AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
ON March 1, 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 [X]
Pre-Effective Amendment No. [ ]
----
Post-Effective Amendment No. 36 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 37 [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
Biddle & Reath LLP
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box).
[X] immediately upon filing pursuant to paragraph (b)
[ ] On March 1, 1999 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on March 1, 1999 pursuant to paragraph (a)(1)
[ ] 75 days after filing on , 1997 pursuant to paragraph (a)(2)
--------
[ ] on , 19 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.
xxxxxxxx
TABLE OF CONTENTS
- ------------------------------------------------------------------------------
Learn about each Fund's Objective, Principal Investment Strategies, Principal
Risks, Performance and Expenses.
- ------------------------------------------------------------------------------
MONEY MARKET FUND 1
INSTITUTIONAL MONEY MARKET FUND 1
U.S. TREASURY MONEY MARKET FUND 3
U.S. GOVERNMENT MONEY MARKET FUND 3
TAX-EXEMPT MONEY MARKET FUND 6
SHORT-TERM BOND MARKET FUND 9
INTERMEDIATE BOND MARKET FUND 9
BOND IMMDEX/TM FUND 9
TAX-EXEMPT INTERMEDIATE BOND FUND 16
BALANCED INCOME FUND 21
BALANCED GROWTH FUND 26
GROWTH AND INCOME FUND 31
EQUITY INDEX FUND 35
GROWTH FUND 39
SPECIAL GROWTH FUND 43
EMERGING GROWTH FUND 47
MICROCAP FUND 51
INTERNATIONAL EQUITY FUND 55
TYPES OF INVESTMENT RISK 60
INVESTING WITH FIRSTAR FUNDS 68
SHARE CLASSES AVAILABLE 68
SALES CHARGES AND WAIVERS 69
PURCHASE OF SHARES 73
BUYING SHARES 73
REDEMPTION OF SHARES 76
EXCHANGES OF SHARES 78
ADDITIONAL SHAREOWNER SERVICES 79
ADDITIONAL INFORMATION 80
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES 80
MANAGEMENT OF THE FUNDS 81
NET ASSET VALUE AND DAYS OF OPERATION 85
APPENDIX 87
FINANCIAL HIGHLIGHTS 87
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
AN INVESTMENT IN A FUND INVOLVES INVESTMENT RISKS, INCLUDING THE RISK THAT YOU
MAY LOSE MONEY.
MONEY MARKET FUND AND INSTITUTIONAL MONEY MARKET FUND
OBJECTIVE
The investment objective of the Money Market Fund and the Institutional Money
Market Fund is to provide a high level of taxable current income consistent with
liquidity, the preservation of capital and a stable net asset value. This
investment objective may be changed by the Board of Directors without approval
of Shareowners, although no change is currently anticipated.
PRINCIPAL INVESTMENT STRATEGIES
Each Fund invests principally in short-term, high quality, dollar-denominated
money market debt obligations generally maturing in 397 days or less. These
obligations may be issued by entities including domestic and foreign
corporations, banks and other financial institutions and other types of entities
or by investment companies, or they may be issued or guaranteed by a U.S. or
foreign government, agency, instrumentality or political subdivision.
Each Fund will acquire only securities which are rated in the highest short-term
rating category by at least two rating agencies (or by the only rating agency
providing a rating), or are issued or guaranteed by, or otherwise provide the
right to demand payment from, entities with those ratings. If the securities are
unrated, they must be of comparable quality, as determined at the time of
acquisition.
Each Fund maintains an average maturity of 90 days or less.
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
Funds are also described under that heading.
The rate of income on Fund shares will vary from day to day so that dividends on
your investment will vary. The Funds are subject to credit risk and interest
rate risk. Credit risk is the risk that an issuer of fixed income securities may
default on its obligation to pay interest and repay principal. Interest rate
risk is the risk that, when interest rates increase, fixed income securities
will decline in value.
An investment in the Funds is not a deposit of Firstar Bank and is not insured
by the Federal Deposit Insurance Corporation, or any other government agency.
Although each Fund seeks to preserve the value
of your investment at $1.00 per share, it is possible to lose money by investing
in the Funds.
BAR CHART AND PERFORMANCE TABLE
The following bar chart and table provide an indication of the risks of
investing in a Fund by showing changes in the performance of a Fund's shares
from year to year. The bar charts and performance tables assume reinvestment of
dividends and distributions. Remember, past performance is not indicative of
future results. Performance reflects fee waivers in effect. If fee waivers were
not in place, a Fund's performance would be reduced.
Year-by-year total return as of 12/31 each year (%)
Money Market Institutional Money Market
1998 5.14 5.38
1997 5.14 5.39
1996 5.00 5.26
1995 5.54 5.81
1994 3.84 4.08
1993 2.67 2.90
1992 3.42 3.58
1991 5.87
1990 8.05
1989 8.98
INSTITUTIONAL
MONEY MARKET MONEY MARKET
FUND FUND
BEST QUARTER: Q 2 '95 1.46% Q 2 '89 2.33%
WORST QUARTER: Q 2 '93 0.70% Q 2 '93 0.64%
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/98
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (INCEPTION DATE)
Institutional Money
Market Fund 5.38% 5.18% - 4.70%
(Apr. 26, 1991)
Money Market Fund 5.14% 4.93% 5.35%
The 7-day yield for the period ended on 12/31/98 for the Money
Market Fund and the Institutional Money Market Fund was 4.76% and 4.84%,
respectively, and without giving effect to fee waivers was 4.53% and 4.58%,
respectively. Figures reflect past performance. Yields will vary. You may call
1-800-228-1024 to obtain the current 7-day yield of the Money Market Fund and
the Institutional Money Market Fund.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Money Market Fund and Institutional Money Market Fund.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
DISTRIBUTION TOTAL ANNUAL
MANAGEMENT AND SERVICE OTHER FUND OPERATING
FEES<F1> (12B-1)FEES<F2> EXPENSES<F3> EXPENSES<F4>
Money Market Fund 0.50% 0.03% 0.35% 0.88
Institutional Money
Market Fund 0.50% 0.00% 0.14% 0.64%
<F1> The Adviser has voluntarily agreed that a portion of its management fee
will not be imposed on the Money Market and Institutional Money Market Funds
during the current fiscal year. As a result of the fee waiver, current
management fees of the Money Market and Institutional Money Market Fund, are
0.37% and 0.29%, respectively, of such Fund's average daily net assets. These
waivers are expected to remain in effect for the current fiscal year. However,
they are voluntary and can be modified or terminated at any time without the
Funds' consent.
<F2> The total of all 12b-1 fees and shareowner servicing fees may not exceed,
in the aggregate, the annual rate of 0.25% of a Fund's average daily net assets
for the shares. The Money Market Fund (but not the Institutional Money Market
Fund) intends to pay 12b-1 fees with respect to the Retail shares for the
current fiscal year.
<F3> "Other Expenses" includes administration fees, transfer agency fees and all
other ordinary operating expenses of the Fund not listed above. The Money Market
Fund has a Shareowner Service Plan permitting it to pay Shareowner Servicing
fees to institutions (described below under the heading "Management of the Funds
- - Shareowner Organizations") equal to up to 0.25% of the Fund's average daily
net assets. The Fund does not intend to pay Shareowner Servicing fees for the
current fiscal year, and "Other Expenses" does not reflect such fees. The
administrator of the Funds has voluntarily agreed that a portion of the
administration fee will not be imposed on the Institutional Money Market Fund
during the current fiscal year. As a result of the fee waiver, "Other Expenses"
of the Institutional Money Market Fund are estimated to be 0.10%. 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> As a result of the fee waivers set forth in notes 1 and 3, the Total Annual
Fund Operating Expenses of the Money Market Fund and Institutional Money Market
Fund are estimated to be 0.75% and 0.39%, respectively, for the current fiscal
year. Although the fee waivers are expected to remain in effect for the current
fiscal year, these waivers are voluntary and may be terminated at any time at
the option of the Adviser or administrator.
A contingent deferred sales charge may be payable upon redemption of the Money
Market Fund shares which were acquired upon exchange for Retail B Shares. The
contingent deferred sales charge is described under the heading of "Investing
with Firstar Funds - Contingent Deferred Sales Charge - Retail B Shares."
A fee of $12.00 is charged for each wire redemption (Money Market Fund only) and
$15.00 for each non-systematic withdrawal from a retirement account for which
Firstar Bank, Milwaukee, N.A. is custodian.
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 5 YEARS 10 YEARS
Money Market Fund $90 $281 $488 $1,084
Institutional Money Market Fund $65 $205 $357 $1,798
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.
U.S. TREASURY MONEY MARKET FUND AND U.S. GOVERNMENT MONEY MARKET FUND
OBJECTIVES
The investment objective of the U.S. Treasury Money Market Fund is to provide a
high level of current income exempt from state income taxes consistent with
liquidity, the preservation of capital and a stable net asset value.
The investment objective of the U.S. Government Money Market Fund is to provide
a high level of taxable current income consistent with liquidity, the
preservation of capital and a stable net asset value (irrespective of state
income tax considerations).
PRINCIPAL INVESTMENT STRATEGIES
Each of these investment objectives may be changed by the Board of Directors
without approval of Shareowners, although no change is currently anticipated.
The U.S. Treasury Money Market Fund invests in short term, dollar-denominated
debt obligations generally maturing in 397 days or less, issued or guaranteed as
to principal and interest by the U.S. Treasury. During normal market conditions,
the Fund intends to invest at least 65% of its total assets in these
obligations.
The U.S. Government Money Market Fund invests in short term debt obligations
generally maturing in 397 days or less, issued or guaranteed as to principal and
interest by the U.S. government, its agencies or instrumentalities. Under normal
market conditions, the Fund intends to invest at least 65% of its total
assets in these obligations. The Fund also invests in variable and floating rate
instruments and repurchase agreements.
Each Fund maintains an average maturity of 90 days or less.
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
Funds are also described under that heading.
- --------------------------------------------------------------------------------
Even though the U.S. Treasury Money Market Fund and U.S. Government Money Market
Fund purchase mostly U.S. government obligations, shares of the Funds are not
themselves issued or guaranteed by any government agency.
- --------------------------------------------------------------------------------
The rate of income on Fund shares will vary from day to day so that dividends on
your investment will vary. The Funds are subject to credit risk and interest
rate risk. Credit risk is the risk that an issuer of fixed income securities may
default on its obligation to pay interest and repay principal. Interest rate
risk is the risk that, when interest rates increase, fixed income securities
will decline in value.
For the U.S. Government Money Market Fund, there can be no assurance
that the U.S. government will provide financial support to U.S. government-
sponsored agencies or instrumentalities where it is not obligated to do so by
law.
An investment in the Funds is not a deposit of Firstar Bank and is not insured
by the Federal Deposit Insurance Corporation, or any other government agency.
Although each Fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the Funds.
BAR CHART AND PERFORMANCE TABLE
The following bar chart and table provide an indication of the risks of
investing in a Fund by showing changes in the performance of a Fund's shares
from year to year. The bar charts and performance tables assume reinvestment of
dividends and distributions. Remember, past performance is not indicative of
future results. Performance reflects fee waivers in effect. If fee waivers were
not in place, a Fund's performance would be reduced.
Year-by-year total return as of 12/31 each year (%)
U.S. Government Money Market U.S. Treasury Money Market
1998 4.95 4.75
1997 4.97 4.78
1996 4.92 4.76
1995 5.39 5.21
1994 3.76 3.57
1993 2.61 2.57
1992 3.30 3.19
1991 5.56
1990 7.71
1989 8.70
U.S. TREASURY U.S. GOVERNMENT
MONEY MARKET FUND MONEY MARKET FUND
BEST QUARTER: Q 2 '95 1.34% Q 2 '89 2.24%
WORST QUARTER: Q 2 '93 0.62% Q 2 '93 0.63%
AVERAGE ANNUAL TOTAL
RETURN AS OF 12/31/98
1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
(INCEPTION DATE)
U.S. TREASURY MONEY MARKET FUND 4.65% 4.59% - 4.19%
(Apr. 29, 1991)
U.S. GOVERNMENT 4.95% 4.79% 5.17%
MONEY MARKET FUND
The 7-day yield for the period ended on 12/31/98 for the U.S. Treasury Money
Market Fund and the U.S. Government Money Market Fund was 4.09% and 4.44%,
respectively, and without giving effect to fee waivers was 3.95% and 4.36%,
respectively. Figures reflect past performance. Yields will vary. You may call
1-800-228-1024 to obtain the current 7-day yield of the U.S.Treasury Money
Market Fund and the U.S. Government Money Market Fund.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the U.S. Treasury Money Market Fund and U.S. Government Money Market
Fund.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
DISTRIBUTION TOTAL ANNUAL
MANAGEMENT AND SERVICE OTHER FUND OPERATING
FEES<F1> (12B-1)FEES<F2> EXPENSES<F3> EXPENSES<F4>
U.S. Treasury
Money Market Fund 0.50% 0.00% 0.26% 0.76%
U.S. Government
Money Market Fund 0.50% 0.00% 0.22% 0.72%
<F1> The Adviser has voluntarily agreed that a portion of its management fee
will not be imposed on the U.S. Treasury Money Market Fund during the current
fiscal year. As a result of the fee waiver, current management fees of the U.S.
Treasury Money Market Fund are 0.49% 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.
<F2> The total of all 12b-1 fees and shareowner servicing fees may not exceed,
in the aggregate, the annual rate of 0.25% of a Fund's average daily net assets
for the shares. The Funds do not intend to pay 12b-1 fees with respect to the
shares for the current fiscal year.
<F3> "Other Expenses" includes administration fees, transfer agency fees and all
other ordinary operating expenses of the Funds not listed above. Each fund has
in place a Shareowner Service Plan permitting the payment of a Shareowner
Servicing fee to institutions (described below under "Management of the Funds -
Shareowner Organizations") equal to up to 0.25% of each Fund's average daily net
assets. The Funds do not intend to pay Shareowner Servicing fees during the
current fiscal year, and "Other Expenses"does not reflect such fees.
<F4> As a result of the fee waivers set forth in note 1, the Total Annual Fund
Operating Expenses of the U.S. Treasury Money Market Fund are estimated to be
0.75% for the current fiscal year. Although the fee waiver is expected to remain
in effect for the current fiscal year, the waiver is voluntary and may be
terminated at any time at the option of the Adviser.
A contingent deferred sales charge may be payable upon redemption of U.S.
Treasury Money Market Fund or U.S. Government Money Market Fund shares which
were acquired upon exchange for Retail B Shares. The contingent deferred sales
charge is described under the heading "Investing with Firstar Funds - Contingent
Deferred Sales Charge - Retail B Shares."
A fee of $12.00 is charged for each wire redemption and $15.00 for each non-
systematic withdrawal from a retirement account for which Firstar Bank,
Milwaukee, N.A. is custodian.
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 5 YEARS 10 YEARS
U.S. Treasury Money Market Fund $78 $243 $422 $942
U.S. Government Money Market Fund $74 $230 $401 $894
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.
TAX-EXEMPT MONEY MARKET FUND
OBJECTIVE
The investment objective of the Tax-Exempt Money Market Fund is to provide a
high level of current income exempt from federal income taxes consistent with
liquidity, the preservation of capital and a stable net asset value. 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 Fund invests principally in a diversified portfolio of dollar-denominated
debt obligations ("municipal obligations") issued by or on behalf of states,
territories and possessions of the United States, the District of Columbia and
their authorities, agencies, instrumentalities and political sub divisions. The
Fund will acquire only securities which are rated in the highest short-term
rating category by at least two rating agencies (or by the only rating agency
providing a rating), or are issued or guaranteed by, or otherwise provide the
right to demand payment from, entities with those ratings. If the security is
unrated, it must be of comparable quality to securities with those ratings, as
determined at the time of acquisition. During normal market conditions, the Fund
will invest at least 80% of its net assets in municipal obligations which are
exempt from federal income taxes with remaining maturities of 13 months or less.
(Securities which are subject to demand features and certain U.S. government
obligations may have longer maturities.) The Fund maintains an average portfolio
maturity of 90 days or less.
The two principal classifications of municipal obligations which the Tax-Exempt
Money Market Fund invests in are:
GENERAL OBLIGATION SECURITIES REVENUE SECURITIES
General obligation securities are secured by the Revenue securities are
issuer's pledge of its full faith, credit and taxing payable only from the
power for the payment of principal and interest. revenues derived from a
particular facility or
class of facilities or, in
some cases, from the
proceeds of a special
excise tax or other
specific revenue source
such as the issuer of the
facility being financed.
Municipal obligations purchased by the Fund may include variable and floating
rate instruments which are instruments with interest rates that are adjusted
either on a schedule or when an index or benchmark changes. While there may be
no active secondary market with respect to a particular variable or floating
rate demand instrument, the Fund may demand payment in full of the principal and
interest.
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 rate of income on Fund shares will vary from day to day so that dividends on
your investment will vary. The Fund is subject to credit risk and interest rate
risk. Credit risk is the risk that an issuer of fixed income securities may
default on its obligation to pay interest and repay principal. Interest rate
risk is the risk that, when interest rates increase, fixed income securities
will decline in value.
Municipal obligations which the Fund purchases may be backed by letters of
credit issued by banks and other financial institutions. Adverse developments
affecting banks could have a negative effect on the Fund's portfolio securities.
The Fund may invest more than 25% of its total assets in municipal obligations
issued by entities located in the same state and the interest on which is paid
solely from revenues of similar projects. As a result, changes in economic,
business or political conditions relating to a particular state or types of
projects may have a disproportionate impact on the Fund's share price.
Municipal obligations which the Fund may acquire include municipal lease
obligations which are issued by a state or local government or authority to
acquire land and a wide variety of equipment and facilities. If the funds are
not appropriated for the following year's lease payments, the lease may
terminate, with the possibility of default on the lease obligation and
significant loss to the Fund.
An investment in the Fund is not a deposit of Firstar Bank and is not insured by
the Federal Deposit Insurance Corporation, or any other government agency.
Although the Fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the Fund.
BAR CHART AND PERFORMANCE TABLE
The following bar chart and table provide an indication of the risks of
investing in a Fund by showing changes in the performance of a Fund's shares
from year to year. The bar charts and performance tables assume reinvestment of
dividends and distributions. Remember, past performance is not indicative of
future results. Performance reflects fee waivers in effect. If fee waivers were
not in place, a Fund's performance would be reduced.
Year-by-year total return as of 12/31 each year (%)
Tax-Exempt Money Market Fund
1998 2.97
1997 3.13
1996 3.06
1995 3.44
1994 2.49
1993 2.06
1992 2.64
1991 4.24
1990 5.48
1989 6.00
BEST QUARTER: Q 2 '89 1.58%
WORST QUARTER: Q 1 '94 0.50%
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/98
1 YEAR 5 YEARS 10 YEARS
TAX-EXEMPT MONEY MARKET FUND 2.97% 3.02% 3.54%
The 7-day yield for the period ended on 12/31/98 for the Tax-Exempt Money Market
Fund was 3.08% and without giving effect to fee waivers was 2.96%. Figures
reflect past performance. Yields will vary. You may call 1-800-228-1024 to
obtain the current 7-day yield of the Tax-Exempt Money Market Fund.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Tax-Exempt Money Market Fund.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
DISTRIBUTION TOTAL ANNUAL
MANAGEMENT AND SERVICE OTHER FUND OPERATING
FEES<F1> (12B-1)FEES<F2> EXPENSES<F3> EXPENSES<F4>
Tax-Exempt Money
Market Fund 0.50% 0.00% 0.27% 0.77%
<F1> The Adviser has voluntarily agreed that a portion of its management fee
will not be imposed on the Tax-Exempt Money Market Fund during the current
fiscal year. As a result of the fee waiver, current management fees of the Fund
are 0.48% 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.
<F2> 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 shares. The Fund does not intend to pay 12b-1 fees with respect
to the shares for the current fiscal year.
<F3> "Other Expenses" includes administration fees, transfer agency fees and all
other ordinary operating expenses of the Fund not listed above. The Fund has in
place a Shareowner Service Plan permitting the payment of a Shareowner Servicing
fee to institutions (described below under "Management of the Funds - Shareowner
Organizations") equal to up to 0.25% of the Fund's average daily net assets. The
Fund does not intend to pay Shareowner Servicing fees during the current fiscal
year, and "Other Expenses" does not reflect such fees.
<F4> As a result of the fee waiver set forth in note 1, the Total Annual Fund
Operating Expenses of the Fund are estimated to be 0.75% 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.
A contingent deferred sales charge may be payable upon redemption of Tax-Exempt
Money Market Fund Shares which were acquired
upon exchange for Retail B Shares. The contingent deferred sales charge is
described under the heading "Investing with Firstar Funds - Contingent Deferred
Sales Charge - Retail B Shares."
A fee of $12.00 is charged for each wire redemption and $15.00 for each non-
systematic withdrawal from a retirement account for which Firstar Bank,
Milwaukee, N.A. is custodian.
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 5 YEARS 10 YEARS
Tax-Exempt Money Market Fund $79 $246 $428 $954
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.
TAXABLE BOND FUNDS
SHORT-TERM BOND MARKET FUND, INTERMEDIATE BOND MARKET FUND
AND BOND IMMDEX/TM FUND
OBJECTIVES
The investment objective of the Short-Term Bond Market Fund is to provide an
annual rate of total return, before Fund expenses, comparable to the annual rate
of total return of the Lehman Brothers 1-3 Year Government/Corporate Bond Index
(the "Lehman 1-3 Index").
The investment objective of the Intermediate Bond Market Fund is to provide an
annual rate of total return, before Fund expenses, comparable to the annual rate
of total return of the Lehman Brothers Intermediate Government/Corporate Bond
Index (the "Lehman Intermediate Index").
The investment objective of the Bond IMMDEX/TM Fund is to provide an annual rate
of total return, before Fund expenses, comparable to the annual rate of total
return of the Lehman Brothers Government/Corporate Bond Index (the "Lehman
Index").
Each of these investment objectives may be changed by the Board of Directors
without approval of Shareowners, although no change is currently anticipated.
Principal Investment Strategies
- --------------------------------------------------------------------------------
DURATION DEFINED:
"Duration" is the average time it takes to receive expected cash flows
(discounted to their present value) on a particular fixed-income instrument or a
portfolio of instruments. Duration usually defines the effect of interest rate
changes on bond prices. However, for large interest rate changes (generally
changes of 1% or more) this measure does not completely explain the interest
rate sensitivity of a bond.
FOR EXAMPLE
The duration of a 5-year zero coupon bond which pays no interest or principal
until the maturity of the bond is 5 years. This is because a zero coupon bond
produces no cash flow until the maturity date.
On the other hand, a coupon bond that pays interest semiannually and matures in
5 years will have a duration of less than 5 years reflecting the semiannual cash
flows resulting from coupon payments.
- --------------------------------------------------------------------------------
The Adviser attempts to make each Fund's duration and return comparable to those
of its respective bond index, and to maintain an overall interest rate
sensitivity for each Fund equivalent to its respective bond index.
The Adviser generally will sell a security when it, on a relative basis and in
the Adviser's opinion, will no longer help a Fund to maintain overall interest
sensitivity and return objectives.
The effective dollar-weighted average portfolio maturity of each Fund will be
more than one year but less than three years for the Short-Term Bond Market
Fund; more than three years but less than ten for the Intermediate Bond Market
Fund; and more than five years for the Bond IMMDEX/TM Fund during normal market
conditions.
Each Fund typically holds less than 200 securities.
The Adviser will attempt to keep each Fund fully invested. Each Fund's policy is
to invest at least 65% of total assets in the following types of debt
securities:
- U.S. government - U.S. government agencies
- Stripped U.S. government - Corporate
- Collateralized mortgage obligations - Medium-term notes
- Asset-backed and mortgage-backed obligations - Eurobonds
Debt obligations acquired by each Fund will be "investment grade," as rated by
at least one rating agency. The Adviser may purchase unrated obligations that
are determined by the Adviser to be comparable in quality to the rated
obligations. Average quality for each Fund is expected to be at least the second
highest rating category of S&P or Moody's. After purchase, a security may cease
to be rated or may have its rating reduced below the minimum rating required by
the Fund for purchase. The Adviser will consider whether to continue to hold the
security. If over 5% of the Fund's net assets consist of obligations which have
fallen below the minimum rating, the Adviser will immediately sell the
securities.
- --------------------------------------------------------------------------------
INVESTMENT GRADE SECURITIES ARE:
securities rated in the highest 4 categories
by S&P, Moody's or another nationally
recognized rating agency.
- --------------------------------------------------------------------------------
Although these Funds attempt to achieve returns comparable to those of their
respective benchmark indices by maintaining a comparable duration (see
"Strategies" for definition), these Funds are NOT index funds. Each Fund may
invest more than 50% of their assets in securities not included in the index.
DESCRIPTION OF BOND INDICES
The bond indices measure the price changes of securities and the income provided
by the securities. The bond indices are intended to measure performance of
fixed-rate debt markets over given time intervals. The difference between the
indices is the maturity range of the securities included. Each index is
comprised of:
- - U.S. Treasury securities - U.S. government agency
securities
- - dollar-denominated debt of certain foreign - investment-grade corporate
sovereign or supranational entities debt obligations
The indices require that investment-grade corporate debt obligations must:
- - be fixed-rate debt (as opposed
to variable-rate debt)
- - have at least one year until maturity
- - have a minimum outstanding par value of $100 million
- - have a minimum quality rating of Baa by Moody's, BBB by S&P, or BBB by Fitch
IBCA
The indices also require the following maturities for each debt obligation:
INDEX LENGTH OF MATURITY
Lehman 1-3 Index From one to three years remaining until maturity
Lehman Intermediate Index From one to 10 years remaining until maturity
Lehman Index From one to 30 years or more remaining until
maturity
The following chart depicts the number of bond issues and their aggregate dollar
values as represented by the indices on October 31, 1998.
BOND ISSUES DOLLAR VALUE
Lehman 1-3 Index 1,235 $1.0 trillion
Lehman Intermediate Index 4,512 $2.5 trillion
Lehman Index 6,441 $3.6 trillion
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
Funds are also described under that heading.
The rate of income on Fund shares will vary from day to day so that dividends on
your investment will vary. The Funds are subject to credit risk and interest
rate risk. Credit risk is the risk that an issuer of fixed income securities may
default on its obligation to pay interest and repay principal. Interest rate
risk is the risk that, when interest rates increase, fixed income securities
will decline in value. Obligations rated in the lowest of the top four rating
categories are considered to have speculative characteristics and are subject to
greater credit and interest rate risk than higher rated securities.
Because of the smaller number of issues held by a Fund than its respective bond
index, material events affecting a Fund's portfolio (for example, an issuer's
decline in credit quality) may influence the performance of the Fund to a
greater degree than such events will influence its respective bond index and may
prevent the Fund from attaining its investment objective for particular periods.
While the Adviser believes purchasing securities which are not in each Fund's
respective index or not consistent with the "mix" of the index provides the
opportunity to achieve an enhanced gross return compared to the index, the
Adviser may err in its choices of securities or portfolio mixes. Further, the
Adviser calculates the Funds' duration and average maturity based on certain
estimates relating to the duration and maturity of the securities held by the
Fund. The estimates used may not always be accurate, so the Adviser's
calculations may be incorrect. Such errors could result in a negative return and
a loss to you. In the event the performance of a Fund is not comparable to the
performance of its respective index, the Board of Directors will examine the
reasons for the deviation and the availability of corrective measures.
BAR CHART AND PERFORMANCE TABLE
Each Fund offers three types of shares, as described under "Investing with
Firstar Funds" - Institutional, Retail A and Retail B. These types of shares
bear differing levels of expenses, as described under "Investing with Firstar
Funds." The following bar chart and table provide an indication of the risks of
investing in a Fund by showing: (a) changes in the performance of a Fund's
Institutional Shares from year to year; and (b) how the average annual returns
of a Fund's Retail A and Institutional Shares compare to those of a broad-based
securities market index. The bar charts and performance tables assume
reinvestment of dividends and distributions. Remember, past performance is not
indicative of future results. Prior to January 10, 1995, each Fund offered to
investors one series of shares with neither a sales charge nor a service fee.
The average annual total return calculation reflects a maximum initial sales
charge of 3.75% for the Retail A Shares, but for periods prior to January 10,
1995, performance does not reflect service organization fees. If service
organization fees had been reflected, performance would be reduced. Performance
reflects fee waivers in effect. If fee waivers were not in place, a Fund's
performance would be reduced. Because the bar chart reflects Institutional share
performance, it does not reflect the sales load applicable to Retail A and B
shares. If the sales loads were reflected, performance would be reduced. The
Retail B Shares commenced operations on March 1, 1999. Because those shares have
less than one year's performance, no average annual returns
are shown for that class in this section.
Year-by-year total return as of 12/31 each year (%)(Institutional Shares
Short Term Intermediate Bond
Bond Market Bond Market IMMDEX
---------------- ---------------- -------------
1998 9.20 7.91 6.57
1997 9.43 7.34 6.39
1996 3.08 4.06 4.99
1995 19.55 15.25 10.73
1994 -.306 -2.09 0.93
1993 10.96 -- 6.46
1992 7.56 -- 6.85
1991 16.58 -- 13.50
1990 8.22 -- 7.62
1989
SHORT-TERM INTERMEDIATE BOND
BOND MARKET BOND MARKET IMMDEX
FUND FUND FUND
BEST QUARTER: Q 4 '91 4.18% Q 2 '955.02% Q2 '95 6.65%
WORST QUARTER: Q 4 '92(0.21)% Q 1 '94(2.04)% Q1 '94(2.90)%
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/98
(Retail A Shares and Institutional Shares)
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (INCEPTION DATE)
SHORT-TERM BOND MARKET FUND -
Retail A Shares 2.31% 4.85% 6.95% -
Institutional Shares 6.57% 5.87% 7.47% -
LEHMAN BROTHERS 1-3 YEAR
GOVERNMENT/CORPORATE BOND INDEX 6.98% 6.00% 7.42% -
INTERMEDIATE BOND MARKET FUND -
Retail A Shares 3.61% 5.33% - 5.89%
(Jan. 5, 1993)
Institutional Shares 7.91% 6.34% - 6.74%
(Jan. 5, 1993)
LEHMAN BROTHERS INTERMEDIATE
GOVERNMENT/CORPORATE BOND INDEX 8.44% 6.60% - 6.90%
BOND IMMDEX/TM FUND -
Retail A Shares 4.85% 6.35% 8.89% -
Institutional Shares 9.20% 7.37% 9.41% -
LEHMAN BROTHERS GOVERNMENT/
CORPORATE BOND INDEX 9.47% 7.30% 9.33% -
Each of the Lehman Brothers 1-3 Year Government/Corporate Bond Index,
Intermediate Government/Corporate Bond Index and Government/Corporate Bond Index
is a widely-recognized unmanaged index of bond prices compiled by Lehman
Brothers. The Index figures do not reflect any fees or expenses. Investors
cannot invest directly in the Index.
Securities included in the Lehman Brothers 1-3 Year Gov't./Corp. Bond Index must
meet the following criteria: not less than one year to maturity; not more than
three years remaining to maturity.
Securities included in the Lehman Brothers Intermediate Gov't./Corp. Bond Index
must meet the following criteria: remaining maturity of one to ten years; and
rated investment grade or higher by Moody's, Standard & Poor's, or Fitch, in
that order.
Securities included in the Lehman Brothers Gov't./Corp. Bond Index must meet the
following criteria: not less than one year to maturity; and rated investment
grade or higher by Moody's, Standard & Poor's, or Fitch, in that order.
The performance of the Short-Term Bond Market and Bond IMMDEX/TM Fund for the
period prior to December 29, 1989 is represented by the performance of
collective investment funds ("collective investment funds") which operated prior
to the effectiveness of the registration statement of the Firstar Short-Term
Bond Market and Bond IMMDEX/TM Funds. At the time of the Firstar Short-Term Bond
Market and Bond IMMDEX/TM Funds' inception, each collective investment fund was
operated using materially equivalent investment objectives, policies, guidelines
and restrictions as its corresponding Firstar Fund. In connection with the
Firstar Short-Term Bond Market and Bond IMMDEX/TM Funds' commencement of
operations, on December 29, 1989, each collective investment fund transferred
its assets to its Firstar Fund equivalent. At the time of the transfer, the
Adviser did not manage any other collective investment or common trust funds
using materially equivalent investment objectives, policies, guidelines and
restrictions to those of the Short-Term Bond Market and Bond IMMDEX/TM Funds.
The collective investment funds were not open to the public generally, nor
registered under the Investment Company Act of 1940 (the "1940 Act") or subject
to certain restrictions that are imposed by the 1940 Act and the Internal
Revenue Code. If the collective investment funds had been registered under the
1940 Act, performance may have been adversely affected. Performance of the
collective investment funds has been restated to reflect the Firstar Short-Term
Bond Market and Bond IMMDEX/TM Funds' respective actual expenses during each
such Fund's first fiscal year. Performance quotations of each collective
investment fund represent past performance of the FIRMCO managed collective
funds, which are separate and distinct from Firstar Short-Term Bond Market Fund
and Bond IMMDEX/TM Fund; do not represent past performance of those Funds; and
should not be considered as representative of future results of the Funds.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Short-Term Bond Market Fund, Intermediate Bond Market Fund and
Bond IMMDEX/TM Fund.
INSTITUTIONAL RETAIL A RETAIL B
SHAREOWNER FEES (fees paid directly SHARES SHARES SHARES
from your investment)
Maximum Sales Charge (Load) Imposed
on Purchases (as a percentage
of offering price) None<F1> 3.75% None<F1>
Maximum Deferred Sales Charge (Load)
(as a percentage of offering price) None<F1> None<F1> 5.00%<F1>
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends None<F1> None<F1> None<F1>
Redemption Fees None<F2> None<F2> None<F2>
Exchange Fees None<F1> None<F1> None<F1>
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
DISTRIBUTION TOTAL ANNUAL
MANAGEMENT AND SERVICE OTHER FUND OPERATING
FEES<F4> (12B-1)FEES<F5> EXPENSES<F6> EXPENSES<F7>
Short-Term Bond
Market Fund - Retail A 0.60% 0.00% 0.52% 1.12%
Retail B<F3> 0.60% 0.75% 0.52% 1.87%
Institutional 0.60% 0.00% 0.27% 0.87%
Intermediate Bond
Market Fund - Retail A 0.50% 0.00% 0.46% 0.96%
Retail B<F3> 0.50% 0.75% 0.46% 1.71%
Institutional 0.50% 0.00% 0.21% 0.71%
Bond IMMDEX/TM Fund -
Retail A 0.30% 0.00% 0.44% 0.74%
Retail B<F3> 0.30% 0.75% 0.44% 1.49%
Institutional 0.30% 0.00% 0.19% 0.49%
<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 year, 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 Annual Operating Expenses for the Retail B Shares are based on Fund
expenses for the prior fiscal year, but "Other Expenses" is restated to reflect
estimated expenses for Retail B Shares.
<F4> The Adviser has voluntarily agreed that a portion of its management fee
will not be imposed on the Short-Term Bond Market Fund and Intermediate Bond
Market Fund during the current fiscal year. As a result of the fee waiver,
current management fees of the Short-Term Bond Market and Intermediate Bond
Market Funds, are 0.30% and 0.36%, respectively, of such Fund's average daily
net assets. These waivers are expected to remain in effect for the current
fiscal year. However, they are voluntary and can be modified or terminated at
any time without the Funds' consent.
<F5> The total of all 12b-1 fees and shareowner servicing fees may not exceed,
in the aggregate, the annual rate of 0.25% of a Fund's average daily net assets
for the Retail A Shares. The Funds do not intend to pay 12b-1 fees with respect
to the Retail A Shares for the current fiscal year. The funds do not intend to
pay more than 0.75% in 12b-1 fees with respect to the Retail B Shares for the
current fiscal year.
<F6> "Other Expenses" includes (1) administration fees, transfer agency fees and
all other ordinary operating expenses of the Funds not listed above and (2) for
the Retail A and Retail B Shares, the payment of a Shareowner Servicing fee to
institutions (described below under the heading "Management of the Funds -
Shareowner Organizations") equal to 0.25% of the average daily net assets of
each Fund's Retail A Shares and Retail B Shares.
<F7> As a result of the fee waivers set forth in note 4, the Total Annual Fund
Operating Expenses of the Short-Term Bond Market Fund and Intermediate Bond
Market Fund are estimated to be 0.82% and 0.82% for the Retail A Shares of each
Fund, 1.57% and 1.57% for the Retail B Shares of each Fund and .57% and .57% for
the Institutional Shares of each Fund, respectively, for the current fiscal
year. Although the fee waivers are expected to remain in effect for the current
fiscal year, these waivers are 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 5 YEARS 10 YEARS
Short-Term Bond Market Fund - Retail A Shares $485 $718 $969 $1,687
Short-Term Bond Market Fund - Retail B Shares
Assuming complete redemption at end of period 690 888 1,211 1,815
Assuming no redemption 190 588 1,011 1,815
Short-Term Bond Market Fund - Institutional 89 278 482 1,073
Intermediate Bond Market Fund -
Retail A Shares 469 669 886 1,509
Intermediate Bond Market Fund -
Retail B Shares
Assuming complete redemption
at end of period 674 839 1,128 1,638
Assuming no redemption 174 539 928 1,638
Intermediate Bond Market Fund - Institutional 73 227 395 883
Bond IMMDEX/TM - Retail A Shares 448 603 771 1,259
Bond IMMDEX/TM - Retail B Shares
Assuming complete redemption at
end of period 652 771 1,013 1,390
Assuming no redemption 152 471 813 1,390
Bond IMMDEX/TM - Institutional 50 157 274 616
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.
TAX-EXEMPT INTERMEDIATE BOND FUND
OBJECTIVE
The investment objective of the Tax-Exempt Intermediate Bond Fund is to provide
current income that is substantially exempt from federal income tax and
emphasize total return with relatively low volatility of 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 Fund invests principally in investment-grade intermediate-term municipal
obligations issued by state and local governments exempt from federal income
tax. Except during temporary defensive periods, the Fund will invest at least
80% of its net assets in securities, the interest on which is exempt from
regular federal income and alternative minimum taxes and will invest at least
65% of its total assets in bonds and debentures. The Fund intends to maintain an
average weighted maturity between three and ten years. There is no limit on the
maturity of any individual security in the Fund, and the Fund may invest in
short-term municipal obligations and tax-exempt commercial paper.
The Adviser generally will sell a security when it, on a relative basis and in
the Adviser's opinion, will no longer help a Fund to maintain overall interest
rate sensitivity and return objectives.
In pursuing its investment objective, the Fund invests in a diversified
portfolio of municipal obligations (as defined above under "Tax-Exempt Money
Market Fund"). Municipal obligations purchased by the
Fund will be:
- - investment grade at the time of purchase (i.e., BBB by S&P or Fitch IBCA or
Baa by Moody's, or in the highest 4 categories by another nationally recognized
rating agency)
- - unrated at the time of purchase but determined to be of comparable quality by
the Adviser
- - municipal notes and other short-term obligations rated SP-1 by S&P or MIG-1 by
Moody's
- - tax-exempt commercial paper rated A-1 or higher by S&P or VMIG-1 by Moody's
After purchase, a security may cease to be rated or may have its rating reduced
below the minimum rating required for purchase by the Fund. At the time, the
Adviser will consider whether to continue to hold the security. The Adviser will
sell promptly any securities that are not rated investment grade by at least one
nationally recognized rating agency if the securities exceed 5% of the Fund's
net assets.
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 rate of income on Fund shares will vary from day to day so that dividends on
your investment will vary. The Fund is subject to credit risk, interest rate
risk and tax risk. Credit risk is the risk that an issuer of fixed income
securities may default on its obligation to pay interest and repay principal.
Interest rate risk is the risk that, when interest rates increase, fixed income
securities will decline in value. Tax risk is the risk that the Fund may be more
adversely impacted by changes in tax rates and policies than other funds.
Obligations rated in the lowest of the top four rating categories are considered
to have speculative characteristics and are subject to greater credit and
interest rate risk than higher rated securities.
The Fund may invest more than 25% of its total assets in municipal obligations
issued by persons located in the same state and the interest on which is paid
solely from revenues of similar projects. As a result, changes in economic,
business or political conditions relating to a particular state or types of
projects may have a disproportionate impact on the Fund's share price.
Municipal obligations which the Fund may acquire include municipal lease
obligations, which are issued by a state or local government or authority to
acquire land and a wide variety of equipment and facilities. If the funds are
not appropriated for the following year's lease payments, the lease may
terminate, with the possibility of default on the lease obligation and
significant loss to the Fund.
BAR CHART AND PERFORMANCE TABLE
The Fund offers three types of shares, as described under "Investing with
Firstar Funds" - Institutional, Retail A and Retail B. These types of shares
bear differing levels of expenses, as described under "Investing with Firstar
Funds." The following bar chart and table provide an indication of the risks of
investing in a Fund by showing: (a) changes in the performance of a Fund's
Institutional Shares from year to year; and (b) how the average annual returns
of a Fund's Retail A and Institutional shares compare to those of a broad-based
securities market index. The bar charts and performance tables assume
reinvestment of dividends and distributions. Remember, past performance is not
indicative of future results. Prior to January 10, 1995, each Fund offered to
investors one series of shares with neither a sales charge nor a service fee.
The average annual total return calculation reflects a maximum initial sales
charge of 3.75% for the Retail A Shares, but for periods prior to January 10,
1995, performance does not reflect service organization fees. If service
organization fees had been reflected, performance would be reduced. Performance
reflects fee waivers in effect. If fee waivers were not in place, a Fund's
performance would be reduced. Because the bar chart reflects Institutional share
performance, the bar chart does not reflect the sales load applicable to Retail
A and B Shares. If the sales loads were reflected, performance would be reduced.
The Retail B Shares commenced operations on March 1, 1999. Because those shares
have less than one year's performance, no average annual returns are shown for
that class in this section.
Year-by-year total return as of 12/31 each year (%)(Institutional Shares
1998 5.36
1997 6.05
1996 3.78
1995 10.51
1994 -1.73
1993
1992
1991
1990
1989
BEST QUARTER: Q 1 '95 3.93%
WORST QUARTER: Q 1 '94 (2.75)%
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/98 (Retail A Shares and Institutional
Shares)
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (Feb. 8, 1993)
TAX-EXEMPT INTERMEDIATE BOND
FUND - Retail A Shares 1.11% 3.71% - 4.25%
Institutional Shares 5.36% 4.72% - 5.12%
LEHMAN BROTHERS 5-YEAR
GENERAL OBLIGATION BOND INDEX 5.84% 5.36% - 5.78%
The Lehman Brothers 5-Year General Obligation Bond Index is a widely recognized
unmanaged index of bond prices compiled by Lehman Brothers. The Index figures do
not reflect any fees or expenses. Investors cannot invest directly in the Index.
To be included in this Index, a municipal bond must be a state or local General
Obligation bond; have a minimum credit rating of at least Baa; have been issued
as part of an offering of at least $50 million; have a minimum amount
outstanding of at least $3 million; have been issued within the last five years;
and have a maturity of four to six years.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Tax-Exempt Intermediate Bond Fund.
INSTITUTIONAL RETAIL A RETAIL B
SHAREOWNER FEES (fees paid directly SHARES SHARES SHARES
from your investment)
Maximum Sales Charge (Load) Imposed
on Purchases (as a percentage
of offering price) None<F1> 3.75% None<F1>
Maximum Deferred Sales Charge (Load)
(as a percentage of offering price) None1 None1 5.00%<F1>
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends None<F1> None<F1> None<F1>
Redemption Fees None<F2> None<F2> None<F2>
Exchange Fees None<F1> None<F1> None<F1>
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
DISTRIBUTION TOTAL ANNUAL
MANAGEMENT AND SERVICE OTHER FUND OPERATING
FEES<F4> (12B-1)FEES<F5> EXPENSES<F6> EXPENSES<F7>
Tax-Exempt Intermediate
Bond Fund - Retail A 0.50% 0.00% 0.56% 1.06%
Tax-Exempt Intermediate
Bond Fund - Retail B3 0.50% 0.75% 0.56% 1.81%
Tax-Exempt Intermediate
Bond Fund - Institutional 0.50% 0.00% 0.31% 0.81%
<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 year, 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 Annual Operating Expenses for the Retail B Shares are based on Fund
expenses for the prior fiscal year, but "Other Expenses" is restated to reflect
estimated expenses for Retail B Shares.
<F4> 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 0.36% 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.
<F5> 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.
<F6> "Other Expenses" includes (1) 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 (described below under the heading "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.
<F7> 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 0.92%, 1.67% and 0.67%, 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 5 YEARS 10 YEARS
Tax-Exempt Intermediate Bond Fund -
Retail A Shares $479 $700 $1,938 $1,621
Tax-Exempt Intermediate Bond Fund -
Retail B Shares
Assuming complete redemption at
end of period $684 $869 $1,180 $1,749
Assuming no redemption $184 $569 $1,980 $1,749
Tax-Exempt Intermediate Bond
Fund - Institutional $183 $259 $1,450 $1,002
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.
BALANCED INCOME FUND
OBJECTIVE
The investment objective of the Balanced Income Fund is to provide current
income and the preservation of capital by investing in a balanced portfolio of
dividend-paying equity and fixed-income securities. 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 Fund selects and purchases common stocks of domestic companies that have a
history of paying dividends. The Fund selects fixed-income securities, which the
Adviser believes will provide an annual rate of total return similar to that of
the Lehman Intermediate Index. That Index is described under "Bond Funds -
Description of Bond Indices."
The Adviser may sell a security for reasons including those relating to
fundamental deterioration or valuation. Fundamental deterioration occurs when a
company is no longer able to achieve the results generally expected by the
investment community due to a specific issue, such as a loss of a customer or
pricing pressure in the industry. The Adviser may sell for reasons relating to
valuation when for example a security's price has reached a target specified by
the Adviser, and the Adviser, believes potential increases in price are limited.
The Fund plans to use a 50/50 method to invest its total assets - that means 50%
in equity securities and 50% in fixed-income securities.
EQUITY SECURITIES 50% (no less than 20%, no more than 60%)
FIXED-INCOME SECURITIES 50% (no less than 40%)
- -----------------------------------------------------------------------------
NOTE: The actual percentage of assets invested in fixed-income and equity
securities will vary from time to time, depending on the judgment of the
Adviser as to the general market and economic conditions, trends and yields,
interest rates and fiscal and monetary developments.
- -----------------------------------------------------------------------------
EQUITY SECURITIES
The Fund primarily invests in common stock of domestic companies the Adviser
considers to be well managed and to have "attractive fundamental financial
characteristics." The Adviser also generally looks for companies with stock
market capitalizations over $750 million. Stock market capitalizations are
calculated by multiplying the total number of common shares outstanding by the
market price per share.
- --------------------------------------------------------------------------------
The Adviser looks for companies with ATTRACTIVE FUNDAMENTAL FINANCIAL
CHARACTERISTICS such as:
1. low debt
2. high return on equity
3. consistent revenue and earnings per share growth over the prior three to five
years
- --------------------------------------------------------------------------------
The Fund may also acquire bonds, notes, debentures and preferred stocks
convertible into common stocks if they provide a current interest or dividend
stream, and may invest up to 5% of its net assets in other types of domestic
securities having common stock characteristics, such as rights and warrants to
purchase equity securities.
FIXED INCOME
The Fund may purchase the following types of fixed-income securities. There are
no maturity limitations.
- - Corporaten U.S. Treasury
- - U.S. government agency - stripped U.S. government
- - asset-backed and mortgage-backed obligations - money market instruments
- - U.S. government
Except for convertible securities, the Fund will purchase only debt obligations
rated investment grade by at least one rating agency or unrated obligations
deemed by the Adviser to be comparable in quality. See "Taxable Bond Funds" for
a description of investment-grade securities. After purchase, a security may
cease to be rated or may have its rating reduced below the minimum rating
required for purchase by the Fund. The Adviser will consider whether to continue
to hold the security.
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 rate of income on Fund shares will vary from day to day so that dividends on
your investment will vary. The Fund is subject to market risk. Market risk is
the risk that the value of the securities in which a Fund invests may go up or
down in response to the prospects of individual companies and/or general
economic conditions. Fixed-income securities in which the Fund invests are
subject to credit risk and interest rate risk. Credit risk is the risk that an
issuer of fixed-income securities may default on its obligation to pay interest
and repay principal. Interest rate risk is the risk that, when interest rates
increase, fixed-income securities will decline in value. In particular,
convertible securities frequently have speculative characteristics and may be
acquired without regard to minimum quality ratings. The Fund intends to invest
no more than 5% of net assets in securities rated non-investment grade by at
least one rating agency at the time of purchase or unrated securities of
comparable quality. Convertible securities and obligations rated in the lowest
of the top four rating categories are subject to greater credit and interest
rate risk than higher rated securities. Stripped securities are subject to
greater interest rate risk than other more typical fixed-income securities.
Certain securities in which the Fund invests pose additional risks. The
Additional Statement describes risks of collateralized mortgage obligations and
mortgage- and asset-backed securities, which are subject to derivatives risk,
extension risk and prepayment risk. Extension risk is the risk that an issuer
will exercise its right to pay principal on an obligation held by a Fund (such
as a mortgage- or asset-backed security) later than expected. This may happen
when there is a rise in interest rates. Under such circumstances, the value of
the obligation will decrease and a Fund will also suffer from the inability to
invest in higher yielding securities. Prepayment risk is the risk that an issuer
will exercise its right to pay principal on an obligation held by a Fund (such
as a mortgage- or asset-backed security) earlier than expected. This may happen
when there is a decline in interest rates. These events may make a Fund unable
to recoup its initial investment and may result in reduced yields.
BAR CHART AND PERFORMANCE TABLE
The Fund offers three types of shares, as described under "Investing with
Firstar Funds" - Institutional, Retail A and Retail B. These types of shares
bear differing levels of expenses, as described under "Investing with Firstar
Funds." The following bar chart and table provide an indication of the risks of
investing in a Fund by showing: (a) changes in the performance of a Fund's
Institutional Shares from year to year; and (b) how the average annual returns
of a Fund's Retail A and Institutional Shares compare to those of a broad-based
securities market index. The bar charts and performance tables assume
reinvestment of dividends and distributions. Remember, past performance is not
indicative of future results. Prior to January 10, 1995, each Fund offered to
investors one series of shares with neither a sales charge nor a service fee.
The average annual total return calculation reflects a maximum initial sales
charge of 4.50% for the Retail A Shares, but for periods prior to January 10,
1995, performance does not reflect service organization fees. If service
organization fees had been reflected, performance would be reduced. Performance
reflects fee waivers in effect. If fee waivers were not in place, a Fund's
performance would be reduced. Because the bar chart reflects Institutional Share
performance, it does not reflect the sales load applicable to Retail A and B
Shares. If the sales loads were reflected, performance would be reduced. The
Retail B Shares commenced operations on March 1, 1999. Because those shares have
less than one year's performance, no average annual returns are shown for that
class in this section.
Year-by-year total return as of 12/31 each year (%)(Institutional Shares)
1998 15.58
1997 23.47
1996 17.83
1995 25.48
1994 -1.74
1993 8.79
1992 8.92
1991 31.95
1990 4.75
1989
BEST QUARTER: Q 2 '97 0.40%
WORST QUARTER: Q 3 '90 (5.43)%
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/98 (Retail A Shares and Institutional
Shares)
1 YEAR 5 YEARS 10 YEARS
BALANCED INCOME FUND - Retail A Shares 11.86% 14.80% 14.94%
Institutional Shares 16.79% 15.93% 15.58%
S&P 500 INDEX 28.58% 24.06% 19.21%
LIPPER BALANCED FUND INDEX 15.09% 13.87% 12.97%
The S&P 500 Index is an unmanaged index of 500 common stocks that is generally
considered representative of the U.S. stock market. The Index is heavily
weighted towards stocks with large market capitalizations and represents
approximately two-thirds of the total market value of all domestic common
stocks. The Lipper Balanced Fund Index is composed of the 30 largest mutual
funds whose primary objective is to conserve principal by maintaining a balanced
portfolio of stocks and bonds. The S&P 500 Index figures do not reflect any
fees or expenses. Investors cannot invest directly in the Index.
The performance of Firstar Balanced Income Fund for the period prior to December
1, 1997 is the performance of a common trust fund managed by FIRMCO which
operated during the periods prior to commencement of operations of the Firstar
Balanced Income Fund using materially equivalent investment objectives,
policies, guidelines and restrictions as Firstar Balanced Income Fund. The
common trust fund transferred its assets to the Balanced Income Fund at the
commencement of operations. At the time of the transfer, the Adviser did not
manage any other collective investment or common trust funds using materially
equivalent investment objectives, policies, guidelines and restrictions to those
of the Balanced Income Fund. The common trust fund was not registered under the
Investment Company Act of 1940 (the "1940 Act"), and was not subject to certain
restrictions that are imposed by the 1940 Act and the Internal Revenue Code. If
the common trust fund had been registered under the 1940 Act, performance may
have been adversely affected. The performance of the common trust fund has been
restated to reflect Firstar Balanced Income Fund's expenses for its first year
of operations.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Balanced Income Fund.
INSTITUTIONAL RETAIL A RETAIL B
SHAREOWNER FEES (fees paid directly SHARES SHARES SHARES
from your investment)
Maximum Sales Charge (Load) Imposed
on Purchases (as a percentage
of offering price) None<F1> 4.50% None<F1>
Maximum Deferred Sales Charge (Load)
(as a percentage of offering price) None<F1> None<F1> 5.00%<F1>
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends None<F1> None<F1> None<F1>
Redemption Fees None<F2> None<F2> None<F2>
Exchange Fees None<F1> None<F1> None<F1>
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
DISTRIBUTION TOTAL ANNUAL
MANAGEMENT AND SERVICE OTHER FUND OPERATING
FEES<F4> (12B-1)FEES<F5> EXPENSES<F6> EXPENSES<F7>
Balanced Income Fund -
Retail A 0.75% 0.00% 0.89% 1.64%
Balanced Income Fund -
Retail B3 0.75% 0.75% 0.89% 2.39%
Balanced Income Fund -
Institutional 0.75% 0.00% 0.64% 1.39%
<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 year, 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 Annual Operating Expenses for the Retail B Shares are based on Fund
expenses for the prior fiscal year, but "Other Expenses" is restated to reflect
estimated expenses for Retail B Shares.
<F4> 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 0.33% 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.
<F5> 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.
<F6> "Other Expenses" includes (1) 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.
<F7> 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 are
estimated to be 1.22%, 1.97% and 0.97%, 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 5 YEARS 10 YEARS
Balanced Income Fund - Retail A Shares $609 $1,944 $1,302 $2,306
Balanced Income Fund - Retail B Shares
Assuming complete redemption at end
of period $742 $1,045 $1,475 $2,370
Assuming no redemption $242 $1,745 $1,275 $2,370
Balanced Income Fund - Institutional $142 $1,440 $1,761 $1,669
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.
BALANCED GROWTH FUND
OBJECTIVE
The investment objective of the Balanced Growth Fund is to achieve a balance of
capital appreciation and current income with relatively low volatility of
capital. This investment objective may be changed by the Board of Directors
without approval of Shareowners, although no change is anticipated.
PRINCIPAL INVESTMENT STRATEGIES
The Fund invests principally in a diversified portfolio of fixed-income and
equity securities. Equity securities are selected on the basis of their
potential for capital appreciation. The Fund selects fixed-income securities,
which the Adviser believes will provide an annual rate of total return similar
to that of the Lehman Brothers Government/Corporate Bond Index. That Index is
described under "Bond Fund - Description of Bond Indices."
The Adviser may sell a security for reasons including those relating to
fundamental deterioration or valuation. Fundamental deterioration occurs when a
company is no longer able to achieve the results generally expected by the
investment community due to a specific issue, such as a loss of a customer or
pricing pressure in the industry. The Adviser may sell for reasons relating to
valuation when for example a security's price has reached a target specified by
the Adviser, and the Adviser believes potential increases in price are limited.
The Fund's policy is to invest at least 25% of the value of its total assets in
fixed-income senior securities and at least 50% and no more than 65% in equity
securities at all times.
INVESTMENT POLICY
FIXED INCOME at least 25%
EQUITY SECURITIES at least 50% (no more than 65%)
NOTE: The actual percentage of assets invested in fixed-income and equity
securities will vary from time to time, depending on the judgment of the Adviser
as to the general market and economic conditions, trends and yields, interest
rates and fiscal and monetary developments.
EQUITY SECURITIES
The Fund primarily invests in common stock of domestic and foreign companies
that the Adviser considers to be well managed and to have attractive fundamental
financial characteristics (see box on page 21 for examples of these
characteristics). The Adviser also generally looks for companies with stock
market capitalizations between $100 million and $50 billion. The Fund may also
invest from time to time a portion of its assets in companies with larger or
smaller market capitalizations.
The Fund may also acquire preferred stocks. In addition, the Fund may invest in
domestic securities convertible into common stock, such as certain bonds and
preferred stocks, and may invest up to 5% of its net assets in other types of
domestic securities having common stock characteristics, such as rights and
warrants to purchase equity securities.
FIXED INCOME
The Fund may purchase the following types of fixed-income securities. There are
no maturity limitations.
- Corporate - U.S. Treasury
- U.S. government agency - stripped U.S. government
- asset-backed and mortgage-backed obligations - money market instruments
- U.S. government
Except for convertible securities the Fund will only acquire debt obligations
that are rated "investment- grade" by at least one rating agency or unrated
obligations deemed by the Adviser to be comparable in quality. See "Taxable Bond
Funds" for a description of investment-grade securities. After purchase, a
security may cease to be rated or may have its rating reduced below the minimum
rating required for purchase by the Fund. The Adviser will consider whether to
continue to hold the security.
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 rate of income on Fund shares will vary from day to day so that dividends on
your investment will vary. The Fund is subject to market risk. Market risk is
the risk that the value of the securities in which a Fund invests may go up or
down in response to the prospects of individual companies and/or general
economic conditions. Fixed-income securities in which the Fund invests are
subject to credit risk and interest rate risk. Credit risk is the risk that an
issuer of fixed-income securities may default on its obligation to pay interest
and repay principal. Interest rate risk is the risk that, when interest rates
increase, fixed-income securities will decline in value. In particular,
convertible securities frequently have speculative characteristics and may be
acquired without regard to minimum quality ratings. The Fund intends to invest
no more than 5% of net assets in securities rated non-investment grade by at
least one rating agency at the time of purchase or unrated securities of
comparable quality. Convertible securities and obligations rated in the lowest
of the top four rating categories are subject to greater credit and interest
rate risk than higher rated securities. Stripped securities are subject to
greater interest rate risk than other more typical fixed-income securities.
Certain securities in which the Fund invests pose additional risks. The
Additional Statement describes risks of collateralized mortgage obligations and
mortgage- and asset-backed securities, which are subject to derivatives risk,
extension risk and prepayment risk. Derivatives risk is the risk of loss from
transactions which may be more sensitive to or otherwise react in tandem with
interest rate changes or market moves and may be leveraged. Extension risk is
the risk that an issuer will exercise its right to pay principal on an
obligation held by a Fund (such as a mortgage- or asset-backed security) later
than expected. This may happen when there is a rise in interest rates. Under
such circumstances, the value of the obligation will decrease and a Fund will
also suffer from the inability to invest in higher yielding securities.
Prepayment risk is the risk that an issuer will exercise its right to pay
principal on an obligation held by a Fund (such as a mortgage- or asset-backed
security) earlier than expected. This may happen when there is a decline in
interest rates. These events may make a Fund unable to recoup its initial
investment and may result in reduced yields.
BAR CHART AND PERFORMANCE TABLE
The Fund offers three types of shares, as described under "Investing with
Firstar Funds" - Institutional, Retail A and Retail B. These types of shares
bear differing levels of expenses, as described under "Investing with Firstar
Funds." The following bar chart and table provide an indication of the risks of
investing in the Fund by showing: (a) changes in the performance of a Fund's
Institutional Shares from year to year, and (b) how the average annual returns
of the Fund's Retail A and Institutional Shares compare to those of a broad-
based securities market index. The bar chart and performance table assume
reinvestment of dividends and distributions. Remember, past performance is not
indicative of future results. Prior to January 10, 1995, the Fund offered to
investors one series of shares with neither a sales charge nor a service fee.
The average annual total return calculation reflects a maximum initial sales
charge of 4.50% for the Retail A Shares, but for periods prior to January 10,
1995, performance does not reflect service organization fees. If service
organization fees had been reflected, performance would be reduced. Because the
bar chart reflects Institutional Share performance, the bar chart does not
reflect the sales load applicable to Retail A and B Shares. If the sales loads
were reflected, performance would be reduced. Performance reflects fee waivers
in effect. If fee waivers were not in place, a Fund's performance would have
been reduced. The Retail B Shares commenced operations on March 1, 1999. Because
those shares have less than one year's performance, no average annual returns
are shown for that class in this section.
YEAR-BY-YEAR TOTAL RETURN AS OF 12/31 EACH YEAR (%) (INSTITUTIONAL SHARES)
1998 16.51
1997 17.47
1996 12.63
1995 26.52
1994 -4.27
1993 8.24
1992
1991
1990
1989
BEST QUARTER: Q 3 '98 (7.98)%
WORST QUARTER: Q 4 '98 14.09%
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/98 (Retail A Shares and Institutional
Shares)
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (Mar. 30, 1992)
BALANCED GROWTH FUND -
Retail A Shares 10.97% 12.04% - 11.69%
Institutional Shares 16.51% 13.29% - 12.62%
S&P 500 INDEX 28.58% 24.06% - 20.75%
LIPPER BALANCED FUND INDEX 15.09% 13.87% - 13.01%
The S&P 500 Index is an unmanaged index of 500 common stocks that is generally
considered representative of the U.S. stock market. The Index is heavily
weighted towards stocks with large market capitalizations and represents
approximately two-thirds of the total market value of all domestic common
stocks. The Lipper Balanced Fund Index is composed of the 30 largest mutual
funds whose primary objective is to conserve principal by maintaining a balanced
portfolio of stocks and bonds. The S&P 500 Index figures do not reflect any
fees or expenses. Investors cannot invest directly in the Index.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Balanced Growth Fund.
INSTITUTIONAL RETAIL A RETAIL B
SHAREOWNER FEES (fees paid SHARES SHARES SHARES
directly from your investment)
Maximum Sales Charge (Load) Imposed
on Purchases as a percentage
of offering price) None<F1> 4.50% None<F1>
Maximum Deferred Sales Charge (Load)
(as a percentage of offering price) None<F1> None<F1> 5.00%<F1>
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends None<F1> None<F1> None<F1>
Redemption Fees None<F2> None<F2> None<F2>
Exchange Fees None<F1> None<F1> None<F1>
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
DISTRIBUTION TOTAL ANNUAL
MANAGEMENT AND SERVICE OTHER FUND OPERATING
FEES<F4> (12B-1)FEES<F5> EXPENSES<F6> EXPENSES<F7>
Balanced Growth Fund -
Retail A 0.75% 0.00% 0.49% 1.24%
Balanced Growth Fund -
Retail B3 0.75% 0.75% 0.49% 1.99%
Balanced Growth Fund -
Institutional 0.75% 0.00% 0.24% 0.99%
<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 year, 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 Annual Operating Expenses for the Retail B Shares are based on Fund
expenses for the prior fiscal year, but "Other Expenses" is restated to reflect
estimated expenses for Retail B Shares.
<F4> 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 0.73% 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.
<F3> 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.
<F6> "Other Expenses" includes (1) 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.
<F7> 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 1.22%, 1.97% and 0.97%, 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 5 YEARS 10 YEARS
Balanced Growth Fund - Retail A Shares $571 $826 $1,100 $1,882
Balanced Growth Fund - Retail B Shares
Assuming complete redemption at
end of period $702 $924 $1,273 $1,946
Assuming no redemption $202 $624 $1,073 $1,946
Balanced Growth Fund - Institutional $101 $315 $1,547 $1,213
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.
GROWTH AND INCOME FUND
OBJECTIVE
The investment objective of the Growth and Income Fund is to seek both
reasonable income and long-term capital appreciation. This investment objective
may be changed by the Board of Directors without approval of Shareowners,
although no change is currently anticipated.
PRINCIPAL INVESTMENT STRATEGIES
COMMON STOCKS
The Fund selects common stocks primarily from a universe of domestic
companies that have established dividend-paying histories. During normal
market conditions, at least 50% of net assets are invested in income-producing
equity securities. Each company initially selected must pay a current dividend.
The Adviser may sell a security for reasons including those relating to
fundamental deterioration or valuation. Fundamental deterioration occurs when a
company is no longer able to achieve the results generally expected by the
investment community due to a specific issue, such as a loss of a customer or
pricing pressure in the industry. The Adviser may sell for reasons relating to
valuation when for example a security's price has reached a target specified by
the Adviser, and the Adviser believes potential increases in price are limited.
MEDIUM- TO LARGE-SIZED COMPANIES
The Fund generally invests in medium- to large-sized companies with stock market
capitalizations over $1 billion that the Adviser considers to be well managed
and to have attractive fundamental financial characteristics (see box on page 21
for examples of these characteristics). The Fund may also invest a
portion of its assets in companies with smaller market capitalizations.
OTHER
The Fund also invests in bonds, notes, debentures and preferred stocks
convertible into common stocks, if they provide a current interest or dividend
payment.
To an extent consistent with its objective, the Fund may purchase non-
convertible debt and preferred stocks that in the opinion of the Adviser present
opportunities for capital appreciation. These obligations must be investment
grade at time of purchase or unrated but deemed comparable by the Adviser. See
"Taxable Bond Funds" for a description of investment-grade securities. After
purchase, a security may cease to be rated or may have its rating reduced below
the minimum rating required by the Fund for purchase. The Adviser will consider
whether to continue to hold the security.
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 a 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 debt securities are subject to credit risk and interest rate
risk. Credit risk is the risk that an issuer of fixed-income securities may
default on its obligation to pay interest and repay principal. Interest rate
risk is the risk that, when interest rates increase, fixed-income securities
will decline in value. In particular, convertible securities frequently have
speculative characteristics and may be acquired without regard to minimum
quality ratings. The Fund intends to invest no more than 5% of net assets in
securities rated non-investment grade at the time of purchase or unrated
securities of comparable quality. Convertible securities and obligations rated
in the lowest of the top four rating categories have speculative characteristics
and are subject to greater credit and interest rate risk than higher rated
securities. The Fund's options and 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.
BAR CHART AND PERFORMANCE TABLE
The Fund offers three types of shares, as described under "Investing with
Firstar Funds" - Institutional, Retail A and Retail B. These types of shares
bear differing levels of expenses, as described under "Investing with Firstar
Funds." The following bar chart and table provide an indication of the risks of
investing in the Fund by showing: (a) changes in the performance of the Fund's
Institutional Shares from year to year, and (b) how the average annual returns
of the Fund's Retail A and Institutional Shares compare to those of a broad-
based securities market index. The bar chart and performance table assume
reinvestment of dividends and distributions. Remember, past performance is not
indicative of future results. Prior to January 10, 1995, the Fund offered to
investors one series of shares with neither a sales charge nor a service fee.
The average annual total return calculation reflects a maximum initial sales
charge of 4.50% for the Retail A Shares, but for periods prior to January 10,
1995, performance does not reflect service organization fees. If service
organization fees had been reflected, performance would be reduced. Because the
bar chart reflects Institutional Share performance, it does not reflect the
sales load applicable to Retail A and B Shares. If the sales loads were
reflected, returns would be reduced. Performance reflects fee waivers in effect.
If fee waivers were not in place, a Fund's performance would be reduced. The
Retail B Shares commenced operations on March 1, 1999. Because those shares have
less than one year's performance, no average annual returns are shown for that
class in this section.
YEAR-BY-YEAR TOTAL RETURN AS OF 12/31 EACH YEAR (%) (INSTITUTIONAL SHARES)
1998 22.77
1997 33.54
1996 25.03
1995 34.83
1994 0.14
1993 6.64
1992 5.48
1991 22.22
1990 -0.28
1989
BEST QUARTER: Q 4 '98 17.77%)
WORST QUARTER: Q 3 '98 (9.72)%
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/98 (Detail A Shares and Institutional
Shares)
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (Dec. 29, 1989)
GROWTH AND INCOME FUND -
Retail A Shares 16.93% 21.22% - 15.23%
Institutional Shares 22.77% 22.57% - 15.95%
S&P 500 INDEX 28.58% 24.06% - 17.89%
The S&P 500 Index is an unmanaged index of 500 common stocks that is generally
considered representative of the U.S. stock market. The Index is heavily
weighted towards stocks with large market capitalizations and represents
approximately two-thirds of the total market value of all domestic common
stocks. The Index figures do not reflect any fees or expenses. Investors cannot
invest directly in the Index.
FEES AND EXPENSES OF THE FUND
this table describes the fees and expenses that you may pay if you buy and hold
shares of the Growth and Income Fund.
INSTITUTIONAL RETAIL A RETAIL B
SHAREOWNER FEES (fees paid SHARES SHARES SHARES
directly from your investment)
Maximum Sales Charge (Load) Imposed
on Purchases (as a percentage
of offering price) None<F1> 4.50% None<F1>
Maximum Deferred Sales Charge (Load)
(as a percentage of offering price) None<F1> None<F1> 5.00%<F1>
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends None<F1> None<F1> None<F1>
Redemption Fees None<F2> None<F2> None<F12>
Exchange Fees None<F1> None<F1> None<F1>
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
DISTRIBUTION TOTAL ANNUAL
MANAGEMENT AND SERVICE OTHER FUND OPERATING
FEES (12B-1)FEES<F4> EXPENSES<F5> EXPENSES
Growth and Income Fund -
Retail A 0.75% 0.00% 0.44% 1.19%
Growth and Income Fund -
Retail B3 0.75% 0.75% 0.44% 1.94%
Growth and Income Fund -
Institutional 0.75% 0.00% 0.19% 0.94%
<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 year, 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 Annual Operating Expenses for the Retail B Shares are based on Fund
expenses for the prior fiscal year, but "Other Expenses" is restated to reflect
estimated expenses for Retail B Shares.
<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" includes (1) 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.
EXAMPLE
The following example is intended to help you compare the cost of investing in
the Fund 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 5 YEARS 10 YEARS
Growth and Income Fund -
Retail A Shares $566 $811 $1,075 $1,828
Growth and Income Fund -
Retail B Shares
Assuming complete redemption
at end of period $697 $909 $1,247 $1,891
Assuming no redemption $197 $609 $1,047 $1,891
Growth and Income Fund -
Institutional $96 $300 $1,520 $1,155
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.
EQUITY INDEX FUND
OBJECTIVE
The investment objective of the Equity Index 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 500 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 500 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 500 Index as the standard performance
comparison because it represents approximately two-thirds of the total market
value of all domestic common stocks and is well known to investors.
- --------------------------------------------------------------------------------
THE FUND WILL HOLD STOCK OF APPROXIMATELY 400 TO 475 ISSUERS INCLUDED IN THE S&P
500 INDEX.
- --------------------------------------------------------------------------------
The S&P 500 Index consists of 500 selected common stocks, most of which are
listed on the New York Stock Exchange. Standard & Poor's selects the stocks
included in the S&P 500 Index on a market capitalization basis, and the S&P 500
Index is heavily weighted toward stocks with large market capitalizations.
Rather than using traditional methods of investment management, index funds such
as the Equity 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 500 Index.
The Fund does not expect to hold all of the stocks included in the S&P 500 Index
at any particular time. However, the Adviser believes that it will be able to
construct and maintain the Fund's investment portfolio so that it reasonably
tracks the performance of the S&P 500 Index by using a capitalization weighting
and sector balancing technique.
The Adviser believes the quarterly performance of the Fund and the S&P 500 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 that it will be able to construct and maintain the Fund's investment
portfolio so that it reasonably tracks the performance of the S&P 500 Index. In
the event the performance of the Fund is not comparable to the performance of
the S&P 500 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.
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 a Fund invests may go up or down in response to the
prospects of individual companies and/or general economic conditions. Your
investment follows the large-cap portion of the U.S. stock market, as measured
by the S&P 500 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 large-cap stocks perform less
than mid- 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 500 Index.
The Adviser may be required to sell common stock if the issuer is eliminated
from the S&P 500 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 500 Index to track general
stock market performance.
BAR CHART AND PERFORMANCE TABLE
The Fund offers three types of shares, as described under "Investing with
Firstar Funds" - Institutional, Retail A and Retail B. These types of shares
bear differing levels of expenses, as described under "Investing with Firstar
Funds." The following bar chart and table provide an indication of the risks of
investing in the Fund by showing: (a) changes in the performance of the Fund's
Institutional Shares from year to year, and (b) how the average annual returns
of the Fund's Retail A and Institutional Shares compare to those of a broad-
based securities market index. The bar chart and performance table assume
reinvestment of dividends and distributions. Remember, past performance is not
indicative of future results. Prior to January 10, 1995, the Fund offered to
investors one series of shares with neither a sales charge nor a service fee.
The average annual total return calculation reflects a maximum initial sales
charge of 4.50% for the Retail A Shares, but for periods prior to January 10,
1995, performance does not reflect service organization fees. If service
organization fees had been reflected, performance would be reduced. Because the
bar chart reflects Institutional Share performance, it does not reflect the
sales load applicable to Retail A and B Shares. If the sales loads were
reflected, returns would be reduced. Performance reflects fee waivers in effect.
If fee waivers were not in place, a Fund's performance would be reduced. The
Retail B Shares commenced operations on March 1, 1999. Because those shares have
less than one year's performance, no average annual returns are shown for that
class in this section.
YEAR-BY-YEAR TOTAL RETURN AS OF 12/31 EACH YEAR (%)(INSTITUTIONAL SHARES)
1998 28.72
1997 32.59
1996 22.65
1995 36.98
1994 1.02
1993 9.11
1992 6.97
1991 29.96
1990 -3.29
1989
BEST QUARTER: Q 4 '98 21.52%
WORST QUARTER: Q 3 '90 (13.60)%
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/98 (Retail A Shares and Institutional
Shares)
1 YEAR 5 YEARS 10 YEARS
EQUITY INDEX FUND -
Retail A Shares 22.62% 22.33% 18.08%
Institutional Shares 28.72% 23.69% 18.74%
S&P 500 INDEX 28.58% 24.06% 19.21%
The S&P 500 Index is an unmanaged index of 500 common stocks that is generally
considered representative of the U.S. stock market. The Index is heavily
weighted towards stocks with large market capitalizations and represents
approximately two-thirds of the total market value of all domestic common
stocks. Index figures do not reflect any fees or expenses. Investors cannot
invest directly in the Index.
The performance of the Equity Index Fund for the period prior to December 29,
1989 is represented by the performance of a collective investment fund which
operated prior to the effectiveness of the registration statement of the Firstar
Equity Index Fund. At the time of Firstar Equity Index Funds' inception, the
collective investment fund was operated using substantially the same investment
objectives, policies and restrictions as Firstar Equity Index Fund. In
connection with Firstar Equity Index Funds' commencement of operations, on
December 29, 1989, the collective investment fund transferred its assets to the
Firstar Equity Index Fund.
The collective investment fund was not open to the public generally, nor
registered under the Investment Company Act of 1940 (the "1940 Act") or subject
to certain restrictions that are imposed by the 1940 Act and the Internal
Revenue Code. If the collective investment fund had been registered under the
1940 Act, performance may have been adversely affected. Performance of the
collective investment fund has been restated to reflect the Firstar Equity Index
Funds' actual expenses during its first fiscal year. Performance quotations of
the collective investment fund represent past performance of the FIRMCO managed
collective fund, which is separate and distinct from Firstar Equity Index Fund;
do not represent past performance of the Fund; and should not be considered as
representative of future results of the Fund.
At the time of the transfer, the Adviser did not manage any other collective
investment or common trust funds using materially equivalent investment
objectives, policies, guidelines and restrictions to those of the Equity Index
Fund.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Equity
Index Fund.
INSTITUTIONAL RETAIL A RETAIL B
SHAREOWNER FEES (fees paid SHARES SHARES SHARES
directly from your investment)
Maximum Sales Charge (Load) Imposed
on Purchases (as a percentage
of offering price) None<F1> 4.50% None<F1>
Maximum Deferred Sales Charge (Load)
(as a percentage of offering price) None<F1> None<F1> 5.00%<F1>
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends None<F1> None<F1> None<F1>
Redemption Fees None<F2> None<F2> None<F2>
Exchange Fees None<F1> None<F1> None<F1>
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
DISTRIBUTION TOTAL ANNUAL
MANAGEMENT AND SERVICE OTHER FUND OPERATING
FEES<F4> (12B-1)FEES<F5> EXPENSES<F6> EXPENSES<F7>
Equity Index Fund - Retail A 0.25% 0.00% 0.43% 0.68%
Equity Index Fund - Retail B3 0.25% 0.75% 0.43% 1.43%
Equity Index Fund -
Institutional 0.25% 0.00% 0.18% 0.43%
<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 year, 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 Annual Operating Expenses for the Retail B Shares are based on Fund
expenses for the prior fiscal year, but "Other Expenses" is restated to reflect
estimated expenses for Retail B Shares.
<F4> 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 0.19% 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.
<F5> 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.
<F6> "Other Expenses" includes (1) 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.
<F7> 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 0.62%, 1.37% and 0.37%, 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 5 YEARS 10 YEARS
Equity Index Fund -
Retail A Shares $516 $658 $812 $1,258
Equity Index Fund - Retail B Shares
Assuming complete redemption
at end of period $646 $752 $982 $1,321
Assuming no redemption $146 $452 $782 $1,321
Equity Index Fund - Institutional $144 $138 $241 $1,542
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.
GROWTH FUND
OBJECTIVE
The Growth Fund seeks capital appreciation through investment in securities of
large-sized companies. This investment objective may be changed by the Board of
Directors without approval of Shareowners, although no change is currently
anticipated.
EQUITY SECURITIES
During normal market conditions, the Fund invests at least 50% of total assets
in equity securities. Most of these equity securities are publicly-traded common
stocks of companies incorporated in the U.S.
PRINCIPAL INVESTMENT STRATEGIES
The Adviser may sell a security for reasons including those relating to
fundamental deterioration or valuation. Fundamental deterioration occurs when a
company is no longer able to achieve the results generally expected by the
investment community due to a specific issue, such as a loss of a customer or
pricing pressure in the industry. The Adviser may sell for reasons relating to
valuation when for example a security's price has reached a target specified by
the Adviser, and the Adviser believes potential increases in price are limited.
LARGE-SIZED COMPANIES
The Fund generally invests in large-sized companies with stock market
capitalizations over $3 billion that the Adviser considers to be well-managed
and to have attractive fundamental financial characteristics (see box on page --
for examples of these characteristics). The Fund may also invest a portion of
its assets in companies with market capitalizations below $3 billion.
OTHER
The Fund also invests in bonds, notes, debentures and preferred stocks
convertible into common stocks, if, in the Adviser's opinion, they present
opportunities for capital appreciation.
To the extent consistent with its objective, the Fund may purchase non-
convertible debt and preferred stocks that, in the opinion of the Adviser,
present opportunities for capital appreciation. These obligations must be
investment grade at time of purchase or unrated but deemed comparable by the
Adviser. See "Taxable Bond Funds" for a description of investment grade
securities. After purchase, a security may cease to be rated or may have its
rating reduced below the minimum rating required by the Fund for purchase. The
Adviser will consider whether to continue to hold the security.
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 a 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 debt securities are subject to credit risk and interest rate
risk. Credit risk is the risk that an issuer of fixed-income securities may
default on its obligation to pay interest and repay principal. Interest rate
risk is the risk that, when interest rates increase, fixed-income securities
will decline in value. In particular, convertible securities frequently have
speculative characteristics and may be acquired without regard to minimum
quality ratings. The Fund intends to invest no more than 5% of net assets in
securities rated non-investment grade at the time of purchase, or unrated
securities of comparable quality. Convertible securities and obligations rated
in the lowest of the top four rating categories have speculative
characteristics, and are subject to greater credit and interest rate risk than
higher rated securities.
BAR CHART AND PERFORMANCE TABLE
The Fund offers three types of shares, as described under "Investing with
Firstar Funds" - Institutional, Retail A and Retail B. These types of shares
bear differing levels of expenses, as described under "Investing with Firstar
Funds." The following bar chart and table provide an indication of the risks of
investing in the Fund by showing: (a) changes in the performance of the Fund's
Institutional Shares from year to year, and (b) how the average annual returns
of the Fund's Retail A and Institutional Shares compare to those of a broad-
based securities market index. The bar chart and performance table assume
reinvestment of dividends and distributions. Remember, past performance is not
indicative of future results. Prior to January 10, 1995, the Fund offered to
investors one series of shares with neither a sales charge nor a service fee.
The average annual total return calculation reflects a maximum initial sales
charge of 4.50% for the Retail A Shares, but for periods prior to January 10,
1995, performance does not reflect service organization fees. If service
organization fees had been reflected, performance would be reduced. Because the
bar chart reflects Institutional Share performance, it does not reflect the
sales load applicable to Retail A and B Shares. If the sales loads were
reflected, returns would be reduced. Performance reflects fee waivers in effect.
If fee waivers were not in place, a Fund's performance would be reduced. The
Retail B Shares commenced operations on March 1, 1999. Because those shares have
less than one year's performance, no average annual returns are shown for that
class in this section.
YEAR-BY-YEAR TOTAL RETURN AS OF 12/31 EACH YEAR (%)(INSTITUTIONAL SHARES)
1998 30.46
1997 22.91
1996 18.15
1995 30.03
1994 -5.34
1993 9.98
1992
1991
1990
1989
BEST QUARTER: Q 4 '98 24.04%)
WORST QUARTER: Q 3 '98 (11.12)%
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/98 (Retail A Shares and Institutional
Shares)
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (DEC. 29, 1992)
GROWTH FUND - Retail A Shares 24.31% 17.14% - 15.98%
Institutional Shares 30.46% 18.44% - 17.06%
S&P 500 INDEX 28.58% 24.06% - 12.61%
The S&P 500 Index is an unmanaged index of 500 common stocks that is generally
considered representative of the U.S. stock market. The Index is heavily
weighted towards stocks with large market capitalizations and represents
approximately two-thirds of the total market value of all domestic common
stocks. The Index figures do not reflect any fees or expenses. Investors cannot
invest directly in the Index.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Growth Fund.
INSTITUTIONAL RETAIL A RETAIL B
SHAREOWNER FEES (fees paid directly) SHARES SHARES SHARES
from your investment
Maximum Sales Charge (Load) Imposed
on Purchases (as a percentage
of offering price) None<F1> 4.50% None<F1>
Maximum Deferred Sales Charge (Load)
(as a percentage of offering price) None<F1> None<F1> 5.00%<F1>
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends None<F1> None<F1> None1<F1>
Redemption Fees None2 None2 None2
Exchange Fees None<F1> None<F1> None<F1>
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
DISTRIBUTION TOTAL ANNUAL
MANAGEMENT AND SERVICE OTHER FUND OPERATING
FEES (12B-1)FEES<F4>EXPENSES<F5> EXPENSES
Growth Fund - Retail A 0.75% 0.00% 0.46% 1.21%
Growth Fund - Retail B3 0.75% 0.75% 0.46% 1.96%
Growth Fund - Institutional 0.75% 0.00% 0.21% 0.96%
<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 year, 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 Annual Operating Expenses for the Retail B Shares are based on Fund
expenses for the prior fiscal year, but are restated to reflect estimated
expenses for Retail B Shares.
<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" includes (1) 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.
EXAMPLE
The following example is intended to help you compare the cost of investing in
the Fund 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 5 YEARS 10 YEARS
Growth Fund - Retail A Shares $568 $817 $1,085 $1,850
Growth Fund - Retail B Shares
Assuming complete redemption
at end of period $699 $915 $1,257 $1,913
Assuming no redemption $199 $615 $1,057 $1,913
Growth Fund - Institutional $198 $306 $1,531 $1,178
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.
SPECIAL GROWTH FUND
OBJECTIVE
The Special Growth Fund seeks capital appreciation. This investment objective
may be changed by the Board of Directors without approval of Shareowners,
although no change is currently anticipated.
EQUITY SECURITIES/POTENTIAL PRICE APPRECIATION
The Fund selects securities based on their potential for price appreciation.
During normal market conditions, the Fund invests at least 50% of total assets
in equity securities. Most of these equity securities are publicly traded common
stocks of companies incorporated in the U.S.
PRINCIPAL INVESTMENT STRATEGIES
The Adviser may sell a security for reasons including those relating to
fundamental deterioration or valuation. Fundamental deterioration occurs when a
company is no longer able to achieve the results generally expected by the
investment community due to a specific issue, such as a loss of a customer or
pricing pressure in the industry. The Adviser may sell for reasons relating to
valuation when for example a security's price has reached a target specified by
the Adviser, and the Adviser believes potential increases in price are limited.
MEDIUM-SIZED COMPANIES
The Fund generally invests in medium-sized companies with stock market
capitalizations between $700 million and $5 billion that the Adviser considers
to be well-managed and to have attractive fundamental financial characteristics
(see box on page 21 for examples of these characteristics). The Fund may also
invest a portion of its assets in companies with smaller or larger market
capitalizations.
OTHER
The Fund also invests in bonds, notes, debentures and preferred stocks
convertible into common stocks, and may invest up to 5% of net assets in other
types of securities having common stock characteristics, such as rights and
warrants to purchase equity securities.
The Fund may purchase non-convertible debt and preferred stocks that, in the
opinion of the Adviser, present opportunities for capital appreciation. These
obligations must be investment-grade at time of purchase or unrated but deemed
comparable by the Adviser. See "Taxable Bond Funds" for a description of
investment grade securities. After purchase, a security may cease to be rated or
may have its rating reduced below the minimum rating required by the Fund for
purchase. The Adviser will consider whether to continue to hold the security.
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 without
concern for current income and are financially able to assume risk in search of
long-term capital appreciation. The Adviser believes, however, that there is
greater potential for price appreciation among medium-sized companies in which
the Fund invests, since they tend to be less widely followed by other securities
analysts and thus may be more likely to be undervalued by the market.
The Fund is subject to market risk. Market risk is the risk that the value of
the securities in which a 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 debt securities are subject to credit risk and interest rate
risk. Credit risk is the risk that an issuer of fixed-income securities may
default on its obligation to pay interest and repay principal. Interest rate
risk is the risk that, when interest rates increase, fixed-income securities
will decline in value. Convertible securities frequently have speculative
characteristics and may be acquired without regard to minimum quality ratings.
The Fund intends to invest no more than 5% of net assets in securities rated
non-investment grade at the time of purchase or unrated securities of comparable
quality. Convertible securities and obligations rated in the lowest of the top
four rating categories are subject to greater credit and interest rate risk than
higher rated securities.
BAR CHART AND PERFORMANCE TABLE
The Fund offers three types of shares, as described under "Investing with
Firstar Funds" - Institutional, Retail A and Retail B. These types of shares
bear differing levels of expenses, as described under "Investing with Firstar
Funds." The following bar chart and table provide an indication of the risks of
investing in the Fund by showing: (a) changes in the performance of the Fund's
Institutional Shares from year to year, and (b) how the average annual returns
of the Fund's Retail A and Institutional Shares compare to those of a broad-
based securities market index. The bar chart and performance table assume
reinvestment of dividends and distributions. Remember, past performance is not
indicative of future results. Prior to January 10, 1995, the Fund offered to
investors one series of shares with neither a sales charge nor a service fee.
The average annual total return calculation reflects a maximum initial sales
charge of 4.50% for the Retail A Shares, but for periods prior to January 10,
1995, performance does not reflect service organization fees. If service
organization fees had been reflected, performance would be reduced. Because the
bar chart reflects Institutional Share performance, it does not reflect the
sales load applicable to Retail A and B Shares. If the sales loads were
reflected, returns would be reduced. Performance reflects fee waivers in effect.
If fee waivers were not in place, a Fund's performance would be reduced. The
Retail B Shares commenced operations on March 1, 1999. Because those shares have
less than one year's performance, no average annual returns are shown for that
class in this section.
YEAR-BY-YEAR TOTAL RETURN AS OF 12/31 EACH YEAR (%)(INSTITUTIONAL SHARES)
1998 4.91
1997 17.42
1996 18.87
1995 29.94
1994 -2.01
1993 8.02
1992 7.22
1991 57.96
1990 1.00
1989
BEST QUARTER: Q 1 '91 21.67%
WORST QUARTER: Q 3 '98 (19.63)%
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/98 (Retail A Shares and Institutional
Shares)
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (DEC. 28, 1989)
SPECIAL GROWTH FUND -
Retail A Shares (0.07)% 12.01% - 14.17%
Institutional Shares 4.91% 13.26% - 14.88%
S&P 500 INDEX 28.58% 24.06% - 17.89%
S&P MIDCAP 400 INDEX 19.11% 18.84% - -
The S&P 500 Index is an unmanaged index of 500 common stocks that is generally
considered representative of the U.S. stock market. The Index is heavily
weighted towards stocks with large market capitalizations and represents
approximately two-thirds of the total market value of all domestic common
stocks. The S&P MidCap 400 Index is a capitalization weighted index that
represents the aggregate market value of the common equity of 400 stocks chosen
by S&P with a median capitalization of approximately $700 million and measures
the performance of the mid-range sector of the U.S. stock market. The Index
figures do not reflect any fees or expenses. Investors cannot invest directly in
the Index.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Special Growth Fund.
INSTITUTIONAL RETAIL A RETAIL B
SHAREOWNER FEES (fees paid SHARES SHARES SHARES
directly from your investment)
Maximum Sales Charge (Load) Imposed
on Purchases (as a percentage
of offering price) None<F1> 4.50% None1
Maximum Deferred Sales Charge (Load)
(as a percentage of offering price) None<F1> None<F1> 5.00%<F1>
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends None<F1> None<F1> None<F1>
Redemption Fees None<F2> None<F2> None<F2>
Exchange Fees None<F1> None<F1> None<F1>
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
DISTRIBUTION TOTAL ANNUAL
MANAGEMENT AND SERVICE OTHER FUND OPERATING
FEES (12B-1)FEES<F4>EXPENSES<F5> EXPENSES
Special Growth Fund - Retail A 0.75% 0.00% 0.45% 1.20%
Special Growth Fund - Retail B3 0.75% 0.75% 0.45% 1.95%
Special Growth Fund -
Institutional 0.75% 0.00% 0.20% 0.95%
<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 year, 2% in the fifth year, declining to 1% in
the sixth 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 Annual Operating Expenses for the Retail B Shares are based on Fund
expenses for the prior fiscal year, but "Other Expenses" is restated to reflect
estimated expenses for Retail B Shares.
<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" includes (1) 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.
EXAMPLE
The following example is intended to help you compare the cost of investing in
the Fund 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 5 YEARS 10 YEARS
Special Growth Fund - Retail A Shares $567 $814 $1,080 $1,839
Special Growth Fund - Retail B Shares
Assuming complete redemption
at end of period $698 $912 $1,252 $1,902
Assuming no redemption $198 $612 $1,052 $1,902
Special Growth Fund - Institutional $197 $303 $1,525 $1,166
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.
EMERGING GROWTH FUND
OBJECTIVE
The Emerging Growth Fund seeks capital appreciation. This investment objective
may be changed by the Board of Directors without approval of Shareowners,
although no change is currently anticipated.
PRINCIPAL INVESTMENT STRATEGIES
EQUITY SECURITIES/POTENTIAL PRICE APPRECIATION
The Fund selects securities based on their potential for price appreciation.
During normal market conditions, the Fund invests at least 50% of total assets
in equity securities. Most of these equity securities will be publicly traded
common stocks of companies incorporated in the U.S.
The Adviser may sell a security for reasons including those relating to
fundamental deterioration or valuation. Fundamental deterioration occurs when a
company is no longer able to achieve the results generally expected by the
investment community due to a specific issue, such as a loss of a customer or
pricing pressure in the industry. The Adviser may sell for reasons relating to
valuation when for example a security's price has reached a target specified by
the Adviser, and the Adviser believes potential increases in price are limited.
SMALL-SIZED COMPANIES
The Fund generally invests in small-sized companies with stock market
capitalizations between $250 million and $2 billion that the Adviser considers
to be well managed and to have attractive fundamental financial characteristics
(see box on page 21 for examples of these characteristics). The Fund may
also invest a portion of its assets in companies with larger or smaller market
capitalizations.
- --------------------------------------------------------------------------------
The Fund invests primarily in small-sized companies with stock market
capitalizations between $250 million and $2 billion.
- --------------------------------------------------------------------------------
OTHER
The Fund also invests in bonds, notes, debentures and preferred stocks
convertible into common stocks, and may invest up to 5% of net assets in other
types of securities having common stock characteristics, such as rights and
warrants to purchase equity securities.
The Fund may purchase non-convertible bonds, notes, debentures, preferred stocks
and other obligations that, in the opinion of the Adviser, present opportunities
for capital appreciation. These obligations must be investment grade at time of
purchase or unrated but deemed comparable by the Adviser. See "Taxable Bond
Funds" for a description of investment-grade securities. After purchase, a
security may cease to be rated or may have its rating reduced below the minimum
rating required by the Fund for purchase. The Adviser will consider whether to
continue to hold the security.
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 without
concern for current income and are financially able to assume an above-average
level of market risk in search of long-term capital appreciation. The Adviser
believes, however, that there is greater potential for price appreciation among
small-sized companies in which the Fund invests, since they tend to be less
widely followed by other securities analysts and thus may be more likely to be
undervalued by the market.
The Fund is subject to market risk. Market risk is the risk that the value of
the securities in which a 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 debt securities are subject to credit risk and interest rate
risk. Credit risk is the risk that an issuer of fixed income securities may
default on its obligation to pay interest and repay principal. Interest rate
risk is the risk that, when interest rates increase, fixed income securities
will decline in value. In particular, convertible securities frequently have
speculative characteristics and may be acquired without regard to minimum
quality ratings. The Fund intends to invest no more than 5% of net assets in
securities rated non-investment grade at the time of purchase or unrated
securities of comparable quality. Convertible securities and obligations rated
in the lowest of the top four rating categories are subject to greater credit
and interest rate risk than higher rated securities.
The Fund's holdings are subject to small cap stock risks.
BAR CHART AND PERFORMANCE TABLE
The Fund offers three types of shares, as described under "Investing with
Firstar Funds" - Institutional, Retail A and Retail B. These types of shares
bear differing levels of expenses, as described under "Investing with Firstar
Funds." The following bar chart and table provide an indication of the risks of
investing in the Fund by showing: (a) changes in the performance of the Fund's
Institutional Shares from year to year, and (b) how the average annual returns
of the Fund's Retail A and Institutional Shares compare to those of a broad-
based securities market index. The bar chart and performance table assume
reinvestment of dividends and distributions. Remember, past performance is not
indicative of future results. The average annual total return calculation
reflects a maximum initial sales charge of 4.50% for the Retail A Shares.
Because the bar chart reflects Institutional Share performance, it does not
reflect the sales load applicable to Retail A and B Shares. If the sales loads
were reflected, returns would be reduced. Performance reflects fee waivers in
effect. If fee waivers were not in place, a Fund's performance would be reduced.
The Retail B Shares commenced operations on March 1, 1999. Because those shares
have less than one year's performance, no average annual returns are shown for
that class in this section.
YEAR-BY-YEAR TOTAL RETURN AS OF 12/31 EACH YEAR (%)(INSTITUTIONAL SHARES)
1998 8.49
1997
1996
1995
1994
1993
1992
1991
1990
1989
BEST QUARTER: Q 4 '98 21.11%
WORST QUARTER: Q 3 '98 (19.59)%
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/98 (Retail A Shares and Institutional
Shares)
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (Aug. 15, 1997)
EMERGING GROWTH FUND -
Retail A Shares 3.43% - - 3.59%
Institutional Shares 8.49% - - 7.31%
S&P SMALLCAP 600 (1.31)% - - 3.98%
WILSHIRE NEXT 1750 INDEX (1.31)% - - 3.98%
The S&P SmallCap 600 Index is a capitalization weighted index that measures the
performance of selected U.S. stocks with small market capitalizations. The
Wilshire Next 1750 Index is an unmanaged index, which shows the next largest
1,750 companies after the Top 750 of the Wilshire 5000 Stock Index. The Index
figures do not reflect any fees or expenses. Investors cannot invest directly in
the Index.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Emerging Growth Fund.
INSTITUTIONAL RETAIL A RETAIL B
SHAREOWNER FEES (fees paid directly SHARES SHARES SHARES
from your investment)
Maximum Sales Charge (Load) Imposed
on Purchases (as a percentage
of offering price) None<F1> 4.50% None<F1>
Maximum Deferred Sales Charge (Load)
(as a percentage of offering price) None<F1> None<F1> 5.00%<F1>
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends None<F1> None<F1> None<F1>
Redemption Fees None<F2> None<F2> None<F2>
Exchange Fees None<F1> None<F1> None<F1>
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
DISTRIBUTION TOTAL ANNUAL
MANAGEMENT AND SERVICE OTHER FUND OPERATING
FEES<F4> (12B-1) FEES<F5> EXPENSES<F6>EXPENSES<F7>
Emerging Growth Fund -
Retail A 0.75% 0.00% 0.63% 1.38%
Emerging Growth Fund -
Retail B3 0.75% 0.75% 0.63% 2.13%
Emerging Growth Fund -
Institutional 0.75% 0.00% 0.38% 1.13%
<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 year, 2% in the fifth year,
declining to 1% in the sixth 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 Annual Operating Expenses for the Retail B Shares are based on Fund
expenses for the prior fiscal year, but "Other Expenses" is restated to reflect
estimated expenses for Retail B Shares.
<F4> 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 0.73% 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.
<F5> 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.
<F6> "Other Expenses" includes (1) 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.
<F7> 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 1.36%, 2.11% and 1.11%, 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 5 YEARS 10 YEARS
EMERGING GROWTH FUND - Retail A Shares $584 $867 $1,171 $2,033
EMERGING GROWTH FUND - Retail B Shares
ASSUMING COMPLETE REDEMPTION AT
END OF PERIOD $716 $967 $1,344 $2,096
ASSUMING NO REDEMPTION $216 $667 $1,144 $2,096
EMERGING GROWTH FUND - Institutional $115 $359 $1,622 $1,375
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.
MICROCAP FUND
OBJECTIVE
The investment objective of the MicroCap Fund is capital appreciation. This
investment objective may be changed by the Board of Directors without approval
of Shareowners, although no change is currently anticipated.
PRINCIPAL INVESTMENT STRATEGIES
COMMON STOCKS/POTENTIAL PRICE APPRECIATION
The Fund selects securities based on their potential for price appreciation.
Most of the securities the Fund holds will be common stocks of companies
incorporated in the U.S.
The Adviser may sell a security for reasons including those relating to
fundamental deterioration or valuation. Fundamental deterioration occurs when a
company is no longer able to achieve the results generally expected by the
investment community due to a specific issue, such as a loss of a customer or
pricing pressure in the industry. The Adviser may sell for reasons relating to
valuation when for example a security's price has reached a target specified by
the Adviser, and the Adviser believes potential increases in price are limited.
MICRO CAPITALIZATION COMPANIES
At least 65% of the Fund's total assets will be invested in equity and debt
securities of micro capitalization companies that, in general, the Adviser
considers to be well managed and to have attractive fundamental financial
characteristics (see box on page 21 for examples of these characteristics).
Micro capitalization companies are those with capitalizations at the time of
purchase below the median market capitalization of the Russell 2000 Index, which
is currently approximately $481 million. The Fund may invest up to 35% of its
assets at the time of purchase in companies in excess of the median market
capitalization of the Russell 2000 Index. If the market capitalization of a
company in which the Fund has invested increases above the median market
capitalization of the Russell 2000 Index, the Fund may continue to hold the
security.
The Adviser believes that there is greater potential for price appreciation
among small-sized companies in which the Fund invests, since they tend to be
less widely followed by other securities analysts and thus may be more likely to
be undervalued by the market.
The Fund intends to invest no more than 5% of net assets in securities rated
non-investment grade at the time of purchase (or unrated securities of
comparable quality).
OTHER
The Fund may invest up to 25% of total assets in the securities of foreign
issuers, either directly or through sponsored American Depository Receipts.
American Depository Receipts are receipts issued by an American bank or trust
company evidencing ownership of underlying securities issued by a foreign
issuer. American Depository Receipts may be listed on a national securities
exchange or may trade in the over-the-counter market. American Depository
Receipts are denominated in U.S. dollars. The underlying securities may be
denominated in a foreign currency.
The Fund also invests in bonds, notes, debentures and preferred stocks
convertible into common stocks.
The Fund may purchase non-convertible debt and preferred stocks that, in the
opinion of the Adviser, present opportunities for capital appreciation. These
obligations must be investment grade at time of purchase or be unrated but
deemed comparable by the Adviser. See "Taxable Bond Funds" for a description of
investment-grade securities. After purchase, a security may cease to be rated or
may have its rating reduced below the minimum rating required by the Fund for
purchase. The Adviser will consider whether to continue to hold the security.
The Fund may acquire securities of unseasoned companies (companies with less
than three years of continuous operation) when the Adviser believes the
investments offer possibilities of attractive capital appreciation, but will not
invest more than 20% of the value of its total assets in the securities of
unseasoned companies.
PRINCIPAL RISK
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 without
concern for current income and are financially able to assume an above-average
level of market risk in search of long-term capital gain. Market risk is the
risk that the value of the securities in which a Fund invests may go up or down
in response to the prospects of individual companies and/or general economic
conditions. The Fund's expenses in a year may exceed income. There can be no
assurance the investment objective of the Fund will be realized or the value of
the Fund's investments will not decline in value. You should consider the Fund
to be a long-term investment and not a vehicle for seeking short-term profits
and income.
The Fund's investments in debt securities are subject to credit risk and
interest rate risk. Credit risk is the risk that an issuer of fixed-income
securities may default on its obligation to pay interest and repay principal.
Interest rate risk is the risk that, when interest rates increase, fixed income
securities will decline in value. In particular, convertible securities
frequently have speculative characteristics and may be acquired without regard
to minimum quality ratings. Obligations rated in the lowest of the top four
rating categories are subject to greater credit and interest rate risk than
higher rated securities.
The Fund's holdings are subject to micro cap stock risks. Micro 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. Also, securities of micro cap companies are less liquid, and are
subject to liquidity risk. Liquidity risk is the risk that certain securities
may be difficult or impossible to sell at a desirable time and price. There
normally is less publicly available information concerning these securities. In
addition, the Fund's investments in unseasoned companies present risks
considerably greater than investments in more established companies. Further,
the securities in which the Fund invests will often be traded only in the over-
the-counter market or on a regional securities exchange, may be listed only in
the quotation service commonly known as the "pink sheets," and may not be traded
every day or in the volume typical of trading on a national securities exchange.
They may be subject to wide fluctuations in market value. The trading market for
any given security may be sufficiently thin as to make it difficult for the Fund
to dispose of a substantial block of such securities. These securities are less
liquid than other more widely traded securities. The disposition by the Fund of
portfolio securities to meet redemptions or otherwise may require the Fund to
sell these securities at a discount from market prices or during periods when,
in the Adviser's judgment, such disposition is not desirable or to make many
small sales over a lengthy period of time.
The Fund's investments in foreign securities and American Depository Receipts
are subject to foreign risks. Foreign risks, which are not typically associated
with domestic issuers, result from less government regulation, less public
information and less economic, political and social stability. The Fund will
also be subject to the risk of negative foreign currency fluctuations. Foreign
risks will normally be greatest when the Fund invests in issuers located in
emerging countries.
BAR CHART AND PERFORMANCE TABLE
The Fund offers three types of shares, as described under "Investing with
Firstar Funds" - Institutional, Retail A and Retail B. These types of shares
bear differing levels of expenses, as described under "Investing with Firstar
Funds." The following bar chart and table provide an indication of the risks of
investing in the Fund by showing: (a) changes in the performance of the Fund's
Institutional Shares from year to year, and (b) how the average annual returns
of the Fund's Retail A and Institutional Shares compare to those of a broad-
based securities market index. The bar chart and performance table assume
reinvestment of dividends and distributions. Remember, past performance is not
indicative of future results. The average annual total return calculation
reflects a maximum initial sales charge of 4.50% for the Retail A Shares.
Because the bar chart reflects Institutional Share performance, it does not
reflect the sales load applicable to Retail A and B Shares. If the sales loads
were reflected, returns would be reduced. Performance reflects fee waivers in
effect. If fee waivers were not in place, a Fund's performance would be reduced.
The Retail B Shares commenced operations on March 1, 1999. Because those shares
have less than one year's performance, no average annual returns are shown for
that class in this section.
YEAR-BY-YEAR TOTAL RETURN AS OF 12/31 EACH YEAR (%)(INSTITUTIONAL SHARES)
1998 -2.45
1997 13.92
1996 57.23
1995
1994
1993
1992
1991
1990
1989
BEST QUARTER:Q 4 '98 23.07%
WORST QUARTER:Q 3 '98 (30.81)%
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/98 (Retail A Shares and Institutional
Shares)
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (Aug. 1, 1995)
MICROCAP FUND - Retail A Shares (7.08)% - - 22.06%
Institutional Shares (2.45)% - - 24.05%
RUSSELL 2000 (2.55)% - - 12.04%
The Russell 2000, an unmanaged index, consists of the smallest 2,000 companies
in a group of 3,000 U.S. companies in the Russell 3000 Index, as ranked by total
market capitalization. The Index figures do not reflect any fees or expenses.
Investors cannot invest directly in the Index.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the MicroCap Fund.
INSTITUTIONAL RETAIL A RETAIL B
SHAREOWNER FEES (fees paid directly SHARES SHARES SHARES
from your investment)
Maximum Sales Charge (Load) Imposed
on Purchases (as a percentage
of offering price) None<F1> 4.50% None<F1>
Maximum Deferred Sales Charge (Load)
(as a percentage of offering price) None<F1> None<F1> 5.00%<F1>
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends None<F1> None<F1> None<F1>
Redemption Fees None<F2> None<F2> None<F2>
Exchange Fees None<F1> None<F1> None<F1>
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
DISTRIBUTION TOTAL ANNUAL
MANAGEMENT AND SERVICE OTHER FUND OPERATING
FEES (12B-1) FEES<F4> EXPENSES<F5> EXPENSES
MicroCap Fund - Retail A 1.50% 0.00% 0.55% 2.05%
MicroCap Fund - Retail B3 1.50% 0.75% 0.55% 2.80%
MicroCap Fund -
Institutional 1.50% 0.00% 0.30% 1.80%
<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 year and fourth year, 2% in the fifth
year, declining to 1% in the sixth 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 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 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.
<F4> The Annual Operating Expenses for the Retail B Shares are based on Fund
expenses for the prior fiscal year, but other expenses are restated to reflect
estimated expenses for Retail B Shares.
<F5> "Other Expenses" includes (1) 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.
EXAMPLE
The following example is intended to help you compare the cost of investing in
the Fund 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 5 YEARS 10 YEARS
MICROCAP FUND - Retail A Shares $649 $1,064 $1,504 $2,722
MICROCAP FUND - Retail B Shares
ASSUMING COMPLETE REDEMPTION AT
END OF PERIOD $783 $1,168 $1,679 $2,786
ASSUMING NO REDEMPTION $283 $1,868 $1,479 $2,786
MICROCAP FUND - Institutional $183 $1,566 $1,975 $2,116
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.
INTERNATIONAL EQUITY FUND
OBJECTIVE
The investment objective of the International Equity Fund is to seek capital
appreciation through investing in foreign securities which the Sub-Adviser
believes are undervalued. This investment objective may be changed by the Board
of Directors without approval of Shareowners, although no change is currently
anticipated.
PRINCIPAL INVESTMEMT
Hansberger Global Investors, Inc. (the Sub-Adviser) chooses securities based on
a long-term investment perspective. The Sub-Adviser seeks opportunities to
invest in many countries and believes that this international search provides
flexibility to shift portfolio investments not only from company to company and
industry to industry, but also country to country, in search of undervalued
securities.
- --------------------------------------------------------------------------------
The Fund's policy under normal market conditions is to invest at least 65% of
its total assets in foreign common stocks, convertible securities, rights to
purchase equity securities, and warrants. UNDER NORMAL MARKET CON DITIONS, AT
LEAST 80% OF ASSETS WILL BE INVESTED IN THREE COUNTRIES OTHER THAN THE U.S.
- -------------------------------------------------------------------------------
The Adviser may sell a security for reasons including those relating to
fundamental deterioration or valuation. Fundamental deterioration occurs when a
company is no longer able to achieve the results generally expected by the
investment community due to a specific issue, such as a loss of a customer or
pricing pressure in the industry. The Adviser may sell for reasons relating to
valuation when for example a security's price has reached a target specified by
the Adviser, and the Adviser believes potential increases in price are limited.
The Fund generally invests in common stocks, but may also invest in preferred
stocks and certain rated or unrated debt securities when the Sub-Adviser
believes there's a potential for appreciation. The Fund may also invest in
warrants or rights to subscribe to or purchase such securities, and sponsored or
unsponsored:
- American Depository Receipts
- European Depository Receipts
- Global Depository Receipts, and
- other depository receipts
American Depository Receipts are receipts issued by an American bank or trust
company evidencing ownership of underlying securities issues by a foreign
issuer. American Depository Receipts may be listed on a national securities
exchange or may trade in the over-the-counter market. American Depository
Receipts are denominated in U.S. dollars. The underlying securities may be
denominated in a foreign currency.
The Fund may also invest in:
- closed-end investment companies holding foreign securities
- options on securities and securities indices
- forward foreign currency contracts
- futures contracts and related options
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. The Fund's investments in foreign
securities, ADRs, EDRs and GDRs are subject to foreign risks. In unsponsored ADR
programs, the issuer may not be directly involved in arranging its securities to
be traded in the form of depository receipts. Although regulatory requirements
with respect to sponsored and unsponsored programs are generally similar, in
some cases it may be easier to obtain financial information from an issuer that
has participated in the creation of a sponsored program. Accordingly, there may
be less information available regarding issuers of securities underlying
unsponsored programs and there may not be a correlation between such information
and the market value of the Depository Receipts. 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.
The Fund's foreign currency exchange transactions are subject to additional
risks. Forward foreign currency exchange contracts ("forward contracts-),
provide for the purchase of or sale of an amount of a specified currency at a
future date. This Fund may use forward contracts to protect against a foreign
currency's decline against the U.S. dollar between the trade date and settlement
date for a securities transaction, or to lock in the U.S. dollar value of
dividends declared on securities it holds, or generally to protect the U.S.
dollar value of the securities it holds against exchange rate fluctuations. This
Fund may also use forward contracts to protect against fluctuating exchange
rates and exchange control regulations. Forward contracts may limit the Fund's
losses due to exchange rate fluctuation, but they will also limit any gains that
the Fund might otherwise have realized. This Fund may also hedge its foreign
currency exchange rate risk by entering into foreign currency futures contracts
("currency futures"). The forecasting of short-term currency market movements is
extremely difficult and whether short-term hedging strategies would be
successful is highly uncertain.
The Fund's investments in convertible securities are subject to credit risk.
Convertible securities frequently have speculative characteristics and may be
acquired without regard to minimum quality ratings. The Fund intends to invest
no more than 5% of net assets in securities rated non-investment grade (or
equivalent rating by an agency recognized in the local market) at the time of
purchase (or unrated securities deemed to be of comparable quality). Convertible
securities and obligations rated in the lowest of the top four rating categories
are subject to greater credit and interest rate risk than higher rated
securities.
The emerging country securities in which the Fund may invest are subject to
significant risk and will not be required to meet any minimum rating standard.
The Fund's investments in options and futures involve derivatives risk. This 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.
Secondary markets generally do not exist for forward foreign currency contracts,
and there is no assurance that the Fund will be able to close out a forward
currency contract or close it out at a favorable price.
Warrants are options to purchase equity securities at a specific price valid for
a specific period of time. The purchase of warrants involves the risk that the
Fund could lose the purchase value of the warrant if the right to subscribe to
additional shares is not exercised prior to the warrant's expiration. Also, the
purchase of warrants involves the risk that the effective price paid for the
warrant added to the subscription price of the related security may exceed the
value of the subscribed security.
BAR CHART AND PERFORMANCE TABLE
The Fund offers three types of shares, as described under "Investing with
Firstar Funds" - Institutional, Retail A and Retail B. These types of shares
bear differing levels of expenses, as described under "Investing with Firstar
Funds." The following bar chart and table provide an indication of the risks of
investing in the Fund by showing: (a) changes in the performance of the Fund's
Institutional Shares from year to year, and (b) how the average annual returns
of the Fund's Retail A and Institutional Shares compare to those of a broad-
based securities market index. The bar chart and performance table assume
reinvestment of dividends and distributions. Remember, past performance is not
indicative of future results. Prior to January 10, 1995, the Fund offered to
investors one series of shares with neither a sales charge nor a service fee.
The average annual total return calculation reflects a maximum initial sales
charge of 4.50% for the Retail A Shares, but for periods prior to January 10,
1995, performance does not reflect service organization fees. If service
organization fees had been reflected, performance would be reduced. Because the
bar chart reflects Institutional Share performance, it does not reflect the
sales loads applicable to Retail A and B Shares. If the sales loads were
reflected, returns would be reduced. Performance reflects fee waivers in effect.
If fee waivers were not in place, a Fund's performance would be reduced. The
Retail B Shares commenced operations on March 1, 1999. Because those shares have
less than one year's performance, no average annual returns are shown for that
class in this section.
Effective September 2, 1997, Hansberger Global Investors, Inc. became investment
Sub-Adviser to the Firstar International Equity Fund.
YEAR-BY-YEAR TOTAL RETURN AS OF 12/31 EACH YEAR (%)(INSTITUTIONAL SHARES)
1998 -9.55
1997 -10.46
1996 5.00
1995 4.49
1994
1993
1992
1991
1990
1989
BEST QUARTER: Q 1 '98 12.90%
WORST QUARTER: Q 3 '98 (21.06)%
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/98 (Retail A Shares and Institutional
Shares)
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (Apr. 28, 1994)
INTERNATIONAL EQUITY FUND -
Retail A Shares (13.75)% - - (4.53)%
Institutional Shares (9.55)% - - (3.39)%
MSCI/EAFE INDEX 20.00% - - 8.10%
The Morgan Stanley Capital International Europe, Australia and Far East Index
("MSCI/EAFE") is a widely recognized unmanaged index composed of 20 European and
Pacific Basin countries. The Index figures do not reflect any fees or expenses.
Investors cannot invest directly in the Index.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the International Equity Fund.
INSTITUTIONAL RETAIL A RETAIL B
SHAREOWNER FEES (fees paid directly SHARES SHARES SHARES
from your investment)
Maximum Sales Charge (Load) Imposed
on Purchases (as a percentage
of offering price) None<F1> 4.50% None<F1>
Maximum Deferred Sales Charge (Load)
(as a percentage of offering price) None<F1> None<F1> 5.00%<F1>
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends None<F1> None<F1> None<F1>
Redemption Fees None<F2> None<F2> None<F2>
Exchange Fees None<F1> None<F1> None<F1>
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
DISTRIBUTION TOTAL ANNUAL
MANAGEMENT AND SERVICE OTHER FUND OPERATING
FEES<F4> (12B-1)FEES<F5> EXPENSES<F6>EXPENSES<F7>
INTERNATIONAL EQUITY FUND -
Retail A 1.37% 0.00% 0.68% 2.05%
INTERNATIONAL EQUITY FUND -
Retail B3 1.37% 0.75% 0.68% 2.80%
INTERNATIONAL EQUITY FUND -
Institutional 1.37% 0.00% 0.43% 1.80%
<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 year, 2% in the fifth year,
declining to 1% in the sixth 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 Annual Operating Expenses for the Retail B Shares are based on Fund
expenses for the prior fiscal year, but "Other Expenses" is restated to reflect
estimated expenses for Retail B Shares.
<F4> 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 1.14% 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.
<F5> 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.
<F6> "Other Expenses" includes (1) 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.
<F7> 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 1.82%, 2.57% and 1.57%, 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 5 YEARS 10 YEARS
INTERNATIONAL EQUITY FUND -
Retail A Shares $649 $1,064 $1,504 $2,722
INTERNATIONAL EQUITY FUND -
Retail B Shares
ASSUMING COMPLETE REDEMPTION AT
END OF PERIOD $783 $1,168 $1,679 $2,786
ASSUMING NO REDEMPTION $283 $1,868 $1,479 $2,786
INTERNATIONAL EQUITY FUND -
Institutional $183 $1,566 $1,975 $2,116
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 each 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
Funds. Risks associated with particular types of investments each Fund makes are
described in this section and in the Additional Statement referred to on the
back page.
GENERAL RISKS OF INVESTING IN EACH OF THE FUNDS
COMPLETE INVESTMENT PROGRAM - ALL FUNDS
An investment in a single Fund, by itself, does not constitute a complete
investment plan.
CREDIT RISK - MONEY MARKET FUNDS, BOND FUNDS, BALANCED FUNDS, AND ANY OTHER FUND
TO THE EXTENT THAT IT INVESTS IN FIXED-INCOME SECURITIES
An issuer of fixed-income securities may default on its obligation to pay
interest and repay principal. Also, changes in the financial strength of an
issuer or changes in the credit rating of a security may affect its value.
Credit risk includes "counterparty risk" - the risk that the other party to a
transaction will not fulfill its contractual obligation. This risk applies, for
example, to repurchase agreements which each Fund may enter.
Securities rated below investment grade are particularly subject to credit risk.
These securities are predominantly speculative and are commonly referred to as
"junk bonds." To the extent a Fund purchases or holds convertible or other
securities that are below investment grade, a greater risk exists as to the
timely repayment of the principal of, and the timely payment of interest or
dividends on, such securities.
DERIVATIVES RISK - ALL FUNDS
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
a Fund's investments in options, futures, swaps, structured securities and other
derivative instruments, which may be leveraged. A 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.
Investment by the Taxable Bond Funds in collateralized mortgage obligations and
mortgage- and asset-backed securities are subject to derivatives risk.
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.
INTEREST RATE RISK - MONEY MARKET FUNDS, BOND FUNDS, BALANCED FUNDS AND ANY
OTHER FUND TO THE EXTENT THAT IT INVESTS IN FIXED-INCOME SECURITIES
When interest rates increase, fixed-income securities tend to decline in value
and when interest rates decrease, fixed-income securities tend to increase in
value. A change in interest rates could cause the value of your investment to
change. Fixed-income securities with longer maturities are more susceptible to
interest rate fluctuations than those with shorter maturities. Therefore, the
risk of interest rate fluctuation is greater in the case of the Bond IMMDEX/TM
Fund and the Tax-Exempt Intermediate Bond Fund than in the case of the Short-
Term Bond Market Fund or the Money Market Funds. Changes in interest rates may
also extend or shorten the duration of certain types of instruments, such as
asset-backed securities, thereby affecting their value and the return on your
investment.
Stripped securities in which the Taxable Bond Funds and Balanced Funds may
invest and zero coupon securities in which the Taxable Bond Funds may invest are
subject to greater interest rate risk than many of the more typical fixed-income
securities.
LIQUIDITY RISK - ALL FUNDS
Certain securities may be difficult or impossible to sell at the time and price
that the Fund would like. A 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 Funds may purchase, short-term
funding agreements which the Money Market Fund and Institutional Money Market
Fund may purchase, the GICs which the Taxable Bond Funds may purchase and the
futures contracts in which the Taxable Bond Funds, Growth and Income Fund,
Equity Index Fund, MicroCap Fund and International Equity 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. Each Fund
may invest up to 15% of its net assets at the time of purchase, in securities
that are illiquid, except that each Money Market Fund may invest up to 10% 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 a Fund.
LOSS OF MONEY - ALL FUNDS
An investment in the Funds 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 a Fund involves risk, including the risk of
losing money. Although the money market funds attempt to preserve the value of
your investment at $1.00 per share, it is possible to lose money by investing in
the money market funds.
MANAGEMENT RISK - ALL FUNDS
A strategy which the Adviser or Sub-Adviser uses may fail to produce the
intended results. The particular securities and types of securities a Fund holds
may underperform other securities and types of securities. There can be no
assurance a Fund will achieve its investment objective. Certain policies of each
Fund, which may not be changed without a shareowner vote, are described in the
Additional Statement.
MARKET RISK - ALL FUNDS
The value of the securities in which a 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 - ALL FUNDS
This Prospectus describes each Fund's principal investment strategies, and the
types of securities in which each Fund principally invests. Each 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 - ALL FUNDS
The Adviser and Sub-Adviser will not consider the portfolio turnover rate a
limiting factor in making investment decisions for a Fund. A high rate of
portfolio turnover (100% or more) involves correspondingly greater expenses
which must be borne by a Fund and its shareowners. It may also result in higher
short-term capital gains taxable to shareowners. See "Financial Highlights" for
the Funds' historical portfolio turnover rates. The Money Market Funds may have
high portfolio turnover, but brokerage commissions are not normally paid on
Money Market instruments. Portfolio turnover is not expected to have a material
effect on the Money Market Funds' net investment income.
TEMPORARY INVESTMENT RISK - ALL FUNDS
Each of the Funds may, for temporary defensive purposes, invest a percentage of
its total assets, without limitation, in cash or various short-term instruments
(except for the MicroCap Fund, which may invest up to 30% of its assets in money
market instruments for temporary defensive purposes). This may occur for
example, when a Fund is attempting to respond to adverse market, economics,
political or other conditions. In particular, the U.S. Treasury Money Market
Fund may temporarily hold cash; the Tax-Exempt Money Market Fund and the Tax-
Exempt Intermediate Bond Fund may, from time to time, hold uninvested cash
reserves or invest in short-term taxable money market obligations (taxable
obligations purchased by each Fund normally will not exceed 20% of total assets
at the time of purchase); and the International Equity Fund may invest in money
market securities denominated in U.S. or foreign currency. When a Fund's assets
are invested in these instruments, the Fund may not be achieving its investment
objective.
VALUATION RISK - ALL FUNDS
This is a risk that a Fund has valued certain securities at a higher or lower
price than the Fund can sell them.
YEAR 2000 RISK - ALL FUNDS
Like other investment companies and financial service providers, each Fund could
be adversely affected if the computer systems used by its investment adviser
(and sub-adviser in the case of the International Equity Fund) and the Funds'
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 each 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 it has business relationships
which may impact the services provided to the Funds 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 Funds' 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 Funds. Also, companies
in which the Funds invest 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.
ADDITIONAL RISKS WHICH APPLY TO INVESTMENT IN CERTAIN OF THE FUNDS
EXTENSION RISK - TAXABLE BOND FUNDS, BALANCED FUNDS AND MONEY MARKET FUNDS
This is the risk that an issuer will exercise its right to pay principal on an
obligation held by a Fund (such as a mortgage- or asset-backed security) later
than expected. This may happen when there is a rise in interest rates. These
events may lengthen the duration and potentially reduce the value of these
securities.
FOREIGN RISKS - INTERNATIONAL EQUITY FUND; EACH OTHER FUND - OTHER THAN THE U.S.
TREASURY MONEY MARKET FUND AND U.S. GOVERNMENT MONEY MARKET FUND - TO THE EXTENT
IT INVESTS IN FOREIGN SECURITIES
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. A
Fund which invests in foreign securities 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 a 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, a Fund may be required to deliver securities
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 a 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.
Each of the Funds, other than the money market funds, 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 International Equity Fund may hedge
against foreign currency risk, and the other Funds may do so on unsettled
trades, but none of the Funds is required to do so.
The International Equity Fund also may invest in obligations of foreign
countries and political entities ("sovereign debt") which may trade at a
substantial discount from face value. An issuer of sovereign debt may be
unwilling or unable to repay interests and principal as due. The Fund may
purchase Brady Bonds as part of its investment in sovereign debt of countries
that have restructured or are restructuring their sovereign debt pursuant to the
Brady Plan. The Brady Plan is an initiative announced by former U.S. Treasury
Secretary Nicholas F. Brady in 1989 as a mechanism for debtor nations to
restructure their external debt. Investments in Brady bonds can be viewed as
speculative.
PREPAYMENT RISK - TAXABLE BOND FUNDS, BALANCED FUNDS AND MONEY MARKET FUNDS
This is the risk that an issuer will exercise its right to pay principal on an
obligation held by a Fund (such as a mortgage- or asset-backed security) earlier
than expected. This may happen when there is a decline in interest rates. These
events may make a Fund unable to recoup its initial investment and may result in
reduced yields.
SMALL CAP STOCK RISK - SPECIAL GROWTH FUND, EMERGING GROWTH FUND AND
MICROCAP FUND
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 Funds 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.
TAX RISK - TAX-EXEMPT MONEY MARKET FUND, U.S. TREASURY MONEY MARKET FUND AND
TAX-EXEMPT INTERMEDIATE BOND FUND
These Funds may be more adversely impacted by changes in tax rates and policies
than the other Funds. Because interest income on municipal obligations is
normally not subject to regular federal income taxation, the attractiveness of
municipal obligations in relation to other investment alternatives is affected
by changes in federal income tax rates applicable to, or the continuing federal
income tax-exempt status of, such interest income. Any proposed or actual
changes in such rates or exempt status, therefore, can significantly affect the
demand for and supply, liquidity and marketability of municipal obligations,
which could in turn affect a Fund's ability to acquire and dispose of municipal
obligations at desirable yield and price levels.
Investment in tax-exempt securities poses additional risks. In many cases, the
Internal Revenue Service has not ruled on whether the interest received on a
tax-exempt obligation is tax-exempt, and accordingly, purchases of these
securities are based on the opinion of bond counsel to the issuers at the time
of issuance. The Fund and the Adviser rely on these opinions and will not review
the basis for them.
ADDITIONAL RISKS WHICH APPLY TO PARTICULAR TYPES OF SECURITIES OTHER INVESTMENT
COMPANIES - ALL FUNDS
The Funds may invest their 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.
GOVERNMENT OBLIGATIONS - MONEY MARKET FUNDS OTHER THAN THE TAX-EXEMPT MONEY
MARKET, TAXABLE BOND FUNDS, BALANCED FUNDS
In addition to U.S. Treasury obligations, the Funds may invest in other
securities issued or guaranteed by the U.S. government, its agencies and
instrumentalities. No assurance can be given that the U.S. government will
provide financial support to U.S. government-sponsored agencies or
instrumentalities where it is not obligated to do so by law.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES - TAXABLE BOND FUNDS AND BALANCED
FUNDS
Each of these Funds may purchase residential and commercial mortgage-backed as
well as other asset-backed securities (i.e., securities backed by credit card
receivables, automobile loans or other assets). In addition to credit and market
risk, mortgage- and asset-backed securities involve prepayment risk because the
underlying assets (loans) may be prepaid at any time. The value of these
securities may also change because of actual or perceived changes in the
creditworthiness of the originator, the servicing agent, the financial
institution providing the credit support, or the counterparty. Like other fixed-
income securities, when interest rates rise, the value of an asset-backed
security generally will decline. However, when interest rates decline, the value
of an asset-backed security with prepayment features may not increase as much as
that of other fixed-income securities. The relative payment rights of certain
types of mortgage-backed securities may make them subject to greater volatility
and interest rate risk than other types of mortgage-backed securities. In
addition, non-mortgage asset-backed securities involve certain risks not
presented by mortgage-backed securities. Primarily, these securities do not have
the benefit of the same security interest in the underlying collateral. Credit
card receivables are generally unsecured, and the debtors are entitled to the
protection of a number of state and federal consumer credit laws. Automobile
receivables are subject to the risk that the trustee for the holders of the
automobile receivables may not have an effective security interest in all of the
obligations backing the receivables. In times of financial stress, the secondary
market for asset-backed securities may not be as liquid as the market for other
types of securities which could result in a Fund experiencing difficulty in
valuing or liquidating such securities.
BORROWINGS, REVERSE REPURCHASE AGREEMENTS - ALL FUNDS
Each 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 a Fund declines 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 a 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 a
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.
SHORT SALES - MICROCAP FUND, EMERGING GROWTH FUND
Short selling is the selling of securities which have been borrowed on the
expectation that the market price will drop. These transactions may result in
gains if a security's price declines, but may result in losses if a security's
price does not decline in price.
OPTIONS - TAXABLE BOND FUNDS, BALANCED FUNDS AND EQUITY FUNDS
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 or Sub-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 or Sub-Adviser to manage future price
fluctuations and the degree of correlation between the options and securities
markets.
The Funds, other than the International Equity Fund, may purchase put and call
options in an amount not to exceed 5% of their respective net assets. The
International Equity Fund may purchase put and call options without limit.
The Taxable Bond Funds and International Equity Fund will engage in unlisted
over-the-counter options only with broker-dealers deemed creditworthy by the
Adviser (or the Sub-Adviser). 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 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.
In addition, each Fund may write call options on securities and on various stock
or bond indices. Each Fund may write a call option only if the option is
"covered." A 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 Taxable Bond Funds, Growth and Income, Equity Index and MicroCap Funds will
not exceed 5%, 25%, 5% and 5%, respectively, of the value of its net assets
during the current year. The International Equity Fund may write call options on
securities and on various stock indices which will be traded on a recognized
securities or futures exchange or over the counter. During the current year the
aggregate value of the International Equity Fund's assets subject to options
written by the Fund will not exceed 5% of the value of its net assets. In order
to close out an option position, a 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).
The Special Growth Fund, Emerging Growth Fund, MicroCap Fund, International
Equity Fund and the Balanced Funds may invest in warrants. Warrants are options
to purchase equity securities at a specific price valid for a specific period of
time. The purchase of warrants involves the risk that the Fund could lose the
purchase value of the warrant if the right to subscribe to additional shares is
not exercised prior to the warrant's expiration. Also, the purchase of warrants
involves the risk that the effective price paid for the warrant added to the
subscription price of the related security may exceed the value of the
subscribed security.
The International Equity Fund may also write (i.e., sell) covered put options on
securities and various securities indices. The writer of a put incurs an
obligation to buy the security underlying the option from the put's purchaser at
the exercise price at any time on or before the termination date, at the
purchaser's election (certain options the Fund writes will be exercisable by the
purchaser only on a specific date). Generally, a put is "covered" if the Fund
maintains cash, U.S. government securities or other liquid high grade debt
obligations equal to the exercise price of the option or if the Fund holds a put
on the same underlying security with a similar or higher exercise price. By
writing a covered put option on a security, the Fund receives a premium for
writing the option; however the Fund assumes the risk that the value of the
security will decline before the exercise date, in which event, the Fund may
incur a loss in excess of the premium received when the put is exercised.
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 - TAXABLE BOND FUNDS, BALANCED FUNDS AND
EQUITY FUNDS
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 a 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 a 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 a Fund sells an option on a futures contract it becomes obligated to
purchase or sell a futures contract if the option is exercised.
Each 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 Equity Index Fund may purchase and sell futures and
related options (based only on the S&P 500 Index) to maintain cash reserves
while simulating full investment in the stocks underlying the S&P 500 Index, to
keep substantially all of its assets exposed to the market (as represented by
the S&P 500 Index), and to reduce transaction costs.
Futures contracts and options present the following risks: imperfect correlation
between the change in market value of a 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 Funds 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).
Each 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, 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. Pursuant to SEC requirements, a 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 Taxable Bond Funds and Growth and Income Fund intend to limit their
transactions in futures contracts and related options so that not more than 5%
of each Fund's respective net assets are at risk. The Equity Index Fund and
International Equity Fund intend to limit their transactions in futures
contracts so that not more than 10% and 25% of each Fund's respective 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.
GUARANTEED INVESTMENT CONTRACTS AND ZERO COUPON SECURITIES - TAXABLE BOND FUNDS
The Taxable Bond Funds may purchase guaranteed investment contracts ("GIC's")
issued by highly rated U.S. insurance companies and zero coupon securities.
GIC's are subject to liquidity risk, which is the risk that certain securities
may be difficult or impossible to sell at a desirable time and price.
INVESTING WITH FIRSTAR FUNDS
SHARE CLASSES AVAILABLE
This section describes for you the procedures for opening an account and how to
buy, sell or exchange Fund shares.
The Firstar Funds offer one class of Shares in the Money Market Funds and three
classes of Shares in the Non-Money Market Funds: Retail A, Retail B and
Institutional.
INSTITUTIONAL SHARES
- - No sales charge (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)
- -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;
- - 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.
RETAIL A SHARES
- - Initial sales charge of 4.50% or less (but no initial sales charge for Money
Market Funds)
- - 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 year, 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
SALES CHARGES AND WAIVERS
INITIAL SALES CHARGES - for Retail A Shares of Funds other than Money Market
Funds: 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 A REALLOWANCE AS A
AMOUNT OF TRANSACTION PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF
AT OFFERING PRICE OFFERING PRICE NET ASSET VALUE OFFERING PRICE
EQUITY BOND EQUITY BOND EQUITY BOND
Less than $100,000 4.50% 3.75% 4.71% 3.90% 4.00% 3.25%
$100,000 to $249,999 3.75% 3.00% 3.90% 3.09% 3.25% 2.50%
$250,000 to $499,999 2.50% 1.75% 2.56% 1.78% 2.00% 1.25%
$500,000 to $749,999 2.00% 1.25% 2.04% 1.27% 1.50% 0.75%
$750,000 to $999,999 1.00% 0.75% 1.01% 0.76% 0.50% 0.25%
$1,000,000 and above 0.25% 0.25% 0.25% 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
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 a 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 on the next page 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 Funds are advised that such conversions may constitute taxable events for
federal tax purposes, which the Funds believe 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.
PURCHASE OF SHARES
Shares of the Funds are offered and sold on a continuous basis by the
distributor for the Funds, 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 a 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 with the exception of
the MicroCap Fund. For the MicroCap Fund the maximum investment is $5,000,000.
INSTITUTIONAL SHARES
The minimum initial investment in the Institutional Money Market Fund is
$1,000,000 by an individual or combination of accounts. There is no minimum
initial or subsequent investment for Institutional Shares of other Funds. The
maximum investment for MicroCap Fund is $5,000,000.
BUYING SHARES
Purchase requests for a money market fund received in proper form before 11:30
a.m. Central time (12:30 p.m. Central time for the Institutional Money Market
Fund) on a business day for the Funds generally are processed at 11:30 a.m.
Central time (12:30 p.m. Central time for the Institutional Money Market Fund)
on the same day. In order to be processed at 11:30 a.m. Central time time (12:30
p.m. Central time for the Institutional Money Market Fund), payment must be
received in immediately available funds wired to the transfer agent by the close
of business. All checks received will be processed at that day's inserts closing
price.
Purchase requests accompanied by a check or wire payment for the money market
funds which are received at or after 11:30 a.m. Central time (12:30 p.m. Central
time for the Institutional Money Market Fund), and purchase requests accompanied
by a check or wire payment for any other Fund which are received by the transfer
agent before 3:00 p.m. Central time on a business day for the Funds 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.
THROUGH A SHAREOWNER ORGANIZATION
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
Contact your Shareowner Organization. Contact your Shareowner
Organization.
BY MAIL
Complete an application and mail it along Make your check payable to Firstar
with a check payable to Firstar Funds, Funds. Please include your sixteen-
P.O. Box 3011, Milwaukee, digit account number on your check
WI 53201-3011. and mail it to the
address at the left.
For overnight delivery mail to:
615 E. Michigan St., Milwaukee, WI 53202.
AUTOMATICALLY (Retail A and B Shares)
Call 1-800-228-1024 to obtain a purchase Complete a Periodic Investment Plan
application, which includes information for Application to automatically
a Periodic Investment Plan or purchase more shares.
ConvertiFundR Account.
Open a ConvertiFundR account to
automatically invest proceeds from
one account to another account of
the Firstar Family of Funds.
BY WIRE
Call 1-800-228-1024 prior to sending Call 1-800-228-1024 prior to
the wire in order to obtain a sending the wire in order to
confirmation number and to obtain a confirmation number and to
ensure prompt and accurate handling ensure prompt and accurate
of funds. Ask your bank to transmit handling of funds.
immediately available funds Ask your bank to transmit
by wire in the amount of immediately available
your purchase to: funds by wire as described at the
Please Firstar Bank Milwaukee, N.A. left. Please include your sixteen-
ABA # 0750-00022 digit account number.
Firstar Trust Department The Fund and its transfer agent are
Account # 112-952-137 not responsible for the
for further credit to consequences of delays resulting
[name of Fund] from the banking or Federal Reserve
[name/title on the account]. Wire system, or from incomplete
The Fund and its transfer wiring instructions.
agent are not responsible
for the consequences of delays
resulting from the banking or Federal
Reserve Wire system, or from
incomplete wiring instructions.
INTERNET www.firstarfunds.com
Not Available Use Firstar Funds 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 1-800-228-1024 to authorize
this service.
BY TELEPHONE EXCHANGE
Call 1-800-228-1024 to exchange Call 1-800-228-1024 to exchange
from another Firstar Fund account from another Firstar Fund account
with the same registration with the same registration
including name, address and taxpayer including name, address and
taxpayer ID number. 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 a 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 Funds 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 a 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 respective Fund.
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.
The Funds 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
Funds 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.
REDEMPTION OF SHARES
SELLING SHARES
Redemption requests for a money market fund received by the transfer agent by
phone before 11:30 a.m. Central time (12:30 p.m. Central time for the
Institutional Money Market Fund) on a business day for the Funds generally are
processed at 11:30 a.m. Central Time (12:30 p.m. Central time for the
Institutional Money Market Fund) on the same day. Redemption requests for money
market funds received at or after 11:30 a.m. Central time (12:30 p.m. Central
time for the Institutional Money Market Fund) and redemption requests for other
Funds received by the transfer agent before 3:00 p.m. Central time on a business
day for the Funds 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 ORGANIZATION
Contact your Shareowner Organization.
BY PHONE
Call 1-800-228-1024 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 guaranted 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 1-800-228-1024 to
authorize this service.
AUTOMATICALLY
Call 1-800-228-1024 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 Funds 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, except for transactions in Money Market
Funds, 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.
CHECK REDEMPTION
You may request on the purchase application or by written request that a Fund
provides Redemption Checks ("Checks"). Checks may be made payable in the amount
of $250 or more. Any checks drawn on a joint account will only require one
signature. There is no charge for the use of the Checks; however, the transfer
agent will impose a $25 charge for stopping payment of a Check upon your
request, or if the transfer agent cannot honor a Check due to insufficient funds
or other valid reason. Because dividends on each Fund accrue daily, Checks may
not be used to close an account, as a small balance is likely to result.
CHECKS ARE NOT AVAILABLE FOR NON-MONEY MARKET FUNDS, INSTITUTIONAL MONEY MARKET
FUND, IRAS OR OTHER RETIREMENT PLANS FOR WHICH FIRSTAR ACTS AS CUSTODIAN.
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 Funds 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 FUNDS 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 Funds may redeem your account. The Fund
will impose no charge and will give you sixty days' written notice prior to any
redemption. A 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.
EXCHANGE OF SHARES
Without a sales charge, you may exchange shares of a money market fund for
shares of another money market fund. Except as described in the next paragraph,
you may also exchange shares of a money market fund for Institutional, Retail A
or Retail B Shares or of a non- money market fund provided you are eligible to
purchase the class at time of the exchange. You may exchange your money market
fund 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 and money market fund Shares acquired in an exchange for Retail B
Shares 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.
Shares of a money market fund which were acquired upon exchange for Retail A
Shares may not be exchanged for Retail B Shares. Shares of a money market fund
which were acquired upon exchange for Retail B Shares may not be exchanged for
Retail A Shares. Shares of the Institutional Money Market Fund are not
exchangeable for Retail A or Retail B Shares of any non-money market fund.
Shares of the Institutional Money Market Fund are exchangeable only for
Institutional Shares of a non-money market fund, and only if you are eligible to
purchase the Institutional Shares at the time of the exchange.
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, a 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.
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 to money market shareowners monthly,
summarizing all transactions. For all other funds, 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 on-line 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 1-800-228-1024.
Firstar Funds and their agents will not be responsible for any losses resulting
from unauthorized on-line transactions when procedures are followed which are
designed to confirm that the on-line 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 on-line. 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-toneR telephone can access information on the Funds
twenty four hours a day, seven days a week. When calling Firstar Mutual Fund
Services, LLC at 1-800-228-1024, 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 Mutual Fund Services, LLC at 1-800-228-1024.
ADDITIONAL INFORMATION
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
- --------------------------------------------------------------------------------
Dividends from net investment income, including net realized gains and losses,
if any, earned on the investments held by a Fund, of the money market funds are
declared on each business day on the shares that are outstanding immediately
after 11:30 a.m. Central time (12:30 P.M. Central time for Institutional Money
Market) on the declaration date.
- --------------------------------------------------------------------------------
Dividends from net investment income of the Bond Funds are declared and paid
monthly. Dividends from net investment income of the Balanced Income, Balanced
Growth, Growth and Income and Equity Index Funds are declared and paid
quarterly.
Dividends from net investment income of the Growth, Special Growth, Emerging
Growth, MicroCap and International Equity Funds 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
Each 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 a 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 INTERNATIONAL EQUITY FUND. It is expected that the International Equity Fund
will be subject to foreign withholding taxes with respect to dividends or
interest received from sources in foreign countries. The International Equity
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 TAX-EXEMPT MONEY MARKET FUND AND TAX-EXEMPT INTERMEDIATE BOND FUND. It is
expected that the Tax-Exempt Money Market Fund and Tax-Exempt Intermediate Bond
Fund will distribute dividends derived from interest earned on Exempt
Securities, and these "exempt interest dividends" will be exempt income for
Shareowners for federal income tax purposes. However, distributions, if any,
derived from net capital gains will generally be taxable to you as capital
gains. It is expected that the Tax-Exempt Intermediate Bond Fund may pay such
capital gains distributions from time to time. Dividends, if any, derived from
taxable interest income will be taxable to you as ordinary income.
Interest on indebtedness incurred by a Shareowner to purchase or carry shares of
the Tax-Exempt Money Market Fund and Tax-Exempt Intermediate Bond Fund generally
will not be deductible for federal income tax purposes.
You should note that a portion of the exempt-interest dividends paid by the Tax-
Exempt Money Market Fund and Tax-Exempt Intermediate Bond Fund may constitute an
item of tax preference for purposes of determining federal alternative minimum
tax liability. Exempt-interest dividends will also be considered along with
other adjusted gross income in determining whether any Social Security or
railroad retirement payments received by you are subject to federal income
taxes.
If you receive an exempt-interest dividend with respect to any Share and the
Share is held by you for six months or less, any loss on the sale or exchange of
the Share will be disallowed to the extent of such dividend amount.
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 each
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 each 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 $26.9 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 each Fund, the Adviser
manages each Fund's portfolio securities and maintains records relating to such
purchases and sales (except for the International Equity Fund). Subject to the
general supervision of the Board of Directors and in accordance with the
investment objective and policies of the International Equity Fund, the Adviser
is responsible for the Fund's investment program, general investment criteria
and policies.
The Adviser has retained Hansberger Global Investors, Inc. (HGI) as Sub-Adviser
for the International Equity Fund a Delaware corporation founded in 1994, with
its principal office at 515 East Las Olas Boulevard, Suite 1300, Fort
Lauderdale, Florida 33301, currently has $2.1 billion in assets under
management. 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 Adviser (or Sub-Adviser for the International Equity Fund) 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 Adviser (or Sub-Adviser for the
International Equity Fund) 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.
For the fiscal year ended October 31, 1998, the Adviser received from each Fund
a fee, calculated daily and payable monthly, at the following annual rates (as a
percentage of the Fund's average daily net assets): 0.37% for the Money Market
Fund, 0.29% for the Institutional Money Market Fund, 0.49% for the U.S. Treasury
Money Market Fund, 0.50% for the U.S. Government Money Market Fund, 0.48% for
the Tax-Exempt Money Market Fund, 0.30% for the Short-Term Bond Market Fund,
0.36% for the Intermediate Bond Market Fund, 0.36% for the Tax-Exempt
Intermediate Bond Fund, 0.30% for the Bond IMMDEX/TM Fund, 0.33% for the
Balanced Income Fund, 0.73% for the Balanced Growth Fund, 0.75% for the Growth
and Income Fund, 0.19% for the Equity Index Fund, 0.75% for the Growth Fund,
0.75% for the Special Growth Fund, 0.73% for the Emerging Growth Fund, 1.50% for
the MicroCap Fund and 1.14% for the International Equity Fund.
The Sub-Adviser is entitled to a fee, payable by the Adviser, for its services
and expenses incurred with respect to the International Equity 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): 0.75% on the Fund's first $25 million,
0.50% of the next $75 million and 0.35% of the Fund's average daily net assets
in excess of $100 million.
FUND MANAGERS
- --------------------------------------------------------------------------------
Chartered Financial Analyst (CFA) designation is a globally recognized standard
for measuring the competence and integrity of financial analysts.
- -------------------------------------------------------------------------------
Mary Ellen Stanek, CFA and Sharon deGuzman co-manage the Short-Term Bond Market
Fund. Ms. Stanek is the President and Chief Executive Officer of FIRMCO, and
Director of Fixed Income Services. In addition, Ms. Stanek has served as an
officer of the Funds since September 1994. She has 20 years of investment
management experience and was named a Director of FIRMCO in 1992. Prior to
joining FIRMCO, Ms. Stanek headed the Fixed Income and Quantitative Investment
Management Department at Firstar Trust Company. She has been the Fund's
portfolio manager since its inception on December 29, 1989. Ms. deGuzman is an
Assistant Vice President and Portfolio Manager and has been with Firstar since
1994. She has 8 years of investment management experience and has been a
portfolio manager of the Fund since March 1, 1999.
Mary Ellen Stanek and Warren Pierson, CFA co-manage the Intermediate Bond Market
Fund. Ms. Stanek has managed the Fund since its inception on January 5, 1993.
Mr. Pierson joined Firstar in 1985 and has 14 years of fixed income experience
at Firstar. He is a Senior Vice President and Senior Portfolio Manager of FIRMCO
and has been a portfolio manager of the Fund since March 1, 1999.
Warren Pierson, also manages the Tax-Exempt Intermediate Bond Fund. Mr. Pierson
has managed the Fund since June 22, 1993.
Mary Ellen Stanek and Daniel Tranchita, CFA co-manage the Bond IMMDEX/TM Fund.
Ms. Stanek has managed the Fund since its inception on December 29, 1989. Mr.
Tranchita is a Senior Vice President and Senior Portfolio Manager and has been
with Firstar since 1989. He has 10 years of investment management experience and
has been a portfolio manager of the Fund since March 1, 1999.
Marian Zentmyer, CFA and Warren Pierson co-manage the Balanced Income Fund. Ms.
Zentmyer is FIRMCO's Equity Chief Investment Officer, a Senior Vice President
and Senior Portfolio Manager. She has been with Firstar since 1982 and has 20
years of investment management experience. Ms. Zentmyer is a Certified Financial
Planner. Ms. Zentmyer and Mr. Pierson have managed the Fund since its inception
on December 1, 1997.
Marian Zentmyer and Dan Tranchita co-manage the Balanced Growth Fund. Ms.
Zentmyer has managed the Fund since June 18, 1996 and Mr. Tranchita since March
1, 1999.
Marian Zentmyer and Walter Dewey, CFA co-manage the Growth and Income Fund. Ms.
Zentmyer has managed the Fund since February 22, 1993 and Mr. Dewey since June
29, 1998. Mr. Dewey is a Senior Vice President and Senior Portfolio Manager of
FIRMCO. He has been with Firstar since 1986 and has 16 years of investment
management experience.
Marian Zentmyer and Walter Dewey also co-manage the Growth Fund. Ms. Zentmyer
has managed the Fund since June 18, 1996 and Mr. Dewey since July 7, 1997.
Todd Krieg, CFA and Matt D'Attilio, CFA co-manage the Special Growth Fund. Mr.
Krieg is the Director of Equity Research and a Senior Vice President and Senior
Portfolio Manager of FIRMCO. Mr. Krieg has been with Firstar since 1992 and has
six years of investment management experience. Mr. Krieg has managed the Fund
since September 1, 1994. Mr. D'Attilio is a Senior Vice President and Senior
Portfolio Manager of FIRMCO and has been with Firstar since 1993. He has five
years of investment management experience and has managed the Fund since
December 1, 1998.
Todd Krieg and Matthew D'Attilio, CFA also co-manage the Emerging Growth Fund.
Both have managed the Fund since its inception on August 15, 1997.
Joe Frohna, CFA, CPA manages the MicroCap Fund. Mr. Frohna is a Senior Vice
President and Senior Portfolio Manager of FIRMCO and has been with Firstar since
1995. He has six years of investment management experience and has managed the
Fund since September 9, 1997.
The portfolio management team comprised of James Chaney, Robert Mazuelos and
John Hock manages the International Equity Fund for the Sub-Adviser. Mr. Chaney
is primarily responsible for the day to day management of the Fund. Mr. Chaney
joined the Sub-Adviser as Chief Investment Officer in 1996 and has 15 years of
investment experience. Prior to joining the Sub-Adviser, he was Executive Vice
President for Templeton Worldwide, Inc. and a senior member of its Portfolio
Management/Strategy Committee. Robert Mazuelos joined the Sub-Adviser in 1995 as
a research analyst and has eight years of investment management experience.
Prior to joining the Sub-Adviser, he was a performance analyst at Templeton
Investment Counsel, Inc. where he was responsible for return analysis on
separate accounts and mutual funds. John Hock joined the Sub-Adviser in 1996 as
a research analyst. Prior to joining the Sub-Adviser, he was a senior analyst in
the global securities research and economics group at Merrill Lynch.
ADMINISTRATIVE SERVICES
Firstar Mutual Fund Services, LLC and B.C. Ziegler and Company ("Ziegler") serve
as the Co-Administrators (the "Co-Administrators") and receives fees for those
services.
SHAREOWNER ORGANIZATIONS - RETAIL A AND B SHARES; MONEY MARKET FUNDS (OTHER THAN
INSTITUTIONAL MONEY MARKET FUND)
The Funds have adopted distribution and service plans for the Retail A and
Retail B Shares. Under the distribution and service plans, the Funds may pay
distribution fees for the sale and distribution of their 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 Funds' 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 Funds also have adopted service plans for the Retail A and B Shares, under
which the Funds 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 a 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 a 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 Funds 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 Funds make no payments to their Distributor under the Plans for the Retail A
Shares or under the service plan for the Retail B Shares. The Funds make
payments to their 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 Funds. 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 Funds
- - 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 Service, LLC, an affiliate of the Adviser, provides transfer
agency, dividend disbursing agency and accounting services for the Funds and
receive fees for these services. Inquiries to the transfer agent may be sent to:
Mutual Fund Service, LLC, P.O. Box 3011, Milwaukee, Wisconsin 53201-3011.
Firstar Bank, Milwaukee, N.A., an affiliate of the Adviser, provides custodial
services for the Funds 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.
MONEY MARKET FUNDS
The net asset value of the money market funds for purposes of pricing purchase
and redemption orders is determined as of 11:30 a.m. Central time (12:30 p.m.
Central time for Institutional Money Market Fund) and as of the close of regular
trading hours on the Exchange, normally, 3:00 p.m. Central Time, on each day on
which both the Exchange is open for trading and the Federal Reserve Banks'
Fedline System is open. Net asset value per share is calculated by dividing the
value of all securities and other assets owned by each Fund, less the
liabilities charged to the Fund, by the number of the Fund's outstanding shares.
Net asset value is computed using the amortized cost method as permitted by SEC
rules.
NON-MONEY MARKET FUNDS
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 Funds' 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. A 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 a Fund may
change on days when shareowners will not be able to purchase or redeem the
Fund's shares.
Each 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 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.
APPENDIX
The financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 years (or, if shorter, the period of the
Fund's operations). Certain information reflects financial results for a single
Fund share. The total returns in the table represent the rate that an investor
would have earned (or lost) on an investment in the Fund (assuming reinvestment
of all dividends and distributions). This information has been audited by
PricewaterhouseCoopers LLP, whose report, along with the Fund's financial
statements, are included in the Annual Report, which is available upon request.
Contact the Firstar Mutual Funds Services, LLC for a free copy of the Annual
Report or Additional Statement.
<TABLE>
<CAPTIONS>
MONEY MARKET FUNDS Supplemental Data and Ratios
------------------------------------------------
Ratio of
Net Asset Dividends Net Asset Net Assets, Ratio of Net Investment
Value, Net from Net Value, End of Net Expenses Income to
Beginning Investment Investment End of Period to Average Average Net Total
of Period Income Income Period (000s) Net Assets Assets Return
--------- ---------- ---------- ------- --------- ---------- -------- ------
MONEY MARKET FUND
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended 1994 1.00 0.03 (0.03) 1.00 165,018 0.60%<F1> 3.44%<F1> 3.42%
Year Ended 1995 1.00 0.05 (0.05) 1.00 172,261 0.60%<F1> 5.36%<F1> 5.51%
Year Ended 1996 1.00 0.05 (0.05) 1.00 224,036 0.60%<F1> 4.94%<F1> 5.06%
Year Ended 1997 1.00 0.05 (0.05) 1.00 261,017 0.60%<F1> 4.98%<F1> 5.12%
Year Ended 1998 1.00 0.05 (0.05) 1.00 289,088 0.60%<F1> 5.05%<F1> 5.16%
INSTITUTIONAL MONEY
MARKET FUND
Year Ended 1994 1.00 0.04 (0.04) 1.00 754,636 0.37%<F2> 3.64%<F2> 3.65%
Year Ended 1995 1.00 0.06 (0.06) 1.00 716,566 0.35%<F2> 5.63%<F2> 5.77%
Year Ended 1996 1.00 0.05 (0.05) 1.00 750,051 0.35%<F2> 5.19%<F2> 5.32%
Year Ended 1997 1.00 0.05 (0.05) 1.00 1,201,341 0.35%<F2> 5.23%<F2> 5.38%
Year Ended 1998 1.00 0.05 (0.05) 1.00 1,623,970 0.35%<F2> 5.30%<F2> 5.41%
U.S. TREASURY
MONEY MARKET FUND
Year Ended 1994 1.00 0.03 (0.03) 1.00 56,020 0.60%<F3> 3.14%<F3> 3.20%
Year Ended 1995 1.00 0.05 (0.05) 1.00 64,655 0.60%<F3> 5.04%<F3> 5.16%
Year Ended 1996 1.00 0.05 (0.05) 1.00 53,430 0.60%<F3> 4.70%<F3> 4.80%
Year Ended 1997 1.00 0.05 (0.05) 1.00 78,478 0.60%<F3> 4.67%<F3> 4.80%
Year Ended 1998 1.00 0.05 (0.05) 1.00 91,872 0.60%<F3> 4.62%<F3> 4.71%
U.S. GOVERNMENT MONEY
MARKET FUND
Year Ended 1994 1.00 0.03 (0.03) 1.00 183,591 0.60%<F4> 3.29%<F4> 3.35%
Year Ended 1995 1.00 0.05 (0.05) 1.00 163,068 0.60%<F4> 5.24%<F4> 5.37%
Year Ended 1996 1.00 0.05 (0.05) 1.00 198,334 0.60%<F4> 4.84%<F4> 4.96%
Year Ended 1997 1.00 0.05 (0.05) 1.00 198,592 0.60%<F4> 4.83%<F4> 4.99%
Year Ended 1998 1.00 0.05 (0.05) 1.00 233,176 0.60%<F4> 4.90%<F4> 4.97%
TAX-EXEMPT MONEY
MARKET FUND
Year Ended 1994 1.00 0.02 (0.02) 1.00 70,436 0.60%<F5> 2.23%<F5> 2.25%
Year Ended 1995 1.00 0.03 (0.03) 1.00 84,084 0.60%<F5> 3.36%<F5> 3.42%
Year Ended 1996 1.00 0.03 (0.03) 1.00 79,328 0.60%<F5> 3.09%<F5> 3.13%
Year Ended 1997 1.00 0.03 (0.03) 1.00 108,639 0.60%<F5> 3.06%<F5> 3.12%
Year Ended 1998 1.00 0.03 (0.03) 1.00 122,451 0.60%<F5> 3.02%<F5> 3.04%
<FN>
<F1> Without fees waived, ratios of net expenses to average net assets for the
fiscal years ended October 31, 1998, 1997, 1996, 1995, 1994 would have been
0.86%, 0.84%, 0.81%, 0.90%, 0.93%, respectively; and ratios of net investment
income to average net assets for the fiscal years ended October 31, 1998,
1997, 1996, 1995, 1994 would have been 4.79%, 4.73%, 4.73%, 5.06%, 3.11%,
respectively.
<F2> Without fees waived, ratios of net expenses to average net assets for the
fiscal years ended October 31, 1998, 1997, 1996, 1995, 1994 would have been
0.64%, 0.66%, 0.64%, 0.69%, 0.85%, respectively; and ratios of net investment
income to average net assets for the fiscal years ended October 31, 1998,
1997, 1996, 1995, 1994 would have been 5.01%, 4.92%, 4.90%, 5.29%, 3.16%,
respectively.
<F3> Without fees waived, ratios of net expenses to average net assets for the
fiscal years ended October 31, 1998, 1997, 1996, 1995, 1994 would have been
0.77%, 0.78%, 0.80%, 0.83%, 0.94%, respectively; and ratios of net investment
income to average net assets for the fiscal years ended October 31,1998,
1997, 1996, 1995, 1994 would have been 4.45%, 4.49%, 4.50%, 4.81%, 2.80%,
respectively.
</TABLE>
<TABLE>
<CAPTION>
RETAIL A SHARE BOND FUNDS
Income from Investment Operations Less Distributions
------------------------------------- ---------------------------------------
Net Net Realized and Dividends Distributions
Asset Value, Net Unrealized Gains Total From from Net From
Beginning Investment or (Losses) on Investment Investment Capital Total
of Period Income<F1> Securities Operations Income Gains Distributions
- -----------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM
BOND MARKET
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
Year Ended 1994 10.56 0.56 (0.41) 0.15 (0.56) (0.12) (0.68)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1995 10.03 0.61 0.24 0.85 (0.60) - (0.60)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1996 10.28 0.58 (0.03) 0.55 (0.58) - (0.58)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1997 10.25 0.60 0.02 0.62 (0.60) - (0.60)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 10.27 0.58 0.07 0.65 (0.58) - (0.58)
- -----------------------------------------------------------------------------------------------------------------------------------
INTERMEDIATE
BOND MARKET
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1994 10.45 0.51 (0.69) (0.18) (0.51) (0.09) (0.60)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1995 9.67 0.60 0.53 1.13 (0.59) - (0.59)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1996 10.21 0.56 (0.02) 0.54 (0.56) - (0.56)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1997 10.19 0.58 0.12 0.70 (0.58) - (0.58)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 10.31 0.57 0.19 0.76 (0.57) - (0.57)
- -----------------------------------------------------------------------------------------------------------------------------------
TAX-EXEMPT
INTERMEDIATE BOND
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1994 10.26 0.41 (0.48) (0.07) (0.41) - (0.41)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1995 9.78 0.42 0.45 0.87 (0.42) - (0.42)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1996 10.24 0.40 (0.01) 0.39 (0.41) - (0.41)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1997 10.21 0.42 0.14 0.56 (0.42) - (0.42)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 10.36 0.41 0.17 0.58 (0.41) - (0.41)
- -----------------------------------------------------------------------------------------------------------------------------------
BOND IMMDEX/TM
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1994 28.91 1.65 (2.74) (1.09) (1.65) (0.50) (2.15)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1995 25.67 1.68 2.30 3.98 (1.79) (0.04) (1.83)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1996 27.82 1.61 (0.26) 1.35 (1.63) - (1.63)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1997 27.55 1.66 0.64 2.30 (1.68) - (1.68)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 28.16 1.64 0.85 2.49 (1.64) - (1.64)
- -----------------------------------------------------------------------------------------------------------------------------------
Supplemental Data and Ratios
-------------------------------------
Ratio of Net
Net Assets, Ratio of Net Investment
Net Asset End of Expenses Income Portfolio
Value, End Total Period to Average to Average Turnover
of Period Return (000s) Net Assets Net Assets Rate
- -----------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM
BOND MARKET
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1994 10.03 1.46% 122,368 0.50%<F3> 5.43%<F3> 76.13%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1995 10.28 8.74% 47,730 0.69%<F3> 6.04%<F3> 100.58%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1996 10.25 5.54% 58,843 0.75%<F3> 5.67%<F3> 59.62%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1997 10.27 6.21% 65,567 0.75%<F3> 5.79%<F3> 77.12%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 10.34 6.58% 75,410 0.75%<F3> 5.67%<F3> 78.20%
- -----------------------------------------------------------------------------------------------------------------------------------
INTERMEDIATE
BOND MARKET
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1994 9.67 (1.73)% 88,306 0.50%<F3> 5.19%<F3> 56.25%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1995 10.21 12.04% 11,576 0.50%<F3> 6.07%<F3> 66.69%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1996 10.19 5.51% 17,392 0.50%<F3> 5.59%<F3> 59.29%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1997 10.31 7.09% 20,691 0.50%<F3> 5.71%<F3> 40.61%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 10.50 7.57% 29,550 0.50%<F3> 5.50%<F3> 27.29%
- -----------------------------------------------------------------------------------------------------------------------------------
TAX-EXEMPT
INTERMEDIATE BOND
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1994 9.78 (0.73)% 26,167 0.60%<F4> 4.04%<F4> 58.54%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1995 10.24 9.07% 7,711 0.71%<F4> 4.25%<F4> 44.13%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1996 10.21 3.87% 10,690 0.75%<F4> 3.99%<F4> 30.46%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1997 10.36 5.606% 19,199 0.75%<F4> 4.11%<F4> 11.22%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 10.52 5.73% 32,466 0.75%<F4> 4.00%<F4> 14.38%
- -----------------------------------------------------------------------------------------------------------------------------------
BOND IMMDEX/TM
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1994 25.67 (3.89)% 256,778 0.48%<F5> 6.14%<F5> 49.70%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1995 27.82 16.05% 21,875 0.64%<F5> 6.31%<F5> 41.67%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1996 27.55 5.06% 42,671 0.68%<F5> 5.98%<F5> 33.38%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1997 28.16 8.68% 64,144 0.67%<F5> 6.08%<F5> 35.12%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 29.02 9.11% 95,301 0.67%<F5> 5.77%<F5> 20.07%
- -----------------------------------------------------------------------------------------------------------------------------------
<F1> For the Tax-Exempt Intermediate Bond Fund, substantially all investment income is exempt from federal income tax.
<F2> The total return calculation for the Funds does not reflect the maximum sales charge of 3.75%.
<F3> Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1998, 1997, 1996,
1995, 1994 would have been 1.11%, 1.11%, 1.12%, 1.10%, 0.90%, respectively; and ratios of net investment income to average net
assets for the fiscal years ended October 31, 1998, 1997, 1996,
1995, 1994 would have been 5.31%, 5.43%, 5.30%, 5.63%, 5.03%, respectively.
<F4> Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1998, 1997, 1996,
1995, 1994 would have been 0.96%, 0.98%, 0.99%, 0.98%, 0.78%, respectively; and ratios of net investment income to average net
assets for the fiscal years ended October 31, 1998, 1997, 1996, 1995 and 1994 would have been 5.29%, 5.49%, 5.35%, 5.78%,
4.91%, respectively.
<F5> Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1998, 1997, 1996,
1995, 1994 would have been 1.06%, 1.13%, 1.22%, 1.20%, 0.98%, respectively; and ratios of net investment income to average net
assets for the fiscal years ended October 31, 1998, 1997, 1996, 1995, 1994 would have been 3.69%, 3.73%, 3.52%, 3.76%, 3.67%,
respectively.
<F6> Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1998, 1997, 1996,
1995, 1994 would have been 0.74%, 0.74%, 0.75%, 0.71%, 0.51%, respectively; and ratios of net investment income to average net
assets for the fiscal years ended October 31, 1998, 1997, 1996, 1995, 1994, would have been 5.70%, 6.01%, 5.91%, 6.24%, 6.10%,
respectively.
</TABLE>
<TABLE>
<CAPTION>
INSTITUTIONAL BOND FUNDS
Income from Investment Operations Less Distributions
------------------------------------- ---------------------------------------
Net Net Realized and Dividends Distributions
Asset Value, Net Unrealized Gains Total From from Net From
Beginning Investment or (Losses) on Investment Investment Capital Total
of Period Income<F1> Securities Operations Income Gains Distributions
- -----------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM
BOND MARKET
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
Year Ended 1994 10.56 0.56 (0.41) 0.15 (0.56) (0.12) (0.68)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1995 10.03 0.63 0.24 0.87 (0.62) - (0.62)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1996 10.28 0.61 (0.03) 0.58 (0.61) - (0.61)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1997 10.25 0.62 0.02 0.64 (0.62) - (0.62)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 10.27 0.61 0.07 0.68 (0.61) - (0.61)
- -----------------------------------------------------------------------------------------------------------------------------------
INTERMEDIATE
BOND MARKET
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1994 10.45 0.51 (0.69) (0.18) (0.51) (0.09) (0.60)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1995 9.67 0.62 0.53 1.15 (0.61) - (0.61)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1996 10.21 0.59 (0.02) 0.57 (0.59) - (0.59)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1997 10.19 0.60 0.12 0.72 (0.60) - (0.60)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 10.31 0.59 0.19 0.78 (0.59) - (0.59)
- -----------------------------------------------------------------------------------------------------------------------------------
TAX-EXEMPT
INTERMEDIATE BOND
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1994 10.26 0.41 (0.48) (0.07) (0.41) - (0.41)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1995 9.78 0.44 0.46 0.90 (0.44) - (0.44)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1996 10.24 0.43 (0.03) 0.40 (0.43) - (0.43)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1997 10.21 0.44 0.15 0.59 (0.44) - (0.44)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 10.36 0.44 0.16 0.60 (0.44) - (0.44)
- -----------------------------------------------------------------------------------------------------------------------------------
BOND IMMDEX/TM
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1994 28.91 1.65 (2.74) (1.09) (1.65) (0.50) (2.15)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1995 25.67 1.74 2.29 4.03 (1.84) (0.04) (1.88)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1996 27.82 1.70 (0.27) 1.43 (1.70) - (1.70)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1997 27.55 1.75 0.61 2.36 (1.75) - (1.75)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 28.16 1.72 0.85 2.57 (1.71) - (1.71)
- -----------------------------------------------------------------------------------------------------------------------------------
Supplemental Data and Ratios
-------------------------------------
Ratio of Net
Net Assets, Ratio of Net Investment
Net Asset End of Expenses Income Portfolio
Value, End Total Period to Average to Average Turnover
of Period Return (000s) Net Assets Net Assets Rate
- -----------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM
BOND MARKET
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1994 10.03 1.46% 122,368 0.50%<F2> 5.43%<F2> 76.13%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1995 10.28 8.95% 94,959 0.50%<F2> 6.23%<F2> 100.58%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1996 10.25 5.80% 147,466 0.50%<F2> 5.92%<F2> 59.62%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1997 10.27 6.47% 136,084 0.50%<F2> 6.04%<F2> 77.12%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 10.34 6.84% 120,693 0.50%<F2> 5.92%<F2> 78.20%
- -----------------------------------------------------------------------------------------------------------------------------------
INTERMEDIATE
BOND MARKET
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1994 9.67 (1.73)% 88,306 0.50%<F3> 5.19%<F3> 56.25%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1995 10.21 12.25% 128,941 0.50%<F3> 6.26%<F3> 66.69%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1996 10.19 5.77% 173,468 0.50%<F3> 5.84%<F3> 59.29%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1997 10.31 7.36% 254,521 0.50%<F3> 5.96%<F3> 40.61%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 10.50 7.83% 291,289 0.50%<F3> 5.75%<F3> 27.29%
- -----------------------------------------------------------------------------------------------------------------------------------
TAX-EXEMPT
INTERMEDIATE BOND
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1994 9.78 (0.73)% 26,167 0.60%<F4> 4.04%<F4> 58.54%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1995 10.24 9.38% 27,595 0.51%<F4> 4.45%<F4> 44.13%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1996 10.21 4.02% 36,652 0.50%<F4> 4.24%<F4> 30.46%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1997 10.36 5.96% 52,208 0.50%<F4> 4.36%<F4> 11.22%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 10.52 5.88% 66,427 0.50%<F4> 4.25%<F4> 14.38%
- -----------------------------------------------------------------------------------------------------------------------------------
BOND IMMDEX/TM
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1994 25.67 (3.89)% 256,778 0.48%<F5> 6.14%<F5> 49.70%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1995 27.82 16.26% 290,274 0.44%<F5> 6.51%<F5> 41.67%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1996 27.55 5.35% 370,556 0.43%<F5> 6.23%<F5> 33.38%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1997 28.16 8.90% 408,018 0.42%<F5> 6.33%<F5> 35.12%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 29.02 9.41% 471,425 0.42%<F5> 6.02%<F5> 20.07%
- -----------------------------------------------------------------------------------------------------------------------------------
<F1> For the Tax-Exempt Intermediate Bond Fund, substantially all investment income is exempt from federal income tax.
<F2> Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1998, 1997, 1996,
1995, 1994 would have been 0.86%, 0.86%, 0.87%, 0.91%, 0.90%, respectively; and ratios of net investment income to average
net assets for the fiscal years ended October 31, 1998, 1997, 1996, 1995, 1994 would have been 5.56%, 5.68%, 5.55%, 5.82%,
5.03%, respectively.
<F3> Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1998, 1997, 1996,
1995, 1994 would have been 0.71%, 0.73%, 0.74%, 0.79%, 0.78%, respectively; and ratios of net investment income to average
net assets for the fiscal years ended October 31, 1998, 1997, 1996, 1995, 1994, would have been 5.54%, 5.74%, 5.60%, 5.97%,
4.91%, respectively.
<F4> Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1998, 1997, 1996,
1995, 1994 would have been 0.81%, 0.88%, 0.97%, 1.00%, 0.98%, respectively; and ratios of net investment income to average
net assets for the fiscal years ended October 31, 1998, 1997, 1996, 1995, 1994 would have been 3.94%, 3.98%, 3.77%, 3.96%,
3.67%, respectively.
<F5> Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1998, 1997, 1996,
1995, 1994 would have been 0.49%, 0.49% ,0.50%, 0.51%, 0.51%, respectively; and ratios of net investment income to average
net assets for the fiscal years ended October 31, 1998, 1997, 1996, 1995, 1994, would have been 5.95%, 6.26%, 6.16%, 6.44%,
6.10%, respectively.
</TABLE>
<TABLE>
<CAPTION>
RETAIL A SHARE EQUITY FUNDS
Income from Investment Operations Less Distributions
------------------------------------- ---------------------------------------
Net Net Realized and Dividends Distributions
Asset Value, Net Unrealized Gains Total From from Net From
Beginning Investment or (Losses) on Investment Investment Capital Total
of Period Income<F1> Securities Operations Income Gains Distributions
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
BALANCED INCOME
- -----------------------------------------------------------------------------------------------------------------------------------
Dec. 1, 1997<F1>
through Oct. 31, 1998 10.00 0.28 0.96 1.24 (0.24) - (0.24)
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCED GROWTH
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1994 22.76 0.44 (0.66) (0.22) (0.44) - (0.44)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1995 22.10 0.49 3.77 4.26 (0.47) - (0.47)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1996 25.89 0.47 2.64 3.11 (0.47) (0.55) (1.02)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1997 27.98 0.58 4.19 4.77 (0.59) (1.68) (2.27)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 30.48 0.56 1.86 2.42 (0.58) (2.50) (3.08)
- -----------------------------------------------------------------------------------------------------------------------------------
GROWTH AND INCOME
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1994 23.70 0.43 (0.03) 0.40 (0.42) (0.59) (1.01)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1995 23.09 0.37 5.14 5.51 (0.38) (0.60) (0.98)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1996 27.62 0.42 6.61 7.03 (0.39) (1.19) (1.58)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1997 33.07 0.37 8.92 9.29 (0.39) (2.73) (3.12)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 39.24 0.36 6.55 6.91 (0.35) (1.39) (1.74)
- -----------------------------------------------------------------------------------------------------------------------------------
EQUITY INDEX
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1994 33.04 0.77 0.35 1.12 (0.75) - (0.75)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1995 33.41 0.70 7.70 8.40 (0.68) (0.06) (0.74)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1996 41.07 0.77 8.69 9.46 (0.78) (0.35) (1.13)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1997 49.40 0.80 14.33 15.13 (0.81) (0.61) (1.42)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 63.11 0.84 12.58 13.42 (0.84) (1.11) (1.95)
- -----------------------------------------------------------------------------------------------------------------------------------
GROWTH
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1994 21.40 0.06 0.06 0.12 (0.05) - (0.05)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1995 21.47 (0.02) 4.16 4.14 (0.03) - (0.03)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1996 25.58 (0.07) 4.81 4.74 - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1997 30.32 (0.05) 6.30 6.25 - (1.30) (1.30)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 35.27 (0.02) 5.66 5.64 (0.02) (5.17) (5.19)
- -----------------------------------------------------------------------------------------------------------------------------------
SPECIAL GROWTH
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1994 32.34 0.04 0.85 0.89 (0.04) - (0.04)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1995 33.19 (0.07) 8.49 8.42 - (0.21) (0.21)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1996 41.40 (0.13) 4.70 4.57 - (4.59) (4.59)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1997 41.38 (0.20) 8.44 8.24 - (5.26) (5.26)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 44.36 (0.24) (2.07) (2.31) - (4.46) (4.46)
- -----------------------------------------------------------------------------------------------------------------------------------
EMERGING GROWTH
- -----------------------------------------------------------------------------------------------------------------------------------
Aug. 15, 19971
through Oct. 31, 1997 10.00 0.02 0.29 0.31 - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 10.31 0.03 (0.71) (0.68) (0.02) (0.05) (0.07)
- -----------------------------------------------------------------------------------------------------------------------------------
MICROCAP
- -----------------------------------------------------------------------------------------------------------------------------------
Aug. 1, 19951
through June 30, 1996 10.00 (0.02) 6.10 6.08 (0.04) (0.62) (0.66)
- -----------------------------------------------------------------------------------------------------------------------------------
July 1, 1996
through Oct. 31, 1996 15.42 (0.08) 0.82 0.74 - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1997 16.16 (0.18) 4.24 4.06 - (2.75) (2.75)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 17.47 (0.25) (3.17) (3.42) - (1.67) (1.67)
- -----------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
- -----------------------------------------------------------------------------------------------------------------------------------
Apr. 28, 19941
through Oct. 31, 1994 20.00 0.04 (0.05) (0.01) - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1995 19.99 0.08 (0.87) (0.79) (0.04) (0.01) (0.05)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1996 19.15 0.07 1.43 1.50 (0.07) (0.37) (0.44)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1997 20.21 0.06 (1.10) (1.04) (0.13) (0.46) (0.59)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 18.58 0.20 (3.15) (2.95) (0.08) (0.37) (0.45)
- -----------------------------------------------------------------------------------------------------------------------------------
Supplemental Data and Ratios
-------------------------------------
Ratio of Net
Net Assets, Ratio of Net Investment
Net Asset End of Expenses Income Portfolio
Value, End Total Period to Average to Average Turnover
of Period Return (000s) Net Assets Net Assets Rate
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
BALANCED INCOME
- -----------------------------------------------------------------------------------------------------------------------------------
Dec. 1, 19971
through Oct. 31, 1998 11.00 12.46% 10,614 1.00%<F4> 2.82%<F4> 58.33%
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCED GROWTH
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1994 22.10 (0.93)% 94,657 0.75%<F5> 2.03%<F5> 59.77%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1995 25.89 19.55% 21,832 0.94%<F5> 2.05%<F5> 61.87%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1996 27.98 12.30% 29,034 1.00%<F5> 1.80%<F5> 63.91%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1997 30.48 18.07% 44,026 1.00%<F5> 2.06%<F5> 69.90%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 29.82 8.60% 59,657 1.00%<F5> 1.91%<F5> 56.44%
- -----------------------------------------------------------------------------------------------------------------------------------
GROWTH AND INCOME
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1994 23.09 1.84% 164,053 0.90%<F6> 1.89%<F6> 56.85%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1995 27.62 24.75% 42,424 1.09%<F6> 1.51%<F6> 47.85%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1996 33.07 26.62% 71,310 1.15%<F6> 1.42%<F6> 51.37%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1997 39.24 30.47% 128,070 1.12%<F6> 1.09%<F6> 31.36%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 44.41 18.08% 190,331 1.12%<F6> 0.86%<F6> 48.56%
- -----------------------------------------------------------------------------------------------------------------------------------
EQUITY INDEX
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1994 33.41 3.51% 107,563 0.50%<F7> 2.38%<F7> 13.28%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1995 41.07 25.79% 18,663 0.66%<F7> 2.14%<F7> 4.61%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1996 49.40 23.36% 39,656 0.66%<F7> 1.76%<F7> 7.48%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1997 63.11 31.08% 76,866 0.63%<F7> 1.40%<F7> 9.81%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 74.58 21.63% 110,129 0.58%<F7> 1.18%<F7> 2.91%
- -----------------------------------------------------------------------------------------------------------------------------------
GROWTH
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1994 21.47 0.56% 113,197 0.88%<F8> 0.30%<F8> 33.24%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1995 25.58 19.31% 10,105 1.09%<F8> (0.06)% <F8> 49.84%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1996 30.32 18.53% 16,636 1.15%<F8> (0.29)% <F8> 56.75%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1997 35.27 21.30% 25,043 1.14%<F8> (0.16)% <F8> 62.09%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 35.72 18.58% 38,213 1.14%<F8> (0.05)% <F8> 51.82%
- -----------------------------------------------------------------------------------------------------------------------------------
SPECIAL GROWTH
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1994 33.19 2.77% 395,584 0.89%<F9> 0.13%<F9> 69.74%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1995 41.40 25.56% 87,269 1.09%<F9> (0.19)% <F9> 79.25%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1996 41.38 12.27% 111,159 1.13%<F9> (0.35)% <F9> 103.34%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1997 44.36 22.18% 147,396 1.12%<F9> (0.50)% <F9> 97.40%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 37.59 (5.91)% 136,146 1.13%<F9> (0.57)% <F9> 77.39%
- -----------------------------------------------------------------------------------------------------------------------------------
EMERGING GROWTH
- -----------------------------------------------------------------------------------------------------------------------------------
Aug. 15, 1997<F1>
through Oct. 31, 1997 10.31 3.10% 5,355 1.15%<F10> 0.93%<F10> 14.51%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 9.56 (6.58)% 12,884 1.15%<F10> 0.24%<F10> 132.63%
- -----------------------------------------------------------------------------------------------------------------------------------
MICROCAP
- -----------------------------------------------------------------------------------------------------------------------------------
Aug. 1, 1995<F1>
through June 30, 1996 15.42 63.52% 9,036 1.99%<F11> (0.36)% <F11> 283.67%
- -----------------------------------------------------------------------------------------------------------------------------------
July 1, 1996
through Oct. 31, 1996 16.16 4.80% 9,273 1.97%<F11> (1.69)% <F11> 64.44%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1997 17.47 29.78% 16,793 1.95%<F11> (1.45)% <F11> 158.39%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 12.38 (21.71)% 12,419 1.99%<F11> (1.63)% <F11> 135.61%
- -----------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
- -----------------------------------------------------------------------------------------------------------------------------------
Apr. 28, 1994<F1>
through Oct. 31, 1994 19.99 (0.05)% 23,756 1.49%<F12> 0.44%<F12> 6.55%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1995 19.15 (3.95)% 1,633 1.70%<F12> 0.46%<F12> 15.12%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1996 20.21 7.95% 3,769 1.75%<F12> 0.37%<F12> 31.57%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1997 18.58 (5.30)% 6,502 1.75%<F12> 0.25%<F12> 97.09%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 15.18 (16.16)% 6,486 1.75%<F12> 1.12%<F12> 43.96%
- -----------------------------------------------------------------------------------------------------------------------------------
<F1> Commencement of operations.
<F2> Not annualized for the period ended October 31, 1998 for the Balanced Income, for the period ended October 31, 1997 for the
Emerging Growth Fund, for the period ended June 30, 1996 and October 31, 1996 for
the MicroCap Fund and for the period ended October 31, 1994 for the International Equity Fund.
<F3> Annualized for the period ended October 31, 1998 for the Balanced Income, for the period ended October 31, 1997 for the
Emerging Growth Fund, for the period ended June 30, 1996 and October 31, 1996 for the
MicroCap Fund and for the period ended October 31, 1994 for the International Equity Fund.
<F4> Without fees waived, ratios of net expenses to average net assets for the period ended October 31, 1998 would have been 1.63%
and ratio of net investment income to average net assets for the period ended
October 31, 1998 would have been 2.19%.
<F5> Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1998, 1997, 1996,
1995, 1994 would have been 1.24%, 1.25%, 1.28%, 1.25%, 1.05%, respectively; and ratios
of net investment income to average net assets for the fiscal years ended October 31, 1998, 1997, 1996, 1995, 1994 would have
been 1.67%, 1.80%, 1.52%, 1.74%, 1.73%, respectively.
<F6> Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1998, 1997, 1996,
1995, 1994 would have been 1.19%, 1.19%, 1.23%, 1.20%, 1.01%, respectively; and ratios
of net investment income to average net assets for the fiscal years ended October 31, 1998, 1997, 1996, 1995, 1994, would have
been 0.79%, 1.02%, 1.35%, 1.40%, 1.78%, respectively.
<F7> Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1998, 1997, 1996,
1995, 1994 would have been 0.69%, 0.70%, 0.73%, 0.73%, 0.57%, respectively; and ratios
of net investment income to average net assets for the fiscal years ended October 31, 1998, 1997, 1996, 1995, 1994 would have
been 1.07%, 1.33%, 1.69%, 2.07%, 2.31%, respectively.
<F8> Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1998, 1997, 1996,
1995, 1994 would have been 1.21%, 1.21%, 1.23%, 1.21%, 1.00%, respectively; and ratios of net investment income to average net
assets for the fiscal years ended October 31, 1998, 1997, 1996, 1995, 1994 would have been (0.12)%, (0.24)%, (0.36)%, (0.18)%,
0.19%, respectively.
<F9> Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1998, 1997, 1996,
1995, 1994 would have been 1.20%, 1.20%, 1.20%, 1.17%, 0.98%, respectively; and ratios of net investment income to average net
assets for the fiscal years ended October 31, 1998, 1997, 1996, 1995, 1994 would have been (0.64)%, (0.57)%, (0.42)%, (0.27)%,
0.04%, respectively.
<F10>Without fees waived, ratios of net expenses to average net assets for the fiscal year ended October 31, 1998 and the period
ended October 31, 1997 would have been 1.42%, 1.59%, respectively; and ratios of net
investment income to average net assets for the fiscal year ended October 31, 1998 and the period ended October 31, 1997 would
have been (0.03)%, 0.59%, respectively.
<F11>Without fees waived, the ratio of net expenses to average net assets for the periods ended October 31, 1998, 1997, 1996 and
June 30, 1996 would have been 2.06%, 2.03%, 2.04% and 2.22%, respectively, and the ratio of net investment income (loss) to
average net assets for the periods ended October 31, 1998, 1997, 1996 and June 30, 1996 would have been (1.70)%, (1.53)%,
(1.76)% and (0.59)%, respectively.
<F12>Without fees waived, ratios of net expenses to average net assets for the fiscal year ended October 31, 1998, 1997, 1996, 1995
and the period ended October 31, 1994 would have been 2.16%, 2.50%, 2.61%, 2.85% and 2.85%, respectively; and ratios of net
investment income to average net assets for the fiscal years ended October 31, 1998, 1997, 1996, 1995 and the period ended
October 31, 1994 would have been 0.71%, (0.50)%, (0.48)%, (0.69)% and (0.92)%, respectively.
<F13>The total return calculation for the Funds do not reflect the maximum sales charge of 4.50%.
</TABLE>
<TABLE>
<CAPTION>
INSTITUTIONAL EQUITY FUNDS
Income from Investment Operations Less Distributions
------------------------------------- ---------------------------------------
Net Net Realized and Dividends Distributions
Asset Value, Net Unrealized Gains Total From from Net From
Beginning Investment or (Losses) on Investment Investment Capital Total
of Period Income Securities Operations Income Gains Distributions
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
BALANCED INCOME
- -----------------------------------------------------------------------------------------------------------------------------------
Dec. 1, 19971 through
Oct. 31, 1998 10.00 0.30 0.96 1.26 (0.25) - (0.25)
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCED GROWTH
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1994 22.76 0.44 (0.66) (0.22) (0.44) - (0.44)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1995 22.10 0.53 3.78 4.31 (0.51) - (0.51)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1996 25.90 0.55 2.62 3.17 (0.53) (0.55) (1.08)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1997 27.99 0.66 4.20 4.86 (0.66) (1.68) (2.34)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 30.51 0.62 1.86 2.48 (0.64) (2.50) (3.14)
- -----------------------------------------------------------------------------------------------------------------------------------
GROWTH AND INCOME
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1994 23.70 0.43 (0.03) 0.40 (0.42) (0.59) (1.01)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1995 23.09 0.42 5.14 5.56 (0.42) (0.60) (1.02)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1996 27.63 0.50 6.61 7.11 (0.47) (1.19) (1.66)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1997 33.08 0.46 8.94 9.40 (0.47) (2.73) (3.20)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 39.28 0.47 6.55 7.02 (0.45) (1.39) (1.84)
- -----------------------------------------------------------------------------------------------------------------------------------
EQUITY INDEX
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1994 33.04 0.77 0.35 1.12 (0.75) - (0.75)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1995 33.41 0.76 7.71 8.47 (0.74) (0.06) (0.80)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1996 41.08 0.91 8.68 9.59 (0.89) (0.35) (1.24)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1997 49.43 0.95 14.33 15.28 (0.94) (0.61) (1.55)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 63.16 1.02 12.59 13.61 (1.00) (1.11) (2.11)
- -----------------------------------------------------------------------------------------------------------------------------------
GROWTH
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1994 21.40 0.06 0.06 0.12 (0.05) - (0.05)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1995 21.47 0.03 4.16 4.19 (0.05) - (0.05)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1996 25.61 (0.01) 4.83 4.82 - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1997 30.43 0.04 6.31 6.35 - (1.30) (1.30)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 35.48 0.07 5.70 5.77 (0.03) (5.17) (5.20)
- -----------------------------------------------------------------------------------------------------------------------------------
SPECIAL GROWTH
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1994 32.34 0.04 0.85 0.89 (0.04) - (0.04)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1995 33.19 0.00 8.49 8.49 - (0.21) (0.21)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1996 41.47 (0.04) 4.74 4.70 - (4.59) (4.59)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1997 41.58 (0.11) 8.49 8.38 - (5.26) (5.26)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 44.70 (0.14) (2.09) (2.23) - (4.46) (4.46)
- -----------------------------------------------------------------------------------------------------------------------------------
EMERGING GROWTH
- -----------------------------------------------------------------------------------------------------------------------------------
Aug. 15, 19971 through
Oct. 31, 1997 10.00 0.02 0.29 0.31 - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 10.31 0.05 (0.71) (0.66) (0.02) (0.05) (0.07)
- -----------------------------------------------------------------------------------------------------------------------------------
MICROCAP
- -----------------------------------------------------------------------------------------------------------------------------------
Aug. 1, 19951 through
June 30, 1996 10.00 (0.02) 6.14 6.12 (0.05) (0.62) (0.67)
- -----------------------------------------------------------------------------------------------------------------------------------
July 1, 1996 through
Oct. 31, 1996 15.45 (0.07) 0.82 0.75 - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1997 16.20 (0.15) 4.27 4.12 - (2.75) (2.75)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 17.57 (0.22) (3.19) (3.41) - (1.67) (1.67)
- -----------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY
- -----------------------------------------------------------------------------------------------------------------------------------
Apr. 28, 1994<F1> through
Oct. 31, 1994 20.00 0.04 (0.05) (0.01) - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1995 19.99 0.12 (0.87) (0.75) (0.04) (0.01) (0.05)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1996 19.19 0.11 1.44 1.55 (0.10) (0.37) (0.47)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1997 20.27 0.10 (1.10) (1.00) (0.17) (0.46) (0.63)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 18.64 0.24 (3.16) (2.92) (0.09) (0.37) (0.46)
- -----------------------------------------------------------------------------------------------------------------------------------
Supplemental Data and Ratios
-------------------------------------
Ratio of Net
Net Assets, Ratio of Net Investment
Net Asset End of Expenses Income Portfolio
Value, End Total Period to Average to Average Turnover
of Period Return (000s) Net Assets Net Assets Rate
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
BALANCED INCOME
- -----------------------------------------------------------------------------------------------------------------------------------
Dec. 1, 19971 through
Oct. 31, 1998 11.01 12.70% 34,036 0.75%<F4> 3.07%<F4> 58.33%
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCED GROWTH
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1994 22.10 (0.93)% 94,657 0.75%<F5> 2.03%<F5> 59.77%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1995 25.90 19.79% 104,552 0.75%<F5> 2.24%<F5> 61.87%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1996 27.99 12.56% 129,415 0.75%<F5> 2.05%<F5> 63.91%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1997 30.51 18.39% 164,382 0.75%<F5> 2.31%<F5> 69.90%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 29.85 8.83% 188,123 0.75%<F5> 2.16%<F5> 56.44%
- -----------------------------------------------------------------------------------------------------------------------------------
GROWTH AND INCOME
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1994 23.09 1.84% 164,053 0.90%<F6> 1.89%<F6> 56.85%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1995 27.63 25.00% 162,752 0.90%<F6> 1.70%<F6> 47.85%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1996 33.08 26.90% 226,888 0.90%<F6> 1.67%<F6> 51.37%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1997 39.28 30.83% 366,020 0.87%<F6> 1.34%<F6> 31.36%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 44.46 18.35% 474,603 0.87%<F6> 1.11%<F6> 48.56%
- -----------------------------------------------------------------------------------------------------------------------------------
EQUITY INDEX
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1994 33.41 3.51% 107,563 0.50%<F7> 2.38%7 13.28%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1995 41.08 26.02% 138,106 0.46%<F7> 2.34%<F7> 4.61%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1996 49.43 23.68% 212,072 0.41%<F7> 2.01%<F7> 7.48%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1997 63.16 31.38% 315,759 0.38%<F7> 1.66%<F7> 9.81%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 74.66 21.93% 452,752 0.33%<F7> 1.43%<F7> 2.91%
- -----------------------------------------------------------------------------------------------------------------------------------
GROWTH
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1994 21.47 0.56% 113,197 0.88%<F8> 0.30%<F8> 33.24%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1995 25.61 19.55% 134,428 0.90%<F8> 0.13%<F8> 49.84%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1996 30.43 18.82% 155,293 0.90%<F8> (0.04)%<F8> 56.75%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1997 35.48 21.56% 181,650 0.89%<F8> 0.09%<F8> 62.09%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 36.05 18.89% 197,798 0.89%<F8> 0.20%<F8> 51.82%
- -----------------------------------------------------------------------------------------------------------------------------------
SPECIAL GROWTH
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1994 33.19 2.77% 395,584 0.89%<F9> 0.13%<F9> 69.74%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1995 41.47 25.79% 434,228 0.90%<F9> 0.00%<F9> 79.25%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1996 41.38 12.58% 482,857 0.88%<F9> (0.10)% <F9> 103.34%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1997 44.36 22.44% 569,028 0.87%<F9> (0.25)% <F9> 97.40%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 38.01 (5.66)% 464,858 0.88%<F9> (0.32)% <F9> 77.39%
- -----------------------------------------------------------------------------------------------------------------------------------
EMERGING GROWTH
- -----------------------------------------------------------------------------------------------------------------------------------
Aug. 15, 19971 through
Oct. 31, 1997 10.31 3.10% 48,044 0.90%<F10> 1.18%<F10> 14.51%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 9.58 (6.35)% 60,400 0.90%<F10> 0.49%<F10> 132.63%
- -----------------------------------------------------------------------------------------------------------------------------------
MICROCAP
- -----------------------------------------------------------------------------------------------------------------------------------
Aug. 1, 19951 through
June 30, 1996 15.45 63.93% 63,595 1.74%<F11> (0.16)% <F11> 283.67%
- -----------------------------------------------------------------------------------------------------------------------------------
July 1, 1996 through
Oct. 31, 1996 16.20 4.85% 66,368 1.72%<F11> (1.44)% <F11> 64.44%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1997 17.57 30.12% 103,840 1.70%<F11> (1.20)% <F11> 158.39%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 12.49 (21.51)% 72,696 1.74%<F11> (1.38)% <F11> 135.61%
- -----------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY
- -----------------------------------------------------------------------------------------------------------------------------------
Apr. 28, 19941 through
Oct. 31, 1994 19.99 (0.05)% 23,756 1.49%<F12> 0.44%<F12> 6.55%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1995 19.19 (3.75)% 31,187 1.50%<F12> 0.66%<F12> 15.12%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1996 20.27 8.21% 43,182 1.50%<F12> 0.62%<F12> 31.57%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1997 18.64 (5.10)% 57,206 1.50%<F12> 0.50%<F12> 97.09%
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 1998 15.26 (15.97)% 44,670 1.50%<F12> 1.37%<F12> 43.96%
- -----------------------------------------------------------------------------------------------------------------------------------
<F1> Commencement of operations.
<F2> Not annualized for the period ended October 31, 1998 for the Balanced Income, for the period ended October 31, 1997 for the
Emerging Growth Fund, for the period ended June 30, 1996 and
October 31, 1996 for the MicroCap Fund and for the period ended October 31, 1994 for the International Equity Fund.
<F3> Annualized for the period ended October 31, 1998 for the Balanced Income, for the period ended October 31, 1997 for the
Emerging Growth Fund, for the period ended June 30, 1996 and
October 31, 1996 for the MicroCap Fund and for the period ended October 31, 1994 for the International Equity Fund.
<F4> Without fees waived, ratios of net expenses to average net assets for the period ended October 31, 1998 would have been 1.38%
and ratio of net investment income to average net assets for the period
ended October 31, 1998 would have been 2.44%.
<F5> Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1998, 1997, 1996,
1995, 1994 would have been 0.99%, 1.00%, 1.03%, 1.06%, 1.05%, respectively;
and ratios of net investment income to average net assets for the fiscal years ended October 31, 1998, 1997, 1996, 1995, 1994
would have been 1.92%, 2.05%, 1.77%, 1.93%, 1.73%, respectively.
<F6> Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1998, 1997, 1996,
1995, 1994 would have been 0.94%, 0.94%, 0.98%, 1.01%, 1.01%, respectively;
and ratios of net investment income to average net assets for the fiscal years ended October 31, 1998, 1997, 1996, 1995, 1994
would have been 1.04%, 1.27%, 1.59%, 1.59%, 1.78%, respectively.
<F7> Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1998, 1997, 1996,
1995, 1994 would have been 0.44%, 0.45%, 0.48%, 0.53%, 0.57%, respectively;
and ratios of net investment income to average net assets for the fiscal years ended October 31, 1998, 1997, 1996, 1995, 1994
would have been 1.32%, 1.59%, 1.94%, 2.27%, 2.31%, respectively.
<F8> Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1998, 1997, 1996,
1995, 1994 would have been 0.96%, 0.96%, 0.98%, 1.02%, 1.00%, respectively; and ratios of net investment income to average net
assets for the fiscal years ended October 31, 1998, 1997, 1996, 1995, 1994 would have been 0.13%, 0.01%, (0.12)%, 0.01%, 0.19%,
respectively.
<F9> Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1998, 1997, 1996,
1995, 1994 would have been 0.95%, 0.95%, 0.95%, 0.98%, 0.98%, respectively; and ratios of net investment income to average net
assets for the fiscal years ended October 31, 1998, 1997, 1996, 1995, 1994 would have been (0.39)%, (0.32)%, (0.17)%, (0.08)%,
0.04%, respectively.
<F10> Without fees waived, ratios of net expenses to average net assets for the fiscal year ended October 1998 and for the period
ended October 31, 1997 would have been 1.17%, 1.24%, respectively; and ratios of net investment income to average net assets
for the fiscal year ended October 1998 and for the period ended October 31, 1997 would have been 0.22%, 0.84%, respectively.
<F11> Without fees waived, the ratio of net expenses to average net assets for the fiscal years ended October 31, 1998, 1997 and for
the periods ended October 31, 1996 and June 30, 1996 would have been 1.81%, 1.78%, 1.79% and 1.97%, respectively, and the ratio
of net investment income (loss) to average net assets for the fiscal years ended October 31, 1998, 1997 and for the periods
ended October 31, 1996 and June 30, 1996 would have been 1.45%, (1.28)%, (1.51)% and (0.39)%, respectively.
<F12> Without fees waived, ratios of net expenses to average net assets for the fiscal year ended October 31, 1998, 1997, 1996, 1995
and the period ended October 31, 1994 would have been 1.92%, 2.25%, 2.36%, 2.65% and 2.85%, respectively; and ratios of net
investment income to average net assets for the fiscal years ended October 31, 1998, 1997, 1996, 1995 and the period ended
October 31, 1994 would have been 0.96%, (0.25)%, (0.24)%, (0.49)% and (0.92)%, respectively.
<FN> Effective September 2, 1997, Hansberger Global Investors assumed the investment sub-advisory responsibilities of State Street
Global Advisers.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUNDS' 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 FUNDS OR THEIR
DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUNDS OR BY
THEIR DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE
MADE.
"STANDARD & POOR'SR", S&PR", "S&P 500R", "STANDARD & POOR'S 500", AND "500" ARE
TRADEMARKS OF THE MCGRAW HILL COMPANIES, INC. AND HAVE BEEN LICENSED FOR USE BY
FIRSTAR FUNDS. THE EQUITY INDEX 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 EQUITY INDEX FUND.
THE LEHMAN BROTHERS 1-3 YEAR GOVERNMENT/CORPORATE BOND INDEX, THE LEHMAN
BROTHERS INTERMEDIATE GOVERNMENT/CORPORATE BOND INDEX AND THE LEHMAN BROTHERS
GOVERNMENT/CORPORATE BOND INDEX ARE TRADEMARKS OF LEHMAN BROTHERS. THE FUND, ITS
ADVISER AND THE CO-ADMINISTRATORS ARE NOT AFFILIATED IN ANY WAY WITH LEHMAN
BROTHERS. INCLUSION OF A SECURITY IN THE BOND INDEX IN NO WAY IMPLIES AN OPINION
BY LEHMAN BROTHERS AS TO ITS ATTRACTIVENESS OR APPROPRIATENESS AS AN INVESTMENT.
LEHMAN BROTHERS'
PUBLICATION OF THE BOND INDEX IS NOT MADE IN CONNECTION WITH ANY SALE OR OFFER
FOR SALE OF SECURITIES OR ANY SOLICITATIONS OF ORDERS FOR THE PURCHASE OF
SECURITIES.
FOR MORE INFORMATION
ANNUAL/SEMIANNUAL REPORTS
Additional information about the Funds' investments is available in the Funds'
annual and semiannual reports to shareowners. In the Funds' annual reports, you
will find a discussion of the market conditions and investment strategies that
significantly affected the Funds' performance during its last fiscal year.
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' annual and semiannual reports and the Additional Statement are
available free upon request by calling Firstar Funds at 1-800-228-1024 or 1-414-
287-3808.
To obtain other information and for shareowner inquiries:
By telephone - call 1-800-228-1024 or 1-414-287-3808
By mail - Firstar Funds
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
xxxxxxxxx
Money Market Fund
U.S. Treasury Money Market Fund
U.S. Government Money Market Fund
Tax-Exempt Money Market Fund
PROSPECTUS
March 1, 1999
(LOGO) FIRSTAR FUNDS
(LOGO) FIRSTAR FUNDS
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
- -------------------------------------------------------------------------------
MONEY MARKET FUND..........................................1
U.S. TREASURY MONEY MARKET FUND............................3
U.S. GOVERNMENT MONEY MARKET FUND..........................3
TAX-EXEMPT MONEY MARKET FUND...............................6
TYPES OF INVESTMENT RISK...................................9
INVESTING WITH FIRSTAR FUNDS..............................12
PURCHASE OF SHARES .....................................12
BUYING SHARES ..........................................12
REDEMPTION OF SHARES ...................................14
EXCHANGE OF SHARES .....................................16
ADDITIONAL SHAREOWNER SERVICES .........................17
ADDITIONAL INFORMATION....................................18
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES .......18
MANAGEMENT OF THE FUNDS ................................19
NET ASSET VALUE AND DAYS OF OPERATION ..................21
APPENDIX..................................................21
FINANCIAL HIGHLIGHTS ...................................21
- -------------------------------------------------------------------------------
Learn about each Fund's Objective, Principal Investment Strategies, Principal
Risks, Performance and Expenses.
- -------------------------------------------------------------------------------
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 Funds is not a deposit of Firstar Bank and is not
insured by the Federal Deposit Insurance Corporation, or any other government
agency. Although each Money Market Fund seeks to preserve the value of your
investment at $1.00 per share, it is possible to lose money by investing in the
Funds.
- --------------------------------------------------------------------------------
MONEY MARKET FUND
OBJECTIVE The investment objective of the Money Market Fund is to provide a
high level of taxable current income consistent with liquidity, the preservation
of capital and a stable net asset value. 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 Fund invests principally in short-term high
quality, dollar-denominated money market debt obligations generally maturing in
397 days or less. These obligations may be issued by entities including domestic
and foreign corporations, banks and other financial institutions and other types
of entities or by investment companies, or they may be issued or guaranteed by a
U.S. or foreign government, agency, instrumentality or political subdivision.
The Fund will acquire only securities which are rated in the highest short-term
rating category by at least two rating agencies (or by the only rating agency
providing a rating), or are issued or guaranteed by, or
otherwise provide the right to demand payment from, entities with those ratings.
If the securities are unrated, they must be of comparable quality, as determined
at the time of acquisition.
The Fund maintains an average maturity of 90 days or less.
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 rate of income on Fund shares will vary from day to day so that dividends on
your investment will vary. The Fund is subject to credit risk and interest rate
risk. Credit risk is the risk that an issuer of fixed income securities may
default on its obligation to pay interest and repay principal. Interest rate
risk is the risk that, when interest rates increase, fixed-income securities
will decline in value. Long-term fixed-income securities will normally have more
price volatility because of this risk than short-term securities.
BAR CHART AND PERFORMANCE TABLE
The following bar chart and table provide an indication of the risks of
investing in the Fund by showing changes in the performance of the Fund's shares
from year to year. The bar charts and performance tables assume reinvestment of
dividends and distributions. Remember, past performance is not indicative of
future results. Performance reflects fee waivers in effect. If fee waivers were
not in place, the Fund's performance would be reduced.
YEAR-BY-YEAR TOTAL RETURN AS OF 12/31/EACH YEAR (%)
1998 5.14
1997 5.14
1996 5.00
1995 5.54
1994 3.84
1993 2.67
1992 3.42
1991 5.87
1990 8.05
1989 8.98
- ---------------------------------------------------------------------------
BEST QUARTER: Q 2 '89 2.33%
WORST QUARTER: Q 2 '93 0.64%
- ---------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/98
- --------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
MONEY MARKET FUND 5.14% 4.93% 5.35%
- --------------------------------------------------------------------------------
The 7-day yield for the period ended on 12/31/98 for the Money Market Fund was
4.76% and without giving effect to fee waivers was 4.53%. Figures reflect past
performance. Yields will vary. You may call 1-800-228-1024 to obtain the current
7-day yield of the Money Market Fund.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Money Market Fund.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
- --------------------------------------------------------------------------------
DISTRIBUTION TOTAL ANNUAL FUND
MANAGEMENT AND SERVICE OTHER OPERATING
FEES<F1> (12B-1)FEES<F2> EXPENSES<F3> EXPENSES<F4>
- --------------------------------------------------------------------------------
Money Market Fund 0.50% 0.03% 0.35% 0.88%
- --------------------------------------------------------------------------------
<F1> The Adviser has voluntarily agreed that a portion of its management fee
will not be imposed on the Money Market Fund during the current fiscal
year. As a result of the fee waiver, current management fees of the Money
Market Fund are 0.37% 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.
<F2> The total of all 12b-1 fees and shareowner servicing fees may not exceed,
in the aggregate, the annual rate of 0.25% of a Fund's average daily net
assets for the shares. The Money Market Fund intends to pay 12b-1 fees for
the current fiscal year.
<F3> "Other Expenses" include (1) administration fees, transfer agency fees, and
all other ordinary operating expenses of the Fund not listed above. The
Money Market Fund has a Shareholder Service Plan permitting it to pay
Shareowner Servicing fees to institutions (described below under the
heading "Management of the Funds - Shareowner Organizations") equal to up
to 0.25% of the Fund's average daily net assets. The Fund does not intend
to pay Shareowner Servicing fees for the current fiscal year and "Other
Expenses" does not reflect such fees.
<F4> As a result of the fee waivers set forth in note 1, the Total Annual Fund
Operating Expenses of the Money Market Fund which are estimated to be
incurred during the current fiscal year are 0.75% 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.
A fee of $12.00 is charged for each wire redemption and $15.00 for each non-
systematic withdrawal from a Retirement Account for which Firstar Bank,
Milwaukee, N.A. is custodian.
- --------------------------------------------------------------------------------
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 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Money Market Fund $90 $281 $488 $1,084
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
U.S. TREASURY MONEY MARKET FUND AND U.S. GOVERNMENT MONEY MARKET FUND
OBJECTIVES The investment objective of the U.S. Treasury Money Market Fund is
to provide a high level of current income exempt from state income taxes
consistent with liquidity, the preservation of capital and a stable net asset
value.
The investment objective of the U.S. Government Money Market Fund is to provide
a high level of taxable current income consistent with liquidity, the
preservation of capital and a stable net asset value (irrespective of state
income tax considerations).
Each of these investment objectives may be changed by the Board of Directors
without approval of Shareowners, although no change is currently anticipated.
PRINCIPAL INVESTMENT STRATEGIES The U.S. Treasury Money Market Fund invests in
short term, dollar-denominated debt obligations, generally maturing in 397 days
or less, issued or guaranteed as to principal and interest by the U.S. Treasury.
During normal market conditions, the Fund invests at least 65% of its total
assets in these obligations.
The U.S. Government Money Market Fund invests in short term, dollar-denominated
debt obligations, generally maturing in 397 days or less, issued or guaranteed
as to principal and interest by the U.S. government, its agencies or
instrumentalities. Under normal market conditions, the Fund intends to invest at
least 65% of its total assets in these obligations. The Fund also invests in
variable and floating rate instruments.
Each Fund maintains an average maturity of 90 days or less.
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 Funds are also described under that heading.
The rate of income on Fund shares will vary from day to day so that
dividends on your investment will vary. The Funds are subject to credit risk
and interest rate risk.
Credit risk is the risk that an issuer of fixed income securities may default on
its obligation to pay interest and repay principal.
Interest rate risk is the risk that, when interest rates increase, fixed-income
securities will decline in value. Long-term fixed-income securities will
normally have more price volatility because of this risk than short-term
securities.
- --------------------------------------------------------------------------------
Even though the U.S. Treasury Money Market Fund and U.S. Government Money Market
Fund purchase mostly U.S. government obligations, shares of the Funds are not
themselves issued or guaranteed by any government agency.
- --------------------------------------------------------------------------------
For the U.S. Government Money Market Fund, there can be no assurance that the
U.S. government will provide financial support to U.S. government-sponsored
agencies or instrumentalities where it is not obligated to do so by law.
BAR CHART AND PERFORMANCE TABLE
The following bar chart and table provide an indication of the risks of
investing in a Fund by showing changes in the performance of a Fund's shares
from year to year. The bar charts and performance tables assume reinvestment of
dividends and distributions. Remember, past performance is not indicative
of future results. Performance reflects fee waivers in effect. If fee waivers
were not in place, a Fund's perform ance would be reduced.
YEAR-BY-YEAR TOTAL RETURN AS OF 12/31 EACH YEAR (%)
U.S. GOVERNMENT U.S. TREASURY
MONEY MARKET MONEY MARKET
1998 4.95 4.65
1997 4.97 4.78
1996 4.92 4.76
1995 5.39 5.21
1994 3.76 3.57
1993 2.61 2.57
1992 3.30 3.19
1991 5.56
1990 7.71
1989 8.70
- --------------------------------------------------------------------------------
U.S. TREASURY U.S. GOVERNMENT
MONEY MARKET MONEY MARKET
FUND FUND
- --------------------------------------------------------------------------------
BEST QUARTER: Q 2 '95 1.34% Q 2 '89 2.24%
WORST QUARTER: Q 2 '93 0.62% Q 2 '93 0.63%
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/98
- --------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (INCEPTION DATE)
- --------------------------------------------------------------------------------
U.S. TREASURY MONEY
MARKET FUND 4.65% 4.59% - 4.19%
(Apr. 29, 1991)
U.S. GOVERNMENT
MONEY MARKET FUND 4.95% 4.79% 5.17% -
- --------------------------------------------------------------------------------
The 7-day yield for the period ended on 12/31/98 for the U.S. Treasury Money
Market Fund and the U.S. Government Money Market Fund was 4.09% and 4.44%,
respectively, and without giving effect to fee waivers was 3.95% and 4.36%,
respectively. Figures reflect past performance. Yields will vary. You may call
1-800-228-1024 to obtain the current 7-day yield of the U.S. Treasury Money
Market Fund and the U.S. Government Money Market Fund.
FEES AND EXPENSES OF THE FUNDS
This table describes the fees and expenses that you may pay if you buy and hold
shares of the U.S. Treasury Money Market Fund and U.S. Government Money Market
Fund.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
DISTRIBUTION TOTAL ANNUAL
MANAGEMENT AND SERVICE OTHER FUND OPERATING
FEES<F1> (12B-1)FEES<F2> EXPENSES<F3> EXPENSES<F4>
- --------------------------------------------------------------------------------
U.S. Treasury Money
Market Fund 0.50% 0.00% 0.26% 0.76%
U.S. Government
Money Market Fund 0.50% 0.00% 0.22% 0.72%
- --------------------------------------------------------------------------------
<F1> The Adviser has voluntarily agreed that a portion of its management fee
will not be imposed on the U.S. Treasury Money Market Fund during the
current fiscal year. As a result of the fee waiver, current management fees
of the U.S. Treasury Money Market Fund are 0.49% 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.
<F2> The total of all 12b-1 fees and shareowner servicing fees may not exceed,
in the aggregate, the annual rate of 0.25% of a Fund's average daily net
assets for the shares. The Funds do not intend to pay 12b-1 fees with
respect to the shares for the current fiscal year.
<F3> "Other Expenses" includes administration fees, transfer agency fees, and
all other ordinary operating expenses of the Funds not listed above. Each
Fund has in place a Shareowner Service Plan permitting the payment of a
Shareowner Servicing fee to institutions (described below under the heading
"Management of the Funds - Shareowner Organizations") equal to up to 0.25%
of each Fund's average daily net assets. The Funds do not intend to pay
Shareowner Servicing fees for the current fiscal year and "Other Expenses"
does not reflect such fees.
<F4> As a result of the fee waivers set forth in note 1, the Total Annual Fund
Operating Expenses of the U.S. Treasury Money Market Fund are estimated to
be 0.75% for the current fiscal year. Although the fee waiver is expected
to remain in effect for the current fiscal year, the waiver is voluntary
and may be terminated at any time at the option of the Adviser.
A fee of $12.00 is charged for each wire redemption and $15.00 for each non-
systematic withdrawal from a Retirement Account for which Firstar Bank,
Milwaukee, N.A. is custodian.
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 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
U.S. Treasury Money
Market Fund $78 $243 $422 $942
U.S. Government
Money Market Fund $74 $230 $401 $894
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
TAX-EXEMPT MONEY MARKET FUND
OBJECTIVE The investment objective of the Tax-Exempt Money Market Fund is to
provide a high level of current income exempt from federal income taxes
consistent with liquidity, the preservation of capital and a stable net asset
value. 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 Fund invests principally in a diversified
portfolio of dollar-denominated debt obligations ("municipal obligations")
issued by or on behalf of states, territories and possessions of the United
States, the District of Columbia and their authorities, agencies,
instrumentalities and political sub divisions. The Fund will acquire only
securities which are rated in the highest short-term rating category by at least
two rating agencies (or by the only rating agency providing a rating), or are
issued or guaranteed by, or otherwise provide the right to demand payment from,
entities with those ratings. If the security is unrated, it must be of
comparable quality to securities with those ratings, as determined at the time
of acquisition. During normal market conditions, the Fund will invest at least
80% of its net assets in municipal obligations which are exempt from federal
income taxes with remaining maturities of 13 months or less. (Securities, which
are subject to, demand features and certain U.S. government obligations may have
longer maturities.) The Fund maintains an average portfolio maturity of 90 days
or less.
The two principal classifications of municipal obligations which the Tax-Exempt
Money Market Fund invests in are:
GENERAL OBLIGATION SECURITIES REVENUE SECURITIES
General obligation securities are secured by the issuer's pledge of its full
faith, credit and taxing power for the payment of principal and interest.
REVENUE SECURITIES
Revenue securities are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise tax or other specific revenue source such as the issuer of the
facility being financed.
Municipal obligations purchased by the Fund may include variable and floating
rate instruments which are instruments with interest rates that are adjusted
either on a schedule or when an index or benchmark changes. While there may be
no active secondary market with respect to a particular variable or floating
rate demand instrument, the Fund may demand payment in full of the principal and
interest.
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 rate of income on Fund shares will vary from day to day so that dividends on
your investment will vary. The Fund is subject to credit risk and interest rate
risk. Credit risk is the risk that an issuer of fixed income securities may
default on its obligation to pay interest and repay principal. Interest rate
risk is the risk that, when interest rates increase, fixed income securities
will decline in value. Long-term fixed-income securities will normally have more
price volatility because of this risk than short-term securities.
Municipal obligations which the Fund purchases may be backed by letters of
credit issued by banks and other financial institutions. Adverse developments
affecting banks could have a negative effect on the Fund's portfolio securities.
The Fund may invest more than 25% of its total assets in municipal obligations
issued by entities located in the same state and the interest on which is paid
solely from revenues of similar projects. As a result, changes in economic,
business or political conditions relating to a particular state or types of
projects may have a disproportionate impact on the Fund's share price.
The Fund may acquire municipal lease obligations, which are issued by a state or
local government or authority to acquire land and a wide variety of equipment
and facilities. If the funds are not appropriated for the following year's lease
payments, the lease may terminate, with the possibility of default on the lease
obligation and significant loss to the Fund.
BAR CHART AND PERFORMANCE TABLE
The following bar chart and table provide an indication of the risks of
investing in a Fund by showing changes in the performance of a Fund's shares
from year to year. The bar charts and performance tables assume reinvestment of
dividends and distributions. Remember, past performance is not indicative of
future results. Performance reflects fee waivers in effect. If fee waivers were
not in place, a Fund's performance would be reduced.
YEAR-BY-YEAR TOTAL RETURN AS OF 12/31/EACH YEAR (%)
1998 2.97
1997 3.13
1996 3.06
1995 3.44
1994 2.49
1993 2.06
1992 2.64
1991 4.24
1990 5.48
1989 6.00
- --------------------------------------------------------------------------------
BEST QUARTER: Q 2 '89 1.58%
WORST QUARTER: Q 1 '94 0.50%
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/98
- --------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
TAX-EXEMPT MONEY MARKET FUND 2.97% 3.02% 3.54%
- --------------------------------------------------------------------------------
The 7-day yield for the period ended on 12/31/98 for the Tax-Exempt Money Market
Fund was 3.08% and, without giving effect to fee waivers, was 2.96%. Figures
reflect past performance. Yields will vary. You may call 1-800-228-1024 to
obtain the current 7-day yield of the Tax-Exempt Money Market Fund.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Tax-Exempt Money Market Fund.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
DISTRIBUTION TOTAL FUND
MANAGEMENT AND SERVICE OTHER OPERATING
FEESK<F1> (12B-1)FEES<F2> EXPENSES<F3> EXPENSES<F4>
- --------------------------------------------------------------------------------
Tax-Exempt Money
Market Fund 0.50% 0.00% 0.27% 0.77%
- --------------------------------------------------------------------------------
<F1> The Adviser has voluntarily agreed that a portion of its management fee
will not be imposed on the Tax-Exempt Money Market Fund
during the current fiscal year. As a result of the fee waiver, current
management fees of the Fund are 0.48% 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.
<F2> The total of all 12b-1 fees and shareowner servicing fees may not exceed,
in the aggregate, the annual rate of 0.25% of a Fund's average daily net
assets for the shares. The Fund does not intend to pay 12b-1 fees for the
current fiscal year.
<F3> "Other Expenses" includes administration fees, transfer agency fees, and
all other ordinary operating expenses of the Fund not listed above. The
Fund has in place a Shareholder Service Plan permitting the payment of a
Shareowner Servicing fee to institutions (described below under the heading
"Management of the Funds - Shareowner Organizations") equal to up to 0.25%
of the Fund's average daily net assets. The Fund does not intend to pay
Shareowner Servicing fees for the current fiscal year and "Other Expenses"
does not reflect such fees.
<F4> As a result of the fee waiver set forth in note 1, the Total Fund Operating
Expenses of the Fund are estimated to be 0.75% 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.
A fee of $12.00 is charged for each wire redemption and $15.00 for each non-
systematic withdrawal from a retirement account for which Firstar Bank,
Milwaukee, N.A. is custodian.
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 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Tax-Exempt Money Market Fund $79 $246 $428 $954
- --------------------------------------------------------------------------------
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 each 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
Funds. Risks associated with particular types of investments each Fund makes are
also described in this section and in the Additional Statement referred to on
the back page.
GENERAL RISKS OF INVESTING IN EACH OF THE FUNDS
COMPLETE INVESTMENT PROGRAM - ALL FUNDS An investment in a single Fund, by
itself, does not constitute a complete investment plan.
CREDIT RISK - ALL FUNDS
An issuer of fixed-income securities may default on its obligation to pay
interest and repay principal. Also, changes in the financial strength of an
issuer or changes in the credit rating of a security may affect its value.
Credit risk includes "counterparty risk"- the risk that the other party to a
transaction will not fulfill its contractual obligation. This risk applies, for
example, to repurchase agreements which each Fund may enter.
DERIVATIVES RISK - ALL FUNDS
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
a Fund's investments in structured securities and other derivative instruments,
which may be leveraged.
EXTENSION RISK - ALL FUNDS
This is the risk that an issuer will exercise its right to pay principal on an
obligation held by a Fund (such as a mortgage- or asset-backed security) later
than expected. This may happen when there is a rise in interest rates. These
events may lengthen the duration and potentially reduce the value of these
securities.
INTEREST RATE RISK - ALL FUNDS
When interest rates increase, fixed-income securities tend to decline in value
and when interest rates decrease, fixed-income securities tend to increase in
value. A change in interest rates could cause the value of your investment to
change. Fixed income securities with longer maturities are more susceptible to
interest rate fluctuations than those with shorter maturities. Changes in
interest rates may also extend or shorten the duration of certain types of
instruments, such as asset-backed securities, thereby affecting their value and
the return on your investment.
LIQUIDITY RISK - ALL FUNDS
Certain securities may be difficult or impossible to sell at the time and price
that the Fund would like. A 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 Funds may purchase and short-term
funding agreements which the Money Market Fund may purchase. Illiquid securities
also include repurchase agreements and time deposits with notice/termination
dates of greater than seven days 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. Each Fund may invest up to 10% of its net assets in securities that
are illiquid at the time of purchase. 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 a Fund.
LOSS OF MONEY - ALL FUNDS
An investment in the Funds is not a deposit of Firstar Bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although the Money Market Funds attempt to preserve the value
of your investment at $1.00 per share, it is possible to lose money by investing
in the money market funds.
MANAGEMENT RISK - ALL FUNDS
A strategy, which the Adviser uses, may fail to produce the intended results.
The particular securities and types of securities a Fund holds may underperform
other securities and types of securities. There can be no assurance a Fund will
achieve its investment objective. Certain policies of each Fund, which may not
be changed without a shareowner vote, are described in the Additional Statement.
MARKET RISK - ALL FUNDS
The value of the securities in which a 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 - ALL FUNDS
This Prospectus describes each Fund's principal investment strategies, and the
types of securities in which each Fund principally invests. Each 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.
PREPAYMENT RISK - ALL FUNDS
This is the risk that an issuer will exercise its right to pay principal on an
obligation held by a Fund (such as a mortgage- or asset-backed security) earlier
than expected. This may happen when there is a decline in interest rates. These
events may make a Fund unable to recoup its initial investment and may result in
reduced yields.
TEMPORARY INVESTMENT RISK - ALL FUNDS
Each of the Funds may, for temporary defensive purposes, invest a certain
percentage of its total assets without limitation in cash or various short-term
instruments. This may occur, for example, when a Fund is attempting to respond
to adverse market, economic, political or other conditions. In particular, the
U.S. Treasury Money Market Fund may temporarily hold cash; the Tax-Exempt Money
Market Fund may from time to time hold uninvested cash reserves or invest in
short-term taxable money market obligations (taxable obligations purchased by
the Fund normally will not exceed 20% of total assets at the time of purchase).
When a Fund's assets are invested in these instruments, the Fund may not be
achieving its investment objective.
VALUATION RISK - ALL FUNDS
This is a risk a Fund has valued certain securities at a higher or lower price
than the Fund can sell them.
YEAR 2000 RISK - ALL FUNDS
Like other investment companies and financial service providers, each Fund could
be adversely affected if the computer systems used by its Investment Adviser and
the Funds' 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 each 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 Funds
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 Funds'
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 Funds.
Also, companies in which the Funds invest 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.
ADDITIONAL RISKS WHICH APPLY TO INVESTMENT IN CERTAIN OF THE FUNDS
FOREIGN RISKS - MONEY MARKET FUND AND TAX-EXEMPT MONEY MARKET FUND - TO THE
EXTENT THEY INVEST IN FOREIGN SECURITIES 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 the 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. A Fund,
which invests in foreign securities, 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 record keeping
requirements.
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.
TAX RISK - TAX-EXEMPT MONEY MARKET FUND AND U.S. TREASURY MONEY MARKET FUND
These Funds may be more adversely impacted by changes in tax rates and policies
than the other Funds. Because interest income on municipal obligations is
normally not subject to regular federal income taxation, the attractiveness of
municipal obligations in relation to other investment alternatives is affected
by changes in federal income tax rates applicable to, or the continuing federal
income tax-exempt status of, such interest income. Any proposed or actual
changes in such rates or exempt status, therefore, can significantly affect the
demand for and supply, liquidity and marketability of municipal obligations,
which could in turn affect a Fund's ability to acquire and dispose of municipal
obligations at desirable yield and price levels.
Investment in tax-exempt securities poses additional risks. In many cases, the
Internal Revenue Service has not ruled on whether the interest received on a
tax-exempt obligation is tax-exempt, and accordingly, purchases of these
securities are based on the opinion of bond counsel to the issuers at the time
of issuance. The Fund and the Adviser rely on these opinions and will not review
the basis for them.
ADDITIONAL RISKS WHICH APPLY TO PARTICULAR TYPES OF SECURITIES
OTHER INVESTMENT COMPANIES - ALL FUNDS
The Funds may invest their 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.
GOVERNMENT OBLIGATIONS - EACH MONEY MARKET FUND OTHER THAN THE
TAX-EXEMPT MONEY MARKET
In addition to U.S. Treasury obligations, the Funds may invest in other
securities issued or guaranteed by the U.S. government, its agencies and
instrumentalities. No assurance can be given that the U.S. government will
provide financial support to U.S. government-sponsored agencies or
instrumentalities where it is not obligated to do so by law.
BORROWINGS, REVERSE REPURCHASE AGREEMENTS - ALL FUNDS
Each 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 a 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 a 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 a 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.
PURCHASE OF SHARES Shares of the Funds are offered and sold on a continuous
basis by the distributor for the Funds, 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
The minimum initial investment for shares in a 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.
BUYING SHARES Purchase requests for a Fund received in proper form before 11:30
a.m. Central time on a business day for the Funds generally are processed at
11:30 a.m. on the same day. In order to be processed at 11:30 a.m., payment must
be received in immediately available funds wired to the transfer agent by the
close of business. All checks received will be processed at that day's closing
price.
Purchase requests for the Funds accompanied by a check or wire payment which are
received at or after 11:30 a.m. Central time on a business day for the Funds
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.
THROUGH A SHARE OWNER ORGANIZATION
</TABLE>
<TABLE>
<CAPTION>
<C> <C>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
Contact your Shareowner Organization. Contact your Shareowner Organization.
BY MAIL Complete an application and mail it along Make your check payable to Firstar Funds. Please
with a check payable to Firstar Funds, include your sixteen-digit account number on
P.O. Box 3011, Milwaukee, WI 53201-3011. your check and mail it to the address at the left.
For overnight delivery mail to:
615 E. Michigan St., Milwaukee, WI 53202.
AUTOMATICALLY
Call your service organization or 1-800-228-1024 Complete a Periodic Investment Plan Application
to obtain a purchase application, which includes to automatically purchase more shares.
information for a Periodic Investment Plan or
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 1-800-228-1024 prior to sending the wire in Call 1-800-228-1024 prior to sending the wire
order to obtain a confirmation number and to in order to obtain a confirmation number and to
ensure prompt and accurate handling of funds. Ask ensure prompt and accurate handling of funds.
your bank to transmit immediately available funds Ask your bank to transmit immediately available
by wire in the amount of your purchase to: funds by wire as described at the left. Please also
Firstar Bank Milwaukee, N.A. include your sixteen-digit account number. The
ABA # 0750-00022 Fund and its transfer agent are not responsible for
Firstar Trust Department the consequences of delays resulting from the
Account # 112-952-137 banking or Federal Reserve Wire system, or from
for further credit to [name of Fund] incomplete wiring instructions.
[Name/title on the account].
The Fund and its transfer agent are not responsible
for the consequences of delays resulting from the
banking or Federal Reserve Wire system, or from
incomplete wiring instructions.
BY TELEPHONE EXCHANGE
Call 1-800-228-1024 to exchange from another Call 1-800-228-1024 to exchange from another
Firstar Fund account with the same registration Firstar Fund account with the same registration
including name, address and taxpayer ID number. including name, address and taxpayer ID number.
</TABLE>
- ------------------------------------------------------------------------------
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 a 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 Funds 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 a 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 respective Fund.
REDEMPTION OF SHARES
SELLING SHARES Telephone redemption requests for a Fund received by the
transfer agent by phone before 11:30 a.m. Central time on a business day for the
Funds generally are processed at 11:30 a.m. Central time on the same day.
Redemption requests for the Funds received at or after 11:30 a.m. Central time
on a business day for the Funds 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 SHARE OWNER ORGANIZATION Contact your Shareowner Organization.
BY PHONE Call 1-800-228-1024 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.
AUTOMATICALLY Call 1-800-228-1024 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 Funds 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.
- --------------------------------------------------------------------------------
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 Funds Center 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. 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.
CHECK REDEMPTION
You may request on the purchase application or by written request that a Fund
provides Redemption Checks ("Checks"). Checks may be made payable in the amount
of $250 or more. Any checks drawn on a joint account will only require one
signature. There is no charge for the use of the Checks; however, the transfer
agent will impose a $25 charge for stopping payment of a Check upon your
request, or if the transfer agent cannot honor a Check due to insufficient funds
or other valid reason. Because dividends on each Fund accrue daily, Checks may
not be used to close an account, as a small balance is likely to result.
Checks are not available for IRAs or other retirement plans for which Firstar
acts as custodian.
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 Funds 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 FUNDS 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 Funds may redeem your account. The Fund
will impose no charge and will give you sixty days' written notice prior to any
redemption. A 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.
EXCHANGE OF SHARES Without a sales charge, you may exchange shares of a money
market fund for shares of another money market fund. Except as described in the
next paragraph, you may also exchange shares of a money market fund for
Institutional, Retail A or Retail B Shares of a non-money market fund provided
you are eligible to purchase the class at time of the exchange. You may exchange
your non-money market fund shares for 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. Money market fund shares
acquired in an exchange for Retail B Shares will be subject to a contingent
deferred sales charge upon redemption in accordance with the prospectus
describing the Retail B Shares. 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 B Shares. Shares of a money market fund which
were acquired upon exchange for Retail A Shares may not be exchanged for Retail
B Shares. Shares of a money market fund which were acquired upon exchange for
Retail B Shares may not be exchanged for Retail A 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, a Fund may 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 to shareowners monthly, summarizing all
transactions. 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 after an account is opened online via the Internet. 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 1-800-228-1024.
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 Funds
twenty-four hours a day, seven days a week. When calling Firstar Mutual Fund
Services, LLC at 1-800-228-1024, 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 Mutual Fund Services, LLC at 1-800-228-1024.
ADDITIONAL INFORMATION
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
Reinvested dividends and distributions receive the same tax treatment as those
paid in cash.
- --------------------------------------------------------------------------------
Dividends from net investment income of the Funds (including net realized gains
and losses, if any, earned on the investments held by a Fund) are declared on
each business day on the shares that are outstanding immediately after 11:30
a.m. Central time on the declaration date.
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. The Funds do
not expect to realize net long-term capital gains.
FEDERAL TAXES
Distributions from the Money Market Fund, the U.S. Treasury Money Market Fund
and the U.S. Government Money Market Fund will generally be taxable to
shareholders. Each such fund expects that all, or substantially all, of its
distributions will consist of ordinary income. You will be subject to income tax
on these distributions regardless of whether they are paid in cash or reinvested
in additional shares. The one major exception to these tax principles is that
distributions on shares held in an IRA (or other tax-qualified plan) will not be
currently taxable.
Generally, distributions from the U.S. Treasury Money Market Fund will be exempt
from state and local taxes.
Distribution from the Tax-Exempt Money Market Fund will generally constitute
tax-exempt income for shareholders for federal income tax purposes. It is
possible, depending upon the Tax-Exempt Money Market Fund's investments, that a
portion of its distributions could be taxable to shareholders as ordinary income
or capital gains, but it is not expected that this will be the case. Moreover,
although the distributions are exempt for federal income tax purposes, they will
generally constitute taxable income for state and local income tax purposes
except that, subject to limitations that vary depending on the state,
distributions from interest paid by a state or municipal entity may be exempt
from tax in that state.
Interest on indebtedness incurred by a shareholder to purchase or carry shares
of the Tax-Exempt Money Market Fund generally will not be deductible for federal
income tax purposes.
You should note that a portion of the exempt-interest dividends paid by the Tax-
Exempt Money Market Fund may constitute an item of tax preference for purposes
of determining federal alternative minimum tax liability. Exempt-interest
dividends will also be considered along with other adjusted gross income in
determining whether any Social Security or railroad retirement payments received
by you are subject to federal income taxes.
You should also consult your tax adviser for further information regarding the
federal, state and local tax consequences with respect 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 each
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 each 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 $26.9 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 each Fund, the Adviser
manages each 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.
For the fiscal year ended October 31, 1998 the Adviser received from each Fund a
fee, calculated daily and payable monthly, at the following annual rates (as a
percentage of the Fund's average daily net assets): 0.37% for the Money Market
Fund, 0.49% for the U.S. Treasury Money Market Fund, 0.50% for the U.S.
Government Money Market Fund and 0.48% for the Tax-Exempt Money Market Fund.
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
The Funds have adopted distribution and service plans. Under the distribution
and service plans, the Funds may pay distribution fees for the sale and
distribution of their 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
Funds' 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.
Under these Plans, the Funds 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. For their
services with respect to the shares, shareowner organizations may be entitled to
receive fees from a Fund at an annual rate of up to 0.25% of the average daily
net asset value of shares covered by their agreement.
The Funds make no payments to their Distributor under the Plans. Payments to
shareowner organizations, including affiliates of the Adviser, under the plans
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 distribution services to
their customers who are the shareowners of the Funds. 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 Funds
- - providing information periodically to customers showing their positions in
Fund shares
- - providing sub-accounting
- - forwarding sales literature and advertising
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 Service, LLC, an affiliate of the Adviser, provides transfer
agency, dividend disbursing agency and accounting services for the Funds and
receive 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 Funds and receives fees for these services.
NET ASSET VALUE AND DAYS OF OPERATION
- --------------------------------------------------------------------------------
The Company intends to use its best efforts to maintain the net asset value of
each Fund at $1.00 per share, although there is no assurance that it will be
able to do so.
- --------------------------------------------------------------------------------
The net asset value of the Funds for purposes of pricing purchase and redemption
orders is determined as of 11:30 a.m. Central time and as of the close of
regular trading hours on the Exchange, normally, 3:00 p.m. Central time, on each
day on which both the Exchange is open for trading and the Federal Reserve
Banks' Fedline System is open. Net asset value per share is calculated by
dividing the value of all securities and other assets owned by each Fund, less
the liabilities charged to the Fund, by the number of the Fund's outstanding
shares. Net asset value is computed using the amortized cost method as permitted
by SEC rules.
- --------------------------------------------------------------------------------
APPENDIX
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you
understand the Fund's financial performance for the past 5 years (or, if
shorter, the period of the Fund's operations). Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by PricewaterhouseCoopers LLP, whose report, along
with the Fund's financial statements, are included in the Additional Statement
which is available upon request. Contact the Firstar Funds Center for a free
copy of the Annual Report or Additional Statement.
<TABLE>
<CAPTION>
Supplemental Data and Ratios
---------------------------------
Net Ratio Ratio of Net
Net Asset Dividends Net Asset Assets, of Net Investment
Value, Net from Net Value, End of Expenses to Income to
Beginning Investment Investment End of Period Average Net Average Total
of Period Income Income Period (000s) Assets Net Assets Return
<C> <C> <C> <C> <C> <C> <C> <C> <C>
MONEY MARKET FUND
Year Ended 1994 1.00 0.03 (0.03) 1.00 165,018 0.60%<F1> 3.44%<F1> 3.42%
Year Ended 1995 1.00 0.05 (0.05) 1.00 172,261 0.60%<F1> 5.36%<F1> 5.51%
Year Ended 1996 1.00 0.05 (0.05) 1.00 224,036 0.60%<F1> 4.94%<F1> 5.06%
Year Ended 1997 1.00 0.05 (0.05) 1.00 261,017 0.60%<F1> 4.98%<F1> 5.12%
Year Ended 1998 1.00 0.05 (0.05) 1.00 289,088 0.60%<F1> 5.05%<F1> 5.16%
U.S. TREASURY MONEY MARKET FUND
Year Ended 1994 1.00 0.03 (0.03) 1.00 56,020 0.60%<F2> 3.14%<F2> 3.20%
Year Ended 1995 1.00 0.05 (0.05) 1.00 64,655 0.60%<F2> 5.04%<F2> 5.16%
Year Ended 1996 1.00 0.05 (0.05) 1.00 53,430 0.60%<F2> 4.70%<F2> 4.80%
Year Ended 1997 1.00 0.05 (0.05) 1.00 78,478 0.60%<F2> 4.67%<F2> 4.80%
Year Ended 1998 1.00 0.05 (0.05) 1.00 91,872 0.60%<F2> 4.62%<F2> 4.71%
U.S. GOVERNMENT MONEY MARKET FUND
Year Ended 1994 1.00 0.03 (0.03) 1.00 183,591 0.60%<F3> 3.29%<F3> 3.35%
Year Ended 1995 1.00 0.05 (0.05) 1.00 163,068 0.60%<F3> 5.24%<F3> 5.37%
Year Ended 1996 1.00 0.05 (0.05) 1.00 198,334 0.60%<F3> 4.84%<F3> 4.96%
Year Ended 1997 1.00 0.05 (0.05) 1.00 198,592 0.60%<F3> 4.83%<F3> 4.99%
Year Ended 1998 1.00 0.05 (0.05) 1.00 233,176 0.60%<F3> 4.90%<F3> 4.97%
TAX-EXEMPT MONEY MARKET FUND
Year Ended 1994 1.00 0.02 (0.02) 1.00 70,436 0.60%<F4> 2.23%<F4> 2.25%
Year Ended 1995 1.00 0.03 (0.03) 1.00 84,084 0.60%<F4> 3.36%<F4> 3.42%
Year Ended 1996 1.00 0.03 (0.03) 1.00 79,328 0.60%<F4> 3.09%<F4> 3.13%
Year Ended 1997 1.00 0.03 (0.03) 1.00 108,639 0.60%<F4> 3.06%<F4> 3.12%
Year Ended 1998 1.00 0.03 (0.03) 1.00 122,451 0.60%<F4> 3.02%<F4> 3.04%
</TABLE>
<F1> Without fees waived, ratios of net expenses to average net assets for the
fiscal years ended October 31, 1998, 1997, 1996, 1995, 1994 would have been
0.86%, 0.84%, 0.81%, 0.90%, 0.93%, respectively; and ratios of net
investment income to average net assets for the fiscal years ended October
31, 1998, 1997, 1996, 1995, 1994 would have been 4.79%, 4.73%, 4.73%,
5.06%, 3.11%, respectively.
<F2> Without fees waived, ratios of net expenses to average net assets for the
fiscal years ended October 31, 1998, 1997, 1996, 1995, 1994 would have been
0.77%, 0.78%, 0.80%, 0.83%, 0.94%, respectively; and ratios of net
investment income to average net assets for the fiscal years ended October
31,1998, 1997, 1996, 1995, 1994 would have been 4.45%, 4.49%, 4.50%, 4.81%,
2.80%, respectively.
<F3> Without fees waived, ratios of net expenses to average net assets for the
fiscal years ended October 31, 1998, 1997, 1996, 1995, 1994 would have been
0.71%, 0.70%, 0.71%, 0.75%, 0.88%, respectively; and ratios of net
investment income to average net assets for the fiscal years ended October
31, 1998, 1997,1996, 1995, 1994 would have been 4.79%, 4.73%, 4.73%, 5.09%,
3.01%, respectively.
<F4> Without fees waived, ratios of net expenses to average net assets for the
fiscal years ended October 31, 1998, 1997, 1996, 1995, 1994 would have been
0.75%, 0.75%, 0.78%, 0.84%, 0.93%, respectively; and ratios of net
investment income to average net assets for the fiscal years ended October
31, 1998, 1997, 1996, 1995, 1994 would have 2.87%, 2.91%, 2.91%, 3.12%,
1.90%, respectively.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUNDS' 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 FUNDS OR THEIR
DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUNDS OR BY
THEIR DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE
MADE.
FOR MORE INFORMATION
ANNUAL/SEMIANNUAL REPORTS
Additional information about the Funds' investments is available in the Funds'
annual and semiannual reports to shareowners.
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' annual and semiannual reports and the Additional Statement are
available free upon request by calling Firstar Funds at 1-800-228-1024 or 1-414-
287-3808.
To obtain other information and for shareowner inquiries:
By telephone - call 1-800-228-1024 or 1-414-287-3808
By mail - Firstar Funds, 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
For Investor Services or to Request Information
1-800-228-1024
1-414-287-3808
Firstar Funds Center
615 East Michigan Street
P.O. Box 3011
Milwaukee, WI 53201-3011
www.firstarfunds.com
(LOGO) FIRSTAR FUNDS
xxxxxxxxx
FIRSTAR FUNDS, INC.
Statement of Additional Information
Short-Term Bond Market Fund Balanced Income Fund Special Growth Fund
Intermediate Bond Market Fund Balanced Growth Fund International Equity Fund
Bond IMMDEX/TM Fund Growth and Income Fund Emerging Growth Fund
Tax-Exempt Intermediate Equity Index Fund MicroCap Fund
Bond Fund Growth Fund
March 1, 1999
TABLE OF CONTENTS
-----------------
Page
----
Firstar Funds, Inc................................................ 2
Description of the Funds and their Investments and Risks.......... 2
Investment Strategies and Risks................................... 5
Net Asset Value................................................... 35
Additional Purchase and Redemption Information.................... 36
Description of Shares............................................. 40
Additional Information Concerning Taxes........................... 43
Management of the Company......................................... 43
Custodian, Transfer Agent and Accounting Services Agent........... 54
Expenses.......................................................... 55
Independent Accountants........................................... 55
Counsel........................................................... 55
Performance Calculations.......................................... 55
Performance History............................................... 60
Miscellaneous..................................................... 63
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 prospectus ("Prospectus") dated March 1, 1999, for Institutional,
Retail A and Retail B Shares of the 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 and International Equity Fund (collectively referred to as the "Funds")
and is incorporated by reference in its entirety into the Prospectus. Copies
of the Prospectus 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 1-800-228-1024. The Financial Statements and Independent
Accountants Report theron in this SAI are incorporated by reference from the
Funds' Annual Report, which may be obtained by writing the address above or
calling the toll-free number above. No other part of the Annual Report is
incorporated herein by reference.
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 thirteen diversified portfolios, the 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 and International Equity Fund (collectively the
"Funds"). The Short-Term Bond Market Fund changed its name from Short-
Intermediate Fixed Income Fund effective January 1, 1993. The Growth and
Income Fund changed its name from the Income and Growth Fund effective
August 16, 1993. The Growth Fund changed its name from the MidCore Growth
Fund effective May 30, 1997. The Balanced Growth Fund changed its name from
the Balanced Fund effective February 1, 1998 and commenced operations on March
30, 1992. The Growth and Income Fund, Equity Index Fund, Short-Term Bond Market
Fund and Bond IMMDEX/TM Fund commenced operations on December 29, 1989; the
Special Growth Fund commenced operations on December 28, 1989; the Growth Fund
commenced operations on December 29, 1992; the Balanced Income Fund commenced
operations on December 1, 1997; the Intermediate Bond Market Fund commenced
operations on January 5, 1993; the Tax-Exempt Intermediate Bond Fund commenced
operations on February 8, 1993; the International Equity Fund commenced
operations on April 28, 1994; the Emerging Growth Fund commenced operations
on August 15, 1997; and the MicroCap Fund commenced operations on August 1,
1995. The Company also offers other investment portfolios which are described
in a separate statement of additional information. For information concerning
these other portfolios, contact the Firstar Mutual Funds Services, LLC at
1-800-982-8909 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 Prospectus.
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 each Fund except the
International Equity Fund. Subject to the general supervision of the Board of
Directors, the Adviser is responsible for the portfolio management of the
International Equity Fund. Pursuant to the terms of the Adviser's Advisory
Agreement with the Fund, the Adviser has delegated certain of its duties to
Hansberger Global Investors, Inc. (the "Sub-Adviser" or "HGI"). 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 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.
Fixed income securities purchased and sold by the Bond and Balanced Funds
are generally traded in the over-the-counter market on a net basis (i.e.,
without commission) through dealers, or otherwise involve transactions directly
with the issuer of an instrument. The cost of securities purchased from
underwriters includes an underwriting commission or concession, and the prices
at which securities are purchased from and sold to dealers include a dealer's
mark-up or mark-down.
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.
For the fiscal years ended October 31, 1998, 1997 and 1996 the Company paid
brokerage commissions of $521,009, $403,426 and $364,819 with respect to the
Growth and Income Fund; $912,455,$965,454 and $1,128,115 with respect to the
Special Growth Fund; and $100,414, $101,524 and $109,625 with respect to the
Equity Index Fund, respectively. For the same periods, the Short-Term Bond
Market, Intermediate Bond Market, Tax-Exempt Intermediate Bond, and Bond
IMMDEX/TM Funds paid no brokerage commissions. For the fiscal years ended
October 31, 1998, 1997 and1996, the Company paid brokerage commissions of
$183,767, $178,114 and $161,362 with respect to the Balanced Growth Fund.
For the fiscal years ended October 31, 1998, 1997 and 1996 the Company paid
brokerage commissions of $187,935, $263,875 and $224,353, with respect to
the Growth Fund. For the fiscal years ended October 31, 1998,1997 and 1996,
the Company paid brokerage commissions of $183,485, $161,449 and $40,498
with respect to the International Equity Fund. For the fiscal year ended
October 31, 1998 and the fiscal period from August 15, 1997 through October
31, 1997 the Company paid brokerage commissions of $183,895 and $34,150 with
respect to the Emerging Growth Fund. For the fiscal year ended October 31,
1998, 1997, and fiscal periods July 1, 1996 through October 31, 1996 and
August 1, 1995 through June 30, 1996 the Company paid brokerage commissions
of $151,906, $132,772, $75,526 and $62,266 with respect to the MicroCap Fund.
For the fiscal year ended October 31, 1998 the Company paid brokerage
commissions of $17,012 with respect to the Balanced Income Fund. None of
the brokerage commissions were paid to affiliates of the Company, the
Adviser, Sub-Adviser or the Co-Administrators.
The Advisory Agreement between the Company and the Adviser and with respect
to the 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 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.
As of October 31, 1998, the Company held securities of its regular brokers
or dealers (as defined under the 1940 Act) or their parents as follows: the
Short-Term Bond Market, Intermediate Bond Market, Bond IMMDEX/TM and Balanced
Income Funds held securities of Lehman Brothers totaling $10,451,281 $9,391,482,
$20,975,017 and $309,065, respectively; the Money Market, Institutional Money
Market, Intermediate Bond and Bond IMMDEX/TM Funds held securities of Goldman
Sachs totaling $12,773,554, $86,295,075, $5,064,265, and $10,128,530,
respectively; the Money Market, Institutional Money Market, Short-Term Bond
Market, Balanced Income and Equity Index Funds held securities of Morgan Stanley
totaling $13,289,712, $80,024,562 $466,931 $328,741 and $2,367,649,
respectively; and the Money Market, Institutional Money Market, Short-Term Bond
Market, Intermediate Bond Market and Equity Index Funds held securities of
Merrill Lynch totaling $9,831,946, $79,292,539, $1,443,344, $128,591 and
$1,250,175, respectively.
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
International Equity Fund) to be of good standing and when, in the Adviser's
(and Sub-Adviser's in the case of the 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 MicroCap Fund's investments in money market instruments under normal market
conditions are expected to represent less than 10% of the Fund's net assets, but
may increase to 30% for temporary defensive purposes during abnormal market
conditions. The 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 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 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 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
Prospectus 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 in the under "Additional Investment
Limitations" below) to meet shareowner redemption's 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 Balanced Income Fund, Balanced Growth Fund, Growth
and Income Fund, Growth Fund, Special Growth Fund, International Equity Fund,
Emerging Growth Fund MicroCap Fund, Short-Term Bond Market Fund, Intermediate
Bond Market Fund and Bond IMMDEX/TM 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.
Each of the Short-Term Bond Market Fund, Intermediate Bond Market Fund and Bond
IMMDEX/TM Fund will limit its investments in preferred stock to no more than 5%
of its respective net assets.
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% (except the MicroCap Fund which is
limited to 20%) 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 then 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 - Emerging Growth Fund and MicroCap Fund - -
Short Sales.
- ------------------------------------------------------------------------------
In a short sale transaction, a Fund borrows a security from a broker and
sells it with the expectation that the market price will drop and the Fund will
be able to replace the borrowed security by repurchasing the same security at a
lower price. These transactions may result in gains if a security's price
declines, but may result in losses if a security's price does not decline.
Other Investment Considerations - Balanced Income Fund, Balanced Growth Fund,
Growth and Income Fund, Growth Fund, Special Growth Fund, Emerging Growth Fund,
MicroCap Fund and International Equity Fund
- -------------------------------------------------------------------------------
The Balanced Income, Balanced Growth, Growth and Income, Growth, Special
Growth, Emerging Growth, MicroCap and International Equity Funds maintain 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 respective Fund's
investment criteria. Each Fund's investment in equity securities may include
limited partnership interests.
The increase or decrease of cash equivalents in a Fund is primarily the
residual effect of the research process. The portion of a 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, not more than 65% of the
value of the Balanced Growth Fund's and at least 50% of the value of the Growth
Fund's, Special Growth Fund's and Emerging Growth Fund's total assets and at
least 65% of the value of the MicroCap Fund's and the International Equity
Fund's total assets will be invested in equity securities. The Funds do not
attempt to "time" the securities market.
Certain securities owned by the Special Growth Fund, Emerging Growth Fund
and MicroCap Fund may be traded only in the over-the-counter market or on a
regional securities exchange, may be listed only in the quotation service
commonly known as the "pink sheets" and may not be traded every day or in the
volume typical of trading on a national securities exchange. As a result, there
may be a greater fluctuation in the value of redemptions or for other reasons,
to sell these securities at a discount from market prices, to sell during
periods when such disposition is not desirable, or to make many small sales over
a lengthy period of time.
Other Investment Considerations - All Funds, Except the Equity Index Fund
- -------------------------------------------------------------------------
Foreign Equities. The 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. In this regard, the Funds, with the exception of the
International Equity Fund, do not intend to hedge against foreign currency risk
(except on unsettled trades). 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 for the International Equity Fund. The Funds and their
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 International Equity 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 International Equity Fund is expected to
be volatile.
Other Investment Considerations - International Equity Fund
- -----------------------------------------------------------
Foreign Futures and Options on Futures. The Adviser and Sub-Adviser may
determine that it would be in the interest of the International Equity Fund to
purchase or sell futures contracts, including interest rate, index, and currency
futures, for the purpose of remaining fully invested and reducing transactions
costs. A stock index futures contract is a bilateral agreement pursuant to which
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 securities in the
index is made.
The International Equity Fund may also purchase put and call options, and
write covered put and call options, on futures in which it is allowed to invest.
The purchase of futures or call options thereon can serve as a long hedge, and
the sale of futures or the purchase of put options thereon can serve as a short
hedge. Writing covered call options on futures contracts can serve as a limited
short hedge, and writing covered put options on futures contracts can serve as a
limited long hedge, using a strategy similar to that used for writing covered
options in securities. The Fund's hedging may include purchases of futures as
an offset against the effect of expected increases in securities prices or
currency exchange rates and sales of futures as an offset against the effect of
expected declines in securities prices or currency exchange rates. The Fund's
futures transactions may be entered into for hedging purposes or risk
management. The Fund may also write put options on futures contracts while at
the same time purchasing call options on the same futures contracts in order to
create synthetically a long futures contract position. Such options would have
the same strike prices and expiration dates. The Fund will engage in this
strategy only when the Adviser (or the Sub-Adviser) believes it is more
advantageous to the Fund than is purchasing the futures contract.
The International Equity Fund intends to limit its transactions in futures
contracts and related options so that not more than 25% of its net assets are at
risk. 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 equal to the entire amount at risk (less margin deposits)
on a continuous basis.
Futures purchased or sold by the International Equity Fund (and related
options) will normally be traded in foreign securities. Participation in
foreign futures and foreign options transactions involves the execution and
clearing of trades on or subject to the rules of a foreign board of trade.
Neither the National Futures Association nor any domestic exchange regulates
activities of any foreign boards of trade, including the execution, delivery and
clearing of transactions, or has the power to compel enforcement of the rules of
a foreign board of trade or any applicable foreign law. This is true even if
the exchange is formally linked to a domestic market so that a position taken on
the market may be liquidated by a transaction on another market. Moreover, such
laws or regulations will vary depending on the foreign country in which the
foreign futures or foreign options transaction occurs. For these reasons,
customers who trade foreign futures of foreign options contracts may not be
afforded certain of the protective measures provided by the Commodity Exchange
Act, the Commodity Futures Trading Commission's ("CFTC") regulations and the
rules of the National Futures Association and any domestic exchange, including
the right to use reparations proceedings before the CFTC and arbitration
proceedings provided by the National Futures Association or any domestic futures
exchange. In particular, the International Equity Fund's investments in foreign
futures or foreign options transactions may not be provided the same protections
in respect of transactions on United States futures exchanges. In addition, the
price of any foreign futures or foreign options contract and, therefore the
potential profit and loss thereon may be affected by any variance in the foreign
exchange rate between the time an order is placed and the time it is
liquidated, offset or exercised. For a further description of futures contracts
and related options, including a discussion of the limitations imposed by
federal tax law, See Appendix B.
Reverse Repurchase Agreements. The 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 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 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 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 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 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 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.
High Risk Debt Securities ("Junk Bonds").
---------------------------------------
As stated in the International Equity Fund's Prospectus, the Fund may
invest up to 5% of its net assets in non-investment grade debt securities. Debt
securities rated below Baa by Moody's or BBB by S&P, or of comparable quality,
are considered below investment grade. Non-investment grade debt securities
""high risk debt securities") may include (i) debt not in default but rated as
low as C by Moody's, S&P, or Fitch IBCA, Inc. ""Fitch IBC""), CC by Thomson
BankWatch ""TB"") or CCC by Duff & Phelps, Inc. ""D&""); (ii) commercial paper
rated as low as C (or D if in default) by S&P or Fitch IBCA, Not Prime by
Moody's, Duff 4 (or Duff 5 if in default) by Duff, TBW-4 by TBW; and (iii)
unrated debt securities of comparable quality. Each Fund may also buy debt in
default (rated D by S&P or TBW or Fitch IBCA, DD by Duff, or of comparable
quality) and commercial paper in default (rated D by S&P or Fitch IBCA, Not
Prime by Moody's, Duff 5 by Duff, TBW-4 by TBW, or of comparable quality). Such
securities, while generally offering higher yields than investment grade
securities with similar maturities, involve greater risks, including the
possibility of (or actual) default or bankruptcy. They are regarded as
predominantly speculative with respect to the issue's capacity to pay interest
and repay principal.
The market for high risk debt securities is relatively new and its growth
has paralleled a long economic expansion. It is not clear how this market would
withstand a prolonged recession or economic downturn, which could severely
disrupt this market and adversely affect the value of such securities.
Market values of high risk debt securities tend to reflect individual
corporate developments to a greater extent, and tend to be more sensitive to
economic conditions, than do higher rated securities. As a result, high risk
debt securities generally involve more credit risks than higher rated debt.
During an economic downturn or a sustained period of rising interest rates,
highly leveraged issuers of high risk debt may experience financial stress and
may not have sufficient revenues to meet their payment obligations. An issuer's
ability to service its debt obligations may also be adversely affected by
specific corporate developments, its own inability to meet specific projected
business forecasts, or unavailability of additional financing. The risk of loss
due to default by an issuer is significantly greater for high risk debt than for
higher rated debt because the high risk debt is generally unsecured and often
subordinated.
If the issuer of high risk debt defaulted, the International Equity Fund
might incur additional expenses in seeking recovery. Periods of economic
uncertainty and changes would also generally result in increased volatility in
the market prices of these securities and thus in the Fund's net asset value.
If the Fund invested in high risk debt experiences unexpected net
redemptions in a rising interest rate market, it may be forced to liquidate a
portion of its portfolio without regard to their investment merits. Due to the
limited liquidity of high risk debt securities, the Fund may be forced to
liquidate these securities at a substantial discount. Any such liquidation
would reduce the Fund's asset base over which expenses could be allocated and
could result in a reduced rate of return for the Fund.
During periods of falling interest rates, issuers of high risk debt
securities that contain redemption, call or prepayment provisions are likely to
redeem or repay the securities and refinance with other debt at a lower interest
rate. If the Fund holds debt securities that are refinanced or otherwise
redeemed, it may have to replace the securities with a lower yielding security,
which would result in a lower return.
Credit ratings evaluate safety of principal and interest payments, but do
not evaluate the market value risk of high risk securities and, therefore, may
not fully reflect the true risks of an investment. In addition, rating agencies
may not make timely changes in a rating to reflect changes in the economy or in
the condition of the issuer that affect the market value of the security.
Consequently, credit ratings are used only as a preliminary indicator of
investment quality. Investments in high risk securities will depend more
heavily on the Sub-Adviser's credit analysis than investment-grade debt
securities. The Adviser (or the Sub-Adviser) will monitor the Fund's
investments and evaluate whether to dispose of or retain high risk securities
whose credit quality may have changed.
The Fund may have difficulty disposing of certain high risk securities with
a thin trading market. Not all dealers maintain markets in all these
securities, and for many such securities there is no established retail
secondary market. The Adviser (or the Sub-Adviser) anticipates that such
securities may be sold only to a limited number of dealers or institutional
investors. To the extent a secondary trading market does exist, it is generally
not as liquid as that for higher-rated securities; a lack of a liquid secondary
market may adversely affect the market price of a security, which may in turn
affect the Fund's net asset value and ability to dispose of particular
securities in order to meet liquidity needs or to respond to a specific economic
event, or may make it difficult for the Fund to obtain accurate market
quotations for valuation purposes. Market quotations on many high risk
securities may be available only from a limited number of dealers and may not
necessarily represent firm bids or prices for actual sales. During periods of
thin trading, the spread between bid and asked prices is likely to increase
significantly, and adverse publicity and investor perceptions (whether or not
based on fundamental analysis) may decrease the value and liquidity of a high
risk security.
Legislation has from time to time been or may be proposed that is designed
to limit the use of certain high risk debt. It is not possible to predict the
effect of such legislation on the market for high risk debt. However, any
legislation that may be proposed or enacted could have a material adverse effect
on the value of these securities, the existence of a secondary trading market
for the securities and, as a result, the Fund's net asset values.
Sovereign Debt. The International Equity Fund may invest up to 5% of its
net assets in obligations of foreign countries and political entities
("Sovereign Debt"), which may trade at a substantial discount from face value.
The Fund may hold and trade Sovereign Debt of emerging market countries in
appropriate circumstances and to participate in debt conversion programs.
Emerging country Sovereign Debt involves a high degree of risk, is generally
lower-quality debt, and is considered speculative in nature. The issuer or
governmental authorities that control Sovereign Debt repayment "Sovereign
Debtor") may be unable or unwilling to repay principal or interest when due in
accordance with the terms of the debt. A Sovereign Debtor's willingness or
ability to repay principal and interest due in a timely manner may be affected
by, among other factors, its cash flow situation, the extent of its foreign
reserves, the availability of sufficient foreign exchange on the date a payment
is due, the relative size of the debt service burden to the economy as a whole,
the Sovereign Debtor's policy towards the International Monetary Fund (the
"IMF'') and the political constraints to which the Sovereign Debtor may be
subject. Sovereign Debtors may also be dependent on expected disbursements from
foreign governments, multilateral agencies and others abroad to reduce principal
and interest arrearage on their debt. The commitment of these third parties to
make such disbursements may be conditioned on the Sovereign Debtor's
implementation of economic reforms or economic performance and the timely
service of the debtor's obligations. The Sovereign Debtor's failure to meet
these conditions may cause these third parties to cancel their commitments to
provide funds to the Sovereign Debtor, which may further impair the debtor's
ability or willingness to timely service its debts. In certain instances, a Fund
may invest in Sovereign Debt that is in default as to payments of principal or
interest. A Fund holding non-performing Sovereign Debt may incur additional
expenses in connection with any restructuring of the issuer's obligations or in
otherwise enforcing its rights thereunder.
Brady Bonds. The International Equity Fund may invest up to 5% of its net
assets in Brady Bonds as part of its investment in Sovereign Debt of countries
that have restructured or are in the process of restructuring their Sovereign
Debt pursuant to the Brady Plan.
Brady Bonds are issued under the framework of the Brady Plan, an initiative
announced by former U.S. Treasury Secretary Nicholas F. Brady in 1989 as a
mechanism for debtor nations to restructure their outstanding external
indebtedness. The Brady Plan contemplates, among other things, the debtor
nation's adoption of certain economic reforms and the exchange of commercial
bank debt for newly issued bonds. In restructuring its external debt under the
Brady Plan framework, a debtor nation negotiates with its existing bank lenders
as well as the World Bank or IMF. The World Bank or IMF supports the
restructuring by providing funds pursuant to loan agreements or other
arrangements that enable the debtor nation to collateralize the new Brady Bonds
or to replenish reserves used to reduce outstanding bank debt. Under these loan
agreements or other arrangements with the World Bank or IMF, debtor nations have
been required to agree to implement certain domestic monetary and fiscal
reforms. The Brady Plan sets forth only general guiding principles for economic
reform and debt reduction, emphasizing that solutions must be negotiated on a
case-by-case basis between debtor nations and their creditors.
Brady Bonds are recent issues and do not have a long payment history.
Agreements implemented under the Brady Plan are designed to achieve debt and
debt-service reduction through specific options negotiated by a debtor nation
with its creditors. As a result, each country offers different financial
packages. Options have included the exchange of outstanding commercial bank debt
for bonds issued at 100% of face value of such debt, bonds issued at a discount
of face value of such debt, and bonds bearing an interest rate that increases
over time and the advancement of the new money for bonds. The principal of
certain Brady Bonds has been collateralized by U.S. Treasury zero coupon bonds
with a maturity equal to the final maturity of the Brady Bonds. Collateral
purchases are financed by the IMF, World Bank and the debtor nation's reserves.
Interest payments may also be collateralized in part in various ways.
Brady Bonds are often viewed as having three or four valuation components:
(i) the collateralized repayment of principal at final maturity; (ii) the
collateralized interest payments; (iii) the uncollateralized interest payments;
and (iv) any uncollateralized principal at maturity (these uncollateralized
amounts constitute the "residual risk"). In light of the residual risk of Brady
Bonds and, among other factors, the history of defaults with respect to
commercial bank loans by public and private entities of countries issuing Brady
Bonds, investments in Brady Bonds can be viewed as speculative.
Other Investment Considerations - The Taxable Bond Funds and Balanced Funds
- ---------------------------------------------------------------------------
Mortgage-Backed and Asset-Backed Securities. The Funds may purchase
residential and commercial mortgage-backed as well as other asset-backed
securities (collectively called "asset-backed securities") that are secured or
backed by automobile loans, installment sale contracts, credit card receivables
or other assets and are issued by entities such as Government National Mortgage
Association "GNMA"), Federal National Mortgage Association "FNMA"), Federal Home
Loan Mortgage Corporation "FHLMC"), commercial banks, trusts, financial
companies, finance subsidiaries of industrial companies, savings and loan
associations, mortgage banks and investment banks. These securities represent
interests in pools of assets in which periodic payments of interest and/or
principal on the securities are made, thus, in effect passing through periodic
payments made by the individual borrowers on the assets that underlie the
securities, net of any fees paid to the issuer or guarantor of the securities.
The average life of these securities varies with the maturities and the
prepayment experience of the underlying instruments. The average life of a
mortgage-backed instrument may be substantially less than the original maturity
of the mortgages underlying the securities as the result of scheduled principal
payments and mortgage prepayments. The rate of such mortgage prepayments, and
hence the life of the certificates, will be a function of current market rates
and current conditions in the relevant housing and commercial markets. In
periods of falling interest rates, the rate of mortgage prepayments tends to
increase. During such periods, the reinvestment of prepayment proceeds by a
Fund will generally be at lower rates than the rates that were carried by the
obligations that have been prepaid. As a result, the relationship between
mortgage prepayments and interest rates may give some high-yielding mortgage-
related securities less potential for growth in value than non-callable bonds
with comparable maturities. In calculating the average weighted maturity of
each Fund, the maturity of asset-backed securities will be based on estimates of
average life. There can be no assurance that these estimates will be accurate.
There are a number of important differences among the agencies and
instrumentalities of the U.S. government that issue mortgage-backed securities
and among the securities that they issue. Mortgage-backed securities guaranteed
by GNMA include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie
Maes") which are guaranteed as to the timely payment of principal and interest
by GNMA and such guarantee is backed by the full faith and credit of the United
States. GNMA is a wholly owned U.S. government corporation within the
Department of Housing and Urban Development. GNMA certificates also are
supported by the authority of GNMA to borrow funds from the U.S. Treasury to
make payments under its guarantee. Mortgage-backed securities issued by FNMA
include FNMA Guaranteed Mortgage Pass-Through Certificates (also known as
"Fannie Maes") which are solely the obligations of FNMA and are not backed by or
entitled to the full faith and credit of the United States, but are supported by
the right of the issuer to borrow from the Treasury. FNMA is a government-
sponsored organization owned entirely by private stockholders. Fannie Maes are
guaranteed as to timely payment of the principal and interest by FNMA.
Mortgage-backed securities issued by the FHLMC include FHLMC Mortgage
Participation Certificates (also known as "Freddie Macs" or "PCs"). FHLMC is a
corporate instrumentality of the United States, created pursuant to an Act of
Congress. Freddie Macs are not guaranteed by the United States or by any
Federal Home Loan Bank and do not constitute a debt or obligation of the United
States or of any Federal Home Loan Bank. Freddie Macs entitle the holder to
timely payment of interest, which is guaranteed by the FHLMC. FHLMC guarantees
either ultimate collection or timely payment of all principal payments on the
underlying mortgage loans. When FHLMC does not guarantee timely payment of
principal, FHLMC may remit the amount due on account of its guarantee of
ultimate payment of principal at any time after default on an underlying
mortgage, but in no event later than one year after it becomes payable.
As stated in the Prospectus for the Funds, mortgage-backed securities such
as collateralized mortgage obligations ("CMOs") may be purchased. There are
several types of mortgage-backed securities which provide the holder with a pro
rata interest in the underlying mortgages, and CMOs which provide the holder
with a specified interest in the cash flow of a pool of underlying mortgages or
other mortgage-backed securities. CMOs are issued in multiple classes and their
relative payment rights may be structured in many ways. In many cases, however,
payments of principal are applied to the CMO classes in order of their
respective maturities, so that no principal payments will be made on a CMO class
until all other classes having an earlier maturity date are paid in full. The
classes may include accrual certificates (also known as "Z-Bonds"), which do not
accrue interest at a specified rate until other specified classes have been
retired and are converted thereafter to interest-paying securities. They may
also include planned amortization classes ("PACs") which generally require,
within certain limits, that specified amounts of principal be applied to each
payment date, and generally exhibit less yield and market volatility than other
classes. Investments in CMO certificates can expose the Fund to greater
volatility and interest rate risk than other types of mortgage-backed
obligations. Prepayments on mortgage-backed securities generally increase with
falling interest rates and decrease with rising interest rates; furthermore,
prepayment rates are influenced by a variety of economic and social factors.
Each Taxable Bond Funds will invest less than 50% of its respective total assets
in CMOs.
The yield characteristics of asset-backed securities differ from
traditional debt securities. A major difference is that the principal amount of
the obligations may be prepaid at any time because the underlying assets (i.e.,
loans) generally may be prepaid at any time. As a result, if an asset-backed
security is purchased at a premium, a prepayment rate that is faster than
expected may reduce yield to maturity, while a prepayment rate that is slower
than expected may have the opposite effect of increasing yield to maturity.
Conversely, if an asset-backed security is purchased at a discount, faster than
expected prepayments may increase, while slower than expected prepayments may
decrease, yield to maturity. Moreover, asset-backed securities may involve
certain risks that are not presented by mortgage-backed securities arising
primarily from the nature of the underlying assets (i.e., credit card and
automobile loan receivables as opposed to real estate mortgages). For example,
credit card receivables are generally unsecured and may require the repossession
of personal property upon the default of the debtor which may be difficult or
impracticable in some cases.
Asset-backed securities may be subject to greater risk of default during
periods of economic downturn than other instruments. Also, while the secondary
market for asset-backed securities is ordinarily quite liquid, in times of
financial stress the secondary market may not be as liquid as the market for
other types of securities, which could result in a Fund experiencing difficulty
in valuing, or liquidating such securities.
In general, the collateral supporting non-mortgage asset-backed securities
is of shorter maturity than mortgage loans. Like other fixed-income securities,
when interest rates rise the value of an asset-backed security generally will
decline; however, when interest rates decline, the value of an asset-backed
security with prepayment features may not increase as much as that of other
fixed-income securities.
Non-mortgage asset-backed securities do not have the benefit of the same
security in the collateral as mortgage-backed securities. Credit card
receivables are generally unsecured and the debtors are entitled to the
protection of a number of state and federal consumer credit laws, many of which
have given debtors the right to reduce the balance due on the credit cards.
Most issuers of automobile receivables permit the servicers to retain possession
of the underlying obligations. If the servicer were to sell these obligations
to another party, there is the risk that the purchaser would acquire an interest
superior to that of the holders of related automobile receivables. In addition,
because of the large number of vehicles involved in a typical issuance and
technical requirements under state laws, the trustee for the holders of the
automobile receivables may not have an effective security interest in all of the
obligations backing such receivables. Therefore, there is a possibility that
payments on the receivables together with recoveries on repossessed collateral
may not, in some cases, be able to support payments on these securities.
Variable Rate Medium Term Notes. The Funds may purchase variable rate
medium term notes which provide for periodic adjustments in the interest rates.
The adjustments in interest rates reflect changes in an index (which may be the
Lehman Brothers 1-3 Year Government/Corporate Bond Index, the Lehman Brothers
Intermediate Government/Corporate Bond Index or the Lehman Brothers
Government/Corporate Bond Index).
Other Investment Considerations - Taxable Bond Funds and Balanced Funds.
- -----------------------------------------------------------------------
Stripped Securities. Each Fund may purchase participations in trusts that
hold U.S. Treasury and agency securities (such as TIGRs and CATs) and also may
purchase Treasury receipts and other "stripped" securities that evidence
ownership in either the future interest payments or the future principal
payments of U.S. government obligations. These participations are issued at a
discount to their "face value," and may (particularly in the case of stripped
mortgage-backed securities) exhibit greater price volatility than ordinary debt
securities because of the manner in which their principal and interest are
returned to investors.
Other Investment Considerations - Balanced Funds and Emerging Growth Fund
- -------------------------------------------------------------------------
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 will consider such an event in determining
whether the Fund should continue to hold the security. The Adviser will sell
promptly any securities that are not rated investment grade by at least one
nationally recognized rating agency and that exceed 5% of the Fund's net assets.
Other Investment Considerations - Taxable Bond Funds
- ----------------------------------------------------
In order to reduce a negative deviation in return between each Fund and its
respective bond index, each Fund will normally attempt to be fully invested.
In an effort to make a Fund's duration and return comparable to those of
its respective bond index, the Adviser will monitor a Fund's portfolio and
market changes in accordance with procedures established by the Adviser under
the supervision of the Board of Directors. The calculation of the Fund's
duration and average portfolio maturity will be based on certain estimates
relating to the duration and maturity of the securities held by a Fund. There
can be no assurance that these estimates will be accurate or that the duration
or average portfolio maturity of a Fund will always remain within the maximum
limits described in the Prospectus. The value of each Fund's portfolio, as is
generally the case with each bond index, can be expected to vary inversely from
changes in prevailing interest rates.
Other Investment Considerations - Tax-Exempt Intermediate Bond Fund
- -------------------------------------------------------------------
The Fund's cash balances may be invested in short-term municipal notes and
tax-exempt commercial paper, as well as municipal bonds with remaining
maturities of thirteen months or less and securities issued by other investment
companies which invest in high quality, short-term municipal debt securities.
The value of the Fund's portfolio can be expected to vary inversely to changes
in prevailing interest rates.
From time to time, on a temporary defensive basis due to market conditions,
the Fund may hold without any limitation uninvested cash reserves and invest
without any limitations in high quality short-term taxable money market
obligations in such proportions as in the opinion of the Adviser, prevailing
market or economic conditions warrant. Uninvested cash reserves will not earn
income. See "Investment Strategies & Risks - Money Market Instruments" above.
Taxable obligations acquired by the Fund will not exceed under normal conditions
20% of the Fund's net assets at the time of purchase.
Municipal Obligations. Municipal obligations which may be acquired by the
Tax-Exempt Intermediate Bond Fund include debt obligations issued by
governmental entities to obtain funds for various public purposes, including the
construction of a wide range of public facilities, the refunding of outstanding
obligations, the payment of general operating expenses and the extension of
loans to public institutions and facilities.
Opinions relating to the validity of municipal obligations and to the
exemption of interest thereon from federal income tax are rendered by bond
counsel to the respective issuers at the time of issuance. Neither the Fund not
the Adviser will review the proceedings relating to the issuance of municipal
obligations or the basis for such opinions.
Certain of the municipal obligations held by the Fund may be insured at
the time of issuance as to the timely payment of principal and interest. The
insurance policies will usually be obtained by the issuer of the municipal
obligation at the time of its original issuance. In the event that the issuer
defaults on interest or principal payment, the insurer will be notified and will
be required to make payment to the bondholders. There is, however, no guarantee
that the insurer will meet its obligations. In addition, such insurance will
not protect against market fluctuations caused by changes in interest rates and
other factors, including credit downgrades, supply and demand. The Fund may,
from time to time, invest more than 25% of its assets in municipal obligations
covered by insurance policies.
The payment of principal and interest on most securities purchased by the
Fund will depend upon the ability of the issuers to meet their obligations. An
issuer's obligations under its municipal obligations 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 or upon the ability of municipalities to levy
taxes. The power or ability of an issuer to meet its obligations for the
payment of interest on, and principal of, its municipal obligations may be
materially adversely affected by litigation or other conditions.
Certain types of municipal obligations (private activity bonds) have been
or are issued to obtain funds to provide privately operated housing facilities,
pollution control facilities, convention or trade show facilities, mass transit,
airport, port or parking facilities and certain local facilities for water
supply, gas, electricity or sewage or solid waste disposal. Private activity
bonds are also issued on behalf of privately held or publicly owned corporations
in the financing of commercial or industrial facilities. State and local
governments are authorized in most states to issue private activity bonds for
such purposes in order to encourage corporations to locate within their
communities. The principal and interest on these obligations may be payable
from the general revenues of the users of such facilities.
Municipal obligations purchased by the Fund may be backed by letters of
credit issued by foreign and domestic banks and other financial institutions.
Such letters of credit are not necessarily subject to federal deposit insurance
and adverse developments in the banking industry could have a negative effect on
the credit quality of the Fund's portfolio securities and its ability to
maintain a stable net asset value and share price. Letters of credit issued by
foreign banks, like other obligations of foreign banks, may involve certain
risks in addition to those of domestic obligations.
The Fund may purchase put options on municipal obligations. A put gives
the Fund the right to sell a municipal obligation at a specified price at any
time before a specified date. A put will be sold, transferred or assigned only
with the related municipal obligation. The Fund will acquire puts only to
enhance liquidity, shorten the maturity of the related municipal security or
permit the Fund to invest its assets at more favorable rates. The aggregate
price of a security subject to a put may be higher than the price which
otherwise would be paid for the security without such an option, thereby
increasing the security's cost and reducing its yield.
From time to time, proposals have been introduced before Congress for the
purpose of restricting or eliminating the federal income tax exemption for
interest on municipal obligations. For example, under the Tax Reform Act of
1986, interest on certain private activity bonds must be included in an
investor's alternative minimum taxable income, and corporate investors must
include all tax-exempt interest in their federal alternative minimum taxable
income. The Company cannot, of course, predict what legislation, if any, may be
proposed in the future as regards the income tax status of interest on municipal
obligations, or which proposals, if any, might be enacted. Such proposals,
while pending or if enacted, might materially and adversely affect the
availability of municipal obligations for investment by the Fund and the
liquidity and value of the Fund's portfolio. In such an event, the Company
would reevaluate the Fund's investment objective and policies and consider
possible changes in its structure or possible dissolution.
Municipal Lease Obligations. As stated in the Prospectus, the Fund may
acquire municipal lease obligations which are issued by a state or local
government authority to acquire land and a wide variety of equipment and
facilities. These obligations typically are not fully backed by the
municipality's credit, and their interest may become taxable if the lease is
assigned. If the funds are not appropriated for the following year's lease
payments, the lease may terminate, with the possibility of default on the lease
obligation and significant loss to the Fund. Certificates of participation in
municipal lease obligations or installment sale contracts entitle the holder to
a proportionate interests in the lease-purchase payments made. The Adviser
determines and monitors the liquidity of municipal lease obligations (including
certificates of participation) under guidelines approved by the Board of
Directors requiring the Advisor to evaluate the credit quality of such
obligations and report on the nature of and the Fund's trading experience in the
municipal lease market. Under the guidelines, municipal lease obligations that
are not readily marketable and transferable are treated as illiquid. In making
a determination that a municipal lease obligation is liquid, the Adviser may
consider, among other things (i) whether the lease can be canceled; (ii) the
likelihood that the assets represented by the lease can be sold; (iii) the
strength of the lessee's general credit; (iv) the likelihood that the
municipality will discontinue appropriating funds for the leased property
because the property is no longer deemed essential to the operations of the
municipality; and (v) availability of legal recourse in the event of failure to
appropriate. The Fund will not knowingly invest more than 10% of the value of
its net assets in securities, including municipal leases, that are illiquid.
Stand-By Commitments. The Tax-Exempt Intermediate Bond Fund may acquire
"stand-by commitments" with respect to municipal obligations held in its
portfolio. Under a "stand-by commitment" a dealer agrees to buy from the Fund,
at the Fund's option, specified municipal obligations at a specified price.
"Stand-by commitment" acquired by the Fund may also be referred to in this
Statement of Additional Information as "put" options.
The amount payable to the Fund upon its exercise of a "stand-by commitment"
is normally (i) the Fund's acquisition cost of the municipal obligations
(excluding any accrued interest which the Fund paid on their acquisition), less
any amortized market premium or plus any amortized market or original issue
discount during the period the Fund owned the securities, plus (ii) all interest
accrued on the securities since the last interest payment date during that
period. A stand-by commitment may be sold, transferred or assigned by the Fund
only with the instrument involved.
The Fund expects that "stand-by commitments" will generally be available
without the payment of any direct or indirect consideration. However, if
necessary or advisable, the Fund may pay for a "stand-by commitment" either
separately in cash or by paying a higher price for the portfolio securities
which are acquired subject to the commitment (thus reducing the yield to
maturity otherwise available for the same securities). The total amount paid in
either manner for outstanding "stand-by commitments" held by the Fund will not
exceed 1/2 of 1% of the value of its total assets calculated immediately after
each "stand-by commitment" is acquired.
The Fund intends to enter into "stand-by commitments" only with dealers,
banks and broker/dealers which, in the investment adviser's opinion, present
minimal credit risks. The Fund's reliance upon the credit of these dealers,
banks and broker/dealers is secured by the value of the underlying municipal
obligations that are subject to a commitment.
The Fund would acquire "stand-by commitments" solely to facilitate
portfolio liquidity and does not intend to exercise its rights thereunder for
trading purposes. The acquisition of a "stand-by commitment" would not affect
the valuation or assumed maturity of the underlying Municipal Securities, which
would continue to be valued in accordance with the ordinary method of valuation
employed by the Fund. "Stand-by commitment" which would be acquired by the Fund
would be valued at zero in determining net asset value. Where the Fund paid any
consideration directly or indirectly for a "stand-by commitment" its cost would
be reflected as unrealized depreciation for the period during which the
commitment was held by the Fund.
Variable and Floating Rate Instruments. Municipal obligations purchased by
the Fund may include variable and floating rate instruments issued by industrial
development authorities and other governmental entities. If such instruments
are unrated, they will be determined by the Fund's Adviser (under the
supervision of the Board of Directors) to be of comparable quality at the time
of purchase to investment grade. While there may be no active secondary market
with respect to a particular variable or floating rate demand instrument
purchased by the Fund, the Fund may (at any time or during specified periods not
exceeding thirteen months, depending upon the instrument involved) demand
payment in full of the principal of the instrument and has the right to resell
the instrument to a third party. The absence of such an active secondary
market, however, could make it difficult for the Fund to dispose of a variable
or floating rate demand instrument if the issuer defaulted on its payment
obligation or during periods that the Fund is not entitled to exercise its
demand rights, and the Fund could, for these or other reasons, suffer a loss
with respect to such instruments.
With respect to the variable and floating rate instruments that may be
acquired by the Tax-Exempt Intermediate Bond Fund the Adviser will consider the
earning power, cash flows and other liquidity ratios of the issuers and
guarantors of such instruments and, if the instrument is subject to a demand
feature, will monitor their financial status to meet payment on demand. In
determining average weighted portfolio maturity, an instrument will usually be
deemed to have a maturity equal to the longer of the period remaining to the
next interest rate adjustment or the time the Fund can recover payment of
principal as specified in the instrument. Variable U.S. government obligations
held by the Fund, however, will be deemed to have maturities equal to the period
remaining until the next interest rate adjustment.
Other Investment Considerations - MicroCap Fund
- ------------------------------------------------
Small Cap Volatility. Companies in which the Fund primarily invests will
include those that have limited product lines, markets, or financial resources,
or are dependent on a small management group. In addition, because these stocks
are not well-known to the investing public, do not have significant
institutional ownership, and are followed by relatively few security analysts,
there will normally be less publicly available information concerning these
securities compared to what is available for the securities of larger companies.
Adverse publicity and investor perceptions, whether based on fundamental
analysis, can decrease the value and liquidity of securities held by the Fund.
Historically, small capitalization stocks have been more volatile in price than
larger capitalization stocks. Among the reasons for the greater price
volatility of these small company stocks are the less certain growth prospects
of smaller firms, the lower degree of liquidity in the markets for such stocks,
the greater sensitivity of small companies to changing economic conditions and
the fewer market makers and the wider spreads between quoted bid and asked
prices which exist in the over-the-counter market for such stocks. Besides
exhibiting greater volatility, small company stocks may, to a degree, fluctuate
independently of larger company stocks. Small company stocks may decline in
price as large company stocks rise, or rise in price as large company stocks
decline. Investors should therefore expect that the Fund will be more volatile
than, and may fluctuate independently of, broad stock market indices such as the
S&P 500 Index.
Other Investment Considerations - Equity Index Fund
- ---------------------------------------------------
Equity Index Fund Management Techniques When purchasing securities for the
Equity Index Fund's portfolio, the Adviser will consider initially the relative
market capitalization weightings of the stocks included in the S&P 500 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 500 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 500 Index. This comparison is made because the Adviser
believes, unless the Fund holds all stocks included in the S&P 500 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 500 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 500 Index. Conversely,
if smaller companies were not purchased by the Fund, industries included in the
S&P 500 Index that are dominated by smaller market-capitalized companies would
be underrepresented (as compared to the S&P 500 Index).
If an issuer drops in ranking, or is eliminated entirely from the S&P 500
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 500 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 500 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 500 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
500 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 Investment Considerations - Bond IMMDEX/TM Fund
- -----------------------------------------------------
The IMMDEX/TM Model. The IMMDEX/TM model has been developed and is
maintained by Capital Management Sciences "Capital Management") under the
"IMMDEX/TM " trademark. Capital Management is neither a sponsor of the Bond
IMMDEX/TM Fund nor affiliated in any way with the Bond IMMDEX/TM Fund or the
Adviser. Neither is Capital Management in any way affiliated with Lehman
Brothers which claims no interest in the model or its ability to effectively or
accurately replicate the Lehman Brothers Government/Corporate Bond Index.
Further, Capital Management is not responsible for the management or results of
the Bond IMMDEX/TM Fund's portfolio. Rather, the Adviser will use the IMMDEX/TM
model and the other investment techniques described in the Prospectus in
choosing portfolio securities and executing transactions in an effort to produce
an annual rate of total return for the Bond IMMDEX/TM Fund that is comparable,
before Fund expenses, to that of the Lehman Brothers Government/Corporate Bond
Index.
Other Portfolio Information
- ---------------------------
Options Trading. As stated in the Prospectus, the Bond Funds, Balanced
Funds and Equity Funds may purchase put and (with the exception of the Tax-
Exempt Intermediate Bond Fund) call options. Option purchases by a Fund (except
the International Equity Fund) will not exceed 5% of its net assets and the
International Equity Fund may purchase put and call options without limit. Such
options may relate to particular securities or to various indices and may or may
not be listed on a national securities exchange and issued by the Options
Clearing Corporation. (In the case of the Equity Index Fund, such options will
relate only to stock indices.) 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.
The Tax-Exempt Intermediate Bond Fund will only purchase put options on
Municipal obligations, and will do so only to enhance liquidity, shorten the
maturity of the related municipal security or permit the Fund to invest its
assets at more favorable rates. The Taxable Bond Funds and International Equity
Fund will engage in unlisted over-the-counter options only with broker-dealers
deemed creditworthy by the Adviser (or the Sub-Adviser). 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.
Each 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, each Fund (with the exception
of the Tax-Exempt Intermediate Bond Fund) may sell covered call options listed
on a national securities exchange. Such options may relate to particular
securities or to various indices. (In the case of the Equity Index Fund, 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 Taxable Bond Funds, Balanced Income,
Balanced Growth, Growth and Income, Equity Index and MicroCap Funds will not
exceed 5%, 5%, 25%, 5%, 5% and 5%, respectively, of the value of its net assets
during the current year. The International Equity Fund may write call options on
securities and on various stock indices which will be traded on a recognized
securities or futures exchange or over the counter and during the current year
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.
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.
The International Equity Fund may also write (i.e., sell) covered put
options on securities and various securities indices. The writer of a put
incurs an obligation to buy the security underlying the option from the put's
purchaser at the exercise price at any time on or before the termination date,
at the purchaser's election (certain options the Fund writes will be exercisable
by the purchaser only on a specific date). Generally, a put is "covered" if the
Fund maintains cash, U.S. government securities or other liquid high grade debt
obligations equal to the exercise price of the option or if the Fund holds a put
on the same underlying security with a similar or higher exercise price. By
writing a covered put option on a security, the Fund receives a premium for
writing the option however, the Fund assumes the risk that the value of the
security will decline before the exercise date in which event, the Fund may
incur a loss in excess of the premium received when the put is exercised.
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 Taxable Bond Funds, Balanced Funds and
Equity Funds 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. The International Equity
Fund may engage in foreign futures and options (see "Other Investment
Considerations-- International Equity Fund-- Foreign Futures and Options on
Futures"). In addition, the Equity Index Fund will purchase and sell futures
and related options (based only on the S&P 500 Index) to maintain cash reserves
while simulating full investment in the stocks underlying the S&P 500 Index to
keep substantially all of its assets exposed to the market (as represented by
the S&P 500 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 Equity Index Fund may purchase and sell futures and related
options (based only on the S&P 500 Index) to maintain cash reserves while
simulating full investment in the stocks underlying the S&P 500 Index, to keep
substantially all of its assets exposed to the market (as represented by the S&P
500 Index), and to reduce transaction costs. The International Equity Fund will
only enter into futures contracts and futures options which are standardized and
traded on a U.S. or foreign exchange, board of trade or similar entity, or in
the case of futures options, for which an established over-the-counter market
exists. The Sub-Adviser of the International Equity Fund anticipates engaging
in transactions from time to time in foreign stock index futures such as the
ALL-ORDS (Australia), CAC-40 (France), TOPIX (Japan) and the FTSE-100 (United
Kingdom).
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 (or Sub-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.
Each 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 Taxable Bond Funds and Growth and Income Fund intend to limit their
transactions in futures contracts and related options so that not more than 5%
of each Fund's respective net assets are at risk. The Equity Index Fund and
International Equity Fund intend to limit their transactions in futures
contracts so that not more than 10% and 25% of each Fund's respective 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 Taxable
Bond Funds, Balanced Funds, Growth and Income, Growth, Special Growth, Emerging
Growth, MicroCap and International Equity Funds may invest in sponsored ADRs.
The International Equity Fund may also invest in 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.
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.
Convertible Securities. The Balanced Funds, Growth and Income, Growth,
Special Growth, Emerging Growth, MicroCap and International Equity Funds may
hold convertible securities. Convertible securities entitle the holder to
receive interest paid or accrued on debt or the dividend paid on preferred stock
until the securities mature or are redeemed, converted or exchanged. Prior to
conversion, convertible securities have characteristics similar to ordinary debt
securities in that they normally provide a stable stream of income with
generally higher yields than those of common stock of the same or similar
issuers. Convertible securities rank senior to common stock in a corporation's
capital structure and therefore generally entail less risk than the
corporation's common stock, although the extent to which such risk is reduced
depends in large measure upon the degree to which the convertible security sells
above its value as a fixed income security. In investing in convertibles, a
Fund is looking for the opportunity, through the conversion feature, to
participate in the capital appreciation of the common stock into which the
securities are convertible, while earning higher current income than is
available from the common stock.
During normal market conditions, no more than 5% of a Fund's net assets
will be purchased or held in convertible or other securities that (1) are not
rated at the time of purchase investment grade by S&P, Moody's or other
nationally recognized rating agencies; (2) are unrated and have not been
determined by the Adviser (or Adviser and Sub-Adviser with regard to the
International Equity Fund) to be of comparable quality to a security rated
investment grade; or (3) in the case of the International Equity Fund, have not
received the foreign equivalent of investment grade by a rating agency
recognized in the local market and determined to be of comparable quality by the
Adviser and Sub-Adviser. Securities rated below investment grade are
predominantly speculative and are commonly referred to as junk bonds. To the
extent a Fund purchases convertibles rated below investment grade or
convertibles that are not rated, a greater risk exists as to the timely
repayment of the principal of, and the timely payment of interest or dividends
on, such securities. Subsequent to its purchase by a Fund, a rated security may
cease to be rated or its rating may be reduced below a minimum rating for
purchase by the Fund. The Adviser (and Sub-Adviser for the International Equity
Fund) will consider such an event in determining whether a Fund should continue
to hold the security. The Adviser (and Sub-Adviser for the International Equity
Fund) will sell promptly any securities that are non-investment grade as a
result of these events and that exceed 5% of a Fund's net assets.
As described in the Prospectus, the Funds may invest a portion of their
assets in convertible securities that are rated below investment grade.
Warrants. The Balanced Growth, Balanced Income, Growth and Income, Growth,
Special Growth, Emerging Growth, MicroCap and International Equity Funds may
purchase warrants and similar rights, which are privileges issued by
corporations enabling the owners to subscribe to and purchase a specified number
of shares of the corporation at the specified price during a specified period of
time. Warrants basically are options to purchase equity securities at a
specific price valid for a specific period of time. They do not represent
ownership of the securities, but only the right to buy them. They have no
voting rights, pay no dividends and have no rights with respect to the assets of
the company issuing them. Warrants differ from call options in that warrants
are issued by the issuer of the security which may be purchased on their
exercise, whereas call options may be written or issued by anyone. The prices
of warrants do not necessarily move parallel to the prices of the underlying
securities.
The purchase of warrants involves the risk that a Fund could lose the
purchase value of a warrant if the right to subscribe to additional shares is
not exercised prior to the warrant's expiration. Also, the purchase of warrants
involves the risk that the effective price paid for the warrant added to the
subscription price of the related security may exceed the value of the
subscribed security's market price such as when there is no movement in the
level of the underlying security. During normal market conditions, no more than
5% of each Fund's net assets will be invested in warrants. This 5% limit
includes warrants that are not listed on any stock exchange, and such warrants
are limited to 2% of the International Equity Fund's net assets. Warrants
acquired by the International Equity Fund in units or attached to securities are
not subject to these limits.
Short Sales. The MicroCap Fund may engage in short sales. If the MicroCap
Fund engages in short sales, it need not segregate Fund assets if it "covers"
the position. A position is "covered" if, at the time the Fund sells the
security or thereafter, the Fund also owns that security or holds a call option
on that security with a strike price no higher than the price at which the
security was sold. For federal tax purposes, a short sale is considered
consummated upon delivery of securities to close the short sale. The gains or
losses realized by the Fund from short sale transactions normally will be
characterized as capital gains or losses although short sales that are part of
certain hedging transactions or straddles may receive different tax treatment.
Special rules generally operate to prevent the use of short sales to convert
short-term capital gain into long-term capital gain and long-term capital loss
into short-term capital loss. As a result, these transactions may increase the
amount of short-term capital gain realized by the Fund which is taxed as
ordinary income when distributed to its shareowners and may reduce the Fund's
short-term capital loss available to reduce its ordinary income. The impact of
the tax consequences of short sale transactions engaged in by the Fund on
distributions to shareowners will be closely monitored.
Guaranteed Investment Contracts. The Taxable Bond Funds may make limited
investments in guaranteed investment contracts ("GICs") issued by highly rated
U.S. insurance companies. Pursuant to such contracts, a Fund makes cash
contributions to a separate account of the insurance company which has been
segregated from the general assets of the issuer. The insurance company then
pays to the Fund at the end of the contract an amount equal to the cash
contributions adjusted for the total return of an index. A GIC is a separate
account obligation of the issuing insurance company. A Fund will only purchase
GICs from issuers which, at the time of purchase, are rated A or higher by
Moody's or S&P, have assets of $1 billion or more and meet quality and credit
standards established by the Adviser. Generally, GICs are not assignable or
transferable without the permission of the issuing insurance companies, and an
active secondary market in GICs does not currently exist. Therefore, GICs are
considered by the Fund to be subject to the 10% limitation on illiquid
investments. Generally, a GIC allows a purchaser to buy an annuity with the
money accumulated under the contract; however, a Fund will not purchase any such
annuities.
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.
Companies in which the MicroCap and Emerging Growth Funds primarily invest
will include those that have limited product lines, markets, or financial
resources, or are dependent upon a small management group. In addition, because
these stocks are not well known to the investing public, do not have significant
institutional ownership, and are followed by relatively few securities analysts,
there will normally be less publicly available information concerning these
securities compared to what is available for the securities of larger companies.
Adverse publicity and investor perceptions, whether or not based on fundamental
analysis, can decrease the value and liquidity of securities held by the Funds.
Historically small capitalization stocks have been more volatile in price than
larger capitalization stocks. Among the reasons for the greater price
volatility of these small company stocks are the less certain growth prospects
of smaller firms, the lower degree of liquidity in the markets for such stocks,
the greater sensitivity of small companies to changing economic conditions and
the fewer market makers and the wider spreads between quoted bid and asked
prices which exist in the over-the-counter market for such stocks. Besides
exhibiting greater volatility, small company stocks may, to a degree, fluctuate
independently of larger company stocks. Small company stocks may decline in
price as large company stocks rise, or rise in price as large company stocks
decline. Investors should therefore expect that the Funds will be more volatile
than, and may fluctuate independently of, broad stock market indices such as the
S&P 500 Index.
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 Special Growth Fund when the Adviser 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 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 (in an amount exceeding one-third of the Fund's net
assets, with respect to the MicroCap Fund), except that (a) this investment
limitation shall not apply to a Fund's transactions in futures contracts and
related options and, with respect to MicroCap Fund, short sales against the box,
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 except the Tax-Exempt
Intermediate Bond Fund, 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) with regard to the Tax-
Exempt Intermediate Bond Fund, there is no limitation with respect to
instruments issued or guaranteed by the United States, any state, territory or
possession of the United States, the District of Columbia or any of their
authorities, agencies, instrumentalities or political subdivisions and
repurchase agreements secured by such instruments; (c) 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
(d) 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 (one-third of the
value of the total assets, with respect to the MicroCap Fund) 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 (one-
third of the value of the total assets, with respect to the MicroCap Fund) 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. The MicroCap Fund may not enter into reverse
repurchase agreements exceeding in the aggregate one-third of its total assets.
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.
12. With respect to the Tax-Exempt Intermediate Bond Fund, invest less
than 80% of its net assets in securities the interest on which is exempt from
federal income tax except during defensive periods or during unusual market
conditions. For purposes of this fundamental policy, Municipal obligations
that are subject to federal alternative minimum tax are considered taxable.
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
(except the MicroCap Fund) will promptly reduce such amount. With respect to
the MicroCap Fund, if due to market fluctuations or other reasons, the total
assets of the Fund fall below 300% of its borrowings, the Fund will reduce its
borrowings in compliance with the 1940 Act. Except as otherwise provided in
Investment Restriction No. 10 above, for the purpose of such restriction, in
determining industry classification with respect to the International Equity
Fund, the Company intends to use the Morgan Stanley Capital International
classification titles.
With respect to investment limitation No. 3 under "Additional Investment
Limitations" as it relates to the Tax-Exempt Intermediate Bond Fund, real estate
shall include real estate mortgages. Although the foregoing investment
limitations would permit the Tax-Exempt Intermediate Bond Fund to invest in
options, futures contracts, options on futures contracts and engage in
securities lending, the Fund, during the current fiscal year, does not intend to
trade in such instruments (except that the Fund may purchase put options on
Municipal obligations as described in the Prospectus) or lend portfolio
securities. Prior to engaging in any such transactions, the Fund will provide
its shareowners with notice and add any additional descriptions concerning the
instruments to the Prospectus and this SAI as may be required. 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 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 International Equity Fund, is not
calculated. The calculation of the net asset value of a Fund, including the
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 October 31, 1998, revised to reflect sales loads in effect commencing January
1, 1999 as follows:
<TABLE>
<CAPTION>
Short-Term Bond Intermediate Bond Tax-Exempt Intermediate Bond IMMDEX/TM
Market Fund Market Fund Bond Fund Fund
----------- ----------- ----------- -----------
<C> <C> <C> <C> <C>
Net Assets (000s) $75,410 $29,550 $32,466 $95,301
Number of Shares
Outstanding (000s) 7,291 2,813 3,087 3,285
Net Asset Value
Per Share 10.34 10.50 10.52 29.01
Sales Charge, 3.75%
of offering price
(3.90% of net asset
value per share) 0.40 0.41 0.41 1.13
Public Offering Price 10.74 10.91 10.93 30.14
Balanced Income Balanced Growth Growth and Income Equity Index
Fund Fund Fund Fund
----------- ----------- ----------- -----------
Net Assets (000s) $10,614 $59,657 $190,331 $110,129
Number of Shares
Outstanding (000s) 965 2,001 4,286 1,477
Net Asset Value
Per Share 11.0029.82 44.41 74.58
Sales Charge, 4.50%
of offering price
(4.71% of net asset
value per share) 0.52 1.41 2.09 3.51
Public Offering Price 11.52 31.23 46.50 78.09
Growth Special Growth Emerging Growth MicroCap
Fund Fund Fund Fund
----------- ----------- ----------- -----------
Net Assets (000s) $38,213 $136,146 $12,884 $12,419
Number of Shares
Outstanding (000s) 1,070 3,622 1,348 1,003
Net Asset Value
Per Share 35.72 37.59 9.56 12.38
Sales Charge, 4.50%
of offering price
(4.71% of net asset
value per share) 1.68 1.77 0.45 0.58
Public Offering Price 37.40 39.36 10.01 12.96
International Equity
Fund
-----------
Net Assets (000s) $6,486
Number of Shares
Outstanding (000s) 427
Net Asset Value
Per Share 15.18
Sales Charge, 4.50%
of offering price
(4.71% of net asset
value per share) .72
Public Offering Price 15.90
</TABLE>
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 Prospectus, 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 Prospectus, 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.
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 414-287-3710. 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:
Number of Authorized
Represents Interest Shares in Each Series
Class-Series of
Common Stock
6-Institutional Special Growth 500 Million
6-A 500 Million
6-B 500 Million
7-Institutional Bond IMMDEX/TM 500 Million
7-A 500 Million
7-B 500 Million
8-Institutional Equity Index 500 Million
8-A 500 Million
8-B 500 Million
9-Institutional Growth and Income 500 Million
9-A 500 Million
9-B 500 Million
10-Institutional Short-Term Bond Market 500 Million
10-A 500 Million
10-B 500 Million
11-Institutional Balanced Growth 500 Million
11-A 500 Million
11-B 500 Million
12-Institutional Growth 500 Million
12-A 500 Million
12-B 500 Million
13-Institutional Intermediate Bond Market 500 Million
13-A 500 Million
13-B 500 Million
14-Institutional Tax-Exempt Intermediate Bond 500 Million
14-A 500 Million
14-B 500 Million
15-Institutional International Equity 500 Million
15-A 500 Million
15-B 500 Million
16-Institutional MicroCap 50 Million
16-A 50 Million
16-B 50 Million
17-Institutional Balanced Income 100 Million
17-A 100 Million
17-B 100 Million
18-Institutional Emerging Growth 100 Million
18-A 100 Million
18-B 100 Million
The Board of Directors has also authorized the issuance of classes 1
through 5 common stock representing interests in five other separate investment
portfolios which are described in a separate statement of additional
information. The remaining authorized shares are classified into eleven
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' Prospectus 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.
The Tax Exempt Intermediate Bond Fund intends to invest all or
substantially all, of its assets in debt obligations, the interest on which is
exempt for federal income tax purposes. For the Fund to pay tax-exempt
dividends for any taxable year, at least 50% of the aggregate value of the
Fund's assets at the close of each quarter of the Fund's taxable year must
consist of exempt-interest obligations.
The Tax-Exempt Intermediate Bond Fund is designed to provide investors with
current tax-exempt interest income. The Fund is not intended to constitute a
balanced investment program and is not designed for investors seeking capital
appreciation or maximum tax-exempt income irrespective of fluctuations in
principal. Shares of the Fund may not be suitable for tax-exempt institutions,
or for retirement plans qualified under Section 401 of the Internal Revenue Code
of 1986 (the "Code"), H.R. 10 plans and individual retirement accounts because
such plans and accounts are generally tax-exempt and, therefore, not only would
not gain any additional benefit from the Fund's dividends being tax-exempt, but
such dividends ultimately would be taxable to the beneficiaries when distributed
to them. In addition, the Fund may not be an appropriate investment for
entities which are "substantial users" of facilities financed by private
activity bonds or "related persons" thereof. "Substantial user" is defined
under U.S. Treasury Regulations to include a non-exempt person who regularly
uses a part of such facilities in his trade or business and whose gross revenues
derived with respect to the facilities financed by the issuance of bonds are
more than 5% of the total revenues derived by all users of such facilities, who
occupies more than 5% of the usable area of such facilities ,or for whom such
facilities, or a part thereof were specifically constructed, reconstructed or
acquired. "Related persons" include certain related natural persons, affiliated
corporations, a partnership and its partners and an S Corporation and its
shareowners.
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) Principal Occupations During Past 5
Name, Address & Age held with the Years and Other Affiliations
Company
James M. Wade Vice President and Chief Financial
2802 Wind Bluff Board Officer, Johnson Controls, Inc. (a
Circle 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 53224- manufacturing company) since January
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 Officer of Weirton Steel since 1995;
Drive Director of Weirton Steel since
Weirton, WV 26062- 1993; Executive Vice President and
4989 Chief Financial Officer, Weirton
Age: 54 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 Financial Officer and Secretary,
Court Rexnord Corporation (an equipment
Elm Grove, WI 53122 manufacturing company), 1988 - 1992;
Age: 68 Vice President - Finance and
Administration, Rexnord Inc., 1982 -
1988; Officer and Director of
several Rexnord subsidiaries until
1992.
Mary Ellen Stanek* Director, President of FIRMCO since 1994 and
777 E. Wisconsin President and Chief Executive Officer, FIRMCO
Avenue, Treasurer since 1998; Director of FIRMCO
Suite 800 since 1992 and Director Fixed
Milwaukee, WI 53202 Income Securities of FIRMCO since
Age: 42 1990.
W.
Philadelphia National Biddle & Reath LLP.
Bank Building
1345 Chestnut Street
Philadelphia, PA
19107
Age: 55
Laura J. Rauman Vice President Vice President of Operations,
777 E. Wisconsin FIRMCO since 1995; Senior Auditor,
Avenue, Price Waterhouse, LLP, prior
Suite 800 thereto.
Milwaukee, WI 53202
Age: 30
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* Director President and CEO of Wisconsin Gas
626 E. Wisconsin Company, WICOR Energy, FieldTech
Avenue and Vice President of WICOR, Inc.
Milwaukee, WI 53202 since 1998; President and CEO of
Age: 54 Ameritech- Wisconsin (formerly
Wisconsin Bell Communications)
1993-1997; Trustee of Roundy Foods.
* Messrs. Haase, Roy 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
PENSION OR COMPENSATION
RETIREMENT ESTIMATED FROM
AGGREGATE BENEFITS ANNUAL COMPANY
COMPENSATION ACCRUED AS BENEFITS AND FUND
NAME OF FROM THE PART OF FUND UPON COMPLEX<F1> PAID
PERSON/POSITI COMPANY EXPENSES RETIREMENT TO DIRECTORS
ON
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. $15,000 $0 $0 $15,000
Remmel
Director
Richard K. $15,000 $0 $0 $15,000
Riederer
Director
Charles R. $15,000 $0 $0 $15,000
Roy
Director
Bronson J. $3,500 $0 $0 $3,500
Haase
Director
<F1> The "Fund Complex" includes only the Company. The Company is comprised of
18 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 became the investment adviser to the Short-Term Bond Market Fund,
Special Growth Fund, Bond IMMDEX/TM Fund and Equity Index Fund as of February 3,
1992 and became the investment adviser to the Growth and Income Fund effective
June 17, 1993. Prior thereto, investment advisory services were provided by
Firstar Trust Services, an affiliate of FIRMCO. Firstar Corporation has
guaranteed all obligations incurred by FIRMCO in connection with its Investment
Advisory Agreement. FIRMCO is also the investment adviser to the Growth Fund,
Intermediate Bond Market Fund, Balanced Income Fund, Balanced Growth Fund, Tax-
Exempt Intermediate Bond Fund, Emerging Growth Fund, MicroCap Fund and
International Equity Fund. 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 Prospectus, 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.
For the services provided and expenses assumed by the Adviser under its
Investment Advisory Agreement in effect for the fiscal years ended October 31,
1998, 1997 and1996, the Adviser was paid and waived advisory fees as follows:
Net Advisory Fees Paid (Advisory Fees Waived)
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- -----
<C> <C> <C> <C>
Short-Term Bond Market Fund $550,921 (528,964) $669,603 (605,038) $552,764 (556,286)
Special Growth Fund 5,243,173 (24) 5,168,254 (0) 4,279,091 (250)
Bond IMMDEX/TM Fund 1,551,355 (0) 1,294,766 (0) 1,074,956 (1,673)
Equity Index Fund 1,076,720 (179,779) 815,050 (0) 555,115 (0)
Intermediate Bond Market Fund 1,080,528 (410,430) 778,669 (345,403) 562,082 (288,147)
Growth Fund 1,663,048 (72) 1,470,245 (2,052) 1,245,050 (8,639)
Balanced Growth Fund 1,345,543 (403,169) 1,056,380 (334,926) 789,896 (309,983)
Growth and Income Fund 4,513,188 (0) 3,086,069 (45) 1,870,213 (18,262)
Tax-Exempt Intermediate Bond Fund 217,113 (207,408) 109,101 (176,855) 40,050 (159,121)
International Equity Fund 641,868 (219,464) 422,050 (370,710) 302,570 (332,273)
Emerging Growth Fund 365,419 (135,525) 46,258 (28,226)<F1>
Balanced Income Fund 60,206 (177,189)<F3>
609,196 (72,149)<F2>
MicroCap Fund 1,685,137 (2,576) 1,318,931 (33) 356,130 (135)
</TABLE>
- ----------------------
<F1> From inception (August 15, 1997) to October 31,1997.
<F2> For the fiscal periods August 1, 1995 through June 30,1996 and July 1,1996
through October 31,1996.
<F3> From inception (December 1,1997) to October 1,1998.
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 compensation 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 International Equity Fund, under the Investment Advisory
Agreement, the Adviser is authorized to delegate its responsibilities to another
adviser. The Adviser has appointed Hansberger Global Investors, Inc. as Sub-
Adviser to the 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 International Equity Fund receives sub-advisory services
from Hansberger Global Investors, Inc. (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
International Equity Fund with respect to its investments. The Sub-Adviser is
responsible for decisions to buy and sell the 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 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 International Equity Fund or the Company, or to any shareowner of the
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.
Prior to September 2, 1997, State Street Bank and Trust Company served as
sub-adviser to the International Equity Fund. For the services provided under
the sub-advisory agreements in effect for the fiscal years ended October 31,
1998, 1997 and 1996, the Sub-Adviser and State Street Bank and Trust Company
were paid and waived sub-advisory fees as follows:
Net Sub-Advisory Fees Paid (Sub-Advisory Fees Waived)
1998 1997 1996
----- ----- -----
International
Equity Fund 381,819 (0) 227,372 (0) 161,584 (0)
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 Trust Company became a Co-Administrator to the Funds on September
1, 1994, and assigned its rights and obligations to Firstar Mutual Fund
Services, LLC on October 1, 1998, and B. C. Ziegler and Company ("Ziegler")
became a Co-Administrator to the Funds on January 1, 1995. 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 Prospectus, 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.
The Distributor provides distribution services for each Fund as described
in the Funds' Prospectus pursuant to a Distribution Agreement with the Funds
under which the Distributor, as agent, sells shares of each Fund on a continuous
basis. The Distributor has agreed to use its best efforts to solicit orders for
the sale of shares, although it is not obliged to sell any particular amount of
shares. The Distributor causes expenses to be paid for the cost of printing and
distributing prospectuses to persons who are not shareowners of the Funds
(excluding preparation and printing expenses necessary for the continued
registration of the Funds' shares) and of printing and distributing all sales
literature. For the fiscal year ended October 31, 1998, 1997, and 1996 Ziegler
received no fees for its distribution services.
For its administrative services for the fiscal years ended October 31,
1998, 1997 and 1996, the Co-Administrators were paid and waived the following
administrative fees:
Net Administration Fees Paid (Administration Fees Waived)
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- -----
<C> <C> <C> <C>
Short-Term Bond Market Fund $69,432 (126,882) $86,550 (149,862) $83,969 (127,339)
Special Growth Fund 269,375 (492,978) 245,929 (521,369) 257,995 (394,054)
Bond IMMDEX/TM Fund 200,288 (364,601) 167,223 (318,234) 159,028 (251,337)
Equity Index Fund 195,703 (353,692) 134,156 (229,162) 159,028 (251,337)
Intermediate Bond Market Fund 115,423 (210,207) 79,413 (171,118) 78,123 (116,341)
Growth Fund 85,845 (156,347) 71,750 (146,715) 75,054 (115,984)
Balanced Income Fund 12,498 (22,106)<F3>
Balanced Growth Fund 90,542 (164,087) 73,298 (133,271) 65,092 (102,563)
Growth and Income Fund 233,865 (423,689) 171,898 (286,778) 65,092 (102,563)
Tax-Exempt Intermediate Bond Fund 32,957 (59,803) 22,619 (41,122) 20,315 (25,259)
International Equity Fund 24,861 (44,829) 20,840 (38,741) 20,015 (30,231)
23,766 (30,742)<F1>
MicroCap Fund 43,380 (79,285) 29,709 (68,284) 12,113 (12,058)
Emerging Growth Fund 26,045 (46,986) 3,488 (7,567)<F2>
</TABLE>
<F1> For the fiscal periods August 1, 1995 through June 30, 1996 and July 1,
1996 through October 31, 1996.
<F2> From inception (August 15, 1997) to October 31, 1997.
<F3> From inception (December 1,1997) to October 31, 1998.
Shareowner Organizations
- -------------------------
Retail A Shares
As stated in the Funds' Prospectus 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.
The Funds paid fees to Shareowner Organizations, none of which were
affiliated with the Adviser, pursuant to the Service Plan for Retail A Shares
for the fiscal year ended October 31, 1998 as follows:
Fees Paid to Non-Affiliated
Shareowner Organizations
---------------------------
Short-Term Bond Market Fund $773
Special Growth Fund 2,163
Bond IMMDEX/TM Fund 0
Equity Index Fund 4,301
Intermediate Bond Market Fund 83
Growth Fund 5
Balanced Income Fund 0
Balanced Growth Fund 395
Growth and Income Fund 1,068
Tax-Exempt Intermediate Bond Fund 0
International Equity Fund 0
MicroCap Fund 0
Emerging Growth Fund 0
The Funds paid fees to Shareowner Organizations, all of which were
affiliated with the Adviser, pursuant to the Service Plan for Retail A Shares
for the fiscal year ended October 31, 1998 as follows:
Fees Paid to by Affiliated
Shareowner Organizations
--------------------------
Short-Term Bond Market Fund $169,222
Special Growth Fund 381,221
Bond IMMDEX/TM Fund 196,204
Equity Index Fund 239,637
Intermediate Bond Market Fund 62,191
Balanced Income Fund 10,544
Growth Fund 81,362
Balanced Growth Fund 135,464
Growth and Income Fund 414,008
Tax-Exempt Intermediate Bond Fund 61,560
International Equity Fund 17,228
MicroCap Fund 39,987
Emerging Growth Fund 23,438
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. No amounts were paid under the Plans applicable to the
Retail B Shares during the fiscal year ended October 31, 1998.
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 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; Balanced
Income Fund, Balanced Growth Fund, Growth and Income Fund, Equity Index Fund,
Growth Fund, Special Growth Fund, Emerging Growth Fund, MicroCap 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 Short-Term
Bond Market Fund, Intermediate Bond Market Fund, Tax-Exempt Intermediate Bond
Fund, Bond IMMDEX/TM Fund and 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. The Company's Annual Report to Shareholders with respect to the Funds
for the fiscal year ended October 31, 1998 has been filed with the SEC. The
financial statements and notes thereto in such Annual Report (the "Financial
Statements") are incorporated by reference into this Statement of Additional
Information. The Financial Statements and Independent Accountants Report
thereon, in such Annual Report have been incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
COUNSEL
Drinker Biddle & Reath LLP (of which Mr. McConnel, Secretary of the
Company, is a partner), Philadelphia National Bank Building, 1345 Chestnut
Street, Philadelphia, Pennsylvania 19107, serve 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 and the yields of such shares of the
Short-Term Bond Market Fund, Intermediate Bond Market Fund, Tax-Exempt
Intermediate Bond Fund and Bond IMMDEX/TM Fund (each, a "Bond 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 1-800-228-1024.
Yield Calculations
- ------------------
Yield is computed based on the net income of a series of shares of a Bond
Fund during a 30-day (or one-month) period, which will be identified in
connection with the particular yield quotation, more specifically, the yield of
a series of shares is calculated by dividing the net investment income per share
for that series (as described below) earned during a 30-day (or one-month)
period by the net asset value per share for that series (including the maximum
front end sales charge of 3.75% for the Retail A Shares of the Bond Funds) on
the last day of the period and annualizing the result on a semiannual basis by
adding one to the quotient, raising the sum to the power of six, subtracting one
from the result and then doubling the difference. Net investment income per
share earned during the period attributable to that series is based on the
average daily number of shares of the series outstanding during the period
entitled to receive dividends and includes dividends and interest earned during
the period attributable to that series minus expenses accrued for the period,
attributable to that series net of reimbursements.
This calculation can be expressed as follows:
a-b
Yield = 2 [(----- + 1)6 - 1]
c x d
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends.
d = Maximum offering price per share on the last day of the
period.
For the purpose of determining net investment income earned during the
period (variable "a" in the formula), dividend income on equity securities held
by a Fund is recognized by accruing 1/360 of the stated dividend rate of the
security each day that the security is in the portfolio. A Fund calculates
interest earned on any debt obligations held in its portfolio by computing the
yield to maturity of each obligation held by it based on the market value of the
obligation (including actual accrued interest) at the close of business on the
last business day of each month, or, with respect to obligations purchased
during the month, the purchase price (plus actual accrued interest) and dividing
the result by 360 and multiplying the quotient by the market value of the obli-
gation (including actual accrued interest) in order to determine the interest
income on the obligation for each day of the subsequent month that the
obligation is in the portfolio. For purposes of this calculation, it is assumed
that each month contains 30 days. The maturity of an obligation with a call
provision is the next call date on which the obligation reasonably may be
expected to be called or, if none, the maturity date. With respect to debt
obligations purchased at a discount or premium, the formula generally calls for
amortization of the discount or premium. The amortization schedule will be
adjusted monthly to reflect changes in the market values of such debt
obligations.
Interest earned on tax-exempt obligations of the Tax-Exempt Intermediate
Bond Fund that are issued without original issue discount and have a current
market discount is calculated by using the coupon rate of interest instead of
the yield to maturity. In the case of tax-exempt obligations that are issued
with original issue discount but which have discounts based on current market
value that exceed the then-remaining portion of the original issue discount
(market discount), the yield to maturity is the imputed rate based on the
original issue discount calculation. On the other hand, in the case of tax-
exempt obligations that are issued with original issue discount but which have
the discounts based on current market value that are less than the then-
remaining portion of the original issue discount (market premium), the yield to
maturity is based on the market value.
With respect to mortgage or other receivables-backed obligations which are
expected to be subject to monthly payments of principal and interest ("pay
downs"), (a) gain or loss attributable to actual monthly pay downs are accounted
for as an increase or decrease to interest income during the period; and (b) a
Fund may elect either (i) to amortize the discount and premium on the remaining
security, based on the cost of the security, to the weighted average maturity
date, if such information is available, or to the remaining term of the
security, if any, if the weighted average maturity date is not available, or
(ii) not to amortize discount or premium on the remaining security.
Undeclared earned income may be subtracted from the net asset value per
share (variable "d" in the formula). Undeclared earned income is the net
investment income which, at the end of the 30-day base period, has not been
declared as a dividend, but is reasonably expected to be and is declared as a
dividend shortly thereafter.
In addition, the Tax-Exempt Intermediate Bond Fund may advertise a "tax-
equivalent yield" which shows the level of taxable yield needed to produce an
after-tax equivalent to the tax-free yield of the Fund. This is done by
increasing the yield of the series of shares (calculated as stated above) by the
amount necessary to reflect the payment of federal income taxes at a stated
rate. This is computed by: (a) dividing the portion of the Fund's yield for a
particular series (as calculated above) that is exempt from federal income tax
by one minus a stated federal income tax rate; and (b) adding the figure
resulting from (a) above to that portion, if any, of the Fund's yield that is
not exempt from federal income tax. The "tax-equivalent" yield will always be
higher than the "yield of the Fund.
For the 30-day period ended October 31, 1998, the annualized yields for
Institutional Shares of the Short-Term Bond Market Fund, Intermediate Bond
Market Fund, Tax-Exempt Intermediate Bond Fund and Bond IMMDEX/TM Fund were
5.28%, 5.05%, 3.69% and 5.35%, respectively. Without fees waived by the
Adviser and the Co-Administrators during such period, the annualized yields
would have been 4.94%, 4.85%, 3.38% and 5.28%, respectively. For the same
period, the tax- equivalent annualized yield for the Tax-Exempt Intermediate
Bond Fund same period would have been 5.35% (assuming a federal income tax
rate of 31%). Without fees waived by the Adviser and Co-Administrators during
such period, the tax-equivalent annualized yield for such Fund would have
been 4.90%.
For the 30-day period ended October 31, 1998, the annualized yields,
assuming the maximum sales charge, for Retail Shares of the Short-Term Bond
Market Fund, Intermediate Bond Market Fund, Tax-Exempt Intermediate Bond Fund
and Bond IMMDEX/TM Fund were 4.92%, 4.70%, 3.37% and 5.00%, respectively.
Without fees waived by the Adviser and the Co-Administrators during such period,
the annualized yields would have been 4.58%, 4.50%, 3.06% and 4.93%,
respectively. For the same period, the tax-equivalent annualized yield for the
Tax-Exempt Intermediate Bond Fund would have been 4.88% (assuming a federal
income tax rate of 31%). Without fees waived by the Adviser and Co-
Administrators during such period, the tax-equivalent annualized yield for such
Fund would have been 4.43%.
For the 30-day period ended October 31, 1998, the annualized yields for
Retail Shares of the Short-Term Bond Market Fund, Intermediate Bond Market Fund,
Tax-Exempt Intermediate Bond Fund and Bond IMMDEX a Fund purchased without a
front-end sales charge were 5.02%, 4.79%, 3.44% and 5.10%, respectively.
Without fees waived by the Adviser and the Co-Administrators during such period,
the annualized yields would have been 4.68%, 4.59%, 3.13% and 5.03%,
respectively. For the same period, the tax-equivalent annualized yield for the
Tax-Exempt Intermediate Bond Fund purchased without a front-end sales charge
would have been 4.99% (assuming a federal income tax rate of 31%). Without fees
waived by the Adviser and Co-Administrators during such period, the tax-
equivalent annualized yield for such Fund would have been 4.54%.
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:
P(1 + T)n = 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 for equity funds and 3.75% maximum front
end sales charge for fixed income funds 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 to those of
other mutual funds with similar investment objectives and to stock, bond and
other relevant indices or to rankings prepared by independent services or other
financial or industry publications that monitor the performance of mutual funds.
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. The total
return of a bond or balanced Fund's shares may be compared to the Lehman
Brothers 1-3 Year Government/Corporate Bond Index; the Merrill Lynch 1-2.99 U.S.
Treasury Bond Index; the Lehman Brothers Intermediate Government/Corporate Bond
Index; the Lehman Brothers 5-Year General Obligation Bond Index; the Lehman
Brothers Government/Corporate Bond Index; and the Consumer Price Index. 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 S&P SmallCap 600 Index, 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 Dow Jones Industrial Average, a recognized unmanaged index of common
stocks of 30 industrial companies listed on the New York Stock Exchange; the
Wilshire Top 750 Index, an index of all domestic equity issues which are traded
over the national exchanges; the Russell 2000 Index; the Value Line Composite
Index, an unmanaged index of nearly 1,700 stocks reviewed in Ratings & Reports;
the Russell MidCap; the Wilshire Next 1750 Index; the Wilshire MidCap 750 Index;
and the Consumer Price Index. In addition, the total return of a series of
shares of the International Equity Fund will be compared to the GDP EAFE Index
and may be compared to the Salomon-Russell Indices, Russell Universe Indices,
Lipper International Indices, and the domestic indices listed above. Total
return and yield data 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 yield and total return and
will reduce the yield and total return received by the accounts.
PERFORMANCE HISTORY
AVERAGE ANNUAL TOTAL RETURN<F1>
INSTITUTIONAL SHARES
Since
1 Year 5 Years 10 Years inception
(inception date)
SHORT-TERM BOND MARKET 6.84% 5.87% 7.35% --
INTERMEDIATE BOND
MARKET 7.83% 6.19% -- 6.80% (Jan 5,1993)
TAX-EXEMPT
INTERMEDIATE BOND 5.88% 4.85% -- 5.17% (Feb. 8, 1993)
BOND IMMDEX/TM 9.41% 7.00% 8.90% --
BALANCED INCOME -- -- -- 12.70% (Dec. 1,1997)
BALANCED GROWTH 8.83% 11.47% -- 11.31% (Mar. 30, 1992)
GROWTH AND INCOME 18.35% 20.11% -- 14.84% (Dec, 29, 1989)
EQUITY INDEX 21.93% 20.90% 17.40% --
GROWTH 18.89% 15.59% -- 14.63% (Dec. 29,1992)
SPECIAL GROWTH (5.66)% 10.94% -- 13.43% (Dec. 28, 1989)
EMERGING GROWTH (6.35)% -- -- (2.86)% (Aug. 15,1997)
MICROCAP (21.51)% -- -- 18.89% (Aug. 1, 1995)
INTERNATIONAL EQUITY (15.97)% -- -- (4.04)% (Apr. 28,1994)
AVERAGE ANNUAL TOTAL RETURN<F1>
RETAIL A SHARES
Since
1 Year 5 Years 10 Years inception
(inception date)
SHORT-TERM BOND MARKET 2.58% 4.88% 6.84% --
INTERMEDIATE BOND
MARKET 3.55% 5.19% -- 5.93% (Jan 5,1993)
TAX-EXEMPT
INTERMEDIATE BOND 1.79% 3.86% -- 4.30% (Feb. 8, 1993)
BOND IMMDEX/TM 5.01% 5.99% 8.38% --
BALANCED INCOME -- -- -- 8.10% (Dec. 1,1997)
BALANCED GROWTH 3.70% 10.25% -- 10.37% (Mar. 30, 1992)
GROWTH AND INCOME 12.76% 18.81% -- 14.12% (Dec, 29, 1989)
EQUITY INDEX 16.16% 19.58% 15.99% --
GROWTH 13.25% 14.33% -- 13.55% (Dec. 29,1992)
SPECIAL GROWTH (10.14)% 9.73% -- 12.72% (Dec. 28, 1989)
EMERGING GROWTH (10.82)% -- -- (6.65)% (Aug. 15,1997)
MICROCAP (25.22)% -- -- 16.91% (Aug. 1, 1995)
INTERNATIONAL EQUITY (19.95)% -- -- (5.20)% (Apr. 28,1994)
<F1> Average annual total return calculations are for periods ended
October 31, 1998, but reflect loads in effect commencing January 1, 1999.
The performance of the Short-Term Bond Market, Bond IMMDEX/TM and Equity
Index Funds for the period prior to December 29, 1989 and for Balanced Income
Fund for the period prior to December 1, 1997 is represented by the performance
of collective investment funds which operated prior to the effectiveness of the
registration statement of the Firstar Short-Term Bond Market, Bond IMMDEX/TM and
Equity Index and Balanced Income Funds. At the time of the Firstar Short-Term
Bond Market, Bond IMMDEX/TM, Equity Index and Balanced Income Funds' inception,
each collective investment fund was operated using materially equivalent
investment objectives, policies, guidelines and restrictions as its
corresponding Firstar fund. In connection with the Firstar Short-Term Bond
Market, Bond IMMDEX/TM and Equity Index Funds' commencement of operations, on
December 29, 1989 and Balance Income Funds' commencement of operations, on
December 1, 1997, each collective investment fund transferred its assets to its
Firstar Fund equivalent. ""
The collective investment funds were not registered under the 1940 Act and
were and are not subject to certain restrictions that are imposed by the 1940
Act and the Internal Revenue Code. If the collective investment funds had been
registered under the 1940 Act, performance may have been adversely affected.
Performance of the collective investment funds has been restated to reflect the
Firstar Short-Term Bond Market, Bond IMMDEX/TM, Equity Index and Balanced Income
Funds' respective actual expenses during each such Fund's first fiscal year.
'Performance quotations of each collective investment fund present past
performance of the FIRMCO managed collective funds, which are separate and
distinct from Firstar Short-Term Bond Market Fund, Bond IMMDEX Fund, Equity
Index Fund and Balanced Income Fund, do not represent past performance o those
Funds and should not be considered as representative of future results of those
Funds.
Prior to January 10, 1995, the Funds offered to retail and institutional
investors one series of shares with neither a sales charge nor a 0.25% service
organization fee. Retail Share performance reflects the deduction of the
current maximum sales charge of 4.50% for equity funds and 3.75% for fixed
income funds, but for periods prior to January 10, 1995, Retail Share
performance does not reflect service organization fees. If service organization
fees had been reflected, performance would be reduced.
Performance assumes the reinvestment of all net investment income and
capital gains and reflects fee waivers. In the absence of fee waivers,
performance would be reduced. Performance quotations represent past
performance, and should not be considered as representative of future results.
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 January 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: 69%; Tax-
Exempt Money Market Fund: 48%; U.S. Treasury Money Market Fund: 31%; U.S.
Government Money Market Fund: 68%; Growth and Income Fund: 67%; Short-Term Bond
Market Fund: 58%; Special Growth Fund: 73%; Bond IMMDEX/TM Fund: 72%; Equity
Index Fund: 75%; Balanced Income Fund: 74%, Balanced Growth Fund: 75%;
Intermediate Bond Market Fund: 81%; Growth Fund: 82%; Tax-Exempt Intermediate
Bond Fund: 61%; International Equity Fund: 84%; MicroCap Fund: 80%, and
Emerging Growth Fund: 81%. 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 Equity 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 Equity Index Fund or any member of the public regarding the advisability of
investing in securities generally or in the Equity Index Fund particularly or
the ability of the S&P 500 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 500 Index which is determined, composed
and calculated by S&P without regard to the Company or the Equity Index Fund.
S&P has no obligation to take the needs of the Company or shareholders of the
Equity Index Fund into consideration in determining, composing or calculating
the S&P 500 Index. S&P is not responsible for and has not participated in the
determination of the prices and amount of the Equity Index Fund or the timing of
the issuance or sale of the Equity Index Fund or in the determination or
calculation of the equation by which the Equity 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 Equity Index Fund.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500
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 500 INDEX OR ANY DATA INCLUDED
THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS
ALL WARRANTIES OF MERCHANTIBILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE
WITH RESPECT TO THE S&P 500 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 ("S&P") commercial paper rating is a current assessment
of the likelihood of timely payment of debt having an original maturity of no
more than 365 days. The 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 S&P 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 has 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 strongest 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 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
BankWatch:
"TBW-1" - This designation represents Thomson 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 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 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 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 has been 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 S&P 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" are of 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 changes 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. Securities are not meeting
obligations and are extremely speculative. "DDD" designates the highest
potential for recovery of amounts outstanding on any securities involved and "D"
represents the lowest potential for recovery.
To provide more detailed indications of credit quality, the Fitch IBCA
ratings from and including "AA" to "B" may be modified by the addition of a plus
(+) or minus (-) sign to show relative standing within these major rating
categories.
Thomson 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
BankWatch to non-investment grade long-term debt. Such issues are regarded as
having speculative characteristics regarding the likelihood of timely payment 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 rating reflects the liquidity concerns and market
access risks unique to notes due in three years or less. The following
summarizes the ratings used by Standard & Poor's Ratings Group 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 very strong
characteristics 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, with margins of
protection that 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 of 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 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
FIRSTAR FUNDS, INC.
Statement of Additional Information
Money Market Fund
Institutional Money Market Fund
U.S. Treasury Money Market Fund
U.S. Government Money Market Fund
Tax-Exempt Money Market Fund
March 1, 1999
TABLE OF CONTENTS
-----------------
Page
----
Firstar Funds, Inc........................................................2
Descriptions of the Funds and their Investments and Risks.................2
Investment Strategies and
Risks.....................................................................4
Net Asset Value..........................................................14
Additional Purchase and Redemption Information...........................15
Description of Shares....................................................18
Additional Information Concerning Taxes..................................19
Management of the Company................................................20
Custodian, Transfer Agent, Disbursing Agent and
Accounting Services Agent.............................................27
Expenses.................................................................28
Independent Accountants .................................................28
Counsel..................................................................28
Yield and Other Performance Information..................................29
Miscellaneous............................................................30
Appendix A..............................................................A-1
This Statement of Additional Information ("SAI"), which is not a
prospectus, supplements and should be read in conjunction with Firstar Funds,
Inc.'s prospectus ("Prospectuses") dated March 1, 1999, for Money Market Fund,
Institutional Money Market Fund, U.S. Treasury Money Market Fund, U.S.
Government Fund and Tax-Exempt Money Market 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 1-800-228-1024. The Financial
Statements and Independent Accountants Report thereon in this SAI are
incorporated by reference from the Funds' Annual Report, which may be
obtained by writing the address above or calling the toll-free number above.
No other part of the Annual Report is incorporated herein by reference.
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.
This SAI pertains to five diversified portfolios, the Money Market Fund,
Institutional Money Market Fund, U.S. Treasury Money Market Fund, U.S.
Government Money Market Fund and Tax-Exempt Money Market Fund. The Money Market
Fund, Institutional Money Market Fund, U.S. Treasury Money Market Fund, U.S.
Government Money Market Fund and Tax-Exempt Money Market Fund commenced
operations on March 16, 1988, April 26, 1991, April 29, 1991, August 1, 1988 and
June 27, 1988, respectively. The Company also offers other investment portfolios
which are described in a separate statement of additional information. For
information concerning these other portfolios, contact the Firstar Mutual Fund
Services, LLC at 615 East Michigan Street, P.O. Box 3011, Milwaukee, Wisconsin
53201-3011 or by calling 1-800-982-8909 or 414-287-3710 (Milwaukee area).
DESCRIPTIONS OF THE FUNDS AND THEIR INVESTMENTS AND RISKS
The Company is a diversified, open-end management company. The following
policies supplement the Funds' respective investment objectives and policies as
set forth in the Prospectus.
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 each Fund.
Securities purchased and sold by each Fund are generally traded in the
over-the-counter market on a net basis (i.e., without commission) through
dealers, or otherwise involve transactions directly with the issuer of an
instrument. The cost of securities purchased from underwriters includes an
underwriting commission or concession, and the prices at which securities are
purchased from and sold to dealers include a dealer's mark-up or mark-down.
With respect to over-the-counter transactions, the Adviser will normally deal
directly with dealers who make a market in the instruments involved except in
those circumstances where more favorable prices and execution are available
elsewhere.
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, in its
sole discretion, believes such practice to be in the Funds' interests.
The Funds do not intend to seek profits from short-term trading. Because
the Funds will invest only in short-term debt instruments, their annual
portfolio turnover rates will be relatively high, but brokerage commissions are
normally not paid on money market instruments, and portfolio turnover is not
expected to have a material effect on the Funds' net investment income. For
regulatory purposes, the Fund's annual portfolio turnover rates are expected to
be zero.
The Advisory Agreement between the Company and the Adviser provides that,
in executing portfolio transactions and selecting brokers or dealers, the
Adviser will seek to obtain the best overall terms available. In assessing the
best overall terms available for any transaction, the 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 commission, if any, both for
the specific transaction and on a continuing basis. In addition, the Agreement
authorizes the Adviser to cause the Funds to pay a broker-dealer which furnishes
brokerage and research services a higher commission than that which might be
charged by another broker-dealer for effecting the same transaction, provided
that the 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 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 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 Distributor or an affiliated
person of either 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 the Adviser, or an affiliated person of either 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 the 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 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 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.
As of October 31, 1998, the Company held securities of its regular brokers
or dealers (as defined under the 1940 Act) or their parents as follows: the
Money Market and Institutional Money Market Funds held securities of Goldman
Sachs totaling $12,773,554 and $86,295,075, respectively; the Money Market and
Institutional Money Market Funds held securities of Morgan Stanley totaling
$13,289,712 and $80,024,562, respectively; and the Money Market and
Institutional Money Market Funds held securities of Merrill Lynch totaling
$9,831,946 and $79,292,539, respectively.
INVESTMENT STRATEGIES AND RISKS
Ratings. 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 a Fund. The Board of Directors or the Adviser, pursuant to
guidelines adopted by the Board, will, in accordance with Rule 2a-7 under the
1940 Act, consider such an event in determining whether the Fund involved should
continue to hold the security.
The Money Market Fund will purchase only "First Tier Eligible Securities"
(as defined by the SEC) that present minimal credit risks as determined by the
Adviser pursuant to guidelines approved by the Board of Directors of the
Company. First Tier Eligible Securities include, generally, (1) securities that
either (a) have short-term debt ratings at the time of purchase in the highest
rating category by at least two unaffiliated nationally recognized statistical
rating organizations ("NRSROs") (or one NRSRO if the security was rated by only
one NRSRO), or (b) are issued or guaranteed by persons with such ratings, and
(2) certain securities that are unrated (including securities of issuers that
have long-term but not short-term ratings) but are of comparable quality as
determined in accordance with guidelines approved by the Board of Directors.
The Appendix to this Statement of Additional Information includes a description
of applicable NRSRO ratings. The following descriptions illustrate the types of
instruments in which the Funds invest.
Variable and Floating Rate Instruments. The Money Market Fund may purchase
variable and floating rate instruments, which may have a stated maturity in
excess of thirteen months but will permit the Fund to demand payment of the
instrument at least once every thirteen months upon not more than thirty days'
notice (unless the instrument is guaranteed by the U.S. Government or an agency
or instrumentality thereof). Such instruments may include variable amount
master demand notes, which are unsecured instruments that permit the
indebtedness thereunder to vary in addition to providing for periodic
adjustments in the interest rate. Unrated variable and floating rate
instruments will be determined by the Adviser (under the supervision of the
Board of Directors) to be of comparable quality at the time of purchase to First
Tier Eligible Securities. An active secondary market may not exist, however,
with respect to particular variable and floating rate instruments, and usually
will not exist with respect to variable amount master demand notes. The absence
of a secondary market could make it difficult for the Fund to dispose of a
variable or floating rate instrument if the issuer defaulted on its payment
obligation or during periods that the Fund could not exercise its demand rights,
and the Fund could, for these or other reasons, suffer a loss with respect to
such instruments. With respect to the variable and floating rate instruments
that may be acquired by the Money Market, Tax-Exempt Money Market and
Institutional Money Market Funds, the Adviser will consider the earning power,
cash flows and other liquidity ratios of the issuers and guarantors of such
instruments and, if the instrument is subject to a demand feature, will monitor
their financial status to meet payment on demand. In determining average
weighted portfolio maturity, an instrument will usually be deemed to have a
maturity equal to the longer of the period remaining to the next interest rate
adjustment or the time the Fund involved can recover payment of principal as
specified in the instrument. Variable U.S. Government obligations held by a
Fund, however, will be deemed to have maturities equal to the period remaining
until the next interest rate adjustment.
The variable and floating rate demand instruments that the Tax-Exempt Money
Market Fund may purchase include participations in municipal obligations
purchased from and owned by financial institutions, primarily banks.
Participation interests provide the Fund with a specified undivided interest (up
to 100%) in the underlying obligation and the right to demand payment of the
unpaid principal balance plus accrued interest on the participation interest
from the institution upon a specified number of days' notice, not to exceed
thirty days. Each participation interest is backed by an irrevocable letter of
credit or guarantee of a bank that the Adviser has determined meets the
prescribed quality standards for the Fund. The bank typically retains fees out
of the interest paid on the obligation for servicing the obligation, providing
the letter of credit and issuing the repurchase commitment.
Bank Obligations. The Money Market Fund may purchase bank obligations, such
as certificates of deposit, bankers' acceptances and time deposits, including
U.S. dollar-denominated instruments issued or supported by the credit of U.S. or
foreign banks or savings institutions having total assets at the time of
purchase in excess of $1 billion. Investments by the Fund in the obligations of
foreign banks and foreign branches of U.S. banks will not exceed 25% of the
value of the Fund's total assets at the time of investment. The Fund may also
make interest-bearing savings deposits in commercial and savings banks in
amounts not in excess of 5% of its total assets.
The Money Market Fund may acquire certain types of bank instruments issued
or supported by the credit of foreign banks or foreign branches of domestic
banks where the Adviser deems the instrument to present minimal credit risks.
Such instruments nevertheless entail risks that are different from those of
investments in domestic obligations of U.S. banks. Such risks include future
political and economic developments, the possible imposition of foreign
withholding taxes on interest income payable on such instruments, the possible
seizure or nationalization of foreign deposits or the adoption of other foreign
government restrictions which might adversely affect the payment of principal
and interest on such instruments. 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. Because the Fund invests in
securities backed by banks and other financial institutions, changes in the
credit quality of these institutions could cause losses to the Fund and affect
its share price.
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.
and Tennessee Valley Authority.
Obligations of certain agencies and instrumentalities of the U.S.
government, such as those of the Governmental National Mortgage Association, are
supported by the full faith and credit of the U.S. Treasury; others, such the
Export-Import Bank of the United States, are supported by the right of the
issuer to borrow from the Treasury; others, such as those of the Federal
National Mortgage Association, are supported by the discretionary authority of
the U.S. government to purchase the agency's obligations; still others, are
supported by only by the credit of the agency or instrumentality issuing the
obligation. No assurance can be given that the U.S. government would provide
financial support to U.S. government-sponsored agencies or instrumentalities if
it is not obligated to do so by law.
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.
Although substantially all of the instruments acquired by the U.S. Treasury
Money Market Fund and U.S. Government Money Market Fund will be U.S. government
obligations (or repurchase agreements collateralized by such obligations),
shares of the U.S. Treasury Money Market Fund and U.S. Government Money Market
Fund are not themselves issued or guaranteed by any government agency. U.S.
government obligations that have maturities in excess of thirteen months but
have variable or floating interest rates may be acquired by the Funds in
accordance with SEC rules.
Stripped U.S. Government Obligations and Government-Backed Trusts. The
Money Market Fund, U.S. Government Money Market Fund and Institutional Money
Market Fund may acquire U.S. government obligations and their unmatured interest
coupons which have been separated ("stripped") by their holder, typically a
custodian bank or investment brokerage firm. Having separated the interest
coupons from the underlying principal of the U.S. government obligations, the
holder will resell the stripped securities in custodial receipt programs with a
number of different names, including Treasury Income Growth Receipts ("TIGRs")
and Certificate of Accrual on Treasury Securities ("CATs"). The stripped
coupons are sold separately from the underlying principal, which is sold at a
deep discount because the buyer receives only the right to receive a future
fixed payment on the security and does not receive any rights to periodic
interest (cash) payments. Purchasers of stripped securities acquire, in effect,
discount obligations that are economically identical to the zero coupon
securities that the Treasury Department sells itself. The underlying U.S.
Treasury bonds and notes themselves are held in book-entry form at the Federal
Reserve Bank or, in the case of bearer securities (i.e., unregistered securities
which are owned ostensibly by the bearer or holder), in trust on behalf of the
owners. Counsel to the underwriters of these certificates or other evidences of
ownership of the U.S. Treasury securities have stated that, in their opinion,
purchasers of the stripped securities, such as the Funds, most likely will be
deemed the beneficial holders of the underlying U.S. government obligations for
federal tax and security purposes. The SEC staff believes that participations
in CATs and TIGRs and other similar trusts are not U.S. government securities.
The Treasury Department has also facilitated transfers of ownership of zero
coupon securities by accounting separately for the beneficial ownership of
particular interest coupon and principal payments on Treasury securities through
the Federal Reserve book-entry record-keeping system. The Federal Reserve
program as established by the Treasury Department is known as "STRIPS" or
"Separate Trading of Registered Interest and Principal of Securities." Under
the STRIPS program, a Fund will be able to have its beneficial ownership of zero
coupon securities recorded directly in the book-entry record-keeping system in
lieu of having to hold certificates or other evidences of ownership of the
underlying U.S. Treasury securities.
The Money Market Fund, U.S. Government Money Market Fund and Institutional
Money Market Fund may also invest in certificates issued by government-backed
trusts (such as TIGRs and CATs). Such certificates represent an undivided
fractional interest in the respective government-backed trust's assets. The SEC
staff believes that participation in CATs and TIGRs and other similar trusts are
not U.S. government securities. These participations are issued at a discount
to their "face value," and may exhibit greater price volatility than ordinary
debt securities because of the manner in which their principal and interest are
returned to investors. The U.S. Government Money Market Fund may also invest in
government-backed trusts which hold obligations of foreign governments that are
guaranteed or backed by the full faith and credit of the United States. The
assets of each government-backed trust consist of (i) a promissory note issued
by a foreign government (the "Note"), (ii) a guaranty by the U.S. Government,
acting through the Defense Security Assistance Agency of the Department of
Defense, of the due and punctual payment of 90% of all principal and interest
due on such Note and (iii) a beneficial interest in a government securities
trust holding U.S. Treasury bills, notes and other direct obligations of the
U.S. Treasury sufficient to provide the Trust with funds in an amount equal to
at least 10% of all principal and interest payments due on the Note. No more
than 35% of the value of a Fund's total assets will be invested in stripped
securities not purchased through the Federal Reserve's STRIPS program and
government-backed trusts.
Investment Companies. 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.
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.
Funding Agreements. The Money Market Fund may invest in short-term funding
agreements. A funding agreement is a contract between an issuer and a purchaser
that obligates the issuer to pay a guaranteed rate of interest on a principal
sum deposited by the purchaser. Funding agreements will also guarantee the
return of principal and may guarantee a stream of payments over time. A funding
agreement has a fixed maturity and may have either a fixed rate or variable
interest rate that is based on an index and guaranteed for a set time period.
Because there is no secondary market for these investments, any such funding
agreement purchased by the Money Market Fund will be regarded as illiquid.
Repurchase Agreements. Each Fund (except the Tax-Exempt Money Market 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 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 thirteen months, 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.
Restricted Securities. The Funds may invest up to 10% 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. It is possible that unregistered securities purchased by a Fund in
reliance upon Rule 144A under the Securities Act of 1933 could have the effect
of increasing the level of the Fund's illiquidity to the extent that qualified
institutional buyers become, for a period, uninterested in purchasing these
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.
Reverse Repurchase Agreements. 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 a 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 a Fund may
decline below the price of the securities it is obligated to repurchase.
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 of the Fund," or any combination thereof. Such loans will not be made,
if, as a result, the aggregate of all outstanding loans of the Fund exceeds 30%
of the value of its total assets. 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 to be of
good standing and when, in the Adviser's 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.
Other Investment Considerations - Tax-Exempt Money Market Fund.
- ---------------------------------------------------------------
Municipal Obligations which may be acquired by the Tax-Exempt Money Market
Fund include debt obligations issued by governmental entities to obtain funds
for various public purposes, including the construction of a wide range of
public facilities, the refunding of outstanding obligations, the payment of
general operating expenses and the extension of loans to public institutions and
facilities.
Opinions relating to the validity of municipal obligations and to the
exemption of interest thereon from federal income tax are rendered by bond
counsel to the respective issue at the time of issuance. Neither the Fund nor
the Adviser will review the proceedings relating to the issuance of municipal
obligations or the basis for such opinions.
The two principal classifications of municipal obligations which may be
held by the Tax-Exempt Money Market Fund are General Obligation securities and
Revenue securities. The Fund may also acquire Moral Obligation securities.
"Moral Obligation" securities are normally issued by special purpose
authorities. If the issuer of Moral Obligation securities is unable to meet its
debt service obligations from current revenues, it may draw on a reserve fund,
the restoration of which is a moral commitment but not a legal obligation of the
state or municipality which created the issue.
There are, of course, variations in the quality of municipal obligations
both within a particular classification and between classifications, and the
yields on municipal obligations depend upon a variety of factors, including
general money market conditions, the financial condition of the issuer, general
conditions of the municipal bond market, the size of a particular offering, the
maturity of the obligation and the rating of the issue. The ratings of NRSROs
represent their opinions as to the quality of municipal obligations. It should
be emphasized, however, that ratings are general and are not absolute standards
of quality, and municipal obligations with the same maturity, interest rate and
rating may have different yields while municipal obligations of the same
maturity and interest rate with different ratings may have the same yield.
The payment of principal and interest on most securities purchased by the
Tax-Exempt Money Market Fund will depend upon the ability of the issuers to meet
their obligations. An issuer's obligations under its municipal obligations 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 or upon the ability of
municipalities to levy taxes. The power or ability of an issuer to meet its
obligations for the payment of interest on, and principal of, its municipal
obligations may be materially adversely affected by litigation or other
conditions.
Certain of the municipal obligations held by the Tax-Exempt Money Market
Fund may be insured at the time of issuance as to the timely payment of
principal and interest. The insurance policies will usually be obtained by the
issuer of the municipal obligation at the time of its original issuance. In the
event that the issuer defaults on interest or principal payment, the insurer
will be notified and will be required to make payment to the bondholders. There
is, however, no guarantee that the insurer will meet its obligations. In
addition, such insurance will not protect against market fluctuations caused by
changes in interest rates and other factors. The Tax-Exempt Money Market Fund
may, from time to time, invest more than 25% of its assets in municipal
obligations covered by insurance policies.
Municipal obligations acquired by the Tax-Exempt Money Market Fund may
include short-term General Obligation Notes, Tax Anticipation Notes, Bond
Anticipation Notes, Revenue Anticipation Notes, Tax-Exempt Commercial Paper,
Construction Loan Notes and other forms of short-term tax-exempt loans. Such
instruments are issued with a short-term maturity in anticipation of the receipt
of tax funds, the proceeds of bond placements or other revenues. In addition,
the Fund may invest in bonds and other types of tax-exempt instruments provided
they have remaining maturities of thirteen months or less at the time of
purchase.
Private activity bonds (e.g., bonds issued by industrial development
authorities) that are issued by or on behalf of public authorities to finance
various privately operated facilities are included within the term "municipal
obligations" if the interest paid thereon is exempt (subject to federal
alternative minimum tax) from federal income tax. (The Fund, however, does not
currently intend to acquire private activity bonds that are subject to the
federal alternative minimum tax.) Private activity bonds are in most cases
Revenue securities and are not payable from the unrestricted revenues of the
issuer. The credit quality of such bonds is usually directly related to the
credit standing of the corporate user of the facility involved. Private
activity bonds may be issued to obtain funds to provide privately operated
housing facilities, pollution control facilities, convention or trade show
facilities, mass transit, airport, port or parking facilities and certain local
facilities for water supply, gas, electricity or sewage or solid waste disposal.
Private activity bonds are also issued on behalf of privately held or publicly
owned corporations in the financing of commercial or industrial facilities.
State and local governments are authorized in most states to issue private
activity bonds for such purposes in order to encourage corporations to locate
within their communities. The principal and interest on these obligations may
be payable from the general revenues of the users of such facilities.
From time to time, proposals have been introduced before Congress for the
purpose of restricting or eliminating the federal income tax exemption for
interest on municipal obligations. For example, under the Tax Reform Act of
1986, interest on certain private activity bonds must be included in an
investor's alternative minimum taxable income, and corporate investors must
include all tax-exempt interest in their federal alternative minimum taxable
income. The Company cannot, of course, predict what legislation, if any, may be
proposed in the future as regards the income tax status of interest on municipal
obligations, or which proposals, if any, might be enacted. Such proposals,
while pending or if enacted, might materially and adversely affect the
availability of municipal obligations for investment by the Tax-Exempt Money
Market Fund and the liquidity and value of the Fund's portfolio. In such an
event, the Company would reevaluate the Fund's investment objective and policies
and consider possible changes in its structure or possible dissolution.
Municipal obligations purchased by the Fund may be backed by letters of
credit issued by foreign and domestic banks and other financial institutions.
Such letters of credit are not necessarily subject to federal deposit insurance
and adverse developments in the banking industry could have a negative effect on
the credit quality of the Fund's portfolio securities and its ability to
maintain a stable net asset value and share price. Letters of credit issued by
foreign banks, like other obligations of foreign banks, may involve certain
risks in addition to those of domestic obligations. Because the Fund invests in
securities backed by banks and other financial institutions, changes in the
credit facility of these institutions could cause losses to the Fund and affect
its share price.
Municipal obligations purchased by the Fund may include variable and
floating rate instruments issued by industrial development authorities and other
governmental entities. If such instruments are unrated, they will be determined
by the Fund's Adviser (under the supervision of the Board of Directors) to be of
comparable quality at the time of purchase to First Tier Eligible Securities.
While there may be no active secondary market with respect to a particular
variable or floating rate demand instrument purchased by the Fund, the Fund may
(at any time or during specified periods not exceeding thirteen months,
depending upon the instrument involved) demand payment in full of the principal
of the instrument and may re-sell the instrument to a third party. The absence
of such an active secondary market, however, could make it difficult for the
Fund to dispose of a variable or floating rate demand instrument if the issuer
defaulted on its payment obligation or during periods that the Fund is not
entitled to exercise its demand rights, and the Fund could, for these or other
reasons, suffer a loss with respect to such instruments.
Although the Tax-Exempt Money Market Fund does not presently intend to do
so on a regular basis, it may invest more than 25% of its total assets in
municipal obligations, the issuers of which are located in the same state or the
interest on which is paid solely from revenues of similar projects if such
investment is deemed necessary or appropriate by the Adviser. To the extent
that the Fund's assets are concentrated in municipal obligations payable from
revenues on similar projects or issued by issuers in the same state, the Fund
will be subject to the peculiar economic, political and business risks
represented by the laws and economic conditions relating to such states and
projects to a greater extent than it would be if the Fund's assets were not so
concentrated. Furthermore, payment of municipal obligations of certain projects
may be secured by mortgages or deeds of trust. In the event of a default,
enforcement of the mortgages or deeds of trust will be subject to statutory
enforcement procedures and limitations, including rights of redemption and
limitations on obtaining deficiency judgements. In the event of a foreclosure,
collection of the proceeds of the foreclosure may be delayed and the amount of
proceeds from the foreclosure may not be sufficient to pay the principal of and
accrued interest on the defaulted municipal obligations.
When-Issued Purchases and Forward Commitments. The Tax-Exempt Money Market
Fund may purchase securities on a "when-issued" or "forward commitment" basis.
These transactions, which involve a commitment by the Fund to purchase
particular securities with payment and delivery taking place beyond the normal
settlement date, permit the Fund to lock in a price or yield on a security it
intends to purchase, regardless of future changes in interest rates. When-
issued and forward commitment transactions involve the risk, however, that the
price or yield obtained in a transaction (and therefore the value of the
security) may be less favorable than the price or yield (and therefore the value
of the security) available in the market when the securities delivery takes
place. The Fund expects that its when- issued purchases and forward commitments
will not exceed 25% of the value of its assets absent unusual market conditions,
and that a forward commitment or commitment to purchase when-issued securities
will not exceed forty-five days. The Fund does not intend to engage in when-
issued purchases and forward commitments for speculative purposes but only in
furtherance of its investment objective.
When the Tax-Exempt Money Market Fund agrees to purchase securities on a
when-issued or forward commitment basis, the 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 separate 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 the 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 the 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 forward commitments and commitments to purchase
when-issued securities ever exceeded 25% of the value of its assets.
The Tax-Exempt Money Market Fund will purchase securities on a when-issued
or forward commitment basis only with the intention of completing the
transaction and actually purchasing the securities. If deemed advisable as a
matter of investment strategy, however, the 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 taxable capital gain or loss.
When the Tax-Exempt Money Market Fund engages in when-issued and forward
commitment transactions, it relies on the other party to consummate the trade.
Failure of such party to do so may result in the Fund's 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 market value of
the Tax-Exempt Money Market 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.
Stand-By Commitments. The Tax-Exempt Money Market Fund may acquire "stand-
by commitments" with respect to municipal obligations held in its portfolio.
Under a stand-by commitment, a dealer or bank agrees to purchase at the Fund's
option specified municipal obligations at a specified price. Stand-by
commitments may be exercisable by the Fund at any time before the maturity of
the underlying municipal obligations and may be sold, transferred or assigned
only with the instruments involved.
The amount payable to the Fund upon its exercise of a stand-by commitment
is normally (i) the Fund's acquisition cost of the municipal obligations
(excluding any accrued interest which the Fund paid on their acquisition), less
any amortized market premium or plus any amortized market or original issue
discount during the period the Fund owned the securities, plus (ii) all interest
accrued on the securities since the last interest payment date during that
period. A "stand-by commitment" may be sold, transferred or assigned by the
Fund only with the instrument involved.
The Fund expects that stand-by commitments will generally be available
without the payment of any direct or indirect consideration. However, if
necessary or advisable, the Fund may pay for a stand-by commitment either
separately in cash or by paying a higher price for portfolio securities which
are acquired subject to the commitment (thus reducing the yield to maturity
otherwise available for the same securities). Where the Fund has paid any
consideration directly or indirectly for a stand-by commitment, its cost would
be reflected as unrealized loss for the period during which the commitment was
held by the Fund and will be reflected in realized gain or loss when the
commitment is exercised or expires. The total amount paid in either manner for
outstanding stand-by commitments held by the Fund will not exceed 1/2 of 1% of
the value of its total assets calculated immediately after each stand-by
commitment is acquired.
The Fund intends to enter into stand-by commitments only with dealers,
banks and broker-dealers which, in the Adviser's opinion, present minimal credit
risks. The Fund's reliances upon the credit of those dealers, banks and
broker/dealers is secured by the value of the underlying Municipal Obligations
that are subject to a commitment.
The Fund would acquire stand-by commitments solely to facilitate portfolio
liquidity and does not intend to exercise its rights thereunder for trading
purposes. The acquisition of a stand-by commitment will not affect the
valuation or assumed maturity of the underlying municipal obligations which will
continue to be valued in accordance with the ordinary method of valuation
employed by the Fund. Stand-by commitments acquired by the Fund would be valued
at zero in determining net asset value where the Fund paid any consideration
directly or indirectly for a stand-by commitment; its cost would be reflected as
unrealized depreciation for the period in which the commitment was held by the
Fund.
During the current fiscal year, the Adviser expects that not more than 5%
of the net assets of the Tax-Exempt Money Market Fund will be invested at any
time in a particular class of taxable obligations described in the Prospectuses.
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, 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
obligations 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. 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 its 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 a Fund's total assets at the time of
such borrowing. No Fund will 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 a Fund's investment practices described in this SAI or in its Prospectus
are not deemed to be pledged for purposes of this limitation.
8. 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.
9. 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.
In addition, no Fund may:
10.
guaranteed by the U.S. government, its agencies or instrumentalities ("U.S.
government securities")) 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.
In accordance with current SEC regulations, the Money Market Fund and
Institutional Money Market Fund intend (as a matter of nonfundamental policy) to
limit investments in the securities of any single issuer (other than U.S.
government securities, certain fully collateralized repurchase agreements,
securities with certain guarantees and, under certain circumstances, securities
of certain money market funds) to not more than 5% of the Fund's total assets,
provided that the Fund may invest up to 25% of its total assets in the
securities of any one issuer for a period of up to three business days.
Compliance with the diversification requirements of SEC Rule 2a-7 will be deemed
to be compliance with the fundamental diversification restriction above.
11. 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) there is no limitation with respect to (i)
instruments issued or guaranteed by the United States, any state, territory or
possession of the United States, the District of Columbia or any of their
authorities, agencies, instrumentalities or political subdivisions; (ii)
instruments issued by domestic branches of U.S. banks; and (iii) repurchase
agreements secured by the instruments described in clauses (i) and (ii); (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.
In addition, the Tax-Exempt Money Market Fund may not:
12. Invest less than 80% of its net assets in securities the interest on which
is exempt from federal income tax, except during defensive periods or during
periods of unusual market conditions. For purposes of this fundamental policy,
Municipal Obligations that are subject to federal alternative minimum income tax
are considered taxable.
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
a Fund's portfolio securities will not constitute a violation of such
limitation. If due to market fluctuations or other reasons, the amount of
borrowings exceed the limit stated above, a Fund will promptly reduce such
amount.
Although the foregoing investment limitations would permit the Funds to
invest in options, futures contracts and options on future contracts, the Funds,
during the current fiscal year, do not intend to trade in such instruments.
Prior to making any such investments, the Funds would notify their shareowners
and add appropriate descriptions concerning the instruments to the Prospectuses
and this SAI.
NET ASSET VALUE
The net asset value per share of each Fund described in this SAI is
calculated separately by adding the value of all portfolio securities and other
assets belonging to the particular Fund, subtracting the liabilities charged to
the Fund, and dividing the result by the number of outstanding shares of that
Fund. 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. Assets
belonging to a particular Fund are charged with the direct liabilities of that
Fund and with a share of the general liabilities of the Company which are
normally allocated in proportion to the relative net asset values of all of the
Company's investment portfolios at the time of allocation. 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.
The Company uses the amortized cost method of valuation to value each
Fund's portfolio securities, pursuant to which an instrument is valued at its
cost initially and thereafter a constant amortization to maturity of any
discount or premium is assumed, regardless of the impact of fluctuating interest
rates on the market value of the instrument. This method may result in periods
during which value, as determined by amortized cost, is higher or lower than the
price a Fund would receive if it sold the instrument. The market value of
portfolio securities held by a Fund can be expected to vary inversely with
changes in prevailing interest rates.
Each Fund attempts to maintain a dollar-weighted average portfolio maturity
appropriate to its objective of maintaining a stable net asset value per share.
In this regard, except for securities subject to repurchase agreements, each
Fund will neither purchase a security deemed to have a remaining maturity of
more than thirteen months within the meaning of the 1940 Act nor maintain a
dollar-weighted average maturity which exceeds 90 days. The Board of Directors
has also established procedures that are intended to stabilize the net asset
value per share of each Fund for purposes of sales and redemptions at $1.00.
These procedures include the determination, at such intervals as the Directors
deem appropriate, of the extent, if any, to which the net asset value per share
of each Fund calculated by using available market quotations deviates from $1.00
per share. In the event such deviation exceeds one-half of one percent, the
Board will promptly consider what action, if any, should be initiated. If the
Board believes that the extent of any deviation from a $1.00 amortized cost
price per share may result in material dilution or other unfair results to new
or existing investors, it has agreed to take such steps as it considers
appropriate to eliminate or reduce to the extent reasonably practicable any such
dilution or unfair results. These steps may include selling portfolio
instruments prior to maturity; shortening the average portfolio maturity;
withholding or reducing dividends; redeeming shares in kind; reducing the number
of outstanding shares without monetary consideration; or utilizing a net asset
value per share determined by using available market quotations.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares of each Fund described in this SAI are sold without a sales charge
imposed by the Company, although Shareowner Organizations may be paid by the
Company for advertising, distribution, or shareowner services. Depending on the
terms of the particular account, Shareowner Organizations 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 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.
Investors redeeming shares by check generally will be subject to the same
rules and regulations that the transfer agent applies to checking accounts,
although the election of this privilege creates only a shareowner-transfer agent
relationship with the transfer agent. Because dividends on each Fund accrue
daily, checks may not be used to close an account, as a small balance is likely
to result.
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's Articles of Incorporation permit a Fund to redeem an account
involuntarily, upon sixty days' notice, if redemptions cause the account's net
asset value to remain at less than $1000.
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' Prospectuses under
"Redemption of Shares" and in the SAI under "Net Asset Value," the Company 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 Prospectuses from time to time.
Exchange Privilege
- ------------------
By use of the exchange privilege, shareowners of the Funds 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. Shares of any Money Market Fund may be exchanged for shares of another
Money Market Fund. 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.
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 Company's customary policies for accepting investments. Exchanges of shares
will be available only in states where they may legally be made.
For federal income tax purposes, share exchanges are treated as sales on which
the shareowner may realize a gain or loss, depending upon whether the value of
the shares to be given up in exchange is more or less than the basis in such
shares at the time of the exchange. Investors exercising the exchange privilege
should request and review the prospectus for the shares to be acquired in the
exchange prior to making an exchange.
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
the Prospectuses. For further information about this form of payment, contact
the Firstar Funds Center at 414-287-3710. 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 receives 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.
ADDITIONAL INFORMATION REGARDING SHAREOWNER SERVICES
Periodic Investment Plan
- ------------------------
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 Fund 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.
ConvertiFundR Transactions
- --------------------------
The Funds permit shareowners to effect ConvertiFundR transactions, an
automated method by which a shareowner may invest proceeds from one account to
another account of the Firstar family of funds. Such proceeds include dividend
distributions, capital gain distributions and systematic withdrawals.
ConvertiFundR 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.
Investments in the non-money market funds will be subject to the applicable
sales charges.
Systematic Withdrawal Plan
- --------------------------
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.
DESCRIPTION OF SHARES
The Company's Articles of Incorporation authorize the Board of Directors to
issue up to 150 billion full and fractional shares of common stock, $.0001 par
value per share that shall be divided into thirty classes (each a designated
"class" or "fund"). Each class of the Money Market Funds is further divided
into two series designated as Institutional Shares and Retail A Shares (each, a
"Series") and, with respect to the Funds, consists of shares set forth next to
its name in the table below:
Class-Series of Fund in Which Stock Number of Authorized
Common Stock Represents Interest Shares in Each Initial
- --------------- ------------------- Series
--------------------
1-Institutional Money Market 5 billion
1-A 5 billion
2-Institutional Tax-Exempt Money Market 5 billion
2-A 5 billion
3-Institutional U.S. Government Money Market 5 billion
3-A 5 billion
4-Institutional Institutional Money Market 5 billion
4-A 5 billion
5-Institutional U.S. Treasury Money Market 5 billion
5-A 5 billion
Currently, only Series A Shares of the Money Market Funds have been offered
by the Company. The Board of Directors has also authorized the issuance of
classes 6 through 18 common stock representing interests in thirteen other
separate investment portfolios which are described in a separate statement of
additional information. The remaining authorized shares have been classified by
the Board into twelve 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 attributable to the
operation of a particular series, 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 holders of a majority of the
outstanding shares 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 each 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.
For the Tax-Exempt Money Market Fund to pay tax-exempt dividends for any
taxable year, at least 50% of the aggregate value of the Fund's assets at the
close of each quarter of the Fund's taxable year must consist of exempt-interest
obligations.
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) Principal Occupations During Past 5
Name, Address & Age held with the Years and Other Affiliations
Company
James M. Wade Vice President and Chief Financial
2802 Wind Bluff Board Officer, Johnson Controls, Inc. (a
Circle controls manufacturing company)
Wilmington, NC 28409
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 53224- manufacturing company) since January
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 Officer of Weirton Steel since 1995;
Drive Director of Weirton Steel since
Weirton, WV 26062- 1993; Executive Vice President and
4989 Chief Financial Officer, Weirton
Age: 54 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<F1> Director
Heatherwood Vice President - Finance, Chief
Court Rexnord Corporation (an equipment
Elm Grove, WI 53122 manufacturing company), 1988 - 1992;
Age: 68 Vice President - Finance and
Administration, Rexnord Inc., 1982 -
1988; Officer and Director of
several Rexnord subsidiaries until
1992.
Mary Ellen Stanek<F1> Director,
777 E. Wisconsin President and Chief Executive Officer, FIRMCO
Avenue, Treasurer since 1998; Director of FIRMCO
Suite 800 since 1992 and Director Fixed
Milwaukee, WI 53202 Income Securities of FIRMCO since
Age: 42 1990.
W.
Philadelphia National Biddle & Reath LLP.
Bank Building
1345 Chestnut Street
Philadelphia, PA
19107
Age: 55
Laura J. Rauman Vice President Vice President of Operations,
777 E. Wisconsin FIRMCO since 1995; Senior Auditor,
Avenue, Price Waterhouse, LLP, prior
Suite 800 thereto.
Milwaukee, WI 53202
Age: 30
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 Company, WICOR Energy, FieldTech
Avenue and Vice President of WICOR, Inc.
Milwaukee, WI 53202 since 1998; President and CEO of
Age: 54 Ameritech- Wisconsin (formerly
Wisconsin Bell Communications)
1993-1997; Trustee of Roundy Foods.
<F1> Messrs. Haase, Roy 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 FROM
RETIREMENT ESTIMATED COMPANY
AGGREGATE BENEFITS ANNUAL AND FUND
NAME OF COMPENSATION ACCRUED AS BENEFITS COMPLEX<F1>
PERSON/ FROM THE PART OF FUND UPON PAID TO
POSITION COMPANY EXPENSES RETIREMENT 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. $0 $0 $15,000
Remmel
Director
Richard K. $15,000 $0 $0 $15,000
Riederer
Director
Charles R. $15,000 $0 $0 $15,000
Roy
Director
Bronson J. $3,500 $0 $0 $3,500
Haase
Director
<F1> The "Fund Complex" includes only the Company. The Company is comprised of
18 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 became the investment adviser to the Funds as of February 3, 1992.
Prior thereto, investment advisory services were provided by Firstar Trust
Services ("Firstar Trust"), an affiliate of the Adviser. Firstar Corporation
has guaranteed all obligations incurred by FIRMCO in connection with its
Investment Advisory Agreement with 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 additional
advisory fees otherwise payable by the Funds.
For the services provided and expenses assumed by the Adviser under its
Investment Advisory Agreement for the fiscal years ended October 31, 1998, 1997
and 1996, the Adviser was paid and waived advisory fees as follows:
Net Advisory Fees Paid (Advisory Fees Waived)
----------------------------------------------
<TABLE>
<CAPTIONS>
1998 1997 1996
<C> <C> <C> <C>
Money Market Fund $809,190 (493,088) $770,065 (401,147) $702,547 (266,408)
U.S. Treasury Money Market Fund 313,106 (74,162) 264,236 (69,017) 228,672 (84,582)
U.S. Government Money Market Fund 904,397 (81,346) 933,618 (50,816) 886,823 (74,691)
Tax-Exempt Money Market Fund 454,275 (88,110) 384,622 (72,448) 307,395 (88,415)
Institutional Money Market Fund 3,552,582 (2,555,949) 2,758,246 (2,045,957) 2,207,362 (1,670,748)
</TABLE>
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 Company in
connection with the performance of such Agreement, except a loss resulting from
a breach of fiduciary duty with respect to the receipt of compensation 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.
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 vs. 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 are subject
to such banking laws and regulations.
The Adviser 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 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.
Shares of the Funds are not bank deposits, are not insured by the FDIC or
any other governmental agency, are not endorsed, insured or guaranteed by
Firstar Trust or FIRMCO and are not obligations of or otherwise supported by
Firstar Trust or FIRMCO.
Administration and Distribution Services
- -----------------------------------------
Firstar Trust became a Co-Administrator to the Funds on September 1, 1994,
and assigned its rights and obligations to Firstar Mutual Fund Services, LLC on
October 1, 1998, and B. C. Ziegler and Company ("Ziegler") became a Co-
Administrator to the Funds on January 1, 1995. 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 Prospectus, 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.
The Distributor provides distribution services for each Fund as described
in the Funds' Prospectus pursuant to a Distribution Agreement with the Funds
under which the Distributor, as agent, sells shares of each Fund on a continuous
basis. The Distributor has agreed to use its best efforts to solicit orders for
the sale of shares, although it is not obliged to sell any particular amount of
shares. The Distributor causes expenses to be paid for the cost of printing and
distributing prospectuses to persons who are not shareowners of the Funds
(excluding preparation and printing expenses necessary for the continued
registration of the Funds' shares) and of printing and distributing all sales
literature. For the fiscal year ended October 31, 1998, 1997, and 1996 Ziegler
received no fees for its distribution services.
For the fiscal years ended October 31, 1998, 1997 and 1996, the following
administrative fees were paid and waived:
Net Administration Fees Paid (Administration Fees Waived)
---------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996
<C> <C> <C> <C>
Money Market Fund $99,437 (184,778) $92,516 (158,431) $73,082 (148,206)
U.S. Treasury Money Market Fund 29,747 (54,772) 25,971 (48,185) 29,446 (42,094)
U. S. Government Money Market Fund 75,209 (139,922) 77,457 (141,599) 84,282 (135,306)
Tax-Exempt Money Market Fund 41,065 (77,310) 35,787 (65,920) 37,207 (53,187)
Institutional Money Market Fund 286,889 (1,046,264) 199,081 (869,952) 205,168 (680,504)
</TABLE>
Shareowner Organizations (Money Market, U.S. Government Money Market, U.S.
Treasury Money Market and Tax-Exempt Money Market Funds)
As stated in the Funds' Prospectus, 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 Fund shares. 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 the 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, under the Distribution and Service Plan, Shareowner
Organizations may provide assistance (such as the forwarding of sales literature
and advertising to their customers) in connection with the distribution of Fund
shares.
The Funds' arrangements with Shareowner Organizations under the agreements
are governed by two Plans (a Service Plan and a Distribution and Service Plan),
which have been adopted by the Board of Directors. Because the Distribution and
Service Plan contemplates the provision of services related to the distribution
of Fund shares (in addition to support services), that Plan has 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 have benefited each Fund and its
shareowners as a way of allowing Shareowners Organizations to participate with
the Funds in the provision of support and distribution services to customers of
the Shareowner Organizations who own Fund shares. Any material amendment to the
arrangements with Shareowner Organizations under the 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 shares of the Fund involved. So
long as the Distribution and Service Plan is 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.
Shareowner Organizations, which are affiliated with the Adviser, pursuant
to the Service Plan received no fees for the fiscal years ended October 31,
1998, 1997 and 1996.
The Funds paid fees to Shareowner Organizations, none of which were
affiliated with the Adviser, pursuant to the Distribution and Service Plan for
the fiscal years ended October 31, 1998, 1997 and 1996 as follows:
Fees Paid to Non-Affliliated Shareowner Organizations
-----------------------------------------------------
1998 1997 1996
Money Market Fund $79,567 $61,140 $45,429
U.S. Government Money Market
Fund 1,205 218 501
Tax-Exempt Money Market Fund 1,203 366 140
Institutional Money Market 0 0 0
Fund
U.S. Treasury Money Market 102 0 0
Fund
CUSTODIAN, TRANSFER AGENT, DISBURSING AGENT AND ACCOUNTING SERVICES AGENT
Firstar Bank Milwaukee, N.A. serves as custodian of 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.
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 $20.00 per shareowner account with an annual minimum of
$12,000 per Fund, plus certain other transaction charges and reimbursement for
expenses.
In addition, 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 annual
rate of $25,000 on the first $40 million of each Fund's assets, 0.01% on the
next $200 million of such assets, and 0.005% on the balance, plus out-of-pocket
expenses, including pricing expenses. The annual fee for the Institutional
Money Market Fund is capped at $55,000.
EXPENSES
Operating expenses of the Funds include taxes, interest, fees and expenses
of Directors and officers, SEC fees, state securities qualification fees,
advisory fees, administrative fees, Shareowner Organization fees, 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, membership fees in the Investment Company Institute, costs of
shareowner reports and meetings and any extraordinary expenses. The Funds also
pay any brokerage fees, commissions and other transaction charges (if any)
incurred in connection with the purchase and sale of portfolio securities.
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS
PricewaterhouseCoopers LLP, independent accountants, serve as auditors for
the Company. The Company's Annual Report to Shareholders with respect to the
Funds for the fiscal year ended October 31, 1998 has been filed with the SEC.
The financial statements and notes thereto in such Annual Report (the "Financial
Statements") are incorporated by reference into this Statement of Additional
Information. The Financial Statements in such Annual Report have been
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
COUNSEL
Drinker Biddle & Reath LLP (of which Mr. McConnel, Secretary of the
Company, is a partner), Philadelphia National Bank Building, 1345 Chestnut
Street, Philadelphia, Pennsylvania 19107, serve as counsel to the Company and
will pass upon the legality of the shares offered by the Funds' Prospectuses.
YIELD AND OTHER PERFORMANCE INFORMATION
From time to time each Fund may quote its "yield" and "effective yield,"
and the Tax-Exempt Money Market Fund may also quote its "tax-equivalent yield,"
in advertisements or in communications to shareowners. Each yield figure is
based on historical earnings and is not intended to indicate future performance.
The "yield" of a Fund refers to the income generated by an investment in the
Fund over a seven-day period identified in the advertisement. This income is
then "annualized." That is, the amount of income generated by the investment
during that week is assumed to be generated each week over a 52-week period and
is shown as a percentage of the investment. The "effective yield" is calculated
similarly but, when annualized, the income earned by an investment in the Fund
is assumed to be reinvested. The "effective yield" will be slightly higher than
the "yield" because of the compounding effect of this assumed reinvestment. The
"yield" and "effective yield" of each Fund are calculated according to formulas
prescribed by the SEC. The standardized seven-day yield for each Fund is
computed separately by determining the net change, exclusive of capital changes
and income other than investment income, in the value of a hypothetical pre-
existing account in the particular Fund involved having a balance of one share
at the beginning of the period, dividing the net change in account value by the
value of the account at the beginning of the base period to obtain the base
period return, and multiplying the base period return by (365/7). The net
change in the value of an account in a Fund includes the value of additional
shares purchased with dividends from the original share, and dividends declared
on both the original share and any such additional shares and all fees, other
than nonrecurring account sales charges, that are charged to all shareowner
accounts in proportion to the length of the base period and the Fund's average
account size. The capital changes to be excluded from the calculation of the
net change in account value are realized gains and losses from the sale of
securities and unrealized appreciation and depreciation. The effective
annualized yield for each Fund is computed by compounding a particular Fund's
unannualized base period return (calculated as above) by adding 1 to the base
period return, raising the sum to a power equal to 365 divided by 7, and
subtracting one from the result. The fees which may be imposed by financial
intermediaries directly on their customers for cash management services are not
reflected in the Company's calculations of yields for the Funds.
The "tax-equivalent yield" of the Tax-Exempt Money Market Fund shows the
level of taxable yield needed to produce an after-tax equivalent to the Fund's
tax-free yield. This is done by increasing the Fund's yield (calculated as
above) by the amount necessary to reflect the payment of federal income tax at a
stated tax rate. The Fund's standardized "tax-equivalent yield" is computed by:
(a) dividing the portion of the Fund's yield (as calculated above) that is
exempt from federal income tax by one minus a stated federal income tax rate;
and (b) adding the figure resulting from (a) above to that portion, if any, of
the Fund's yield that is not exempt from federal income tax. The "tax-
equivalent yield" will always be higher than the "yield" of the Tax-Exempt Money
Market Fund.
Each Fund may compute "average annual total return." Average annual total
return reflects the average annual percentage change in value of an investment
in shares of a series over the measuring period. Each Fund may compute
aggregate total return, which reflects the total percentage change in value over
the measuring period.
Additionally, the total returns and yields of the Funds may be compared in
such advertisements or reports to shareowners to those of other mutual funds
with similar investment objectives and to other relevant indices or to rankings
prepared by independent services or other financial or industry publications
that monitor the performance of mutual funds. For example, the yields of the
Money Market Fund and the Institutional Money Market Fund may be compared to the
Donoghue's Money Fund Average, the yields of the U.S. Treasury Money Market Fund
and the U.S. Government Money Market Fund may be compared to the Donoghue's
Government Money Fund Average, and the yields of the Tax-Exempt Money Market
Fund may be compared to the Donoghue's Tax-Free Money Fund Average, which are
averages compiled by IBC/Donoghue's Money Fund Report, a widely recognized
independent publication that monitors the performance of money market funds. In
addition, the yields of the Money Market, Institutional Money Market, U.S.
Treasury Money Market and the U.S. Government Money Market Funds may be compared
to the average yields reported by the Bank Rate Monitor for money market deposit
accounts offered by the 50 leading banks and thrift institutions in the top five
standard metropolitan statistical areas.
Yield data and total return as reported in national financial publications
including Money Magazine, Forbes, Barron's, Morningstar Mutual Funds, The Wall
Street Journal, Mutual Funds Magazine, Kiplingers Personal Finance and The New
York Times, or in publications of a local or regional nature, may also be used
in comparing the yields of the Funds.
Since performance fluctuates, performance data cannot necessarily be used
to compare an investment in a Fund's 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 and yield are generally functions of the kind and quality of the
instruments held in a portfolio, portfolio maturity, operating expenses, and
market conditions. Any fees charged by Shareowner Organizations directly to
their customer accounts in connection with investments in shares of the Funds
will not be included in the Funds' calculations of yield and total return.
The current yield for each of the Funds may be obtained by calling Firstar
Mutual Fund Services, LLC at 1-800-228-1024. For the seven-day period ended
October 31, 1998, the annualized yields of the Money Market Fund, Institutional
Money Market Fund, U.S. Treasury Money Market Fund, U.S. Government Money Market
Fund and Tax-Exempt Money Market Fund were 4.85%, 5.08%, 4.14%, 4.53% and 2.62%,
respectively. Without fees waived by the Adviser and Co-Administrators during
such period, the annualized yields of such Funds would have been 4.61%, 4.79%,
3.99%, 4.43% and 2.48%, respectively. For the seven-day period ended October
31, 1998, the effective yields of the Money Market Fund, Institutional Money
Market Fund, U.S. Treasury Money Market Fund, U.S. Government Money Market Fund
and Tax-Exempt Money Market Fund were 4.97%, 5.21%, 4.22%, 4.63% and 2.66%,
respectively. Without fees waived by the Adviser and Co-Administrators during
such period, the effective yields of such Funds would have been 4.73%, 4.92%,
4.07%, 4.53% and 2.52%, respectively. For the seven-day period ended October
31, 1998, the tax-equivalent yield of the Tax-Exempt Money Market Fund was 3.86%
(assuming a federal income tax rate of 31%). Without fees waived by the Adviser
and Co-Administrators during such period, the tax-equivalent yield of such Fund
would have been 3.65%.
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 change 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 January 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: 69%; Tax-
Exempt Money Market Fund: 48%; U.S. Treasury Money Market Fund: 31%; U.S.
Government Money Market Fund: 68%; Growth and Income Fund: 67%; Short-Term Bond
Market Fund: 58%; Special Growth Fund: 73%; Bond IMMDEX- Fund: 72%; Equity Index
Fund: 75%; Balanced Income Fund: 74%, Balanced Growth Fund: 75%; Intermediate
Bond Market Fund: 81%; Growth Fund: 82%; Tax-Exempt Intermediate Bond Fund: 61%;
International Equity Fund: 84%; MicroCap Fund: 80%, and Emerging Growth Fund:
81%. 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.
APPENDIX A
COMMERCIAL PAPER RATINGS
A Standard & Poor's ("S&P") commercial paper rating is a current
assessment of the likelihood of timely payment of debt having an original
maturity of no more than 365 days. The 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 S&P 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 has 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 strongest 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 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
BankWatch:
"TBW-1" - This designation represents Thomson 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 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 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 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 has been 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 S&P 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" are of 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 changes 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. Securities are not meeting
obligations and are extremely speculative. "DDD" designates the highest
potential for recovery of amounts outstanding on any securities involved and "D"
represents the lowest potential for recovery.
To provide more detailed indications of credit quality, the Fitch IBCA
ratings from and including "AA" to "B" may be modified by the addition of a plus
(+) or minus (-) sign to show relative standing within these major rating
categories.
Thomson 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
BankWatch to non-investment grade long-term debt. Such issues are regarded as
having speculative characteristics regarding the likelihood of timely payment 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 rating reflects the liquidity concerns and market
access risks unique to notes due in three years or less. The following
summarizes the ratings used by Standard & Poor's Ratings Group 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 very strong
characteristics 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, with margins of
protection that 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 of margins of protection.
Fitch IBCA and Duff & Phelps use the short-term ratings described under
Commercial Paper Ratings for municipal notes.
xxxxxxx
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: December 18, 1998 /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: December 18, 1998 /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: December 18, 1998 /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: December 18, 1998 /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: December 18, 1998 /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: December 18, 1998 /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: December 18, 1998 /s/Bronson J. Haase
-------------------
Bronson J. Haase
xxxxxxxx
FIRSTAR FUNDS, INC.
CERTIFICATE OF SECRETARY
The following resolution was duly adopted by the Board of Directors of
Firstar Funds, Inc. on December 18, 1998 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: February 26, 1999
xxxxxxxxx
EXHIBIT INDEX
Exhibit No. Item
- ----------- ----
(a) (14) Amendment No. 13 to Articles of Incorporation filed February
17, 1999.
(e) (5) Form of Addendum No. 4 to the Distribution Agreement dated
February 26, 1999 between Registrant and B.C. Ziegler &
Company.
(g) (14) Assignment dated October 1, 1998 of Custodian Agreement
between Registrant and Firstar Trust Company.
(h) (39) Order Processing Agreement with Northern Trust Retirement
Consulting, L.L.C., dated February 1, 1998.
(h) (40) 403(b) Comprehensive Service Agreement with Universal
Pensions, Inc., dated May 4, 1998.
(h) (41) Assignment dated October 1, 1998 of Fund Accounting
Servicing Agreement between Registrant and Firstar Trust
Company.
(h) (42) Assignment dated October 1, 1998 of Co-Administration
Agreement between Registrant, B.C. Ziegler and Company and
Firstar Trust Company.
(h) (43) Assignment dated October 1, 1998 of the Shareholder
Servicing Agent Agreement between Registrant and Firstar
Trust Company.
(i) (1) Opinion of Drinker Biddle & Reath LLP.
(j) (1) Consent of Drinker Biddle & Reath LLP.
(j) (2) Consent of PricewaterhouseCoopers LLP.
(l) (4) Form of Purchase Agreement dated February 26, 1999 between
Registrant and B.C. Ziegler & Company.
(m) (2) Distribution and Services Plan for Retail B Shares.
(m) (3) Services Plan for Retail B Shares dated.
(n) (1) Financial Data Schedules
(o) (2) Amended and Restated Plan Pursuant to Rule 18f-3 for
Operation of a Multi-Series System.
xxxxxxxxx
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.
(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.
(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 incorporated 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.
(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.
(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.
(40) 403(b) Comprehensive Agreement with Universal Pensions, Inc.,
dated May 4, 1998.
(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.
(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.
(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.
(i) (1) Opinion of Drinker Biddle & Reath LLP.
(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 26, 1999 between
Registrant and B.C. Ziegler & Company.
(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.
(3) Services Plan for the Retail B Shares.
(n) Financial Data Schedules.
(o) (1) Amended and Restated Plan Pursuant to Rule 18f-3 for Operation of
a Multi-Series System is incorporated by reference to Exhibit
18(a) to Post-Effective Amendment No. 32.
(2) 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 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
<TABLE>
<CAPTION>
Position with
Firstar Investment
Research and Other Business Type of
Name Management Company Connections Business
- ----- ------------------- --------------- ---------
<C> <C> <C> <C>
John A. Becker Director Vice Chairman and
Chief Operating
Officer, Firstar Bank
Corporation, 777 E. Holding Co.
Wisconsin Avenue,
Milwaukee, WI 53201
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 President, Bank
Firstar Bank,
Milwaukee, N.A.
777 E. Wisconsin
Avenue, Milwaukee, WI
53202
</TABLE>
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.
HANSBERGER GLOBAL INVESTORS, INC.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Position with Other Business
Name and Principal Hansberger Global Connections and Type of
Business Address Investors, Inc. Address <F1> Business
- ------------------ ------------------- --------------- ---------
- --------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C>
Thomas L. Hansberger Chairman, CEO, President, Director, Mutual Fund
Director and Treasurer Schroder Korea Fund PLC
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 supplier
Riverwood International of paperboard packaging and
Corp. producer of coated unbleached
Atlanta, GA Kraft paperboard
- --------------------------------------------------------------------------------------------------------------------
Member & Chairman of Distributor electronically
the Board, McCarthy, of financial information
Crizanti & Maffel, Inc.
One Chase Manhattan Way
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, Crisanti &
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 & CEO, Holding Company
NCP Holding Company
- --------------------------------------------------------------------------------------------------------------------
Salah Al-Maousberji Director Director, Paper Manufacturer
Gulf Paper
Kuwait
- --------------------------------------------------------------------------------------------------------------------
President, Corporate Finance
Mashora Consulting
Services
- --------------------------------------------------------------------------------------------------------------------
Virgil Cumming Director Chief Investment Officer, Brokerage/Advisory
Smith Barney Inc.
New York, NY
- --------------------------------------------------------------------------------------------------------------------
James Everett Chaney Chief Investment Officer None
- --------------------------------------------------------------------------------------------------------------------
Kimberly Ann Scott Senior Vice President
and Chief Compliance
Officer None
- --------------------------------------------------------------------------------------------------------------------
J. Christopher Jackson Senior Vice President
and General Counsel None
- --------------------------------------------------------------------------------------------------------------------
Louretta Ann Reeves Director of Research None
- --------------------------------------------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<F1> Address of all individuals: 515 East Las Olas Blvd., Suite 1300, Fort
Lauderdale, FL 33301.
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 Offices with
Business Address with 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
- ----------------------------------------------------------------------------
D. A. Wallestad Senior Vice President - None
Acquisition
Chief Financial
Officer 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 - None
Bond Sales Control
- ----------------------------------------------------------------------------
Darrell P. Frank Vice President - None
Director of Strategic
Change
- ----------------------------------------------------------------------------
M.L. McBain Vice President - None
Equity Securities
- ----------------------------------------------------------------------------
James L. Brendemuehl Vice President - None
Managed 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, Philadelphia National Bank Building, 1345
Chestnut Street, Philadelphia, Pennsylvania 19107 (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).
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 certifies that it meets all the
requirements for effectiveness of this Registration Statement under Rule 485(b)
under the Securities Act and has duly caused this Post-Effective Amendment No.
36 to the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Philadelphia, and Commonwealth of
Pennsylvania, on the end day of March 1, 1999.
FIRSTAR FUNDS, INC.
Registrant
By /s/ Mary Ellen Stanek<F1>
-------------------------
Mary Ellen Stanek
Director, President & Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No. 36 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 March 1, 1999
(James M. Wade) Director
/s/ Mary Ellen Stanek Director, President, March 1, 1999
- ---------------------- Treasurer
(Mary Ellen Stanek)
<F1>Richard Riederer Director March 1, 1999
- ---------------------
(Richard Riederer)
<F1>Jerry Remmel Director March 1, 1999
- -----------------
(Jerry Remmel)
<F1>Glen R. Bomberger Director March 1, 1999
- ----------------------
(Glen R. Bomberger)
<F1>Charles R. Roy Director March 1, 1999
- -------------------
(Charles R. Roy)
<F1>Bronson J. Haase Director March 1, 1999
- ---------------------
(Bronson J. Haase)
<F1>By/s/ Mary Ellen Stanek March 1, 1999
----------------------
Mary Ellen Stanek
Attorney-in-fact
xxxxxxx
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: December 18, 1998 /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: December 18, 1998 /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: December 18, 1998 /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: December 18, 1998 /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: December 18, 1998 /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: December 18, 1998 /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: December 18, 1998 /s/Bronson J. Haase
-------------------
Bronson J. Haase
xxxxxxxx
FIRSTAR FUNDS, INC.
CERTIFICATE OF SECRETARY
The following resolution was duly adopted by the Board of Directors of
Firstar Funds, Inc. on December 18, 1998 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: February 26, 1999
EXHIBIT (A)(14)
ARTICLES OF AMENDMENT Stock(for profit)
- -----------------------------
Joan Ohlbaum Swirsky, Esquire <- Please indicate where you
DRINKER BIDDLE & REATH LLP would like the acknowledgement
PNB Building, 11th Floor copy of the filed document sent.
1345 Chestnut Street Please include complete name and
Philadelphia, PA 19107 mailing address.
- -----------------------------
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 February 24,
1999.
B. Amendment(s) adopted on September 17, 1998 (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 February 24, 1999
---------------------
(date)
/s/ Mary Ellen Stanek
---------------------
(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 17, 1998
---------------------------------------------------
WHEREAS, Article V of the Articles of Incorporation of the Corporation
provides that the aggregate number of shares which the Corporation shall have
authority to issue is one-hundred and fifty billion (150,000,000,000) shares of
Common Stock, which shall be divided into thirty (30) classes designated as
Classes 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20,
21, 22, 23, 24, 25, 26, 27, 28, 29 and 30, respectively (each, a "Class" and
collectively, the "Classes") and shall be designated as "Common Stock," and that
the par value of the shares of each of the Corporation's Classes of Common Stock
shall be $.0001 per share; and
WHEREAS, Article V of said Articles of Incorporation currently provides
that eighteen (18) Classes of Common Stock of the Corporation are divided into
two series designated as Institutional Series and Series A; and
WHEREAS, Article V of said Articles of Incorporation provides that the
Board of Directors of the Corporation may from time to time create one or more
additional series of shares in any or all of its thirty (30) Classes of Common
Stock and determine the number of shares of such series and the designations,
preferences, limitations and relative rights thereof, and may amend these
Articles of Incorporation to provide for such additional series, without
shareholder action, to the extent permitted by the Wisconsin Business
Corporation Law; and
WHEREAS, the Board of Directors of the Corporation have determined to
create an additional series designated as Series B in Classes 6 through 18 of
the eighteen (18) Classes of Common Stock of the Corporation as identified
below;
NOW, THEREFORE, BE IT RESOLVED that the Articles of Incorporation of the
Corporation shall be amended to include the following provisions relating to
Series B shares of the Corporation:
A. The Common Stock of the following Classes shall be divided into a third
series designated as Series B and shall consist of the number of shares set
forth next to its designation in the table below:
Class and Series Shares
---------------- ------
6-B 500,000,000
7-B 500,000,000
8-B 500,000,000
9-B 500,000,000
10-B 500,000,000
11-B 500,000,000
12-B 500,000,000
13-B 500,000,000
14-B 500,000,000
15-B 500,000,000
16-B 50,000,000
17-B 100,000,000
18-B 100,000,000
B. Series B shares of Classes 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17,
18, 19, 20, 21, 22, 23, 23, 24, 25, 26, 27, 28, 29 and 30 Common Stock of the
Corporation, whether now or hereafter created, shall, unless altered or revoked
as provided in Article V of the Articles of Incorporation of the Corporation,
have the following preferences, limitations and relative rights:
(1) Assets Belonging to a Class. Consideration that is received by the
Corporation for the issue or sale of shares of any Class of the Corporation's
Common Stock (a) shall not be commingled with the consideration that is received
by the Corporation for the issue or sale of shares of any other Class of Common
Stock; and (b) together with all assets in which such consideration is invested
and reinvested, income, earnings, profits and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation thereof, any such funds
or payments derived from any reinvestment of such proceeds in whatever form the
same may be, and any general assets of the Corporation not belonging to a
particular Class of Common Stock of the Corporation which the Board of Directors
may, in their sole discretion, allocate to a Class, shall irrevocably belong to
the Class of the Corporation's Common Stock with respect to which such assets,
payments or funds were received or allocated for all purposes, subject only to
the rights of creditors, and shall be so handled upon the books of account of
the Corporation. Such assets and the income, earnings, profits and proceeds
thereof, including any proceeds derived from the sale, exchange or liquidation
thereof, and any assets derived from any reinvestment of such proceeds in
whatever form, are herein referred to as "assets belonging to" such Class.
Shareholders of a Class of Common Stock of the Corporation shall have no right,
title or interest in or to the assets belonging to any Class of Common Stock
with a different numerical designation. Each Series of a Class of the
Corporation's Common Stock shall share equally, based on relative net asset
value or such other basis prescribed by the Securities and Exchange Commission,
with all Series of such Class in the assets belonging to such Class.
(2) Liabilities Belonging to a Class. The assets belonging to any Class of
the Corporation's Common Stock shall be charged with the direct liabilities in
respect of such Class and shall also be charged with such Class's proportionate
share of the general liabilities of the Corporation as determined by comparing
the assets belonging to such Class with the aggregate assets of the Corporation,
provided that the Board of Directors may, in their discretion, direct that any
one or more general liabilities of the Corporation be allocated to the
respective Classes of its Common Stock on a different basis. The liabilities so
charged to a Class of Common Stock are herein referred to as "liabilities
belonging to" such Class. Except as provided in the next sentence or otherwise
required or permitted by applicable law or any rule or order of the Securities
and Exchange Commission, each Series of a Class of the Corporation's Common
Stock shall bear a pro rata portion, based on relative net asset value or such
other method prescribed by the Securities and Exchange Commission, of the
"liabilities belonging to" such Class. To the extent permitted by rule or order
of the Securities and Exchange Commission, the Board of Directors may allocate
all or a portion of any expenses, costs, charges and reserves to any one or more
Series of the Corporation's Common Stock as follows:
(a) A Series with respect to which agreements are entered into by or
on behalf of the Corporation pursuant to which institutions agree to provide
distribution, administrative or other services with respect to beneficial owners
of shares of that Series but not with respect to beneficial owners of shares of
other Series of the same Class shall bear the expenses and liabilities relating
to such agreements, as well as any other expenses directly attributable to such
Series which the Board of Directors determine should be borne solely by such
Series; and
(b) A Series shall not be required to bear the expenses and
liabilities relating to any agreement described in clause (a) above pursuant to
which an institution agrees to provide services with respect to beneficial
owners of shares of other Series of the same Class but not to beneficial owners
of shares of that Series, or any other expenses directly attributable to one or
more other Series of shares which the Board of Directors determine should be
borne solely by such other Series.
(3) Dividends and Distributions. Shares of each Series of a Class of the
Corporation's Common Stock shall be entitled to such dividends and
distributions, in stock or in cash or both, as may be declared from time to time
by the Board of Directors, acting in their sole discretion, with respect to such
Series; provided, however, that such dividends and distributions shall be paid
only out of the lawfully available "assets belonging to" the Class of which such
Series is part as such phrase is defined in Section (B)(1) of this Article V.
(4) Liquidation Dividends and Distributions. In the event of the
liquidation or dissolution of the Corporation, the shareholders of each Series
of a Class of the Corporation's Common Stock shall be entitled to receive, as a
Series, out of the assets of the Corporation available for distribution to
shareholders, but other than general assets not belonging to any particular
Class of Common Stock, the excess of the assets belonging to such Class of
Common Stock that are allocated to such Series in accordance with Section (B)(1)
of this Article V over the liabilities belonging to that Class that are
allocated to that Series in accordance with Section (B)(2) of this Article V,
and the assets so distributable to the shareholders of any particular Series
shall be distributed among such shareholders in proportion to the number of
shares of such Series held by them and recorded on the books of the Corporation.
In the event that there are any general assets not belonging to any particular
Class of the Corporation's Common Stock and available for distribution, the
shareholders of a Class of Common Stock shall be entitled to receive a portion
of such general assets determined by comparing the assets belonging to such
Class with the aggregate assets of the Corporation; the shareholders of each
Series of such Class shall be entitled to receive, as a Series, the portion of
such assets that are allocated such Series in accordance with Section (B)(1) of
this Article V; and the assets so distributable to the shareholders of any
particular Series shall be distributed among such shareholders in proportion to
the number of shares of such Series held by them and recorded on the books of
the Corporation.
(5) Voting Rights. Shareholders of each Class of the Corporation's Common
Stock shall be entitled to one (1) vote for each full share, and a fractional
vote for each fractional share, of such Class then standing in his or her name
on the books of the Corporation. On any matter submitted to a vote of
shareholders, shares of all Classes that are then issued and outstanding and
entitled to vote shall be voted in the aggregate and not by Class except: (a) as
otherwise required by applicable law or permitted by the Board of Directors, or
(b) when the matter, as conclusively determined by the Board of Directors,
affects only the interests of the shareholders of a particular Class or Classes
(in which case only shareholders of the affected Class or Classes shall be
entitled to vote thereon). Each share of a Series of a Class shall vote
together in the aggregate with all other Shares of the same Class and not by
Series on all matters submitted to a vote of the shareholders of the Class,
except that:
(x) on any matter that pertains to the agreements or expenses and
liabilities described in subsection (B)(2)(a) of this Article V (or to any plan
or other document adopted by the Corporation relating to said agreements,
expenses or liabilities) and is submitted to a vote of shareholders of the
Corporation, only the particular Series specified therein shall be entitled to
vote, except that: (i) if said matter affects shares in the Corporation other
than such Series, such other affected shares in the Corporation shall also be
entitled to vote, and in such case the particular Series of shares so specified
shall be voted in the aggregate together with such other affected shares and not
by individual Series except where otherwise required by law or permitted by the
Board of Directors of the Corporation; and (ii) if said matter does not affect
the particular Series of shares specified therein, said Series of shares shall
not be entitled to vote (except where required by law or permitted by the Board
of Directors) even though the matter is submitted to a vote of the holders of
shares in the Corporation other than shares of such Series; and
(y) on any matter that pertains to the agreements or expenses and
liabilities described in subsection B(2)(b) of this Article V (or any plan or
other document adopted by the Corporation relating to said agreements, expenses
or liabilities) and is submitted to a vote of shareholders of the Corporation,
the particular Series of shares specified therein shall not be entitled to vote,
except where otherwise required by law or permitted by the Board of Directors of
the Corporation, and except that if said matter affects such Series of shares,
such Series of shares shall be entitled to vote, and in such case shall be voted
in the aggregate together with all other shares in the Corporation voting on the
matter and not by individual Series except where otherwise required by law or
permitted by the Board of Directors.
(6) Redemption of Shares. To the extent of the assets of the Corporation
legally available for such redemptions, a shareholder of the Corporation shall
have the right to require the Corporation to redeem his or her full and
fractional shares of any Class of Common Stock out of the assets belonging to
such Class at a redemption price established as provided below, subject to the
right of the Corporation to suspend the right of redemption of shares or
postpone the date of payment of such redemption price in accordance with the
provisions of applicable law. The Board of Directors shall establish such rules
and procedures as they deem appropriate for the redemption of shares, provided
that all redemptions shall be in accordance with the Investment Company Act of
1940 and the Wisconsin Business Corporation Law. Without limiting the foregoing,
the Corporation shall, to the extent permitted by applicable law, have the right
at any time to redeem the shares of any Class and Series of Common Stock owned
by any holder thereof: (a) in connection with the termination of any Class of
the Corporation's Common Stock as provided hereunder; (b) if the value of such
shares in the account maintained by the Corporation or its transfer agent for
any Series is less than One Thousand Dollars ($1,000) provided that the
Corporation shall provide a shareholder with written notice at least sixty (60)
days prior to effecting such a redemption of shares as a result of not
satisfying such requirement; (c) to reimburse the Corporation for any loss it
has sustained by reason of the failure of such shareholder to make full payment
for shares of the Corporation's Common Stock purchased by such shareholder; (d)
to collect any charge relating to a transaction effected for the benefit of such
shareholder which is applicable to shares of the Corporation's Common Stock as
provided in the prospectus relating to such shares; or (e) if the net income
with respect to any Class or Series of Common Stock should be negative or it
should otherwise be appropriate to carry out the Corporation's responsibilities
under the Investment Company Act of 1940, in each case subject to such further
terms and conditions as the Board of Directors may from time to time establish.
The redemption price of shares of any Class or Series of the Corporation's
Common Stock shall, except as otherwise provided in this section, be the net
asset value thereof as determined by the Board of Directors from time to time in
accordance with the provisions of applicable law and these Articles of
Incorporation, less such sales load, redemption fee or other charge, if any, as
may be fixed by the Board of Directors. When the net income of any Class or
Series of Common Stock with respect to which the Board of Directors have, in
their discretion, established a policy of maintaining a constant net asset value
per share is negative or whenever deemed appropriate by the Board of Directors
in order to carry out the Corporation's responsibilities under the Investment
Company Act of 1940, the Corporation may, without payment of compensation but in
consideration of the interests of the Corporation and the holders of shares of
such Class or Series in maintaining a constant net asset value per share of such
Class or Series, redeem pro rata from each holder of record of such Class or
Series on such day, such number of full and fractional shares of such Class or
Series as may be necessary to reduce the aggregate number of outstanding shares
in order to permit the net asset value thereof to remain constant. Payment of
the redemption price, if any, shall be made in cash by the Corporation at such
time and in such manner as may be determined from time to time by the Board of
Directors unless, in the opinion of the Board of Directors, which shall be
conclusive, conditions exist which make payment wholly in cash unwise or
undesirable; in such event the Corporation may make payment in the assets
belonging or allocable to the Class redemption of which is being sought, the
value of which shall be determined as provided herein. Any shares of a Class of
the Corporation's Common Stock that are redeemed by the Corporation shall be
deemed to be cancelled and returned to the status of authorized but unissued
shares of the particular Class and Series involved and, unless otherwise
determined by the Board of Directors of the Corporation, may be reissued from
time to time in the same manner and to the same extent as other authorized,
unissued shares of the same Class and Series.
(7) Termination of Classes. Without the vote of the shares of any Class or
Series of the Corporation's Common Stock then outstanding (unless otherwise
required by applicable law), the Corporation may, if so determined by the Board
of Directors:
(a) Sell and convey the assets belonging to any Class of Common Stock
to another trust or corporation that is a management investment company (as
defined in the Investment Company Act of 1940) and is organized under the laws
of any jurisdiction within the United States for consideration which may include
the assumption of all outstanding obligations, taxes and other liabilities,
accrued or contingent, belonging to such Class and which may include securities
issued by such trust or corporation. Following such sale and conveyance, and
after making provision for the payment of any liabilities belonging to such
Class of Common Stock that are not assumed by the purchaser of the assets
belonging to such Class, the corporation may, at its option, redeem all
outstanding shares of such Class at their net asset value as determined by the
Board of Directors in accordance with the provisions of applicable law and these
Articles of Incorporation, less such redemption fee, sales load or other charge,
if any, as may be fixed by the Board of Directors. Notwithstanding any other
provision of these Articles of Incorporation to the contrary, the redemption
price may be paid in cash or by distribution of the securities or other
consideration received by the Corporation for the assets belonging to such Class
of Common Stock upon such conditions as the Board of Directors deem, in their
sole discretion, to be appropriate and consistent with applicable law and these
Articles of Incorporation;
(b) Sell and convert the assets belonging to a Class of Common Stock
into money and, after making provision for the payment of all obligations, taxes
and other liabilities, accrued or contingent, belonging to such Class, the
Corporation may, at its option, (i) redeem all outstanding shares of such Class
at their net asset value as determined by the Board of Directors in accordance
with the provisions of applicable law and these Articles of Incorporation, less
such redemption fee, sales load or other charge, if any, as may be fixed by the
Board of Directors upon such conditions as the Board of Directors deem, in their
sole discretion, to be appropriate and consistent with applicable law and these
Articles of Incorporation; or combine the assets belonging to such Class
following such sale and conversion with the assets belonging to any one or more
other Classes of Common Stock of the Corporation pursuant to and in accordance
with Section (B)(7)(c) of this Article V; or
(c) Combine the assets belonging to a Class of Common Stock with the
assets belonging to any one or more other Classes of Common Stock of the
Corporation if the Board of Directors reasonably determines that such
combination will not have a material adverse effect on the shareholders of any
Class of Common Stock of the Corporation participating in such combination. In
connection with any such combination of assets, the shares of any Class of
Common Stock (and any Series therein) then outstanding may, if so determined by
the Board of Directors, be converted into shares of any other Class or Classes
of Common Stock of the Corporation (and any Series therein) with respect to
which conversion is permitted by applicable law, or may be redeemed, at the
option of the Corporation, at their net asset value as determined by the Board
of Directors in accordance with the provisions of applicable law and these
Articles of Incorporation, less such redemption fee, sales load or other charge,
or conversion cost, if any, as may be fixed by the Board of Directors upon such
conditions as the Board of Directors deem, in their sole discretion, to be
appropriate and consistent with applicable law and these Articles of
Incorporation. Notwithstanding any other provision of these Articles of
Incorporation to the contrary, any redemption price, or part thereof, paid
pursuant to this Section (B)(7)(c) may be paid in shares of one or more other
Class or Classes of Common Stock of the Corporation (and any one or more Series
thereof) participating in such combination.
(8) Conversion Rights. The Board of Directors shall have the authority to
provide from time to time that the holders of shares of any Series of any Class
of the Corporation's Common Stock shall have the right to convert or exchange
said shares for or into shares of one or more other Series of the same or
another Class in accordance with such requirements and procedures as may be
established from time to time by the Board of Directors.
(9) No Preemptive Rights. No holder of shares of any Class or Series of
the Corporation's Common Stock shall, as such holder, have any preemptive or
other right to purchase, subscribe for or otherwise acquire any shares of any
Class of Common Stock of the Corporation, or any Series thereof, or any
securities of the Corporation convertible into such shares or carrying a right
to subscribe to or acquire such shares (whether such shares or securities are
now or hereafter authorized or are acquired by the Corporation after the
issuance thereof), other than such right, if any, as the Board of Directors, in
their discretion, may determine.
Exhibit (e)(5)
ADDENDUM NO. 4 TO THE DISTRIBUTION AGREEMENT
This Addendum, dated as of the 26 day of February 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 and amended as of August 1, 1995, August 15, 1997,
and December 1, 1997, (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_ Fund, Balanced
Income Fund, Balanced Growth Fund, Growth and Income Fund, Equity Index Fund,
Growth Fund, Special Growth Fund, Emerging Growth Fund, MicroCap Fund, and
International Equity Fund and any other Firstar Funds that may be contemplated
(the "Funds");
WHEREAS, the Company is establishing a contingent deferred sales load
series (the "Series B Shares") for the Funds other than the money market funds
(the "CDSL Funds") and desires to retain BCZ to act as the distributor for the
Series B Shares under the Distribution Agreement; and
WHEREAS, BCZ is willing to serve as distributor for the Series B Shares;
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 Series B Shares 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. AMENDMENT OF SECTION 1.1(B). The following language shall be inserted
in sub-section 1.1(b) after the first sentence:
Shares sold with a contingent deferred sales charge ("CDSC;" "CDSC Shares")
shall be subject to a CDSC in connection with the redemption of such CDSC Shares
as provided for in the then current prospectuses and such CDSC shall be payable
in accordance with the then current prospectuses.
3. MISCELLANEOUS. Except to the extent amended and 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: Joseph C. Neuberger
--------------------------
Title: Assistant Treasurer
------------------------
B.C. ZIEGLER AND COMPANY
By: Robert J. Tuszynski
--------------------------
Title: Senior Vice President
------------------------
Exhibit (g)(14)
CONSENT TO ASSIGNMENT
----------------------
The undersigned consents to the Assignment attached hereto of the Custodian
Agreement dated as of July 29, 1988 between Firstar Trust Company (formerly
First Wisconsin Trust Company) and Firstar Funds, Inc. (formerly Elan Funds,
Inc.), as amended through the date hereof on the express condition that (1)
Assignor will remain liable for the performance of each and every one of its
obligations under the Contract arising on or before the Effective Date; (2) this
Consent to Assignment will not be deemed a consent to any subsequent assignment
but rather any subsequent assignment will require the prior written consent of
the undersigned pursuant to the terms of the Contract; and (3) Assignor will
notify the undersigned of the actual Effective Date if such date occurs on a
date other than October 1, 1998.
FIRSTAR FUNDS, INC.
By: /s/ Steven R. Parish
Name: Steven R. Parish
Title: President
ASSIGNMENT OF CONTRACT
This ASSIGNMENT OF CONTRACT (the "Assignment") is dated as of the 1st day
of October, 1998 by and between Firstar Trust Company (formerly, First Wisconsin
Trust Company), a Wisconsin corporation ("Assignor"), and Firstar Bank
Milwaukee, N.A., a Wisconsin limited liability company ("Assignee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Assignor is a party to the contract or contracts attached hereto
as Exhibit A (the "Contract") and identified as follows:
Custodian Agreement by and among Firstar Funds, Inc. (formerly, Elan
Funds) and Assignor dated July 29, 1988, as amended through the date
hereof.
WHEREAS, Assignor desires to transfer to Assignee all of Assignor's right,
title and interest in the Contract.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, Assignor and Assignee agree as follows:
1. Assignment of the Contract. Assignor hereby transfers and assigns to
Assignee all of Assignor's right, title and interest in and to the Contract.
2. Assumption and Acceptance of the Contract. By acceptance of this
Assignment, Assignee hereby assumes and agrees to perform all of the obligations
and covenants of Assignor under the Contract from and after the date and year
first written above or such other date as the parties may agree in writing (the
"Effective Date").
3. Consent. The effectiveness of this Assignment is expressly subject to
the written consent of Firstar Funds, Inc.
4. Indemnification. Assignor agrees that it will remain liable under the
Contract for all obligations arising on or before the Effective Date and will
indemnify and hold harmless Assignee from any such obligation.
IN WITNESS WHEREOF, this Assignment has been executed by Assignor and
Assignee as a sealed instrument as of the day and year first written above.
ASSIGNOR
FIRSTAR TRUST COMPANY
By: /s/ Joseph D. Redwine
Name: Joseph D. Redwine
Title: Senior Vice President
ASSIGNEE
FIRSTAR BANK MILWAUKEE, N.A.
By: /s/ Joseph Neuberger
Name: Joseph C. Neuberger
Title: Vice President
Exhibit (h)(39)
ORDER PROCESSING AGREEMENT
--------------------------
This Agreement is entered into as of February 1, 1998 among Northern Trust
Retirement Consulting, L.L.C. ("Service Provider"), Firstar Funds, Inc., an
open-end management company (the "Company"), and Firstar Trust Company, transfer
agent and co-administrator for the Company ("Transfer Agent/Co-Administrator").
Service Provider provides certain administrative services comprised of, but
not limited to, recordkeeping, reporting, and processing services (the
"Administrative Services") to qualified employee benefit plans. Administrative
Services for the Plan(s) include processing and transfer arrangements for the
investment and reinvestment of Plan assets generally upon the direction of Plan
beneficiaries (the "Participants") or in investments specified by an investment
adviser, sponsor, or administrative committee of the Plan(s) (a "Plan
Representative"). The Administrative Services are provided by Service Provider
under service agreements with the Plan(s).
The Company includes the portfolios identified on Schedule A attached
hereto (collectively, the "Funds" and, individually, a "Fund"). The Company is
registered with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended (the "Company Act"),
The Transfer Agent/Co-Administrator serves as transfer agent and co-
administrator to each of the Funds.
Accordingly, the Parties hereto agree as follows:
1. Agency. The Company hereby appoints the Service Provider as its agent
for the limited purposes of accepting orders for the purchase and redemption of
shares of the Funds by the Service Provider on behalf of each Plan.
(a) Procedures. The operating procedures (the "Procedures")
governing the responsibilities of the Parties under this Agreement are set forth
in Schedule B which is attached hereto and specifically made a part of this
Agreement. The Procedures shall be consistent with the terms of each Fund's
prospectus, the requirements of the Company Act and the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and all other applicable laws and
regulations.
2. Maintenance of Records.
(a) Each Party shall maintain and preserve all records it is required
by law to maintain and preserve in connection with the matters contemplated by
this Agreement.
(b) Subject to any applicable confidentiality obligations, each Party
hereby agrees to make available copies of all records such Party is required to
maintain hereunder that are reasonably requested by any other Party to ensure
compliance with applicable law. Such copies shall be furnished at the expense
of the requesting Party.
(c) Recordkeeping and other administrative services to Plan
participants shall be the responsibility of the Service Provider and shall not
be the responsibility of the Company or the Transfer Agent/Co-Administrator.
The Company and the Transfer Agent/Co-Administrator will recognize each Plan as
a single shareholder and as an unallocated account in each of the Funds, and
will not maintain separate accounts for Plan participants. Upon the reasonable
request of the Company or the Transfer Agent/Co-Administrator, the Service
Provider shall provide copies of all records relating to the Funds necessary for
the Company, the Transfer Agent/Co-Administrator or their representatives to
comply with applicable legal requirements.
3. Compliance with Laws. At all times during the term of this Agreement,
each party shall comply with all applicable laws, rules, and regulations.
4. Representations with Respect to the Funds. Service Provider and its
agents shall not make representations concerning the Company or its shares
except in strict accordance with the information contained in: (a) a Fund's then
current prospectus, and (b) current sales literature respecting a Fund furnished
by the Company or the Transfer Agent/Co-Administrator. Subject to the previous
sentence, the Service Provider may include the selected Funds in its marketing
efforts.
5. Expenses.
(a) Except as otherwise provided in this Agreement, each Party shall
bear all expenses incidental to the performance of its obligations under this
Agreement.
(b) Transfer Agent/Co-Administrator shall distribute, or cause to be
distributed, to Service Provider Fund prospectuses, any Fund proxy solicitation
materials, periodic reports to Fund shareholders, and other materials that the
Company may be required by law to distribute to Plan(s) as shareholders of the
Funds. Service Provider agrees to use reasonable efforts to arrange for
delivery of such materials to participants through Plan Sponsors or Plan
Representatives.
6. Relationship of Parties. Except to the limited extent provided in
Paragraph 2(c) of the Procedures, it is understood and agreed that all services
performed hereunder by Service Provider shall be as an independent contractor
and not as an employee or agent of the Company.
7. Termination. This Agreement may be terminated by any Party at any
time upon at least sixty (60) days' prior written notice to the other Parties.
Notwithstanding the foregoing, any party may terminate this Agreement
immediately upon written notice to such Party of the institution of formal
proceedings against any other Party with respect to the arrangements documented
herein by the Securities and Exchange Commission or any other regulatory body.
8. Registration of the Funds. During the term of this Agreement, the
Company shall remain an open-end investment company registered pursuant to the
Company Act and the Securities Act of 1933 (the "Securities Act").
9. Indemnification.
(a) Service Provider agrees to indemnify and hold harmless Transfer
Agent/Co-Administrator, the Company, the Company's administrators, and each of
their respective affiliates, directors, trustees, officers, employees, agents,
and each person, if any, who controls them within the meaning of the Securities
Act against any losses, claims, damages, settlements, liabilities or expenses
(including, without limitation, reasonable attorneys' fees and expense whether
or not involving a third party) (collectively, "Claims") to the extent any such
Claim arises out of or is based upon (i) Service Provider's negligence, bad
faith, or willful misconduct in perforating its obligations hereunder, (ii) any
breach by Service Provider of any material provision of this Agreement, or (iii)
any breach by Service Provider of a representation, warranty, or covenant made
in this Agreement; and Service Provider shall reimburse the persons indemnified
hereunder for any legal or other expenses reasonably incurred, as incurred, by
them in connection with investigating or defending such Claim. For the
avoidance of doubt, Service Provider's indemnity obligation shall include any
loss or expense to the Company caused by a cancellation or correction of a
purchase or redemption order subsequent to the order of instruction to the
Transfer Agent/Co-Administrator by the Service Provider. This indemnification
shall be in addition to any liability which Service Provider may otherwise
incur. This indemnity shall continue in full force and effect, notwithstanding
the termination of this Agreement.
(b) The Transfer Agent/Co-Administrator agrees to indemnify Service
Provider and each of its respective affiliates, directors, officers, employees,
agents, and each person, if any, who controls them within the meaning of the
Securities Act against any Claims to the extent any such Claim arises out of or
is based upon (i) any breach by transfer Agent/Co-Administrator of any material
provision of this Agreement, (ii) Transfer Agent/Co-Administrator's negligence,
bad faith, or willful misconduct in carrying out its duties and responsibilities
under this Agreement, or (iii) any breach by Transfer Agent/Co-Administrator of
a representation, warranty, or covenant made in this Agreement; and Transfer
Agent/Co-Administrator shall reimburse the persons indemnified hereunder for any
legal or other expenses reasonably incurred, as incurred, by them in connection
with investigating or defending such Claim. For the avoidance of doubt,
Transfer Agent/Co-Administrators indemnity obligation shall include any loss or
expense to Service Provider for corrections to the individual participant
accounts due to pricing data which is incorrectly reported by Transfer Agent/Co-
Administrator. This indemnity shall continue in full force and effect,
notwithstanding the termination of this Agreement.
(c) The Company agrees to indemnify Service Provider and each of its
respective affiliates, directors, officers, employees, agents, and each person,
if any, who controls them within the meaning of the Securities Act against any
Claims to the extent any such Claim arises out of or is based upon (i) any
breach by Company of any material provision of this Agreement, (ii) Company's
negligence, bad faith, or willful misconduct in carrying out its duties and
responsibilities under this Agreement, or (iii) any breach by Company of a
representation, warranty, or covenant made in this Agreement; and Company shall
reimburse the persons indemnified hereunder for any legal or other expenses
reasonably incurred, as incurred, by them in connection with investigation or
defending such Claim. This indemnity shall continue in full force and effect,
notwithstanding the termination of this Agreement.
(d) Upon the assertion of a Claim for which a Party may be required
to indemnify another Party, the Party seeking indemnification ("Indemnitee")
shall promptly notify the indemnifying Party ("Indemnitor") in writing of such
assertion and of any relevant facts or background known by Indemnitee in the
defense of such Claim or to defend against such Claim in the name of Indemnitees
or in the name of Indemnitors. If Indemnitor elects to defend and control the
course of any defense, Indemnitee shall cooperate with Indemnitor in connection
with such defense. If Indemnitor elects not to control the defense, Indemnitee
shall have the right to select counsel of its choice and participate in such
defense. In any event, Indemnitor shall not be responsible for any Claim
settled or compromised, or for any confessions of judgment, without its prior
written consent.
(e) Notwithstanding any other provision of this Agreement, no Party
shall have any liability or owe any indemnity obligation to the other for any
incidental or consequential losses, claims, actions, expenses, or liabilities.
10. Additional Representations, Warranties, and Covenants. Each Party
represents, warrants, and covenants that it has full power and authority under
applicable law, and has taken all action necessary, to enter into and perform
this Agreement, and that it is free to enter into this Agreement, and that by
doing so it will not breach or otherwise impair any other agreement or
understanding with any person, corporation, or other entity.
11. Notice. Each notice required by this Agreement shall be given in
writing and delivered personally or mailed by certified mail or overnight
courier service to the other Party at the following address or such other
address as each Party may give notice to the other:
If to Service Provider, to:
Northern Trust Retirement Consulting, Inc.
400 Perimeter Center Terrace, Suite 850
Atlanta, Georgia 30346
Attn: Northern Trust Alliance Management
If to the Company, to:
Firstar Funds, Inc.
777 E. Wisconsin Avenue
Milwaukee, WI 53202
Attn: Investor Services Manager
If to the Transfer Agent/Co-Administrator, to:
Firstar Trust Company
Mutual Fund Services
Milwaukee, WI 53202
Attn: Andrea McVoy
A notice given pursuant to this Section 11 shall be deemed given immediately
when delivered personally, three (3) business days after the date of certified
mailing, and one (1) business day after delivery by overnight courier service.
12. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Wisconsin applicable to
agreements fully executed and to be performed therein.
13. Complete Agreement. This Agreement contains the full and complete
understanding of the Parties and supersedes all prior representations, promises,
statements, arrangements, agreements, warranties, and understandings between the
Parties with respect to the subject matter hereto whether oral or written,
express or implied.
14. Modification. This Agreement may be modified or amended, and the
terms of this Agreement may be waived, only by a writing signed by each of the
Parties.
15. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement.
16. Assignment. This Agreement shall not be assigned by a Party, without
the prior written consent of the other Parties, except that a party may assign
this Agreement to an affiliate having the same ultimate ownership and regulatory
licenses or qualifications as the assigning Party without such prior consent,
and the assigning Party shall, subsequent to any such assignment, promptly
notify the other Parties in writing.
17. Non-Exclusivity. Each of the Parties acknowledges and agrees that
this Agreement and the arrangement described herein are intended to be non-
exclusive and that each of the Parties is free to enter into similar agreements
and arrangements with other entities.
18. Confidentiality. The Transfer Agent/Co-Administrator and Service
Provider agree to keep confidential all proprietary data, software, processes,
information, and documentation related to this Agreement, except as may be
necessary or useful to perform obligations under this Agreement or otherwise as
may be agreed to, from time to time, by the Parties or otherwise as may be
required by applicable law or regulations or at the request of a regulatory
agency with jurisdiction over the Party from which information is being
requested.
NORTHERN TRUST RETIREMENT
CONSULTING, L.L.C.
By: /s/ Michael H. Waters
---------------------
Title: Assistant Secretary
-------------------
FIRSTAR FUNDS, INC.
By: /s/ Mary Ellen Stanek
---------------------
Title: Vice President
--------------
FIRSTAR TRUST COMPANY
By: /S/ Andrea McVey
----------------
Title: Asst. Vice President
--------------------
SCHEDULE A
----------
FIRSTAR FUNDS
- -------------
Ticker Media
Cusips Fund Name Symbol Symbol
- ------ --------- ------ ------
337,938,724 Short -Term Bond Market FISTX ST Bond
337,938,740 Intermediate Bond Market FIIBX IntBdM
337,938,765 Bond IMMDEX FIBMX Bdldx
337,938,880 Balanced Income FIBIX Ballnc
337,938,773 Balanced Growth FIBAX BalGro
337,938,781 Growth & Income FIGCX Grlnc
337,938,831 Equity Index FIENX Eqldx
337,938,799 Growth FIGWX Grow
337,938,815 Special Growth FISGX SpGr
337,938,807 Emerging Growth FIEMX EmgGr
337,938,823 International Equity FIIEX IntlEq
SCHEDULE B
1. Pricing Information. Transfer Agent/Co-Administrator or its designee
will furnish Service Provider or its designee (via electronic data transmission
or hard copy), on each business day that the New York Stock Exchange or the
Funds are open for business ("Business Day"), with (a) per share net asset value
information as of the close of trading (currently 4:00 p.m. Eastern Time) on the
New York Stock Exchange, or as of such earlier times at which the Funds' net
asset values are calculated as specified in the Funds' then current prospectuses
("Close of Trading"), (b) per share dividend and capital gains information
respecting the Funds as it becomes available, and (c) if a Fund is an income
fund, the daily accrual for interest rate factor (mil rate) of such Fund.
Transfer Agent/Co-Administrator shall provide such information to Service
Provider or designee by 7:00 p.m. Eastern Time on the same Business Day.
2. Orders and Settlement.
(a) Upon the receipt of instructions from Participants or Plan
Representatives, Service Provider will calculate order allocations among
designated investment media and transmit to Transfer Agent/Co-Administrator
orders for net purchase, or redemptions for specified accounts on the basis of
those instructions, as set forth below. Service Provider agrees that orders for
net purchases or net redemptions of shares derived from instructions received in
proper form by Service Provider from Participants or Plan Representatives prior
to the Close of Trading on any given Business Day will be processed that same
evening and transmitted to Transfer Agent/Co-Administrator by 8:00 a.m. Eastern
Time on the next Business Day. Service Provider agrees that payment for net
purchases attributable to all orders executed for the Accounts on a given
Business Day will be wired by Service Provider or its designee on the same
Business Day such purchase orders are transmitted to Transfer Agent/Co-
Administrator no later than 12:00 p.m. Eastern Time to a custodial account
designated by Transfer Agent/Co-Administrator.
(b) Transfer Agent/Co-Administrator agrees that payments for net
redemptions attributable to all orders executed for the Accounts on a given
Business Day will be wired by Transfer Agent/Co-Administrator on the same
business day such redemption orders are transmitted to Transfer Agent/Co-
Administrator no later than 12:00 p.m. Eastern Time to a custodial account
designated by Service Provider.
(c) Subject to Service Provider's compliance with the foregoing, the
Business Day on which such share instructions are received in proper form by
Service Provider from Participants or Plan Representatives by the Close of
trading shall be the date as of which shares will be purchased and redeemed as a
result of such instructions at the net asset value per share next determined
after such receipt by Service Provider.
(d) Instructions received in proper form by Service Provider from
Participants or Plan Representatives after the Close of Trading on any given
Business Day shall be treated as if received on the next following Business Day,
and shall be effected at the net asset value per share next determined after
such receipt. Transfer Agent/Co-Administrator agrees that payment for net
distributions, if a Fund is a fixed-income fund, will include (when applicable)
income accrued during the current accrual period of such Fund.
(e) Dividends and capital gains distributions will be automatically
reinvested at net asset value in accordance with the Funds' then current
prospectuses.
3. Account Information. Transfer Agent/Co-Administrator agrees to
provide Service Provider or the Plan Trustee daily confirmation of Account
activity and statements detailing activity in each Service Provider Account
consistent with each Fund's prospectus requirements.
Exhibit (h)(40)
403(B) COMPREHENSIVE SERVICE AGREEMENT
THIS AGREEMENT IS BETWEEN
FIRSTAR FUNDS And UNIVERSAL PENSIONS, INC.
With Offices At: A Minnesota Corporation With
Offices at:
615 E. Michigan St. 431 Golf Course Road North
Milwaukee, WI 53202 P.O. Box 979
Brainerd, Minnesota 56401
Hereinafter together with its Hereinafter called "UPI"
Affiliates called "Financial
Organization"
I. THE TERM
The Initial Term of this Service Agreement (Agreement) is three (3) years
commencing with the Effective Date of this Agreement. Either party may
terminate this Agreement effective at the expiration of the Initial Term or any
extension thereof by giving the other party thirty (30) days prior written
notice. If such written notice of termination is not given, then the Term shall
be automatically extended thereafter for additional successive one (1) year
terms unless and until terminated by either party giving the required thirty
(30) days notice.
II. PRODUCTS OR SERVICES SELECTED
The Financial Organization has selected the products and services
designated below and agrees to pay UPI the corresponding fee for furnishing or
rendering such products and services:
FEES
----
Enrollment Annual
2.01 403(B) DOCUMENTS $2,000.00 $750.00
[X] Salary Deferral Plan (Non-Title I)
[X] 403(b)(7) Custodial Account Plan
III. DEFINITIONS AND FEE DESCRIPTIONS
3.01 ENROLLMENT FEE: A fee assessed by UPI for the privilege of using
the 403(b) plan document, the ancillary forms, the reference
services as described below. The Enrollment Fee is due upon the
effective date of this Agreement.
3.02 ANNUAL SERVICE FEE: A yearly fee due on the anniversary of the
effective date of this Agreement for the continued privilege of
using the 403(b) plan document and ancillary forms and for receiving
notices of amendments affecting the plan as outlined herein.
3.03 AFFILIATES: The Financial Organization Affiliates are set forth in
the attached Schedule A, which may be amended from time to time upon
the mutual written consent of both parties.
IV. PRODUCTS AND SERVICES DESCRIPTIONS
UPI shall provide the following services in exchange for the fees described
above:
4.01 403(B) PLAN DOCUMENT AND ANCILLARY FORMS
THE SERVICES:
UPI shall provide the Financial Organization with the following
403(b) plan services.
a. Grant to the Financial Organization the right to copy and
otherwise use the UPI 403(b) plan document and the ancillary
forms (the "Documents") to assist employers or 403(b) plan
participants in establishing 403(b) plans. The Financial
Organization may use the Documents only for the purpose of
implementing 403(b) plans for customers of the Financial
Organization who are adopting employers or 403(b) plan
participants. The Financial Organization shall not use the
Documents for any other purpose than stated above.
1. Salary Deferral Plan (Non-Title I) Documents
(a) 403(b)(7) Custodial Account Agreement or Annuity
Endorsement (whichever is applicable)
(b) 403(b) Enrollment/Investment Form
(c) 403(b) Designation of Beneficiary Form
(d) 403(b) Transfer Request Form
(e) 403(b) Payout Request Form
Documents are available on diskette in WordPerfect 6.0 format at
no extra charge. Upon the Financial Organization's request, UPI
will provide the diskette to the Financial Organization.
b. Upon the Financial Organization's request, UPI shall make
available to the Financial Organization additional consulting
support and document customization. The fee for such services
shall be based upon UPI's then current hourly rate for such
services.
c. UPI shall provide amendments for minor revisions to the Document
resulting from law and regulatory changes affecting 403(b) plans.
Such amendments shall be suitable for use with the Documents
prior to any customization. At the Financial Organization's
request, UPI will customize the amendments to suit the Financial
Organization's needs. The fee for any document customization
shall be based upon UPI's then current hourly rate for such
services.
UPI shall notify the Financial Organization of all major
amendments to the Document required by fundamental regulatory and
legislative changes affecting 403(b) plans. At the Financial
Organization's request, any major changes required to be made to
the Documents will be performed by UPI for the Financial
Organization. The fee for such services shall be based upon
UPI's then current hourly rate for such services. UPI shall have
complete discretion in determining whether a change is major to
minor.
OTHER TERMS AND CONDITIONS:
d. The Financial Organization acknowledges that all copyright
ownership in the Documents and Reference Materials is vested in
UPI. No Reference Materials may be reproduced in any manner
without the express written consent of UPI. However, the
Financial Organization acknowledges that such changes may cause
the Documents to fail to be in compliance with laws and
regulations applicable to 403(b) plans and accepts any and all
liability arising from such changes.
e. The Financial Organization agrees to provide UPI with all
relevant facts, figures and circumstances necessary to enable UPI
to design the Documents to meet the Financial Organization's
needs and agrees to provide accurate information. UPI is not
responsible for inaccurate information given.
V. GENERAL PROVISIONS
5.01 AGENCY RELATIONSHIP: By performing services under this Agreement,
UPI acts only as an agent for the Financial Organization. The
Financial Organization and UPI acknowledge and agree that nothing in
this Agreement shall be construed as creating the status of UPI as
plan administrator or other fiduciary, as those terms are defined in
the Employee Retirement Income Security Act of 1974 (ERISA), as
amended, with respect to the plans sponsored by the Financial
Organization. The parties further acknowledge and agree that UPI
shall not be deemed to be providing legal, investment, or tax advice
to the Financial Organization as a result of the obligations
undertaken by UPI as contemplated herein.
5.02 SUCCESSOR ORGANIZATION: If the Financial Organization is merged
with or bought by another organization, the successor organization
may continue to receive the products and services set forth in this
Agreement if it desires and UPI so consents.
5.03 SEVERABILITY: Should any provision of this Agreement not be
enforceable in any jurisdiction, the remainder of this Agreement
shall not be affected thereby.
5.04 FINANCIAL ORGANIZATION TO PROVIDE INFORMATION: The Financial
Organization shall provide UPI with all requested information and
figures, within the time period and in the manner prescribed by UPI,
to enable UPI to perform its services. UPI shall rely on the
accuracy and completeness of information submitted by the Financial
Organization.
5.05 SUPPLEMENTAL SERVICES: If services which are not covered by this
Agreement are requested or required, then UPI shall charge an
additional fee based on UPI's then current hourly rate. Any
supplemental services shall not be performed without the Financial
Organization's prior approval.
5.06 NOTICES: All notices required or permitted by this Agreement shall
be in writing. Any notice given shall be considered effective when
actually received. Notice may be given to either party by United
States mail, postage pre-paid and addressed to the attention of the
party's authorized representative designated below. Either party
may, in writing, notify the other of a change in the identity of the
person to receive the notice.
5.07 EFFECT OF WAIVER: The waiver by either party or the failure by
either party to claim a breach of any of the provisions of this
Agreement shall not be held to be a waiver of any subsequent breach
or as affecting in any way the effectiveness of such provisions.
5.08 AMENDMENTS: The parties may amend, modify and supplement this
Agreement in such manner as may be agreed upon by them in writing.
5.09 FEE MODIFICATIONS: After the initial term of this Agreement, UPI
shall have the right to modify any of the fees set forth herein as
it deems appropriate. Fee modifications shall be preceded by thirty
(30) days written notice to the Financial Organization.
5.10 SALES TAX: The Financial Organization acknowledges that sales tax
may be applicable, either now or in the future, to the products or
services provided by UPI under the terms of this Agreement, and that
such sales tax will be in addition to the fees set forth herein.
5.11 INSURANCE LAWS: UPI makes no representations regarding compliance
of its products or services with any state insurance laws. Further,
UPI shall not be responsible for obtaining the approval of any state
insurance authority on behalf of the Financial Organization.
5.12 SECURITIES LAWS: UPI makes no representations regarding compliance
of its products or services with any securities laws. Further, UPI
shall not be responsible for obtaining the approval of any federal
or state securities authority on behalf of the Financial
Organization.
5.13 ENTIRE AGREEMENT: The Financial Organization acknowledges that
there are no agreements or understandings, written or oral, between
itself and UPI with respect to the services which are to be
rendered, other than as set forth herein and that this Agreement
contains the entire agreement between the parties with respect
thereto.
VI. EFFECTIVE DATE: The effective date of this Agreement is May 4, 1998.
VII. SIGNATURES:
FIRSTAR FUNDS Universal Pensions, Inc.
/s/ Mary Ellen Stanek /s/ Thomas G. Anderson
-------------------------------- --------------------------------
Authorized Signature Authorized Signature
Mary Ellen Stanek Thomas G. Anderson
-------------------------------- --------------------------------
Name of Individual (Please Type) Name of Individual (Please Type)
Vice President President
-------------------------------- --------------------------------
Title Title
4-23-98 May 4, 1998
-------------------------------- --------------------------------
Date Date
SCHEDULE A
Financial Organization has no parents. The following list sets forth the name
of each Affiliate for purposes of the Comprehensive Service Agreement.
1 Firstar Bank Milwaukee, National Association
1 Firstar Bank Wisconsin
1 Firstar Bank Wausau, National Association
1 Firstar Bank Iowa, National Association
1 Firstar Bank Burlington, National Association
1 Firstar Bank Minnesota, National Association
1 Firstar Bank Illinois
1 Firstar Bank U.S.A., National Association
1 Firstar Metropolitan Bank & Trust
1 Firstar Trust Company
1 Firstar Trust Company of Florida, National Association
1 Firstar Investment Research & Management Company, LLC
1 Firstar Insurance Services, LLC
2 Firstar Investment Services, Inc.
1 Firstar Title Corp.
2 Firstar Community Investment Corporation
2 Firstar Equipment Finance Corporation
2 CSFM Corporation
2 Firstar Home Mortgage Corporation
2 Firstar Information Services Corporation
1 Banks of Iowa Capital Corporation
2 DPC of Milwaukee, Inc.
2 Firstar Trade Services Corporation
3 Firstar Trade Services Limited
2 Milwaukee Capital Corporation
4 Wisconsin Capital Corporation
1 American Credit Corporation
Notes
- -----
1 Subsidiary of Firstar Corporation
2 Subsidiary of Firstar Bank Milwaukee, National Association
3 Subsidiary of Firstar Trade Services Corporation
4 Subsidiary of Firstar Bank Wisconsin
Exhibit (h)(41)
CONSENT TO ASSIGNMENT
---------------------
The undersigned consents to the Assignment attached hereto of the Fund
Accounting Servicing Agreement dated as of March 23, 1988 between Firstar Funds,
Inc. (formerly Elan Funds, Inc.) and Firstar Trust Company (formerly First
Wisconsin Trust Company), as amended through the date hereof, on the express
condition that (1) Assignor will remain liable for the performance of each and
every one of its obligations under the Contract arising on or before the
Effective Date; (2) this Consent to Assignment will not be deemed a consent to
any subsequent assignment but rather any subsequent assignment will require the
prior written consent of the undersigned pursuant to the terms of the Contract;
and (3) Assignor will notify the undersigned of the actual Effective Date if
such date occurs on a date other than October 1, 1998.
FIRSTAR FUNDS, INC.
By: /s/ Steven R. Parish
Name: Steven R. Parish
Title: President
ASSIGNMENT OF CONTRACT
This ASSIGNMENT OF CONTRACT (the "Assignment") is dated as of the 1st day
of October, 1998 by and between Firstar Trust Company (formerly, First Wisconsin
Trust Company), a Wisconsin corporation ("Assignor"), and Firstar Mutual Fund
Services, LLC, a Wisconsin limited liability company ("Assignee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Assignor is a party to the contract or contracts attached hereto
as Exhibit A (the "Contract") and identified as follows:
Fund Accounting Servicing Agreement by and among Firstar Funds, Inc.
(formerly, Elan Funds) and Assignor dated March 21, 1998, as amended
through the date hereof.
WHEREAS, Assignor desires to transfer to Assignee all of Assignor's right,
title and interest in the Contract.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, Assignor and Assignee agree as follows:
1. Assignment of the Contract. Assignor hereby transfers and assigns to
Assignee all of Assignor's right, title and interest in and to the Contract.
2. Assumption and Acceptance of the Contract. By acceptance of this
Assignment, Assignee hereby assumes and agrees to perform all of the obligations
and covenants of Assignor under the Contract from and after the date and year
first written above or such other date as the parties may agree in writing (the
"Effective Date").
3. Consent. The effectiveness of this Assignment is expressly subject to
the written consent of Firstar Funds, Inc.
4. Indemnification. Assignor agrees that it will remain liable under the
Contract for all obligations arising on or before the Effective Date and will
indemnify and hold harmless Assignee from any such obligation.
IN WITNESS WHEREOF, this Assignment has been executed by Assignor and
Assignee as a sealed instrument as of the day and year first written above.
ASSIGNOR
FIRSTAR TRUST COMPANY
By: /s/ Joseph D. Redwine
Name: Joseph D. Redwine
Title: Senior Vice President
ASSIGNEE
FIRSTAR MUTUAL FUND SERVICES, LLC
By: /s/ Joseph Neuberger
Name: Joseph C. Neuberger
Title: Vice President
Exhibit (h)(42)
CONSENT TO ASSIGNMENT
----------------------
The undersigned consents to the Assignment attached hereto of the Co-
Administration Agreement dated January 1, 1995 among B.C. Ziegler and Company,
Firstar Trust Company and Firstar Funds, Inc., as amended through the date
hereof, on the express condition that (1) Assignor will remain liable for the
performance of each and every one of its obligations under the Contract arising
on or before the Effective Date; (2) this Consent to Assignment will not be
deemed a consent to any subsequent assignment but rather any subsequent
assignment will require the prior written consent of the undersigned pursuant to
the terms of the Contract; and (3) Assignor will notify the undersigned of the
actual Effective Date if such date occurs on a date other than October 1, 1998.
FIRSTAR FUNDS, INC.
By: /s/ Steven R. Parish
Name: Steven R. Parish
Title: President
B.C. ZIEGLER AND COMPANY
By: /s/ Robert Tuszynski
Name: Robert Tuszynski
Title: Senior Vice President
ASSIGNMENT OF CONTRACT
This ASSIGNMENT OF CONTRACT (the "Assignment") is dated as of the 1st day
of October, 1998 by and between Firstar Trust Company, a Wisconsin corporation
("Assignor"), and Firstar Mutual Fund Services, LLC, a Wisconsin limited
liability company ("Assignee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Assignor is a party to the contract or contracts attached hereto
as Exhibit A (the "Contract") and identified as follows:
Co-Administration Agreement by and among B. C. Ziegler and Company,
Firstar Funds, Inc. (formerly Portico Funds, Inc.) and Assignor dated
January 1, 1995, as amended through the date hereof.
WHEREAS, Assignor desires to transfer to Assignee all of Assignor's right,
title and interest in the Contract.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, Assignor and Assignee agree as follows:
1. Assignment of the Contract. Assignor hereby transfers and assigns to
Assignee all of Assignor's right, title and interest in and to the Contract.
2. Assumption and Acceptance of the Contract. By acceptance of this
Assignment, Assignee hereby assumes and agrees to perform all of the obligations
and covenants of Assignor under the Contract from and after the date and year
first written above or such other date as the parties may agree in writing (the
"Effective Date").
3. Consent. The effectiveness of this Assignment is expressly subject to
the written consent of Firstar Funds, Inc. and B.C. Ziegler and Company.
4. Indemnification. Assignor agrees that it will remain liable under the
Contract for all obligations arising on or before the Effective Date and will
indemnify and hold harmless Assignee from any such obligation.
IN WITNESS WHEREOF, this Assignment has been executed by Assignor and
Assignee as a sealed instrument as of the day and year first written above.
ASSIGNOR
FIRSTAR TRUST COMPANY
By: /s/ Joseph D. Redwine
Name: Joseph D. Redwine
Title: Senior Vice President
ASSIGNEE
FIRSTAR MUTUAL FUND SERVICES, LLC
By: /s/ Joseph C. Neuberger
Name: Joseph C. Neuberger
Title: Vice President
EXHIBIT (h)(43)
CONSENT TO ASSIGNMENT
---------------------
The undersigned consents to the Assignment attached hereto of the
Shareholder Servicing Agent Agreement dated as of March 23, 1988 between Firstar
Funds, Inc. (formerly Elan Funds, Inc.) and Firstar Trust Company (formerly
First Wisconsin Trust Company), as amended through the date hereof, on the
express condition that (1) Assignor will remain liable for the performance of
each and every one of its obligations under the Contract arising on or before
the Effective Date; (2) this Consent to Assignment will not be deemed a consent
to any subsequent assignment but rather any subsequent assignment will require
the prior written consent of the undersigned pursuant to the terms of the
Contract; and (3) Assignor will notify the undersigned of the actual Effective
Date if such date occurs on a date other than October 1, 1998.
FIRSTAR FUNDS, INC.
By: /s/ Steven R. Parish
Name: Steven R. Parish
Title: President
EXHIBIT (H)(43)
ASSIGNMENT OF CONTRACT
This ASSIGNMENT OF CONTRACT (the "Assignment") is dated as of the 1st day
of October, 1998 by and between Firstar Trust Company (formerly, First Wisconsin
Trust Company), a Wisconsin corporation ("Assignor"), and Firstar Mutual Fund
Services, LLC a Wisconsin limited liability company ("Assignee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Assignor is a party to the contract or contracts attached hereto
as Exhibit A (the "Contract") and identified as follows:
Shareholder Servicing Agent Agreement by and among Firstar Funds, Inc.
(formerly, Elan Funds) and Assignor dated March 23, 1988, as amended through the
date hereof.
WHEREAS, Assignor desires to transfer to Assignee all of Assignor's right,
title and interest in the Contract.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, Assignor and Assignee agree as follows:
1. Assignment of the Contract. Assignor hereby transfers and assigns to
Assignee all of Assignor's right, title and interest in and to the Contract.
2. Assumption and Acceptance of the Contract. By acceptance of this
Assignment, Assignee hereby assumes and agrees to perform all of the obligations
and covenants of Assignor under the Contract from and after the date and year
first written above or such other date as the parties may agree in writing (the
"Effective Date").
3. Consent. The effectiveness of this Assignment is expressly subject to
the written consent of Firstar Funds, Inc.
4. Indemnification. Assignor agrees that it will remain liable under the
Contract for all obligations arising on or before the Effective Date and will
indemnify and hold harmless Assignee from any such obligation.
IN WITNESS WHEREOF, this Assignment has been executed by Assignor and
Assignee as a sealed instrument as of the day and year first written above.
ASSIGNOR
FIRSTAR TRUST COMPANY
By: /s/ Joseph D. Redwine
Name: Joseph D. Redwine
Title: Senior Vice President
ASSIGNEE
FIRSTAR MUTUAL FUNDS SERVICES, LLC
By: /s/ Joseph Neuberger
Name: Joseph C. Neuberger
Title: Vice President
Exhibit (l)(4)
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 $____, one share of beneficial
interest of the Special Growth Fund - Series B, one share of the Bond IMMDEX/TM
Fund - Series B, one share of the Equity Index Fund - Series B, one share of the
Growth & Income Fund - Series B, one share of the Short-Term Bond Market Fund -
Series B, one share of the Balanced Growth Fund - Series B, one share of the
Growth Fund - Series B, one share of the Intermediate Bond Market Fund - Series
B, one share of the Tax-Exempt Intermediate Bond Fund - Series B, one share of
the International Equity Fund - Series B, one share of the MicroCap Fund -
Series B, one share of the Balanced Income Fund - Series B, and one share of the
Emerging Growth Fund - Series B each 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 26th day of February, 1999.
(SEAL)
FIRSTAR FUNDS, INC.
By: /s/Joseph C. Neuberger
----------------------------------
Name: Joseph C. Neuberger
Title: Assistant Treasurer
B.C. ZIEGLER & COMPANY
By: /s/Robert J. Tuszyski
----------------------------------
Name: Robert J. Tuszyski
Title: Senior Vice President
Exhibit 1
---------
Firstar Short Term Bond Market Fund - Series B $
---------
Firstar Intermediate Bond Market Fund - Series B $
---------
Firstar Tax-Exempt Intermediate Bond Fund - Series B $
---------
Firstar Bond IMMEX/TM Fund - Series B $
---------
Firstar Balanced Income Fund - Series B $
---------
Firstar Balanced Growth Fund - Series B $
---------
Firstar Growth and Income Fund - Series B $
---------
Firstar Equity Index Fund - Series B $
---------
Firstar Growth Fund - Series B $
---------
Firstar Special Growth Fund - Series B $
---------
Firstar Emerging Growth Fund - Series B $
---------
Firstar MicroCap Fund - Series B $
---------
Firstar International Equity Fund - Series B $
---------
Total Consideration for one share of each series $
---------
Exhibit (m)(2)
FIRSTAR FUNDS, INC.
DISTRIBUTION AND SERVICES PLAN
FOR SERIES B SHARES
------------------------------
This Distribution and Services Plan (the "Plan") has been adopted by the
Board of Directors of the Firstar Funds, Inc. (the "Company") in connection with
the Series B shares (the "B Shares") in each of the following investment
portfolios of the Company: Short-Term Bond Market Fund, Intermediate Bond Market
Fund, Tax-Exempt Intermediate Bond Fund, Bond IMMDEX/TM Fund, Balanced Growth
Fund, Balanced Income Fund, Growth and Income Fund, Equity Index Fund, Growth
Fund, Special Growth Fund, Emerging Growth Fund, MicroCap Fund and International
Equity Fund (collectively, the "Funds"). The Plan has been adopted pursuant to
Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940
Act").
Section 1. Expenses.
---------
The Company may incur expenses under the Plan in an amount not to exceed
1.00 % annually of the average daily net assets attributable to the outstanding
B Shares of each of the Funds.
Section 2. Distribution Payments.
----------------------
(a) The Company may pay the distributor of the Company (the "Distributor")
(or any other person) a fee (a "Distribution Fee") of up to 0.75% annually of
the average daily net assets attributable to the outstanding B Shares of each of
the Funds. The Distribution Fee shall be calculated and accrued daily, paid
monthly and shall be in consideration for distribution services and the
assumption of related expenses (including the payment of commissions and
transaction fees) in conjunction with the offering and sale of B Shares of the
Funds. In determining the amounts payable on behalf of a Fund under the Plan,
the net asset value of the B Shares shall be computed in the manner specified in
the Company's then current Prospectuses and Statements of Additional Information
describing such B Shares.
(b) Payments to the Distributor (or other person to whom payments are made;
reference in this section to the Payee shall include reference to such other
person) under subsection (a) above shall be used by the Payee to cover expenses
and activities primarily intended to result in the sale of B Shares. Such
expenses and activities may include but are not limited to: (i) direct out-of-
pocket promotional expenses incurred by the Distributor in advertising and
marketing B Shares; (ii) expenses incurred in connection with preparing,
printing, mailing, and distributing or publishing advertisements and sales
literature; (iii) expenses incurred in connection with printing and mailing
Prospectuses and Statements of Additional Information to other than current
shareholders; (iv) periodic payments or commissions to one or more securities
dealers, brokers, financial institutions or other industry professionals, such
as investment advisors, accountants, and estate planning firms (each a
"Distribution Organization") with respect to a Fund's B Shares beneficially
owned by customers for whom the Distribution Organization is the Distribution
Organization of record or shareholder of record; (v) the direct or indirect cost
of financing the payments or expenses included in (i) and (iv) above; or (vi)
such other services as may be construed by any court or governmental agency or
commission, including the Securities and Exchange Commission (the "Commission"),
to constitute distribution services under the 1940 Act or rules and regulations
thereunder.
Section 3. Payments for Shareholder Liaison Services Covered by Plan.
----------------------------------------------------------
(a) The Company may also pay securities dealers, brokers, financial
institutions or other industry professionals, such as investment advisers,
accountants, and estate planning firms (each a "Service Organization") for
Shareholder Liaison Services (as hereinafter defined) provided with respect to
their customers' B Shares. Shareholder Liaison Services shall be provided
pursuant to an agreement in substantially the form attached hereto ("Servicing
Agreement"). Any organization providing distribution assistance may also become
a Service Organization and receive fees for Shareholder Liaison Services
pursuant to a Servicing Agreement under this Plan. Firstar Mutual Fund
Services, LLC ("Firstar") and its affiliates are eligible to become Service
Organizations and to receive fees under this Plan.
(b) Fees paid to a Service Organization under subsection (a) above may be
paid at an annual rate of up to 0.25% of the average daily net assets
attributable to the outstanding B Shares of each of the Funds, which B Shares
are owned of record or beneficially by that Service Organization's customers for
whom such Service Organization is the dealer of record or shareholder of record
or with whom it has a servicing relationship. Such fees shall be calculated and
accrued daily, paid monthly and computed in the manner set forth in the
Servicing Agreement.
(c) "Shareholder Liaison Services" means "personal service and/or the
maintenance of shareholder accounts" within the meaning of the Rules of Fair
Practice of the National Association of Securities Dealers, Inc., such as
responding to customers' inquiries and providing information on their
investments.
Section 4. Expenses Allocated; Compliance.
-------------------------------
Amounts paid by a Fund under the Plan must be for services rendered for or
on behalf of the holders of such Fund's B Shares. However, joint distribution
financing or other services rendered with respect to such B Shares (which may
involve other investment funds or companies that are affiliated persons of the
Company or affiliated persons of the Distributor) are authorized to the extent
permitted by law.
Section 5. Reports to Company.
-------------------
The Distributor shall monitor the arrangement pertaining to Firstar Funds'
agreements with Service Organizations in accordance with the terms of the
Distributor's agreement with Firstar Funds. Firstar Funds shall not be
obligated to execute any Agreement with any qualifying Service Organization. So
long as this Plan is in effect, the Distributor shall provide the Company's
Board of Directors, and the Directors shall review, at least quarterly, a
written report of the amounts expended pursuant to the Plan and the purposes for
which such expenditures were made.
Section 6. Approval of Plan.
-----------------
This Plan will become effective with respect to a particular Fund's B
Shares on the date the public offering of B Shares commences upon the approval
by a majority of the Board of Directors, including a majority of those Directors
who are not "interested persons" (as defined in the 1940 Act) of the Company and
who have no direct or indirect financial interest in the operation of the Plan
or in any agreements entered into in connection with the Plan (the
"Disinterested Directors"), pursuant to a vote cast in person at a meeting
called for the purpose of voting on the approval of the Plan.
Section 7. Continuance of Plan.
--------------------
Unless sooner terminated in accordance with the terms hereof, this Plan
shall continue until February 29, 2000, and thereafter for so long as its
continuance is specifically approved at least annually by the Company's Board of
Directors in the manner described in Section 6 hereof.
Section 8. Amendments.
-----------
This Plan may be amended at any time by the Board of Directors provided
that (a) any amendment to increase materially the costs which the B Shares of a
Fund may bear for distribution pursuant to the Plan shall be effective only upon
approval by a vote of a majority of the outstanding B Shares of such Fund, and
(b) any material amendments of the terms of the Plan shall become effective only
upon approval in the manner described in Section 6 hereof.
Section 9. Termination.
------------
This Plan, as to any Fund, is terminable without penalty at any time by (a)
a vote of a majority of the Disinterested Directors, or (b) a vote of a majority
of the outstanding B Shares of such Fund.
Section 10. Selection/Nomination of Directors.
----------------------------------
While this Plan is in effect, the selection and nomination of the
Disinterested Directors shall be committed to the discretion of such
Disinterested Directors.
Section 11. Miscellaneous.
--------------
The captions in this Agreement are included for convenience of reference
only and in no way define or delimit any of the provisions hereof or otherwise
affect their construction or effect.
IN WITNESS WHEREOF, the Company has originally adopted this Plan as of
February 28, 1999 on behalf of the Funds.
FIRSTAR FUNDS, INC.
By: Laura J. Rauman
Exhibit (m)(3)
FIRSTAR FUNDS, INC.
SERVICES PLAN
FOR SERIES B SHARES
-------------------
This Services Plan (the "Plan") has been adopted by the Board of Directors
of the Firstar Funds, Inc. (the "Company") in connection with the Series B
shares (the "B Shares") in each of the following investment portfolios of the
Company: Short-Term Bond Market Fund, Intermediate Bond Market Fund, Tax-Exempt
Intermediate Bond Fund, Bond IMMDEX/TM Fund, Balanced Growth Fund, Balanced
Income Fund, Growth and Income Fund, Equity Index Fund, Growth Fund, Special
Growth Fund, Emerging Growth Fund, MicroCap Fund and International Equity Fund
(collectively, the "Funds").
Section 1. Expenses.
---------
The Company may incur expenses under the Plan in an amount not to exceed
.25% annually of the average daily net assets attributable to the outstanding B
Shares of each of the Funds.
Section 2. Payments for Administrative Support Services Covered by Plan.
-------------------------------------------------------------
(a) The Company may pay securities dealers, brokers, financial institutions
or other industry professionals such as investment advisers, accountants and
estate planning firms (each a "Service Organization") for Administrative Support
Services (as hereinafter defined) provided with respect to its customers' B
Shares. Administrative Support Services shall be provided pursuant to a
Servicing Agreement in substantially the form attached hereto (the "Servicing
Agreement").
(b) Fees paid to a Service Organization under subsection (a) above may be
paid at an annual rate of up to 0.25% of the average daily net assets
attributable to the outstanding B Shares of each of the Funds, which B Shares
are owned of record or beneficially by that Service Organization's customers for
whom such Service Organization is the dealer of record or shareholder of record
or with whom it has a servicing relationship. Such fees shall be calculated and
accrued daily, paid monthly and computed in the manner set forth in the
Servicing Agreement.
(c) "Administrative Support Services" include but are not limited to: (i)
processing dividend and distribution payments on behalf of customers; (ii)
arranging for bank wires; (iii) providing subaccounting with respect to Series B
Shares beneficially owned by customers or the information necessary to the
Company for subaccounting; (iv) if required by law, forwarding shareholder
communications from the Company (such as proxies; shareholder reports; annual
and semi-annual financial statements and dividends; and distribution and tax
notices to customers); (v) assisting in processing purchase, exchange and
redemption requests from customers and in placing such orders with the Company's
service contractors; (vi) assisting customers in changing dividend options,
account designations and addresses; (vii) providing such other similar services
as the Company may reasonably request to the extent the Service Organization is
permitted to do so under applicable statutes, rules and regulations; provided,
however, that such term does not include "personal service and/or the
maintenance of shareholder accounts" within the meaning of the Rules of Fair
Practice of the National Association of Securities Dealers, Inc., such as
responding to customers' inquiries and providing information on their
investments ("Shareholder Liaison Services").
Section 3. Expenses Allocated; Compliance.
-------------------------------
Amounts paid by a Fund under the Plan must be for services rendered for or
on behalf of the holders of such Fund's B Shares.
Section 4. Reports to Company.
-------------------
Firstar Mutual Fund Services, LLC ("Firstar") shall monitor the arrangement
pertaining to Firstar Funds' agreements with Service Organizations in accordance
with the terms of Firstar's agreement with Firstar Funds. Firstar Funds shall
not be obligated to execute any Agreement with any qualifying Service
Organization. So long as this Plan is in effect, Firstar shall provide the
Company's Board of Directors, and the Directors shall review, at least
quarterly, a written report of the amounts expended pursuant to the Plan and the
purposes for which such expenditures were made.
Section 5. Approval of Plan.
-----------------
This Plan will become effective with respect to a particular Fund's B
Shares on the date the public offering of B Shares commences upon the approval
by a majority of the Board of Directors, including a majority of those Directors
who are not "interested persons" (as defined in the 1940 Act) of the Company and
who have no direct or indirect financial interest in the operation of the Plan
or in any agreements entered into in connection with the Plan (the
"Disinterested Directors"), pursuant to a vote cast in person at a meeting
called for the purpose of voting on the approval of the Plan.
Section 6. Continuance of Plan.
--------------------
Unless sooner terminated in accordance with the terms hereof, this Plan shall
continue until February 29, 2000, and thereafter for so long as its continuance
is specifically approved at least annually by the Company's Board of Directors
in the manner described in Section 5 hereof.
Section 7. Amendments.
-----------
This Plan may be amended at any time by the Board of Directors provided
that any material amendments of the terms of the Plan shall become effective
only upon approval in the manner described in Section 5 hereof.
Section 8. Termination.
------------
This Plan, as to any Fund, is terminable without penalty at any time by a
vote of a majority of the Disinterested Directors.
Section 9. Miscellaneous.
--------------
The captions in this Agreement are included for convenience of reference
only and in no way define or delimit any of the provisions hereof or otherwise
affect their construction or effect.
IN WITNESS WHEREOF, the Company has originally adopted this Plan as of
February 28, 1999 on behalf of the Funds.
FIRSTAR FUNDS, INC.
By: Laura J. Rauman
Exhibit (o)(2)
FIRSTAR FUNDS, INC.
(THE "COMPANY")
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. This Amended and Restated Plan pursuant to Rule
18f-3 for operation of a multi-series system was approved by the Board of
Directors of the Company on December 18, 1998, becomes effective on March 1,
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 and
Emerging Growth 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 and Emerging Growth 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 shall be offered to (i)
all trust, agency or custodial accounts opened through trust companies or trust
departments affiliated with Firstar Corporation, (ii) all employer-sponsored
qualified retirement plans, except as otherwise set forth in the applicable
prospectus, as amended or supplemented from time to time, (iii) all clients of
Firstar Investment Research & Management Company and (iv) other investors as may
be approved from time to time by the Company's Board of Directors.
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 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 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 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
--------------------
-7-
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.
Exhibit (I)(1)
February 23, 1999
Firstar Funds, Inc.
Firstar Funds Center
615 East Michigan Street
Milwaukee, WI 53201-3011
Re: Firstar Funds, Inc. - Classes 1 through 30 Common Stock
-------------------------------------------------------
Gentlemen:
We have acted as counsel for Firstar Funds, Inc., a Wisconsin corporation
("Firstar"), in connection with the registration by Firstar of its shares of
common stock, par value $.0001 per share. The Articles of Incorporation of
Firstar authorize the issuance of one hundred fifty billion (150,000,000,000)
shares of common stock, which are divided into thirty (30) classes, designated
as Classes 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19,
20, 21, 22, 23, 24, 25, 26, 27, 28, 29 and 30, respectively (each, a "Class" and
collectively, the "Classes"). The Board of Directors of Firstar (the "Board")
has previously classified certain of the shares of common stock of each of
Classes 1 through 5 into two series, designated as Institutional Series and
Series A, and has previously classified certain of the shares of Common Stock of
each of Classes 6 through 18 into three series, designated as Institutional
Series, Series A and Series B, and has previously authorized the issuance of
shares of these series to the public. The shares of Common Stock designated into
each such series are referred to herein as the "Current Series Common Stock";
the shares of Common Stock that are not designated into series are referred to
herein as the "Future Common Stock"; and the Current Series Common Stock and the
Future Common Stock are referred to collectively herein as the "Common Stock."
You have asked for our opinion on certain matters relating to the Common Stock.
We have reviewed Firstar's Articles of Incorporation and By-laws,
resolutions of Firstar's Board, certificates of public officials and of
Firstar's officers and such other legal and factual matters as we have deemed
appropriate. We have also reviewed Firstar's Registration Statement on Form N-
1A under the Securities Act of 1933 (the "Registration Statement"), as amended
through Post-Effective Amendment No. 36 thereto.
This opinion is based exclusively on the laws of the State of Wisconsin and
the federal law of the United States of America. We have relied on an opinion
of Foley & Lardner, special Wisconsin counsel to Firstar, insofar as our opinion
relates to matters arising under the laws of the State of Wisconsin.
We have also assumed the following for purposes of this opinion:
1. The shares of Current Series Common Stock have been, and will continue
to be, issued in accordance with the Articles of Incorporation and By-laws of
Firstar and resolutions of Firstar's Board and shareholders relating to the
creation, authorization and issuance of the Current Series Common Stock.
2. Prior to the issuance of any shares of Future Common Stock, the Board
(a) will duly authorize the issuance of such Future Common Stock, (b) will
determine with respect to each class of such Future Common Stock the
preferences, limitations and relative rights applicable thereto and (c) if such
Future Common Stock is classified into separate series, will duly take the
action necessary (i) to create such series and to determine the number of shares
of such series and the relative designations, preferences, limitations and
relative rights thereof ("Future Series Designations") and (ii) to amend
Firstar's Articles of Incorporation to provide for such additional series.
3. With respect to the shares of Future Common Stock, there will be
compliance with the terms, conditions and restrictions applicable to the
issuance of such shares that are set forth in (i) Firstar's Articles of
Incorporation and By-laws, each as amended as of the date of such issuance, and
(ii) the applicable Future Series Designations.
4. The Board will not change the number of shares of any series of Common
Stock, or the preferences, limitations or relative rights of any class or series
of Common Stock after any shares of such class or series have been issued.
Based upon the foregoing, we are of the opinion that:
1. Firstar is authorized to issue (a) the number of shares of each of
Classes 1 through 30 of its Common Stock set forth in the table below, (b) the
number of shares of each series of Current Series Common Stock set forth in the
table below, and (c) the number of shares of each of Classes 1 through 30 of its
Common Stock unclassified as to series set forth in the table below:
(b) and (c)
Shares in Series
(a) and Shares Unclassified
Class Shares in Class as to Series
- ----- --------------- -----------------------
1 20,000,000,000
1-Institutional 5,000,000,000
1-A 5,000,000,000
1-Unclassified as to Series 10,000,000,000
2 20,000,000,000
2-Institutional 5,000,000,000
2-A 5,000,000,000
2-Unclassified as to Series 10,000,000,000
3 20,000,000,000
3-Institutional 5,000,000,000
3-A 5,000,000,000
3-Unclassified as to Series 10,000,000,000
4 20,000,000,000
4-Institutional 5,000,000,000
4-A 5,000,000,000
4-Unclassified as to Series 10,000,000,000
5 20,000,000,000
5-Institutional 5,000,000,000
5-A 5,000,000,000
5-Unclassified as to Series 10,000,000,000
6 2,000,000,000
6-Institutional 500,000,000
6-A 500,000,000
6-B 500,000,000
6-Unclassified as to Series 500,000,000
7 2,000,000,000
7-Institutional 500,000,000
7-A 500,000,000
7-B 500,000,000
7-Unclassified as to Series 500,000,000
8 2,000,000,000
8-Institutional 500,000,000
8-A 500,000,000
8-B 500,000,000
8-Unclassified as to Series 500,000,000
9 2,000,000,000
9-Institutional 500,000,000
9-A 500,000,000
9-B 500,000,000
9-Unclassified as to Series 500,000,000
10 2,000,000,000
10-Institutional 500,000,000
10-A 500,000,000
10-B 500,000,000
10-Unclassified as to Series 500,000,000
11 2,000,000,000
11-Institutional 500,000,000
11-A 500,000,000
11-B 500,000,000
11-Unclassified as to Series 500,000,000
12 2,000,000,000
12-Institutional 500,000,000
12-A 500,000,000
12-B 500,000,000
12-Unclassified as to Series 500,000,000
13 2,000,000,000
13-Institutional 500,000,000
13-A 500,000,000
13-B 500,000,000
13-Unclassified as to Series 500,000,000
14 2,000,000,000
14-Institutional 500,000,000
14-A 500,000,000
14-B 500,000,000
14-Unclassified as to Series 500,000,000
15 2,000,000,000
15-Institutional 500,000,000
15-A 500,000,000
15-B 500,000,000
15-Unclassified as to Series 500,000,000
16 2,000,000,000
16-Institutional 50,000,000
16-A 50,000,000
16-B 50,000,000
16-Unclassified as to Series 1,850,000,000
17 2,000,000,000
17-Institutional 100,000,000
17-A 100,000,000
17-B 100,000,000
17-Unclassified as to Series 1,700,000,000
18 2,000,000,000
18-Institutional 100,000,000
18-A 100,000,000
18-B 100,000,000
18-Unclassified as to Series 1,700,000,000
19 All Unclassified as to Series 2,000,000,000
20 All Unclassified as to Series 2,000,000,000
21 All Unclassified as to Series 2,000,000,000
22 All Unclassified as to Series 2,000,000,000
23 All Unclassified as to Series 2,000,000,000
24 All Unclassified as to Series 2,000,000,000
25 All Unclassified as to Series 2,000,000,000
26 All Unclassified as to Series 2,000,000,000
27 All Unclassified as to Series 2,000,000,000
28 All Unclassified as to Series 2,000,000,000
29 All Unclassified as to Series 2,000,000,000
30 All Unclassified as to Series 2,000,000,000
2. Firstar's Board is authorized (i) to create from time to time one or
more additional series of shares in any or all of its thirty Classes of Common
Stock, (ii) to determine, at the time of creation of any such series, the number
of shares of such series and the designations, preferences, limitations and
relative rights thereof and (iii) to amend the Articles of Incorporation to
provide for such additional series.
3. All necessary action by Firstar to authorize the Current Series Common
Stock has been taken, and Firstar has the power to issue the shares of Current
Series Common Stock.
4. The shares of Common Stock will be, when issued in accordance with, and
sold for the consideration described in, the Registration Statement (provided
that (i) the price of such shares is not less than the par value thereof and
(ii) the number of shares of any class or series issued does not exceed the
authorized number of shares for such class or series as of the date of issuance
of the shares), validly issued, fully paid and (except as provided in Section
180.0622(2)(b) of the Wisconsin Business Corporation Law and judicial
interpretations thereof) non-assessable by Firstar.
We consent to the filing of this opinion with Post-Effective Amendment No.
36 to the Registration Statement to be filed by Firstar with the Securities and
Exchange Commission.
Very truly yours,
/s/ DRINKER BIDDLE & REATH LLP
------------------------------
DRINKER BIDDLE & REATH LLP
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. 36 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
February 26, 1999
Exhibit (j)(2)
PROPOSED AUDITOR'S CONSENT FOR PEA #36
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses and
Statements of Additional Information constituting parts of this Post-Effective
Amendment No. 36 to the registration statement on Form N-1A (the "Registration
Statement") of our reports dated December 8, 1998, relating to the financial
statements and financial highlights appearing in the October 31, 1998 Annual
Reports to Shareholders of Firstar Money Market Fund, Firstar U.S. Treasury
Money Market Fund, Firstar U.S. Government Money Market Fund, Firstar Tax-Exempt
Money Market Fund, Firstar Institutional Money Market Fund, Firstar Short-Term
Bond Market Fund, Firstar Intermediate Bond Market Fund, Firstar Tax-Exempt
Intermediate Bond Fund, Firstar Bond IMMDEX Fund, Firstar Balanced Growth Fund
(formerly known as the Balanced Fund), Firstar Balanced Income Fund, Firstar
Growth and Income Fund, Firstar Equity Index Fund, Firstar Growth Fund (formerly
know as the MidCore Growth Fund), Firstar Special Growth Fund, Firstar
International Equity Fund, Firstar MicroCap Fund, and Firstar Emerging Growth
Fund (portfolios of Firstar Funds, Inc.) which are also incorporated by
reference into the Registration Statement. We also consent to the references to
us under the heading "Financial Highlights" in each Prospectus and under the
heading "Independent Accountants" in each Statement of Additional Information.
/s/PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
February 26, 1999
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000824612
<NAME> FIRSTAR FUNDS, INC.
<SERIES>
<NUMBER> 010
<NAME> FIRSTAR MONEY MARKET FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 290,255
<INVESTMENTS-AT-VALUE> 290,255
<RECEIVABLES> 149
<ASSETS-OTHER> 16
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 290,420
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,332
<TOTAL-LIABILITIES> 1,332
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 289,088
<SHARES-COMMON-STOCK> 289,088
<SHARES-COMMON-PRIOR> 261,017
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 289,088
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 14,720
<OTHER-INCOME> 0
<EXPENSES-NET> (1,563)
<NET-INVESTMENT-INCOME> 13,157
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 13,157
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (13,157)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 630,330
<NUMBER-OF-SHARES-REDEEMED> (615,513)
<SHARES-REINVESTED> 11,254
<NET-CHANGE-IN-ASSETS> 28,071
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,302
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,241
<AVERAGE-NET-ASSETS> 260,456
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.05)
<PER-SHARE-DISTRIBUTIONS> .00
<RETURNS-OF-CAPITAL> .00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000824612
<NAME> FIRSTAR FUNDS, INC.
<SERIES>
<NUMBER> 020
<NAME> FIRSTAR U.S. GOVERNMENT MONEY MARKET FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 233,612
<INVESTMENTS-AT-VALUE> 233,612
<RECEIVABLES> 575
<ASSETS-OTHER> 5
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 234,192
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,016
<TOTAL-LIABILITIES> 1,016
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 233,176
<SHARES-COMMON-STOCK> 233,176
<SHARES-COMMON-PRIOR> 198,592
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 233,176
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 10,866
<OTHER-INCOME> 0
<EXPENSES-NET> (1,183)
<NET-INVESTMENT-INCOME> 9,683
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 9,683
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (9,608)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 829,540
<NUMBER-OF-SHARES-REDEEMED> (797,563)
<SHARES-REINVESTED> 2,532
<NET-CHANGE-IN-ASSETS> 34,584
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 986
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1404
<AVERAGE-NET-ASSETS> 197,147
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.05)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000824612
<NAME> FIRSTAR FUNDS, INC.
<SERIES>
<NUMBER> 030
<NAME> FIRSTAR TAX-EXEMPT MONEY MARKET FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 121,867
<INVESTMENTS-AT-VALUE> 121,867
<RECEIVABLES> 950
<ASSETS-OTHER> 6
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 122,823
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 372
<TOTAL-LIABILITIES> 372
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 122,451
<SHARES-COMMON-STOCK> 122,451
<SHARES-COMMON-PRIOR> 108,639
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 122,451
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,922
<OTHER-INCOME> 0
<EXPENSES-NET> (651)
<NET-INVESTMENT-INCOME> 3,271
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 3,271
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3,271)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 249,502
<NUMBER-OF-SHARES-REDEEMED> (236,848)
<SHARES-REINVESTED> 1,158
<NET-CHANGE-IN-ASSETS> 13,812
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 542
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 816
<AVERAGE-NET-ASSETS> 108,479
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.03)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000824612
<NAME> FIRSTAR FUNDS, INC.
<SERIES>
<NUMBER> 041
<NAME> FIRSTAR SHORT-TERM BOND MARKET FUND - INSTITUTIONAL SERIES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 196,022
<INVESTMENTS-AT-VALUE> 198,077
<RECEIVABLES> 2,830
<ASSETS-OTHER> 12
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 200,919
<PAYABLE-FOR-SECURITIES> 4,303
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 513
<TOTAL-LIABILITIES> 4,816
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 196,294
<SHARES-COMMON-STOCK> 11,668
<SHARES-COMMON-PRIOR> 13,248
<ACCUMULATED-NII-CURRENT> 85
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,331)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,055
<NET-ASSETS> 120,693
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 11,549
<OTHER-INCOME> 0
<EXPENSES-NET> (1,070)
<NET-INVESTMENT-INCOME> 10,479
<REALIZED-GAINS-CURRENT> 309
<APPREC-INCREASE-CURRENT> 920
<NET-CHANGE-FROM-OPS> 11,708
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (6,580)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,455
<NUMBER-OF-SHARES-REDEEMED> (6,475)
<SHARES-REINVESTED> 440
<NET-CHANGE-IN-ASSETS> (5,548)
<ACCUMULATED-NII-PRIOR> 62
<ACCUMULATED-GAINS-PRIOR> (2,633)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,080
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,726
<AVERAGE-NET-ASSETS> 111,868
<PER-SHARE-NAV-BEGIN> 10.27
<PER-SHARE-NII> 0.61
<PER-SHARE-GAIN-APPREC> 0.07
<PER-SHARE-DIVIDEND> (0.61)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.34
<EXPENSE-RATIO> 0.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000824612
<NAME> FIRSTAR FUNDS, INC.
<SERIES>
<NUMBER> 042
<NAME> FIRSTAR SHORT-TERM BOND MARKET FUND - RETAIL SERIES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 196,022
<INVESTMENTS-AT-VALUE> 198,077
<RECEIVABLES> 2,830
<ASSETS-OTHER> 12
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 200,919
<PAYABLE-FOR-SECURITIES> 4,303
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 513
<TOTAL-LIABILITIES> 4,816
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 196,294
<SHARES-COMMON-STOCK> 7,291
<SHARES-COMMON-PRIOR> 6,383
<ACCUMULATED-NII-CURRENT> 85
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,331)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,055
<NET-ASSETS> 75,410
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 11,549
<OTHER-INCOME> 0
<EXPENSES-NET> (1,070)
<NET-INVESTMENT-INCOME> 10,479
<REALIZED-GAINS-CURRENT> 309
<APPREC-INCREASE-CURRENT> 920
<NET-CHANGE-FROM-OPS> 11,708
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3,882)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,052
<NUMBER-OF-SHARES-REDEEMED> (2,499)
<SHARES-REINVESTED> 355
<NET-CHANGE-IN-ASSETS> (5,548)
<ACCUMULATED-NII-PRIOR> 62
<ACCUMULATED-GAINS-PRIOR> (2,633)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,080
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,726
<AVERAGE-NET-ASSETS> 68,035
<PER-SHARE-NAV-BEGIN> 10.27
<PER-SHARE-NII> 0.58
<PER-SHARE-GAIN-APPREC> 0.07
<PER-SHARE-DIVIDEND> (0.58)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.34
<EXPENSE-RATIO> 0.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000824612
<NAME> FIRSTAR FUNDS, INC.
<SERIES>
<NUMBER> 051
<NAME> FIRSTAR BOND IMMDEX FUND - INSTITUTIONAL SERIES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 532,830
<INVESTMENTS-AT-VALUE> 568,708
<RECEIVABLES> 10,546
<ASSETS-OTHER> 19
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 579,273
<PAYABLE-FOR-SECURITIES> 11,772
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 775
<TOTAL-LIABILITIES> 12,547
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 530,760
<SHARES-COMMON-STOCK> 16,243
<SHARES-COMMON-PRIOR> 14,487
<ACCUMULATED-NII-CURRENT> 292
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (204)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 35,878
<NET-ASSETS> 471,425
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 33,382
<OTHER-INCOME> 0
<EXPENSES-NET> (2,363)
<NET-INVESTMENT-INCOME> 31,019
<REALIZED-GAINS-CURRENT> 512
<APPREC-INCREASE-CURRENT> 15,260
<NET-CHANGE-FROM-OPS> 46,791
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (26,368)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,214
<NUMBER-OF-SHARES-REDEEMED> (4,217)
<SHARES-REINVESTED> 759
<NET-CHANGE-IN-ASSETS> 94,564
<ACCUMULATED-NII-PRIOR> 158
<ACCUMULATED-GAINS-PRIOR> (697)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,551
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,728
<AVERAGE-NET-ASSETS> 439,454
<PER-SHARE-NAV-BEGIN> 28.16
<PER-SHARE-NII> 1.72
<PER-SHARE-GAIN-APPREC> 0.85
<PER-SHARE-DIVIDEND> (1.71)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 29.02
<EXPENSE-RATIO> 0.42
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000824612
<NAME> FIRSTAR FUNDS, INC.
<SERIES>
<NUMBER> 052
<NAME> FIRSTAR BOND IMMDEX FUND - RETAIL SERIES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 532,830
<INVESTMENTS-AT-VALUE> 568,708
<RECEIVABLES> 10,546
<ASSETS-OTHER> 19
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 579,273
<PAYABLE-FOR-SECURITIES> 11,772
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 775
<TOTAL-LIABILITIES> 12,547
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 530,760
<SHARES-COMMON-STOCK> 3,285
<SHARES-COMMON-PRIOR> 2,278
<ACCUMULATED-NII-CURRENT> 292
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (204)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 35,878
<NET-ASSETS> 95,301
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 33,382
<OTHER-INCOME> 0
<EXPENSES-NET> (2,363)
<NET-INVESTMENT-INCOME> 31,019
<REALIZED-GAINS-CURRENT> 512
<APPREC-INCREASE-CURRENT> 15,260
<NET-CHANGE-FROM-OPS> 46,791
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4,535)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,403
<NUMBER-OF-SHARES-REDEEMED> (534)
<SHARES-REINVESTED> 138
<NET-CHANGE-IN-ASSETS> 94,564
<ACCUMULATED-NII-PRIOR> 158
<ACCUMULATED-GAINS-PRIOR> (697)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,551
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,728
<AVERAGE-NET-ASSETS> 78,212
<PER-SHARE-NAV-BEGIN> 28.16
<PER-SHARE-NII> 1.64
<PER-SHARE-GAIN-APPREC> 0.85
<PER-SHARE-DIVIDEND> (1.64)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 29.01
<EXPENSE-RATIO> 0.67
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000824612
<NAME> FIRSTAR FUNDS, INC.
<SERIES>
<NUMBER> 061
<NAME> FIRSTAR GROWTH AND INCOME FUND - INSTITUTIONAL SERIES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 468,009
<INVESTMENTS-AT-VALUE> 657,749
<RECEIVABLES> 13,415
<ASSETS-OTHER> 30
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 671,194
<PAYABLE-FOR-SECURITIES> 4,953
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,307
<TOTAL-LIABILITIES> 6,260
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 425,586
<SHARES-COMMON-STOCK> 10,674
<SHARES-COMMON-PRIOR> 9,319
<ACCUMULATED-NII-CURRENT> 910
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 48,698
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 189,740
<NET-ASSETS> 474,603
<DIVIDEND-INCOME> 9,037
<INTEREST-INCOME> 2,856
<OTHER-INCOME> 12
<EXPENSES-NET> (5,664)
<NET-INVESTMENT-INCOME> 6,241
<REALIZED-GAINS-CURRENT> 48,714
<APPREC-INCREASE-CURRENT> 37,014
<NET-CHANGE-FROM-OPS> 91,969
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4,463)
<DISTRIBUTIONS-OF-GAINS> (13,098)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,600
<NUMBER-OF-SHARES-REDEEMED> (2,614)
<SHARES-REINVESTED> 369
<NET-CHANGE-IN-ASSETS> 170,844
<ACCUMULATED-NII-PRIOR> 535
<ACCUMULATED-GAINS-PRIOR> 17,697
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,513
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,088
<AVERAGE-NET-ASSETS> 436,272
<PER-SHARE-NAV-BEGIN> 39.28
<PER-SHARE-NII> 0.47
<PER-SHARE-GAIN-APPREC> 6.55
<PER-SHARE-DIVIDEND> (0.45)
<PER-SHARE-DISTRIBUTIONS> (1.39)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 44.46
<EXPENSE-RATIO> 0.87
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000824612
<NAME> FIRSTAR FUNDS, INC.
<SERIES>
<NUMBER> 062
<NAME> FIRSTAR GROWTH AND INCOME FUND - RETAIL SERIES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 468,009
<INVESTMENTS-AT-VALUE> 657,749
<RECEIVABLES> 13,415
<ASSETS-OTHER> 30
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 671,194
<PAYABLE-FOR-SECURITIES> 4,953
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,307
<TOTAL-LIABILITIES> 6,260
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 425,586
<SHARES-COMMON-STOCK> 4,286
<SHARES-COMMON-PRIOR> 3,264
<ACCUMULATED-NII-CURRENT> 910
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 48,698
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 189,740
<NET-ASSETS> 190,331
<DIVIDEND-INCOME> 9,037
<INTEREST-INCOME> 2,856
<OTHER-INCOME> 12
<EXPENSES-NET> (5,664)
<NET-INVESTMENT-INCOME> 6,241
<REALIZED-GAINS-CURRENT> 48,714
<APPREC-INCREASE-CURRENT> 37,014
<NET-CHANGE-FROM-OPS> 91,969
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,343)
<DISTRIBUTIONS-OF-GAINS> (4,638)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,359
<NUMBER-OF-SHARES-REDEEMED> (483)
<SHARES-REINVESTED> 146
<NET-CHANGE-IN-ASSETS> 170,844
<ACCUMULATED-NII-PRIOR> 535
<ACCUMULATED-GAINS-PRIOR> 17,697
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,513
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,088
<AVERAGE-NET-ASSETS> 166,313
<PER-SHARE-NAV-BEGIN> 39.24
<PER-SHARE-NII> 0.36
<PER-SHARE-GAIN-APPREC> 6.55
<PER-SHARE-DIVIDEND> (0.35)
<PER-SHARE-DISTRIBUTIONS> (1.39)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 44.41
<EXPENSE-RATIO> 1.12
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000824612
<NAME> FIRSTAR FUNDS, INC.
<SERIES>
<NUMBER> 071
<NAME> FIRSTAR EQUITY INDEX FUND - INSTITUTIONAL SERIES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 331,009
<INVESTMENTS-AT-VALUE> 563,662
<RECEIVABLES> 1,456
<ASSETS-OTHER> 51
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 565,169
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,288
<TOTAL-LIABILITIES> 2,288
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 326,978
<SHARES-COMMON-STOCK> 6,064
<SHARES-COMMON-PRIOR> 5,000
<ACCUMULATED-NII-CURRENT> 621
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 844
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 234,438
<NET-ASSETS> 452,752
<DIVIDEND-INCOME> 7,195
<INTEREST-INCOME> 1,660
<OTHER-INCOME> 6
<EXPENSES-NET> (1,916)
<NET-INVESTMENT-INCOME> 6,945
<REALIZED-GAINS-CURRENT> 1,439
<APPREC-INCREASE-CURRENT> 81,804
<NET-CHANGE-FROM-OPS> 90,188
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5,682)
<DISTRIBUTIONS-OF-GAINS> (5,759)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,167
<NUMBER-OF-SHARES-REDEEMED> (1,252)
<SHARES-REINVESTED> 150
<NET-CHANGE-IN-ASSETS> 170,256
<ACCUMULATED-NII-PRIOR> 513
<ACCUMULATED-GAINS-PRIOR> 6,560
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,256
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,449
<AVERAGE-NET-ASSETS> 405,711
<PER-SHARE-NAV-BEGIN> 63.16
<PER-SHARE-NII> 1.02
<PER-SHARE-GAIN-APPREC> 12.59
<PER-SHARE-DIVIDEND> (1.00)
<PER-SHARE-DISTRIBUTIONS> (1.11)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 74.66
<EXPENSE-RATIO> 0.33
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000824612
<NAME> FIRSTAR FUNDS, INC.
<SERIES>
<NUMBER> 072
<NAME> FIRSTAR EQUITY INDEX FUND - RETAIL SERIES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 331,009
<INVESTMENTS-AT-VALUE> 563,662
<RECEIVABLES> 1,456
<ASSETS-OTHER> 51
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 565,169
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,288
<TOTAL-LIABILITIES> 2,288
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 326,978
<SHARES-COMMON-STOCK> 1,477
<SHARES-COMMON-PRIOR> 1,218
<ACCUMULATED-NII-CURRENT> 621
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 844
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 234,438
<NET-ASSETS> 110,129
<DIVIDEND-INCOME> 7,195
<INTEREST-INCOME> 1,660
<OTHER-INCOME> 6
<EXPENSES-NET> (1,916)
<NET-INVESTMENT-INCOME> 6,945
<REALIZED-GAINS-CURRENT> 1,439
<APPREC-INCREASE-CURRENT> 81,804
<NET-CHANGE-FROM-OPS> 90,188
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,155)
<DISTRIBUTIONS-OF-GAINS> (1,399)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 428
<NUMBER-OF-SHARES-REDEEMED> (206)
<SHARES-REINVESTED> 37
<NET-CHANGE-IN-ASSETS> 170,256
<ACCUMULATED-NII-PRIOR> 513
<ACCUMULATED-GAINS-PRIOR> 6,560
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,256
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,449
<AVERAGE-NET-ASSETS> 97,756
<PER-SHARE-NAV-BEGIN> 63.11
<PER-SHARE-NII> 0.84
<PER-SHARE-GAIN-APPREC> 12.58
<PER-SHARE-DIVIDEND> (0.84)
<PER-SHARE-DISTRIBUTIONS> (1.11)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 74.58
<EXPENSE-RATIO> 0.58
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000824612
<NAME> FIRSTAR FUNDS, INC.
<SERIES>
<NUMBER> 081
<NAME> FIRSTAR SPECIAL GROWTH FUND - INSTITUTIONAL SERIES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 465,653
<INVESTMENTS-AT-VALUE> 605,308
<RECEIVABLES> 4,710
<ASSETS-OTHER> 31
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 610,049
<PAYABLE-FOR-SECURITIES> 4,428
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,617
<TOTAL-LIABILITIES> 9,045
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 458,626
<SHARES-COMMON-STOCK> 12,230
<SHARES-COMMON-PRIOR> 12,729
<ACCUMULATED-NII-CURRENT> (2)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,725
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 139,655
<NET-ASSETS> 464,858
<DIVIDEND-INCOME> 1,797
<INTEREST-INCOME> 2,028
<OTHER-INCOME> 80
<EXPENSES-NET> (6,531)
<NET-INVESTMENT-INCOME> (2,626)
<REALIZED-GAINS-CURRENT> 3,773
<APPREC-INCREASE-CURRENT> (33,543)
<NET-CHANGE-FROM-OPS> (32,396)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (56,822)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,750
<NUMBER-OF-SHARES-REDEEMED> (4,477)
<SHARES-REINVESTED> 1,228
<NET-CHANGE-IN-ASSETS> (115,420)
<ACCUMULATED-NII-PRIOR> (2)
<ACCUMULATED-GAINS-PRIOR> 70,433
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,243
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7,024
<AVERAGE-NET-ASSETS> 545,320
<PER-SHARE-NAV-BEGIN> 44.70
<PER-SHARE-NII> (0.14)
<PER-SHARE-GAIN-APPREC> (2.09)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (4.46)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 38.01
<EXPENSE-RATIO> 0.88
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000824612
<NAME> FIRSTAR FUNDS, INC.
<SERIES>
<NUMBER> 082
<NAME> FIRSTAR SPECIAL GROWTH FUND - RETAIL SERIES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 465,653
<INVESTMENTS-AT-VALUE> 605,308
<RECEIVABLES> 4,710
<ASSETS-OTHER> 31
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 610,049
<PAYABLE-FOR-SECURITIES> 4,428
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,617
<TOTAL-LIABILITIES> 9,045
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 458,626
<SHARES-COMMON-STOCK> 3,622
<SHARES-COMMON-PRIOR> 3,323
<ACCUMULATED-NII-CURRENT> (2)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,725
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 139,655
<NET-ASSETS> 136,146
<DIVIDEND-INCOME> 1,797
<INTEREST-INCOME> 2,028
<OTHER-INCOME> 80
<EXPENSES-NET> (6,531)
<NET-INVESTMENT-INCOME> (2,626)
<REALIZED-GAINS-CURRENT> 3,773
<APPREC-INCREASE-CURRENT> (33,543)
<NET-CHANGE-FROM-OPS> (32,396)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (14,736)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 820
<NUMBER-OF-SHARES-REDEEMED> (878)
<SHARES-REINVESTED> 357
<NET-CHANGE-IN-ASSETS> (115,420)
<ACCUMULATED-NII-PRIOR> (2)
<ACCUMULATED-GAINS-PRIOR> 70,433
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,243
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7,024
<AVERAGE-NET-ASSETS> 153,303
<PER-SHARE-NAV-BEGIN> 44.36
<PER-SHARE-NII> (0.24)
<PER-SHARE-GAIN-APPREC> (2.07)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (4.46)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 37.59
<EXPENSE-RATIO> 1.13
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000824612
<NAME> FIRSTAR FUNDS, INC.
<SERIES>
<NUMBER> 090
<NAME> FIRSTAR INSTITUTIONAL MONEY MARKET FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 1,628,569
<INVESTMENTS-AT-VALUE> 1,628,569
<RECEIVABLES> 1,589
<ASSETS-OTHER> 18
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,630,176
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6,206
<TOTAL-LIABILITIES> 6,206
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,623,970
<SHARES-COMMON-STOCK> 1,623,970
<SHARES-COMMON-PRIOR> 1,201,341
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,623,970
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 69,037
<OTHER-INCOME> 0
<EXPENSES-NET> (4,276)
<NET-INVESTMENT-INCOME> 64,761
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 64,761
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (64,761)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,302,686
<NUMBER-OF-SHARES-REDEEMED> (2,885,096)
<SHARES-REINVESTED> 5,039
<NET-CHANGE-IN-ASSETS> 422,629
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6,109
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7,878
<AVERAGE-NET-ASSETS> 1,221,706
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.05)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .035
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000824612
<NAME> FIRSTAR FUNDS, INC.
<SERIES>
<NUMBER> 100
<NAME> FIRSTAR U.S. TREASURY MONEY MARKET FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 110,309
<INVESTMENTS-AT-VALUE> 110,309
<RECEIVABLES> 1,778
<ASSETS-OTHER> 8
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 112,095
<PAYABLE-FOR-SECURITIES> 19,809
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 414
<TOTAL-LIABILITIES> 20,223
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 91,872
<SHARES-COMMON-STOCK> 91,872
<SHARES-COMMON-PRIOR> 78,478
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 91,872
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,044
<OTHER-INCOME> 0
<EXPENSES-NET> (465)
<NET-INVESTMENT-INCOME> 3,579
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 3,579
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3,579)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 266,098
<NUMBER-OF-SHARES-REDEEMED> (253,094)
<SHARES-REINVESTED> 390
<NET-CHANGE-IN-ASSETS> 13,394
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 387
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 594
<AVERAGE-NET-ASSETS> 77,454
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.05)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000824612
<NAME> FIRSTAR FUNDS, INC.
<SERIES>
<NUMBER> 111
<NAME> FIRSTAR BALANCED GROWTH FUND - INSTITUTIONAL SERIES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 209,436
<INVESTMENTS-AT-VALUE> 249,841
<RECEIVABLES> 3,519
<ASSETS-OTHER> 20
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 253,380
<PAYABLE-FOR-SECURITIES> 5,350
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 250
<TOTAL-LIABILITIES> 5,600
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 199,861
<SHARES-COMMON-STOCK> 6,302
<SHARES-COMMON-PRIOR> 5,388
<ACCUMULATED-NII-CURRENT> 373
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7,141
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 40,405
<NET-ASSETS> 188,123
<DIVIDEND-INCOME> 693
<INTEREST-INCOME> 6,078
<OTHER-INCOME> 22
<EXPENSES-NET> (1,885)
<NET-INVESTMENT-INCOME> 4,908
<REALIZED-GAINS-CURRENT> 7,539
<APPREC-INCREASE-CURRENT> 5,444
<NET-CHANGE-FROM-OPS> 17,891
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3,864)
<DISTRIBUTIONS-OF-GAINS> (13,536)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,111
<NUMBER-OF-SHARES-REDEEMED> (1,798)
<SHARES-REINVESTED> 600
<NET-CHANGE-IN-ASSETS> 39,372
<ACCUMULATED-NII-PRIOR> 460
<ACCUMULATED-GAINS-PRIOR> 16,679
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,749
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,452
<AVERAGE-NET-ASSETS> 178,944
<PER-SHARE-NAV-BEGIN> 30.51
<PER-SHARE-NII> 0.62
<PER-SHARE-GAIN-APPREC> 1.86
<PER-SHARE-DIVIDEND> (0.64)
<PER-SHARE-DISTRIBUTIONS> (2.50)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 29.85
<EXPENSE-RATIO> 0.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000824612
<NAME> FIRSTAR FUNDS, INC.
<SERIES>
<NUMBER> 112
<NAME> FIRSTAR BALANCED GROWTH FUND - RETAIL SERIES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 209,436
<INVESTMENTS-AT-VALUE> 249,841
<RECEIVABLES> 3,519
<ASSETS-OTHER> 20
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 253,380
<PAYABLE-FOR-SECURITIES> 5,350
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 250
<TOTAL-LIABILITIES> 5,600
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 199,861
<SHARES-COMMON-STOCK> 2,001
<SHARES-COMMON-PRIOR> 1,444
<ACCUMULATED-NII-CURRENT> 373
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7,141
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 40,405
<NET-ASSETS> 59,657
<DIVIDEND-INCOME> 693
<INTEREST-INCOME> 6,078
<OTHER-INCOME> 22
<EXPENSES-NET> (1,885)
<NET-INVESTMENT-INCOME> 4,908
<REALIZED-GAINS-CURRENT> 7,539
<APPREC-INCREASE-CURRENT> 5,444
<NET-CHANGE-FROM-OPS> 17,891
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,052)
<DISTRIBUTIONS-OF-GAINS> (3,620)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 660
<NUMBER-OF-SHARES-REDEEMED> (266)
<SHARES-REINVESTED> 163
<NET-CHANGE-IN-ASSETS> 39,372
<ACCUMULATED-NII-PRIOR> 460
<ACCUMULATED-GAINS-PRIOR> 16,679
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,749
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,452
<AVERAGE-NET-ASSETS> 54,399
<PER-SHARE-NAV-BEGIN> 30.48
<PER-SHARE-NII> 0.56
<PER-SHARE-GAIN-APPREC> 1.86
<PER-SHARE-DIVIDEND> (0.58)
<PER-SHARE-DISTRIBUTIONS> (2.50)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 29.82
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000824612
<NAME> FIRSTAR FUNDS, INC.
<SERIES>
<NUMBER> 121
<NAME> FIRSTAR GROWTH FUND - INSTITUTIONAL SERIES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 167,346
<INVESTMENTS-AT-VALUE> 235,176
<RECEIVABLES> 4,129
<ASSETS-OTHER> 19
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 239,324
<PAYABLE-FOR-SECURITIES> 2,959
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 354
<TOTAL-LIABILITIES> 3,313
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 141,456
<SHARES-COMMON-STOCK> 5,488
<SHARES-COMMON-PRIOR> 5,120
<ACCUMULATED-NII-CURRENT> 234
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 26,491
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 67,830
<NET-ASSETS> 197,798
<DIVIDEND-INCOME> 1,128
<INTEREST-INCOME> 1,230
<OTHER-INCOME> 53
<EXPENSES-NET> (2,055)
<NET-INVESTMENT-INCOME> 356
<REALIZED-GAINS-CURRENT> 26,680
<APPREC-INCREASE-CURRENT> 10,510
<NET-CHANGE-FROM-OPS> 37,546
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (185)
<DISTRIBUTIONS-OF-GAINS> (26,481)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,622
<NUMBER-OF-SHARES-REDEEMED> (1,919)
<SHARES-REINVESTED> 665
<NET-CHANGE-IN-ASSETS> 29,318
<ACCUMULATED-NII-PRIOR> 121
<ACCUMULATED-GAINS-PRIOR> 29,222
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,663
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,211
<AVERAGE-NET-ASSETS> 189,343
<PER-SHARE-NAV-BEGIN> 35.48
<PER-SHARE-NII> 0.07
<PER-SHARE-GAIN-APPREC> 5.70
<PER-SHARE-DIVIDEND> (0.03)
<PER-SHARE-DISTRIBUTIONS> (5.17)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 36.05
<EXPENSE-RATIO> 0.89
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000824612
<NAME> FIRSTAR FUNDS, INC.
<SERIES>
<NUMBER> 122
<NAME> FIRSTAR GROWTH FUND - RETAIL SERIES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 167,346
<INVESTMENTS-AT-VALUE> 235,176
<RECEIVABLES> 4,129
<ASSETS-OTHER> 19
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 239,324
<PAYABLE-FOR-SECURITIES> 2,959
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 354
<TOTAL-LIABILITIES> 3,313
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 141,456
<SHARES-COMMON-STOCK> 1,070
<SHARES-COMMON-PRIOR> 710
<ACCUMULATED-NII-CURRENT> 234
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 26,491
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 67,830
<NET-ASSETS> 38,213
<DIVIDEND-INCOME> 1,128
<INTEREST-INCOME> 1,230
<OTHER-INCOME> 53
<EXPENSES-NET> (2,055)
<NET-INVESTMENT-INCOME> 356
<REALIZED-GAINS-CURRENT> 26,680
<APPREC-INCREASE-CURRENT> 10,510
<NET-CHANGE-FROM-OPS> 37,546
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (16)
<DISTRIBUTIONS-OF-GAINS> (3,671)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 367
<NUMBER-OF-SHARES-REDEEMED> (135)
<SHARES-REINVESTED> 118
<NET-CHANGE-IN-ASSETS> 29,318
<ACCUMULATED-NII-PRIOR> 121
<ACCUMULATED-GAINS-PRIOR> 29,222
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,663
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,211
<AVERAGE-NET-ASSETS> 32,603
<PER-SHARE-NAV-BEGIN> 35.27
<PER-SHARE-NII> (0.02)
<PER-SHARE-GAIN-APPREC> 5.66
<PER-SHARE-DIVIDEND> (0.02)
<PER-SHARE-DISTRIBUTIONS> (5.17)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 35.72
<EXPENSE-RATIO> 1.14
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000824612
<NAME> FIRSTAR FUNDS, INC.
<SERIES>
<NUMBER> 131
<NAME> FIRSTAR INTERMEDIATE BOND MARKET FUND - INSTITUTIONAL SERIES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 310,209
<INVESTMENTS-AT-VALUE> 319,501
<RECEIVABLES> 9,311
<ASSETS-OTHER> 13
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 328,825
<PAYABLE-FOR-SECURITIES> 7,197
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 789
<TOTAL-LIABILITIES> 7,986
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 311,041
<SHARES-COMMON-STOCK> 27,732
<SHARES-COMMON-PRIOR> 24,686
<ACCUMULATED-NII-CURRENT> 156
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 350
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9,292
<NET-ASSETS> 291,289
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 18,647
<OTHER-INCOME> 0
<EXPENSES-NET> (1,553)
<NET-INVESTMENT-INCOME> 17,094
<REALIZED-GAINS-CURRENT> 1,171
<APPREC-INCREASE-CURRENT> 4,459
<NET-CHANGE-FROM-OPS> 22,724
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (15,656)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7,928
<NUMBER-OF-SHARES-REDEEMED> 5,674
<SHARES-REINVESTED> 792
<NET-CHANGE-IN-ASSETS> 45,627
<ACCUMULATED-NII-PRIOR> 96
<ACCUMULATED-GAINS-PRIOR> (820)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,491
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,174
<AVERAGE-NET-ASSETS> 273,462
<PER-SHARE-NAV-BEGIN> 10.31
<PER-SHARE-NII> 0.59
<PER-SHARE-GAIN-APPREC> 0.19
<PER-SHARE-DIVIDEND> (0.59)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.50
<EXPENSE-RATIO> 0.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000824612
<NAME> FIRSTAR FUNDS, INC.
<SERIES>
<NUMBER> 132
<NAME> FIRSTAR INTERMEDIATE BOND MARKET FUND - RETAIL SERIES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 310,209
<INVESTMENTS-AT-VALUE> 319,501
<RECEIVABLES> 9,311
<ASSETS-OTHER> 13
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 328,825
<PAYABLE-FOR-SECURITIES> 7,197
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 789
<TOTAL-LIABILITIES> 7,986
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 311,041
<SHARES-COMMON-STOCK> 2,813
<SHARES-COMMON-PRIOR> 2,007
<ACCUMULATED-NII-CURRENT> 156
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 350
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9,292
<NET-ASSETS> 29,550
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 18,647
<OTHER-INCOME> 0
<EXPENSES-NET> (1,553)
<NET-INVESTMENT-INCOME> 17,094
<REALIZED-GAINS-CURRENT> 1,171
<APPREC-INCREASE-CURRENT> 4,459
<NET-CHANGE-FROM-OPS> 22,724
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,379)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,126
<NUMBER-OF-SHARES-REDEEMED> (411)
<SHARES-REINVESTED> 91
<NET-CHANGE-IN-ASSETS> 45,627
<ACCUMULATED-NII-PRIOR> 96
<ACCUMULATED-GAINS-PRIOR> (820)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,491
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,174
<AVERAGE-NET-ASSETS> 24,946
<PER-SHARE-NAV-BEGIN> 10.31
<PER-SHARE-NII> 0.57
<PER-SHARE-GAIN-APPREC> 0.19
<PER-SHARE-DIVIDEND> (0.57)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.50
<EXPENSE-RATIO> 0.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000824612
<NAME> FIRSTAR FUNDS, INC.
<SERIES>
<NUMBER> 141
<NAME> FIRSTAR TAX-EXEMPT INTERMEDIATE BOND FUND - INSTITUTIONAL SE
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 92,357
<INVESTMENTS-AT-VALUE> 94,848
<RECEIVABLES> 4,109
<ASSETS-OTHER> 19
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 98,976
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 83
<TOTAL-LIABILITIES> 83
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 96,298
<SHARES-COMMON-STOCK> 6,315
<SHARES-COMMON-PRIOR> 5,042
<ACCUMULATED-NII-CURRENT> 26
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 78
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,491
<NET-ASSETS> 66,427
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,038
<OTHER-INCOME> 0
<EXPENSES-NET> (486)
<NET-INVESTMENT-INCOME> 3,552
<REALIZED-GAINS-CURRENT> 130
<APPREC-INCREASE-CURRENT> 1,175
<NET-CHANGE-FROM-OPS> 4,857
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,548)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,306
<NUMBER-OF-SHARES-REDEEMED> (2,098)
<SHARES-REINVESTED> 65
<NET-CHANGE-IN-ASSETS> 27,486
<ACCUMULATED-NII-PRIOR> 13
<ACCUMULATED-GAINS-PRIOR> (51)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 425
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 753
<AVERAGE-NET-ASSETS> 60,310
<PER-SHARE-NAV-BEGIN> 10.36
<PER-SHARE-NII> 0.44
<PER-SHARE-GAIN-APPREC> 0.16
<PER-SHARE-DIVIDEND> (0.44)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.52
<EXPENSE-RATIO> 0.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000824612
<NAME> FIRSTAR FUNDS, INC.
<SERIES>
<NUMBER> 142
<NAME> FIRSTAR TAX-EXEMPT INTERMEDIATE BOND FUND - RETAIL SERIES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 92,357
<INVESTMENTS-AT-VALUE> 94,848
<RECEIVABLES> 4,109
<ASSETS-OTHER> 19
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 98,976
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 83
<TOTAL-LIABILITIES> 83
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 96,298
<SHARES-COMMON-STOCK> 3,087
<SHARES-COMMON-PRIOR> 1,854
<ACCUMULATED-NII-CURRENT> 26
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 78
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,491
<NET-ASSETS> 32,446
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,038
<OTHER-INCOME> 0
<EXPENSES-NET> (486)
<NET-INVESTMENT-INCOME> 3,552
<REALIZED-GAINS-CURRENT> 130
<APPREC-INCREASE-CURRENT> 1,175
<NET-CHANGE-FROM-OPS> 4,857
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (991)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,333
<NUMBER-OF-SHARES-REDEEMED> (1,191)
<SHARES-REINVESTED> 91
<NET-CHANGE-IN-ASSETS> 27,486
<ACCUMULATED-NII-PRIOR> 13
<ACCUMULATED-GAINS-PRIOR> (51)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 425
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 753
<AVERAGE-NET-ASSETS> 24,696
<PER-SHARE-NAV-BEGIN> 10.35
<PER-SHARE-NII> 0.41
<PER-SHARE-GAIN-APPREC> 0.17
<PER-SHARE-DIVIDEND> (0.41)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.52
<EXPENSE-RATIO> 0.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000824612
<NAME> FIRSTAR FUNDS, INC.
<SERIES>
<NUMBER> 151
<NAME> FIRSTAR INTERNATIONAL EQUITY FUND - INSTITUTIONAL SERIES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 63,679
<INVESTMENTS-AT-VALUE> 50,099
<RECEIVABLES> 2,692
<ASSETS-OTHER> 13
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 52,804
<PAYABLE-FOR-SECURITIES> 920
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 728
<TOTAL-LIABILITIES> 1,648
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 69,060
<SHARES-COMMON-STOCK> 2,927
<SHARES-COMMON-PRIOR> 3,068
<ACCUMULATED-NII-CURRENT> 866
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (5,191)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (13,579)
<NET-ASSETS> 44,670
<DIVIDEND-INCOME> 1,773
<INTEREST-INCOME> 58
<OTHER-INCOME> 0
<EXPENSES-NET> (976)
<NET-INVESTMENT-INCOME> 855
<REALIZED-GAINS-CURRENT> (5,147)
<APPREC-INCREASE-CURRENT> (7,351)
<NET-CHANGE-FROM-OPS> (11,643)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (277)
<DISTRIBUTIONS-OF-GAINS> (1,122)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 748
<NUMBER-OF-SHARES-REDEEMED> (952)
<SHARES-REINVESTED> 63
<NET-CHANGE-IN-ASSETS> (12,552)
<ACCUMULATED-NII-PRIOR> 275
<ACCUMULATED-GAINS-PRIOR> 1,254
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 861
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,240
<AVERAGE-NET-ASSETS> 56,973
<PER-SHARE-NAV-BEGIN> 18.64
<PER-SHARE-NII> 0.24
<PER-SHARE-GAIN-APPREC> (3.16)
<PER-SHARE-DIVIDEND> (0.09)
<PER-SHARE-DISTRIBUTIONS> (0.37)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 15.26
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000824612
<NAME> FIRSTAR FUNDS, INC.
<SERIES>
<NUMBER> 152
<NAME> FIRSTAR INTERNATIONAL EQUITY FUND - RETAIL SERIES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 63,679
<INVESTMENTS-AT-VALUE> 50,099
<RECEIVABLES> 2,692
<ASSETS-OTHER> 13
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 52,804
<PAYABLE-FOR-SECURITIES> 920
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 728
<TOTAL-LIABILITIES> 1,648
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 69,060
<SHARES-COMMON-STOCK> 427
<SHARES-COMMON-PRIOR> 350
<ACCUMULATED-NII-CURRENT> 866
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (5,191)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (13,579)
<NET-ASSETS> 6,486
<DIVIDEND-INCOME> 1,773
<INTEREST-INCOME> 58
<OTHER-INCOME> 0
<EXPENSES-NET> (976)
<NET-INVESTMENT-INCOME> 855
<REALIZED-GAINS-CURRENT> (5,147)
<APPREC-INCREASE-CURRENT> (7,351)
<NET-CHANGE-FROM-OPS> (11,643)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (31)
<DISTRIBUTIONS-OF-GAINS> (135)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 190
<NUMBER-OF-SHARES-REDEEMED> (122)
<SHARES-REINVESTED> 9
<NET-CHANGE-IN-ASSETS> (12,552)
<ACCUMULATED-NII-PRIOR> 275
<ACCUMULATED-GAINS-PRIOR> 1,254
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 861
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,240
<AVERAGE-NET-ASSETS> 6,891
<PER-SHARE-NAV-BEGIN> 18.58
<PER-SHARE-NII> 0.20
<PER-SHARE-GAIN-APPREC> (3.15)
<PER-SHARE-DIVIDEND> (0.08)
<PER-SHARE-DISTRIBUTIONS> (0.37)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 15.18
<EXPENSE-RATIO> 1.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000824612
<NAME> FIRSTAR FUNDS, INC.
<SERIES>
<NUMBER> 161
<NAME> FIRSTAR MICROCAP FUND - INSTITUTIONAL SERIES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 81,091
<INVESTMENTS-AT-VALUE> 85,674
<RECEIVABLES> 486
<ASSETS-OTHER> 32
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 86,192
<PAYABLE-FOR-SECURITIES> 916
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 161
<TOTAL-LIABILITIES> 1,077
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 80,837
<SHARES-COMMON-STOCK> 5,822
<SHARES-COMMON-PRIOR> 5,910
<ACCUMULATED-NII-CURRENT> (3)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (302)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,583
<NET-ASSETS> 72,696
<DIVIDEND-INCOME> 188
<INTEREST-INCOME> 208
<OTHER-INCOME> 0
<EXPENSES-NET> (1,991)
<NET-INVESTMENT-INCOME> (1,595)
<REALIZED-GAINS-CURRENT> (275)
<APPREC-INCREASE-CURRENT> (21,884)
<NET-CHANGE-FROM-OPS> (23,754)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (9,815)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 125
<NUMBER-OF-SHARES-REDEEMED> (706)
<SHARES-REINVESTED> 492
<NET-CHANGE-IN-ASSETS> (35,518)
<ACCUMULATED-NII-PRIOR> (2)
<ACCUMULATED-GAINS-PRIOR> 11,401
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,688
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,073
<AVERAGE-NET-ASSETS> 96,430
<PER-SHARE-NAV-BEGIN> 17.57
<PER-SHARE-NII> (0.22)
<PER-SHARE-GAIN-APPREC> (3.19)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (1.67)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.49
<EXPENSE-RATIO> 1.74
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000824612
<NAME> FIRSTAR FUNDS, INC.
<SERIES>
<NUMBER> 162
<NAME> FIRSTAR MICROCAP FUND - RETAIL SERIES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 81,091
<INVESTMENTS-AT-VALUE> 85,674
<RECEIVABLES> 486
<ASSETS-OTHER> 32
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 86,192
<PAYABLE-FOR-SECURITIES> 916
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 161
<TOTAL-LIABILITIES> 1,077
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 80,837
<SHARES-COMMON-STOCK> 1,003
<SHARES-COMMON-PRIOR> 961
<ACCUMULATED-NII-CURRENT> (3)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (302)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,583
<NET-ASSETS> 12,419
<DIVIDEND-INCOME> 188
<INTEREST-INCOME> 208
<OTHER-INCOME> 0
<EXPENSES-NET> (1,991)
<NET-INVESTMENT-INCOME> (1,595)
<REALIZED-GAINS-CURRENT> (275)
<APPREC-INCREASE-CURRENT> (21,884)
<NET-CHANGE-FROM-OPS> (23,754)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (1,599)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 80
<NUMBER-OF-SHARES-REDEEMED> (137)
<SHARES-REINVESTED> 99
<NET-CHANGE-IN-ASSETS> (35,518)
<ACCUMULATED-NII-PRIOR> (2)
<ACCUMULATED-GAINS-PRIOR> 11,401
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,688
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,073
<AVERAGE-NET-ASSETS> 15,980
<PER-SHARE-NAV-BEGIN> 17.47
<PER-SHARE-NII> (0.25)
<PER-SHARE-GAIN-APPREC> (3.17)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (1.67)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.38
<EXPENSE-RATIO> 1.99
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000824612
<NAME> FIRSTAR FUNDS, INC.
<SERIES>
<NUMBER> 171
<NAME> FIRSTAR EMERGING GROWTH FUND - INSTITUTIONAL SERIES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 67,122
<INVESTMENTS-AT-VALUE> 68,871
<RECEIVABLES> 5,269
<ASSETS-OTHER> 44
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 74,184
<PAYABLE-FOR-SECURITIES> 829
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 71
<TOTAL-LIABILITIES> 900
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 77,996
<SHARES-COMMON-STOCK> 6,305
<SHARES-COMMON-PRIOR> 4,659
<ACCUMULATED-NII-CURRENT> 71
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (6,532)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,749
<NET-ASSETS> 60,400
<DIVIDEND-INCOME> 552
<INTEREST-INCOME> 376
<OTHER-INCOME> 0
<EXPENSES-NET> (625)
<NET-INVESTMENT-INCOME> 303
<REALIZED-GAINS-CURRENT> (6,752)
<APPREC-INCREASE-CURRENT> 875
<NET-CHANGE-FROM-OPS> (5,574)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (118)
<DISTRIBUTIONS-OF-GAINS> (276)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,998
<NUMBER-OF-SHARES-REDEEMED> (1,384)
<SHARES-REINVESTED> 32
<NET-CHANGE-IN-ASSETS> 19,885
<ACCUMULATED-NII-PRIOR> 117
<ACCUMULATED-GAINS-PRIOR> 306
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 501
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 807
<AVERAGE-NET-ASSETS> 57,513
<PER-SHARE-NAV-BEGIN> 10.31
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> (0.71)
<PER-SHARE-DIVIDEND> (0.02)
<PER-SHARE-DISTRIBUTIONS> (0.05)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.58
<EXPENSE-RATIO> 0.90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000824612
<NAME> FIRSTAR FUNDS, INC.
<SERIES>
<NUMBER> 172
<NAME> FIRSTAR EMERGING GROWTH FUND - RETAIL SERIES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 67,122
<INVESTMENTS-AT-VALUE> 68,871
<RECEIVABLES> 5,269
<ASSETS-OTHER> 44
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 74,184
<PAYABLE-FOR-SECURITIES> 829
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 71
<TOTAL-LIABILITIES> 900
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 77,996
<SHARES-COMMON-STOCK> 1,348
<SHARES-COMMON-PRIOR> 519
<ACCUMULATED-NII-CURRENT> 71
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (6,532)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,749
<NET-ASSETS> 12,884
<DIVIDEND-INCOME> 552
<INTEREST-INCOME> 376
<OTHER-INCOME> 0
<EXPENSES-NET> (625)
<NET-INVESTMENT-INCOME> 303
<REALIZED-GAINS-CURRENT> (6,752)
<APPREC-INCREASE-CURRENT> 875
<NET-CHANGE-FROM-OPS> (5,574)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (12)
<DISTRIBUTIONS-OF-GAINS> (33)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 969
<NUMBER-OF-SHARES-REDEEMED> (145)
<SHARES-REINVESTED> 5
<NET-CHANGE-IN-ASSETS> 19,885
<ACCUMULATED-NII-PRIOR> 117
<ACCUMULATED-GAINS-PRIOR> 306
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 501
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 807
<AVERAGE-NET-ASSETS> 9,413
<PER-SHARE-NAV-BEGIN> 10.31
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> (0.71)
<PER-SHARE-DIVIDEND> (0.02)
<PER-SHARE-DISTRIBUTIONS> (0.05)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.56
<EXPENSE-RATIO> 1.15
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000824612
<NAME> FIRSTAR FUNDS, INC.
<SERIES>
<NUMBER> 181
<NAME> FIRSTAR BALANCED INCOME FUND - INSTITUTIONAL SERIES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 11-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 40,199
<INVESTMENTS-AT-VALUE> 42,963
<RECEIVABLES> 2,804
<ASSETS-OTHER> 64
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 45,831
<PAYABLE-FOR-SECURITIES> 1,075
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 106
<TOTAL-LIABILITIES> 1,181
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 39,978
<SHARES-COMMON-STOCK> 3,091
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 122
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,786
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,764
<NET-ASSETS> 34,036
<DIVIDEND-INCOME> 238
<INTEREST-INCOME> 972
<OTHER-INCOME> 0
<EXPENSES-NET> (248)
<NET-INVESTMENT-INCOME> 962
<REALIZED-GAINS-CURRENT> (227)
<APPREC-INCREASE-CURRENT> 2,764
<NET-CHANGE-FROM-OPS> 3,499
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (718)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,540
<NUMBER-OF-SHARES-REDEEMED> (456)
<SHARES-REINVESTED> 7
<NET-CHANGE-IN-ASSETS> 44,650
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 237
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 447
<AVERAGE-NET-ASSETS> 29,915
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.30
<PER-SHARE-GAIN-APPREC> 0.96
<PER-SHARE-DIVIDEND> (0.25)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.01
<EXPENSE-RATIO> 0.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000824612
<NAME> FIRSTAR FUNDS, INC.
<SERIES>
<NUMBER> 182
<NAME> FIRSTAR BALANCED INCOME FUND - RETAIL SERIES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 11-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 40,199
<INVESTMENTS-AT-VALUE> 42,963
<RECEIVABLES> 2,804
<ASSETS-OTHER> 64
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 45,831
<PAYABLE-FOR-SECURITIES> 1,075
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 106
<TOTAL-LIABILITIES> 1,181
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 39,978
<SHARES-COMMON-STOCK> 965
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 122
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,786
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,764
<NET-ASSETS> 10,614
<DIVIDEND-INCOME> 238
<INTEREST-INCOME> 972
<OTHER-INCOME> 0
<EXPENSES-NET> (248)
<NET-INVESTMENT-INCOME> 962
<REALIZED-GAINS-CURRENT> (227)
<APPREC-INCREASE-CURRENT> 2,764
<NET-CHANGE-FROM-OPS> 3,499
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (128)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,046
<NUMBER-OF-SHARES-REDEEMED> (92)
<SHARES-REINVESTED> 11
<NET-CHANGE-IN-ASSETS> 44,650
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 237
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 447
<AVERAGE-NET-ASSETS> 4,636
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.28
<PER-SHARE-GAIN-APPREC> 0.96
<PER-SHARE-DIVIDEND> (0.24)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.00
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
