FIRSTAR FUNDS, INC.
Supplement dated November 2, 2000 to the Prospectus for Firstar Funds, Inc.
dated March 1, 2000
On September 1, 2000, Glenmede Advisers, Inc., a wholly-owned subsidiary of The
Glenmede Trust Company, became sub-adviser to the Core International Equity Fund
of Firstar Funds, Inc. Accordingly, the following revisions are made to the
prospectus effective as of the date of this supplement:
PAGE 57
The first sentence in the first paragraph under "Principal Investment
Strategies" is revised as follows:
Glenmede Advisers, Inc. (the "Sub-Adviser" or "Glenmede") attempts to achieve
the Fund's objective by investing primarily in common stocks and other equity
securities of companies located outside the United States.
PAGE 87
The first three sentences in the fifth paragraph under "Advisory Services" are
replaced with the following two sentences:
The Adviser has retained Glenmede Advisers, Inc. as Sub-Adviser for the Core
International Equity Fund. Glenmede's principal offices are at One Liberty
Place, 1650 Market Street, Suite 1200, Philadelphia, Pennsylvania 19103.
PAGE 90
The first sentence in the first paragraph under "Glenmede's Prior Performance"
is revised as follows:
The Core International Equity Fund is managed by Andrew B. Williams of Glenmede
Advisers, Inc.
The following sentence is added as the last sentence in the third paragraph
under "Glenmede's Prior Performance":
Prior to September 1, 2000, The Glenmede Trust Company was sub-adviser to the
Core International Equity Fund.
* * * *
At the June 16, 2000 meeting of the Board of Directors of Firstar Funds, Inc.
(the "Company"), the Board approved the reorganization of the International
Equity Portfolio of Mercantile Mutual Funds, Inc. (the "Mercantile International
Portfolio) into the Core International Equity Fund of the Company (the
"Reorganization"), subject to the approval of the shareholders of the Mercantile
International Portfolio. In connection with the Reorganization, the Company and
Firstar Investment Research and Management Company LLC ("FIRMCO"), the
investment adviser for both the Firstar International Fund and the Mercantile
International Portfolio, intend to enter into a new Investment Sub-Advisory
Agreement (the "New Sub-Advisory Agreement") with Clay Finlay, Inc. ("Clay
Finlay"). Clay Finlay currently serves as investment sub-adviser to the
Mercantile International Portfolio and would replace Glenmede as sub-adviser to
the Core International Equity Fund. The hiring of Clay Finlay is contingent upon
approval of the New Sub-Advisory Agreement by the shareholders of the Core
International Equity Fund at a meeting scheduled to be held on November 8, 2000.
In connection with the change in sub-adviser, the Core International Equity Fund
will make certain investment policy changes. Currently, the Fund diversifies its
investments across companies located in a number of foreign countries, which may
include, but are not limited to: Japan, the United Kingdom, Germany, France,
Switzerland, the Netherlands, Sweden, Australia, Hong Kong and Singapore. The
Fund invests at least 65% of its total assets in securities, such as equity
securities, securities convertible into equity securities, and debt of companies
based in at least three different countries other than the United States. Under
the revised investment policies, during normal market conditions, the Fund will
invest substantially all (at least 80%) of its total assets in the securities of
companies that derive more than 50% of their gross revenues outside the United
States or have more than 50% of their assets outside the United States. Under
normal market conditions, the Fund will invest in equity securities from at
least three foreign countries. Generally, at least 50% of the Fund's total
assets will be invested in securities of companies located either in the
developed countries of Western Europe or in Japan. The Fund will also be able to
invest in other developed countries in the Far East and in countries with
emerging markets or economies.
During the period November 2, 2000 through the date of the Reorganization, which
is expected to be November 27, 2000, FIRMCO and Glenmede will begin to
transition the investment portfolio of the Core International Equity Fund to the
management style practiced by Clay Finlay, which is described below in the
second paragraph under the revised PRINCIPAL INVESTMENT STRATEGIES section.
Effective as of the date of the Reorganization, the Prospectus is amended as
follows:
The name of the Core International Equity Fund is changed to the International
Growth Fund wherever the name appears throughout the Prospectus. The changes
effected below refer to the Fund's new name, the International Growth Fund.
PAGE 57
Replace the OBJECTIVE section with the following:
The investment objective of the International Growth Fund is to provide capital
growth consistent with reasonable investment risk. The investment objective may
be changed by the Board of Directors without approval of shareholders, although
no change is currently anticipated.
Replace the PRINCIPAL INVESTMENT STRATEGIES section with the following:
The Fund invests primarily in foreign common stocks, most of which will be
denominated in foreign currencies. During normal market conditions, the Fund
will invest substantially all (at least 80%) of its total assets in the
securities of companies that derive more than 50% of their gross revenues
outside the United States or have more than 50% of their assets outside the
United States. Under normal market conditions, the Fund invests in equity
securities from at least three foreign countries. Generally, at least 50% of the
Fund's total assets will be invested in securities of companies located either
in the developed countries of Western Europe or in Japan. The Fund also may
invest in other developed countries in the Far East and in countries with
emerging markets or economies.
By investing in various foreign stocks, the Fund attempts to achieve broad
diversification and to take advantage of differences between economic trends and
the performance of securities markets in different countries, regions and
geographic areas. In selecting stocks, Clay Finlay, Inc., the Fund's investment
sub-adviser ("Sub-Adviser"), determines which companies represent the best
values relative to their long-term growth prospects and local markets through
the use of a screening tool which focuses on valuation ranges. The Sub-Adviser
focuses on companies with steady, sustainable earnings growth rates that sell at
a multiple lower than the average for that growth rate in the local market. The
Sub-Adviser also uses fundamental analysis by evaluating balance sheets, market
share and strength of management.
PAGE 58
Replace the PRINCIPAL RISKS section with the following:
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 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 and MANAGEMENT RISK. MARKET RISK is the risk
that the value of the securities in which the Fund invests may go up or down in
response to the prospects of individual companies and/or general economic
conditions. MANAGEMENT RISK is the risk that the evaluation by the investment
adviser of the rewards and risks presented by all securities purchased by the
Fund and how they advance the Fund's investment objectives may prove to be
inaccurate. The Fund's investments in foreign securities are subject to FOREIGN
RISK. Foreign stocks involve special risks not typically associated with U.S.
stocks. The stocks held by the Fund may underperform other types of stocks, and
they may not increase or may decline in value. Foreign investments may be
riskier than U.S. investments because of factors such as foreign government
restrictions, changes in currency exchange rates, incomplete financial
information about the issuers of securities, and political or economic
instability. Foreign stocks may be more volatile and less liquid than U.S.
stocks. Foreign risks will normally be greatest when the Fund invests in issues
located in emerging countries. The governments and economies of emerging
countries feature greater instability than those of more developed countries.
Such investments tend to fluctuate in price more widely and to be less liquid
than other foreign investments. The Fund is also subject to CURRENCY RISK which
is the potential for price fluctuations in the dollar value of the foreign
securities which the Fund holds because of changing currency exchange rates.
An investment in the Fund is not a deposit of Firstar Bank, N.A. and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. An investment in the Fund involves risk, including the risk
of losing money.
PAGE 87
Replace the fifth paragraph with the following:
Clay Finlay Inc. ("Clay Finlay"), an experienced international investment
manager, serves as sub-adviser to the International Growth Fund. Clay Finlay
manages the Fund under the guidance and direction of FIRMCO and according to its
sub-advisory agreement with the Company and FIRMCO. Founded in 1982, Clay
Finlay, a registered investment adviser, is a wholly owned subsidiary of United
Asset Management Corporation ("UAM"), a financial services holding company, and
an indirect subsidiary of UAM's parent, Old Mutual plc, a United Kingdom-based
asset management, banking and general insurance firm. Clay Finlay's principal
office is located at 200 Park Avenue, 56th Floor, New York, NY 10166.
PAGE 89
Replace the last paragraph with the following:
Frances Dakers, a principal and senior portfolio manager of Clay Finlay, is
responsible for the management of the International Growth Fund. Ms. Dakers has
been with Clay Finlay since January 1982 and has managed the Mercantile
International Portfolio since it began operations in 1994.
PAGES 90 AND 91
Delete the sections entitled Glenmede's Prior Performance and Glenmede Fund
Performance
FIRSTAR FUNDS, INC.
Supplement dated November 2, 2000 to the Statement of Additional Information
dated March 1, 2000, as revised March 17, 2000, for the Short-Term Bond Market
Fund, Intermediate Bond Market Fund, Bond IMMDEX(TM) Fund, Tax-Exempt
Intermediate Bond Fund, Balanced Income Fund, Balanced Growth Fund, Growth and
Income Fund, Equity Index Fund, Growth Fund, Special Growth Fund, MidCap Index
Fund, Emerging Growth Fund, MicroCap Fund, Core International Equity Fund and
International Equity Fund
On September 1, 2000, Glenmede Advisers, Inc., a wholly-owned subsidiary of The
Glenmede Trust Company, became sub-adviser to the Core International Equity
Fund. Accordingly, the following revisions are made to the statement of
additional information effective as of the date of this supplement:
PAGE 4
The third sentence in the first paragraph under "Portfolio Transactions" on page
4 is revised as follows:
Pursuant to the terms of the Adviser's Advisory Agreements with the Funds, the
Adviser has delegated certain of its duties to Hansberger Global Investors, Inc.
("HGI") and Glenmede Advisers, Inc. ("Glenmede") (HGI and Glenmede are
collectively referred to as the "Sub-Advisers").
PAGE 61
The second sentence in the third paragraph is replaced with the following two
sentences:
The Adviser has appointed Hansberger Global Investors, Inc. as Sub-Adviser to
the International Equity Fund and Glenmede Advisers, Inc. as Sub-Adviser to
the Core International Equity Fund. Prior to September 1, 2000, The
Glenmede Trust Company, an affiliate of Glenmede Advisers, Inc., was
sub-adviser to the Core International Equity Fund.
PAGE 62
The first sentence in the first full paragraph is revised as follows:
The Core International Equity Fund receives sub-advisory services from Glenmede
Advisers, Inc. ("Glenmede").
* * * *
As described in a supplement dated November 2, 2000 to the Prospectus for
Firstar Funds, Inc. (the "Prospectus Supplement"), following reorganization of
the International Equity Portfolio of Mercantile Mutual Funds, Inc. (the
"Mercantile Portfolio") into the Core International Equity Fund of Firstar
Funds, Inc. (the "Reorganization"), which is contingent upon approval by
shareholders of the Mercantile Portfolio, it is expected that Clay Finlay, Inc.
will replace Glenmede Advisers, Inc. as sub-adviser to the Core International
Equity Fund. The change in sub-adviser is subject to the approval by
shareholders of the Core International Equity Fund of a new investment
sub-advisory agreement. If the new sub-advisory agreement is approved, certain
investment policies of the Core International Equity Fund will be changed to
accommodate Clay Finlay, Inc.'s investment management practices. This supplement
to the Statement of Additional Information includes information not covered by
the Prospectus or Prospectus Supplement.
Effective as of the date of the Reorganization, which is expected to occur on
November 27, 2000, the Statement of Additional Information is amended as
follows:
The name of the Core International Equity Fund is changed to the International
Growth Fund wherever the name appears throughout the Statement of Additional
Information. The changes effected below refer to the Fund's new name, the
International Growth Fund.
The names Glenmede Advisers, Inc. and Glenmede are changed to Clay Finlay, Inc.
and Clay Finlay, respectively, in (1) the first paragraph on page 4, (2) the
last paragraph on page 5, (3) the last full paragraph on page 61, and (4) the
first full paragraph on page 62.
PAGE 9
The following is inserted after the second sentence of the last paragraph:
The International Growth Fund may invest a portion of its assets in the
obligations of foreign banks and foreign branches of domestic banks. Such
obligations may include: Eurodollar Certificates of Deposit, which are U.S.
dollar-denominated certificates of deposit issued by offices of foreign and
domestic banks located outside the United States; Eurodollar Time Deposits
("ETDs"), which are U.S. dollar-denominated deposits in a foreign branch of a
U.S. bank or a foreign bank; Canadian Time Deposits, which are essentially the
same as ETDs except they are issued by Canadian offices of major Canadian banks;
Schedule Bs, which are obligations issued by Canadian branches of foreign or
domestic banks; Yankee Certificates of Deposit, which are U.S.
dollar-denominated certificates of deposit issued by a U.S. branch of a foreign
bank and held in the United States; and Yankee Bankers' Acceptances, which are
U.S. dollar-denominated bankers' acceptances issued by a U.S. branch of a
foreign bank and held in the United States.
PAGE 15
The last sentence is changed to read as follows:
Furthermore, because each of the International Equity Fund and International
Growth Fund will invest substantially all (and, in any event, at least 65%, with
respect to the International Equity Fund, and at least 80%, with respect to the
International Growth Fund) of the value of its total assets in foreign
securities, the net asset values of the International Equity Fund and
International Growth Fund are expected to be volatile.
PAGE 22
The following is added after the third paragraph of the section captioned
Emerging Market Countries:
VARIABLE AND FLOATING RATE INSTRUMENTS. The International Growth Fund
may purchase variable and floating rate obligations. The Adviser or Sub-Adviser
will consider the earning power, cash flows and other liquidity ratios of the
issuers and guarantors of such obligations and, for obligations subject to a
demand feature, will monitor their financial status to meet payment on demand.
The Fund will invest in such instruments only when the Adviser or Sub-Adviser
believes that any risk of loss due to issuer default is minimal.
STANDARD AND POOR'S DEPOSITORY RECEIPTS, STANDARD & POOR'S MIDCAP 400
DEPOSITORY RECEIPTS AND THE DOW INDUSTRIALS DIAMONDS. The International Growth
Fund may invest in Standard & Poor's Depository Receipts ("SPDRs"), Standard &
Poor's MidCap 400 Depository Receipts ("MidCap SPDRs") and The Dow Industrials
DIAMONDS ("DIAMONDS"). SPDRs represent ownership in the SPDR Trust, a long-term
unit investment trust which holds a portfolio of common stocks that is intended
to track the performance and dividend yield of the Standard & Poor's 500 Index.
MidCap SPDRs represent ownership in the MidCap SPDR Trust, a long-term unit
investment trust which holds a portfolio of common stocks that is intended to
track the performance and dividend yield of the Standard & Poor's MidCap 400
Index. DIAMONDS represent ownership in the DIAMONDS Trust, a long-term unit
investment trust which holds a portfolio of common stocks that is intended to
track the performance and yield of the Dow Jones Industrial Average. Because
investments in SPDRs, MidCap SPDRs and DIAMONDS represent investments in unit
investment trusts, such investments are subject to the Investment Company Act's
limitations on investments in other investment companies.
PAGE 33
The first two sentences following the caption OPTIONS TRADING are deleted and
replaced with the following:
The Bond Funds, Balanced Funds and Equity Funds may purchase put and (with the
exception of the Tax-Exempt Intermediate Bond Fund) call options. Except for the
International Equity Fund and International Growth Fund, option purchases by a
Fund will not exceed 5% of its net assets. The International Equity Fund may
purchase put and call options without limit. The International Growth Fund may
purchase put and call options in an amount not exceeding 10% of the Fund's net
assets at the time of purchase. The International Growth Fund will not invest
more than 5% of its total assets in initial margin deposits and premiums
(including, without limitation, puts, calls, straddles and spreads) and any
combination thereof. The International Growth Fund may also write secured put
options.
PAGE 34
The thirteenth sentence of the first full paragraph is changed to read as
follows:
The aggregate value of the Fund's assets subject to covered options written by
the Taxable Bond Fund, Balanced Income Fund, Balanced Growth Fund, Growth and
Income Fund, Equity Index Fund, MidCap Index Fund, MicroCap Fund and
International Growth Fund will not exceed 5%, 5%, 25%, 5%, 5%, 5%, 5%, and 25%,
respectively, of the value of its net assets during the current year.
PAGE 36
Following the carryover paragraph from page 35, insert the following:
FOREIGN CURRENCY OPTIONS. The International Growth Fund may purchase
foreign currency put options on U.S. Exchanges or U.S. over-the-counter markets.
(See "Options Trading" above for a discussion of options trading.) A put option
gives the Fund, upon payment of a premium, the right to sell a currency at the
exercise price until the expiration of the option and serves to insure against
adverse currency price movements in the underlying portfolio assets denominated
in that currency. Exchange listed options markets in the United States include
seven major currencies, and trading may be thin and illiquid. The seven major
currencies are Australian dollars, British pounds, Canadian dollars, German
marks, French francs, Japanese yen, and Swiss francs.
UNLISTED CURRENCY OPTIONS. The International Growth Fund may purchase
unlisted currency options. A number of major investment firms trade unlisted
options which are more flexible than exchange listed options with respect to
strike price and maturity date. These unlisted options generally are less liquid
than listed options and involve the credit risk associated with the individual
issuer. They will be deemed to be illiquid for purposes of the Fund's limitation
on investments in illiquid securities.
WRITING FOREIGN CURRENCY CALL OPTIONS. A call option written by the
International Growth Fund gives the purchaser, upon payment of a premium, the
right to purchase from the Fund a currency at the exercise price until the
expiration of the option.
Following the second sentence in the first paragraph of the section captioned
"Futures Contracts and Related Options," the following sentence is added:
The International Growth Fund may also invest in other types of financial
futures contracts (such as foreign currency contracts), as well as any index or
foreign market futures (such as stock or bond index futures contracts or
interest rate futures or options) which are available in recognized exchanges or
in other established financial markets.
PAGE 39
In the third full paragraph, the International Growth Fund is added to the Funds
that may hold convertible securities.
PAGE 40
In the second full paragraph, the International Growth Fund is added to the
Funds that may purchase warrants and similar rights.
The last two sentences of the third full paragraph are deleted and replaced with
the following:
This 5% limit includes warrants that are not listed on any stock exchange.
Warrants not listed on any stock exchange are limited to 2% of the International
Equity Fund's net assets. Warrants not listed on the New York, American, or
Canadian Stock Exchanges are limited to 2% of the International Growth Fund's
net assets. Warrants acquired by the International Equity Fund or International
Growth Fund in units or attached to securities are not subject to these limits.
Page 41
The following sentence is added at the end of the third full paragraph:
However, while it is permitted to do so, the International Growth Fund will not
normally invest in securities of issuers having a record, together with their
predecessors, of less than three years of continuous operations
