AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 28, 2000
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. 38 x
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 x
Amendment No. 39 x
(Check appropriate box or boxes)
FIRSTAR FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
FIRSTAR Funds Center
615 East Michigan Street
Milwaukee, Wisconsin 53201-3011
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (414) 287-3909
W. Bruce McConnel, III, Esquire
Drinker Biddle & Reath LLP
One Logan Square
18th and Cherry Street
Philadelphia, Pennsylvania 19103
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate
box).
[ ] immediately upon filing pursuant to paragraph (b)
[x] on March 1, 2000 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box
[ ] this Post-Effective Amendment designates a new effective date for a
previously filed Post-Effective Amendment.
Title of securities being registered: Shares of common stock.
xxxxx
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
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
MIDCAP INDEX FUND
SPECIAL GROWTH FUND
EMERGING GROWTH FUND
MICROCAP FUND
CORE INTERNATIONAL EQUITY FUND
INTERNATIONAL EQUITY FUND
PROSPECTUS
MARCH 1, 2000
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved any shares of these funds or determined if this
prospectus is truthful or complete. Anyone who tells you otherwise is
committing a criminal offense.
(LOGO) FIRSTAR FUNDS
<PAGE>
(LOGO) FIRSTAR FUNDS
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Learn about each Fund's Objective, Principal Investment Strategies, Principal
Risks, Performance and Expenses.
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TABLE OF CONTENTS
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MONEY MARKET FUND AND
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INSTITUTIONAL MONEY MARKET FUND 1
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U.S. TREASURY MONEY MARKET FUND AND
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U.S. GOVERNMENT MONEY MARKET FUND 3
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TAX-EXEMPT MONEY MARKET FUND 6
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SHORT-TERM BOND MARKET FUND,
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INTERMEDIATE BOND MARKET FUND AND BOND IMMDEX/TM FUND 9
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TAX-EXEMPT INTERMEDIATE BOND FUND 16
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BALANCED INCOME FUND 20
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BALANCED GROWTH FUND 25
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GROWTH AND INCOME FUND 30
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EQUITY INDEX FUND 34
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GROWTH FUND 38
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MIDCAP INDEX FUND 42
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SPECIAL GROWTH FUND 45
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EMERGING GROWTH FUND 49
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MICROCAP FUND 53
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CORE INTERNATIONAL EQUITY FUND 57
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INTERNATIONAL EQUITY FUND 60
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TYPES OF INVESTMENT RISK 64
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INVESTING WITH FIRSTAR FUNDS 72
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SHARE CLASSES AVAILABLE 72
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SALES CHARGES AND WAIVERS 72
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PURCHASING SHARES 77
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REDEEMING SHARES 81
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EXCHANGING SHARES 83
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ADDITIONAL SHAREHOLDER SERVICES 84
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ADDITIONAL INFORMATION 85
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DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES 85
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MANAGEMENT OF THE FUNDS 87
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NET ASSET VALUE AND DAYS OF OPERATION 91
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APPENDIX 93
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FINANCIAL HIGHLIGHTS 93
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AN INVESTMENT IN THE FUNDS IS NOT A DEPOSIT OF FIRSTAR BANK, N.A. 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.
<PAGE>
(LOGO) FIRSTAR FUNDS
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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 Shareholders, 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, N.A. 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 Institutional
Market Money Market
------------ ------------
90 8.05 -
91 5.87 -
92 3.42 3.58
93 2.67 2.90
94 3.84 4.08
95 5.54 5.81
96 5.00 5.26
97 5.14 5.39
98 5.14 5.38
99 4.57 4.94
<PAGE>
(LOGO) FIRSTAR FUNDS
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INSTITUTIONAL
MONEY MARKET MONEY MARKET
FUND FUND
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BEST QUARTER: Q 2 '89 2.33% Q 2 '95 1.46%
WORST QUARTER: Q 2 '93 0.64% Q 2 '93 0.70%
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AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/99
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SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (INCEPTION DATE)
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MONEY MARKET FUND 4.57% 5.07% 4.91% -
INSTITUTIONAL
MONEY MARKET FUND 4.94% 5.35% - 4.72%
(Apr. 26, 1991)
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The 7-day yield for the period ended on 12/31/99 for the Money Market Fund and
the Institutional Money Market Fund was 5.30% and 5.54%, respectively, and
without giving effect to fee waivers was 5.18% and 5.29%, respectively. Figures
reflect past performance. Yields will vary. You may call 1-800-677-FUND 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)
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DISTRIBUTION TOTAL ANNUAL
MANAGEMENT AND SERVICE OTHER FUND OPERATING
FEES<F1> (12B-1) FEES<F2> EXPENSES<F3> EXPENSES<F4>
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Money Market Fund 0.50% 0.04% 0.53% 1.07%
Institutional
Money Market Fund 0.50% 0.00% 0.15% 0.65%
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<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 waivers,
current management fees of the Money Market and Institutional Money Market
Funds are 0.18% and 0.28%, 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 shareholder 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 for the current fiscal year.
<PAGE>
(LOGO) FIRSTAR FUNDS
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<F3> "Other Expenses" includes administrative fees, transfer agency fees and all
other ordinary operating expenses of the Fund not listed above. Each of the
Money Market Fund and Institutional Money Market Fund has a Shareholder
Service Plan permitting each to pay shareholder servicing fees to
institutions (described below under the heading "Investing with Firstar
Funds - Shareholder Organizations") equal to up to 0.25% of the Fund's
average daily net assets. The Institutional Money Market Fund does not
intend to pay shareholder 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 0.11%. 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 "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, N.A. is custodian.
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:
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1 YEAR 3 YEARS 5 YEARS 10 YEARS
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Money Market Fund $109 $340 $590 $1,306
Institutional Money
Market Fund 66 208 362 810
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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 Shareholders, 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 intends to invest at least 65% of its total assets in these
obligations.
<PAGE>
(LOGO) FIRSTAR FUNDS
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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.
The rate of income on Fund shares will vary from day to day so that the
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.
- --------------------------------------------------------------------------------
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.
An investment in the Funds is not a deposit of Firstar Bank, N.A. 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 U.S. Treasury
Money Market Money Market
------------ ------------
90 7.71 -
91 5.56 -
92 3.30 3.19
93 2.61 2.57
94 3.76 3.57
95 5.39 5.21
96 4.92 4.76
97 4.97 4.78
98 4.95 4.65
99 4.41 4.05
<PAGE>
(LOGO) FIRSTAR FUNDS
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U.S. TREASURY U.S. GOVERNMENT
MONEY MARKET MONEY MARKET
FUND FUND
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BEST QUARTER: Q 2 '95 1.34% Q 2 '89 2.24%
WORST QUARTER: Q 2 '93 0.62% Q 2 '93 0.63%
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AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/99
- --------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (INCEPTION DATE)
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U.S. TREASURY
MONEY MARKET FUND 4.05% 4.69% - 4.17%
(Apr. 29, 1991)
U.S. GOVERNMENT
MONEY MARKET FUND 4.41% 4.92% 4.75% -
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The 7-day yield for the period ended on 12/31/99 for the U.S. Treasury Money
Market Fund and the U.S. Government Money Market Fund was 4.55% and 4.66%,
respectively, and without giving effect to fee waivers was 4.54% and 4.66%,
respectively. Figures reflect past performance. Yields will vary. You may call
1-800-677-FUND 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% 0.42% 0.92%
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<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 and U.S.
Government Money Market Fund during the current fiscal year. As a result of
the fee waivers, current management fees of the U.S. Treasury Money Market
Fund and U.S. Government Money Market Fund are 0.49% and 0.30%,
respectively, of the 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 shareholder 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 Shareholder Service Plan permitting the payment of a
shareholder servicing fee to institutions (described below under "Investing
with Firstar Funds - Shareholder Organizations") equal to up to 0.25% of
each Fund's average daily net assets. The Funds do not intend to pay
shareholder 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 and U.S.
Government Money Market Fund are estimated to be 0.75% and 0.72%,
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.
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, N.A. is
custodian.
<PAGE>
(LOGO) FIRSTAR FUNDS
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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
- --------------------------------------------------------------------------------
U.S. Treasury
Money Market Fund $78 $243 $422 $942
U.S. Government
Money Market Fund 94 293 509 1,131
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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 Shareholders, 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 subdivisions. 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 Revenue securities are payable only
secured by the issuer's pledge of from the revenues derived from a
its full faith, credit and taxing particular facility or class of
power for the payment of principal facilities or, in some cases,
and interest. 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.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
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, N.A. 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 (%)
90 5.48
91 4.24
92 2.64
93 2.06
94 2.49
95 3.44
96 3.06
97 3.13
98 2.97
99 2.58
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BEST QUARTER: Q 2 '89 1.58%
WORST QUARTER: Q 1 '94 0.50%
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/99
- --------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
TAX-EXEMPT MONEY MARKET FUND 2.58% 3.03% 3.20%
- --------------------------------------------------------------------------------
The 7-day yield for the period ended on 12/31/99 for the Tax-Exempt Money Market
Fund was 3.66%. Figures reflect past performance. Yields will vary. You may call
1-800-677-FUND 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 (12B-1) FEES<F1> EXPENSES<F2> EXPENSES
- --------------------------------------------------------------------------------
Tax-Exempt
Money Market Fund 0.50% 0.00% 0.22% 0.72%
- --------------------------------------------------------------------------------
<F1> The total of all 12b-1 fees and shareholder 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.
<F2> "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
shareholder servicing fee to institutions (described below under "Investing
with Firstar Funds - Shareholder Organizations") equal to up to 0.25% of
the Fund's average daily net assets. The Fund does not intend to pay
shareholder servicing fees during the current fiscal year, and "Other
Expenses" does not reflect such fees.
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, N.A. is
custodian.
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
- --------------------------------------------------------------------------------
Tax-Exempt Money Market Fund $74 $230 $401 $894
- --------------------------------------------------------------------------------
<PAGE>
(LOGO) FIRSTAR 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 Shareholders, although no change is currently anticipated.
PRINCIPAL INVESTMENT STRATEGIES
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.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
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 n U.S. government agencies
- - Stripped U.S. government - Corporate
- - Collateralized mortgage obligations - Medium-term notes
- - Asset-backed and mortgage-backed obligations - Eurobonds
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
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
- - dollar-denominated debt of certain foreign securities
sovereign or supranational entities - investment-grade corporate
debt obligations
The indices require that investment-grade corporate debt obligations must:
- - be fixed-rate debt (as opposed to - have at least one year until
variable-rate debt) maturity
- - have a minimum outstanding par value of - have a minimum quality rating
$100 million 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, 1999.
- --------------------------------------------------------------------------------
BOND ISSUES DOLLAR VALUE
- --------------------------------------------------------------------------------
Lehman 1-3 Index 956 $966 billion
Lehman Intermediate Index 3,282 $2.4 trillion
Lehman Index 4,665 $3.5 trillion
- --------------------------------------------------------------------------------
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
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.
An investment in the Funds 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 a Fund involves risk, including the risk of
losing money.
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 chart and performance table 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 4.00%
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.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
SHORT TERM INTERMEDIATE BOND
BOND MARKET BOND MARKET IMMDEX/TM
------------ ------------ ------------
90 7.62 - 8.22
91 13.50 - 16.58
92 6.85 - 7.56
93 6.46 - 10.96
94 0.93 -2.09 -3.06
95 10.73 15.25 19.55
96 4.99 4.06 3.08
97 6.39 7.34 9.43
98 6.57 7.91 9.20
99 3.36 1.00 -1.36
- --------------------------------------------------------------------------------
SHORT-TERM INTERMEDIATE BOND
BOND MARKET BOND MARKET IMMDEX/TM
FUND FUND FUND
- --------------------------------------------------------------------------------
BEST QUARTER: Q 4 '91 4.18% Q 2 '95 5.02% 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 12/31/99 (Retail A Shares and Institutional
Shares)
- --------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (INCEPTION DATE)
- --------------------------------------------------------------------------------
SHORT-TERM BOND MARKET FUND -
Retail A Shares -1.03% 5.26% 6.12% -
Institutional Shares 3.36% 6.38% 6.68% -
LEHMAN BROTHERS 1-3 YEAR
GOVERNMENT/CORPORATE
BOND INDEX 3.15% 6.55% 6.64% -
INTERMEDIATE BOND MARKET FUND -
Retail A Shares -3.32% 5.87% - 5.09%
(Jan. 5, 1993)
Institutional Shares 1.00% 7.00% - 5.90%
(Jan. 5, 1993)
LEHMAN BROTHERS INTERMEDIATE
GOVERNMENT/CORPORATE
BOND INDEX 0.39% 7.10% - 5.94%
(Jan. 5, 1993)
BOND IMMDEX/TM FUND -
Retail A Shares -5.58% 6.61% 7.23% -
Institutional Shares -1.36% 7.75% 7.80% -
LEHMAN BROTHERS GOVERNMENT/
CORPORATE BOND INDEX -2.15% 7.61% 7.65% -
- --------------------------------------------------------------------------------
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
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.
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.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
(fees paid directly INSTITUTIONAL RETAIL A RETAIL B
from your investment) SHARES SHARES SHARES
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) None 4.00% None
Maximum Deferred Sales Charge (Load)
(as a percentage of
offering price) None None 5.00%<F1>
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends None None None
Redemption Fees None<F2> None<F2> None<F2>
Exchange Fees None None None
- --------------------------------------------------------------------------------
<PAGE>
(LOGO) FIRSTAR FUNDS
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
- --------------------------------------------------------------------------------
DISTRIBUTION TOTAL
AND ANNUAL
MANAGEMENT SERVICE OTHER FUND
FEES (12B-1) EXPENSES OPERATING
<F3> FEES<F4> <F5> EXPENSES<F6>
- --------------------------------------------------------------------------------
Short-Term Bond
Market Fund - Retail A 0.60% 0.00% 0.50% 1.10%
Short-Term Bond
Market Fund - Retail B 0.60% 0.75% 0.50% 1.85%
Short-Term Bond
Market Fund - Institutional 0.60% 0.00% 0.25% 0.85%
Intermediate Bond
Market Fund - Retail A 0.50% 0.00% 0.45% 0.95%
Intermediate Bond
Market Fund - Retail B 0.50% 0.75% 0.45% 1.70%
Intermediate Bond
Market Fund - Institutional 0.50% 0.00% 0.20% 0.70%
Bond IMMDEX/TM Fund -
Retail A 0.30% 0.00% 0.43% 0.73%
Bond IMMDEX/TM Fund -
Retail B 0.30% 0.75% 0.43% 1.48%
Bond IMMDEX/TM Fund -
Institutional 0.30% 0.00% 0.18% 0.48%
- --------------------------------------------------------------------------------
<F1> A contingent deferred sales charge is imposed on Retail B Shares redeemed
within six years of purchase at a rate of 5% in the first year, 4% in the
second year, 3% in the third and fourth years, 2% in the fifth year,
declining to 1% in the sixth year. Thereafter Retail B Shares convert to
Retail A Shares, which do not bear a contingent deferred sales charge.
<F2> A fee of $12.00 is charged for each wire redemption (Retail Shares) and
$15.00 for each non-systematic withdrawal from a Retirement Account for
which Firstar Bank, N.A. is custodian.
<F3> 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 0.32% and 0.37%, 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.
<F4> The total of all 12b-1 fees and shareholder 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.
<F5> "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 shareholder
servicing fee to institutions (described below under the heading "Investing
with Firstar Funds - Shareholder Organizations") equal to 0.25% of the
average daily net assets of each Fund's Retail A Shares and Retail B
Shares.
<F6> As a result of the fee waivers set forth in note 3, the Total Annual Fund
Operating Expenses of the Short-Term Bond Market Fund and Intermediate Bond
Market Fund are estimated to be 0.57% and 0.57% for the Institutional
Shares of each Fund, 0.82% and 0.82% for the Retail A Shares of each Fund
and 1.57% and 1.57% for the Retail B 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.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
Short-Term Bond Market Fund -
Retail A Shares $508 $736 $1,982 $1,687
Short-Term Bond Market Fund -
Retail B Shares
Assuming complete redemption
at end of period 688 882 1,201 1,793
Assuming no redemption 188 582 1,001 1,793
Short-Term Bond Market Fund -
Institutional 87 271 471 1,049
Intermediate Bond Market Fund -
Retail A Shares 493 691 904 1,520
Intermediate Bond Market Fund -
Retail B Shares
Assuming complete redemption
at end of period 673 836 1,123 1,627
Assuming no redemption 173 536 923 1,627
Intermediate Bond Market Fund -
Institutional 72 224 390 871
Bond IMMDEX/TM - Retail A Shares 472 624 790 1,270
Bond IMMDEX/TM - Retail B Shares
Assuming complete redemption
at end of period 651 768 1,008 1,378
Assuming no redemption 151 468 808 1,378
Bond IMMDEX/TM - Institutional 49 154 269 604
- --------------------------------------------------------------------------------
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.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
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 Shareholders, 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 that 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.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
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, N.A. 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.
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, 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 4.00% 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)
90 -
91 -
92 -
93 -
94 -1.73
95 10.51
96 3.78
97 6.05
98 5.36
99 0.31
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BEST QUARTER: Q 1 '95 3.93%
WORST QUARTER: Q 1 '94 -2.75%
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/99 (Retail A Shares and Institutional
Shares)
- --------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (FEBRUARY 8, 1993)
- --------------------------------------------------------------------------------
TAX-EXEMPT INTERMEDIATE
BOND FUND
Retail A Shares -3.88% 4.03% - 3.60%
Institutional Shares 0.31% 5.15% - 4.41%
LEHMAN BROTHERS 5-YEAR GENERAL
OBLIGATION BOND INDEX 0.71% 5.81% - 5.03%
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
(fees paid directly INSTITUTIONAL RETAIL A RETAIL B
from your investment) SHARES SHARES SHARES
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) None 4.00% None
Maximum Deferred Sales Charge (Load)
(as a percentage of
offering price) None None 5.00%<F1>
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends None None None
Redemption Fees None<F2> None<F2> None<F2>
Exchange Fees None None None
- --------------------------------------------------------------------------------
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
- --------------------------------------------------------------------------------
DISTRIBUTION TOTAL
AND ANNUAL
MANAGEMENT SERVICE OTHER FUND
FEES (12B-1) EXPENSES OPERATING
<F3> FEES<F4> <F5> EXPENSES<F6>
- --------------------------------------------------------------------------------
Tax-Exempt Intermediate
Bond Fund - Retail A 0.50% 0.00% 0.61% 1.11%
Tax-Exempt Intermediate
Bond Fund - Retail B 0.50% 0.75% 0.61% 1.86%
Tax-Exempt Intermediate
Bond Fund - Institutional 0.50% 0.00% 0.36% 0.86%
- --------------------------------------------------------------------------------
<F1> A contingent deferred sales charge is imposed on Retail B Shares redeemed
within six years of purchase at a rate of 5% in the first year, 4% in the
second year, 3% in the third and fourth years, 2% in the fifth year,
declining to 1% in the sixth year. Thereafter Retail B Shares convert to
Retail A Shares, which do not bear a contingent deferred sales charge.
<F2> A fee of $12.00 is charged for each wire redemption (Retail Shares) and
$15.00 for each non-systematic withdrawal from a Retirement Account for
which Firstar Bank, N.A. is custodian.
<F3> The Adviser has voluntarily agreed that a portion of its management fee
will not be imposed on the Fund during the current fiscal year. As a result
of the fee waiver, current management fees for the Fund are 0.31% of the
Fund's average daily net assets. This waiver is expected to remain in
effect for the current fiscal year. However, it is voluntary and can be
modified or terminated at any time without the Fund's consent.
<F4> The total of all 12b-1 fees and shareholder 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 shareholder
servicing fee to institutions (described below under the heading "Investing
with Firstar Funds - Shareholder Organizations") equal to 0.25% of the
average daily net assets of the Fund's Retail A Shares and Retail B Shares.
<F6> As a result of the fee waiver set forth in note 3, the Total Annual Fund
Operating Expenses of the Institutional, Retail A and Retail B Shares of
the Fund are estimated to be 0.67%, 0.92% and 1.67%, 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 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 $509 $739 $1,987 $1,698
Tax-Exempt Intermediate Bond Fund -
Retail B Shares
Assuming complete redemption
at end of period 689 885 1,206 1,804
Assuming no redemption 189 585 1,006 1,804
Tax-Exempt Intermediate Bond Fund -
Institutional 188 274 477 1,061
- --------------------------------------------------------------------------------
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.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
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 Shareholders,
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 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.
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
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.
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 a Fund involves risk, including the risk of
losing money.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
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, 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 5.50% 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)
90 4.75
91 31.95
92 8.92
93 8.79
94 -1.74
95 25.48
96 17.83
97 23.47
98 15.58
99 1.40
- --------------------------------------------------------------------------------
BEST QUARTER: Q 2 '97 10.40%
WORST QUARTER: Q 3 '90 -5.43%
- --------------------------------------------------------------------------------
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/99 (Retail A Shares and Institutional
Shares)
- --------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS
BALANCED INCOME FUND
Retail A Shares -4.44% 15.17% 12.45%
Institutional Shares 1.40% 16.66% 13.27%
S&P 500 INDEX 21.04% 28.86% 18.21%
LIPPER BALANCED FUND INDEX 8.98% 16.33% 12.26%
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
(fees paid directly INSTITUTIONAL RETAIL A RETAIL B
from your investment) SHARES SHARES SHARES
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed
on Purchases
(as a percentage of offering price) None 5.50% None
Maximum Deferred Sales Charge (Load)
(as a percentage of offering price) None None 5.00%<F1>
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends None None None
Redemption Fees None<F2> None<F2> None<F2>
Exchange Fees None None None
- --------------------------------------------------------------------------------
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
- --------------------------------------------------------------------------------
DISTRIBUTION TOTAL
AND ANNUAL
MANAGEMENT SERVICE OTHER FUND
FEES (12B-1) EXPENSES OPERATING
<F3> FEES<F4> <F5> EXPENSES<F6>
- --------------------------------------------------------------------------------
Balanced Income Fund -
Retail A 0.75% 0.00% 0.66% 1.41%
Balanced Income Fund -
Retail B 0.75% 0.75% 0.66% 2.16%
Balanced Income Fund -
Institutional 0.75% 0.00% 0.41% 1.16%
- --------------------------------------------------------------------------------
<F1> A contingent deferred sales charge is imposed on Retail B Shares redeemed
within six years of purchase at a rate of 5% in the first year, 4% in the
second year, 3% in the third and fourth years, 2% in the fifth year,
declining to 1% in the sixth year. Thereafter Retail B Shares convert to
Retail A Shares, which do not bear a contingent deferred sales charge.
<F2> A fee of $12.00 is charged for each wire redemption (Retail Shares) and
$15.00 for each non-systematic withdrawal from a Retirement Account for
which Firstar Bank, N.A. is custodian.
<F3> The Adviser has voluntarily agreed that a portion of its management fee
will not be imposed on the Fund during the current fiscal year. As a result
of the fee waiver, current management fees for the Fund are 0.56% of the
Fund's average daily net assets. This waiver is expected to remain in
effect for the current fiscal year. However, it is voluntary and can be
modified or terminated at any time without the Fund's consent.
<F4> The total of all 12b-1 fees and shareholder 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 shareholder
servicing fee to institutions under a Service Plan (described below under
"Investing with Firstar Funds - Shareholder Organizations") equal to 0.25%
of the average daily net assets of the Fund's Retail A Shares and Retail B
Shares.
<F6> As a result of the fee waiver set forth in note 3, the Total Annual Fund
Operating Expenses of the Institutional, Retail A and Retail B Shares are
estimated to be 0.97%, 1.22% and 1.97%, 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 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 $686 $972 $1,279 $2,148
Balanced Income Fund - Retail B Shares
Assuming complete redemption at end
of period 719 976 1,359 2,128
Assuming no redemption 219 676 1,159 2,128
Balanced Income Fund - Institutional 118 368 638 1,409
- --------------------------------------------------------------------------------
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.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
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 Shareholders, 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 20 for examples of these
characteristics). The Adviser also generally looks for companies with stock
market capitalizations between $100 million and $100 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.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
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 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.
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 a Fund involves risk, including the risk of
losing money.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
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 5.50% 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)
90 -
91 -
92 -
93 8.24
94 -4.27
95 26.52
96 12.63
97 17.47
98 16.51
99 4.28
- --------------------------------------------------------------------------------
BEST QUARTER: Q 3 '98 14.09%
WORST QUARTER: Q 4 '98 -7.98%
- --------------------------------------------------------------------------------
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/99 (Retail A Shares and Institutional
Shares)
- --------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (MARCH 30, 1992)
- --------------------------------------------------------------------------------
BALANCED GROWTH FUND -
Retail A Shares -1.71% 13.67% - 10.52%
Institutional Shares 4.28% 15.25% - 11.51%
S&P 500 INDEX 21.04% 28.86% - 20.78%
LIPPER BALANCED FUND INDEX 8.98% 16.33% - 12.52%
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
(fees paid directly INSTITUTIONAL RETAIL A RETAIL B
from your investment) SHARES SHARES SHARES
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) None 5.50% None
Maximum Deferred Sales Charge (Load)
(as a percentage of
offering price) None None 5.00%<F1>
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends None None None
Redemption Fees None<F2> None<F2> None<F2>
Exchange Fees None None None
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
- --------------------------------------------------------------------------------
DISTRIBUTION TOTAL
AND ANNUAL
MANAGEMENT SERVICE OTHER FUND
FEES (12B-1) EXPENSES OPERATING
<F3> FEES<F4> <F5> EXPENSES<F6>
- --------------------------------------------------------------------------------
Balanced Growth Fund -
Retail A 0.75% 0.00% 0.52% 1.27%
Balanced Growth Fund -
Retail B 0.75% 0.75% 0.52% 2.02%
Balanced Growth Fund -
Institutional 0.75% 0.00% 0.27% 1.02%
- --------------------------------------------------------------------------------
<F1> A contingent deferred sales charge is imposed on Retail B Shares redeemed
within six years of purchase at a rate of 5% in the first year, 4% in the
second year, 3% in the third and fourth years, 2% in the fifth year,
declining to 1% in the sixth year. Thereafter Retail B Shares convert to
Retail A Shares, which do not bear a contingent deferred sales charge.
<F2> A fee of $12.00 is charged for each wire redemption (Retail Shares) and
$15.00 for each non-systematic withdrawal from a Retirement Account for
which Firstar Bank, N.A. is custodian.
<F3> The Adviser has voluntarily agreed that a portion of its management fee
will not be imposed on the Fund during the current fiscal year. As a result
of the fee waiver, current management fees for the Fund are 0.70% of the
Fund's average daily net assets. This waiver is expected to remain in
effect for the current fiscal year. However, it is voluntary and can be
modified or terminated at any time without the Fund's consent.
<F4> The total of all 12b-1 fees and shareholder 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 shareholder
servicing fee to institutions under a Service Plan (described below under
"Investing with Firstar Funds - Shareholder Organizations") equal to 0.25%
of the average daily net assets of the Fund's Retail A Shares and Retail B
Shares.
<F6> As a result of the fee waiver set forth in note 3, the Total Annual Fund
Operating Expenses of the Institutional, Retail A and Retail B Shares of
the Fund are estimated to be 0.97%, 1.22% and 1.97%, 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 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 $672 $931 $1,209 $2,000
Balanced Growth Fund - Retail B Shares
Assuming complete redemption at
end of period 705 934 1,288 1,978
Assuming no redemption 205 634 1,088 1,978
Balanced Growth Fund - Institutional 104 325 563 1,248
- --------------------------------------------------------------------------------
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.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
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 Shareholders,
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 the
Fund's net assets will be invested in equities. The Fund will not purchase a
non-dividend paying security if immediately after giving effect to such purchase
less than 80% of the net assets of the Fund will be invested in dividend paying
securities.
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 20
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 principal investment risks below 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.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
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 a Fund involves risk, including the risk of
losing money.
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 5.50% 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)
90 -0.28
91 22.22
92 5.48
93 6.64
94 0.14
95 34.83
96 25.03
97 33.54
98 22.77
99 3.01
- --------------------------------------------------------------------------------
BEST QUARTER: Q 4 '98 17.77%
WORST QUARTER: Q 3 '98 -9.72%
- --------------------------------------------------------------------------------
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/99 (Retail A Shares and Institutional
Shares)
- --------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS
GROWTH AND INCOME FUND -
Retail A Shares -2.91% 21.59% 13.82%
Institutional Shares 3.01% 23.26% 14.59%
S&P 500 INDEX 21.04% 28.56% 18.21%
- --------------------------------------------------------------------------------
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. 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.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
(fees paid directly INSTITUTIONAL RETAIL A RETAIL B
from your investment) SHARES SHARES SHARES
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) None 5.50% None
Maximum Deferred Sales Charge (Load)
(as a percentage of
offering price) None None 5.00%<F1>
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends None None None
Redemption Fees None<F2> None<F2> None<F2>
Exchange Fees None None None
- --------------------------------------------------------------------------------
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
- --------------------------------------------------------------------------------
DISTRIBUTION TOTAL ANNUAL
MANAGEMENT AND SERVICE OTHER FUND OPERATING
FEES (12B-1) FEES<F3> EXPENSES<F4> EXPENSES
- --------------------------------------------------------------------------------
Growth and Income Fund -
Retail A 0.75% 0.00% 0.44% 1.19%
Growth and Income Fund -
Retail B 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 years, 2% in the fifth year,
declining to 1% in the sixth year. Thereafter Retail B Shares convert to
Retail A Shares, which do not bear a contingent deferred sales charge.
<F2> A fee of $12.00 is charged for each wire redemption (Retail Shares) and
$15.00 for each non-systematic withdrawal from a Retirement Account for
which Firstar Bank, N.A. is custodian.
<F3> The total of all 12b-1 fees and shareholder 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.
<F4> "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 shareholder
servicing fee to institutions under a Service Plan (described below under
"Investing with Firstar Funds - Shareholder 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 $665 $907 $1,168 $1,914
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 96 300 520 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.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
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 Shareholders, 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 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.
In general, the Fund expects to hold all of the stocks included in the S&P 500
Index. 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. 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. The Fund may invest in futures contracts and
options on futures contracts for hedging purposes, to have fuller exposure to
price movements in a stock or bond index, to increase total return or to
maintain liquidity to meet potential shareholder redemptions, invest cash
balances or dividends or minimize trading costs. In addition, the Fund may
purchase and sell futures and related options (based only on the S&P 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.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
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. 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 shareholders 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.
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 a Fund involves risk, including the risk of
losing money.
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 5.50% 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.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
YEAR-BY-YEAR TOTAL RETURN AS OF 12/31 EACH YEAR (%) (INSTITUTIONAL SHARES)
90 -3.29
91 29.96
92 6.97
93 9.11
94 1.02
95 36.98
96 22.65
97 32.59
98 28.72
99 20.41
- --------------------------------------------------------------------------------
BEST QUARTER: Q 4 '98 21.52%
WORST QUARTER: Q 3 '90 -13.60%
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/99 (Retail A Shares and Institutional
Shares)
- --------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
EQUITY INDEX FUND -
Retail A Shares 13.49% 26.38% 16.90%
Institutional Shares 20.41% 28.11% 17.72%
S&P 500 INDEX 21.04% 28.56% 18.21%
- --------------------------------------------------------------------------------
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.
<PAGE>
(LOGO) FIRSTAR 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 Equity
Index Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
(fees paid directly INSTITUTIONAL Retail A RETAIL B
from your investment) SHARES SHARES SHARES
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) None 5.50% None
Maximum Deferred Sales Charge (Load)
(as a percentage of
offering price) None None 5.00%<F1>
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends None None None
Redemption Fees None<F2> None<F2> None<F2>
Exchange Fees None None None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
- --------------------------------------------------------------------------------
DISTRIBUTION TOTAL
AND ANNUAL
MANAGEMENT SERVICE OTHER FUND
FEES (12B-1) EXPENSES OPERATING
<F3> FEES<F4> <F5> EXPENSES<F6>
- --------------------------------------------------------------------------------
Equity Index Fund - Retail A 0.25% 0.00% 0.43% 0.68%
Equity Index Fund - Retail B 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 years, 2% in the fifth year,
declining to 1% in the sixth year. Thereafter Retail B Shares convert to
Retail A Shares, which do not bear a contingent deferred sales charge.
<F2> A fee of $12.00 is charged for each wire redemption (Retail Shares) and
$15.00 for each non-systematic withdrawal from a Retirement Account for
which Firstar Bank, N.A. is custodian.
<F3> The Adviser has voluntarily agreed that a portion of its management fee
will not be imposed on the Fund during the current fiscal year. As a result
of the fee waiver, current management fees for the Fund are 0.19% 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.
<F4> The total of all 12b-1 fees and shareholder 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 shareholder
servicing fee to institutions under a Service Plan (described below under
"Investing with Firstar Funds - Shareholder Organizations") equal to 0.25%
of the average daily net assets of the Fund's Retail A Shares and Retail B
Shares.
<F6> As a result of the fee waiver set forth in note 3, the Total Fund Operating
Expenses of the Institutional, Retail A and Retail B Shares of the Fund are
estimated to be 0.37%, 0.62% and 1.37%, 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.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
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
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 $616 $756 $908 $1,350
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 44 138 241 542
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
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 Shareholders, although no change is currently
anticipated.
PRINCIPAL INVESTMENT STRATEGIES
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.
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 20
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.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
PRINCIPAL RISKS
The principal investment risks below 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.
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.
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 5.50% 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.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
YEAR-BY-YEAR TOTAL RETURN AS OF 12/31 EACH YEAR (%) (INSTITUTIONAL SHARES)
90 -
91 -
92 -
93 9.98
94 -5.34
95 30.03
96 18.15
97 22.91
98 30.46
99 14.29
- --------------------------------------------------------------------------------
BEST QUARTER: Q 4 '98 24.04%
WORST QUARTER: Q 3 '98 -11.12%
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/99 (Retail A Shares and Institutional
Shares)
- --------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (DEC. 29, 1992)
- --------------------------------------------------------------------------------
GROWTH FUND - Retail A Shares 7.77% 21.33% - 15.53%
Institutional Shares 14.29% 22.99% - 16.66%
S&P 500 INDEX 21.04% 28.56% - 21.53%
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
(fees paid directly INSTITUTIONAL RETAIL A RETAIL B
from your investment) SHARES SHARES SHARES
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) None 5.50% None
Maximum Deferred Sales Charge (Load)
(as a percentage of
offering price) None None 5.00%<F1>
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends None None None
Redemption Fees None<F2> None<F2> None<F2>
Exchange Fees None None None
- --------------------------------------------------------------------------------
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
- --------------------------------------------------------------------------------
DISTRIBUTION TOTAL ANNUAL
MANAGEMENT AND SERVICE OTHER FUND OPERATING
FEES (12B-1) FEES<F3> EXPENSES<F4> EXPENSES
- --------------------------------------------------------------------------------
Growth Fund - Retail A 0.75% 0.00% 0.45% 1.20%
Growth Fund - Retail B 0.75% 0.75% 0.45% 1.95%
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 years, 2% in the fifth year,
declining to 1% in the sixth year. Thereafter Retail B Shares convert to
Retail A Shares, which do not bear a contingent deferred sales charge.
<F2> A fee of $12.00 is charged for each wire redemption (Retail Shares) and
$15.00 for each non-systematic withdrawal from a Retirement Account for
which Firstar Bank, N.A. is custodian.
<F3> The total of all 12b-1 fees and shareholder 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.
<F4> "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 shareholder
servicing fee to institutions under a Service Plan (described below under
"Investing with Firstar Funds - Shareholder 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 $666 $910 $1,173 $1,925
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 97 303 525 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.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
MIDCAP INDEX FUND
OBJECTIVE
The investment objective of the Fund is to seek returns, before Fund expenses,
comparable to the price and yield performance of publicly traded common stocks
in the aggregate, as represented by the S&P MidCap 400 Index. The investment
objective may be changed by the Board of Directors without approval of
Shareholders, although no change is currently anticipated.
PRINCIPAL INVESTMENT STRATEGIES
Under normal market conditions, the Fund intends to invest substantially all of
its total assets in securities included in the S&P MidCap 400 Index, and in any
event the Fund will invest at least 80% of its net assets in securities included
in that Index. The Fund uses the S&P MidCap 400 Index as the standard
performance comparison because it is composed of 400 selected common stocks of
medium-size domestic companies with market capitalizations between approximately
$148 million and $13 billion.
The S&P MidCap 400 Index is an unmanaged, capitalization-weighted index of
common stocks representing all major industries in the mid-range of the U.S.
stock market.
Rather than using traditional methods of investment management, index funds such
as the Firstar MidCap Index Fund are managed with the aid of a computer program.
The Adviser purchases and sells securities for the Fund in an attempt to produce
investment results that substantially duplicate the performance of the common
stocks of the issuers represented in the S&P MidCap 400 Index.
The Fund does not expect to hold all of the stocks included in the S&P MidCap
400 Index at any particular time; however, the Adviser believes it will be able
to construct and maintain the Fund's investment portfolio so that it reasonably
tracks the performance of the S&P MidCap 400 Index by using a capitalization
weighting and sector balancing technique.
The Adviser believes the quarterly performance of the Fund and the S&P MidCap
400 Index will be within +0.3% under normal market conditions. The Adviser
believes that through the application of a capitalization weighting and sector
balancing technique it will be able to construct and maintain the Fund's
investment portfolio so it reasonably tracks the performance of the S&P MidCap
400 Index. In the event the performance of the Fund is not comparable to the
performance of the S&P MidCap 400 Index, the Board of Directors will examine the
reasons for the deviation and the availability of corrective measures. These
measures would include additional fee waivers by the Adviser and Co-
Administrators or adjustments to the Adviser's portfolio management practices.
If substantial deviation in the Fund's performance continued for extended
periods, it is expected the Board of Directors would consider possible changes
to the Fund's investment objective.
The Fund may invest in futures contracts. 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. The Fund may invest in futures contracts and
options on futures contracts for hedging purposes, to have fuller exposure to
price movements in a stock or bond index, to increase total return or to
maintain liquidity to meet potential shareholder redemptions, invest cash
balances or dividends or minimize trading costs. In addition, the Fund may
purchase and sell futures and related options (based only on the S&P MidCap 400
Index) to maintain cash reserves while simulating full investment in the stocks
underlying the S&P MidCap 400 Index, to keep substantially all of its assets
exposed to the market (as represented by the S&P MidCap 400 Index), and to
reduce transaction costs.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
PRINCIPAL RISKS
The following principal investment risks are described in more detail under the
heading "Types of Investment Risk." Some additional risks which apply to the
Fund are also described under that heading.
The Fund is subject to market risk. Market risk is the risk that the value of
the securities in which the Fund invests may go up or down in response to the
prospects of individual companies and/or general economic conditions. Your
investment follows the mid-cap portion of the U.S. stock market, as measured by
the S&P MidCap 400 Index, during upturns as well as downturns. Because of its
indexing strategy, the Fund cannot take steps to reduce market volatility or to
lessen the effects of a declining market. Whenever mid-cap stocks underperform
large- or small-cap stocks, the Fund may underperform funds that have exposure
to those segments. Further, the Fund will not necessarily dispose of a security
in response to adverse events affecting the issuer of a security (such as
adverse credit factors or failure to pay dividends) if disposal would not be
consistent with the Fund's indexing strategy.
The Adviser may be required to sell common stock if the issuer is eliminated
from the S&P MidCap 400 Index. Such sales may result in:
- - lower prices, or
- - losses, that may not have been incurred if the Adviser did not have to 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.
The Fund's ability to duplicate the performance of the S&P MidCap 400 Index will
depend to some extent on the size and timing of cash flows into and out of the
Fund, as well as the Fund's expenses.
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 investment risks,
including the risk that you may lose money.
Standard & Poor's makes no representation or warranty regarding the advisability
of investing in index funds or the ability of the S&P MidCap 400 Index to track
general stock market performance.
There is no performance information in this section for the Fund because it
commenced operations on November 4, 1999.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses you may pay if you buy and hold
shares of the Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
(fees paid directly INSTITUTIONAL RETAIL A RETAIL B
from your investment) SHARES SHARES SHARES
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) None 5.50% None
Maximum Deferred Sales Charge (Load)
(as a percentage of
offering price) None None 5.00%<F1>
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends None None None
Redemption Fees None<F2> None<F2> None<F2>
Exchange Fees None None None
- --------------------------------------------------------------------------------
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
- --------------------------------------------------------------------------------
DISTRIBUTION TOTAL
AND ANNUAL
MANAGEMENT SERVICE OTHER FUND
FEES (12B-1) EXPENSES OPERATING
<F3> FEES<F4> <F5> EXPENSES<F6>
- --------------------------------------------------------------------------------
MidCap Index Fund - Retail A 0.25% 0.00% 0.65% 0.90%
MidCap Index Fund - Retail B 0.25% 0.75% 0.65% 1.65%
MidCap Index Fund -
Institutional 0.25% 0.00% 0.40% 0.65%
- --------------------------------------------------------------------------------
<F1> A contingent deferred sales charge is imposed on Retail B Shares redeemed
within six years of purchase at a rate of 5% in the first year, 4% in the
second year, 3% in the third and fourth years, 2% in the fifth year,
declining to 1% in the sixth year. Thereafter, Retail B Shares convert to
Retail A Shares, which do not bear a contingent deferred sales charge.
<F2> A fee of $12.00 is charged for each wire redemption (Retail Shares) and
$15.00 for each non-systematic withdrawal from a Retirement Account for
which Firstar Bank, N.A. is custodian.
<F3> The Adviser has voluntarily agreed that a portion of its management fee
will not be imposed on the Fund during the current fiscal year. As a result
of the fee waiver, current management fees for the Fund are 0.10% of the
Fund's average daily net assets. This waiver is expected to remain in
effect for the current fiscal year; however, it is voluntary and can be
modified or terminated at any time without the Fund's consent.
<F4> The total of all 12b-1 fees and shareholder servicing fees may not exceed,
in the aggregate, the annual rate of 0.25% of the Fund's average daily net
assets for the Retail A Shares. The Fund does not intend to pay 12b-1 fees
with respect to the Retail A Shares for the current fiscal year. The Fund
does not intend to pay more than 0.75% in 12b-1 fees with respect to the
Retail B Shares for the current fiscal year.
<F5> "Other Expenses" is based on estimated amounts for the current fiscal year
and includes (1) estimated administration fees, transfer agency fees and
all other ordinary operating expenses of the Fund not listed above and (2)
for the Retail A and Retail B Shares, the payment of a shareholder
servicing fee to institutions under a Service Plan (described below under
"Investing with Firstar Funds - Shareholder Organizations") equal to 0.25%
of the average daily net assets of the Fund's Retail A Shares and Retail B
Shares.
<F6> As a result of the fee waiver set forth in note 3, the Total Fund Operating
Expenses of the Institutional, Retail A and Retail B Shares of the Fund are
estimated to be 0.50%, 0.75% and 1.50%, respectively, for the current
fiscal year. Although the fee waiver is expected to remain in effect for
the current fiscal year, this waiver is voluntary and may be terminated at
any time at the option of the Adviser.
EXAMPLE
The following example is intended to help you compare the cost of investing in
the Fund 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
- --------------------------------------------------------------------------------
MidCap Index Fund - Retail A Shares $637 $821
MidCap Index Fund - Retail B Shares
Assuming complete redemption
at end of period 668 820
Assuming no redemption 168 520
MidCap Index Fund - Institutional 66 208
- --------------------------------------------------------------------------------
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
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 Shareholders,
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 are 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.
MEDIUM-SIZED COMPANIES
The Fund generally invests in medium-sized companies with stock market
capitalizations between $700 million and $10 billion that the Adviser considers
to be well-managed and to have attractive fundamental financial characteristics
(see box on page 20 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
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
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.
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.
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 5.50% 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)
90 1.00
91 57.96
92 7.22
93 8.02
94 -2.01
95 29.94
96 18.87
97 17.42
98 4.91
99 2.53
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BEST QUARTER: Q 4 '99 24.27%
WORST QUARTER: Q 3 '98 -19.63%
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/99 (Retail A Shares and Institutional
Shares)
- --------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
SPECIAL GROWTH FUND -
Retail A Shares -3.35% 12.74% 12.67%
Institutional Shares 2.53% 14.29% 13.44%
S&P 500 INDEX 21.04% 28.56% 18.21%
S&P MIDCAP 400 INDEX 14.72% 23.05% -
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
(fees paid directly INSTITUTIONAL RETAIL A RETAIL B
from your investment) SHARES SHARES SHARES
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) None 5.50% None
Maximum Deferred Sales Charge (Load)
(as a percentage of
offering price) None None 5.00%<F1>
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends None None None
Redemption Fees None<F2> None<F2> None<F2>
Exchange Fees None None None
- --------------------------------------------------------------------------------
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
- --------------------------------------------------------------------------------
DISTRIBUTION TOTAL
AND ANNUAL
MANAGEMENT SERVICE OTHER FUND
FEES (12B-1) EXPENSES OPERATING
<F3> FEES<F4> <F5> EXPENSES<F6>
- --------------------------------------------------------------------------------
Special Growth Fund - Retail A 0.75% 0.00% 0.47% 1.22%
Special Growth Fund - Retail B 0.75% 0.75% 0.47% 1.97%
Special Growth Fund -
Institutional 0.75% 0.00% 0.22% 0.97%
- --------------------------------------------------------------------------------
<F1> A contingent deferred sales charge is imposed on Retail B Shares redeemed
within six years of purchase at a rate of 5% in the first year, 4% in the
second year, 3% in the third and fourth years, 2% in the fifth year,
declining to 1% in the sixth year. Thereafter 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, N.A. is custodian.
<F3> The Adviser has voluntarily agreed that a portion of its management fee
will not be imposed on the Fund during the current fiscal year. As a result
of the fee waiver, current management fees for the Fund are 0.73% 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.
<F4> The total of all 12b-1 fees and shareholder 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 shareholder
servicing fee to institutions under a Service Plan (described below under
"Investing with Firstar Funds - Shareholder Organizations") equal to 0.25%
of the average daily net assets of the Fund's Retail A Shares and Retail B
Shares.
<F6> As a result of the fee waiver set forth in note 3, the Total Fund Operating
Expenses of the Institutional, Retail A and Retail B Shares of the Fund are
estimated to be 0.95%, 1.20% and 1.95%, 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 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 $667 $916 $1,183 $1,946
Special Growth Fund - Retail B Shares
Assuming complete redemption
at end of period 700 918 1,262 1,924
Assuming no redemption 200 618 1,062 1,924
Special Growth Fund - Institutional 99 309 536 1,190
- --------------------------------------------------------------------------------
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.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
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 Shareholders,
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 20 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.
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 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.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
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.
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.
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 5.50% 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)
90 -
91 -
92 -
93 -
94 -
95 -
96 -
97 -
98 8.49
99 4.40
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BEST QUARTER: Q 4 '99 24.59%
WORST QUARTER: Q 3 '98 -19.59%
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/99 (Retail A Shares and Institutional
Shares)
- --------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (AUG. 15, 1997)
- --------------------------------------------------------------------------------
EMERGING GROWTH FUND -
RETAIL A SHARES -1.47% - - 3.40%
Institutional Shares 4.40% - - 6.08%
S&P SMALLCAP 600 12.40% - - 7.44%
WILSHIRE NEXT 1750 INDEX 25.32% - - 13.51%
- --------------------------------------------------------------------------------
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.
SHAREHOLDER FEES
(fees paid directly INSTITUTIONAL RETAIL A RETAIL B
from your investment) SHARES SHARES SHARES
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) None 5.50% None
Maximum Deferred Sales Charge (Load)
(as a percentage of
offering price) None None 5.00%<F1>
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends None None None
Redemption Fees None<F2> None<F2> None<F2>
Exchange Fees None None None
- --------------------------------------------------------------------------------
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
- --------------------------------------------------------------------------------
DISTRIBUTION TOTAL ANNUAL
MANAGEMENT AND SERVICE OTHER FUND OPERATING
FEES (12B-1) FEES<F3> EXPENSES<F4> EXPENSES
- --------------------------------------------------------------------------------
Emerging Growth Fund -
Retail A 0.75% 0.00% 0.56% 1.31%
Emerging Growth Fund -
Retail B 0.75% 0.75% 0.56% 2.06%
Emerging Growth Fund -
Institutional 0.75% 0.00% 0.31% 1.06%
- --------------------------------------------------------------------------------
<F1> A contingent deferred sales charge is imposed on Retail B Shares redeemed
within six years of purchase at a rate of 5% in the first year, 4% in the
second year, 3% in the third and fourth years, 2% in the fifth year,
declining to 1% in the sixth year. Thereafter 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, N.A. is custodian.
<F3> The total of all 12b-1 fees and shareholder 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.
<F4> "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 shareholder
servicing fee to institutions under a Service Plan (described below under
"Investing with Firstar Funds - Shareholder 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
- --------------------------------------------------------------------------------
Emerging Growth Fund - Retail A Shares $676 $942 $1,229 $2,042
Emerging Growth Fund - Retail B Shares
Assuming complete redemption at
end of period 709 946 1,308 2,021
Assuming no redemption 209 646 1,108 2,021
Emerging Growth Fund - Institutional 108 337 585 1,294
- --------------------------------------------------------------------------------
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.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
MICROCAP FUND
The MicroCap Fund is currently closed to new investors. Please see the
"Purchasing Shares" section below for additional information.
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 Shareholders, 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 20 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.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
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.
The Fund may also participate in the initial public offering (IPO) market, and a
significant portion of the Fund's returns have been attributable to its
investments in IPOs. However, IPOs may not be consistently available to the Fund
for investing, particularly as the Fund's asset base grows. As the Fund's assets
continue to grow, the effect of the Fund's investment in IPOs on its total
returns may decline, which could reduce the Fund's total returns.
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 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.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
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.
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 5.50% 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)
90 -
91 -
92 -
93 -
94 -
95 -
96 57.23
97 13.92
98 -2.45
99 137.79
- --------------------------------------------------------------------------------
BEST QUARTER: Q 4 '99 74.44%
WORST QUARTER: Q 3 '98 -30.81%
- --------------------------------------------------------------------------------
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/99 (Retail A Shares and Institutional
Shares)
- --------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (AUG. 1, 1995)
- --------------------------------------------------------------------------------
MICROCAP FUND
Retail A Shares 123.31% - - 41.39%
Institutional Shares 137.79% - - 43.73%
RUSSELL 2000 21.26% - - 14.06%
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
(fees paid directly INSTITUTIONAL RETAIL A RETAIL B
from your investment) SHARES SHARES SHARES
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) None 5.50% None
Maximum Deferred Sales Charge (Load)
(as a percentage of
offering price) None None 5.00%<F1>
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends None None None
Redemption Fees None<F2> None<F2> None<F2>
Exchange Fees None None None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
- --------------------------------------------------------------------------------
DISTRIBUTION TOTAL ANNUAL
MANAGEMENT AND SERVICE OTHER FUND OPERATING
FEES (12B-1) FEES<F3> EXPENSES<F4> EXPENSES
- --------------------------------------------------------------------------------
MicroCap Fund -
Retail A 1.50% 0.00% 0.43% 1.93%
MicroCap Fund -
Retail B 1.50% 0.75% 0.43% 2.68%
MicroCap Fund -
Institutional 1.50% 0.00% 0.18% 1.68%
- --------------------------------------------------------------------------------
<F1> A contingent deferred sales charge is imposed on Retail B Shares redeemed
within six years of purchase at a rate of 5% in the first year, 4% in the
second year, 3% in the third and fourth years, 2% in the fifth year,
declining to 1% in the sixth year. Thereafter 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, N.A. is custodian.
<F3> The total of all 12b-1 fees and shareholder 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> "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 shareholder
servicing fee to institutions under a Service Plan (described below under
"Investing with Firstar Funds - Shareholder Organizations") equal to 0.25%
of the average daily net assets of the Fund's Retail A Shares and Retail B
Shares.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
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 $735 $1,123 $1,535 $2,680
MicroCap Fund - Retail B Shares
Assuming complete redemption at
end of period 771 1,132 1,620 2,666
Assuming no redemption 271 832 1,420 2,666
MicroCap Fund - Institutional 171 530 913 1,987
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
CORE INTERNATIONAL EQUITY FUND
OBJECTIVE
The investment objective of the Core International Equity Fund is to provide
maximum, long-term total return consistent with reasonable risk to principal.
This investment objective may be changed by the Board of Directors without
approval of Shareholders, although no change is currently anticipated.
PRINCIPAL INVESTMENT STRATEGIES
The Glenmede Trust Company (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. The Fund expects to
derive its income from primarily dividends on equity securities and also from
investments in fixed-income securities. The Fund is expected to diversify its
investments across companies located in a number of foreign countries, which may
include, but are not limited to: Japan, the United Kingdom, Germany, France,
Switzerland, the Netherlands, Sweden, Australia, Hong Kong and Singapore. The
Fund will invest at least 65% of its total assets in 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.
Factors considered by the Sub-Adviser in the selection of securities to buy and
sell for this Fund include both country selection and stock selection. Countries
are primarily selected by evaluating countries' valuations relative to their
historical valuations. Economic growth, government policies and other factors
are also considered. Securities are primarily selected by evaluating a
security's valuation relative to the valuations of other securities in the same
country. Prospective growth in company earnings, industry fundamentals, and
other factors, such as low valuations relative to the universe of stocks which
the Sub-Adviser would normally consider for investment, are also considered in
determining which securities to buy and sell.
When a company's growth in earnings and valuation results in price appreciation
that reaches a level which meets the Fund's valuation 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. Securities may also be sold for other reasons, such as a more
favorable investment opportunity.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
PRINCIPAL RISKS
The following principal investment risks are described in more detail under the
heading "Types of Investment Risk." Some additional risks, which apply to the
Fund, are also described under that heading.
The Fund may be suitable for you only if you are prepared to invest for the
long-term and are not seeking to speculate on short-term stock market movements.
The Fund's value is expected to be volatile as a result of its investment in
foreign securities.
The Fund is subject to market risk. Market risk is the risk that the value of
the securities in which the Fund invests may go up or down in response to the
prospects of individual companies and/or general economic conditions. The Fund's
investments in foreign securities are subject to foreign risks. Foreign stocks
involve special risks not typically associated with U.S. stocks. The stocks held
by the Fund may underperform other types of stocks, and they may not increase or
may decline in value. Foreign investments may be riskier than U.S. investments
because of factors such as foreign government restrictions, changes in currency
exchange rates, incomplete financial information about the issuers of
securities, and political or economic instability. Foreign stocks may be more
volatile and less liquid than U.S. stocks.
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 investment risks,
including the risk that you may lose money.
There is no performance information in this section for the Fund because it
commenced operations on November 4, 1999.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses you may pay if you buy and hold
shares of the Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
(fees paid directly INSTITUTIONAL RETAIL A RETAIL B
from your investment) SHARES SHARES SHARES
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) None 5.50% None
Maximum Deferred Sales Charge (Load)
(as a percentage of
offering price) None None 5.00%<F1>
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends None None None
Redemption Fees None<F2> None<F2> None<F2>
Exchange Fees None None None
- --------------------------------------------------------------------------------
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
- --------------------------------------------------------------------------------
DISTRIBUTION TOTAL
AND ANNUAL
MANAGEMENT SERVICE OTHER FUND
FEES (12B-1) EXPENSES OPERATING
<F3> FEES<F4> <F5> EXPENSES<F6>
- --------------------------------------------------------------------------------
Core International
Equity Fund - Retail A 1.25% 0.00% 1.16% 2.41%
Core International
Equity Fund - Retail B 1.25% 0.75% 1.16% 3.16%
Core International
Equity Fund - Institutional 1.25% 0.00% 0.91% 2.16%
- --------------------------------------------------------------------------------
<F1> A contingent deferred sales charge is imposed on Retail B Shares redeemed
within six years of purchase at a rate of 5% in the first year, 4% in the
second year, 3% in the third and fourth years, 2% in the fifth year,
declining to 1% in the sixth year. Thereafter, 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, N.A. is custodian.
<F3> The Adviser has voluntarily agreed that a portion of its management fee
will not be imposed on the Fund during the current fiscal year. As a result
of the fee waiver, current management fees for the Fund are 0.80% of the
Fund's average daily net assets. This waiver is expected to remain in
effect for the current fiscal year; however, it is voluntary and can be
modified or terminated at any time without the Fund's consent.
<F4> The total of all 12b-1 fees and shareholder servicing fees may not exceed,
in the aggregate, the annual rate of 0.25% of the Fund's average daily net
assets for the Retail A Shares. The Fund does not intend to pay 12b-1 fees
with respect to the Retail A Shares for the current fiscal year. The Fund
does not intend to pay more than 0.75% in 12b-1 fees with respect to the
Retail B Shares for the current fiscal year.
<F5> "Other Expenses" is based on estimated amounts for the current fiscal year,
and includes (1) estimated administration fees, transfer agency fees and
all other ordinary operating expenses of the Fund not listed above and (2)
for the Retail A and Retail B Shares, the payment of a shareholder
servicing fee to institutions under a Service Plan (described below under
"Investing with Firstar Funds - Shareholder Organizations") equal to 0.25%
of the average daily net assets of the Fund's Retail A Shares and Retail B
Shares.
<F6> As a result of the fee waiver set forth in note 3, the Total Annual Fund
Operating Expenses of the Institutional Shares, Retail A and Retail B
Shares and of the Fund are estimated to be 1.71%, 1.96% and 2.71%,
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 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
- --------------------------------------------------------------------------------
Core International Equity Fund - Retail A Shares $781 $1,260
Core International Equity Fund - Retail B Shares
Assuming complete redemption at end of period 819 1,274
Assuming no redemption 319 974
Core International Equity Fund -
Institutional 219 676
- --------------------------------------------------------------------------------
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
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 Shareholders, although no change is currently
anticipated.
PRINCIPAL INVESTMENT STRATEGIES
Hansberger Global Investors, Inc. (the "Sub-Adviser" or "HGI") 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 Sub-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 Sub-Adviser may sell for reasons relating
to valuation when for example a security's price has reached a target specified
by the Sub-Adviser, and the Sub-Adviser believes potential increases in price
are limited.
- --------------------------------------------------------------------------------
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 CONDITIONS, AT
LEAST 80% OF ASSETS WILL BE INVESTED IN THREE COUNTRIES OTHER THAN THE U.S.
- --------------------------------------------------------------------------------
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 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 may also invest in:
- - closed-end investment companies holding foreign securities
- - options on securities and securities indices
- - futures contracts and related options
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
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 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.
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.
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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 5.50% 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)
90 -
91 -
92 -
93 -
94 -
95 4.49
96 5.00
97 -10.46
98 -9.55
99 30.07
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BEST QUARTER: Q 2 '99 14.98%
WORST QUARTER: Q 3 '98 -21.06%
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AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/99 (Retail A Shares and Institutional
Shares)
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SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (APR. 28, 1994)
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INTERNATIONAL EQUITY FUND -
Retail A Shares 22.57% 1.54% - 0.58%
Institutional Shares 30.07% 2.94% - 1.80%
MSCI/EAFE INDEX 26.96% 12.83% - 11.21%
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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.
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SHAREHOLDER FEES
(fees paid directly INSTITUTIONAL RETAIL A RETAIL B
from your investment) SHARES SHARES SHARES
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) None 5.50% None
Maximum Deferred Sales Charge (Load)
(as a percentage of
offering price) None None 5.00%<F1>
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends None None None
Redemption Fees None<F2> None<F2> None<F2>
Exchange Fees None None None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
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DISTRIBUTION TOTAL
AND ANNUAL
MANAGEMENT SERVICE OTHER FUND
FEES (12B-1) EXPENSES OPERATING
<F3> FEES<F4> <F5> EXPENSES<F6>
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International Equity Fund -
Retail A 1.34% 0.00% 0.67% 2.01%
International Equity Fund -
Retail B 1.34% 0.75% 0.67% 2.76%
International Equity Fund -
Institutional 1.34% 0.00% 0.42% 1.76%
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<F1> A contingent deferred sales charge is imposed on Retail B Shares redeemed
within six years of purchase at a rate of 5% in the first year, 4% in the
second year, 3% in the third and fourth years, 2% in the fifth year,
declining to 1% in the sixth year. Thereafter 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, N.A. is custodian.
<F3> The Adviser has voluntarily agreed that a portion of its management fee
will not be imposed on the Fund during the current fiscal year. As a result
of the fee waiver, current management fees for the Fund are 1.15% 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.
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<F4> The total of all 12b-1 fees and shareholder 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 shareholder
servicing fee to institutions under a Service Plan (described below under
"Investing with Firstar Funds - Shareholder Organizations") equal to 0.25%
of the average daily net assets of the Fund's Retail A Shares and Retail B
Shares.
<F6> As a result of the fee waiver set forth in note 3 the Total Annual Fund
Operating Expenses of the Institutional, Retail A and Retail B Shares of
the Fund are estimated to be are 1.57%, 1.82% and 2.57%, 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 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:
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1 YEAR 3 YEARS 5 YEARS 10 YEARS
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International Equity Fund -
Retail A Shares $743 $1,146 $1,573 $2,759
International Equity Fund -
Retail B Shares
Assuming complete redemption at
end of period 779 1,156 1,659 2,746
Assuming no redemption 279 856 1,459 2,746
International Equity Fund - Institutional 179 554 954 2,073
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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.
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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.
COMPLETE INVESTMENT PROGRAM - ALL FUNDS
An investment in a single Fund, by itself, does not constitute a complete
investment plan.
GENERAL RISKS OF INVESTING IN EACH OF THE FUNDS
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.
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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 IMMDEXTM 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, Core International Equity 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
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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 (or Sub-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.
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. The Adviser and each
Sub-Adviser may not change certain investment practices of the Fund without
shareholder vote. These policies of each Fund, which may not be changed without
a shareholder 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. Each
Fund's performance results may reflect periods of above average performance
attributable to its investment in certain securities during the initial public
offering, the performance of a limited number of the securities in the Fund, or
other non-recurring factors. It is possible that the performance may not be
repeated in the future.
NONPRINCIPAL STRATEGY RISKS - 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-Advisers 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 shareholders. It may also result in higher
short-term capital gains taxable to shareholders. 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.
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
Over the past several years, the Adviser and the Funds' other major service
providers expended considerable time and money in addressing the computer and
technology problems associated with the transition to the Year 2000. As a result
of those efforts, the Funds did not experience any material disruptions in their
operations as a result of the transition to the 21st century. The Adviser and
the Funds' other major service providers are continuing to monitor the year 2000
or Y2K problem, however, and there can be no assurances that there will be no
adverse impact to the Funds as a result of future computer-related Y2K
difficulties.
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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 - CORE INTERNATIONAL EQUITY FUND, 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 prior
to 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 and Core
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.
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EUROPEAN CURRENCY UNIFICATION - CORE INTERNATIONAL EQUITY FUND, 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
Many European countries have adopted a single European currency, the euro. On
January 1, 1999, the euro became legal tender for all countries participating in
the Economic and Monetary Union ("EMU"). A new European Central Bank has been
created to manage the monetary policy of the new unified region. On the same
date, the exchange rates were irrevocably fixed between the EMU member
countries. National currencies will continue to circulate until they are
replaced by euro coins and bank notes by the middle of 2002.
This change is likely to significantly impact the European capital markets in
which a Fund invests and may result in a Fund facing additional risks in
pursuing its investment objective. These risks, which include, but are not
limited to, uncertainty as to proper tax treatment of the currency conversion,
volatility of currency exchange rates as a result of the conversion, uncertainty
as to capital market reaction, conversion costs that may affect issuer
profitability and creditworthiness, and lack of participation by some European
countries, may increase the volatility of a Fund's net asset value per share.
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 AND MIDCAP STOCK RISK - MIDCAP INDEX FUND, SPECIAL GROWTH FUND, EMERGING
GROWTH FUND AND MICROCAP FUND (WITH RESPECT TO SMALL CAP STOCK)
Smaller and medium capitalization stocks involve greater risks than those
associated with larger, more established companies. Small and medium 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 and medium cap stocks tend to be less liquid, particularly during periods
of market disruption. There normally is less publicly available information
concerning these securities. Small and medium 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.
TEMPORARY INVESTMENT RISK - ALL FUNDS OTHER THAN INDEX 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
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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, economic, 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
and Core 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.
ADDITIONAL RISKS WHICH APPLY TO PARTICULAR TYPES OF SECURITIES
GOVERNMENT OBLIGATIONS - MONEY MARKET FUNDS OTHER THAN THE TAX-EXEMPT MONEY
MARKET FUND, 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 shareholder 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.
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OPTIONS - TAXABLE BOND FUNDS, BALANCED FUNDS AND EQUITY FUNDS OTHER THAN CORE
INTERNATIONAL EQUITY FUND
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, MicroCap, MidCap Index,
Special Growth and Emerging Growth Funds will not exceed 5%, 25%, 5%, 5%, 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. 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
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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. The Core International Equity Fund may
invest in futures but may not invest in options. 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.
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, MidCap
Index Fund and International Equity Fund intend to limit their transactions in
futures contracts so that not more than 10%, 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.
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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
This section describes for you the procedures for opening an account and how to
buy, sell or exchange Fund shares.
SHARE CLASSES AVAILABLE
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
- - Available for:
- - trust, agency or custodial accounts opened through Firstar Bank, N.A.;
- - employer-sponsored qualified retirement plans other than those serviced by
certain external organizations who have service agreements with Firstar or
its affiliates, and other than plans administered by Firstar with assets of
less than $1 million at the time Firstar begins plan administration (but
including plans administered by Firstar which owned Institutional Shares
prior to June 18, 1999). Plans administered by Firstar with assets of less
than $1 million at the time Firstar begins plan administration will become
eligible for Institutional Shares when such plans grow to $1 million or
greater as further described in the SAI:
- - all clients of FIRMCO; and
n those purchasing through certain broker-dealers who have agreed to provide
certain services with respect to shares of the Funds, including TD
Waterhouse. Check with your broker-dealer to see if you qualify for
Institutional Shares.
RETAIL A SHARES
- - Initial sales charge of 5.50% 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 years, 2% in the fifth
year, 1% in the sixth year and 0% thereafter
- - Converts to Retail A Shares after six years
- - Available to any investor who does not qualify to purchase Institutional
Shares
A securities dealer, broker, financial institution or other industry
professional ("Shareholder Organization") may charge transaction or other fees
for providing administrative or other services in connection with investments in
Fund shares.
SALES CHARGES AND WAIVERS
INITIAL SALES CHARGES - for Retail A Shares of 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:
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SHAREHOLDER
ORGANIZATION
AMOUNT OF SALES CHARGE AS A SALES CHARGE AS A REALLOWANCE AS A
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 $50,000 5.50% 4.00% 5.82% 4.17% 5.00% 3.75%
$50,000 to $99,999 4.50% 3.50% 4.71% 3.63% 4.00% 3.25%
$100,000 to $249,999 3.50% 3.00% 3.63% 3.09% 3.00% 2.75%
$250,000 to $499,999 2.50% 2.50% 2.56% 2.56% 2.00% 2.25%
$500,000 to $999,999 2.00% 2.00% 2.04% 2.04% 1.50% 1.75%
$1,000,000 and above 0.50% 0.50% 0.50% 0.50% 0.40% 0.40%
- --------------------------------------------------------------------------------
You only pay a sales charge when you buy shares. The Distributor may reallow the
entire sales charge to certain shareholder organizations and the amount
reallowed may change periodically. To the extent that 90% or more of the sales
charge is reallowed, shareholder 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 shareholder organization or the Distributor at the time of purchase or
exchange. The reduction in sales charge is subject to confirmation of your
holdings through a check of records. The Company may modify or terminate
quantity discounts at any time.
WAIVERS - RETAIL A SHARES
You may purchase retail shares without a sales charge if:
(a) you are an employee, director, retiree or registered representative of
Firstar Corporation or its affiliates or of Firstar Funds, Inc.
(b) you are a spouse, parent, in-law, sibling or child of an individual who
falls within the preceding category (a) above
(c) you make any purchase for your medical savings account for which Firstar
Corporation or an affiliate serves in a custodial capacity
(d) you purchase through certain external organizations that have entered into
a service agreement with Firstar or its affiliates
(e) you are part of an employer-sponsored qualified retirement plan
administered by Firstar with assets of less than $1 million at the time
Firstar begins plan administration, provided such administration commenced
on or after June 18, 1999
(f) you purchase through certain broker-dealers who have agreed to provide
certain services with respect to shares of the Funds, including Charles
Schwab Mutual Fund Marketplace/R. Check with your broker-dealer to see if
you qualify for this exemption.
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REDUCING YOUR SALES CHARGES - RETAIL A SHARES
- - Right of Accumulation - Existing Equity, Balanced and Bond Fund shares of
Firstar Funds and existing class A shares of any Firstar family of funds 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 purchased all 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
Equity, Balanced or Bond Fund Retail A Shares of Firstar Funds or A Shares
of any Firstar family of funds. Any investments you make during the period
receive the discounted sales charge based on the full amount of your
investment commitment. The Additional Statement includes details about the
Letter of Intent.
For purposes of applying the Rights of Accumulation and Letter of Intent
privileges, the sales charge schedule applies to the combined purchases made by
any individual and/or spouse purchasing securities for his, her or their own
account, or the aggregate investments of a trustee or other fiduciary or IRA for
the benefit of the persons previously listed.
CONTINGENT DEFERRED SALES CHARGE - RETAIL B SHARES
The public offering price for Retail B Shares is the net asset value of the
Retail B Shares purchased. Although investors pay no front-end sales charge on
purchases of Retail B Shares, such Shares are subject to a contingent deferred
sales charge at the rates set forth below if they are redeemed within six years
of purchase.
The amount of any contingent deferred sales charge an investor must pay depends
on the number of years that elapse between the purchase date and the date such
Retail B Shares are redeemed. Solely for purposes of this determination, all
payments during a month will be aggregated and deemed to have been made on the
first day of the month.
- --------------------------------------------------------------------------------
NUMBER OF YEARS CONTINGENT DEFERRED SALES CHARGE
ELAPSED SINCE PURCHASE (AS % OF DOLLAR AMOUNT SUBJECT TO THE CHARGE)
- --------------------------------------------------------------------------------
Less than one 5.00%
At least one but less than two 4.00%
At least two but less than three 3.00%
At least three but less than four 3.00%
At least four but less than five 2.00%
At least five but less than six 1.00%
At least six None
The contingent deferred sales charge on Retail B Shares is based on the lesser
of the net asset value of the Shares on the redemption date or the original cost
of the Shares being redeemed. As a result, no sales charge is imposed on any
increase in the net asset value of an investor's Retail B Shares. In addition, a
contingent deferred sales charge will not be assessed on Retail B Shares
purchased through reinvestment of dividends or capital gains distributions.
When a shareholder 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.
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Shareholder organizations will receive commissions in connection with sales of
Retail B Shares. A commission equal to 5% of the amount invested is paid to
authorized dealers.
The contingent deferred sales charge a shareholder 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
shareholder 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
shareholder'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 certain tax-free returns from IRAs of 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 shareholder 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 shareholder'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
shareholder servicing fees borne by Retail B Shares, although they will be
subject to the shareholder servicing fees borne by Retail A Shares.
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REINSTATEMENT PRIVILEGE
If you sell shares of a Firstar Fund, or of any Firstar family of funds, 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 you notify the transfer agent
or your shareholder organization at the time you reinvest. 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.
SHAREHOLDER ORGANIZATIONS - RETAIL A AND B SHARES; MONEY MARKET FUNDS
The Funds have adopted a distribution and service plan for the Retail A Shares.
The Funds also have adopted a service plan for the Retail A Shares, under which
the Funds may pay service fees for shareholder services to Retail A
shareholders. Under either of these plans, shareholder 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 respective
agreements for distribution and/or shareholder support services, as the case may
be. Fees under both these plans will not exceed, in the aggregate, the annual
rate of 0.25% of a Fund's average daily net assets for the Retail A Shares.
Shareholder support services may include:
- - assisting investors in processing purchase, exchange and redemption requests
- - processing dividend and distribution payments from the Fund
- - providing information periodically to customers showing their positions in
Fund shares
- - providing sub-accounting
- - forwarding sales literature and advertising
The Funds have adopted a distribution and service plan for the Retail B Shares.
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. Also under the distribution and service plan for
Retail B Shares, shareholder 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 shareholder liaison services.
Shareholder liaison services may include responding to customers' inquiries and
providing information on their investments, and other personal and account
maintenance services within NASD Rules.
The Funds also have adopted a service plan for the Retail B Shares, under which
a Fund may pay service fees for shareholder services (as listed above) to Retail
B shareholders. Under the service plan for the Retail B Shares, shareholder
organizations may be entitled to receive fees from the Fund at an annual rate of
up to 0.25% of the average daily net asset value of the shares covered by their
agreement.
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The Money Market Funds (other than the Institutional Money Market Fund) have
adopted a distribution and service plan. These Funds, including the
Institutional Money Market Fund, also have adopted a service plan under which
these Funds may pay service fees for shareholder services to money market
shareholders. Under either of these plans, shareholder 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 respective
agreements for distribution and/or shareholder support services, as the case may
be. Fees under both these plans will not exceed, in the aggregate, the annual
rate of 0.25% of a Fund's average daily net assets for the money market shares.
Distribution 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 a Fund's assets on an ongoing basis, over time, these fees will increase
the cost of your investment and may cost you more than paying other types of
sales charges.
Payments to shareholder organizations, including affiliates of the Adviser,
under the plans, and to the Distributor under the distribution and service plans
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.
Under these plans, a Fund may enter into agreements with shareholder
organizations, including affiliates of the Adviser (such as Firstar Investment
Services, Inc.). The shareholder 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
shareholder organizations' agreements with Firstar. In addition, investors
should contact their shareholder organizations with respect to the availability
of shareholder services and the particular shareholder organization's procedures
for purchasing and redeeming shares. It is the responsibility of shareholder
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.
Conflict-of-interest restrictions may apply to the receipt of compensation paid
by Firstar to a shareholder 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.
PURCHASING SHARES
The MicroCap Fund closed to new investors on January 14, 2000. However, this
Fund will continue to accept additional share purchases from existing
shareholders in existing accounts or new accounts of which an existing
shareholder is a full or partial owner. The Fund will also accept purchases
through reinvestment of dividend and capital gain distributions. The Fund may
open to new investors in the future at the discretion of the Adviser based on
various factors, including assets under management and current investment
opportunities.
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 not an affiliate of the Adviser. The Distributor is a registered broker-
dealer with offices at 215 North Main Street, West Bend, Wisconsin 53095.
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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 (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 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 (normally 3:00 p.m. Central
time) will be executed on the next business day after receipt of both order and
payment in proper form.
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<TABLE>
<CAPTION>
THROUGH A SHAREHOLDER ORGANIZATION
<S> <C>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
Contact your Shareholder Organization Contact your Shareholder 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 (RETAIL A AND B SHARES)
Call 1-800-677-FUND to obtain a purchase Complete a Periodic Investment Plan Application
application, which includes information for to automatically purchase more shares.
a Periodic Investment Plan or 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 1-800-677-FUND prior to sending the wire Call 1-800-677-FUND prior to sending the wire
in 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
Firstar Bank, 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.
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 1-800-677-FUND to authorize this service.
</TABLE>
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<TABLE>
<CAPTION>
BY TELEPHONE EXCHANGE
<S> <C>
Call 1-800-677-FUND to exchange from another Call 1-800-677-FUND 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.
The Funds may authorize one or more brokers and other shareholder organizations
to accept on their behalf purchase, redemption and exchange orders, and may
authorize such shareholder 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
shareholder 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 shareholder organization or intermediary. Shareholder
organizations and intermediaries will be responsible for transmitting accepted
orders to the Funds within the period agreed upon by them. Shareholders should
contact their shareholder organization or intermediaries to learn whether they
are authorized to accept orders for Funds.
It is the responsibility of shareholder organizations to transmit orders and
payment for the purchase of shares by their customers to the transfer agent on a
timely basis and to provide account statements in accordance with the procedures
previously stated.
FOR OWNERS OF INSTITUTIONAL SHARES
All share purchases are effected pursuant to a customer's account at Firstar
Bank, 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 shareholder organizations involved.
Firstar Trust and the other shareholder 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 shareholder communications from the Fund will be governed by the
customers' account agreements with Firstar Trust and the other shareholder
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.
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The Funds may authorize one or more brokers and other shareholder organizations
to accept on their behalf purchase, redemption and exchange orders, and may
authorize such shareholder 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
shareholder 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 shareholder organization or intermediary. Shareholder
organizations and intermediaries will be responsible for transmitting accepted
orders to the Funds within the period agreed upon by them. Shareholders should
contact their shareholder organization or intermediaries to learn whether they
are authorized to accept orders for Funds.
It is the responsibility of shareholder 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.
REDEEMING 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 SHAREHOLDER ORGANIZATION
Contact your Shareholder Organization.
BY PHONE
Call 1-800-677-FUND with your account name, sixteen-digit account number and
amount of redemption (minimum $500). Redemption proceeds will only be sent to a
shareholder's address or bank account of a commercial bank located within the
United States as shown on the transfer agent's records. (Available only if
telephone redemptions have been authorized on the account application and if
there has been no change of address by telephone within the preceding 15 days).
BY MAIL
Mail your instructions to the Firstar Funds, P.O. Box 3011, Milwaukee, WI 53201-
3011 (via overnight delivery to 615 E. Michigan Street, Milwaukee, WI 53202).
Include the number of shares or the amount to be redeemed, your sixteen-digit
account number and Social Security number or other taxpayer identification
number. Your instructions must be signed by all persons required to sign for
transactions exactly as their names appear on the account. If the redemption
amount exceeds $50,000, or if the proceeds are to be sent elsewhere than the
address of record, or the address of record has been changed by telephone within
the preceding 15 days, each signature must be guaranteed in writing by either a
commercial bank that is a member of the FDIC, a trust company, a credit union, a
savings association, a member firm of a national securities exchange or other
eligible guarantor institution.
INTERNET
www.firstarfunds.com
Use Firstar Funds Direct to redeem up to $25,000. Call 1-800-677-FUND to
authorize this service.
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AUTOMATICALLY
Call 1-800-677-FUND for a Systematic Withdrawal Plan application ($5,000 account
minimum and $50 minimum per transaction).
Guarantees must be signed by an eligible guarantor institution and "Signature
Guaranteed" must appear with the signature.
- --------------------------------------------------------------------------------
The 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 as specified above. Purchases of
additional shares concurrently with withdrawals could be disadvantageous because
of the sales charge involved in the additional purchases.
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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 Firstar Mutual Fund Services, LLC or contact your
registered representative. Each shareholder 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 shareholders.
During periods of substantial economic or market change, telephone redemptions
may be difficult to implement. If a shareholder 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 shareholder 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.
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CERTIFICATES
Certificates are only issued upon shareholder 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 as specified above, 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 UP TO 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, other than due to market fluctuations, the
Funds may redeem your account. The Fund will impose no charge and will give you
sixty days written notice and an opportunity to raise the account balance prior
to any redemption. A Fund, 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 for more information on involuntary redemptions.
EXCHANGING 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 non-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 shareholder 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.
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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, shareholder 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 shareholder and the exchange privilege may be modified or terminated
at any time. At least sixty days' notice will be given to shareholders 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. If this happens, you may initiate transactions in your
share accounts by mail or as otherwise described in this Prospectus.
Shares of the Firstar Funds also may be exchanged with shares of corresponding
classes of the Firstar Stellar Funds and the Mercantile Mutual Funds, Inc.
Please read the prospectus for those funds before investing.
ADDITIONAL SHAREHOLDER SERVICES
SHAREHOLDER REPORTS
Shareholders 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 shareholder reports will be
sent to shareholders with the same mailing address. Shareholders may request
duplicate copies free of charge.
Account statements will be mailed to Money Market Shareholders 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, a 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, Shareholders can request purchases, exchanges and redemptions of Fund
shares online via the Internet after an account is opened. Redemption requests
of up to $25,000 will be accepted through the Internet. Payment for shares
purchased online must be made by electronic funds transfer from your banking
institution. To authorize this service, call Firstar Mutual Fund Services, LLC
at 1-800-677-FUND.
Firstar Funds and their agents will not be responsible for any losses resulting
from unauthorized 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.
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AUTOMATED TELERESPONSE SERVICE
Shareholders 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 1-800-677-FUND, shareholders 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 Traditional, Roth,
SIMPLE and SEP IRAs. For details concerning Retirement Accounts (including
service fees), please call Firstar Mutual Fund Services,LLC at 1-800-677-FUND.
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
Reinvested dividends and distributions receive the same tax treatment as those
paid in cash.
- --------------------------------------------------------------------------------
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 shareholder's dividends and
capital gains distributions will be reinvested automatically in additional
shares unless the Fund is notified that the shareholder elects to receive
distributions in cash.
If a shareholder 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 shareholder's address of record, such shareholder'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). 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 subject to income tax on
these distributions regardless of whether they are paid in cash or reinvested in
additional Shares. You will be notified annually of the tax status of
distributions to you.
In the case of any Fund other than a Money Market Fund, 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.
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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.
A Fund's dividends that are paid to its corporate shareholders and are
attributable to qualifying dividends the Fund receives from U.S. domestic
corporations may be eligible, in the hands of the corporate shareholders, for
the corporate dividends-received deduction, subject to certain holding period
requirements and debt financing limitations.
THE INTERNATIONAL EQUITY FUND AND CORE INTERNATIONAL EQUITY FUND. It is expected
that the International Equity Fund and Core 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 and
Core International Equity Fund may make an election to treat a proportionate
amount of such taxes as constituting a distribution to each Shareholder, which
would allow each Shareholder 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
Shareholders 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 Shareholder 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. Shareholders who are nonresident
aliens, foreign trusts or estates, or foreign corporations or partnerships, may
be subject to different United States federal income tax treatment. 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
Shareholders 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 or localities
within the state. Shareholders should consult their tax advisers regarding the
tax status of distributions in their state and locality.
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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 $35.3 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 Core International Equity and International
Equity Funds). Subject to the general supervision of the Board of Directors and
in accordance with the respective investment objectives and policies of the Core
International Equity and International Equity Funds, the Adviser is responsible
for each Fund's investment program, general investment criteria and policies.
The Adviser has retained Hansberger Global Investors, Inc. 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 $2.9 billion in assets under management. Subject to
the oversight and supervision of the Fund's Board of Directors and Adviser, HGI
formulates and implements a continuous investment program for the International
Equity Fund.
The Adviser has retained The Glenmede Trust Company as Sub-Adviser for the Core
International Equity Fund. Glenmede is a limited purpose trust company chartered
in 1956, with principal offices at One Liberty Place, 1650 Market Street, Suite
1200, Philadelphia, Pennsylvania 19103. Glenmede currently has over $17.0
billion in assets in the accounts for which it serves in various capacities
including as executor, trustee or investment advisor. Subject to the oversight
and supervision of the Fund's Board of Directors and Adviser, Glenmede
formulates and implements a continuous investment program for the Core
International Equity Fund.
The Adviser (or Sub-Adviser for the Core International Equity Fund and
International Equity Fund, respectively) is authorized to allocate purchase and
sale orders for portfolio securities to shareholder organizations, including, in
the case of agency transactions, shareholder organizations which are affiliated
with the Adviser (or Sub-Advisers), to take into account the sale of Fund shares
if the Adviser (or Sub-Adviser for the Core International Equity Fund or
International Equity Fund, respectively) 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, 1999, 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): 0.38% for the Money Market
Fund, 0.28% 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, 0.49% for
the Tax-Exempt Money Market Fund, 0.32% for the Short-Term Bond Market Fund,
0.35% for the Intermediate Bond Market Fund, 0.32% for the Tax-Exempt
Intermediate Bond Fund, 0.30% for the Bond IMMDEX/TM Fund, 0.45% for the
Balanced Income Fund, 0.68% for the Balanced Growth Fund, 0.75% for the Growth
and Income Fund, 0.18% for the Equity Index Fund, 0.75% for the Growth Fund,
0.01% for the MidCap Index Fund 0.73% for the Special Growth Fund, 0.72% for the
Emerging Growth Fund, 1.50% for the MicroCap Fund, 1.08% for the International
Equity Fund and 0.03% for the Core International Equity Fund.
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Glenmede is entitled to a fee, payable by the Adviser, for its services and
expenses incurred with respect to the Core 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): 0.50% on the Fund's first $50 million
and 0.30% of the Fund's average daily net assets in excess of $50 million.
HGI 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.
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Chartered Financial Analyst (CFA) designation is a globally recognized standard
for measuring the competence and integrity of financial analysts.
- --------------------------------------------------------------------------------
FUND MANAGERS
Richard Burling, CFA and Bradley Peters, CFA co-manager the Short-Term Bond
Market Fund. Mr. Burling is a Senior Vice President and Senior Portfolio Manager
of FIRMCO. He has been with FIRMCO and its affiliates since 1980 and has 17
years of investment management experience. Mr. Peters is a Vice President and
Portfolio Manager of FIRMCO. He has been with FIRMCO since 1993 and has 18 years
of investment management experience. Mr. Peters is a Certified Public
Accountant, a Certified Financial Planner, and a Certified Management
Accountant. Mr. Burling and Mr. Peters have managed the Fund since February
14, 2000.
David Bethke, CFA and Steven Jones co-manage the Intermediate Bond Fund. Mr.
Bethke has 19 years of investment management experience and has been with
FIRMCO and its affiliates since 1987. Mr. Jones has 19 years of investment
management experience and has been with FIRMCO and its affiliates since 1990.
Mr. Bethke and Mr. Jones have managed the Fund since February 14, 2000.
Peter Merzian manages the Tax-Exempt Intermediate Bond Fund. Mr. Merzian joined
FIRMCO and its affiliates in 1993 and has 12 years of investment management
experience. He has managed the Fund since February 14, 2000.
George Schupp, CFA and David Bethke, CFA co-manage the Bond IMMDEX/TM Fund. Mr.
Schupp serves as FIRMCO's Director of Fixed Income Services. He has 24 years of
investment management experience and has been with FIRMCO and its affiliates
since 1983. Mr. Schupp and Mr. Bethke have managed the Fund since February
14, 2000.
Marian Zentmyer, CFA and David Bethke co-manage the Balanced Income Fund. Ms.
Zentmyer serves as FIRMCO's Chief Equity Investment Officer. She has been with
FIRMCO and its affiliates since 1982 and has 21 years of investment management
experience. Ms. Zentmyer is a Certified Financial Planner. Ms. Zentmyer has
managed the Fund since its inception on December 1, 1997. Mr. Bethke has
managed the Fund since February 14, 2000.
Walter Dewey, CFA and George Schupp co-manage the Balanced Growth Fund. Mr.
Dewey serves as a Senior Vice President and Senior Portfolio Manager with
FIRMCO. He has been with FIRMCO and its affiliates since 1986 and has 16 years
of investment management experience. Mr. Dewey has managed the Fund since
November 8, 1999. Mr. Schupp has managed the Fund since February 14, 2000.
Marian Zentmyer, CFA and David Lettenberger, CFA co-manage the Growth and Income
Fund. Ms. Zentmyer has managed the Fund since February 22, 1993. Mr.
Lettenberger is a Vice President and Portfolio Manager with FIRMCO and has been
with FIRMCO and its affiliates since 1999. He has seven years of investment
management experience and has been a portfolio manager of the Fund since
November 8, 1999.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
Walter Dewey manages the Growth Fund. Mr. Dewey has managed the Fund
since July 7, 1997.
Todd Krieg, CFA and Matt D'Attilio, CFA co-manage the Special Growth Fund. Mr.
Krieg is a Senior Vice President and Senior Portfolio Manager of FIRMCO. Mr.
Krieg has been with FIRMCO and its affiliates since 1992 and has seven 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 FIRMCO and its affiliates since
1993. He has six years of investment management experience and has managed the
Fund since December 1, 1998.
Robert Anthony and Gregory Glidden co-manage the Emerging Growth Fund. Mr.
Anthony is a Senior Portfolio Manager with FIRMCO and has been with FIRMCO
and its affiliates since 1973. He has 26 years of investment management
experience. Mr. Anthony has managed the Fund since November 8, 1999. Mr.
Glidden is the Director of Equity Research and is a Senior Portfolio Manager
of FIRMCO. Mr. Glidden has managed the Fund since February 28, 2000.
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 FIRMCO and
its affiliates since 1995. He has seven years of investment management
experience and has managed the Fund since September 9, 1997.
The portfolio management team of James Chaney, John Fenley, John Hock and
Victoria Gretzky manages the International Equity Fund for HGI. Mr. Chaney is
primarily responsible for the day-to-day management of the Fund. Mr. Chaney
joined HGI as Chief Investment Officer in 1996 and has 15 years of investment
management experience. Prior to joining HGI, he was Executive Vice President of
Templeton Worldwide, Inc. and a senior member of its Portfolio
Management/Strategy Committee. John Fenley joined HGI in 1997 as
a Vice President of Research and has 10 years of investment management
experience. Prior to joining HGI, he developed and managed the Institutional
Investment Department for SunTrust Bank, South Florida. John Hock joined HGI in
1996 as a research analyst. Prior to joining HGI, he was a senior analyst in the
global securities research and economics group at Merrill Lynch. Victoria
Gretzky joined HGI in 1995 as a research analyst. From 1993 to 1996, prior to
joining HGI, she was a research analyst for Optimum Consulting, a Russian based
firm which specialized in restructuring Russian companies during privatization.
Andrew B. Williams manages the Core International Equity Fund for Glenmede. Mr.
Williams joined Glenmede in 1985, has been a portfolio manager with Glenmede
since 1988 and a Senior Vice President of Glenmede since 1997.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
GLENMEDE'S PRIOR PERFORMANCE
The Core International Equity Fund is managed by Andrew B. Williams of The
Glenmede Trust Company. Mr. Williams is primarily responsible for the day-to-day
management of this Fund and he uses substantially the same investment objective
policies, restrictions and strategies as the Glenmede International Portfolio
(the "Glenmede Fund"). The Glenmede Fund has been managed by Mr. Williams since
its inception date, November 17, 1988.
Shares of the Glenmede Fund do not bear a sales load. Retail A Shares of the
Firstar Core International Equity Fund bear a maximum front-end sales load of
5.50% and Retail B Shares of the Firstar Core International Equity Fund bear a
maximum contingent deferred sales load of 5.00%.
The following table sets forth the performance of the Glenmede Fund for the
periods represented, reflecting all Glenmede Fund expenses. There was no load
charged on the Glenmede Fund during those periods. The following table also sets
forth that performance has been adjusted to reflect the fees and expenses and
maximum sales loads set forth in the fee table of this Prospectus applicable to
each class of the Firstar Core International Equity Fund.
GLENMEDE FUND PERFORMANCE
AVERAGE ANNUAL TOTAL RETURN AS OF 9/30/99
- --------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
GLENMEDE FUND - 33.07% 13.64% 11.65%
with Institutional fees and expenses 31.62% 12.18% 10.19%
with Retail A Load, fees and expenses 24.14% 10.67% 9.32%
with Retail B Load, fees and expenses 25.62% 10.91% 9.18%
MSCI EAFE/R INDEX 30.95% 9.12% 5.82%
- --------------------------------------------------------------------------------
The MSCI EAFE/R Index is an unmanaged capitalization weighted composite
portfolio consisting of equity total returns of companies in Australia, New
Zealand, Europe and the Far East. Investors cannot invest directly in the Index.
During the period October 1, 1989 through September 30, 1999, the expense ratio
imposed on the Glenmede Fund ranged between 0.14% and 0.13% of the Fund's
average net assets. During the period October 1, 1989 through September 30,
1999, account fees for the Glenmede Fund were a maximum of 1.00% of the Fund's
average net assets. These account fees were paid directly to The Glenmede Trust
Company and are not reflected in the Glenmede Fund's expense ratio or in the
performance chart above. The expense ratio of the Firstar Core International
Equity Fund for the current fiscal year is anticipated to be 1.70% of the Fund's
average net assets for Retail A Shares, 2.45% of average net assets for Retail B
Shares, and 1.45% of average net assets for Institutional Shares (2.15%, 2.90%
and 1.90%, respectively, without waivers).
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
Performance quotations of the Glenmede Fund represent past performance of the
Glenmede Fund, which is separate and distinct from the Firstar Core
International Equity Fund; do not represent past performance of the Core
International Equity Fund; and should not be considered as representative of
future results of the Core International Equity Fund.
Performance assumes the reinvestment of all net investment income and capital
gains and reflects fee waivers.
ADMINISTRATIVE SERVICES
Firstar Mutual Fund Services, LLC and B. C. Ziegler and Company ("Ziegler")
serve as the Co-Administrators (the "Co-Administrators") and receive fees for
those services.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, AND ACCOUNTING SERVICES AGENT
Firstar Mutual Fund Services, LLC, an affiliate of the Adviser, provides
transfer agency, dividend disbursing agency and accounting services for the
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, 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 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.
- --------------------------------------------------------------------------------
The Company intends to use its best efforts to maintain the net asset value of
each Money Market Fund at $1.00 per share, although there is no assurance that
it will be able to do so.
- --------------------------------------------------------------------------------
Net asset value is computed using the amortized cost method as permitted by SEC
rules.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
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 sub sequent 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 shareholders 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.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
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 Annual Report, and are incorporated by reference
into the Additional Statement, both of which are available upon request. Contact
Firstar Mutual Fund Services, LLC for a free copy of the Annual Report or
Additional Statement.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
MONEY MARKET FUNDS
<TABLE>
<CAPTION>
Supplemental Data and Ratios
---------------------------------------
Ratio Ratio of Net
Net Asset Dividends Net Asset Net Assets, of Net Investment
Value, Net from Net Value, End of Expenses Income
Beginning Investment Investment End of Period to Average to Average Total
of Period Income Income Period (000s) Net Assets Net Assets Return
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MONEY MARKET FUND
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995 $1.00 $0.05 $(0.05) $1.00 $172,261 0.60%<F1> 5.36%<F1> 5.51%
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 1.00 0.05 (0.05) 1.00 224,036 0.60%<F1> 4.94%<F1> 5.06%
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 1.00 0.05 (0.05) 1.00 261,017 0.60%<F1> 4.98%<F1> 5.12%
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 1.00 0.05 (0.05) 1.00 289,088 0.60%<F1> 5.05%<F1> 5.16%
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 1.00 0.04 (0.04) 1.00 283,481 0.72%<F1> 4.44%<F1> 4.52%
- --------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL MONEY MARKET FUND
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995 1.00 0.06 (0.06) 1.00 716,566 0.35%<F2> 5.63%<F2> 5.77%
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 1.00 0.05 (0.05) 1.00 750,051 0.35%<F2> 5.19%<F2> 5.32%
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 1.00 0.05 (0.05) 1.00 1,201,341 0.35%<F2> 5.23%<F2> 5.38%
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 1.00 0.05 (0.05) 1.00 1,623,970 0.35%<F2> 5.30%<F2> 5.41%
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 1.00 0.05 (0.05) 1.00 2,356,251 0.38%<F2> 4.76%<F2> 4.85%
- --------------------------------------------------------------------------------------------------------------------------------
U.S. TREASURY MONEY MARKET FUND
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995 1.00 0.05 (0.05) 1.00 64,655 0.60%<F3> 5.04%<F3> 5.16%
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 1.00 0.05 (0.05) 1.00 53,430 0.60%<F3> 4.70%<F3> 4.80%
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 1.00 0.05 (0.05) 1.00 78,478 0.60%<F3> 4.67%<F3> 4.80%
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 1.00 0.05 (0.05) 1.00 91,872 0.60%<F3> 4.62%<F3> 4.71%
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 1.00 0.04 (0.04) 1.00 95,539 0.71%<F3> 3.94%<F3> 4.01%
- --------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT MONEY MARKET FUND
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995 1.00 0.05 (0.05) 1.00 163,068 0.60%<F4> 5.24%<F4> 5.37%
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 1.00 0.05 (0.05) 1.00 198,334 0.60%<F4> 4.84%<F4> 4.96%
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 1.00 0.05 (0.05) 1.00 198,592 0.60%<F4> 4.83%<F4> 4.99%
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 1.00 0.05 (0.05) 1.00 233,176 0.60%<F4> 4.90%<F4> 4.97%
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 1.00 0.04 (0.04) 1.00 209,015 0.68%<F4> 4.30%<F4> 4.37%
- --------------------------------------------------------------------------------------------------------------------------------
TAX-EXEMPT MONEY MARKET FUND
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995 1.00 0.036 (0.03) 1.00 84,084 0.60%5 3.36%5 3.42%
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 1.00 0.036 (0.03) 1.00 79,328 0.60%5 3.09%5 3.13%
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 1.00 0.036 (0.03) 1.00 108,639 0.60%5 3.06%5 3.12%
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 1.00 0.036 (0.03) 1.00 122,451 0.60%5 3.02%5 3.04%
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 1.00 0.036 (0.03) 1.00 153,189 0.71%5 2.51%5 2.53%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<F1> Without fees waived, ratios of net expenses to average net assets for the
fiscal years ended October 31, 1999, 1998, 1997, 1996, 1995 would have been
0.85%, 0.86%, 0.84%, 0.81%, 0.90%, respectively; and ratios of net
investment income to average net assets for the fiscal years ended October
31, 1999, 1998, 1997, 1996, 1995 would have been 4.31%, 4.79%, 4.73%,
4.73%, 5.06%, respectively.
<F2> Without fees waived, ratios of net expenses to average net assets for the
fiscal years ended October 31, 1999, 1998, 1997, 1996, 1995 would have been
0.62%, 0.64%, 0.66%, 0.64%, 0.69%, respectively; and ratios of net
investment income to average net assets for the fiscal years ended October
31, 1999, 1998, 1997, 1996, 1995 would have been 4.52%, 5.01%, 4.92%,
4.90%, 5.29%, respectively.
<F3> Without fees waived, ratios of net expenses to average net assets for the
fiscal years ended October 31, 1999, 1998, 1997, 1996, 1995 would have been
0.74%, 0.77%, 0.78%, 0.80%, 0.83%, respectively; and ratios of net
investment income to average net assets for the fiscal years ended October
31, 1999, 1998, 1997, 1996, 1995 would have been 3.91%, 4.45%, 4.49%,
4.50%, 4.81%, respectively.
<F4> Without fees waived, ratios of net expenses to average net assets for the
fiscal years ended October 31, 1999, 1998, 1997, 1996, 1995 would have been
0.69%, 0.71%, 0.70%, 0.71%, 0.75%, respectively; and ratios of net
investment income to average net assets for the fiscal years ended October
31, 1999, 1998, 1997, 1996, 1995 would have been 4.29%, 4.79%, 4.73%,
4.73%, 5.09%, respectively.
<F5> Without fees waived, ratios of net expenses to average net assets for the
fiscal years ended October 31, 1999, 1998, 1997, 1996, 1995 would have been
0.73%, 0.75%, 0.75%, 0.78%, 0.84%, respectively; and ratios of net
investment income to average net assets for the fiscal years ended October
31, 1999, 1998, 1997, 1996, 1995 would have been 2.49%, 2.87%, 2.91%,
2.91%, 3.12%, respectively.
<F6> For the Tax-Exempt Money Market Fund, substantially all the investment
income is exempt from federal income tax.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
INSTITUTIONAL BOND FUNDS
<TABLE>
<CAPTION>
Income from Investment Operations Less Distributions
---------------------------------- --------------------------------------
Net Realized
Net and Unrealized Total Dividends Distributions
Asset Value, Net Gains or From from Net From
Beginning Investment (Losses) on Investment Investment Capital Total
of Period Income<F1> Securities Operations Income Gains Distributions
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SHORT-TERM BOND MARKET
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995<F6> $10.03 $0.63 $0.24 $0.87 $(0.62) $- $(0.62)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 10.28 0.61<F7> (0.03) 0.58 (0.61) - (0.61)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 10.25 0.62 0.02 0.64 (0.62) - (0.62)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 10.27 0.61 0.07 0.68 (0.61) - (0.61)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 10.34 0.56 (0.22) 0.34 (0.56) - (0.56)
- ----------------------------------------------------------------------------------------------------------------------------------
INTERMEDIATE BOND MARKET
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995<F6> 9.67 0.62 0.53 1.15 (0.61) - (0.61)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 10.21 0.59<F7> (0.02) 0.57 (0.59) - (0.59)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 10.19 0.60 0.12 0.72 (0.60) - (0.60)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 10.31 0.59 0.19 0.78 (0.59) - (0.59)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 10.50 0.59 (0.39) 0.20 (0.59) (0.01) (0.60)
- ----------------------------------------------------------------------------------------------------------------------------------
TAX-EXEMPT INTERMEDIATE BOND
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995<F6> 9.78 0.44 0.46 0.90 (0.44) - (0.44)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 10.24 0.43<F7> (0.03) 0.40 (0.43) - (0.43)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 10.21 0.44 0.15 0.59 (0.44) - (0.44)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 10.36 0.44 0.16 0.60 (0.44) - (0.44)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 10.52 0.44 (0.40) 0.04 (0.43) (0.01) (0.44)
- ----------------------------------------------------------------------------------------------------------------------------------
BOND IMMDEX/TM
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995<F6> 25.67 1.74 2.29 4.03 (1.84) (0.04) (1.88)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 27.82 1.70<F7> (0.27) 1.43 (1.70) - (1.70)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 27.55 1.75 0.61 2.36 (1.75) - (1.75)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 28.16 1.72 0.85 2.57 (1.71) - (1.71)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 29.02 1.70 (1.65) 0.05 (1.70) - (1.70)
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Supplemental Data and Ratios
------------------------------------------------
Net Ratio Ratio of Net
Assets, of Net Investment
Net Asset End of Expenses Income Portfolio
Value, End Total Period to Average to Average Turnover
of Period Return (00s) Net Assets Net Assets Rate<F8>
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SHORT-TERM BOND MARKET
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995<F6> $10.28 8.95% $ 94,959 0.50%<F2> 6.23%<F2> 100.58%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 10.25 5.80% 147,466 0.50%<F2> 5.92%<F2> 59.62%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 10.27 6.47% 136,084 0.50%<F2> 6.04%<F2> 77.12%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 10.34 6.84% 120,693 0.50%<F2> 5.92%<F2> 78.20%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 10.12 3.42% 130,611 0.56%<F2> 5.52%<F2> 52.28%
- ----------------------------------------------------------------------------------------------------------------------------------
INTERMEDIATE BOND MARKET
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995<F6> 10.21 12.25% 128,941 0.50%<F3> 6.26%<F3> 66.69%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 10.19 5.77% 173,468 0.50%<F3> 5.84%<F3> 59.29%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 10.31 7.36% 254,521 0.50%<F3> 5.96%<F3> 40.61%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 10.50 7.83% 291,289 0.50%<F3> 5.75%<F3> 27.29%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 10.10 1.91% 284,047 0.56%<F3> 5.71%<F3> 64.07%
- ----------------------------------------------------------------------------------------------------------------------------------
TAX-EXEMPT INTERMEDIATE BOND
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995<F6> 10.24 9.38% 27,595 0.51%<F4> 4.45%<F4> 44.13%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 10.21 4.02% 36,652 0.50%<F4> 4.24%<F4> 30.46%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 10.36 5.96% 52,208 0.50%<F4> 4.36%<F4> 11.22%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 10.52 5.88% 66,427 0.50%<F4> 4.25%<F4> 14.38%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 10.12 0.39% 65,034 0.64%<F4> 4.16%<F4> 21.77%
- ----------------------------------------------------------------------------------------------------------------------------------
BOND IMMDEX/TM
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995<F6> 27.82 16.26% 290,274 0.44%<F5> 6.51%<F5> 41.67%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 27.55 5.35% 370,556 0.43%<F5> 6.23%<F5> 33.38%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 28.16 8.90% 408,018 0.42%<F5> 6.33%<F5> 35.12%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 29.02 9.41% 471,425 0.42%<F5> 6.02%<F5> 20.07%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 27.37 0.20% 421,897 0.47%<F5> 6.05%<F5> 57.04%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<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, 1999, 1998, 1997, 1996, 1995 would have been
0.84%, 0.86%, 0.86%, 0.87%, 0.91%, respectively; and ratios of net
investment income to average net assets for the fiscal years ended
October31, 1999, 1998, 1997, 1996, 1995 would have been 5.24%, 5.56%,
5.68%, 5.55%, 5.82%, respectively.
<F3> Without fees waived, ratios of net expenses to average net assets for the
fiscal years ended October 31, 1999, 1998, 1997, 1996, 1995 would have been
0.70%, 0.71%, 0.73%, 0.74%, 0.79%, respectively; and ratios of net
investment income to average net assets for the fiscal years ended October
31, 1999, 1998, 1997, 1996, 1995 would have been 5.57%, 5.54%, 5.73%,
5.60%, 5.97%, respectively.
<F4> Without fees waived, ratios of net expenses to average net assets for the
fiscal years ended October 31, 1999, 1998, 1997, 1996, 1995 would have been
0.82%, 0.81%, 0.88%, 0.97%, 1.00%, respectively; and ratios of net
investment income to average net assets for the fiscal years ended October
31, 1999, 1998, 1997, 1996, 1995 would have been 3.98%, 3.94%, 3.98%,
3.77%, 3.96%, respectively.
<F5> Without fees waived, ratios of net expenses to average net assets for the
fiscal years ended October 31, 1999, 1998, 1997, 1996, 1995 would have been
0.48%, 0.49%, 0.49%, 0.50%, 0.51%, respectively; and ratios of net
investment income to average net assets for the fiscal years ended October
31, 1999, 1998, 1997, 1996, 1995 would have been 6.04%, 5.95%, 6.26%,
6.16%, 6.44%, respectively.
<F6> On January 9, 1995, all previously existing series of shares of each Fund
were reclassified as Series A shares. Effective January 9, 1995,
Institutional shareowners exchanged their Series A shares for the Funds'
Institutional series shares. For the year ended October 31, 1995, the
Financial Highlights ratios of net expenses to average net assets, ratios
of net investment income to average net assets, total return and the per
share income from investment operations and distributions are presented on
a basis whereby the Funds' net investment income, net expenses, net
realized and unrealized gains (losses) and distributions for the period
November 1, 1994, through January 9, 1995, were allocated to each class of
shares based upon the relative net assets of each class of shares as of the
close of business on January 9, 1995, and the results thereof combined with
the results of operations and distributions for each applicable class for
the period January 10, 1995, through October 31, 1995.
<F7> Net investment income per share is calculated using ending balances prior
to consideration of adjustments for permanent book and tax differences.
<F8> Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
<PAGE>
(LOGO) FIRSTAR FUNDS
RETAIL A SHARE BOND FUNDS
<TABLE>
<CAPTION>
Income from Investment Operations Less Distributions
---------------------------------- --------------------------------------
Net Realized
Net and Unrealized Total Dividends Distributions
Asset Value, Net Gains or From from Net From
Beginning Investment (Losses) on Investment Investment Capital Total
of Period Income<F1> Securities Operations Income Gains Distributions
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SHORT-TERM BOND MARKET
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995<F7> $10.03 $0.61 $ 0.24 $0.85 $(0.60) $1 $(0.60)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 10.28 0.58<F8> (0.03) 0.55 (0.58) - (0.58)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 10.25 0.60 0.02 0.62 (0.60) - (0.60)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 10.27 0.58 0.07 0.65 (0.58) - (0.58)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 10.34 0.54 (0.22) 0.32 (0.54) - (0.54)
- ----------------------------------------------------------------------------------------------------------------------------------
INTERMEDIATE BOND MARKET
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995<F7> 9.67 0.60 0.53 1.13 (0.59) - (0.59)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 10.21 0.56<F8> (0.02) 0.54 (0.56) - (0.56)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 199<F7> 10.19 0.58 0.12 0.70 (0.58) - (0.58)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 10.31 0.57 0.19 0.76 (0.57) - (0.57)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 10.50 0.56 (0.39) 0.17 (0.56) (0.01) (0.57)
- ----------------------------------------------------------------------------------------------------------------------------------
TAX-EXEMPT INTERMEDIATE BOND
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995<F7> 9.78 0.42 0.45 0.87 (0.42) - (0.42)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 10.23 0.40<F8> (0.01) 0.39 (0.41) - (0.41)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 10.21 0.42 0.14 0.56 (0.42) - (0.42)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 10.35 0.41 0.17 0.58 (0.41) - (0.41)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 10.52 0.42 (0.40) 0.02 (0.41) (0.01) (0.42)
- ----------------------------------------------------------------------------------------------------------------------------------
BOND IMMDEX/TM
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 19957 25.67 1.68 2.30 3.98 (1.79) (0.04) (1.83)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 27.82 1.61<F8> (0.26) 1.35 (1.63) - (1.63)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 27.54 1.66 0.64 2.30 (1.68) - (1.68)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 28.16 1.64 0.85 2.49 (1.64) - (1.64)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 29.01 1.64 (1.66) (0.02) (1.63) - (1.63)
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Supplemental Data and Ratios
------------------------------------------------
Net Ratio Ratio of Net
Assets, of Net Investment
Net Asset End of Expenses Income Portfolio
Value, End Total Period to Average to Average Turnover
of Period Return<F2> (00s) Net Assets Net Assets Rate<F9>
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SHORT-TERM BOND MARKET
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995<F7> $10.28 8.74% $47,730 0.69%<F3> 6.04%<F3> 100.58%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 10.25 5.54% 58,843 0.75%<F3> 5.67%<F3> 59.62%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 10.27 6.21% 65,567 0.75%<F3> 5.79%<F3> 77.12%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 10.34 6.58% 75,410 0.75%<F3> 5.67%<F3> 78.20%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 10.12 3.16% 65,490 0.81%<F3> 5.27%<F3> 52.28%
- ----------------------------------------------------------------------------------------------------------------------------------
INTERMEDIATE BOND MARKET
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995<F7> 10.21 12.04% 11,576 0.69%<F4> 6.07%<F4> 66.69%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 10.19 5.51% 17,392 0.75%<F4> 5.59%<F4> 59.29%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 10.31 7.09% 20,691 0.75%<F4> 5.71%<F4> 40.61%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 10.50 7.57% 29,550 0.75%<F4> 5.50%<F4> 27.29%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 10.10 1.66% 33,779 0.81%<F4> 5.47%<F4> 64.07%
- ----------------------------------------------------------------------------------------------------------------------------------
TAX-EXEMPT INTERMEDIATE BOND
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995<F7> 10.23 9.07% 7,711 0.71%<F5> 4.25%<F5> 44.13%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 10.21 3.87% 10,690 0.75%<F5> 3.99%<F5> 30.46%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 10.35 5.60% 19,199 0.75%<F5> 4.11%<F5> 11.22%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 10.52 5.73% 32,466 0.75%<F5> 4.00%<F5> 14.38%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 10.12 0.14% 20,016 0.89%<F5> 3.91%<F5> 21.77%
- ----------------------------------------------------------------------------------------------------------------------------------
BOND IMMDEX/TM
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995<F7> 27.82 16.05% 21,875 0.64%<F6> 6.31%<F6> 41.67%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 27.54 5.06% 42,671 0.68%<F6> 5.98%<F6> 33.38%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 28.16 8.68% 64,144 0.67%<F6> 6.08%<F6> 35.12%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 29.01 9.11% 95,301 0.67%<F6> 5.77%<F6> 20.07%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 27.36 (0.05)% 95,635 0.72%<F6> 5.80%<F6> 57.04%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<F1> For the Tax-Exempt Intermediate Bond Fund, substantially all investment
income is exempt from federal income tax.
<F2> The total return calculation does not reflect the maximum sales charge of
4.00%.
<F3> Without fees waived, ratios of net expenses to average net assets for the
fiscal years ended October 31, 1999, 1998, 1997, 1996, 1995 would have been
1.09%, 1.11%, 1.11%, 1.12%, 1.10%, respectively; and ratios of net
investment income to average net assets for the fiscal years ended October
31, 1999, 1998, 1997, 1996, 1995 would have been 4.99%, 5.31%, 5.43%,
5.30%, 5.63%, respectively.
<F4> Without fees waived, ratios of net expenses to average net assets for the
fiscal years ended October 31, 1999, 1998, 1997, 1996, 1995 would have been
0.95%, 0.96%, 0.98%, 0.99%, 0.98%, respectively; and ratios of net
investment income to average net assets for the fiscal years ended October
31, 1999, 1998, 1997, 1996 and 1995 would have been 5.33%, 5.29%, 5.48%,
5.35%, 5.78%, respectively.
<F5> Without fees waived, ratios of net expenses to average net assets for the
fiscal years ended October 31, 1999, 1998, 1997, 1996, 1995 would have been
1.07%, 1.06%, 1.13%, 1.22%, 1.20%, respectively; and ratios of net
investment income to average net assets for the fiscal years ended October
31, 1999, 1998, 1997, 1996, 1995 would have been 3.73%, 3.69%, 3.73%,
3.52%, 3.76%, respectively.
<F6> Without fees waived, ratios of net expenses to average net assets for the
fiscal years ended October 31, 1999, 1998, 1997, 1996, 1995 would have been
0.74%, 0.74%, 0.74%, 0.75%, 0.71%, respectively; and ratios of net
investment income to average net assets for the fiscal years ended October
31, 1999, 1998, 1997, 1996, 1995 would have been 5.78%, 5.70%, 6.01%,
5.91%, 6.24%, respectively.
<F7> On January 9, 1995, all previously existing series of shares of each Fund
were reclassified as Series A shares. Effective January 9, 1995,
Institutional shareowners exchanged their Series A shares for the Funds'
Institutional series shares. For the year ended October 31, 1995, the
Financial Highlights ratios of net expenses to average net assets, ratios
of net investment income to average net assets, total return and the per
share income from investment operations and distributions are presented on
a basis whereby the Funds' net investment income, net expenses, net
realized and unrealized gains (losses) and distributions for the period
November 1, 1994, through January 9, 1995, were allocated to each class of
shares based upon the relative net assets of each class of shares as of the
close of business on January 9, 1995, and the results thereof combined with
the results of operations and distributions for each applicable class for
the period January 10, 1995, through October 31, 1995.
<F8> Net investment income per share is calculated using ending balances prior
to consideration of adjustments for permanent book and tax differences.
<F9> Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
<PAGE>
(LOGO) FIRSTAR FUNDS
RETAIL B SHARE BOND FUNDS
<TABLE>
<CAPTION>
Income from Investment Operations Less Distributions
---------------------------------- --------------------------------------
Net Realized
Net and Unrealized Total Dividends Distributions
Asset Value, Net Gains or From from Net From
Beginning Investment (Losses) on Investment Investment Capital Total
of Period Income<F2> Securities Operations Income Gains Distributions
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SHORT-TERM BOND MARKET
- ----------------------------------------------------------------------------------------------------------------------------------
March 1, 1999<F1> through October 31, 1999 $10.23 $0.31<F10> $(0.09) $0.22 $(0.33) $ - $(0.33)
- ----------------------------------------------------------------------------------------------------------------------------------
INTERMEDIATE BOND MARKET
- ----------------------------------------------------------------------------------------------------------------------------------
March 1, 1999<F1> through October 31, 1999 10.31 0.31<F10> (0.21) 0.10 (0.32) - (0.32)
- ----------------------------------------------------------------------------------------------------------------------------------
TAX-EXEMPT INTERMEDIATE BOND
- ----------------------------------------------------------------------------------------------------------------------------------
March 1, 1999<F1> through October 31, 1999 10.51 0.22<F10> (0.38) (0.16) (0.23) - (0.23)
- ----------------------------------------------------------------------------------------------------------------------------------
BOND IMMDEX/TM
- ----------------------------------------------------------------------------------------------------------------------------------
March 1, 1999<F1> through October 31, 1999 28.34 0.92<F10> (0.91) 0.01 (0.99) - (0.99)
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Supplemental Data and Ratios
------------------------------------------------
Net Ratio Ratio of Net
Assets, of Net Investment
Net Asset End of Expenses Income Portfolio
Value, End Total Period to Average to Average Turnover
of Period Return<F3> (00s) Net Assets Net Assets Rate<F9>
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SHORT-TERM BOND MARKET
- ----------------------------------------------------------------------------------------------------------------------------------
March 1, 1999<F1> through October 31, 1999 $10.12 2.18%<F7> $517 1.57% 4.58% 52.28%
<F4><F8> <F4><F8>
- ----------------------------------------------------------------------------------------------------------------------------------
INTERMEDIATE BOND MARKET
- ----------------------------------------------------------------------------------------------------------------------------------
March 1, 1999<F1> through October 31, 1999 10.09 1.02%<F7> 206 1.57% 4.87% 64.07%
<F5><F8> <F5><F8>
- ----------------------------------------------------------------------------------------------------------------------------------
TAX-EXEMPT INTERMEDIATE BOND
- ----------------------------------------------------------------------------------------------------------------------------------
March 1, 1999<F1> through October 31, 1999 10.12 (1.55)%<F7> 74 1.67% 3.25% 21.77%
<F6><F8> <F6><F8>
- ----------------------------------------------------------------------------------------------------------------------------------
BOND IMMDEX/TM
- ----------------------------------------------------------------------------------------------------------------------------------
March 1, 19991<F1> through October 31, 1999 27.36 0.04%<F7> 1,869 1.49%<F8> 5.06%<F8> 57.04%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<F1> Commencement of operations.
<F2> For the Tax-Exempt Intermediate Bond Fund, substantially all investment
income is exempt from federal income tax.
<F3> The total return calculation does not reflect the maximum deferred sales
charge of 5.00%.
<F4> Without fees waived, ratio of net expenses to average net assets for the
period ended October 31, 1999 would have been 1.85%, and ratio of net
investment income for the period ended October 31, 1999 would have been
4.30%.
<F5> Without fees waived, ratio of net expenses to average net assets for the
period ended October 31, 1999 would have been 1.71%, and ratio of net
investment income for the period ended October 31, 1999 would have been
4.73%.
<F6> Without fees waived, ratio of net expenses to average net assets for the
period ended October 31, 1999 would have been 1.85%, and ratio of net
investment income for the period ended October 31, 1999 would have been
3.07%.
<F7> Not annualized.
<F8> Annualized.
<F9> Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
<F10> Net investment income per share represents net investment income
dividend by the average shares outstanding throughout the period.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
INSTITUTIONAL EQUITY FUNDS
<TABLE>
<CAPTION>
Income from Investment Operations Less Distributions
---------------------------------- --------------------------------------
Net Realized
Net and Unrealized Total Dividends Distributions
Asset Value, Net Gains or From from Net From
Beginning Investment (Losses) on Investment Investment Capital Total
of Period Income Securities Operations Income Gains Distributions
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCED INCOME
- ----------------------------------------------------------------------------------------------------------------------------------
Dec. 1, 1997<F1> through Oct. 31, 1998 $10.00 $0.30<F10> $0.96 $1.26 $(0.25) $ - $(0.25)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 11.01 0.31 0.38 0.69 (0.30) (0.44) (0.74)
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCED GROWTH
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995<F9> 22.10 0.53 3.78 4.31 (0.51) - (0.51)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 25.90 0.55<F11> 2.62 3.17 (0.53) (0.55) (1.08)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 27.99 0.66 4.20 4.86 (0.66) (1.68) (2.34)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 30.51 0.62 1.86 2.48 (0.64) (2.50) (3.14)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 29.85 0.58 1.19 1.77 (0.56) (0.95) (1.51)
- ----------------------------------------------------------------------------------------------------------------------------------
GROWTH AND INCOME
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995<F9> 23.09 0.42 5.14 5.56 (0.42) (0.60) (1.02)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 27.63 0.50<F11> 6.61 7.11 (0.47) (1.19) (1.66)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 33.08 0.46 8.94 9.40 (0.47) (2.73) (3.20)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 39.28 0.47 6.55 7.02 (0.45) (1.39) (1.84)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 44.46 0.41 4.92 5.33 (0.46) (3.21) (3.67)
- ----------------------------------------------------------------------------------------------------------------------------------
EQUITY INDEX
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995<F9> 33.41 0.76 7.71 8.47 (0.74) (0.06) (0.80)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 41.08 0.91<F11> 8.68 9.59 (0.89) (0.35) (1.24)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 49.43 0.95 14.33 15.28 (0.94) (0.61) (1.55)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 63.16 1.02<F10> 12.59 13.61 (1.00) (1.11) (2.11)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 74.66 1.04 17.75 18.79 (1.03) (0.47) (1.50)
- ----------------------------------------------------------------------------------------------------------------------------------
GROWTH
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995<F9> 21.47 0.03 4.16 4.19 (0.05) - (0.05)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 25.61 (0.01)<F11> 4.83 4.82 - - -
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 30.43 0.04<F11> 6.31 6.35 - (1.30) (1.30)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 35.48 0.07<F10> 5.70 5.77 (0.03) (5.17) (5.20)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 36.05 (0.02)<F10> 6.47 6.45 (0.04) (4.04) (4.08)
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Supplemental Data and Ratios
------------------------------------------------
Net Ratio Ratio of Net
Assets, of Net Investment
Net Asset End of Expenses Income Portfolio
Value, End Total Period to Average to Average Turnover
of Period Return (00s) Net Assets Net Assets Rate<F12>
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCED INCOME
- ----------------------------------------------------------------------------------------------------------------------------------
Dec. 1, 19971 through Oct. 31, 1998 $11.01 12.70%2 $ 34,036 0.75% 3.07% 58.33%<F2>
<F3><F4> <F3><F4>
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 10.96 6.34% 49,728 0.93%<F4> 2.84%<F4> 48.46%
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCED GROWTH
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995<F9> 25.90 19.79% 104,552 0.75%<F5> 2.24%<F5> 61.87%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 27.99 12.56% 129,415 0.75%<F5> 2.05%<F5> 63.91%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 30.51 18.39% 164,382 0.75%<F5> 2.31%<F5> 69.90%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 29.85 8.83% 188,123 0.75%<F5> 2.16%<F5> 56.44%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 30.11 5.87% 180,737 0.93%<F5> 1.84%<F5> 69.42%
- ----------------------------------------------------------------------------------------------------------------------------------
GROWTH AND INCOME
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995<F9> 27.63 25.00% 162,752 0.90%<F6> 1.70%<F6> 47.85%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 33.08 26.90% 226,888 0.90%<F6> 1.67%<F6> 51.37%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 39.28 30.83% 366,020 0.87%<F6> 1.34%<F6> 31.36%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 44.46 18.35% 474,603 0.87%<F6> 1.11%<F6> 48.56%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 46.12 12.04% 531,257 0.92%<F6> 0.99%<F6> 62.20%
- ----------------------------------------------------------------------------------------------------------------------------------
EQUITY INDEX
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995<F9> 41.08 26.02% 138,106 0.46%<F7> 2.34%<F7> 4.61%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 49.43 23.68% 212,072 0.41%<F7> 2.01%<F7> 7.48%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 63.16 31.38% 315,759 0.38%<F7> 1.66%<F7> 9.81%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 74.66 21.93% 452,752 0.33%<F7> 1.43%<F7> 2.91%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 91.95 25.32% 568,161 0.36%<F7> 1.17%<F7> 13.95%
- ----------------------------------------------------------------------------------------------------------------------------------
GROWTH
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995<F9> 25.61 19.55% 134,428 0.90%<F8> 0.13%<F8> 49.84%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 30.43 18.82% 155,293 0.90%<F8> (0.04)%<F8> 56.75%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 35.48 21.56% 181,650 0.89%<F8> 0.09%<F8> 62.09%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 36.05 18.89% 197,798 0.89%<F8> 0.20%<F8> 51.82%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 38.42 18.18% 306,832 0.94%<F8> (0.06)%<F8> 59.35%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<F1> Commencement of operations.
<F2> Not annualized.
<F3> Annualized.
<F4> Without fees waived, ratios of net expenses to average net assets for
the fiscal year ended October 31, 1999, and the period ended October 31,
1998 would have been 1.23%, 1.38%, respectively; and ratio of net
investment income to average net assets for the fiscal year ended
October 31, 1999 and period ended October 31, 1998 would have been
2.54%, 2.44%, respectively.
<F5> Without fees waived, ratios of net expenses to average net assets for
the fiscal years ended October 31, 1999, 1998, 1997, 1996, 1995 would
have been 1.00%, 0.99%, 1.00%, 1.03%, 1.06%, respectively; and ratios of
net investment income to average net assets for the fiscal years ended
October 31, 1999, 1998, 1997, 1996, 1995 would have been 1.77%, 1.92%,
2.05%, 1.77%, 1.93%, respectively.
<F6> Without fees waived, ratios of net expenses to average net assets for
the fiscal years ended October 31, 1999, 1998, 1997, 1996, 1995 would
have been 0.93%, 0.94%, 0.94%, 0.98%, 1.01%, respectively; and ratios of
net investment income to average net assets for the fiscal years ended
October 31, 1999, 1998, 1997, 1996, 1995 would have been 0.98%, 1.04%,
1.27%, 1.59%, 1.59%, respectively.
<F7> Without fees waived, ratios of net expenses to average net assets for
the fiscal years ended October 31, 1999, 1998, 1997, 1996, 1995 would
have been 0.43%, 0.44%, 0.45%, 0.48%, 0.53%, respectively; and ratios
of net investment income to average net assets for the fiscal years
ended October 31, 1999, 1998, 1997, 1996, 1995 would have been 1.10%,
1.32%, 1.59%, 1.94%, 2.27%, respectively.
<F8> Without fees waived, ratios of net expenses to average net assets for
the fiscal years ended October 31, 1999, 1998, 1997, 1996, 1995 would
have been 0.95%, 0.96%, 0.96%, 0.98%, 1.02%, respectively; and ratios of
net investment income to average net assets for the fiscal years ended
October 31, 1999, 1998, 1997, 1996, 1995 would have been (0.07)%, 0.13%,
0.01%, (0.12)%, 0.01%, respectively.
<F9> On January 9, 1995, all previously existing series of shares of each
Fund were reclassified as Series A shares. Effective January 9, 1995,
Institutional shareowners exchanged their Series A shares for the Funds'
Institutional series shares. For the year ended October 31, 1995, the
Financial Highlights ratios of net expenses to average net assets,
ratios of net investment income to average net assets, total return and
the per share income from investment operations and distributions are
presented on a basis whereby the Funds' net investment income, net
expenses, net realized and unrealized gains (losses) and distributions
for the period November 1, 1994, through January 9, 1995, were allocated
to each class of shares based upon the relative net assets of each class
of shares as of the close of business on January 9, 1995, and the
results thereof combined with the results of operations and
distributions for each applicable class for the period January 10, 1995,
through October 31, 1995.
<F10> Net investment income per share represents net investment income divided
by the average shares outstanding throughout the period.
<F11> Net investment income (loss) per share is calculated using ending
balances prior to consideration of adjustments for permanent book and
tax differences.
<F12> Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
<PAGE>
(LOGO) FIRSTAR FUNDS
INSTITUTIONAL EQUITY FUNDS (CONT'D.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income from Investment Operations Less Distributions
---------------------------------- --------------------------------------
Net Realized
Net and Unrealized Total Dividends Distributions
Asset Value, Net Gains or From from Net From
Beginning Investment (Losses) on Investment Investment Capital Total
of Period Income Securities Operations Income Gains Distributions
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SPECIAL GROWTH
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995<F9> $33.19 $0.00 $8.49 $8.49 $ - $(0.21) $(0.21)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 41.47 (0.04)<F11> 4.74 4.70 - (4.59) (4.59)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 41.58 (0.11)<F11> 8.49 8.38 - (5.26) (5.26)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 44.70 (0.14)<F10> (2.09) (2.23) - (4.46) (4.46)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 38.01 0.02<F11> 0.60 0.62 - (0.31) (0.31)
- ----------------------------------------------------------------------------------------------------------------------------------
EMERGING GROWTH
- ----------------------------------------------------------------------------------------------------------------------------------
Aug. 15, 1997<F1> through Oct. 31, 1997 10.00 0.02 0.29 0.31 - - -
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 10.31 0.05<F10> (0.71) (0.66) (0.02) (0.05) (0.07)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 9.58 (0.01) (0.24) (0.25) (0.01) - (0.01)
- ----------------------------------------------------------------------------------------------------------------------------------
MICROCAP
- ----------------------------------------------------------------------------------------------------------------------------------
Aug. 1, 1995<F1> 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 October 31, 1997 16.20 (0.15) 4.27 4.12 - (2.75) (2.75)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 17.57 (0.22) (3.19) (3.41) - (1.67) (1.67)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 12.49 (0.19)<F11> 9.79 9.60 - (0.03) (0.03)
- ----------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY<F8>
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995<F9> 19.99 0.12 (0.87) (0.75) (0.04) (0.01) (0.05)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 19.19 0.11<F11> 1.44 1.55 (0.10) (0.37) (0.47)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 20.27 0.10<F11> (1.10) (1.00) (0.17) (0.46) (0.63)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 18.64 0.24<F10> (3.16) (2.92) (0.09) (0.37) (0.46)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 15.26 0.09 3.62 3.71 (0.31) - (0.31)
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Supplemental Data and Ratios
------------------------------------------------
Net Ratio Ratio of Net
Assets, of Net Investment
Net Asset End of Expenses Income Portfolio
Value, End Total Period to Average to Average Turnover
of Period Return (00s) Net Assets Net Assets Rate<F12>
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SPECIAL GROWTH
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995<F9> $41.47 25.79% $434,228 0.90%<F4> 0.00%<F4> 79.25%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 41.58 12.58% 482,857 0.88%<F4> (0.10)%<F4> 103.34%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 44.70 22.44% 569,028 0.87%<F4> (0.25)%<F4> 97.40%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 38.01 (5.66)% 464,858 0.88%<F4> (0.32)%<F4> 77.39%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 38.32 1.56% 359,947 0.94%<F4> 0.04%<F4> 139.91%
- ----------------------------------------------------------------------------------------------------------------------------------
EMERGING GROWTH
- ----------------------------------------------------------------------------------------------------------------------------------
Aug. 15, 1997<F1> through Oct. 31, 1997 10.31 3.10%2 48,044 0.90% 1.18% 14.51%<F2>
<F3><F5> <F3><F5>
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 9.58 (6.35)% 60,400 0.90%<F5> 0.49%<F5> 132.63%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 9.32 (2.57)% 139,279 1.05%<F5> (0.10)%<F5> 115.65%
- ----------------------------------------------------------------------------------------------------------------------------------
MICROCAP
- ----------------------------------------------------------------------------------------------------------------------------------
Aug. 1, 1995<F1> through June 30, 1996 15.45 63.93%2 63,595 1.74% (0.16)% 283.67%<F2>
<F3><F6> <F3><F6>
- ----------------------------------------------------------------------------------------------------------------------------------
July 1, 1996 through Oct. 31, 1996 16.20 4.85% 66,368 1.72% (1.44)% 64.44%
<F3><F6> <F3><F6>
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 17.57 30.12% 103,840 1.70%<F6> (1.20)%<F6> 158.39%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 12.49 (21.51)% 72,696 1.74%<F6> (1.38)%<F6> 135.61%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 22.06 77.06% 150,898 1.76%<F6> (1.18)%<F6> 200.09%
- ----------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY<F8>
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995<F9> 19.19 (3.75)% 31,187 1.50%<F7> 0.66%<F7> 15.12%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 20.27 8.21% 43,182 1.50%<F7> 0.62%<F7> 31.57%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 18.64 (5.10)% 57,206 1.50%<F7> 0.50%<F7> 97.09%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 15.26 (15.97)% 44,670 1.50%<F7> 1.37%<F7> 43.96%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 18.66 24.74% 54,423 1.56%<F7> 0.80%<F7> 45.50%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<F1> Commencement of operations.
<F2> Not annualized.
<F3> Annualized.
<F4> Without fees waived, ratios of net expenses to average net assets for
the fiscal years ended October 31, 1999, 1998, 1997, 1996, 1995 would
have been 0.96%, 0.95%, 0.95%, 0.95%, 0.98%, respectively; and ratios of
net investment income to average net assets for the fiscal years ended
October 31, 1999, 1998, 1997, 1996, 1995 would have been 0.02%, (0.39)%,
(0.32)%, (0.17)%, (0.08)%, respectively.
<F5> Without fees waived, ratios of net expenses to average net assets for
the fiscal years ended October 31, 1999, 1998 and for the period ended
October 31, 1997 would have been 1.07%, 1.17%, 1.24%, respectively; and
ratios of net investment income to average net assets for the fiscal
year ended October 31, 1999, 1998 and for the period ended October 31,
1997 would have been (0.12)%, 0.22%, 0.84%, respectively.
<F6> Without fees waived, the ratio of net expenses to average net assets
for the fiscal years ended October 31, 1999, 1998, 1997 and for the
periods ended October 31, 1996 and June 30, 1996 would have been 1.77%,
1.81%, 1.78%, 1.79%, 1.97%, respectively, and the ratio of net
investment income (loss) to average net assets for the fiscal years
ended October 31, 1999, 1998, 1997 and for the periods ended October 31,
1996 and June 30, 1996 would have been (1.19)%. 1.45%, (1.28)%, (1.51)%,
(0.39)%, respectively.
<F7> Without fees waived, ratios of net expenses to average net assets for
the fiscal years ended October 31, 1999, 1998, 1997, 1996, 1995 would
have been 1.85%, 1.92%, 2.25%, 2.36%, 2.65%, respectively; and ratios of
net investment income to average net assets for the fiscal years ended
October 31, 1999, 1998, 1997, 1996, 1995 would have been 0.51%, 0.96%,
(0.25)%, (0.24)%, (0.49)%, respectively.
<F8> Effective September 2, 1997, Hansberger Global Investors assumed the
investment sub-advisory responsibilities of State Street Global
Advisers.
<F9> On January 9, 1995, all previously existing series of shares of each
Fund were reclassified as Series A shares. Effective January 9, 1995,
Institutional shareowners exchanged their Series A shares for the Funds'
Institutional series shares. For the year ended October 31, 1995, the
Financial Highlights ratios of net expenses to average net assets,
ratios of net investment income to average net assets, total return and
the per share income from investment operations and distributions are
presented on a basis whereby the Funds' net investment income, net
expenses, net realized and unrealized gains (losses) and distributions
for the period November 1, 1994, through January 9, 1995, were allocated
to each class of shares based upon the relative net assets of each class
of shares as of the close of business on January 9, 1995, and the
results thereof combined with the results of operations and
distributions for each applicable class for the period January 10, 1995,
through October 31, 1995.
<F10> Net investment income (loss) per share represents net investment income
divided by the average shares outstanding throughout the period.
<F11> Net investment income (loss) per share is calculated using ending
balances prior to consideration of adjustments for permanent book and
tax differences.
<F12> Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
RETAIL A SHARE EQUITY FUNDS
<TABLE>
<CAPTION>
Income from Investment Operations Less Distributions
---------------------------------- --------------------------------------
Net Realized
Net and Unrealized Total Dividends Distributions
Asset Value, Net Gains or From from Net From
Beginning Investment (Losses) on Investment Investment Capital Total
of Period Income Securities Operations Income Gains Distributions
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCED INCOME
- ----------------------------------------------------------------------------------------------------------------------------------
Dec. 1, 1997<F1> through Oct. 31, 1998 $10.00 $0.28<F11> $0.96 $1.24 $(0.24) $ - $(0.24)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 11.00 0.28 0.38 0.66 (0.28) (0.44) (0.72)
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCED GROWTH
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995<F10> 22.10 0.49 3.77 4.26 (0.47) - (0.47)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 25.89 0.47<F12> 2.64 3.11 (0.47) (0.55) (1.02)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 27.98 0.58 4.19 4.77 (0.59) (1.68) (2.27)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 30.48 0.56 1.86 2.42 (0.58) (2.50) (3.08)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 29.82 0.49 1.19 1.68 (0.49) (0.95) (1.44)
- ----------------------------------------------------------------------------------------------------------------------------------
GROWTH AND INCOME
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995<F10> 23.09 0.37 5.14 5.51 (0.38) (0.60) (0.98)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 27.62 0.42<F12> 6.61 7.03 (0.39) (1.19) (1.58)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 33.07 0.37 8.92 9.29 (0.39) (2.73) (3.12)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 39.24 0.36 6.55 6.91 (0.35) (1.39) (1.74)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 44.41 0.29 4.92 5.21 (0.35) (3.21) (3.56)
- ----------------------------------------------------------------------------------------------------------------------------------
EQUITY INDEX
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995<F10> 33.41 0.70 7.70 8.40 (0.68) (0.06) (0.74)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 41.07 0.77<F12> 8.69 9.46 (0.78) (0.35) (1.13)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 49.40 0.80<F11> 14.33 15.13 (0.81) (0.61) (1.42)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 63.11 0.84 12.58 13.42 (0.84) (1.11) (1.95)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 74.58 0.80 17.75 18.55 (0.83) (0.47) (1.30)
- ----------------------------------------------------------------------------------------------------------------------------------
GROWTH
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995<F10> 21.47 (0.02) 4.16 4.14 (0.03) - (0.03)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 25.58 (0.07)<F12> 4.81 4.74 - - -
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 30.32 (0.05)<F12> 6.30 6.25 - (1.30) (1.30)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 35.27 (0.02)<F11> 5.66 5.64 (0.02) (5.17) (5.19)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 35.72 (0.11)<F11> 6.42 6.30 (0.02) (4.04) (4.06)
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Supplemental Data and Ratios
------------------------------------------------
Net Ratio Ratio of Net
Assets, of Net Investment
Net Asset End of Expenses Income Portfolio
Value, End Total Period to Average to Average Turnover
of Period Return<F9> (00s) Net Assets Net Assets Rate<F13>
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCED INCOME
- ----------------------------------------------------------------------------------------------------------------------------------
Dec. 1, 19971 through Oct. 31, 1998 $11.00 12.46%<F2> $10,614 1.00% 2.82% 58.33%<F2>
<F3>F4> <F3><F4>
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 10.94 6.01% 13,087 1.18%<F4> 2.59%<F4> 48.46%
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCED GROWTH
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995<F10> 25.89 19.55% 21,832 0.94%<F5> 2.05%<F5> 61.87%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 27.98 12.30% 29,034 1.00%<F5> 1.80%<F5> 63.91%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 30.48 18.07% 44,026 1.00%<F5> 2.06%<F5> 69.90%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 29.82 8.60% 59,657 1.00%<F5> 1.91%<F5> 56.44%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 30.06 5.56% 53,807 1.18%<F5> 1.59%<F5> 69.42%
- ----------------------------------------------------------------------------------------------------------------------------------
GROWTH AND INCOME
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995<F10> 27.62 24.75% 42,424 1.09%<F6> 1.51%<F6> 47.85%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 33.07 26.62% 71,310 1.15%<F6> 1.42%<F6> 51.37%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 39.24 30.47% 128,070 1.12%<F6> 1.09%<F6> 31.36%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 44.41 18.08% 190,331 1.12%<F6> 0.86%<F6> 48.56%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 46.06 11.78% 194,089 1.17%<F6> 0.74%<F6> 62.20%
- ----------------------------------------------------------------------------------------------------------------------------------
EQUITY INDEX
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995<F10> 41.07 25.79% 18,663 0.66%<F7> 2.14%<F7> 4.61%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 49.40 23.36% 39,656 0.66%<F7> 1.76%<F7> 7.48%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 63.11 31.08% 76,866 0.63%<F7> 1.40%<F7> 9.81%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 74.58 21.63% 110,129 0.58%<F7> 1.18%<F7> 2.91%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 91.83 25.01% 142,247 0.61%<F7> 0.92%<F7> 13.95%
- ----------------------------------------------------------------------------------------------------------------------------------
GROWTH
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 199510 25.58 19.31% 10,105 1.09%<F8> (0.06)%<F8> 49.84%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 30.32 18.53% 16,636 1.15%<F8> (0.29)%<F8> 56.75%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 35.27 21.30% 25,043 1.14%<F8> (0.16)%<F8> 62.09%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 35.72 18.58% 38,213 1.14%<F8> (0.05)%<F8> 51.82%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 37.96 17.92% 47,238 1.19%<F8> (0.31)%<F8> 59.35%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<F1> Commencement of operations.
<F2> Not annualized.
<F3> Annualized.
<F4> Without fees waived, ratios of net expenses to average net assets for
the fiscal year ended October 31, 1999, and period ended October
31, 1998 would have been 1.48%, 1.63%, respectively; and ratio of net
investment income to average net assets for the fiscal year ended
October 31, 1999, and period ended October 31, 1998 would have
been 2.29%, 2.19%, respectively.
<F5> Without fees waived, ratios of net expenses to average net assets for
the fiscal years ended October 31, 1999, 1998, 1997, 1996, 1995 would
have been 1.25%, 1.24%, 1.25%, 1.28%, 1.25%, respectively; and ratios of
net investment income to average net assets for the fiscal years ended
October 31, 1999, 1998, 1997, 1996, 1995 would have been 1.52%, 1.67%,
1.80%, 1.52%, 1.74%, respectively.
<F6> Without fees waived, ratios of net expenses to average net assets for
the fiscal years ended October 31, 1999, 1998, 1997, 1996, 1995 would
have been 1.18%, 1.19%, 1.19%, 1.23%, 1.20%, respectively; and ratios of
net investment income to average net assets for the fiscal years ended
October 31, 1999, 1998, 1997, 1996, 1995 would have been 0.73%, 0.79%,
1.02%, 1.35%, 1.40%, respectively.
<F7> Without fees waived, ratios of net expenses to average net assets for
the fiscal years ended October 31, 1999, 1998, 1997, 1996, 1995 would
have been 0.68%, 0.69%, 0.70%, 0.73%, 0.73%, respectively; and ratios of
net investment income to average net assets for the fiscal years ended
October 31, 1999, 1998, 1997, 1996, 1995 would have been 0.85%, 1.07%,
1.33%, 1.69%, 2.07%, respectively.
<F8> Without fees waived, ratios of net expenses to average net assets for
the fiscal years ended October 31, 1999, 1998, 1997, 1996, 1995 would
have been 1.20%, 1.21%, 1.21%, 1.23%, 1.21%, respectively; and ratios of
net investment income to average net assets for the fiscal years ended
October 31, 1999, 1998, 1997, 1996, 1995 would have been (0.32)%,
(0.12)%, (0.24)%, (0.36)%, (0.18)%, respectively.
<F9> The total return calculation does not reflect the maximum sales charge
of 5.50%.
<F10> On January 9, 1995, all previously existing series of shares of each
Fund were reclassified as Series A shares. Effective January 9, 1995,
Institutional shareholders exchanged their Series A shares for the Funds'
Institutional series shares. For the year ended October 31, 1995, the
Financial Highlights ratios of net expenses to average net assets,
ratios of net investment income to average net assets, total return and
the per share income from investment operations and distributions are
presented on a basis whereby the Funds' net investment income, net
expenses, net realized and unrealized gains (losses) and distributions
for the period November 1, 1994, through January 9, 1995, were allocated
to each class of shares based upon the relative net assets of each class
of shares as of the close of business on January 9, 1995, and the
results thereof combined with the results of operations and
distributions for each applicable class for the period January 10, 1995,
through October 31, 1995.
<F11> Net investment income (loss) per share represents net investment income
divided by the average shares outstanding throughout the period.
<F12> Net investment income (loss) per share is calculated using ending
balances prior to consideration of adjustments for permanent book and
tax differences.
<F13> Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
RETAIL A SHARE EQUITY FUNDS (CONT'D.)
<TABLE>
<CAPTION>
Income from Investment Operations Less Distributions
---------------------------------- --------------------------------------
Net Realized
Net and Unrealized Total Dividends Distributions
Asset Value, Net Gains or From from Net From
Beginning Investment (Losses) on Investment Investment Capital Total
of Period Income Securities Operations Income Gains Distributions
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SPECIAL GROWTH
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995<F10> $33.19 $(0.07) $8.49 $8.42 $ - $(0.21) $(0.21)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 41.40 (0.13)<F12> 4.70 4.57 - (4.59) (4.59)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 41.38 (0.20)<F12> 8.44 8.24 - (5.26) (5.26)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 44.36 (0.24)<F11> (2.07) (2.31) - (4.46) (4.46)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 37.59 (0.08)<F11> 0.60 0.52 - (0.31) (0.31)
- ----------------------------------------------------------------------------------------------------------------------------------
EMERGING GROWTH
- ----------------------------------------------------------------------------------------------------------------------------------
Aug. 15, 1997<F1> through Oct. 31, 1997 10.00 0.02 0.29 0.31 - - -2
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 10.31 0.03<F11> (0.71) (0.68) $(0.02) (0.05) (0.07)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 9.56 (0.02) (0.24) (0.26) (0.01) - (0.01)
- ----------------------------------------------------------------------------------------------------------------------------------
MICROCAP
- ----------------------------------------------------------------------------------------------------------------------------------
Aug. 1, 1995<F1> 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)<F12> 0.82 0.74 - - -
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 16.16 (0.18)<F12> 4.24 4.06 - (2.75) (2.75)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 17.47 (0.25)<F11> (3.17) (3.42) - (1.67) (1.67)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 12.38 (0.26)<F12> 9.71 9.45 - (0.03) (0.03)
- ----------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY<F8>
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995<F10> 19.99 0.08 (0.87) (0.79) (0.04) (0.01) (0.05)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 19.15 0.07<F12> 1.43 1.50 (0.07) (0.37) (0.44)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 20.21 0.06<F12> (1.10) (1.04) (0.13) (0.46) (0.59)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 18.58 0.20<F11> (3.15) (2.95) (0.08) (0.37) (0.45)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 15.18 0.03 3.62 3.65 (0.30) - (0.30)
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Supplemental Data and Ratios
------------------------------------------------
Net Ratio Ratio of Net
Assets, of Net Investment
Net Asset End of Expenses Income Portfolio
Value, End Total Period to Average to Average Turnover
of Period Return<F9> (00s) Net Assets Net Assets Rate<F13>
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SPECIAL GROWTH
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995<F10> $41.40 25.56% $ 87,269 1.09%<F4> (0.19)%<F4> 79.25%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 41.38 12.27% 111,159 1.13%<F4> (0.35)%<F4> 103.34%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 44.36 22.18% 147,396 1.12%<F4> (0.50)%<F4> 97.40%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 37.59 (5.91)% 136,146 1.13%<F4> (0.57)%<F4> 77.39%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 37.80 1.31% 95,758 1.19%<F4> (0.21)%<F4> 139.91%
- ----------------------------------------------------------------------------------------------------------------------------------
EMERGING GROWTH
- ----------------------------------------------------------------------------------------------------------------------------------
Aug. 15, 19971 through Oct. 31, 1997 10.31 3.10%<F2> 5,355 1.15% 0.93% 14.51%<F2>
<F3><F5> <F3><F5>
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 9.56 (6.58)% 12,884 1.15%<F5> 0.24%<F5> 132.63%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 9.29 (2.72)% 9,957 1.30%<F5> (0.35)%<F5> 115.65%
- ----------------------------------------------------------------------------------------------------------------------------------
MICROCAP
- ----------------------------------------------------------------------------------------------------------------------------------
Aug. 1, 19951 through June 30, 1996 15.42 63.52%<F2> 9,036 1.99% (0.36)% 283.67%<F2>
<F3><F6> <F3><F6>
- ----------------------------------------------------------------------------------------------------------------------------------
July 1, 1996 through Oct. 31, 1996 16.16 4.80%<F2> 9,273 1.97% (1.69)% 64.44%<F2>
<F3><F6> <F3><F6>
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 17.47 29.78% 16,793 1.95%<F6> (1.45)%<F6> 158.39%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 12.38 (21.71)% 12,419 1.99%<F6> (1.63)%<F6> 135.61%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 21.80 76.54% 21,988 2.01%<F6> (1.43)%<F6> 200.09%
- ----------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY<F8>
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995<F10> 19.15 (3.95)% 1,633 1.70%<F7> 0.46%<F7> 15.12%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 20.21 7.95% 3,769 1.75%<F7> 0.37%<F7> 31.57%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 18.58 (5.30)% 6,502 1.75%<F7> 0.25%<F7> 97.09%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 15.18 (16.16)% 6,486 1.75%<F7> 1.12%<F7> 43.96%
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 18.53 24.48% 6,418 1.81%<F7> 0.56%<F7> 45.50%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<F1> Commencement of operations.
<F2> Not annualized.
<F3> Annualized.
<F4> Without fees waived, ratios of net expenses to average net assets for
the fiscal years ended October 31, 1999, 1998, 1997, 1996, 1995 would
have been 1.21%, 1.20%, 1.20%, 1.20%, 1.17%, respectively; and ratios of
net investment income to average net assets for the fiscal years ended
October 31, 1999, 1998, 1997, 1996, 1995 would have been (0.23)%,
(0.64)%, (0.57)%, (0.42)%, (0.27)%, respectively.
<F5> Without fees waived, ratios of net expenses to average net assets for
the fiscal years ended October 31, 1999, 1998 and the period ended
October 31, 1997 would have been 1.32%, 1.42%, 1.59%, respectively; and
ratios of net investment income to average net assets for the fiscal
years ended October 31, 1999, 1998 and the period ended October 31, 1997
would have been (0.37)%, (0.03)%, 0.59%, respectively.
<F6> Without fees waived, the ratio of net expenses to average net assets
for the fiscal years ended October 31, 1999, 1998, 1997, 1996 and the
period ended June 30, 1996 would have been 2.02%, 2.06%, 2.03%, 2.04%,
2.22%, respectively, and the ratio of net investment income (loss) to
average net assets for the fiscal years ended October 31, 1999, 1998,
1997, 1996 and the period ended June 30, 1996 would have been (1.44)%,
(1.70)%, (1.53)%, (1.76)%, (0.59)%, respectively.
<F7> Without fees waived, ratios of net expenses to average net assets for
the fiscal years ended October 31, 1999, 1998, 1997, 1996, 1995 would
have been 2.10%, 2.16%, 2.50%, 2.61%, 2.85%, respectively; and ratios of
net investment income to average net assets for the fiscal years ended
October 31, 1999, 1998, 1997, 1996, 1995 would have been (0.27)%, 0.71%,
(0.50)%, (0.48)%, (0.69)%, respectively.
<F8> Effective September 2, 1997, Hansberger Global Investors assumed the
investment sub-advisory responsibilities of State Street Global
Advisors.
<F9> The total return calculation does not reflect the maximum sales charge
of 5.50%.
<F10> On January 9, 1995, all previously existing series of shares of each
Fund were reclassified as Series A shares. Effective January 9, 1995,
Institutional shareowners exchanged their Series A shares for the Funds'
Institutional series shares. For the year ended October 31, 1995, the
Financial Highlights ratios of net expenses to average net assets,
ratios of net investment income to average net assets, total return and
the per share income from investment operations and distributions are
presented on a basis whereby the Funds' net investment income, net
expenses, net realized and unrealized gains (losses) and distributions
for the period November 1, 1994, through January 9, 1995, were allocated
to each class of shares based upon the relative net assets of each class
of shares as of the close of business on January 9, 1995, and the
results thereof combined with the results of operations and
distributions for each applicable class for the period January 10, 1995,
through October 31, 1995.
<F11> Net investment income (loss) per share represents net investment income
divided by the average shares outstanding throughout the period.
<F12> Net investment income (loss) per share is calculated using ending
balances prior to consideration of adjustments for permanent book and
tax differences.
<F13> Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
<PAGE>
(LOGO) FIRSTAR FUNDS
RETAIL B SHARE
EQUITY FUNDS
<TABLE>
<CAPTION>
Income from Investment Operations Less Distributions
---------------------------------- --------------------------------------
Net Realized
Net and Unrealized Total Dividends Distributions
Asset Value, Net Gains or From from Net From
Beginning Investment (Losses) on Investment Investment Capital Total
of Period Income Securities Operations Income Gains Distributions
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCED INCOME
- ----------------------------------------------------------------------------------------------------------------------------------
March 1, 1999<F1> through October 31, 1999 $10.87 $0.14<F13> $0.07 $0.21 $(0.12) $1 $(0.12)
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCED GROWTH
- ----------------------------------------------------------------------------------------------------------------------------------
March 1, 1999<F1> through October 31, 1999 30.25 0.17<F13> (0.10) 0.07 (0.17) - (0.17)
- ----------------------------------------------------------------------------------------------------------------------------------
GROWTH AND INCOME
- ----------------------------------------------------------------------------------------------------------------------------------
March 1, 1999<F1> through October 31, 1999 44.64 0.02<F13> 1.40 1.42 (0.03) - (0.03)
- ----------------------------------------------------------------------------------------------------------------------------------
EQUITY INDEX
- ----------------------------------------------------------------------------------------------------------------------------------
March 1, 1999<F1> through October 31, 1999 83.72 0.08<F13> 8.18 8.26 (0.26) - (0.26)
- ----------------------------------------------------------------------------------------------------------------------------------
GROWTH
- ----------------------------------------------------------------------------------------------------------------------------------
March 1, 1999<F1> through October 31, 1999 36.92 (0.29)<F13> 1.15 0.86 - - -
- ----------------------------------------------------------------------------------------------------------------------------------
SPECIAL GROWTH
- ----------------------------------------------------------------------------------------------------------------------------------
March 1, 1999<F1> through October 31, 1999 37.57 (0.23)<F13> 0.29 0.06 - - -
- ----------------------------------------------------------------------------------------------------------------------------------
EMERGING GROWTH
- ----------------------------------------------------------------------------------------------------------------------------------
March 1, 1999<F1> through October 31, 1999 9.57 (0.07)<F13> (0.25) (0.32) - - -
- ----------------------------------------------------------------------------------------------------------------------------------
MICROCAP
- ----------------------------------------------------------------------------------------------------------------------------------
March 1, 1999<F1> through October 31, 1999 13.74 (0.30)<F13> 8.25 7.95 - - -
- ----------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY<F10>
- ----------------------------------------------------------------------------------------------------------------------------------
March 1, 1999<F1> through October 31, 1999 14.71 (0.10)<F13> 3.76 3.66 - - -
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Supplemental Data and Ratios
------------------------------------------------
Net Ratio Ratio of Net
Assets, of Net Investment
Net Asset End of Expenses Income Portfolio
Value, End Total Period to Average to Average Turnover
of Period Return<F12> (00s) Net Assets Net Assets Rate<F11>
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCED INCOME
- ----------------------------------------------------------------------------------------------------------------------------------
March 1, 1999<F1> through October 31, 1999 $10.96 1.97%<F2> $1,571 1.97% 1.90% 48.46%
<F3><F4> <F3><F4>
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCED GROWTH
- ----------------------------------------------------------------------------------------------------------------------------------
March 1, 1999<F1> through October 31, 1999 30.15 0.25%<F2> 630 1.97% 0.87% 69.42%
<F3><F5> <F3><F5>
- ----------------------------------------------------------------------------------------------------------------------------------
GROWTH AND INCOME
- ----------------------------------------------------------------------------------------------------------------------------------
March 1, 1999<F1> through October 31, 1999 46.03 3.19%<F2> 1,550 1.94%<F3> 0.05%<F3> 62.20%
- ----------------------------------------------------------------------------------------------------------------------------------
EQUITY INDEX
- ----------------------------------------------------------------------------------------------------------------------------------
March 1, 1999<F1> through October 31, 1999 91.72 9.88%<F2> 4,613 1.37% 0.13% 13.95%
<F3><F6> <F3><F6>
- ----------------------------------------------------------------------------------------------------------------------------------
GROWTH
- ----------------------------------------------------------------------------------------------------------------------------------
March 1, 1999<F1> through October 31, 1999 37.78 2.33%<F2> 722 1.96% (1.17)% 59.35%
<F3><F7> <F3><F7>
- ----------------------------------------------------------------------------------------------------------------------------------
SPECIAL GROWTH
- ----------------------------------------------------------------------------------------------------------------------------------
March 1, 1999<F1> through October 31, 1999 37.63 0.16%<F2> 126 1.95% (0.89)% 139.91%
<F3><F8> <F3><F8>
- ----------------------------------------------------------------------------------------------------------------------------------
EMERGING GROWTH
- ----------------------------------------------------------------------------------------------------------------------------------
March 1, 1999<F1> through October 31, 1999 9.25 (3.34)% <F2> 80 2.08%<F3> (1.17)%<F3> 115.65%
- ----------------------------------------------------------------------------------------------------------------------------------
MICROCAP
- ----------------------------------------------------------------------------------------------------------------------------------
March 1, 1999<F1> through October 31, 1999 21.69 57.86%<F2> 140 2.78%<F3> (2.36)%<F3> 200.09%
- ----------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY<F10>
- ----------------------------------------------------------------------------------------------------------------------------------
March 1, 1999<F1> through October 31, 1999 18.37 24.88%<F2> 44 2.57% (0.85)% 45.50%
<F3><F9> <F3><F9>
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<F1> Commencement of operations.
<F2> Not annualized.
<F3> Annualized.
<F4> Without fees waived, ratio of net expenses to average net assets for the
year ended October 31, 1999 would have been 2.21% and the ratio of net
investment income to average net assets for the year ended October 31,
1999 would have been 1.66%.
<F5> Without fees waived, ratio of net expenses to average net assets for the
year ended October 31, 1999 would have been 2.03% and the ratio of net
investment income to average net assets for the year ended October 31,
1999 would have been 0.81%.
<F6> Without fees waived, ratio of net expenses to average net assets for the
year ended October 31, 1999 would have been 1.43% and the ratio of net
investment income to average net assets for the year ended October 31,
1999 would have been 0.07%.
<F7> Without fees waived, ratio of net expenses to average net assets for
the year ended October 31, 1999 would have been 1.97% and the ratio of
net investment income to average net assets for the year ended October
31, 1999 would have been (1.18)%.
<F8> Without fees waived, ratio of net expenses to average net assets for the
year ended October 31, 1999 would have been 1.97% and the ratio of net
investment income to average net assets for the year ended October 31,
1999 would have been (0.91)%.
<F9> Without fees waived, ratio of net expenses to average net assets for the
year ended October 31, 1999 would have been 2.85% and the ratio of net
investment income to average net assets for the year ended October 31,
1999 would have been (1.13)%.
<F10> Effective September 2, 1997, Hansberger Global Investors assumed the
investment sub-advisory responsibilities of State Street Global
Advisors.
<F11> Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
<F12> The total return calculation does not reflect the maximum deferred sales
charge of 5.00%.
<F13> Net investment income per share represents net investment income
divided by the average shares outstanding throughout the period.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
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", "500", "S&P
MIDCAP 400 INDEX" AND STANDARD & POOR'S MIDCAP 400 INDEX" ARE TRADEMARKS OF THE
MCGRAW HILL COMPANIES, INC. AND HAVE BEEN LICENSED FOR USE BY FIRSTAR FUNDS. THE
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 OR MIDCAP 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.
<PAGE>
FOR MORE INFORMATION
ANNUAL/SEMIANNUAL REPORTS
Additional information about the Funds' performance and investments is available
in the Funds' annual and semiannual reports to shareholders. 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 1-800-677-FUND or 1-414-
287-3808.
To obtain other information and for shareholder inquiries:
By telephone - call 1-800-677-FUND 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 paying a duplicating fee and sending an electronic request at the following
e-mail address at: [email protected]., or by sending your request and a
duplicating fee to the SEC's Public Reference Section, Washington, D.C. 20549-
0102. Information on the operation of the public reference room may be obtained
by calling the SEC at 1-202-942-8090.
The Fund's Investment Company Act File Number is 811-5380
WWW.FIRSTARFUNDS.COM
(LOGO) FIRSTAR FUNDS
FORM# 40-0193 (REV. 3/00)
xxxxx
MONEY MARKET FUND
INSTITUTIONAL MONEY MARKET FUND
U.S. TREASURY MONEY MARKET FUND
U.S. GOVERNMENT MONEY MARKET FUND
TAX-EXEMPT MONEY MARKET FUND
PROSPECTUS
MARCH 1, 2000
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved any shares of these funds or determined if this
prospectus is truthful or complete. Anyone who tells you otherwise is
committing a criminal offense.
(LOGO) FIRSTAR FUNDS
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
MONEY MARKET FUND AND
----------------------------------------------------------------------
INSTITUTIONAL MONEY MARKET FUND 1
----------------------------------------------------------------------
U.S. TREASURY MONEY MARKET FUND AND
----------------------------------------------------------------------
U.S. GOVERNMENT MONEY MARKET FUND 3
----------------------------------------------------------------------
TAX-EXEMPT MONEY MARKET FUND 6
----------------------------------------------------------------------
TYPES OF INVESTMENT RISK 8
----------------------------------------------------------------------
INVESTING WITH FIRSTAR FUNDS 11
----------------------------------------------------------------------
PURCHASING SHARES 11
----------------------------------------------------------------------
REDEEMING SHARES 14
----------------------------------------------------------------------
EXCHANGING SHARES 16
----------------------------------------------------------------------
ADDITIONAL SHAREHOLDER 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.
- --------------------------------------------------------------------------------
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
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 Shareholders, although no
change is currently anticipated.
PRINCIPAL Each Fund invests principally in short-term, high quality,
INVESTMENT dollar-denominated money market debt obligations generally
STRATEGIES 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. Long-term fixed-income securities will
normally have more price volatility because of this risk
than short-term securities.
An investment in the Funds is not a deposit of Firstar Bank,
N.A. 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.
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
------------ --------------------------
90 8.05 -
91 5.87 -
92 3.42 3.58
93 2.67 2.90
94 3.84 4.08
95 5.54 5.81
96 5.00 5.26
97 5.14 5.39
98 5.14 5.38
99 4.57 4.94
<PAGE>
(LOGO) FIRSTAR FUNDS
MONEY MARKET FUND INSTITUTIONAL MONEY MARKET FUND
- --------------------------------------------------------------------------------
BEST QUARTER: Q 2 '89 2.33% Q 2 '95 1.46%
WORST QUARTER: Q 2 '93 0.64% Q 2 '93 0.70%
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/99
- --------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (INCEPTION DATE)
- --------------------------------------------------------------------------------
Money Market Fund 4.57% 5.07% 4.91% -
Institutional Money
Market Fund 4.94% 5.35% - 4.72%
(April 26, 1991)
- --------------------------------------------------------------------------------
The 7-day yield for the period ended on 12/31/99 for the Money Market Fund and
the Institutional Money Market Fund was 5.30% and 5.54%, respectively, and
without giving effect to fee waivers was 5.18% and 5.29%, respectively. Figures
reflect past performance. Yields will vary. You may call 1-800-677-FUND 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
AND TOTAL
SERVICE ANNUAL
MANAGEMENT FUND OTHER OPERATING
FEES (12B-1) EXPENSES EXPENSES
<F1> FEES<F2> <F3> <F4>
- --------------------------------------------------------------------------------
MONEY MARKET FUND 0.50% 0.04% 0.53% 1.07%
INSTITUTIONAL MONEY MARKET FUND 0.50% 0.00% 0.15% 0.65%
- --------------------------------------------------------------------------------
<F1> The Adviser has voluntarily agreed that a portion of its management fee
will not be imposed on the Money Market Fund and Institutional Money Market
Fund during the current fiscal year. As a result of the fee waivers,
current management fees of the Money Market Fund and Institutional Money
Market Fund are 0.18% and 0.28%, 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 shareholder 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 for the current fiscal year.
<F3> "Other Expenses" includes administrative fees, transfer agency fees and all
other ordinary operating expenses of the Fund not listed above. Each of the
Money Market Fund and Institutional Money Market Fund has a Shareholder
Service Plan permitting each to pay shareholder servicing fees to
institutions (described below under the heading "Investing with Firstar
Funds - Shareholder Organizations") equal to up to 0.25% of the Fund's
average daily net assets. The Institutional Money Market Fund does not
intend to pay Shareholder 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 0.11%. 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 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, N.A. is
custodian.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
Money Market Fund $109 $340 $590 $1,306
Institutional Money Market Fund 66 208 362 810
- --------------------------------------------------------------------------------
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 Shareholders,
although no change is currently anticipated.
PRINCIPAL The U.S. Treasury Money Market Fund invests in short term,
INVESTMENT dollar-denominated debt obligations, generally maturing in
STRATEGIES 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.
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.
------------------------------------------------------------
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.
------------------------------------------------------------
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
An investment in the Funds is not a deposit of Firstar Bank,
N.A. 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.
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
---------------------------- --------------------------
90 7.71 -
91 5.56 -
92 3.30 3.19
93 2.61 2.57
94 3.76 3.57
95 5.39 5.21
96 4.92 4.76
97 4.97 4.78
98 4.95 4.65
99 4.41 4.05
- --------------------------------------------------------------------------------
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 12/31/99
- --------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (INCEPTION DATE)
- --------------------------------------------------------------------------------
U.S. TREASURY MONEY MARKET FUND 4.05% 4.69% - 4.17%
(Apr. 29, 1991)
U.S. GOVERNMENT
MONEY MARKET FUND 4.41% 4.92% 4.75% -
- --------------------------------------------------------------------------------
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
The 7-day yield for the period ended on 12/31/99 for the
U.S. Treasury Money Market Fund and the U.S. Government
Money Market Fund was 4.55% and 4.66%, respectively, and
without giving effect to fee waivers was 4.54% and 4.66%,
respectively. Figures reflect past performance. Yields will
vary. You may call 1-800-677-FUND 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
AND TOTAL
SERVICE ANNUAL
MANAGEMENT FUND OTHER OPERATING
FEES (12B-1) EXPENSES EXPENSES
<F1> FEES<F2> <F3> <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% 0.42% 0.92%
- --------------------------------------------------------------------------------
<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 and U.S.
Government 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 and U.S. Government Money Market Fund are 0.49% and 0.30%,
respectively, of the 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 Fund's
consent.
<F2> The total of all 12b-1 fees and shareholder 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 Shareholder Service Plan permitting the payment of a
shareholder servicing fee to institutions (described below under the
heading "Investing with Firstar Funds - Shareholder Organizations") equal
to up to 0.25% of each Fund's average daily net assets. The Funds do not
intend to pay Shareholder 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 Annual Fund
Operating Expenses of the U.S. Treasury Money Market Fund and U.S.
Government Money Market Fund are estimated to be 0.75% and 0.72%,
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.
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, N.A. is
custodian.
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
- --------------------------------------------------------------------------------
U.S. Treasury Money Market Fund $78 $243 $422 $942
U.S. Government Money Market Fund $94 $293 $509 1,131
- --------------------------------------------------------------------------------
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
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 Shareholders, although no
change is currently anticipated.
PRINCIPAL The Fund invests principally in a diversified portfolio of
INVESTMENT dollar-denominated debt obligations ("municipal
STRATEGIES 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 subdivisions. 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 Revenue securities are payable only
by the issuer's pledge of its full faith, from the revenues derived from
credit and taxing power for the payment a particular facility or class of
of principal and interest. 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.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
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.
An investment in the Fund is not a deposit of Firstar Bank,
N.A. and is not insured by the Federal Deposit Insurance
Corporation or any other government agency. Although the
Tax-Exempt 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 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 (%)
90 5.48
91 4.24
92 2.64
93 2.06
94 2.49
95 3.44
96 3.06
97 3.13
98 2.97
99 2.58
- --------------------------------------------------------------------------------
BEST QUARTER: Q 2 '89 1.58%
WORST QUARTER: Q 1 '94 0.50%
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/99
- --------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
TAX-EXEMPT MONEY MARKET FUND 2.58% 3.03% 3.20%
- --------------------------------------------------------------------------------
The 7-day yield for the period ended on 12/31/99 for the Tax-Exempt Money Market
Fund was 3.66%. Figures reflect past performance. Yields will vary. You may call
1-800-677-FUND to obtain the current 7-day yield of the Tax-Exempt Money Market
Fund.
<PAGE>
(LOGO) FIRSTAR 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 Tax-Exempt Money Market
Fund.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
DISTRIBUTION
AND TOTAL
SERVICE ANNUAL
MANAGEMENT FUND OTHER OPERATING
FEES (12B-1) EXPENSES EXPENSES
<F1> FEES<F2> <F3> <F4>
- --------------------------------------------------------------------------------
Tax-Exempt Money Market Fund 0.50% 0.00% 0.22% 0.72%
- --------------------------------------------------------------------------------
<F1> The total of all 12b-1 fees and shareholder 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 for the
current fiscal year.
<F2> "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
shareholder servicing fee to institutions (described below under the
heading "Investing with Firstar Funds - Shareholder Organizations") equal
to up to 0.25% of the Fund's average daily net assets. The Fund does
not intend to pay Shareholder Servicing fees for the current fiscal year
and "Other Expenses" does not reflect such fees.
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, N.A. is
custodian.
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
- --------------------------------------------------------------------------------
Tax-Exempt Money Market Fund $74 $230 $401 $894
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 COMPLETE INVESTMENT PROGRAM - ALL FUNDS
OF INVESTING AN investment in a single fund, by itself, does not
IN EACH OF constitute a complete investment plan.
THE FUNDS
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.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
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.
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. The Adviser may not
change certain investment practices of a Fund without
shareholder vote. The policies of each Fund, which may not
be changed without shareholder 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.
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.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
RISKS ASSOCIATED WITH NONPRINCIPAL STRATEGIES - ALL FUNDS
This Prospectus describes each Fund's principal investment
strategies, and the types of securities in which each Fund
principally invests. Each of the Funds 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
risks involved - are described in detail in the Additional
Statement, which is referred to on the back cover of this
Prospectus.
TEMPORARY INVESTMENT RISK - ALL FUNDS
Each Fund 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
Over the past several years, the Adviser and the Funds'
other major service providers expended considerable time and
money in addressing the computer and technology problems
associated with the transition to the Year 2000. As a result
of those efforts, the Funds did not experience any material
disruptions in their operations as a result of the
transition to the 21st century. The Adviser and the Funds'
other major service providers are continuing to monitor the
Year 2000 or Y2K problem, however, and there can be no
assurances that there will be no adverse impact to the Funds
as a result of future computer-related Y2K difficulties.
ADDITIONAL FOREIGN RISKS - MONEY MARKET FUND, INSTITUTIONAL MONEY
RISKS WHICH MARKET FUND AND TAX-EXEMPT MONEY MARKET FUND - TO THE EXTENT
APPLY TO THEY INVEST IN FOREIGN SECURITIES
INVESTMENT IN When a Fund invests in foreign securities, it will be
CERTAIN OF subject to special risks not typically associated with
THE FUNDS 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 recordkeeping 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.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
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 OTHER INVESTMENT COMPANIES - ALL FUNDS
RISKS WHICH The Funds may invest their cash balances in other investment
APPLY TO companies, which invest in high quality, short-term debt
PARTICULAR securities. A pro rata portion of the other investment
TYPES OF companies expenses will be borne by the Fund's shareholders.
SECURITIES
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 shareholder
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.
- --------------------------------------------------------------------------------
INVESTING WITH FIRSTAR FUNDS
This section describes for you the procedures for opening an
account and how to buy, sell or exchange Fund shares.
PURCHASING Shares of the Funds are offered and sold on a continuous
SHARES basis by the distributor for the Funds, B.C. Ziegler and
Company (the "Distributor"), which is not an affiliate of
the Adviser. The Distributor is a registered broker-dealer
with offices at 215 North Main Street, West Bend, Wisconsin
53095.
MINIMUM MONEY MARKET FUND, U.S. TREASURY MONEY MARKET FUND, U.S.
INVESTMENTS GOVERNMENT MONEY MARKET FUND AND TAX-EXEMPT MONEY MARKET
FUND
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.
INSTITUTIONAL MONEY MARKET FUND
The minimum initial investment in the Institutional Money
Market Fund is $1,000,000 by an individual or combination of
accounts (including a combination of accounts purchased
through one fund family having an arrangement to make
available the Institutional Money Market Fund). There is no
minimum subsequent investment.
BUYING SHARES Purchase requests for a Fund received in proper form, as
specified below, 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 (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 closing
price.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
Purchase requests for the Funds accompanied by a check or
wire payment which are received at or after 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 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
(normally 3:00 p.m. Central time) will be executed on the
next business day after receipt of both order and payment in
proper form.
<TABLE>
<CAPTION>
<S> <C> <C>
THROUGH A OPENING AN ACCOUNT ADDING TO AN ACCOUNT
SHAREHOLDER Contact your Shareholder Organization Contact your Shareholder Organization
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 1-800-677-FUND 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
ConvertiFundR Account. Open a ConvertiFund/TM account to automatically
invest proceeds from one account to another account
of the Firstar Family of Funds.
BY WIRE Call 1-800-677-FUND prior to sending the wire in Call 1-800-677-FUND 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, 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 1-800-677-FUND to exchange from another Call 1-800-677-FUND 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>
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
------------------------------------------------------------
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.
The Funds may authorize one or more brokers and other
shareholder organizations to accept on their behalf
purchase, redemption and exchange orders, and may authorize
such shareholder 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
shareholder 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 shareholder
organization or intermediary. Shareholder organizations and
intermediaries will be responsible for transmitting accepted
orders to the Funds within the period agreed upon by them.
Shareholders should contact their shareholder organization
or intermediaries to learn whether they are authorized to
accept orders for Funds.
It is the responsibility of shareholder organizations to
transmit orders and payments for the purchase of shares by
their customers to the transfer agent on a timely basis and
to provide account statements in accordance with the
procedures previously stated.
FOR OWNERS OF INSTITUTIONAL MONEY MARKET FUND SHARES:
All share purchases are effected pursuant to a customer's
account at Firstar Bank, 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 shareholder organizations involved. Firstar Trust
and the other shareholder 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 shareholder communications from the Fund will
be governed by the customers' account agreements with
Firstar Trust and the other shareholder organizations.
Investors wishing to purchase shares of the Institutional
Money Market Fund should contact their account
representatives.
In the case of participants in certain employee benefit
plans investing in the Institutional Money Market Fund,
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.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
The Institutional Money Market Fund may authorize one or
more brokers and other shareholder organizations to accept
on its behalf purchase, redemption and exchange orders, and
may authorize such shareholder organizations to designate
other intermediaries to accept purchase, redemption and
exchange orders on the Fund's behalf. In these cases, the
Fund will be deemed to have received an order when an
authorized shareholder 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
shareholder organization or intermediary. Shareholder
organizations and intermediaries will be responsible for
transmitting accepted orders to the Fund within the period
agreed upon by them. Shareholders should contact their
shareholder organization or intermediaries to learn whether
they are authorized to accept orders for the Fund.
It is the responsibility of shareholder 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 stated above.
REDEEMING SELLING SHARES
SHARES Telephone redemption requests for a 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 the Funds received at or after
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 will be executed the same day, at that day's closing
price. Orders received after 3:00 p.m. Central time will be
executed on the next business day.
THROUGH A Contact your Shareholder Organization.
SHAREHOLDER
ORGANIZATION
BY PHONE Call 1-800-677-FUND with your account name, sixteen-digit
account number and amount of redemption (minimum $500).
Redemption proceeds will only be sent to a shareholder'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 1-800-677-FUND for a Systematic Withdrawal Plan
application ($5,000 account minimum and $50 minimum per
transaction).
Guarantees must be signed by an eligible guarantor
institution and "Signature Guaranteed" must appear with the
signature.
------------------------------------------------------------
The 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, as specified
above.
------------------------------------------------------------
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
ADDITIONAL TELEPHONE REQUESTS
TRANSACTION In order to arrange for telephone redemptions after you have
INFORMATION 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 shareholder 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 shareholders.
During periods of substantial economic or market change,
telephone redemptions may be difficult to implement. If a
shareholder 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 shareholder 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 THE INSTITUTIONAL MONEY MARKET
FUND, IRAS OR OTHER RETIREMENT PLANS FOR WHICH FIRSTAR ACTS
AS CUSTODIAN.
CERTIFICATES
Certificates are only issued upon shareholder 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 as specified above, 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 UP TO 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, other than due to market
fluctuations, the Funds may redeem your account. The Fund
will impose no charge and will give you sixty days' written
notice and an opportunity to raise the account balance prior
to any redemption. A Fund, 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 for more information on involuntary
redemptions.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
EXCHANGING Without a sales charge, you may exchange shares of a Money
SHARES 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. 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
shareholder 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, Shareholder 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
shareholder and the exchange privilege may be modified or
terminated at any time. At least sixty days' notice will be
given to shareholders 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.
If this happens, you may initiate transactions in your
share accounts by mail or as otherwise described in this
Prospectus.
Shares of the Firstar Funds also may be exchanged with
shares of corresponding classes of the Firstar Stellar
Funds and the Mercantile Mutual Funds, Inc. Please read the
prospectus for those funds before investing.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
ADDITIONAL SHAREHOLDER ORGANIZATIONS
SHAREHOLDER The Funds (other than the Institutional Money Market Fund)
SERVICES have adopted a distribution and service plan. These Funds,
including the Institutional Money Market Fund, also have
adopted a service plan, under which the Funds may pay
service fees for shareholder services to money market
shareholders. Under either of these plans, shareholder
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 respective
agreements for distribution and/or shareholder support
services, as the case may be. Fees under both these
plans will not exceed, in the aggregate, the annual rate of
0.25% of a Fund's average daily net assets for the money
market shares.
Shareholder 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 Funds make no payments to their Distributor under the
plans. Payments to shareholder 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.
Distribution 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 a Fund's
assets on an ongoing basis, over time, these fees will
increase the cost of your investment and may cost you more
than paying other types of sales charges.
Under these plans, the Funds may enter into agreements with
shareholder organizations, including affiliates of the
Adviser (such as Firstar Investment Services, Inc.). The
shareholder 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
shareholder organization's agreement with Firstar. In
addition, investors should contact their shareholder
organizations with respect to the availability of
shareholder services and the particular shareholder
organization's procedures for purchasing and redeeming
shares. It is the responsibility of shareholder
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, shareholder
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.
Conflict-of-interest restrictions may apply to the receipt
of compensation paid by Firstar to a shareholder
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.
SHAREHOLDER REPORTS
Shareholders 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 shareholder reports will be sent to shareholders
with the same mailing address. Shareholders may request
duplicate copies free of charge.
Account statements will be mailed to shareholders monthly,
summarizing all transactions. Generally, a Fund does not
send statements for funds held in brokerage, retirement or
other similar accounts.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
FIRSTAR FUNDS WEBSITE (WWW.FIRSTARFUNDS.COM)
The site offers educational information and interactive
financial planning tools as well as product-specific
information.
Generally, shareholders 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-
677-FUND.
Firstar Funds and their agents will not be responsible for
any losses resulting from unauthorized online transactions
when procedures are followed which are designed to confirm
that the online transaction request is genuine. Statements
of accounts shall be conclusive if not objected to in
writing within 10 days after transmitted by mail. During
periods of significant economic or market change, it may be
difficult to reach the Funds online. If this happens, you
may initiate transactions in your share accounts by mail or
as otherwise described in the prospectus.
AUTOMATED TELERESPONSE SERVICE
Shareholders 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-
800-677-FUND, shareholders 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
Traditional, Roth, SIMPLE and SEP IRAs. For details
concerning Retirement Accounts (including service fees),
please call Firstar Mutual Fund Services, LLC at 1-800-677-
FUND.
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
DIVIDENDS, ------------------------------------------------------------
CAPITAL GAINS Reinvested dividends and distributions receive the same
DISTRIBUTIONS tax treatment as those paid in cash.
AND TAXES ------------------------------------------------------------
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
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 ( 12:30 p.m. Central time for the
Institutional Money Market Fund) on the declaration date.
A shareholder's dividends and capital gains distributions
will be reinvested automatically in additional shares unless
the Fund is notified that the shareholder elects to receive
distributions in cash.
If a shareholder 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
shareholder's address of record, such shareholder'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.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
FEDERAL TAXES
Distributions from the Money Market Fund, the Institutional
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.
Distributions from the Tax-Exempt Money Market Fund will
generally constitute tax-exempt income to 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.
The foregoing is only a summary of certain tax
considerations under current law, which may be subject to
change in the future. Shareholders who are nonresident
aliens, foreign trusts o estates, or foreign corporations
or partnerships, may be subject to different United States
federal income tax treatment. You should also consult your
tax adviser for further information regarding the federal,
state, local and/or foreign tax consequences with respect
to your specific situation.
STATE AND LOCAL TAXES
Shareholders 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. Shareholders should consult their tax
advisers regarding the tax status of distributions in their
state and locality.
MANAGEMENT ADVISORY SERVICES
OF THE FUNDS 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 $35.3
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.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
The Adviser is authorized to allocate purchase and sale
orders for portfolio securities to shareholder
organizations, including, in the case of agency
transactions, shareholder 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, 1999 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): 0.38% for the Money
Market Fund, 0.28% 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 and 0.49% 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.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, AND
ACCOUNTING SERVICES AGENT
Firstar Mutual Fund Services, LLC, an affiliate of the
Adviser, provides transfer agency, dividend disbursing
agency and accounting services for the Funds and receives
fees for these services. Inquiries to the transfer agent may
be sent to: Firstar Mutual Fund Service, LLC, P.O. Box 3011,
Milwaukee, Wisconsin 53201-3011. Firstar Bank, N.A. an
affiliate of the Adviser, provides custodial services for
the Funds and receives fees for these services.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
NET ASSET ------------------------------------------------------------
VALUE AND The Company intends to use its best efforts to maintain the
DAYS OF net asset value of each Fund at $1.00 per share, although
OPERATION 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 (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.
- --------------------------------------------------------------------------------
APPENDIX
FINANCIAL The financial highlights table is intended to help you
HIGHLIGHTS 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, and are incorporated by reference into the
Additional Statement, both of which are available upon
request. Contact the Firstar Funds Center for a free copy
of the Annual Report or Additional Statement.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Supplemental Data and Ratios
---------------------------------------
Ratio of Net
Net Asset Dividends Net Asset Net Assets, Ratio of Investment
Value, Net from Net Value, End of Net Expenses Income
Beginning Investment Investment End of Period to Average to Average Total
of Period Income Income Period (000s) Net Assets Net Assets Return
<C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
MONEY MARKET FUND
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995 $1.00 $0.05 $(0.05) $1.00 $172,261 0.60%<F1> 5.36%<F1> 5.51%
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 1.00 0.05 (0.05) 1.00 224,036 0.60%<F1> 4.94%<F1> 5.06%
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 1.00 0.05 (0.05) 1.00 261,017 0.60%<F1> 4.98%<F1> 5.12%
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 1.00 0.05 (0.05) 1.00 289,088 0.60%<F1> 5.05%<F1> 5.16%
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 1.00 0.04 (0.04) 1.00 283,481 0.72%<F1> 4.44%<F1> 4.52%
- --------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL MONEY MARKET FUND
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995 1.00 0.06 (0.06) 1.00 716,566 0.35%<F2> 5.63%<F2> 5.77%
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 1.00 0.05 (0.05) 1.00 750,051 0.35%<F2> 5.19%<F2> 5.32%
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 1.00 0.05 (0.05) 1.00 1,201,341 0.35%<F2> 5.23%<F2> 5.38%
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 1.00 0.05 (0.05) 1.00 1,623,970 0.35%<F2> 5.30%<F2> 5.41%
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 1.00 0.05 (0.05) 1.00 2,356,251 0.38%<F2> 4.76%<F2> 4.85%
- --------------------------------------------------------------------------------------------------------------------------------
U.S. TREASURY MONEY MARKET FUND
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995 1.00 0.05 (0.05) 1.00 64,655 0.60%<F3> 5.04%<F3> 5.16%
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 1.00 0.05 (0.05) 1.00 53,430 0.60%<F3> 4.70%<F3> 4.80%
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 1.00 0.05 (0.05) 1.00 78,478 0.60%<F3> 4.67%<F3> 4.80%
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 1.00 0.05 (0.05) 1.00 91,872 0.60%<F3> 4.62%<F3> 4.71%
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 1.00 0.04 (0.04) 1.00 95,539 0.71%<F3> 3.94%<F3> 4.01%
- --------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT MONEY MARKET FUND
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995 1.00 0.05 (0.05) 1.00 163,068 0.60%<F4> 5.24%<F4> 5.37%
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 1.00 0.05 (0.05) 1.00 198,334 0.60%<F4> 4.84%<F4> 4.96%
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 1.00 0.05 (0.05) 1.00 198,592 0.60%<F4> 4.83%<F4> 4.99%
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 1.00 0.05 (0.05) 1.00 233,176 0.60%<F4> 4.90%<F4> 4.97%
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 1.00 0.04 (0.04) 1.00 209,015 0.68%<F4> 4.30%<F4> 4.37%
- --------------------------------------------------------------------------------------------------------------------------------
TAX-EXEMPT MONEY MARKET FUND
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1995 1.00 0.03<F6> (0.03) 1.00 84,084 0.60%<F5> 3.36%<F5> 3.42%
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 1.00 0.03<F6> (0.03) 1.00 79,328 0.60%<F5> 3.09%<F5> 3.13%
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1997 1.00 0.03<F6> (0.03) 1.00 108,639 0.60%<F5> 3.06%<F5> 3.12%
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1998 1.00 0.03<F6> (0.03) 1.00 122,451 0.60%<F5> 3.02%<F5> 3.04%
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999 1.00 0.03<F6> (0.03) 1.00 153,189 0.71%<F5> 2.51%<F5> 2.53%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<F1> Without fees waived, ratios of net expenses to average net assets for the
fiscal years ended October 31, 1999, 1998, 1997, 1996, 1995 would have been
0.85%, 0.86%, 0.84%, 0.81%, 0.90%, respectively; and ratios of net
investment income to average net assets for the fiscal years ended October
31, 1999, 1998, 1997, 1996, 1995 would have been 4.31%, 4.79%, 4.73%,
4.73%, 5.06%, respectively.
<F2> Without fees waived, ratios of net expenses to average net assets for the
fiscal years ended October 31, 1999, 1998, 1997, 1996, 1995 would have been
0.62%, 0.64%, 0.66%, 0.64%, 0.69%, respectively; and ratios of net
investment income to average net assets for the fiscal years ended October
31, 1999, 1998, 1997, 1996, 1995 would have been 4.52%, 5.01%, 4.92%,
4.90%, 5.29%, respectively.
<F3> Without fees waived, ratios of net expenses to average net assets for the
fiscal years ended October 31, 1999, 1998, 1997, 1996, 1995 would have been
0.74%, 0.77%, 0.78%, 0.80%, 0.83%, respectively; and ratios of net
investment income to average net assets for the fiscal years ended October
31, 1999, 1998, 1997, 1996, 1995 would have been 3.91%, 4.45%, 4.49%,
4.50%, 4.81%, respectively.
<F4> Without fees waived, ratios of net expenses to average net assets for the
fiscal years ended October 31, 1999, 1998, 1997, 1996, 1995 would have been
0.69%, 0.71%, 0.70%, 0.71%, 0.75%, respectively; and ratios of net
investment income to average net assets for the fiscal years ended October
31, 1999, 1998, 1997, 1996, 1995 would have been 4.29%, 4.79%, 4.73%,
4.73%, 5.09%, respectively.
<F5> Without fees waived, ratios of net expenses to average net assets for the
fiscal years ended October 31, 1999, 1998, 1997, 1996, 1995 would have been
0.73%, 0.75%, 0.75%, 0.78%, 0.84%, respectively; and ratios of net
investment income to average net assets for the fiscal years ended October
31, 1999, 1998, 1997, 1996, 1995 would have been 2.49%, 2.87%, 2.91%,
2.91%, 3.12%, respectively.
<F6> For the Tax-Exempt Money Market Fund, substantially all the investment
income is exempt from federal income tax.
<PAGE>
(LOGO) FIRSTAR FUNDS
- --------------------------------------------------------------------------------
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.
<PAGE>
FOR MORE ANNUAL/SEMIANNUAL REPORTS
INFORMATION Additional information about the Funds' performance and
investments is available in the Funds' annual and semiannual
reports to shareholders.
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 1-800-677-FUND or 1-414-287-3808.
To obtain other information and for shareholder inquiries:
By telephone - call 1-800-677-FUND 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.
Information on the operation of the public reference room
may be obtained by calling the SEC at 1-202-942-8090. You
may also obtain copies of Fund documents by paying a
duplicating fee and sending an electronic request at the
following e-mail address: [email protected], or by sending
your request and a duplicating fee to the SEC's Public
Reference Section, Washington, D.C. 20549-0102
The Fund's Investment Company Act File Number is 811-5380
WWW.FIRSTARFUNDS.COM
(LOGO) FIRSTAR FUNDS
FORM# 40-0191 (REV. 3/00)
xxxxx
FIRSTAR FUNDS, INC.
Statement of Additional Information
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
International Equity Fund
March 1, 2000
TABLE OF CONTENTS
-----------------
Page
----
Firstar Funds, Inc.........................................................2
Description of the Funds and their Investments and Risks...................2
Investment Strategies and Risks............................................7
Net Asset Value...........................................................40
Additional Purchase and Redemption Information............................41
Description of Shares.....................................................48
Additional Information Concerning Taxes...................................50
Management of the Company.................................................51
Custodian, Transfer Agent and Accounting Services Agent...................61
Expenses and Financial Statements.........................................62
Independent Accountants...................................................62
Counsel...................................................................63
Performance Calculations..................................................63
Performance History.......................................................68
Miscellaneous.............................................................71
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, 2000, 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, , MidCap Index Fund, Emerging Growth Fund, MicroCap
Fund, Core International Equity 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 1-800-677-FUND. The Financial
Statements and the 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 that 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 fifteen 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, MidCap Index
Fund, Emerging Growth Fund, MicroCap Fund, Core International Equity 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; the MidCap Index Fund and Core International
Equity Fund commenced operations on November 4, 1999 and the MicroCap Fund
commenced operations on August 1, 1995. The Company also offers other
investment portfolios that are described in a separate statement of additional
information. For information concerning these other portfolios, contact Firstar
Mutual Fund Services, LLC at 1-800-677-FUND or write to 615 East Michigan
Street, P.O. Box 3011, Milwaukee, Wisconsin 53201-3011.
DESCRIPTION OF THE FUNDS AND THEIR INVESTMENTS AND RISKS
The Company is a diversified, open-end management investment company. The
following policies supplement the Funds' respective investment objectives and
policies as set forth in the 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 and Core 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 and Core International
Equity Fund. 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 The Glenmede Trust Company ("Glenmede") (HGI and
Glenmede are collectively referred to as the "Sub-Advisers"). Within the
framework of the investment objectives, policies and restrictions of each Fund,
and subject to the supervision of the Adviser, HGI and Glenmede each is
responsible for, makes decisions with respect to, and places orders for all
purchases and sales of portfolio securities for the International Equity Fund
and Core International Equity Fund, respectively.
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. The expected maximum portfolio turnover rate for the Core
International Equity Fund for the current fiscal year is 75%, and the expected
maximum portfolio turnover rate for the MidCap Index Fund for the current fiscal
year is 30%.
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 that involve the payment of negotiated brokerage
commissions, transactions in foreign securities generally involve the payment of
fixed brokerage commissions that 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-Advisers 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 the
respective Sub-Adviser), in its sole discretion, believes such practice to be in
the Funds' interests.
For the fiscal years ended October 31, 1999, 1998 and 1997, the company paid
brokerage commissions as follows:
Fund 1999 1998 1997
- ---- ---- ---- ----
Short-Term Bond Market $0 $0 $0
Intermediate Bond Market 0 0 0
Tax-Exempt Intermediate Bond 0 0 0
Bond IMMDEX/TM 0 0 0
Balanced Income 35,386 17,012 N/A
Balanced Growth 269,930 183,767 178,114
Growth and Income 944,299 521,009 403,426
Equity Index Fund 103,834 100,414 101,524
Growth 347,203 187,935 263,875
Special Growth 1,732,758 912,455 965,454
MidCap Index N/A N/A N/A
Emerging Growth 262,171 183,895 34,150
MicroCap 171,579 151,906 132,772<F1>
Core International Equity N/A N/A N/A
International Equity 125,280 183,485 161,449
<F1> For the fiscal period from August 15, 1997 through October 31, 1997.
None of the brokerage commissions were paid to affiliates of the Company, the
Adviser, Sub-Advisers or the Co-Administrators.
The Advisory Agreement between the Company and the Adviser, with respect to
the International Equity Fund, the Sub-Advisory Agreement among the Company, the
Adviser and HGI, and with respect to the Core International Equity Fund, the
Sub-Advisory Agreement among the Company, the Adviser and Glenmede, provide
that, in executing portfolio transactions and selecting brokers or dealers, the
Adviser and Sub-Advisers will seek to obtain the best overall terms available.
In assessing the best overall terms available for any transaction, the Adviser
(or the respective 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 respective 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-Advisers 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-Advisers, 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-Advisers, 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-Advisers. 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
respective 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 respective 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, 1999, the Company held securities of its regular brokers or
dealers (as defined under the 1940 Act) or their parents as follows:
Fund Broker/Dealer Total Holdings
- ---- ------------- --------------
Money Market Goldman Sachs
Merrill Lynch
Morgan Stanley
Prudential
Institutional Money Market Merrill Lynch
Morgan Stanley
Prudential
Household International
American General
GE Capital
Short-Term Bond Market Goldman Sachs $1,947,516
Lehman Brothers 4,929,414
First Chicago 2,362,444
Paine Webber 993,597
Bear Stearns 829,747
Intermediate Bond Market Goldman Sachs 4,868,790
Merrill Lynch 6,828,738
Donaldson Lufkin and Jenrette 2,927,700
Lehman Brothers 10,177,970
Salomon 1,953,249
Paine Webber 5,588,483
Prudential 4,921,624
Bear Stearns 2,217,476
Bond IMMDEX Goldman Sachs 9,737,580
Merrill Lynch 4,808,450
Lehman Brothers 15,907,006
Salomon 5,533,178
Paine Webber 6,449,671
General Motors Acceptance Corp. 2,849,856
Balanced Income Goldman Sachs 389,503
Merrill Lynch 233,742
Morgan Stanley 312,459
Donaldson Lufkin and Jenrette 195,180
Lehman Brothers 838,575
Salomon 691,795
American Express 492,600
General Electric 366,019
Balanced Growth Goldman Sachs 1,460,637
Merrill Lunch 862,712
Morgan Stanley 1,158,281
Lehman Brothers 2,303,524
Salomon 1,262,048
Paine Webber 1,038,413
General Motors 1,003,905
Growth and Income Bank of New York 14,966,125
American Express 10,841,800
Household International 5,645,063
Equity Index Morgan Stanley 3,901,311
American Express 4,158,000
General Motors Acceptance Corp. 2,824,050
Lehman Brothers 530,550
Bear Stearns 313,294
Household International 1,325,630
Growth Fund Morgan Stanley 4,930,969
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 respective 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 or Core 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 or Core International Equity Fund) judgment, the
income to be earned from the loan justifies the attendant risks. When a Fund
lends its securities, it continues to receive interest or dividends on the
securities loaned and may simultaneously earn interest on the investment of the
cash collateral which will be invested in readily marketable, high-quality,
short-term obligations. Although voting rights, or rights to consent, attendant
to securities on loan pass to the borrower, such loans may be called at any time
and will be called so that the securities may be voted by a Fund if a material
event affecting the investment is to occur.
Securities lending arrangements with broker/dealers require that the loans be
secured by collateral equal in value to at least the market value of the
securities loaned. During the term of such arrangements, a Fund will maintain
such value by the daily marking-to-market of the collateral.
Money Market Instruments. The Funds may invest from time to time in "money
market instruments," a term that includes, among other things, U.S. government
obligations, repurchase agreements, cash, bank obligations, commercial paper,
variable amount master demand notes and corporate bonds with remaining
maturities of thirteen months or less. These investments are used to help meet
anticipated redemption requests or if other suitable securities are unavailable.
The 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 and Core International Equity Fund
may reduce its holdings in equity and other securities and may invest up to 100%
of its assets in certain short-term (less than twelve months to maturity) and
medium-term (not greater than five years to maturity) debt securities and in
cash (U.S. dollars, foreign currencies, or multicurrency units) for temporary
defensive purposes, during periods in which the Adviser (or the respective 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 or Core
International Equity Fund) determines the instrument to present minimal credit
risks, such investments may nevertheless entail risks that are different from
those of investments in domestic obligations of U.S. banks due to differences in
political, regulatory and economic systems and conditions. All investments in
bank obligations are limited to the obligations of financial institutions having
more than $1 billion in total assets at the time of purchase, and investments by
each Fund in the obligations of foreign banks and foreign branches of U.S. banks
will not exceed 25% of such Fund's total assets at the time of purchase. The
Funds may also make interest-bearing savings deposits in commercial and savings
banks in amounts not in excess of 5% of its net assets.
Investments by a Fund in commercial paper will consist of issues rated at the
time A-1 and/or P-1 by Standard & Poor's, Moody's or similar rating by another
nationally recognized rating agency. In addition, the Funds may acquire unrated
commercial paper and corporate bonds that are determined by the Adviser at the
time of purchase to be of comparable quality to rated instruments that may be
acquired by such Fund as previously described.
The Funds may also purchase variable amount master demand notes which are
unsecured instruments that permit the indebtedness thereunder to vary and
provide for periodic adjustments in the interest rate. Although the notes are
not normally traded and there may be no secondary market in the notes, a Fund
may demand payment of the principal of the instrument at any time. The notes
are not typically rated by credit rating agencies, but issuers of variable
amount master demand notes must satisfy the same criteria as set forth above for
issuers of commercial paper. If an issuer of a variable amount master demand
note defaulted on its payment obligation, a Fund might be unable to dispose of
the note because of the absence of a secondary market and might, for this or
other reasons, suffer a loss to the extent of the default. The Funds invest in
variable amount master demand notes only when the Adviser (and Sub-Adviser in
the case of the International Equity Fund or Core International Equity Fund)
deem the investment to involve minimal credit risk.
Repurchase Agreements. Each Fund may agree to purchase securities from
financial institutions subject to the seller's agreement to repurchase them at
an agreed upon time and price ("repurchase agreements"). During the term of the
agreement, the Adviser (and Sub-Adviser in the case of the International Equity
Fund or Core International Equity Fund) will continue to monitor the
creditworthiness of the seller and will require the seller to maintain the value
of the securities subject to the agreement at not less than 102% of the
repurchase price. Default or bankruptcy of the seller would, however, expose
the Fund to possible loss because of adverse market action or delay in
connection with the disposition of the underlying securities. The securities
held subject to a repurchase agreement may have stated maturities exceeding one
year, provided the repurchase agreement itself matures in less than one year.
The repurchase price under the repurchase agreements described in the
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 that 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 shareholder of another investment
company, the Funds would bear, along with other shareholders, 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
shareholders. 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 that 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 Receipts") 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 144A
Securities. These securities are restricted securities that are eligible for
resale pursuant to Rule 144A under the Securities Act of 1933. A Fund may treat
a Rule 144A security as liquid if determined to be so under procedures adopted
by the Board.
Borrowings and Reverse Repurchase Agreements. Each Fund may borrow money to
the extent allowed (as described under "Additional Investment Limitations"
below) to meet shareholder redemptions from banks or through reverse repurchase
agreements. These strategies involve leveraging. 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
risks that the interest income earned by the Fund (from the investment of the
proceeds) will be less than the interest expense of the transaction, that the
market value of the securities sold by the Fund may decline below the price of
the securities it is obligated to repurchase and that the securities may not be
returned to the Fund.
Preferred Stocks. The Balanced Income Fund, Balanced Growth Fund, Growth and
Income Fund, Growth Fund, Special Growth Fund, International Equity Fund, Core
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, International Equity Fund and Core International Equity Fund
- ---------------------------------------------------------------------------
The Balanced Income, Balanced Growth, Growth and Income, Growth, Special
Growth, Emerging Growth, MicroCap, International Equity and Core 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 that meets the
Fund's valuation 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 that 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 and
- -----------------------------------------------------------------------------
MidCap 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 and Core 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
and Core International Equity Fund. The Funds and their shareholders 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 and Core 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 and Core International Equity Fund is expected to be
volatile.
Other Investment Considerations - International Equity Fund and Core
- --------------------------------------------------------------------
International Equity Fund
- -------------------------
Foreign Futures and Options on Futures. The Adviser and Sub-Advisers may
determine that it would be in the interest of the International Equity Fund and
Core International Equity Fund to purchase or sell futures contracts, including
interest rate, index, and currency futures for the International Equity Fund,
and forward foreign currency contracts and currency futures for the Core
International Equity Fund, 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. The Core International Equity Fund may invest in futures contracts for
hedging purposes only. 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 and Core
International Equity Fund may engage in reverse repurchase agreements to
facilitate portfolio liquidity, a practice common in the mutual fund industry,
for temporary purposes only. In a reverse repurchase agreement, a 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 and Reverse Repurchase Agreements" above.)
When required by guidelines of the SEC, a 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 and Core
International Equity Fund may enter into forward currency contracts. Forward
foreign currency exchange 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 the 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. Such transactions may
serve as long hedges (for example, if a 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 (if a Fund anticipates selling
a security denominated in a foreign currency it may sell a forward currency
contract to lock in the $US equivalent of the anticipated sales proceeds). This
Fund may also use forward contracts to protect against fluctuating exchange
rates and exchange control regulations.
The International Equity Fund and Core International Equity Fund may seek to
hedge against changes in the value of a particular currency by using forward
contracts on another foreign currency or a basket of currencies, the value of
which the Adviser or the respective Sub-Adviser believes will have a positive
correlation to the values of the currency being hedged. In addition, the Funds
may use forward currency contracts to shift exposure to foreign currency
fluctuations from one country to another. For example, if a 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 and Core International Equity Fund
of engaging in forward currency contracts varies with factors such as the
currency involved, the length of the contract period and the market conditions
then prevailing. Because forward currency contracts are usually entered into on
a principal basis, no fees or commissions are involved. When a 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 or Core International Equity Fund will in fact be able to close out
a forward currency contract at a favorable price prior to maturity. In
addition, in the event of insolvency of the counterparty, a 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 and
Core International Equity Fund might need to purchase or sell foreign currencies
in the spot (cash) market to the extent such foreign currency market movements
is extremely difficult, and the successful execution of a short-term hedging
strategy is highly uncertain. 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.
Foreign Currency Transactions. Although the International Equity Fund and
Core International Equity Fund value their respective assets daily in U.S.
dollars, the Funds are not required to convert their holdings of foreign
currencies to U.S. dollars on a daily basis. The Funds' 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 Funds could suffer a loss of some or all of the amounts
deposited. The Funds 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
these Funds enter into a forward contract or currency futures, the Custodian
will place cash, U.S. government securities, or high-grade debt securities into
segregated accounts of these Funds in an amount equal to the value of each
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 appropriate account on a daily basis so that
the account value is at least equal to the Funds' commitments to such contracts.
Foreign Currency Futures Contracts. The International Equity Fund and Core
International Equity Fund may also hedge their foreign exchange rate risk by
entering into foreign currency futures contracts. The forecasting of short-term
currency market movements is extremely difficult and whether short-term hedging
strategies would be successful is highly uncertain.
Other Investment Considerations - International Equity Fund
- -----------------------------------------------------------
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. The 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, the Fund may invest in
Sovereign Debt that is in default as to payments of principal or interest. The
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 Core International Equity Fund
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Derivatives Risk. The Core International Equity Fund may invest in
derivatives. The term derivative covers a wide number of investments, but in
general it refers to any financial instrument whose value is derived, at least
in part, from the price of another security or a specified index, asset or rate.
Some derivatives may be more sensitive to or otherwise not react in tandem with
interest rate changes or market moves, and some may be susceptible to changes in
yields or values due to their structure or contract terms. Loss may result from
the Fund's investment in options, futures, swaps, structured securities and
other derivative instruments that may be leveraged. The Fund may use
derivatives to: increase yield; hedge against a decline in principal value;
invest with greater efficiency and lower cost than is possible through direct
investment; adjust the Fund's duration; or provide daily liquidity.
Hedging is the use of one investment to offset the effects of another
investment. To the extent that a derivative is used as a hedge against an
opposite position that the Fund also holds, a loss generated by the derivative
should by substantially offset by gains on the hedged investment, and vice
versa. While hedging can reduce or eliminate losses, it can also reduce or
eliminate gains. Hedging also involves correlation risk - the risk that changes
in the value of a hedging instrument may not match those of the asset being
hedged.
To the extent that a derivative is not used as a hedge, the Fund is directly
exposed to the risks of that derivative. Gains or losses from speculative
positions in a derivative may be substantially greater than the derivative's
original cost.
Emerging Market Countries. The Core International Fund may invest in
emerging market countries. Developing countries may impose restrictions on a
Fund's ability to repatriate investment income or capital. Even where there is
no outright restriction on repatriation of investment income or capital, the
mechanics of repatriation may affect certain aspects of the operations of the
Fund. For example, funds may be withdrawn from the People's Republic of China
only in U.S. or Hong Kong dollars and only at an exchange rate established by
the government once each week.
Some of the currencies in emerging markets have experienced devaluations
relative to the U.S. dollar, and major adjustments have been made periodically
in certain of such currencies. Certain developing countries face serious
exchange constraints.
Lastly, governments of some developing countries exercise substantial
influence over many aspects of the private sector. In some countries, the
government owns or controls many companies, including the largest in the
country. As such, government actions in the future could have a significant
effect on economic conditions in developing countries in these regions, which
could affect private sector companies, a portfolio and the value of its
securities. Furthermore, certain developing countries are among the largest
debtors to commercial banks and foreign governments. Trading in debt
obligations issued or guaranteed by such governments or their agencies and
instrumentalities involves a high degree of risk.
Other Investment Considerations - The Taxable Bond Funds and Balanced Funds
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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 that 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 nor
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 that 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.
Equity Swaps. The Fund may enter into equity swap contracts to invest in a
market without owning or taking physical custody of securities in circumstances
in which direct investment is restricted for legal reasons or is otherwise
impracticable. Equity swaps may also be used for hedging purposes or to seek to
increase total return. The counterparty to an equity swap contract will
typically be a bank, investment banking firm or broker/dealer. Equity swaps may
be structured in different ways. For example, a counterparty may agree to pay
the Fund the amount, if any, by which the notional amount of the equity swap
contract would have increased in value had it been invested in the particular
stocks (or an index of stocks), plus the dividends that would have been received
on those stocks. In those cases, the Fund may agree to pay to the counterparty
a floating rate of interest on the notional amount of the equity swap contract
plus the amount, if any, by which that notional amount would have decreased in
value had it been invested in such stocks. Therefore, the return to the Fund on
the equity swap contract should be the gain or loss on the notional amount plus
dividends on the stocks less the interest paid by the underlying Fund on the
notional amount. In other cases, the counterparty and the Fund may each agree
to pay the other the difference between the relative investment performances
that would have been achieved if the notional amount of the equity swap contract
had been invested in different stocks (or indices of stocks).
The Fund will enter into equity swaps only on a net basis, which means that
the two payment streams are netted out, with the Fund receiving or paying, as
the case may be, only the net amount of the two payments. Payments may be made
at the conclusion of an equity swap contract or periodically during its term.
Equity swaps do not involve the delivery of securities or other underlying
assets. Accordingly, the risk of loss with respect to equity swaps is limited
to the net amount of payments that the Fund is contractually obligated to make.
If the other party to an equity swap defaults, the Fund's risk of loss consists
of the net amount of payments that such Fund is contractually entitled to
receive, if any. Inasmuch as these transactions are offset by segregated cash
or liquid assets to cover the Fund's potential exposure, the Fund and its
investment adviser believes that these transactions do not constitute senior
securities under the Act and, accordingly, will not treat them as being subject
to the Fund's borrowing restrictions.
The Fund will not enter into equity swap transactions unless the unsecured
commercial paper, senior debt or claims paying ability of the other party
thereto is considered to be investment grade by the investment adviser.
Other Investment Considerations - Equity Index Fund and MidCap Index Fund
- -------------------------------------------------------------------------
Equity Index Fund and MidCap Index Fund Management Techniques. When
purchasing securities for these Fund portfolios, the Adviser will consider
initially the relative market capitalization weightings of the stocks included
in the S&P 500 Index for the Equity Index Fund, and of the stocks included in
the S&P MidCap 400 Index for the MidCap Index Fund. 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 or S&P
MidCap 400 Index, respectively.
The Adviser will then compare the industry sector diversification of the
stocks in these Funds, acquired solely on the basis of their weighted
capitalizations, with the industry sector diversification of all issuers
included in the S&P 500 Index for the Equity Index Fund, and of all issuers
included in the S&P MidCap 400 Index for the MidCap Index Fund. This comparison
is made because the Adviser believes, unless the Funds hold all stocks included
in the S&P 500 Index and S&P MidCap 400 Index, respectively, which they
currently do not, that the selection of stocks for purchase by the Funds solely
on the basis of their weighted market capitalizations would tend to place
heavier concentration (as compared to the S&P 500 Index and S&P MidCap 400
Index, respectively) 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 or the S&P MidCap 400 Index, respectively.
Conversely, if smaller companies were not purchased by the Funds, industries
included in the S&P 500 Index and S&P MidCap 400 Index, respectively, that are
dominated by smaller market-capitalized companies would be underrepresented (as
compared to the S&P 500 Index and S&P MidCap 400 Index, respectively).
If an issuer drops in ranking, or is eliminated entirely from the S&P 500
Index or S&P MidCap 400 Index, the Adviser may be required to sell some or all
of the common stock of such issuer then held by the respective 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 or S&P MidCap 400 Index, such securities might not be sold. Such
sales may result in lower prices for such securities than may have been realized
or in losses that may not have been incurred if the Adviser were not required to
effect the purchases and sales. "Adverse events" will not necessarily be the
basis for the disposition of portfolio securities, unless an event causes the
issuer to be eliminated entirely from the S&P 500 Index or S&P MidCap 400 Index.
"Adverse events" include the failure of an issuer to declare or pay dividends,
the institution against an issuer of materially adverse legal proceedings, the
existence or threat of defaults materially and adversely affecting an issuer's
future declaration and payment of dividends, or the existence of other
materially adverse credit factors. However, although the Adviser does not
intend to screen securities for investment by these Funds by traditional methods
of financial and market analysis, the Adviser will monitor the Funds' investment
with a bias towards removing stocks of companies which may impair for any reason
the Funds' 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 these Fund
portfolios and will purchase balancing securities in these sectors until the
portfolio's sector weightings closely match that of the S&P 500 Index and S&P
MidCap 400 Index, respectively. This process continues until the portfolios are
fully invested (except for cash holdings).
These Funds may occasionally receive securities that are outside of the S&P
500 Index or S&P MidCap 400 Index, respectively, due to corporate
reorganizations or spin-offs. These Funds will dispose of those securities in
due course consistent with the Funds' investment objectives.
If a large number of shareholders were to redeem shares, however, the Adviser
may be forced to reduce the number of issuers represented in the portfolios.
This could have an adverse effect on the accuracy with which the Equity Index
Fund and MidCap Index Fund match the performance of the S&P 500 Index and S&P
MidCap 400 Index, respectively.
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
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Options Trading. As stated in the Prospectus, the Bond Funds, Balanced Funds
and Equity Funds (other than the Core International Equity Fund) 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 and MidCap 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 and
MidCap 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, MidCap
Index and MicroCap Funds will not exceed 5%, 5%, 25%, 5%, 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 and MidCap Index Fund will
purchase and sell futures and related options (based only on the S&P 500 Index
and S&P MidCap 400 Index, respectively) 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 and MidCap Index Fund may purchase and sell futures and related
options (based only on the S&P 500 Index and S&P MidCap 400 Index, respectively)
to maintain cash reserves while simulating full investment in the stocks
underlying the S&P 500 Index and S&P MidCap 400 Index, respectively, to keep
substantially all of its assets exposed to the market (as represented by the S&P
500 Index and S&P MidCap 400 Index, respectively), 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, MidCap
Index Fund and International Equity Fund intend to limit their transactions in
futures contracts so that not more than 10%, 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, International Equity and Core International Equity Funds may
invest in sponsored ADRs. The International Equity Fund and Core 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.
The Core International Equity Fund may also invest in EDRs and GDRs. EDRs
are receipts issued by a European financial institution evidencing ownership of
underlying foreign securities. GDRs are receipts structured similarly to EDRs
and are issued and traded in several international financial markets. The
underlying security may be subject to foreign government taxes, which would
reduce the yield on such securities.
Zero Coupon Bonds. Zero coupon obligations have greater price volatility
than coupon obligations and will not result in the payment of interest until
maturity, provided that a Fund will purchase such zero coupon obligations only
if the likely relative greater price volatility of such zero coupon obligations
is not inconsistent with the Fund's investment objective. Although zero coupon
securities pay no interest to holders prior to maturity, interest on these
securities is reported as income to a Fund and distributed to its shareholders.
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 shareholders 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 shareholders 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 MicroCap Fund and Core International Equity Fund when the Adviser or Sub-
Adviser, respectively, 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
shareholders. 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 or Core International Equity Fund, real estate limited partnerships,
except that each Fund may purchase securities of issuers which deal in real
estate and may purchase securities which are secured by interests in real
estate.
4. Acquire any other investment company or investment company security
except in connection with a merger, consolidation, reorganization or acquisition
of assets or where otherwise permitted by the 1940 Act.
5. Act as an underwriter of securities within the meaning of the
Securities Act of 1933 except insofar as a Fund might be deemed to be an
underwriter upon the disposition of portfolio securities acquired within the
limitation on purchases of restricted securities and except to the extent that
the purchase of securities directly from the issuer thereof in accordance with
the Fund's investment objective, policies and limitations may be deemed to be
underwriting.
6. Write or sell put options, call options, straddles, spreads, or any
combination thereof, except for transactions in options on securities, indices
of securities, futures contracts and options on futures contracts.
7. Purchase securities on margin, make short sales of securities or
maintain a short position (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 Prospectus are not deemed
to be pledged for purposes of this limitation.
The Funds will monitor liquidity on an ongoing basis to determine whether an
adequate level of liquidity is being maintained.
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 and Core International Equity Fund, the Company intends to use the Morgan
Stanley Capital International classification titles.
For purposes of investment limitation No. 1, "total assets" includes the value
of the collateral for the securities loaned.
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 shareholders 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
Shareholder 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 Core International Equity Fund and
at the current bid prices for the other Funds. Securities traded on only over-
the-counter markets are valued on the basis of closing over-the-counter bid
prices. Securities trading in over-the-counter markets in European and Pacific
Basin countries is normally completed well before 3:00 P.M. Central time. In
addition, European and Pacific Basin securities trading may not take place on
all business days. Furthermore, trading takes place in Japanese markets on
certain Saturdays and in various foreign markets on days which are not business
days in New York and on which the net asset value of a Fund, including the
International Equity Fund and Core International Equity Fund, is not calculated.
The calculation of the net asset value of a Fund, including the International
Equity Fund and Core International Equity Fund, may not take place
contemporaneously with the determination of the prices of portfolio securities
used in such calculation. Events affecting the values of portfolio securities
that occur between the time their prices are determined and 3:00 P.M. Central
time, and at other times, may not be reflected in the calculation of net asset
value of a Fund.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Computation of Offering Price of the Funds. An illustration of the
computation of the initial offering price per share of the Retail A Shares based
on the value of each such Fund's net assets and number of outstanding securities
at October 31, 1999, as follows:
Short-Term Intermediate Tax-Exempt Bond
Bond Market Bond Market Intermediate IMMDEX/TM
Fund Fund Bond Fund Fund
--------- --------- --------- ---------
Net Assets (000s) $65,490 $33,779 $20,016 $95,635
Number of Shares
Outstanding (000s) 6,470 3,346 1,978 3,495
Net Asset Value
Per Share 10.12 10.10 10.12 27.36
Sales Charge,4.00%
of offering price
(4.16% of net asset
value per share) 0.39 0.39 0.39 1.07
Public Offering Price 10.54 10.52 10.54 28.50
Balanced Balanced Growth and Equity
Income Growth Income Index
Fund Fund Fund Fund
--------- --------- --------- ---------
Net Assets (000s) $13,087 $53,807 $194,089 $142,247
Number of Shares
Outstanding (000s) 1,197 1,790 4,214 1,549
Net Asset Value
Per Share 10.94 30.06 46.06 91.83
Sales Charge, 5.50%
of offering price
(5.82% of net asset
value per share) 0.52 1.42 2.17 4.33
Public Offering Price 11.58 31.81 48.74 97.17
<TABLE>
<CAPTION>
MidCap Special Emerging
Index Growth Growth Growth MicroCap
Fund Fund Fund Fund Fund
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Assets (000s) - $47,238 $95,758 $9,957 $21,988
Number of Shares
Outstanding (000s) - 1,245 2,533 1,072 1,009
Net Asset Value
Per Share - 37.96 37.80 9.29 21.80
Sales Charge, 5.50%
of offering price
(5.82% of net asset
value per share) - 1.79 1.78 0.44 1.03
Public Offering Price - 40.17 40.00 9.83 23.07
</TABLE>
Core
International International
Equity Fund Equity Fund
----------- -----------
Net Assets (000s) $6,418 -
Number of Shares
Outstanding (000s) 346 -
Net Asset Value
Per Share 18.53 -
Sales Charge, 5.50%
of offering price
(5.82% of net asset
value per share) 0.87 -
Public Offering Price 19.61 -
Shareholder organizations or Institutions may be paid by the Funds for
advertising, distribution or shareholder services. Depending on the terms of the
particular account, shareholder 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. Shareholder 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 when
appropriate under the 1940 Act, such as to reimburse the Funds for any loss
sustained by reason of the failure of a shareholder to make full payment for
shares purchased by the shareholder or to collect any charge relating to a
transaction effected for the benefit of a shareholder 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 4.00% 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, shareholders authorize
the transfer agent to act on telephonic or written exchange instructions from
any person representing himself to be the shareholder or in some cases, the
shareholder'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 shareholders.
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 shareholder subsequently exchanges the
shares back into Retail B Shares of a Fund, the holding period accumulation on
the shares will continue to accumulate. In the event that a shareholder wishes
to redeem MMF Shares acquired by exchange for Retail B Shares of a Fund, the
contingent deferred sales charge applicable to the accumulated Retail B Shares
and Money Market Fund Shares will be charged.
E. Retail A Shares of any Fund may be exchanged without a sales load for
Retail A Shares in any other Fund for shares of any other Fund that are offered
without a sales load.
F. Institutional Shares of any Fund may be exchanged for Institutional
Shares of any other Fund.
Except as stated above, a sales load will be imposed when shares of any Fund
that were purchased or otherwise acquired without a sales load are exchanged for
Retail A Shares of another Fund which are sold with a sales load.
Retail A Shares of any Fund will be exchanged for Institutional Shares if the
shares are registered in the name of an employer-sponsored qualified retirement
plan administered by Firstar and assets equal or exceed $1 million at the
preceding month-end. The date of the exchange will be 15 business days
following the month-end in which the plan assets equal or exceed $1 million.
Shares in a Fund from which the shareholder 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 shareholder 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.
As noted in the prospectus, shares of the Firstar Funds may be exchanged
with shares of corresponding classes of the Firstar Stellar Funds and the
Mercantile Mutual Funds, Inc. The Firstar Stellar Funds currently offers the
Treasury, Tax-Free Money Market, Ohio Tax-Free Money Market, Strategic Income,
U.S. Government Income, Insured Tax-Free Bond, Growth Equity, Relative Value,
Science and Technology, Stellar, Capital Appreciation and International Equity
Funds. The Mercantile Mutual Funds, Inc. currently offers the Treasury Money
Market, Money Market, Tax-Exempt Money Market, Conning Money Market, U.S.
Government Securities, Intermediate Corporate Bond, Bond Index, Government
& Corporate Bond, Short-Intermediate Municipal, Missouri Tax-Exempt Bond,
National Municipal Bond, Balanced, Equity Income, Equity Index, Growth &
Income Equity, Growth Equity, Small Cap Equity, Small Cap Equity Index and
International Equity Portfolios. FIRMCO, the Firstar Funds' adviser, also
serves as the adviser to Mercantile Mutual Funds, Inc. Prior to March 1,
2000, Mississippi Valley Advisors Inc. ("MVA") served as adviser to
Mercantile Mutual Funds, Inc. On March 1, 2000, MVA merged into FIRMCO.
The Firstar Stellar Funds are advised by Firstar Bank, N.A. Firstar
Bank, N.A. and FIRMCO are under the common control of Firstar Corporation.
Exemptions from CDSC. Certain types of redemptions may also qualify for an
exemption from the contingent deferred sales charge. To receive exemptions (i),
(ii) or (iii) below, a shareholder 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 Shareholder 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 not 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"),
due to death, disability or the attainment of a specified age;
(ii) redemptions in connection with the death or disability of a
shareholder; or
(iii) redemptions resulting from certain tax-free returns from IRAs of excess
contributions pursuant to section 408(d)(4) or (5) of the Code.
Retirement Plans: Retail A and Retail B Shares of the Funds
- -----------------------------------------------------------
Individual Retirement Accounts. The Company has available a plan (the
"Traditional IRA") for use by individuals with compensation for services
rendered (including earned income from self-employment) who wish to use shares
of the Funds as a funding medium for individual retirement saving. However,
except for rollover contributions, an individual who has attained, or will
attain, age 70 1/2 before the end of the taxable year may only contribute to a
Traditional IRA for his or her nonworking spouse under age 70 /. Distribution
of an individual's Traditional IRA assets (and earnings thereon) before the
individual attains age 59 / will (with certain exceptions) result in an
additional 10% tax on the amount included in the individual's gross income.
Earnings on amounts contributed to the Traditional IRA are not subject to
federal income tax until distributed.
The Company also has available a Roth Individual Retirement Account (the
"Roth IRA") for retirement saving for use by individuals with compensation for
services rendered. A single individual with adjusted gross income of up to
$110,000 may contribute to a Roth IRA (for married couples filing jointly, the
adjusted gross income limit is $160,000), and contributions may be made even
after the Roth IRA owner has attained age 70 /, as long as the account owner has
earned income. Contributions to a Roth IRA are not deductible. Earnings on
amounts contributed to a Roth IRA, however, are not subject to federal income
tax when distributed if the distribution is a "qualified distribution" (i.e.,
the Roth IRA has been held for at least five years beginning with the first tax
year for which a contribution was made to the Roth IRA and the distribution is
due to the account owner's attainment of age 59 /, disability or death, or for
qualified first-time homebuyer expenses. A non-qualified distribution of an
individual's Roth IRA assets (and the earnings thereon) will (with certain
exceptions) result in an additional 10% tax on the amount included in the
individual's gross income.
The Company permits certain employers (including self-employed individuals)
to make contributions to employees' Traditional IRAs if the employer establishes
a Simplified Employee Pension ("SEP") plan and/or a Salary Reduction SEP
("SARSEP"). Although SARSEPs may not be established after 1996, employers may
continue to make contributions to SARSEPs established before January 1, 1997,
under the pre-1997 federal tax law. A SEP permits an employer to make
discretionary contributions to all of its employees' Traditional IRAs (employees
who have not met certain eligibility criteria may be excluded) equal to a
uniform percentage of each employee's compensation (subject to certain limits).
If an employer (including a self-employed individual) established a SARSEP
before January 1, 1997, employees may defer a percentage of their compensation -
- - pre-tax -- to Traditional IRAs (subject to certain limits). The Code provides
certain tax benefits for contributions by an employer, pursuant to a SEP and/or
SARSEP, to an employee's Traditional IRA. For example, contributions to an
employee's Traditional IRA pursuant to a SEP and/or SARSEP are deductible
(subject to certain limits) and the contributions and earnings thereon are not
taxed until distributed.
Savings Incentive Match Plan for Employees of Small Employers. The Company
also has available a simplified tax-favored retirement plan for employees of
small employers (a "SIMPLE IRA Plan"). If an employer establishes a SIMPLE IRA
Plan, contributions under the Plan are made to eligible employees' SIMPLE
individual retirement accounts ("SIMPLE IRAs"). Each eligible employee may
choose to defer a percentage of his or her pre-tax compensation to the
employee's SIMPLE IRA. The employer must generally make an annual matching
contribution to the SIMPLE IRA of each eligible employee equal to the employee's
salary reduction contributions, up to a limit of 3 percent of the employee's
compensation. Alternatively, the employer may make an annual non-discretionary
contribution to the SIMPLE IRA of each eligible employee equal to 2 percent of
each employee's compensation. As with contributions to an employee's IRA
pursuant to a SEP and/or SARSEP, the Code provides tax benefits for
contributions by an employer, pursuant to a SIMPLE IRA Plan, to an employee's
SIMPLE IRA. For example, contributions to an employee's SIMPLE IRA are
deductible (subject to certain limits) and the contributions and earnings
thereon are not taxed until distributed.
In the SIMPLE IRA Plan and in Traditional and Roth IRAs, distributions of net
investment income and capital gains will be automatically reinvested.
The foregoing brief descriptions are not complete or definitive explanations
of the SIMPLE IRA Plan, the Traditional IRA, or the Roth IRA available for
investment in the Funds. Any person who wishes to establish a retirement plan
account may do so by contacting Investor Services at 800-677-FUND. The complete
Plan documents and applications will be provided to existing or prospective
shareholders upon request, without obligation. The Company recommends that
investors consult their attorneys or tax advisors to determine if the retirement
programs described herein are appropriate for their needs.
Additional Information Regarding Shareholder Services for Retail Shares
-----------------------------------------------------------------------
The Retail A and Retail B Shares of the Funds offer a Periodic Investment
Plan whereby a shareholder may automatically make purchases of shares of a Fund
on a regular, monthly basis ($50 minimum per transaction). Under the Periodic
Investment Plan, a shareholder's designated bank or other financial institution
debits a preauthorized amount on the shareholder'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 shareholder's account or the shareholder'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 shareholders to effect
ConvertiFundR transactions, an automated method by which a Retail shareholder
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. 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.
The Retail A and Retail B Shares of the Funds offer shareholders a Systematic
Withdrawal Plan, which allows a shareholder who owns shares of a Fund worth at
least $5,000 at current net asset value at the time the shareholder initiates
the Systematic Withdrawal Plan to designate that a fixed sum ($50 minimum per
transaction) be distributed to the shareholder 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 1-800-677-FUND. In connection with an
in-kind securities payment, a Fund will require, among other things, that the
securities be valued on the day of purchase in accordance with the pricing
methods used by the Fund; that the Fund receive satisfactory assurances that it
will have good and marketable title to the securities received by it; that the
securities be in proper form for transfer to the Fund; that adequate information
be provided to the Fund concerning the basis and other tax matters relating to
the securities; and that the amount of the purchase be at least $1,000,000.
DESCRIPTION OF SHARES
The Company's Articles of Incorporation authorize the Board of Directors to
issue up to 150,000,000,000 full and fractional shares of common stock, $.0001
par value per share, which is divided into thirty classes (each, a "class" or
"fund"). Each class below is divided into three series designated as
Institutional Shares, Retail A Shares and Retail B Shares (each, a "Series") and
consists of the number of shares set forth next to its Fund name in the table
below:
Class-Series of Fund in which Stock Number of Authorized
Common Stock Represents Interest Shares in Each Series
- --------------- -------------------- ---------------------
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
19 - Institutional MidCap Index 100 Million
19 - A 100 Million
19 - B 100 Million
20 - Institutional Core International 100 Million
20 -A 100 Million
20 - B 100 Million
The Board of Directors has also authorized the issuance of classes 1 through
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 ten additional
classes representing interests in other potential future investment portfolios
of the Company. The Directors may similarly classify or reclassify any
particular class of shares into one or more additional series.
In the event of a liquidation or dissolution of the Company or an individual
Fund, shareholders 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' Prospectus, shareholders 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 shareholder.
Shareholders of each class of the Funds are entitled to one vote for each
full share held and proportionate fractional votes for fractional shares held.
Shareholders 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 shareholders 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 shareholders 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
shareholders of the Company voting together in the aggregate without regard to
particular portfolios. Similarly, on any matter submitted to the vote of
shareholders 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 shareholders 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
shareholder 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 shareholders 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
shareholders.
The tax principles applicable to transactions in financial instruments and
futures contracts and options that may be engaged in by the Core International
Equity Fund and the International Equity Fund, and investments in passive
foreign investment companies ("PFICs"), are complex and, in some cases,
uncertain. Such transactions and investments may cause the Core International
Equity Fund and the International Equity 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.
In addition, in the case of any shares of a PFIC in which the Core
International Equity Fund or the International Equity Fund invests, the Fund may
be liable for corporate-level tax on any ultimate gain or distributions on the
shares if the Fund fails to make an election to recognize income annually during
the period of its ownership of the shares.
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 shareholders.
The Board does not normally hold shareholder meetings except when required by
the 1940 Act or other applicable law. The Board will call a shareholders'
meeting for the purpose of voting on the question of removal of a Director when
requested to do so in writing by the record holders of not less than 10% of the
outstanding shares of the Company that are entitled to vote.
Directors and Officers
- ----------------------
The Directors and Officers of the Company, their addresses, principal
occupations during the past five years and other affiliations are as follows:
Position(s)
held with the Principal Occupations During Past 5
Name, Address & Age Company Years and Other Affiliations
- ------------------- --------------- ------------------------------------
James M. Wade Chairman of the 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: 56
Glen R. Bomberger Director Executive Vice President, Chief
One Park Plaza Financial Officer and Director, A.O.
11270 West Park Place Smith Corporation (a diversified
Milwaukee, WI manufacturing company) since January
53224-3690 1987; Director of companies
Age: 62 affiliated with A.O. Smith
Corporation; Director, Smith
Investment Company; 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: 68 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 1993; Executive Vice President and
26062-4989 Chief Financial Officer, Weirton
Age: 55 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; Trustee of Carnegie
Mellon University since 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: 69 Vice President - Finance and
Administration, Rexnord Inc., 1982 -
1988; Officer and Director of
several Rexnord subsidiaries until
1992.
Bruce Laning Director, President and CEO of FIRMCO since 2000;
777 E. Wisconsin President Director of FIRMCO since 2000; Senior
Avenue, and Treasurer Vice President, FIRMCO since 1999;
Suite 800 Vice President, FIRMCO since 1994.
Milwaukee 53202
Age: 40
W. Bruce McConnel, III Secretary Partner of the law firm of Drinker
One Logan Square Biddle & Reath LLP.
18th & Cherry Streets
Philadelphia, PA
19103
Age: 56
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: 31
Joseph C. Neuberger Assistant Senior Vice President, Firstar
615 E. Michigan Street Treasurer Mutual Fund Services, LLC since
Milwaukee, WI 53202 1994; Manager, Arthur Andersen LLP,
Age: 38 prior thereto.
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: 55 Ameritech - Wisconsin (formerly
Wisconsin Bell) 1993-1998;
President of Wisconsin Bell
Communications 1988-1993; Board of
Directors, The Marcus Corporation;
Trustee of Roundy Foods;
Chairman of the Wisconsin Utilities
Association.
<F1> Mr. Haase and Mr. Laning are considered by the Company to be an "interested
person" 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, 1999 of the Company's Directors.
TOTAL
PENSION OR COMPENSATION
RETIREMENT FROM
BENEFITS ESTIMATED COMPANY
AGGREGATE ACCRUED AS ANNUAL AND FUND
COMPENSATION PART OF BENEFITS COMPLEX<F1>
NAME OF FROM THE FUND UPON PAID TO
PERSON/POSITION COMPANY EXPENSES RETIREMENT DIRECTORS
James M. Wade $18,500 $0 $0 $18,500
Chairman of the
Board
Glen R. Bomberger $15,000<F2> $0 $0 $15,000
Director
Jerry G. Remmel $15,000 $0 $0 $15,000
Director
Richard K. Riederer $15,000 $0 $0 $15,000
Director
Charles R. Roy $15,000 $0 $0 $15,000
Director
Bronson J. Haase $15,000 $0 $0 $15,000
Director
<F1> The "Fund Complex" includes only the Company. The Company is comprised of
20 separate portfolios.
<F2> Includes $15,000 which Mr. Bomberger elected to defer under the Company's
deferred compensation plan.
Each Director receives an annual fee of $10,000, a $1,000 per meeting
attendance fee and reimbursement of expenses incurred as a Director. The
Chairman of the Board is entitled to receive an additional $3,500 per annum for
services in such capacity. For the fiscal year ended October 31, 1999, the
Directors and Officers received aggregate fees and reimbursed expenses of
$88,492. Mr. Laning, 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 Mr. Laning 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 Senior 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 Company, an affiliate of FIRMCO. 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, MidCap Index Fund, International Equity Fund and Core
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,
1999, 1998 and1997, the Adviser was paid and waived advisory fees as follows:
Net Advisory Fees Paid (Advisory Fees Waived)
----------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Short-Term Bond Market Fund $675,262 (542,291) $550,921 (528,964) $669,603 (605,038)
Special Growth Fund 4,187,456 (31,109) 5,243,173 (24) 5,168,254 (0)
Bond IMMDEX/TM Fund 1,577,620 (800) 1,551,355 (0) 1,294,766 (0)
Equity Index Fund 1,248,658 (394,242) 1,076,720 (179,779) 815,050 (0)
Intermediate Bond Market Fund 1,165,094 (421,858) 1,080,528 (410,430) 778,669 (345,403)
Growth Fund 2,378,404 (3,010) 1,663,048 (72) 1,470,245 (2,052)
Balanced Growth Fund 1,796,430 (156,173) 1,345,543 (403,169) 1,056,380 (334,926)
Growth and Income Fund 5,581,009 (5,771) 4,513,188 (0) 3,086,069 (45)
Tax-Exempt Intermediate Bond Fund 319,104 (164,330) 217,113 (207,408) 109,101 (176,855)
International Equity Fund 558,117 (142,472) 641,868 (219,464) 422,050 (370,710)
Emerging Growth Fund 938,829 (25,818) 365,419 (135,525) 46,258 (28,226)<F1>
Balanced Income Fund 230,911 (147,908) 60,206 (177,189)<F2>
MicroCap Fund 1,941,648 (928) 1,685,137 (2,576) 1,318,931 (33)
</TABLE>
- -----------------------------
<F1> From inception (August 15, 1997) to October 31,1997.
<F2> 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 and Core International Equity
Fund, under the Investment Advisory Agreements, 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 and The Glenmede Trust Company as Sub-Adviser to the Core International
Equity Fund. The Sub-Adviser determines the securities to be purchased,
retained or sold by the respective Fund. See "Sub-Advisers" below.
Sub-Advisers. The International Equity Fund receives sub-advisory services
from Hansberger Global Investors, Inc. ("HGI"). Under the terms of the Sub-
Advisory Agreement between the Adviser and HGI, HGI furnishes investment
advisory and portfolio management services to the International Equity Fund with
respect to its investments. HGI is responsible for decisions to buy and sell
the International Equity Fund's investments and all other transactions related
to investment therein. HGI 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, HGI will bear all expenses
incurred by it in connection with its services under such agreement.
The Core International Equity Fund receives sub-advisory services from The
Glenmede Trust Company ("Glenmede"). Under the terms of the Sub-Advisory
Agreement between the Adviser and Glenmede, Glenmede furnishes investment
advisory and portfolio management services to the Core International Equity Fund
with respect to its investments. Glenmede is responsible for decisions to buy
and sell the Core International Equity Fund's investments and all other
transactions related to investment therein. Glenmede negotiates brokerage
commissions and places orders of purchases and sales of the Core International
Equity Fund's portfolio securities. During the term of the Sub-Advisory
Agreement, Glenmede will bear all expenses incurred by it in connection with its
services under such agreement.
Pursuant to the Sub-Advisory Agreements, 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, Core International Equity Fund or the Company, or
to any shareholder of the International Equity Fund, Core International Equity
Fund or the Company, for any act or omission in the course of, or connected
with, rendering services under the Sub-Advisory Agreements. See "Banking Laws
and Regulations" below for information regarding certain banking laws and
regulations and their applicability to the Sub-Adviser and services under the
Sub-Advisory agreements.
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,
1999, 1998 and 1997, HGI 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)
1999 1998 1997
---- ---- ----
International Equity Fund $318,983 (0) $381,819 (0) $227,372 (0)
REGULATORY MATTERS. Conflict of interest restrictions may apply to the
receipt of compensation paid pursuant to a Servicing Agreement by a Fund to a
financial intermediary in connection with the investment of fiduciary funds in a
Funds' 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, should consult legal counsel before entering into Servicing
Agreements.
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 Shareholder 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 Shareholders; 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 shareholders 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 shareholders 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 years ended October 31, 1999, 1998 and 1997, Ziegler
received no fees for its distribution services.
For its administrative services for the fiscal years ended October 31, 1999,
1998 and 1997, the Co-Administrators were paid and waived the following
administrative fees:
Net Administration Fees Paid (Administration Fees Waived)
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Short-Term Bond Market Fund $196,764 (24,546) $69,432 (126,882) $86,550 (149,862)
Special Growth Fund 528,380 (78,076) 269,375 (492,978) 245,929 (521,369)
Bond IMMDEX/TM Fund 495,763 (70,052) 200,288 (364,601) 167,223 (318,234)
Equity Index Fund 633,693 (72,866) 195,703 (353,692) 134,156 (229,162)
Intermediate Bond Market Fund 304,583 (39,645) 115,423 (210,207) 79,413 (171,118)
Growth Fund 312,797 (31,157) 85,845 (156,347) 71,750 (146,715)
Balanced Income Fund 49,835 (5,686) 12,498 (22,106)<F2>
Balanced Growth Fund 250,967 (31,982) 90,542 (164,087) 73,298 (133,271)
Growth and Income Fund 724,594 (87,590) 233,865 (423,689) 171,898 (286,778)
Tax-Exempt Intermediate Bond Fund 93,040 (12,419) 32,957 (59,803) 22,619 (41,122)
International Equity Fund 48,844 (6,041) 24,861 (44,829) 20,840 (38,741)
MicroCap Fund 127,042 (12,611) 43,380 (79,285) 29,709 (68,284)
Emerging Growth Fund 129,042 (9,235) 26,045 (46,986) 3,488 (7,567)<F1>
</TABLE>
<F1> From inception (August 15, 1997) to October 31, 1997.
<F2> From inception (December 1,1997) to October 31, 1998.
Shareholder Organizations
- -------------------------
Retail A Shares
As stated in the Funds' Prospectus the Funds intend to enter into agreements
from time to time with Shareholder Organizations providing for support and/or
distribution services to customers of the Shareholder Organizations who are the
beneficial owners of Retail A Shares of the Fund. Under the agreements, the
Funds may pay Shareholder 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 Shareholder 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 shareholder
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, Shareholder 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 Shareholder 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 Shareholder Organizations will benefit each Fund and the
holders of Retail A or Retail B Shares as a way of allowing Shareholder
Organizations to participate with the Funds in the provision of support and
distribution services to customers of the Shareholder Organization who own
Retail A or Retail B Shares. Any material amendment to the arrangements with
Shareholder 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 Shareholder 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, 1999 as follows:
Fees Paid to Non-Affiliated
Shareholder Organizations
---------------------------
Short-Term Bond Market Fund $123,961
Special Growth Fund 171,223
Bond IMMDEX/TM Fund 159,669
Equity Index Fund 227,087
Intermediate Bond Market Fund 38,438
Growth Fund ,778
Balanced Income Fund 23,721
Balanced Growth Fund 98,055
Growth and Income Fund 346,521
Tax-Exempt Intermediate Bond Fund 52,199
International Equity Fund 10,779
MicroCap Fund 22,921
Emerging Growth Fund 21,083
The Funds paid fees to Shareholder 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, 1999 as follows:
Fees Paid to Affiliated
Shareholder Organizations
---------------------------
Short-Term Bond Market Fund $59,847
Special Growth Fund 123,426
Bond IMMDEX/TM Fund 86,123
Equity Index Fund 101,716
Intermediate Bond Market Fund 40,088
Balanced Income Fund 8,337
Growth Fund 35,331
Balanced Growth Fund 49,362
Growth and Income Fund 154,698
Tax-Exempt Intermediate Bond Fund 24,755
International Equity Fund 4,602
MicroCap Fund 18,767
Emerging Growth Fund 9,971
Under the terms of their agreement with Firstar, Shareholder 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 Shareholder
Organizations with respect to the availability of shareholder services and the
particular Shareholder Organization's procedures for purchasing and redeeming
shares. It is the responsibility of Shareholder 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 Shareholder Organization, the transfer agent's charge of $12.00 for
each payment made by wire of redemption proceeds may be billed directly to the
Shareholder Organization..
The Funds paid fees to Shareholder Organizations, none of which were
affiliated with the Adviser, pursuant to the 12b-1 Plan for Retail B shares for
the fiscal year ended October 31, 1999 as follows:
Fees Paid to Non-Affiliated
Shareholder Organizations
---------------------------
Short-Term Bond Market Fund $ 1,628
Special Growth Fund 462
Bond IMMDEX/TM Fund 5,589
Equity Index Fund 11,170
Intermediate Bond Market Fund 610
Balanced Income Fund 3,177
Growth Fund 2,238
Balanced Growth Fund 1,711
Growth and Income Fund 4,617
Tax-Exempt Intermediate Fund 153
International Equity Fund 92
MicroCap Fund 224
Emerging Growth Fund 247
CUSTODIAN, TRANSFER AGENT AND ACCOUNTING SERVICES AGENT
Firstar Bank, N.A. serves as custodian of all the Funds' assets. Under the
Custody Agreement, Firstar Bank, 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 shareholders, security brokers and others relating to its
duties and (v) make periodic reports to the Company concerning each Fund's
operations. Firstar Bank, 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, 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, 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, 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 and Core International Equity Fund.
Firstar Mutual Fund Services, LLC, 615 East Michigan Street, Milwaukee,
Wisconsin 53202, serves as transfer agent and dividend disbursing agent for each
Fund under a Shareholder 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
shareholders of the Funds, (iii) respond to correspondence by Fund shareholders
and others relating to its duties, (iv) maintain shareholder 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 shareholder account with an annual minimum of
$24,000 per Fund, plus a 0.01% asset - based fee, and 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 and Balanced Growth Fund -- $49,500 on the first $100 million,
0.0225% on the next $200 million, and 0.015% on the balance, plus out of pocket
expenses, including pricing expenses; Growth and Income Fund, Equity Index
Fund, Growth Fund, MidCap Index Fund, Special Growth Fund, Emerging Growth
Fund, MicroCap Fund -- $45,000 on the first $100 million, 0.01875% on the next
$200 million, 0.01125% 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, International
Equity Fund and Core International Equity Fund -- $58,500 on the first $100
million, 0.03% on the next $200 million, 0.015% 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, Shareholder 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 shareholders, costs of shareholder
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, 1999 has been filed with the SEC. The
financial statements, notes thereto and Report of Independent Accountants
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), One Logan Square, 18th and Cherry Streets, Philadelphia, PA
19103-6996, serve as counsel to the Company and will pass upon the legality of
the shares offered by the Funds' Prospectus.
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, shareholder reports or other communications to
shareholders. Performance information is generally available by calling the
Firstar Funds Center at 1-800-677-FUND.
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 4.00% 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 6
Yield = 2 [(----- + 1) - 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.
The Fund currently calculates 30-day yields for its Bond Portfolios but not
for its Equity Portfolios. For the 30-day period ended October 31, 1999, the
yields on the Bond Portfolios were as follows:
PORTFOLIO 30-DAY YIELD
- --------- ------------
Short-Term Bond Market Fund
Institutional Shares 5.98%
Retail A - No Load 5.73%
Retail A - Load Adjusted 5.50%
Retail B 4.98%
Intermediate Bond Market Fund
Institutional Shares 6.37%
Retail A - No Load 6.11%
Retail A - Load Adjusted 5.87%
Retail B 5.36%
Bond IMMDEX/TM Fund
Institutional Shares 6.68%
Retail A - No Load 6.43%
Retail A - Load Adjusted 6.17%
Retail B 5.67%
Tax-Exempt Intermediate Bond Fund
Institutional Shares 4.19%
Retail A - No Load 3.94%
Retail A - Load Adjusted 3.78%
Retail B 3.19%
Without fees waived by the Advisor, the 30-day yields for the period ended
October 31, 1999, would have been:
PORTFOLIO 30-DAY YIELD
- --------- ------------
Short-Term Bond Market Fund
Institutional Shares 5.70%
Retail A - No Load 5.45%
Retail A - Load Adjusted 5.22%
Retail B 4.70%
Intermediate Bond Market Fund
Institutional Shares 6.23%
Retail A - No Load 5.97%
Retail A - Load Adjusted 5.73%
Retail B 5.22%
Bond IMMDEX/TM Fund
Institutional Shares 6.68%
Retail A - No Load 6.43%
Retail A - Load Adjusted 6.17%
Retail B 5.67%
Tax-Exempt Intermediate Bond Fund
Institutional Shares 4.00%
Retail A - No Load 3.75%
Retail A - Load Adjusted 3.59%
Retail B 3.00%
For the 30-day period ended October 31, 1999, the tax-equivalent yield
(assuming a tax rate of 39.6%) for the Tax-Exempt Intermediate Bond Fund was:
30-DAY TAX-
PORTFOLIO EQUIVALENT YIELD
- --------- ----------------
Tax-Exempt Intermediate Bond Fund
Institutional Shares 6.94%
Retail A - No Load 6.52%
Retail A - Load Adjusted 6.26%
Retail B 5.28%
Without fees waived by the Advisor, the 30-day, tax-equivalent yield
(assuming a tax rate of 39.6%) for the Tax-Exempt Intermediate Bond Fund at
October 31, 1999 would have been:
30-DAY TAX-
PORTFOLIO EQUIVALENT YIELD
- --------- ----------------
Tax-Exempt Intermediate Bond Fund
Institutional Shares 6.62%
Retail A - No Load 6.21%
Retail A - Load Adjusted 5.94%
Retail B 4.97%
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
5.50% maximum front-end sales charge for equity funds and 4.00% 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 in publications
to those of other mutual funds with similar investment objectives and to stock,
bond and other relevant indices, to rankings, or other information prepared by
independent services or other financial or industry publications that monitor
the performance of mutual funds or to investments for which reliable performance
data is available. For example, the total return and yield, as appropriate, of
a Fund's shares may be compared to data prepared by Lipper Analytical Services,
Inc. 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. 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. 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.
In addition, a non-Money Market Fund's average annual total return and aggregate
total return quotations reflect the deduction of the maximum front-end sales
charge in connection with the purchase of Retail A Shares and the deduction of
any applicable contingent deferred sales charge with respect to Retail B Shares.
PERFORMANCE HISTORY
AVERAGE ANNUAL TOTAL RETURN
INSTITUTIONAL SHARES
1 5 10 Since inception
Year Years Years (inception date)
SHORT-TERM BOND MARKET 3.36% 6.38% 6.68%
INTERMEDIATE BOND MARKET 1.00% 7.00% -- 5.90%
(Jan 5,1993)
TAX-EXEMPT INTERMEDIATE BOND 0.31% 5.15% -- 4.41%
(Feb. 8, 1993)
BOND IMMDEX/TM -1.36% 7.75% 7.80% --
BALANCED INCOME 1.40% -- -- 9.67%
(Dec. 1,1997)
BALANCED GROWTH 4.28% 15.25% -- 11.51%
(Mar. 30, 1992)
GROWTH AND INCOME 3.01% 23.26% 14.59% --
EQUITY INDEX 20.41% 28.11% 17.72% --
GROWTH 14.29% 22.99% -- 16.66%
(Dec. 29,1992)
SPECIAL GROWTH 2.53% 14.29% 13.44%
EMERGING GROWTH 4.40% -- -- 6.08%
(Aug. 15,1997)
MICROCAP 137.79% -- -- 43.73%
(Aug. 1, 1995)
INTERNATIONAL EQUITY 30.07% 2.94% -- 1.80%
(Apr. 28,1994)
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
RETAIL A SHARES
1 5 10 Since inception
Year Years Years (inception date)
SHORT-TERM BOND MARKET -1.03% 5.26% 6.12% --
INTERMEDIATE BOND MARKET -3.32% 5.87% 5.09%
(Jan 5,1993)
TAX-EXEMPT
INTERMEDIATE BOND -3.88% 4.03% 3.60%
(Feb. 8, 1993)
BOND IMMDEX/TM -5.58% 6.61% 7.23% --
BALANCED INCOME -4.44% 15.17% 12.45%
BALANCED GROWTH -1.71% 13.67% 10.52%
(Mar. 30, 1992)
GROWTH AND INCOME -2.91% 21.59% 13.82% --
EQUITY INDEX 13.49% 26.38% 16.90% --
GROWTH 7.77% 21.33% 15.53%
(Dec. 29,1992)
SPECIAL GROWTH -3.35% 12.74% 12.67% --
EMERGING GROWTH -1.47% 3.40%
(Aug. 15,1997)
MICROCAP 123.31% 41.39%
(Aug. 1, 1995)
INTERNATIONAL EQUITY 22.57% 1.54% 0.58%
(Apr. 28,1994)
AVERAGE ANNUAL TOTAL RETURN
RETAIL B SHARES
Since inception
(inception date)
SHORT-TERM BOND MARKET 2.46% (March 1,1999)
INTERMEDIATE BOND MARKET 0.84% (March 1, 1999)
TAX-EXEMPT INTERMEDIATE BOND -1.26% (March 1, 1999)
BOND IMMDEX/TM -0.57% (March 1, 1999)
BALANCED INCOME 3.03% (March 1, 1999)
BALANCED GROWTH 8.67% (March 1, 1999)
GROWTH AND INCOME 5.64% (March 1, 1999)
EQUITY INDEX 18.33% (March 1, 1999)
GROWTH 14.66% (March 1, 1999)
MIDCAP INDEX 8.56% (Nov 4, 1999)
SPECIAL GROWTH 15.63% (March 1, 1999)
EMERGING GROWTH 18.08% (March 1, 1999)
MICROCAP 150.95% (March 1, 1999)
CORE INTERNATIONAL 7.90% (Nov 4, 1999)
INTERNATIONAL EQUITY 33.18% (March 1, 1999)
The performance of the Balanced Income Fund for the period prior to December
1, 1997 is represented by the performance of a collective investment fund which
operated prior to the effectiveness of the registration statement of the
Balanced Income Fund. At the time of Balanced Income Fund's inception, the
collective investment fund was operated using materially equivalent investment
objectives, policies, guidelines and restrictions as its corresponding Firstar
fund. In connection with the Balance Income Fund's commencement of operations,
on December 1, 1997, the collective investment fund transferred its assets to
its Firstar Fund equivalent.
The collective investment fund was not registered under the 1940 Act and was
and is not 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 Balanced Income Fund's actual expenses during the Fund's first fiscal
year. Performance quotations of the collective investment fund present past
performance of the FIRMCO managed collective fund, which is separate and
distinct from Firstar Balanced Income Fund, do not represent past performance of
this Fund and should not be considered as representative of future results of
this Fund.
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.
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 shareholders may summarize the substance of information
contained in shareholder reports (including the investment composition of a
Fund), as well as the views of the Adviser or Sub-Advisers 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
shareholder 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' Prospectus, 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, 2000, 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 Bank, N.A., 425 Walnut Street, Cincinnati,
Ohio 45202 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:
Fund Percentage Owned
- ---- ----------------
Money Market 1.0%
Institutional Money Market 96.0%
Tax-Exempt Money Market 70.0%
U.S. Treasury Money Market 58.0%
U.S. Government Money Market 67.0%
Growth and Income 68.0%
Short-Term Bond Market 64.0%
Intermediate Bond Market 70.0%
Bond IMMDEX/TM 70.0%
Tax-Exempt Intermediate Bond 69.0%
Balanced Income 76.0%
Balanced Growth 75.0%
Growth and Income 68.0%
Equity Index 74.0%
Growth 84.0%
Special Growth 74.0%
MidCap Index 55.0%
Emerging Growth 93.0%
MicroCap 83.0%
Core International Equity 100.0%
International Equity 90.0%
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 and MidCap Index Fund are 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, MidCap Index Fund or any member of the
public regarding the advisability of investing in securities generally or in the
Equity Index Fund or MidCap Index Fund particularly or the ability of the S&P
500 Index or S&P MidCap 400 Index to track general stock market performance.
S&P's only relationship to the Company is the licensing of certain trademarks
and trade names of S&P, the S&P 500 Index and the S&P MidCap 400 Index which is
determined, composed and calculated by S&P without regard to the Company, the
Equity Index Fund or the MidCap Index Fund. S&P has no obligation to take the
needs of the Company or shareholders of the Equity Index Fund or MidCap Index
Fund into consideration in determining, composing or calculating the S&P 500
Index and S&P MidCap 400 Index. S&P is not responsible for and has not
participated in the determination of the prices and amount of the Equity Index
Fund or the MidCap Index Fund or the timing of the issuance or sale of the
Equity Index Fund or MidCap Index Fund or in the determination or calculation
of the equation by which the Equity Index Fund and MidCap Index Fund is to be
converted into cash. S&P has no obligation or liability in connection with the
administration, marketing or trading of the Equity Index Fund or MidCap Index
Fund.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500
INDEX, S&P MIDCAP 400 INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO
LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO
WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, OWNERS
OF THE PRODUCT, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500 INDEX,
S&P MIDCAP 400 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, S&P
MIDCAP 400 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE
FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE,
INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF
THE POSSIBILITY OF SUCH DAMAGES.
APPENDIX A
COMMERCIAL PAPER RATINGS
- -------------------------
A Standard & Poor's commercial paper rating is a current opinion of the
creditworthiness of an obligor with respect to financial obligations having an
original maturity of no more than 365 days. The following summarizes the rating
categories used by Standard and Poor's for commercial paper:
"A-1" - Obligations are rated in the highest category indicating that the
obligor's capacity to meet its financial commitment on the obligation is strong.
Within this category, certain obligations are designated with a plus sign (+).
This indicates that the obligor's capacity to meet its financial commitment on
these obligations is extremely strong.
"A-2" - Obligations are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in higher
rating categories. However, the obligor's capacity to meet its financial
commitment on the obligation is satisfactory.
"A-3" - Obligations exhibit adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.
"B" - Obligations are regarded as having significant speculative
characteristics. The obligor currently has the capacity to meet its financial
commitment on the obligation; however, it faces major ongoing uncertainties
which could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.
"C" - Obligations are currently vulnerable to nonpayment and are dependent
upon favorable business, financial, and economic conditions for the obligor to
meet its financial commitment on the obligation.
"D" - Obligations are in payment default. The "D" rating category is used
when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The "D" rating will be
used upon the filing of a bankruptcy petition or the taking of a similar action
if payments on an obligation are jeopardized.
Moody's commercial paper ratings are opinions of the ability of issuers to
repay punctually senior debt obligations not having an original maturity in
excess of one year, unless explicitly noted. The following summarizes the
rating categories used by Moody's for commercial paper:
"Prime-1" - Issuers (or supporting institutions) have a superior ability
for repayment of senior short-term debt obligations. Prime-1 repayment ability
will often be evidenced by many of the following characteristics: leading
market positions in well-established industries; high rates of return on funds
employed; conservative capitalization structure with moderate reliance on debt
and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.
"Prime-2" - Issuers (or supporting institutions) have a strong ability for
repayment of senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
"Prime-3" - Issuers (or supporting institutions) have an acceptable ability
for repayment of senior short-term debt obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.
"Not Prime" - Issuers do not fall within any of the Prime rating
categories.
The three rating categories of Duff & Phelps for investment grade
commercial paper and short-term debt are "D-1," "D-2" and "D-3." Duff & Phelps
employs three designations, "D-1+," "D-1" and "D-1-," within the highest rating
category. The following summarizes the rating categories used by Duff & Phelps
for commercial paper:
"D-1+" - Debt possesses the highest certainty of timely payment. Short-
term liquidity, including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is just below risk-free
U.S. Treasury short-term obligations.
"D-1" - Debt possesses very high certainty of timely payment. Liquidity
factors are excellent and supported by good fundamental protection factors.
Risk factors are minor.
"D-1-" - Debt possesses high certainty of timely payment. Liquidity
factors are strong and supported by good fundamental protection factors. Risk
factors are very small.
"D-2" - Debt possesses good certainty of timely payment. Liquidity factors
and company fundamentals are sound. Although ongoing funding needs may enlarge
total financing requirements, access to capital markets is good. Risk factors
are small.
"D-3" - Debt possesses satisfactory liquidity and other protection factors
qualify issues as to investment grade. Risk factors are larger and subject to
more variation. Nevertheless, timely payment is expected.
"D-4" - Debt possesses speculative investment characteristics. Liquidity
is not sufficient to insure against disruption in debt service. Operating
factors and market access may be subject to a high degree of variation.
"D-5" - Issuer failed to meet scheduled principal and/or interest payments.
Fitch IBCA short-term ratings apply to debt obligations that have time
horizons of less than 12 months for most obligations, or up to three years for
U.S. public finance securities. The following summarizes the rating categories
used by Fitch IBCA for short-term obligations:
"F1" - Securities possess the highest credit quality. This designation
indicates the best capacity for timely payment of financial commitments and may
have an added "+"to denote any exceptionally strong credit feature.
"F2" - Securities possess good credit quality. This designation indicates
a satisfactory capacity for timely payment of financial commitments, but the
margin of safety is not as great as in the case of the higher ratings.
"F3" - Securities possess fair credit quality. This designation indicates
that the capacity for timely payment of financial commitments is adequate;
however, near-term adverse changes could result in a reduction to non-investment
grade.
"B" - Securities possess speculative credit quality. This designation
indicates minimal capacity for timely payment of financial commitments, plus
vulnerability to near-term adverse changes in financial and economic conditions.
"C" - Securities possess high default risk. This designation indicates
that default is a real possibility and that the capacity for meeting financial
commitments is solely reliant upon a sustained, favorable business and economic
environment.
"D" - Securities are in actual or imminent payment default.
Thomson Financial BankWatch short-term ratings assess the likelihood of an
untimely payment of principal and interest of debt instruments with original
maturities of one year or less. The following summarizes the ratings used by
Thomson Financial BankWatch:
"TBW-1" - This designation represents Thomson Financial BankWatch's highest
category and indicates a very high likelihood that principal and interest will
be paid on a timely basis.
"TBW-2" - This designation represents Thomson Financial BankWatch's second-
highest category and indicates that while the degree of safety regarding timely
repayment of principal and interest is strong, the relative degree of safety is
not as high as for issues rated "TBW-1."
"TBW-3" - This designation represents Thomson Financial BankWatch's lowest
investment-grade category and indicates that while the obligation is more
susceptible to adverse developments (both internal and external) than those with
higher ratings, the capacity to service principal and interest in a timely
fashion is considered adequate.
"TBW-4" - This designation represents Thomson Financial BankWatch's lowest
rating category and indicates that the obligation is regarded as non-investment
grade and therefore speculative.
CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS
- -----------------------------------------------
The following summarizes the ratings used by Standard & Poor's for
corporate and municipal debt:
"AAA" - An obligation rated "AAA" has the highest rating assigned by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is extremely strong.
"AA" - An obligation rated "AA" differs from the highest rated obligations
only in small degree. The obligor's capacity to meet its financial commitment
on the obligation is very strong.
"A" - An obligation rated "A" is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations in
higher-rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
"BBB" - An obligation rated "BBB" exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation.
Obligations rated "BB," "B," "CCC," "CC" and "C" are regarded as having
significant speculative characteristics. "BB" indicates the least degree of
speculation and "C" the highest. While such obligations will likely have some
quality and protective characteristics, these may be outweighed by large
uncertainties or major exposures to adverse conditions.
"BB" - An obligation rated "BB" is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial or economic conditions which could lead to the
obligor's inadequate capacity to meet its financial commitment on the
obligation.
"B" - An obligation rated "B" is more vulnerable to nonpayment than
obligations rated "BB", but the obligor currently has the capacity to meet its
financial commitment on the obligation. Adverse business, financial or economic
conditions will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation.
"CCC" - An obligation rated "CCC" is currently vulnerable to nonpayment,
and is dependent upon favorable business, financial and economic conditions for
the obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, the obligor is not likely
to have the capacity to meet its financial commitment on the obligation.
"CC" - An obligation rated "CC" is currently highly vulnerable to
nonpayment.
"C" - The "C" rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action taken, but payments on this obligation
are being continued.
"D" - An obligation rated "D" is in payment default. The "D" rating
category is used when payments on an obligation are not made on the date due
even if the applicable grace period has not expired, unless Standard & Poor's
believes that such payments will be made during such grace period. The "D"
rating also will be used upon the filing of a bankruptcy petition or the taking
of a similar action if payments on an obligation are jeopardized.
PLUS (+) OR MINUS (-) - The ratings from "AA" through "CCC" may be modified
by the addition of a plus or minus sign to show relative standing within the
major rating categories.
"c" - The 'c' subscript is used to provide additional information to
investors that the bank may terminate its obligation to purchase tendered bonds
if the long-term credit rating of the issuer is below an investment-grade level
and/or the issuer's bonds are deemed taxable.
"p" - The letter 'p' indicates that the rating is provisional. A
provisional rating assumes the successful completion of the project financed by
the debt being rated and indicates that payment of debt service requirements is
largely or entirely dependent upon the successful, timely completion of the
project. This rating, however, while addressing credit quality subsequent to
completion of the project, makes no comment on the likelihood of or the risk of
default upon failure of such completion. The investor should exercise his own
judgment with respect to such likelihood and risk.
* Continuance of the ratings is contingent upon Standard & Poor's receipt
of an executed copy of the escrow agreement or closing documentation confirming
investments and cash flows.
"r" - The 'r' highlights derivative, hybrid, and certain other obligations
that Standard & Poor's believes may experience high volatility or high
variability in expected returns as a result of noncredit risks. Examples of such
obligations are securities with principal or interest return indexed to
equities, commodities, or currencies; certain swaps and options; and interest-
only and principal-only mortgage securities. The absence of an 'r' symbol should
not be taken as an indication that an obligation will exhibit no volatility or
variability in total return.
N.R. Not rated. Debt obligations of issuers outside the United States and
its territories are rated on the same basis as domestic corporate and municipal
issues. The ratings measure the creditworthiness of the obligor but do not take
into account currency exchange and related uncertainties.
The following summarizes the ratings used by Moody's for corporate and
municipal long-term debt:
"Aaa" - Bonds are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
"Aa" - Bonds are judged to be of high quality by all standards. Together
with the "Aaa" group they comprise what are generally known as high-grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as in "Aaa" securities or fluctuation of protective elements may be
of greater amplitude or there may be other elements present which make the long-
term risk appear somewhat larger than the "Aaa" securities.
"A" - Bonds possess many favorable investment attributes and are to be
considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds are considered as medium-grade obligations, (i.e., they are
neither highly protected nor poorly secured). Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
"Ba," "B," "Caa," "Ca," and "C" - Bonds that possess one of these ratings
provide questionable protection of interest and principal ("Ba" indicates
speculative elements; "B" indicates a general lack of characteristics of
desirable investment; "Caa" indicates poor standing; "Ca" represents obligations
which are speculative in a high degree; and "C" represents the lowest rated
class of bonds). "Caa," "Ca" and "C" bonds may be in default.
Con. (---) - Bonds for which the security depends upon the completion of
some act or the fulfillment of some condition are rated conditionally. These
are bonds secured by (a) earnings of projects under construction, (b) earnings
of projects unseasoned in operating experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. Parenthetical rating denotes probable credit stature upon completion
of construction or elimination of basis of condition.
Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic
rating classification from "Aa" through "Caa". The modifier 1 indicates that
the obligation ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking
in the lower end of its generic rating category.
The following summarizes the long-term debt ratings used by Duff & Phelps
for corporate and municipal long-term debt:
"AAA" - Debt is considered to be of the highest credit quality. The risk
factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt.
"AA" - Debt is considered to be of high credit quality. Protection factors
are strong. Risk is modest but may vary slightly from time to time because of
economic conditions.
"A" - Debt possesses protection factors which are average but adequate.
However, risk factors are more variable in periods of greater economic stress.
"BBB" - Debt possesses below-average protection factors but such protection
factors are still considered sufficient for prudent investment. Considerable
variability in risk is present during economic cycles. This is the lowest
investment grade category.
"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. This is the lowest investment grade category.
"BB" - Bonds considered to be speculative. These ratings indicate that
there is a possibility of credit risk developing, particularly as the result of
adverse economic change over time; however, business or financial alternatives
may be available to allow financial commitments to be met. Securities rated in
this category are not investment grade.
"B" - Bonds are considered highly speculative. These ratings indicate that
significant credit risk is present, but a limited margin of safety remains.
Financial commitments are currently being met; however, capacity for continued
payment is contingent upon a sustained, favorable business and economic
environment.
"CCC", "CC", "C" - Bonds have high default risk. Default is a real
possibility, and capacity for meeting financial commitments is solely reliant
upon sustained, favorable business or economic developments. "CC" ratings
indicate that default of some kind appears probable, and "C" ratings signal
imminent default.
"DDD," "DD" and "D" - Bonds are in default. The ratings of obligations in
this category are based on their prospects for achieving partial or full
recovery in a reorganization or liquidation of the obligor. While expected
recovery values are highly speculative and cannot be estimated with any
precision, the following serve as general guidelines. "DDD" obligations have the
highest potential for recovery, around 90%-100% of outstanding amounts and
accrued interest. "DD" indicates potential recoveries in the range of 50%-90%,
and "D" the lowest recovery potential, i.e., below 50%.
Entities rated in this category have defaulted on some or all of their
obligations. Entities rated "DDD" have the highest prospect for resumption of
performance or continued operation with or without a formal reorganization
process. Entities rated "DD" and "D" are generally undergoing a formal
reorganization or liquidation process; those rated "DD" are likely to satisfy a
higher portion of their outstanding obligations, while entities rated "D" have a
poor prospect for repaying all obligations.
To provide more detailed indications of credit quality, the Fitch IBCA
ratings from and including "AA" to "CCC" may be modified by the addition of a
plus (+) or minus (-) sign to denote relative standing within these major rating
categories.
'NR' indicates the Fitch IBCA does not rate the issuer or issue in
question.
'Withdrawn': A rating is withdrawn when Fitch IBCA deems the amount of
information available to be inadequate for rating purposes, or when an
obligation matures, is called, or refinanced.
RatingAlert: Ratings are placed on RatingAlert to notify investors that
there is a reasonable probability of a rating change and the likely direction of
such change. These are designated as "Positive", indicating a potential
upgrade, "Negative", for a potential downgrade, or "Evolving", if ratings may be
raised, lowered or maintained. RatingAlert is typically resolved over a
relatively short period.
Thomson Financial BankWatch assesses the likelihood of an untimely
repayment of principal or interest over the term to maturity of long term debt
and preferred stock which are issued by United States commercial banks, thrifts
and non-bank banks; non-United States banks; and broker-dealers. The following
summarizes the rating categories used by Thomson BankWatch for long-term debt
ratings:
"AAA" - This designation indicates that the ability to repay principal and
interest on a timely basis is extremely high.
"AA" - This designation indicates a very strong ability to repay principal
and interest on a timely basis, with limited incremental risk compared to issues
rated in the highest category.
"A" - This designation indicates that the ability to repay principal and
interest is strong. Issues rated "A" could be more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.
"BBB" - This designation represents the lowest investment-grade category
and indicates an acceptable capacity to repay principal and interest. Issues
rated "BBB" are more vulnerable to adverse developments (both internal and
external) than obligations with higher ratings.
"BB," "B," "CCC," and "CC," - These designations are assigned by Thomson
Financial BankWatch to non-investment grade long-term debt. Such issues are
regarded as having speculative characteristics regarding the likelihood of
timely repayment of principal and interest. "BB" indicates the lowest degree of
speculation and "CC" the highest degree of speculation.
"D" - This designation indicates that the long-term debt is in default.
PLUS (+) OR MINUS (-) - The ratings from "AAA" through "CC" may include a
plus or minus sign designation which indicates where within the respective
category the issue is placed.
MUNICIPAL NOTE RATINGS
- -----------------------
A Standard and Poor's note rating reflects the liquidity factors and market
access risks unique to notes due in three years or less. The following
summarizes the ratings used by Standard & Poor's for municipal notes:
"SP-1" - The issuers of these municipal notes exhibit a strong capacity to
pay principal and interest. Those issues determined to possess a very strong
capacity to pay debt service are given a plus (+) designation.
"SP-2" - The issuers of these municipal notes exhibit satisfactory capacity
to pay principal and interest, with some vulnerability to adverse financial and
economic changes over the term of the notes.
"SP-3" - The issuers of these municipal notes exhibit speculative capacity
to pay principal and interest.
Moody's ratings for state and municipal notes and other short-term loans
are designated Moody's Investment Grade ("MIG") and variable rate demand
obligations are designated Variable Moody's Investment Grade ("VMIG"). Such
ratings recognize the differences between short-term credit risk and long-term
risk. The following summarizes the ratings by Moody's Investors Service, Inc.
for short-term notes:
"MIG-1"/"VMIG-1" - This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
"MIG-2"/"VMIG-2" - This designation denotes high quality. Margins of
protection are ample although not so large as in the preceding group.
"MIG-3"/"VMIG-3" - This designation denotes favorable quality, with all
security elements accounted for but lacking the undeniable strength of the
preceding grades. Liquidity and cash flow protection may be narrow and market
access for refinancing is likely to be less well established.
"MIG-4"/"VMIG-4" - This designation denotes adequate quality. Protection
commonly regarded as required of an investment security is present and although
not distinctly or predominantly speculative, there is specific risk.
"SG" - This designation denotes speculative quality. Debt instruments in
this category lack margins of protection.
Fitch IBCA and Duff & Phelps use the short-term ratings described under
Commercial Paper Ratings for municipal notes.
APPENDIX B
-----------
ADDITIONAL INFORMATION CONCERNING FUTURES AND RELATED
OPTIONS
As stated in the Prospectus, 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 Prospectus. 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 that 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 that 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
that 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 that 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 that 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.
xxxxx
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, 2000
TABLE OF CONTENTS
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Page
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Firstar Funds, Inc...........................................................2
Descriptions of the Funds and their Investments and Risks....................2
Investment Strategies and Risks..............................................4
Net Asset Value.............................................................15
Additional Purchase and Redemption Information..............................15
Description of Shares.......................................................18
Additional Information Concerning Taxes.....................................20
Management of the Company...................................................21
Custodian, Transfer Agent, Disbursing Agent and Accounting Services Agent...28
Expenses....................................................................29
Independent Accountants and Financial Statements............................29
Counsel.....................................................................30
Yield and Other Performance Information.....................................30
Miscellaneous...............................................................31
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 ("Prospectus") dated March 1, 2000, for 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 (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 1-800-677-FUND. The Financial
Statements and the 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 that 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
that are described in a separate statement of additional information. For
information concerning these other portfolios, contact Firstar Mutual Fund
Services, LLC at 1-800-677-FUND or write to 615 East Michigan Street, P.O. Box
3011, Milwaukee, Wisconsin 53201-3011.
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
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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, 1999, the Company held securities of its regular brokers
or dealers (as defined under the 1940 Act) or their parents as follows: the
Money Market Fund held securities of Goldman Sachs totaling $13,901,315; the
Money Market and Institutional Money Market Funds held securities of Merrill
Lynch totaling $12,914,761 and $134,840,721, respectively; the Money Market and
Institutional Money Market Funds held securities of Morgan Stanley totaling
$13,820,551 and $88,831,144, respectively; and the Money Market and
Institutional Money Market Funds held securities of Prudential Funding totaling
$12,893,254 and $94,094,239, respectively. The Institutional Money Market Fund
also held securities of Household International, American General and General
Electric totaling $84,171,314, $79,887,089 and $36,000,000, 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 and Institutional 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 and
Institutional 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 that 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 as 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.
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 that 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 that 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 shareholder of
another investment company, the Funds would bear, along with other shareholders,
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 shareholders. 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 and Institutional 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
and Institutional 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
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.
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 144A
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 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 may decline below the price
of the securities it is obligated to repurchase, and that the securities may not
be returned to such Fund.
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 (including the value of the collateral for
securities loaned). 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.
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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 that 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 that 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 that, 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 that 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 Prospectus.
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 that deal in real estate and may purchase securities that
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. Purchase securities of any one issuer (other than securities issued or
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. Each Fund will monitor liquidity on an ongoing basis to determine
whether an adequate level of liquidity is being maintained. 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 shareholders
and add appropriate descriptions concerning the instruments to the Prospectus
and this SAI. For purposes of limitation no. 1, "total assets" includes the
value of the collateral for the securities loaned.
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 Shareholder Organizations may be paid by the
Company for advertising, distribution, or shareholder services. Depending on
the terms of the particular account, Shareholder 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. Shareholder 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 shareholder-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' Prospectus under
"Redemption of Shares" and in the SAI under "Net Asset Value," the Company may
redeem shares involuntarily when appropriate under the 1940 Act, such as to
reimburse the Funds for any loss sustained by reason of the failure of a
shareholder to make full payment for shares purchased by the shareholder or to
collect any charge relating to a transaction effected for the benefit of a
shareholder which is applicable to Fund shares as provided in the Prospectus
from time to time.
Exchange Privilege
- ------------------
By use of the exchange privilege, shareholders of the Funds authorize the
transfer agent to act on telephonic or written exchange instructions from any
person representing himself to be the shareholder or in some cases, the
shareholder'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 shareholders.
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 shareholder 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 shareholder 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 shareholder 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 shareholder 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.
As noted in the prospectus, shares of the Firstar Funds may be exchanged
with shares of corresponding classes of the Firstar Stellar Funds and the
Mercantile Mutual Funds, Inc. The Firstar Stellar Funds currently offers the
Treasury, Tax-Free Money Market, Ohio Tax-Free Money Market, Strategic Income,
U.S. Government Income, Insured Tax-Free Bond, Growth Equity, Relative Value,
Science and Technology, Stellar, Capital Appreciation and International Equity
Funds. The Mercantile Mutual Funds, Inc. currently offers the Treasury Money
Market, Money Market, Tax-Exempt Money Market, Conning Money Market, U.S.
Government Securities, Intermediate Corporate Bond, Bond Index, Government &
Corporate Bond, Short-Intermediate Municipal, Missouri Tax-Exempt Bond,
National Municipal Bond, Balanced, Equity Income, Equity Index, Growth &
Income Equity, Growth Equity, Small Cap Equity, Small Cap Equity Index and
International Equity Portfolios. FIRMCO, the Firstar Funds' adviser, also
serves as the adviser to Mercantile Mutual Funds, Inc. Prior to March 1, 2000,
Mississippi Valley Advisors Inc. ("MVA") served as adviser to Mercantile
Mutual Funds, Inc. On March 1, 2000, MVA merged into FIRMCO. The Firstar
Stellar Funds are advised by Firstar Bank, N.A. Firstar Bank, N.A. and FIRMCO
are under the common control of Firstar Corporation.
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 Prospectus. For further information about this form of
payment, contact the Firstar Funds Center at 1-800-677-FUND. In connection with
an in-kind securities payment, a Fund will require, among other things, that the
securities be valued on the day of purchase in accordance with the pricing
methods used by the Fund; that the Fund 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.
Retirement Plans
- ----------------
Individual Retirement Accounts. The Company has available a plan (the
"Traditional IRA") for use by individuals with compensation for services
rendered (including earned income from self-employment) who wish to use shares
of the Funds as a funding medium for individual retirement saving. However,
except for rollover contributions, an individual who has attained, or will
attain, age 70 1/2 before the end of the taxable year may only contribute to a
Traditional IRA for his or her nonworking spouse under age 70 1/2. Distribution
of an individual's Traditional IRA assets (and earnings thereon) before the
individual attains age 59 1/2 will (with certain exceptions) result in an
additional 10% tax on the amount included in the individual's gross income.
Earnings on amounts contributed to the Traditional IRA are not subject to
federal income tax until distributed.
The Company also has available a Roth Individual Retirement Account (the
"Roth IRA") for retirement saving for use by individuals with compensation for
services rendered. A single individual with adjusted gross income of up to
$110,000 may contribute to a Roth IRA (for married couples filing jointly, the
adjusted gross income limit is $160,000), and contributions may be made even
after the Roth IRA owner has attained age 70 1/2, as long as the account owner
has earned income. Contributions to a Roth IRA are not deductible. Earnings on
amounts contributed to a Roth IRA, however, are not subject to federal income
tax when distributed if the distribution is a "qualified distribution" (i.e.,
the Roth IRA has been held for at least five years beginning with the first tax
year for which a contribution was made to the Roth IRA and the distribution is
due to the account owner's attainment of age 59 1/2, disability or death, or for
qualified first-time homebuyer expenses. A non-qualified distribution of an
individual's Roth IRA assets (and the earnings thereon) will (with certain
exceptions) result in an additional 10% tax on the amount included in the
individual's gross income.
The Company permits certain employers (including self-employed individuals)
to make contributions to employees' Traditional IRAs if the employer establishes
a Simplified Employee Pension ("SEP") plan and/or a Salary Reduction SEP
("SARSEP"). Although SARSEPs may not be established after 1996, employers may
continue to make contributions to SARSEPs established before January 1, 1997,
under the pre-1997 federal tax law. A SEP permits an employer to make
discretionary contributions to all of its employees' Traditional IRAs (employees
who have not met certain eligibility criteria may be excluded) equal to a
uniform percentage of each employee's compensation (subject to certain limits).
If an employer (including a self-employed individual) established a SARSEP
before January 1, 1997, employees may defer a percentage of their compensation -
- - pre-tax -- to Traditional IRAs (subject to certain limits). The Code provides
certain tax benefits for contributions by an employer, pursuant to a SEP and/or
SARSEP, to an employee's Traditional IRA. For example, contributions to an
employee's Traditional IRA pursuant to a SEP and/or SARSEP are deductible
(subject to certain limits) and the contributions and earnings thereon are not
taxed until distributed.
Savings Incentive Match Plan for Employees of Small Employers. The Company
also has available a simplified tax-favored retirement plan for employees of
small employers (a "SIMPLE IRA Plan"). If an employer establishes a SIMPLE IRA
Plan, contributions under the Plan are made to eligible employees' SIMPLE
individual retirement accounts ("SIMPLE IRAs"). Each eligible employee may
choose to defer a percentage of his or her pre-tax compensation to the
employee's SIMPLE IRA. The employer must generally make an annual matching
contribution to the SIMPLE IRA of each eligible employee equal to the employee's
salary reduction contributions, up to a limit of 3 percent of the employee's
compensation. Alternatively, the employer may make an annual non-discretionary
contribution to the SIMPLE IRA of each eligible employee equal to 2 percent of
each employee's compensation. As with contributions to an employee's IRA
pursuant to a SEP and/or SARSEP, the Code provides tax benefits for
contributions by an employer, pursuant to a SIMPLE IRA Plan, to an employee's
SIMPLE IRA. For example, contributions to an employee's SIMPLE IRA are
deductible (subject to certain limits) and the contributions and earnings
thereon are not taxed until distributed.
In the SIMPLE IRA Plan and in Traditional and Roth IRAs, distributions of
net investment income and capital gains will be automatically reinvested.
The foregoing brief descriptions are not complete or definitive
explanations of the SIMPLE IRA Plan, the Traditional IRA, or the Roth IRA
available for investment in the Funds. Any person who wishes to establish a
retirement plan account may do so by contacting Investor Services at 800-677-
FUND. The complete Plan documents and applications will be provided to existing
or prospective shareholders upon request, without obligation. The Company
recommends that investors consult their attorneys or tax advisors to determine
if the retirement programs described herein are appropriate for their needs.
ADDITIONAL INFORMATION REGARDING SHAREHOLDER SERVICES
Periodic Investment Plan
- ------------------------
The Funds offer a Periodic Investment Plan whereby a shareholder may
automatically make purchases of shares of a Fund on a regular, monthly basis
($50 minimum per transaction). Under the Periodic Investment Plan, a
shareholder's designated bank or other financial institution debits a
preauthorized amount on the shareholder'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 shareholder's account or the
shareholder's account has been closed at the time of the automatic transaction.
ConvertiFund/R Transactions
- ---------------------------
The Funds permit shareholders to effect ConvertiFund/R transactions, an
automated method by which a shareholder 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.
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.
Investments in the non-money market funds will be subject to the applicable
sales charges.
Systematic Withdrawal Plan
- --------------------------
The Funds offer shareholders a Systematic Withdrawal Plan, which allows a
shareholder who owns shares of a Fund worth at least $5,000 at current net asset
value at the time the shareholder initiates the Systematic Withdrawal Plan to
designate that a fixed sum ($50 minimum per transaction) be distributed to the
shareholder 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:
Number of Authorized
Class-Series of Fund in Which Stock Shares in Each
Common Stock Represents Interest 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 Fund, Tax-Exempt
Money Market Fund, U.S. Government Money Market Fund, and U.S. Treasury Money
Market Fund, and Institutional Shares of the Institutional Money Market Fund
have been offered by the Company. The Board of Directors has also authorized
the issuance of classes 6 through 20 common stock representing interests in
fifteen 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 ten additional classes representing interests in
other potential future investment portfolios of the Company. The Directors
may similarly classify or reclassify any particular class of shares into one
or more additional series.
In the event of a liquidation or dissolution of the Company or an
individual Fund, shareholders 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, shareholders 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 shareholder.
Shareholders of each class of the Funds are entitled to one vote for each
full share held and proportionate fractional votes for fractional shares held.
Shareholders 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 shareholders 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 shareholders of the Company voting together
in the aggregate without regard to particular portfolios. Similarly, on
any matter submitted to the vote of shareholders 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 shareholders 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
shareholder 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 shareholders 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.
The Tax-Exempt Money Market 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 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 shareholders.
The Board does not normally hold shareholder meetings except when required
by the 1940 Act or other applicable law. The Board will call a shareholders'
meeting for the purpose of voting on the question of removal of a Director when
requested to do so in writing by the record holders of not less than 10% of the
outstanding shares of the Company that are entitled to vote.
Directors and Officers
- ----------------------
The Directors and Officers of the Company, their addresses, principal
occupations during the past five years and other affiliations are as follows:
Position(s)
held with the Principal Occupations During Past 5
Name, Address & Age Company Years and Other Affiliations
- ------------------------------------------------------------------------------
James M. Wade Chairman of the 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: 56
Glen R. Bomberger Director Executive Vice President, Chief
One Park Plaza Financial Officer and Director, A.O.
11270 West Park Place Smith Corporation (a diversified
Milwaukee, WI manufacturing company) since January
53224-3690 1987; Director of companies
Age: 62 affiliated with A.O. Smith
Corporation; Director, Smith
Investment Company; Director of
companies affiliated with Smith
Investment Company.
Jerry G. Remmel Vice President, Treasurer and Chief
16650A Lake Circle Financial Officer of Wisconsin
Brookfield, WI 53005 Energy Corporation 1994-1996;
Age: 68 Treasurer of Wisconsin Electric
Power Company 1973-1996; Director of
Wisconsin Electric Power Company
1989-1996; Senior Vice President,
Wisconsin Electric Power Company
1988 - 1994; Chief Financial
Officer, Wisconsin Electric Power
Company 1983-1996; Vice President
and Treasurer, Wisconsin Electric
Power Company, 1983 - 1989.
Richard K. Riederer Director President and Chief Executive
400 Three Springs Drive Officer of Weirton Steel since 1995;
Weirton, WV Director of Weirton Steel since
26062-4989 1993; Executive Vice President and
Age: 55 Chief Financial Officer, Weirton
Steel January 1994 - 1995; Vice
President of Finance and Chief
Financial Officer, Weirton Steel
January 1989-1994; Member, Board of
Directors of American Iron and Steel
Institute since 1995; Member, Board
of Directors, National Association
of Manufacturers since 1995; Member,
Board of Directors, WESBANCO since
September 1997; Trustee of Carnegie
Mellon University since 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: 69 Vice President - Finance and
Administration, Rexnord Inc., 1982 -
1988; Officer and Director of
several Rexnord subsidiaries until
1992.
Bruce Laning Director, President and CEO of FIRMCO since 2000;
777 E. Wisconsin President Director of FIRMCO since 2000; Senior
Avenue, and Treasurer Vice President, FIRMCO, since 1999;
Suite 800 Vice President, FIRMCO, since 1994.
Milwaukee, WI 53202
Age: 40
W. Bruce McConnel, III Secretary Partner of the law firm of Drinker,
One Logan Square Biddle & Reath LLP.
18th & Cherry Streets
Philadelphia, PA
19103
Age: 56
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: 31
Joseph C. Neuberger Assistant Senior Vice President, Firstar
615 E. Michigan Street Treasurer Mutual Fund Services, LLC since
Milwaukee, WI 53202 1994; Manager, Arthur Andersen LLP,
Age: 38 prior thereto.
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: 55 Ameritech - Wisconsin (formerly
Wisconsin Bell) 1993-1998;
President of Wisconsin Bell
Communications 1988-1993; Board of
Directors, The Marcus Corporation;
Trustee of Roundy Foods;
Chairman of the Wisconsin Utilities
Association.
<F1> Mr. Haase and Mr. Laning are considered by the Company to be an "interested
person" 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, 1999 of the Company's Directors.
TOTAL
PENSION OR COMPENSATION
RETIREMENT ESTIMATED FROM COMPANY
AGGREGATE BENEFITS ANNUAL AND FUND
NAME OF COMPENSATION ACCRUED AS BENEFITS COMPLEX/R PAID
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. $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
Bronson J. $15,000 $0 $0 $15,000
Haase
Director
<F1> The "Fund Complex" includes only the Company. The Company is
comprised of 20 separate portfolios.
<F2> Includes $15,000 which Mr. Bomberger elected to defer under the
Company's deferred compensation plan.
Each Director receives an annual fee of $10,000, a $1,000 per meeting
attendance fee and reimbursement of expenses incurred as a Director. The
Chairman of the Board is entitled to receive an additional $3,500 per annum for
services in such capacity. For the fiscal year ended October 31, 1999, the
Directors and Officers received aggregate fees and reimbursed expenses of
$88,492. Mr. Laning, 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 Mr. Laning 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 Senior 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 (the "Adviser") became the investment adviser to the Funds as of
February 3, 1992. Prior thereto, investment advisory services were provided by
Firstar Trust Company ("Firstar Trust"), an affiliate of the Adviser. 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 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, 1999, 1998
and 1997 , the Adviser was paid and waived advisory fees as follows:
Net Advisory Fees Paid (Advisory Fees Waived)
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Money Market Fund $1,086,867 (335,701) $809,190 (493,088) $770,065 (401,147)
U.S. Treasury Money Market Fund 519,416 (15,375) 313,106 (74,162) 264,236 (69,017)
U.S. Government Money Market Fund 1,248,897 (6,821) 904,397 (81,346) 933,618 (50,816)
Tax-Exempt Money Market Fund 678,369 (14,071) 454,275 (88,110) 384,622 (72,448)
Institutional Money Market Fund 6,285,747 (4,398,932) 3,552,582 (2,555,949) 2,758,246 (2,045,957)
</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.
Regulatory Matters. Conflict of interest restrictions may apply to the
receipt of compensation paid pursuant to a Servicing Agreement by a Fund to a
financial intermediary in connection with the investment of fiduciary funds in a
Fund's 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, should consult legal counsel before entering into Servicing
Agreements.
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 Bank, N.A. or FIRMCO and are not obligations of or otherwise supported
by Firstar Bank, N.A. 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 Shareholder 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 Shareholders; 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 shareholders 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 shareholders 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, 1999, 1998 and 1997, Ziegler
received no fees for its distribution services.
For the fiscal years ended October 31, 1999, 1998 and 1997 , the following
administrative fees were paid and waived:
Net Administration Fees Paid (Administration Fees Waived)
---------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Money Market Fund $271,041 (34,831) $99,437 (184,778) $92,516 (158,431)
U.S. Treasury Money Market Fund 102,983 (12,042) 29,747 (54,772) 25,971 (48,185)
U. S. Government Money Market Fund 239,801 (30,215) 75,209 (139,922) 77,457 (141,599)
Tax-Exempt Money Market Fund 133,293 (15,624) 41,065 (77,310) 35,787 (65,920)
Institutional Money Market Fund 1,382,842 (973,726) 286,889 (1,046,264) 199,081 (869,952)
</TABLE>
Shareholder Organizations
-------------------------
As stated in the Funds' Prospectus, the Funds intend to enter into
agreements from time to time with shareholder organizations providing for
support and/or distribution services to customers of the shareholder
organizations who are the beneficial owners of Fund shares. Under the
agreements, the Funds may pay shareholder 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 shareholder
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 shareholder 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 (not available for the Institutional Money Market
Fund), Shareholder 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 Shareholder Organizations under the agreements
are governed by a Service Plan and, for Funds other than the Institutional Money
Market Fund, a separate 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 shareholder organizations have benefited each Fund and its
shareholders as a way of allowing shareholders organizations to participate with
the Funds in the provision of support and distribution services to customers of
the shareholder organizations who own Fund shares. Any material amendment to
the arrangements with shareholder 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.
Shareholder organizations, which are affiliated with the Adviser, pursuant
to the Service Plan received no fees for the fiscal years ended October 31,
1999, 1998 and 1997.
The Funds paid fees to shareholder organizations, none of which were
affiliated with the Adviser, pursuant to the Distribution and Service Plan for
the fiscal years ended October 31, 1999, 1998 and 1997 as follows:
Fees Paid to Non-Affiliated
Shareholder Organizations
---------------------------
1999 1998 1997
---- ---- ----
Money Market Fund $74,046 $63,411 $60,667
U.S. Government Money Market Fund 1,060 889 809
Tax-Exempt Money Market Fund 104 335 123
U.S. Treasury Money Market Fund 10 28 17
The Funds paid fees to shareholder organizations, none of which were affiliated
with the Adviser, pursuant to the Service Plan for the fiscal years ended
October 31, 1999, 1998, and 1997 as follows:
Fees Paid to Non-Affiliated
Shareholder Organizations
----------------------------
1999 1998 1997
Money Market Fund $20,808 $17,364 $5,944
U.S. Government Money Market Fund 278 391 218
Tax-Exempt Money Market Fund 544 873 366
Institutional Money Market Fund 0 0 0
U.S. Treasury Money Market Fund 0 0 0
CUSTODIAN, TRANSFER AGENT, DISBURSING AGENT AND ACCOUNTING SERVICES AGENT
Firstar Bank, N.A. serves as custodian of the Funds' assets. Under the
Custody Agreement, Firstar Bank, 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 shareholders, security brokers and others relating to its
duties and (v) make periodic reports to the Company concerning each Fund's
operations. Firstar Bank, 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, 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, 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, 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 Shareholder 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
shareholders of the Funds, (iii) respond to correspondence by Fund shareholders
and others relating to its duties, (iv) maintain shareholder 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 shareholder account with an annual minimum of
$12,000 per Fund, and .01% of the Fund's net assets, 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
following annual rates of the market value of each Fund's assets: Money Market,
Institutional Money Market, U.S. Treasury Money Market, and U.S. Government
Money Market Funds--$39,000 on the first $100 million, 0.01% on the next $200
million, and 0.005% on the balance, plus out-of-pocket expenses, including
pricing expenses; and Tax-Exempt Money Market Fund--$39,000 on the first $100
million, 0.02% on the next $200 million, and 0.01% 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 qualification fees,
advisory fees, administrative fees, Shareholder 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 shareholders, membership fees in the Investment Company
Institute, costs of shareholder 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, 1999 has been filed with the SEC.
The financial statements, notes thereto and Report of Independent Accountants
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), One Logan Square, 18th and Cherry Streets, Philadelphia,
PA 19103-6996, serve as counsel to the Company and will pass upon the legality
of the shares offered by the Funds' Prospectus.
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 shareholders. 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 shareholder
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
publications to those of other mutual funds with similar investment objectives
and to other relevant indices, rankings or other information prepared by
independent services or other financial or industry publications that monitor
the performance of mutual funds or to investments for which reliable performance
data is available. For example, the 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 Shareholder 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 1-800-677-FUND. For the seven-day period ended
October 31, 1999, 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 4.82%, 5.25%, 4.12%, 4.60% and
2.66%, respectively. Without fees waived by the Adviser and Co-Administrators
during such period, the annualized yields of such Funds would have been 4.70%,
5.00%, 4.11%, 4.60% and 2.66%, respectively. For the seven-day period ended
October 31, 1999, 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 4.93%, 5.39%, 4.21%, 4.71% and 2.70%,
respectively. Without fees waived by the Adviser and Co-Administrators during
such period, the effective yields of such Funds would have been 4.81%, 5.14%,
4.20%, 4.71% and 2.70%, respectively. For the seven-day period ended October
31, 1999, the tax-equivalent yield of the Tax-Exempt Money Market Fund was 4.38%
(assuming a federal income tax rate of 31%).
MISCELLANEOUS
As used in this SAI and in the Funds' Prospectus, 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, 2000, 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 Bank, N.A., 425 Walnut Street, Cincinnati,
Ohio 45202, 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: 96%;
Tax-Exempt Money Market Fund: 70%; U.S. Treasury Money Market Fund: 58%; U.S.
Government Money Market Fund: 67%; Growth and Income Fund: 68%; Short-Term Bond
Market Fund: 64%; Special Growth Fund: 74%; Bond IMMDEX_ Fund: 70%; Equity Index
Fund: 74%; Balanced Income Fund: 84%, Balanced Growth Fund: 75%; Intermediate
Bond Market Fund: 70%; Growth Fund: 84%; Tax-Exempt Intermediate Bond Fund: 69%;
International Equity Fund: 90%; MicroCap Fund: 83%, Emerging Growth Fund: 93%,
MidCap Index Fund: 55%, and Core International Equity Fund: 100%. 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
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COMMERCIAL PAPER RATINGS
- -------------------------
A Standard & Poor's commercial paper rating is a current opinion of the
creditworthiness of an obligor with respect to financial obligations having an
original maturity of no more than 365 days. The following summarizes the rating
categories used by Standard and Poor's for commercial paper:
"A-1" - Obligations are rated in the highest category indicating that the
obligor's capacity to meet its financial commitment on the obligation is strong.
Within this category, certain obligations are designated with a plus sign (+).
This indicates that the obligor's capacity to meet its financial commitment on
these obligations is extremely strong.
"A-2" - Obligations are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in higher
rating categories. However, the obligor's capacity to meet its financial
commitment on the obligation is satisfactory.
"A-3" - Obligations exhibit adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.
"B" - Obligations are regarded as having significant speculative
characteristics. The obligor currently has the capacity to meet its financial
commitment on the obligation; however, it faces major ongoing uncertainties
which could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.
"C" - Obligations are currently vulnerable to nonpayment and are dependent
upon favorable business, financial, and economic conditions for the obligor to
meet its financial commitment on the obligation.
"D" - Obligations are in payment default. The "D" rating category is used
when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The "D" rating will be
used upon the filing of a bankruptcy petition or the taking of a similar action
if payments on an obligation are jeopardized.
Moody's commercial paper ratings are opinions of the ability of issuers to
repay punctually senior debt obligations not having an original maturity in
excess of one year, unless explicitly noted. The following summarizes the
rating categories used by Moody's for commercial paper:
"Prime-1" - Issuers (or supporting institutions) have a superior ability
for repayment of senior short-term debt obligations. Prime-1 repayment ability
will often be evidenced by many of the following characteristics: leading
market positions in well-established industries; high rates of return on
funds employed; conservative capitalization structure with moderate reliance on
debt and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.
"Prime-2" - Issuers (or supporting institutions) have a strong ability for
repayment of senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
"Prime-3" - Issuers (or supporting institutions) have an acceptable ability
for repayment of senior short-term debt obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.
"Not Prime" - Issuers do not fall within any of the Prime rating
categories.
The three rating categories of Duff & Phelps for investment grade
commercial paper and short-term debt are "D-1," "D-2" and "D-3." Duff & Phelps
employs three designations, "D-1+," "D-1" and "D-1-," within the highest rating
category. The following summarizes the rating categories used by Duff & Phelps
for commercial paper:
"D-1+" - Debt possesses the highest certainty of timely payment.
Short-term liquidity, including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is just below
risk-free U.S. Treasury short-term obligations.
"D-1" - Debt possesses very high certainty of timely payment. Liquidity
factors are excellent and supported by good fundamental protection factors.
Risk factors are minor.
"D-1-" - Debt possesses high certainty of timely payment. Liquidity
factors are strong and supported by good fundamental protection factors. Risk
factors are very small.
"D-2" - Debt possesses good certainty of timely payment. Liquidity factors
and company fundamentals are sound. Although ongoing funding needs may enlarge
total financing requirements, access to capital markets is good. Risk factors
are small.
"D-3" - Debt possesses satisfactory liquidity and other protection factors
qualify issues as to investment grade. Risk factors are larger and subject to
more variation. Nevertheless, timely payment is expected.
"D-4" - Debt possesses speculative investment characteristics. Liquidity
is not sufficient to insure against disruption in debt service. Operating
factors and market access may be subject to a high degree of variation.
"D-5" - Issuer failed to meet scheduled principal and/or interest payments.
Fitch IBCA short-term ratings apply to debt obligations that have time
horizons of less than 12 months for most obligations, or up to three years for
U.S. public finance securities. The following summarizes the rating categories
used by Fitch IBCA for short-term obligations:
"F1" - Securities possess the highest credit quality. This designation
indicates the best capacity for timely payment of financial commitments and
may have an added "+"to denote any exceptionally strong credit feature.
"F2" - Securities possess good credit quality. This designation indicates
a satisfactory capacity for timely payment of financial commitments, but the
margin of safety is not as great as in the case of the higher ratings.
"F3" - Securities possess fair credit quality. This designation indicates
that the capacity for timely payment of financial commitments is adequate;
however, near-term adverse changes could result in a reduction to non-investment
grade.
"B" - Securities possess speculative credit quality. This designation
indicates minimal capacity for timely payment of financial commitments, plus
vulnerability to near-term adverse changes in financial and economic conditions.
"C" - Securities possess high default risk. This designation indicates
that default is a real possibility and that the capacity for meeting financial
commitments is solely reliant upon a sustained, favorable business and economic
environment.
"D" - Securities are in actual or imminent payment default.
Thomson Financial BankWatch short-term ratings assess the likelihood of an
untimely payment of principal and interest of debt instruments with original
maturities of one year or less. The following summarizes the ratings used by
Thomson Financial BankWatch:
"TBW-1" - This designation represents Thomson Financial BankWatch's highest
category and indicates a very high likelihood that principal and interest will
be paid on a timely basis.
"TBW-2" - This designation represents Thomson Financial BankWatch's second-
highest category and indicates that while the degree of safety regarding timely
repayment of principal and interest is strong, the relative degree of safety is
not as high as for issues rated "TBW-1."
"TBW-3" - This designation represents Thomson Financial BankWatch's lowest
investment-grade category and indicates that while the obligation is more
susceptible to adverse developments (both internal and external) than those with
higher ratings, the capacity to service principal and interest in a timely
fashion is considered adequate.
"TBW-4" - This designation represents Thomson Financial BankWatch's lowest
rating category and indicates that the obligation is regarded as non-investment
grade and therefore speculative.
CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS
- -----------------------------------------------
The following summarizes the ratings used by Standard & Poor's for
corporate and municipal debt:
"AAA" - An obligation rated "AAA" has the highest rating assigned by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is extremely strong.
"AA" - An obligation rated "AA" differs from the highest rated obligations
only in small degree. The obligor's capacity to meet its financial commitment
on the obligation is very strong.
"A" - An obligation rated "A" is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations in
higher-rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
"BBB" - An obligation rated "BBB" exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation.
Obligations rated "BB," "B," "CCC," "CC" and "C" are regarded as having
significant speculative characteristics. "BB" indicates the least degree of
speculation and "C" the highest. While such obligations will likely have some
quality and protective characteristics, these may be outweighed by large
uncertainties or major exposures to adverse conditions.
"BB" - An obligation rated "BB" is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial or economic conditions which could lead to the
obligor's inadequate capacity to meet its financial commitment on the
obligation.
"B" - An obligation rated "B" is more vulnerable to nonpayment than
obligations rated "BB", but the obligor currently has the capacity to meet its
financial commitment on the obligation. Adverse business, financial or economic
conditions will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation.
"CCC" - An obligation rated "CCC" is currently vulnerable to nonpayment,
and is dependent upon favorable business, financial and economic conditions for
the obligor to meet its financial commitment on the obligation. In the event
of adverse business, financial, or economic conditions, the obligor is not
likely to have the capacity to meet its financial commitment on the obligation.
"CC" - An obligation rated "CC" is currently highly vulnerable to
nonpayment.
"C" - The "C" rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action taken, but payments on this obligation
are being continued.
"D" - An obligation rated "D" is in payment default. The "D" rating
category is used when payments on an obligation are not made on the date due
even if the applicable grace period has not expired, unless Standard & Poor's
believes that such payments will be made during such grace period. The "D"
rating also will be used upon the filing of a bankruptcy petition or the taking
of a similar action if payments on an obligation are jeopardized.
PLUS (+) OR MINUS (-) - The ratings from "AA" through "CCC" may be modified
by the addition of a plus or minus sign to show relative standing within the
major rating categories.
"c" - The 'c' subscript is used to provide additional information to
investors that the bank may terminate its obligation to purchase tendered bonds
if the long-term credit rating of the issuer is below an investment-grade level
and/or the issuer's bonds are deemed taxable.
"p" - The letter 'p' indicates that the rating is provisional. A
provisional rating assumes the successful completion of the project financed by
the debt being rated and indicates that payment of debt service requirements is
largely or entirely dependent upon the successful, timely completion of the
project. This rating, however, while addressing credit quality subsequent to
completion of the project, makes no comment on the likelihood of or the
risk of default upon failure of such completion. The investor should exercise
his own judgment with respect to such likelihood and risk.
* Continuance of the ratings is contingent upon Standard & Poor's receipt
of an executed copy of the escrow agreement or closing documentation confirming
investments and cash flows.
"r" - The 'r' highlights derivative, hybrid, and certain other obligations
that Standard & Poor's believes may experience high volatility or high
variability in expected returns as a result of noncredit risks. Examples of such
obligations are securities with principal or interest return indexed to
equities, commodities, or currencies; certain swaps and options; and interest-
only and principal-only mortgage securities. The absence of an 'r' symbol should
not be taken as an indication that an obligation will exhibit no volatility or
variability in total return.
N.R. Not rated. Debt obligations of issuers outside the United States and
its territories are rated on the same basis as domestic corporate and municipal
issues. The ratings measure the creditworthiness of the obligor but do not take
into account currency exchange and related uncertainties.
The following summarizes the ratings used by Moody's for corporate and
municipal long-term debt:
"Aaa" - Bonds are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
"Aa" - Bonds are judged to be of high quality by all standards.
Together with the "Aaa" group they comprise what are generally known as high-
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in "Aaa" securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risk appear somewhat larger than the "Aaa"
securities.
"A" - Bonds possess many favorable investment attributes and are to be
considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds are considered as medium-grade obligations, (i.e., they are
neither highly protected nor poorly secured). Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
"Ba," "B," "Caa," "Ca," and "C" - Bonds that possess one of these ratings
provide questionable protection of interest and principal ("Ba" indicates
speculative elements; "B" indicates a general lack of characteristics of
desirable investment; "Caa" indicates poor standing; "Ca" represents obligations
which are speculative in a high degree; and "C" represents the lowest rated
class of bonds). "Caa," "Ca" and "C" bonds may be in default.
Con. (---) - Bonds for which the security depends upon the completion of
some act or the fulfillment of some condition are rated conditionally. These
are bonds secured by (a) earnings of projects under construction, (b) earnings
of projects unseasoned in operating experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. Parenthetical rating denotes probable credit stature upon completion
of construction or elimination of basis of condition.
Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic
rating classification from "Aa" through "Caa". The modifier 1 indicates that
the obligation ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking
in the lower end of its generic rating category.
The following summarizes the long-term debt ratings used by Duff & Phelps
for corporate and municipal long-term debt:
"AAA" - Debt is considered to be of the highest credit quality. The risk
factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt.
"AA" - Debt is considered to be of high credit quality. Protection factors
are strong. Risk is modest but may vary slightly from time to time because of
economic conditions.
"A" - Debt possesses protection factors which are average but adequate.
However, risk factors are more variable in periods of greater economic stress.
"BBB" - Debt possesses below-average protection factors but such protection
factors are still considered sufficient for prudent investment. Considerable
variability in risk is present during economic cycles. This is the lowest
investment grade category.
"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. This is the lowest investment grade category.
"BB" - Bonds considered to be speculative. These ratings indicate that
there is a possibility of credit risk developing, particularly as the result of
adverse economic change over time; however, business or financial alternatives
may be available to allow financial commitments to be met. Securities rated in
this category are not investment grade.
"B" - Bonds are considered highly speculative. These ratings indicate that
significant credit risk is present, but a limited margin of safety remains.
Financial commitments are currently being met; however, capacity for continued
payment is contingent upon a sustained, favorable business and economic
environment.
"CCC", "CC", "C" - Bonds have high default risk. Default is a real
possibility, and capacity for meeting financial commitments is solely reliant
upon sustained, favorable business or economic developments. "CC" ratings
indicate that default of some kind appears probable, and "C" ratings signal
imminent default.
"DDD," "DD" and "D" - Bonds are in default. The ratings of obligations in
this category are based on their prospects for achieving partial or full
recovery in a reorganization or liquidation of the obligor. While expected
recovery values are highly speculative and cannot be estimated with any
precision, the following serve as general guidelines. "DDD" obligations have the
highest potential for recovery, around 90%-100% of outstanding amounts and
accrued interest. "DD" indicates potential recoveries in the range of 50%-90%,
and "D" the lowest recovery potential, i.e., below 50%.
Entities rated in this category have defaulted on some or all of their
obligations. Entities rated "DDD" have the highest prospect for resumption of
performance or continued operation with or without a formal reorganization
process. Entities rated "DD" and "D" are generally undergoing a formal
reorganization or liquidation process; those rated "DD" are likely to satisfy a
higher portion of their outstanding obligations, while entities rated "D" have a
poor prospect for repaying all obligations.
To provide more detailed indications of credit quality, the Fitch IBCA
ratings from and including "AA" to "CCC" may be modified by the addition of a
plus (+) or minus (-) sign to denote relative standing within these major rating
categories.
'NR' indicates the Fitch IBCA does not rate the issuer or issue in
question.
'Withdrawn': A rating is withdrawn when Fitch IBCA deems the amount of
information available to be inadequate for rating purposes, or when an
obligation matures, is called, or refinanced.
RatingAlert: Ratings are placed on RatingAlert to notify investors that
there is a reasonable probability of a rating change and the likely direction of
such change. These are designated as "Positive", indicating a potential
upgrade, "Negative", for a potential downgrade, or "Evolving", if ratings may be
raised, lowered or maintained. RatingAlert is typically resolved over a
relatively short period.
Thomson Financial BankWatch assesses the likelihood of an untimely
repayment of principal or interest over the term to maturity of long term debt
and preferred stock which are issued by United States commercial banks, thrifts
and non-bank banks; non-United States banks; and broker-dealers. The following
summarizes the rating categories used by Thomson BankWatch for long-term debt
ratings:
"AAA" - This designation indicates that the ability to repay principal and
interest on a timely basis is extremely high.
"AA" - This designation indicates a very strong ability to repay principal
and interest on a timely basis, with limited incremental risk compared to issues
rated in the highest category.
"A" - This designation indicates that the ability to repay principal and
interest is strong. Issues rated "A" could be more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.
"BBB" - This designation represents the lowest investment-grade category
and indicates an acceptable capacity to repay principal and interest. Issues
rated "BBB" are more vulnerable to adverse developments (both internal and
external) than obligations with higher ratings.
"BB," "B," "CCC," and "CC," - These designations are assigned by Thomson
Financial BankWatch to non-investment grade long-term debt. Such issues are
regarded as having speculative characteristics regarding the likelihood of
timely repayment of principal and interest. "BB" indicates the lowest degree of
speculation and "CC" the highest degree of speculation.
"D" - This designation indicates that the long-term debt is in default.
PLUS (+) OR MINUS (-) - The ratings from "AAA" through "CC" may include a
plus or minus sign designation which indicates where within the respective
category the issue is placed.
MUNICIPAL NOTE RATINGS
- -----------------------
A Standard and Poor's note rating reflects the liquidity factors and
market access risks unique to notes due in three years or less. The following
summarizes the ratings used by Standard & Poor's for municipal notes:
"SP-1" - The issuers of these municipal notes exhibit a strong capacity to
pay principal and interest. Those issues determined to possess a very strong
capacity to pay debt service are given a plus (+) designation.
"SP-2" - The issuers of these municipal notes exhibit satisfactory capacity
to pay principal and interest, with some vulnerability to adverse financial and
economic changes over the term of the notes.
"SP-3" - The issuers of these municipal notes exhibit speculative capacity
to pay principal and interest.
Moody's ratings for state and municipal notes and other short-term loans
are designated Moody's Investment Grade ("MIG") and variable rate demand
obligations are designated Variable Moody's Investment Grade ("VMIG"). Such
ratings recognize the differences between short-term credit risk and long-term
risk. The following summarizes the ratings by Moody's Investors Service, Inc.
for short-term notes:
"MIG-1"/"VMIG-1" - This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
"MIG-2"/"VMIG-2" - This designation denotes high quality. Margins of
protection are ample although not so large as in the preceding group.
"MIG-3"/"VMIG-3" - This designation denotes favorable quality, with all
security elements accounted for but lacking the undeniable strength of the
preceding grades. Liquidity and cash flow protection may be narrow and
market access for refinancing is likely to be less well established.
"MIG-4"/"VMIG-4" - This designation denotes adequate quality. Protection
commonly regarded as required of an investment security is present and although
not distinctly or predominantly speculative, there is specific risk.
"SG" - This designation denotes speculative quality. Debt instruments in
this category lack margins of protection.
Fitch IBCA and Duff & Phelps use the short-term ratings described under
Commercial Paper Ratings for municipal notes.
xxxxx
PART C. OTHER INFORMATION
Item 23. Exhibits.
(a) (1) Articles of Incorporation filed February 19, 1988 is
incorporated by reference to Exhibit (1)(a) to Post-
Effective Amendment No. 28 to the Registration
Statement, filed February 15, 1996 ("Post-Effective
Amendment No. 28").
(2) Amendment No. 1 to the Articles of Incorporation filed
June 30, 1989 is incorporated by reference to Exhibit
(1)(b) to Post-Effective Amendment No. 28.
(3) Amendment No. 2 to the Articles of Incorporation filed
June 30, 1989 is incorporated by reference to Exhibit
(1)(c) to Post-Effective Amendment No. 28.
(4) Amendment No. 3 to the Articles of Incorporation filed
November 12, 1991 is incorporated by reference to
Exhibit (1)(d) to Post-Effective Amendment No. 28.
(5) Amendment No. 4 to the Articles of Incorporation filed
August 18, 1992 is incorporated by reference to Exhibit
(1)(e) to Post-Effective Amendment No. 28.
(6) Amendment No. 5 to the Articles of Incorporation filed
October 23, 1992 is incorporated by reference to
Exhibit (1)(f) to Post-Effective Amendment No. 28.
(7) Amendment No. 6 to the Articles of Incorporation filed
January 26, 1993 is incorporated by reference to
Exhibit (1)(g) to Post-Effective Amendment No. 28.
(8) Amendment No. 7 to the Articles of Incorporation filed
February 10, 1994 is incorporated by reference to
Exhibit (1)(h) to Post-Effective Amendment No. 28.
(9) Amendment No. 8 to the Articles of Incorporation filed
December 29, 1994 is incorporated by reference to
Exhibit (1)(i) to Post-Effective Amendment No. 28.
(10) Amendment No. 9 to the Articles of Incorporation filed
July 20, 1995 is incorporated by reference to Exhibit
(1)(j) to Post-Effective Amendment No. 28.
(11) Amendment No. 10 to the Articles of Incorporation filed
November 10, 1995 is incorporated by reference to
Exhibit (1)(k) to Post-Effective Amendment No. 28.
(12) Amendment No. 11 to Articles of Incorporation filed
July 21, 1997 with respect to the Emerging Growth Fund
is incorporated by reference to Exhibit (1)(l) to Post-
Effective Amendment No. 32.
(13) Amendment No. 12 to Articles of Incorporation filed
January 12, 1998 with respect to change of name to
Firstar Funds, Inc. is incorporated by reference to
Exhibit (1)(m) to Post-Effective Amendment No. 34.
(14) Amendment No. 13 to Articles of Incorporation filed
February 17, 1999 with respect to Retail B Shares is
incorporated by reference to Exhibit (a)(14) to Post-
Effective Amendment No. 36.
(15) Amendment No. 14 to Articles of Incorporation dated
October 15, 1999 with respect to Core International
Equity Fund.
(16) Amendment No. 15 to Articles of Incorporation dated
October 15,1999 with respect to MidCap Index Fund.
(b) (1) Registrant's By-laws dated September 9, 1988 are
incorporated by reference to Exhibit (2)(a) to Post-
Effective Amendment No. 28.
(2) Amendment to By-Laws as approved by the Registrant's
Board of Directors on February 23, 1990 is incorporated
by reference to Exhibit (2)(b) to Post-Effective
Amendment No. 28.
(3) Amendment to By-Laws as approved by the Registrant's
Board of Directors on February 15, 1991 is incorporated
by reference to Exhibit (2)(c) to Post-Effective
Amendment No. 28.
(4) Amendment to By-Laws as approved by the Registrant's
Board of Directors on June 21, 1991 is incorporated by
reference to Exhibit (2)(d) to Post-Effective Amendment
No. 28.
(c) (1) See Articles V and VII of the Articles of Incorporation
which are included as Exhibit (a)(14)and incorporated
by reference to Exhibits (1)(a) and (1)(i) to Post-
Effective Amendment No. 28 and Article II, Sections 1,
9 and 10 of Article III, Sections 1, 2 and 3 of Article
V and Section II of Article VII of the By-laws which
are incorporated by reference to Exhibits 2(a)-2(d) of
Post-Effective Amendment No. 28.
(d) (1) Investment Advisory Agreement between Registrant and
First Wisconsin Trust Company dated August 29, 1991
with respect to the Money Market Fund, U.S. Government
Money Market Fund, Tax-Exempt Money Market Fund, Income
and Growth Fund, Short-Intermediate Fixed Income Fund,
Special Growth Fund, Bond IMMDEXO Fund, Equity Index
Fund, Institutional Money Market Fund and U.S. Federal
Money Market Fund is incorporated by reference to
Exhibit (5)(a) to Post-Effective Amendment No. 28.
(2) Assumption and Guarantee Agreement between First
Wisconsin Trust Company and First Wisconsin Asset
Management dated February 3, 1992 is incorporated by
reference to Exhibit (5)(b) to Post-Effective Amendment
No. 28.
(3) Investment Advisory Agreement between Registrant and
First Wisconsin Asset Management dated March 27, 1992
with respect to the Balanced Fund is incorporated by
reference to Exhibit (5)(c) to Post-Effective Amendment
No. 28.
(4) Addendum No. 1 dated December 27, 1992 to Investment
Advisory Agreement between Registrant and Firstar
Investment Research and Management Company dated March
27, 1992 with respect to the Growth Fund (formerly the
MidCore Growth Fund) and Intermediate Bond Market Fund
is incorporated by reference to Exhibit (5)(d) to Post-
Effective Amendment No. 28.
(5) Addendum No. 2 dated February 5, 1993, to Investment
Advisory Agreement between the Registrant and Firstar
Investment Research and Management Company dated March
27, 1992 with respect to the Tax-Exempt Intermediate
Bond Fund is incorporated by reference to Exhibit
(5)(e) to Post-Effective Amendment No. 28.
(6) Assumption and Guarantee Agreement between Firstar
Trust Company and Firstar Investment Research and
Management Company dated June 17, 1993 with respect to
the Income and Growth Fund is incorporated by reference
to Exhibit (5)(f) to Post-Effective Amendment No. 28.
(7) Addendum No. 3 dated September 2, 1997, to Investment
Advisory Agreement between the Registrant and Firstar
Investment Research and Management Company dated March
27, 1992 with respect to the International Equity Fund
is incorporated by reference to Exhibit (5)(g) to Post-
Effective Amendment No. 32.
(8) Amended and Restated Sub-Advisory Agreement among
Firstar Investment Research and Management Company, the
Registrant and Hansberger Global Investors, Inc. dated
June 15, 1997 with respect to the International Equity
Fund is incorporated by reference to Exhibit (5)(h) to
Post-Effective Amendment No. 32.
(9) Addendum No. 4 to the Investment Advisory Agreement
between Registrant and Firstar Investment Research and
Management Company dated March 27, 1992 with respect to
the MicroCap Fund is incorporated by reference to
Exhibit (5)(i) to Post-Effective Amendment No. 28.
(10) Addendum No. 6 to the Investment Advisory Agreement
between Registrant and Firstar Investment Research &
Management Company dated December 1, 1997 with respect
to the Balanced Income Fund is incorporated by
reference to Exhibit (5)(j) to Post-Effective Amendment
No. 34.
(11) Addendum No. 5 to the Investment Advisory Agreement
between Registrant and Firstar Investment Research &
Management Company dated as of August 15, 1997 with
respect to the Emerging Growth Fund is incorporated by
reference to Exhibit (5)(k) to Post-Effective Amendment
No. 32.
(12) Investment Sub-Advisory Agreement among the Registrant,
Firstar Investment Research & Management Company, LLC
and The Glenmede Trust Company dated November 1, 1999
with respect to the Core International Equity Fund.
(13) Addendum No. 7 to the Investment Advisory Agreement
between Registrant and Firstar Investment Research and
Management Company, LLC dated November 1, 1999 with
respect to the Core International Equity Fund.
(14) Addendum No. 8 to the Investment Advisory Agreement
between Registrant and Firstar Investment Research &
Management Company, LLC dated November 1, 1999 with
respect to the MidCap Index Fund.
(e) (1) Distribution Agreement between Registrant and B.C.
Ziegler & Company dated as of January 1, 1995, with
respect to Money Market Fund, U.S. Government Money
Market Fund, Tax-Exempt Money Market Fund, Growth and
Income Fund, Short-Term Bond Market Fund, Special
Growth Fund, Bond IMMDEXO 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) Addendum No. 4 to the Distribution Agreement dated
February 26, 1999 between Registrant and B.C. Ziegler &
Company with respect to the Series B Shares.
(6) Addendum No. 5 to the Distribution Agreement between
the Registrant and B. C. Ziegler and Company dated
November 1, 1999 with respect to the Core International
Equity Fund.
(7) Addendum No. 6 to the Distribution
Agreement between the Registrant and B.C. Ziegler and
Company dated November 1, 1999 with respect to the
MidCap Index Fund.
(f) Deferred Compensation Plan dated September 16, 1994 and
Deferred Compensation Agreement between Registrant and
its Directors is incorporated by reference to Exhibit
(7) to Post-Effective Amendment No. 28.
(g) (1) Custodian Agreement between Registrant and First
Wisconsin Trust Company dated July 29, 1988 is
incorporated by reference to Exhibit (8)(a) to Post-
Effective Amendment No. 28.
(2) Letter dated December 28, 1989 with respect to the
Custodian Agreement with respect to the Equity Index
Fund is incorporated by reference to Exhibit (8)(b) to
Post-Effective Amendment No. 28.
(3) Revised Mutual Fund Custodial Agent Service Annual Fee
Schedule dated March 1, 1997 to the Custodian Agreement
with respect to the Money Market Fund, U.S. Government
Money Market Fund, Intermediate Bond Market Fund, Bond
IMMDEXO Fund, Growth and Income Fund, MidCore Growth
Fund, MicroCap Fund, Tax-Exempt Money Market Fund, U.S.
Treasury Money Market Fund, Short-Term Bond Market
Fund, Tax-Exempt Intermediate Bond Fund, Balanced Fund,
Equity Index Fund, Special Growth Fund and
International Equity Fund is incorporated by reference
to Exhibit (8)(c) to Post-Effective Amendment No. 34.
(4) Amendment dated May 1, 1990 to the Custodian Agreement
between Registrant and First Wisconsin Trust Company is
incorporated by reference to Exhibit (8)(d) to Post-
Effective Amendment No. 28.
(5) Letter dated April 19, 1991 with respect to the
Custodian Agreement with respect to the Institutional
Money Market Fund and U.S. Federal Money Market Fund is
incorporated by reference to Exhibit (8)(e) to Post-
Effective Amendment No. 28.
(6) Letter dated March 27, 1992 with respect to the
Custodian Agreement with respect to the Balanced Fund
is incorporated by reference to Exhibit (8)(f) to Post-
Effective Amendment No. 28.
(7) Letter dated December 27, 1992 with respect to the
Custodian Agreement with respect to the Intermediate
Bond Market Fund and Growth Fund (formerly the MidCore
Growth Fund) is incorporated by reference to Exhibit
(8)(g) to Post-Effective Amendment No. 28.
(8) Letter dated February 5, 1993 with respect to the
Custodian Agreement with respect to the Tax-Exempt
Intermediate Bond Fund is incorporated by reference to
Exhibit (8)(h) to Post-Effective Amendment No. 28.
(9) Letter Agreement with respect to the Custodian
Agreement dated as of September 2, 1997 with respect to
the International Equity Fund is incorporated by
reference to Exhibit No. (8)(i) to Post-Effective
Amendment No. 32.
(10) Letter Agreement dated August 1, 1995 with respect to
the Custodian Agreement with respect to the MicroCap
Fund is incorporated by reference to Exhibit No. (8)(j)
to Post-Effective Amendment No. 28.
(11) Letter Agreement with respect to the Custodian
Agreement with respect to the Balanced Income Fund
dated December 1, 1997 is incorporated by reference to
Exhibit (8)(k) to Post-Effective Amendment No. 34.
(12) Letter Agreement with respect to the Custodian
Agreement with respect to the Emerging Growth Fund
dated as of March 1, 1997 is incorporated by reference
to Exhibit (8)(l) to Post-Effective Amendment No. 34.
(13) Foreign Custodian Monitoring Agreement between
Registrant and Firstar Investment Research and
Management Company dated June 13, 1997 with respect to
the International Equity Fund is incorporated by
reference to Exhibit 8(m) to Post-Effective Amendment
No. 32.
(14) Assignment dated October 1, 1998 of Custodian Agreement
between Registrant and Firstar Trust Company, dated as
of July 29, 1988 to Firstar Bank Milwaukee, N.A. is
incorporated by reference to Exhibit (g)(14) to Post-
Effective Amendment No. 36.
(15) Letter Agreement dated November 1, 1999 with respect to
the Custodian Agreement between the Registrant and
Firstar Bank Milwaukee, N. A. with respect to the Core
International Equity Fund.
(16) Letter Agreement dated November 1, 1999 with respect to
the Custodian Agreement between the Registrant and
Firstar Bank Milwaukee, N.A. with respect to the MidCap
Index Fund.
(h) (1) Co-Administration Agreement Among the Registrant, B.C.
Ziegler & Company and Firstar Trust Company dated as of
January 1, 1995 is incorporated by reference to
Exhibit (9)(a) to Post-Effective Amendment No. 28.
(2) Addendum No. 1 to the Co-Administration Agreement among
the Registrant, B.C. Ziegler and Company and Firstar
Trust Company dated as of January 1, 1995 with respect
to the MicroCap Fund is incorporated by reference to
Exhibit (9)(b) to Post-Effective Amendment No. 28.
(3) Addendum No. 3 to the Co-Administration Agreement among
the Registrant, B.C. Ziegler and Company and Firstar
Trust Company dated as of January 1, 1995 with respect
to the Balanced Income Fund is incorporated by
reference to Exhibit (9)(c) to Post-Effective Amendment
No. 34.
(4) Fund Accounting Servicing Agreement dated March 23,
1988 between Registrant and First Wisconsin Trust
Company is incorporated by reference to Exhibit (9)(d)
to Post-Effective Amendment No. 28.
(5) Letter dated July 29, 1988 with respect to the Fund
Accounting Servicing Agreement is incorporated by
reference to Exhibit (9)(e) to Post-Effective Amendment
No. 28.
(6) Letter dated December 28, 1989 with respect to the Fund
Accounting Servicing Agreement with respect to the
Equity Index Fund is incorporated by reference to
Exhibit (9)(f) to Post-Effective Amendment No. 28.
(7) Letter dated April 19, 1991 with respect to the Fund
Accounting Servicing Agreement with respect to the
Institutional Money Market Fund and U.S. Federal Money
Market Fund is incorporated by reference to Exhibit
(9)(g) to Post-Effective Amendment No. 28.
(8) Letter dated March 27, 1992 with respect to the Fund
Accounting Servicing Agreement with respect to the
Balanced Fund is incorporated by reference to Exhibit
(9)(h) to Post-Effective Amendment No. 28.
(9) Letter dated December 27, 1992 with respect to the Fund
Accounting Servicing Agreement with respect to the
Intermediate Bond Market Fund and Growth Fund (formerly
the MidCore Growth Fund) is incorporated by reference
to Exhibit (9)(i) to Post-Effective Amendment No. 28.
(10) Letter dated February 5, 1993 with respect to the Fund
Accounting Servicing Agreement with respect to the Tax-
Exempt Intermediate Bond Fund is incorporated by
reference to Exhibit (9)(j) to Post-Effective Amendment
No. 29.
(11) Revised Fund Valuation and Accounting Fee Schedule
dated January 1, 2000 to the Fund Accounting Servicing
Agreement with respect 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,
Intermediate Bond Market Fund, Bond IMMDEXTM Fund, Tax-
Exempt Intermediate Bond Fund, Balanced Income Fund,
Balanced Growth Fund, Growth & Income Fund, Equity
Index Fund, Growth Fund, MidCap Index Fund, Special
Growth Fund, Emerging Growth Fund, MicroCap Fund, Core
International Equity Fund and International Equity
Fund.
(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 January 1, 2000 to the Fund Accounting
Servicing Agreement with respect 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, Intermediate Bond Market Fund, Bond IMMDEXTM
Fund, Tax-Exempt Intermediate Bond Fund, Balanced
Income Fund, Balanced Growth Fund, Growth & Income
Fund, Equity Index Fund, Growth Fund, MidCap Index
Fund, Special Growth Fund, Emerging Growth Fund,
MicroCap Fund, Core International Equity Fund and
International Equity Fund.
(35) Internet Access Agreement with Firstar Trust Company,
dated April 1998 is incorporated by reference to
Exhibit (h)(35) to Post-Effective Amendment No. 35.
(36) Order Processing Agreement with M and I Trust Company,
dated April 1, 1998 is incorporated by reference to
Exhibit (h)(36) to Post-Effective Amendment No. 35.
(37) Service Agreement with Jack White and Company, dated
May 12, 1998 is incorporated by reference to Exhibit
(h)(37) to Post-Effective Amendment No. 35.
(38) Service Agreement with National Investors Services
Corporation, dated June 1998 is incorporated by
reference to Exhibit (h)(38) to Post-Effective
Amendment No. 35.
(39) Order Processing Agreement with Northern Trust
Retirement Consulting, L.L.C., dated February 1, 1998
is incorporated by reference to Exhibit (h)(39) to
Post-Effective Amendment No. 36.
(40) 403(b) Comprehensive Agreement with Universal Pensions,
Inc., dated May 4, 1998 is incorporated by reference to
Exhibit (h) (40) to Post-Effective Amendment No. 36.
(41) Assignment dated October 1, 1998 of Fund Accounting
Servicing Agreement between Registrant and Firstar
Trust Company, dated March 23, 1988, to Firstar Mutual
Fund Services, LLC. is incorporated by reference to
Exhibit (h)(41) to Post-Effective Amendment No. 36.
(42) Assignment dated October 1, 1998 of Co-Administration
Agreement between Registrant, B.C. Ziegler and Company
and Firstar Trust Company, dated January 1, 1995, to
Firstar Mutual Fund Services, LLC. is incorporated by
reference to Exhibit (h) (42) to Post-Effective
Amendment No. 36.
(43) Assignment dated October 1, 1998 of the Shareholder
Servicing Agent Agreement between Registrant and
Firstar Trust Company, dated March 23, 1988, to Firstar
Mutual Fund Services, LLC. is incorporated by reference
to Exhibit (h)(43) to Post-Effective Amendment No. 36.
(44) Confidentiality Agreement dated June 17, 1999 between
Charles Schwab & Co., Inc. and Firstar Investment
Research and Management Company, LLC is incorporated by
reference to Exhibit (h)(44) to Post-Effective
Amendment No. 37.
(45) Operating Agreement dated June 17, 1999 among
Registrant, Charles Schwab & Co., Inc. and Firstar
Investment Research and Management Company LLC is
incorporated by reference to Exhibit (h)(45) to Post-
Effective Amendment No. 37.
(46) Retirement Plan Order Processing Amendment to the
Operating Agreement dated June 17, 1999 among
Registrant, Charles Schwab & Co., Inc., the Charles
Schwab Trust Company and Firstar Investment Research
and Management Company, LLC is incorporated by
reference to Exhibit (h)(46) to Post-Effective
Amendment No. 37.
(47) Services Agreement dated June 17, 1999 among
Registrant, Charles Schwab & Co., Inc. and Firstar
Investment Research and Management Company, LLC is
incorporated by reference to Exhibit (h)(47) to Post-
Effective Amendment No. 37.
(48) Addendum No. 4 dated November 1, 1999 to the Co-
Administration Agreement among the Registrant, Firstar
Investment Research and Management Company, LLC and B.
C. Ziegler and Company with respect to the Core
International Equity Fund.
(49) Addendum No. 5 dated November 1, 1999 to the Co-
Administration Agreement among the Registrant, Firstar
Investment Research and Management Company, LLC, and
B.C. Ziegler & Company with respect to the MidCap Index
Fund.
(50) Letter Agreement dated November 1, 1999 regarding Fund
Accounting Servicing Agreement between Registrant and
Firstar Mutual Fund Services, LLC, with respect to the
Core International Equity Fund.
(51) Letter Agreement dated November 1, 1999 regarding Fund
Accounting Servicing Agreement between Registrant and
Firstar Mutual Fund Services, LLC, with respect to the
MidCap Index Fund.
(52) Letter Agreement dated November 1, 1999 to the
Shareholder Servicing Agent Agreement between the
Registrant and Firstar Mutual Fund Services, LLC, with
respect to the Core International Equity Fund.
(53) Letter Agreement dated November 1, 1999 to the
Shareholder Servicing Agent Agreement between the
Registrant and Firstar Mutual Fund Services, LLC, with
respect to the MidCap Index Fund.
(54) Credit Agreement dated December 29, 1999 for Firstar
Funds, Inc. and Mercantile Mutual Funds, Inc. with
Chase Manhattan Bank.
(i) 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) Purchase Agreement dated February 26, 1999 between
Registrant and B.C. Ziegler & Company with respect to
the Series B Shares.
(5) Purchase Agreement dated November 3, 1999 between
Registrant and B.C. Ziegler & Company with respect to
the Core International Equity Fund.
(6) Purchase Agreement dated November 3, 1999 between
Registrant and B.C. Ziegler & Company with respect to
the MidCap Index Fund.
(m) (1) Amended and Restated Distribution and Service Plan and
Form of Distribution and Servicing Agreement is
incorporated by reference to Exhibit (14)(a) to Post-
Effective Amendment No. 30.
(2) Distribution and Services Plan for the Retail B Shares
is incorporated by reference to Exhibit (m)(2) to Post-
Effective Amendment No. 36.
(3) Services Plan for the Retail B Shares is incorporated
by reference to Exhibit (m)(3) to Post-Effective
Amendment No. 36.
(n) (1) Intentionally left blank.
(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 the Registrant and its directors, officers,
employees and agents against certain losses is provided for in Section 13 of the
Retirement Plan Order Processing Amendment to the Operating Agreement with
Charles Schwab & Co., Inc. and The Charles Schwab Trust Company incorporated
herein by reference to Exhibit (h)(46).
Indemnification of the Registrant, its investment adviser and their
directors, officers, employees and agents against certain losses is provided for
in Section 4(a) of the Services Agreement with Charles Schwab and Co., Inc.
incorporated herein by reference as Exhibit (h)(47).
Indemnification of Registrant's principal underwriter, custodians and
transfer agents against certain losses is provided for, respectively, in Section
1.9 of the Distribution Agreement, incorporated by reference as Exhibit (6)(a)
hereto, Section 11 of the Custodian Agreement, incorporated by reference as
Exhibit (8)(a) hereto, and Section 6(c) of the Shareholder Servicing Agent
Agreement incorporated by reference as Exhibit (9)(p) hereto. Registrant has
obtained from a major insurance carrier a directors' and officers' liability
policy covering certain types of errors and omissions.
Item 26. Business and Other Connections of Investment Adviser
----------------------------------------------------
Firstar Investment Research and Management Company, LLC, 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 IMMDEXO 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, Balanced Income Fund, Core International Equity Fund and MidCap
Index 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 LLC, 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 LLC 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 LLC who
are or have been engaged in any other business, profession, vocation or
employment of a substantial nature.
FIRSTAR INVESTMENT RESEARCH AND MANAGEMENT COMPANY
Position with
Firstar Investment
Research and Other Business Type of
Name Management Company Connections Business
- ---- ------------------ -------------- --------
Robert L. Webster Director Executive Bank
Vice President,
Firstar Bank,
Milwaukee, N.A.
777 E. Wisconsin
Avenue, Milwaukee, WI
53202
Todd Krieg Director
Bruce Laning Director
Marian Zentmyer Director,
Chief Equity
Investment Officer
Hansberger Global Investors, Inc., a wholly-owned subsidiary of
Hansberger, 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
Business Address Investors, Inc. Address*<F1> Type of Business
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Thomas L. Hansberger Chairman, CEO, Director, Mutual Fund
President, Director Schroder Korea Fund PLC
and Treasurer 33 Gutter Lane
London,
EC2B-A124 8AS
- -----------------------------------------------------------------------------------------
Director, Mutual Fund
The Bangkok Fund
Bangkok, Thailand
- -----------------------------------------------------------------------------------------
Advisory Board Member, Mutual Fund
The India Fund
India
- -----------------------------------------------------------------------------------------
Kimberly Ann Scott Director, None
Senior Vice
President, Chief
Administrative
Officer, Chief
Compliance Officer
and Secretary
- -----------------------------------------------------------------------------------------
J. Christopher Jackson Director, Senior None
Vice President,
General Counsel and
Assistant Secretary
- -----------------------------------------------------------------------------------------
James Everett Chaney Chief Investment None
Officer
- -----------------------------------------------------------------------------------------
Lauretta 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
- -----------------------------------------------------------------------------------------
Ajit Dayal Managing Director None
- -----------------------------------------------------------------------------------------
Aureole Foong Managing Director None
- -----------------------------------------------------------------------------------------
Thomas A. Christenson Managing Director None
- -----------------------------------------------------------------------------------------
</TABLE>
<F1>Address of all individuals: 515 East Las Olas Blvd., Suite 1300, Fort
Lauderdale, FL 33301.
The Glenmede Trust Company serves as sub-investment adviser to the Core
International Equity Fund.
Set forth below is a list of all of the directors, senior officers and
those officers primarily responsible for Registrant's affairs and, with respect
to each such person, the name and business address of the Company (if any) with
which such person has been connected at any time since July 31, 1996, as well as
the capacity in which such person was connected.
THE GLENMEDE TRUST COMPANY
- ------------------------------------------------------------------------------
DIRECTOR ORGANIZATION AFFILIATION
- ------------------------------------------------------------------------------
SUSAN W. CATHERWOOD The Glenmede Corporation Director
- ------------------------------------------------------------------------------
The Glenmede Trust Company Director
- ------------------------------------------------------------------------------
The Glenmede Trust Company Director
of New Jersey
- ------------------------------------------------------------------------------
PECO Energy Director
- ------------------------------------------------------------------------------
University of Pennsylvania Vice Chairman, Board
of Trustees
- ------------------------------------------------------------------------------
The World Affairs Council Member, Board
of Philadelphia
- ------------------------------------------------------------------------------
Monell Chemical Senses Director
Center
- ------------------------------------------------------------------------------
The Christopher Ludwick Member, Board of
Foundation Managers, Vice Chairman
- ------------------------------------------------------------------------------
Executive Service Corps of Vice Chairman, Board of
the Delaware Valley Directors
- ------------------------------------------------------------------------------
Montessori Genesis II Member, Advisory Board
- ------------------------------------------------------------------------------
United Way of Southeastern Director
Pennsylvania
- ------------------------------------------------------------------------------
Thomas Harrison Skelton Board Member
Foundation
- ------------------------------------------------------------------------------
The Catherwood Foundation Board Member
- ------------------------------------------------------------------------------
JAMES L. KERMES The Glenmede Trust Company Director
- ------------------------------------------------------------------------------
The Glenmede Trust Company Director
of New Jersey
- ------------------------------------------------------------------------------
The Glenmede Trust Company, Director, Chairman of
N.A the Board
- ------------------------------------------------------------------------------
Rittenhouse Square Board Member and
Indemnity Ltd. Officer
- ------------------------------------------------------------------------------
Assoc. for Investment Mgm't Committee Member-
& Research (AIMR) Performance
Presentation Standards
- ------------------------------------------------------------------------------
Elwyn, Inc. Board Member
- ------------------------------------------------------------------------------
THOMAS W. LANGFITT, M.D. The Glenmede Corporation Director
- ------------------------------------------------------------------------------
The Glenmede Trust Company Director
- ------------------------------------------------------------------------------
General Motors Medical Chairman
Committee on Automotive
Safety
- ------------------------------------------------------------------------------
University of Pennsylvania Board of Trustees
Medical Center
- ------------------------------------------------------------------------------
Greater Philadelphia Urban Member
Affairs Coalition
- ------------------------------------------------------------------------------
The Philadelphia Public Member
School/Business Partnership
for Reform Governing Board
- ------------------------------------------------------------------------------
Secretary's Advisory Member
Committee on Infant
Mortality Department of
Health and Human Services
- ------------------------------------------------------------------------------
Institute of Medicine Member
- ------------------------------------------------------------------------------
American Philosophical Member
Society
- ------------------------------------------------------------------------------
Community College of Director
Philadelphia
- ------------------------------------------------------------------------------
Nat'l Museum of American Trustee
History Smithsonian
Institution
- ------------------------------------------------------------------------------
ARTHUR E. PEW, III The Glenmede Corporation Director
- ------------------------------------------------------------------------------
The Glenmede Trust Company Director
- ------------------------------------------------------------------------------
Manitou Island Association Member, Board of
(White Bear Lake, MN) Directors
- ------------------------------------------------------------------------------
Minnesota Transportation Member, Board of
Museum, Inc. (Mpls, MN) Trustees
- ------------------------------------------------------------------------------
Museum of Transport. Chairman, Board of
Development Corp.(St. Paul, Directors
MN)
- ------------------------------------------------------------------------------
Osceola & St. Croix Valley Member, Board of
Railway (Osceola, WI) Directors
- ------------------------------------------------------------------------------
G. THOMPSON PEW, JR. The Glenmede Trust Company Director
- ------------------------------------------------------------------------------
The Glenmede Fund, Inc. Director/Trustee
- ------------------------------------------------------------------------------
The Glenmede Portfolios Director/Trustee
- ------------------------------------------------------------------------------
The Glenmede Equity Fund Advisory Board Member
- ------------------------------------------------------------------------------
Opera Company of Vice President and
Philadelphia Board Member, Executive
Committee
- ------------------------------------------------------------------------------
Philadelphia Charity Ball, Board Member, Past
Inc. President
- ------------------------------------------------------------------------------
Philadelphia Zoo "Zoobilee" Committee Member
- ------------------------------------------------------------------------------
Academy of Music AOM Committee, Board
Philadelphia, Inc.
- ------------------------------------------------------------------------------
(SEA) Sea Education Board Member
Association
- ------------------------------------------------------------------------------
Corinthian Historical President, Board Member
Foundation
- ------------------------------------------------------------------------------
Devon Horse Show Trophy Committee Member
- ------------------------------------------------------------------------------
Corinthian Yacht Club Committee Member
- ------------------------------------------------------------------------------
American Health Care Director
(China)
- ------------------------------------------------------------------------------
Benchmark School Chairperson, Annual
Giving
- ------------------------------------------------------------------------------
Special Opportunities Group Board Member
(Guilder Assoc.)
- ------------------------------------------------------------------------------
J. HOWARD PEW, II The Glenmede Corporation Director
- ------------------------------------------------------------------------------
The Glenmede Trust Company Director
- ------------------------------------------------------------------------------
J. N. PEW, III The Glenmede Corporation Director
- ------------------------------------------------------------------------------
The Glenmede Trust Company Director
- ------------------------------------------------------------------------------
J. N. PEW, IV, M.D. The Glenmede Corporation Director
- ------------------------------------------------------------------------------
The Glenmede Trust Company Director
- ------------------------------------------------------------------------------
The Glenmede Trust Company Director
of New Jersey
- ------------------------------------------------------------------------------
Joseph N. Pew, IV, M.D., PC President
- ------------------------------------------------------------------------------
Flying Hills Self Storage, President
Inc.
- ------------------------------------------------------------------------------
American Red Cross, Berks Director
County
- ------------------------------------------------------------------------------
French & Pickering Creek Director
Conservation Trust, Inc.
- ------------------------------------------------------------------------------
R. ANDERSON PEW The Glenmede Corporation Director, Chairman of
the Board
- ------------------------------------------------------------------------------
The Glenmede Trust Company Director
- ------------------------------------------------------------------------------
The Glenmede Trust Company, Director
N.A.
- ------------------------------------------------------------------------------
Sun Company, Inc. Director
- ------------------------------------------------------------------------------
Academy of Music Member, AOM Committee
Philadelphia, Inc.
- ------------------------------------------------------------------------------
Aircraft Owners and Pilots Chairman of the Board
Association
- ------------------------------------------------------------------------------
AOPA Air Safety Foundation Chairman, Board of
Trustees
- ------------------------------------------------------------------------------
Bryn Mawr College Vice Chairman, Board of
Trustees
- ------------------------------------------------------------------------------
The Children's Hospital of Vice Chairman, Board of
Philadelphia Trustees
- ------------------------------------------------------------------------------
The Curtis Institute of Member, Board of
Music Trustees
- ------------------------------------------------------------------------------
The Jackson Laboratory Member, Corporation
Board of Trustees
- ------------------------------------------------------------------------------
RICHARD F. PEW The Glenmede Corporation Director
- ------------------------------------------------------------------------------
The Glenmede Trust Company Director
- ------------------------------------------------------------------------------
Yellowstone Center for Director
Mountain Environments
- ------------------------------------------------------------------------------
Mountain Research Center, Director
Montana State University
- ------------------------------------------------------------------------------
Teton Science School; Director
Kelly, Wyoming
- ------------------------------------------------------------------------------
REBECCA W. RIMEL The Glenmede Trust Company Director
- ------------------------------------------------------------------------------
Deutsche Banc Alex. Brown Director
Flag Investors Funds
- ------------------------------------------------------------------------------
-Deutsche Banc Alex Brown
Cash Reserve Fund
- ------------------------------------------------------------------------------
-Communications Income Fund
Inc.
- ------------------------------------------------------------------------------
-Real Estate Securities
Fund Inc.
- ------------------------------------------------------------------------------
-Equity Partners Fund Inc.
- ------------------------------------------------------------------------------
-Emerging Growth Fund Inc.
- ------------------------------------------------------------------------------
-Short-Intermediate Income
Fund Inc.
- ------------------------------------------------------------------------------
-Value Builder Fund Inc.
- ------------------------------------------------------------------------------
University of Virginia Campaign Executive
Committee, UVA Alumni
Association Board of
Managers
- ------------------------------------------------------------------------------
Thomas Jefferson Memorial Board of Directors
Foundation (Monticello)
- ------------------------------------------------------------------------------
Gilder Lehrman Institute of Advisory Board
American History
- ------------------------------------------------------------------------------
Council on Foundations Board of Directors,
Robert W. Scrivner
Award Selection
Committee
- ------------------------------------------------------------------------------
ROBERT G. WILLIAMS The Glenmede Trust Company Director, Chairman of
the Board
- ------------------------------------------------------------------------------
The Glenmede Trust Company Director
of New Jersey
- ------------------------------------------------------------------------------
Coriell Institute for Trustee, Chairman
Medical Research Investment Committee
- ------------------------------------------------------------------------------
Elizabeth Haddon Housing President / Director
Corp (affordable housing)
- ------------------------------------------------------------------------------
Estaugh Corporation (aka President / Trustee
Medford Leas)
- ------------------------------------------------------------------------------
Upland Corp. President
- ------------------------------------------------------------------------------
ETHEL BENSON WISTER The Glenmede Corporation Director
- ------------------------------------------------------------------------------
The Glenmede Trust Company Director
- ------------------------------------------------------------------------------
Academy of Music Committee Member
Philadelphia, Inc.
- ------------------------------------------------------------------------------
Concerto Soloists Orchestra Arts Award 1997
Recipient
- ------------------------------------------------------------------------------
Scheie Eye Institute - Recipient, Guest of
Department of Ophthalmology Honor Award 1998 -
University of Pennsylvania Scheie Odyssey Ball
- ------------------------------------------------------------------------------
Philadelphia Television Board Member
Network, Inc.
- ------------------------------------------------------------------------------
NAME AND PRINCIPAL
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:
Name and Principal Position and Offices Positions and Offices
Business Address with B. C. Ziegler with Registrant
- ---------------- ------------------- ---------------------
Peter D. Ziegler Chairman, President, Chief None
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, Treasurer, None
Controller and Director
Charles G. Stevens Vice President - Marketing None
Director
Jack H. Downer Vice President - None
MIS Director
Robert J. Tuszynski Senior Vice President None
Gerry Aman Vice President - Insurance None
Sheila K. Hittman Vice President - Personnel None
Robert J. Johnson Vice President - Compliance None
James M. Bushman Vice President - Recruiting None
and Training Coordinator
Lay C. Rosenheimer Vice President - Bond Sales None
Control
Darrell P. Frank Vice President - Director None
of Strategic Change
M.L. McBain Vice President - None
Equity Securities
James L. Brendemuehl Vice President - Managed None
Products
Ronald C. Strzok Senior Vice President - None
Administration
Roxanne Dalnodar Vice President - Operations None
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, LLC, Firstar
Center, 777 E. Wisconsin Avenue, Suite 800, Milwaukee, WI 53202
(records relating to its function as investment adviser).
(3) Hansberger Global Investors, Inc., 515 East Las Olas Blvd., Suite
1300, Fort Lauderdale, FL 33301 (records relating to its function as
sub-investment adviser for the International Equity Fund).
(4) B.C. Ziegler & Company, 215 North Main Street, West Bend, Wisconsin
53095-3348 (records relating to its functions as distributor and co-
administrator).
(5) Drinker Biddle & Reath LLP, One Logan Square, 18th and Cherry Streets,
Philadelphia, Pennsylvania 19103 (Registrant's Articles of
Incorporation, By-laws and Minute Books).
(6) The Chase Manhattan Bank, 4 Chase Metro Tech Center, Brooklyn, NY
11245, ATTN: Global Investor Services, Investment Management Group
(records relating to its function as foreign subcustodian).
(7) The Glenmede Trust Company, One Liberty Place, 1650 Market Street,
Suite 1200, Philadelphia, PA 19103 (records relating to its function
as sub-investment adviser for the Core International Equity Fund).
Item 29. Management Services
-------------------
None.
Item 30 Undertakings
-------------
None.
SIGNATURES
------------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment to its
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment No. 38 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Milwaukee, and the State of Wisconsin,
on the 28th day of February, 2000.
FIRSTAR FUNDS, INC.
Registrant
By /s/Bruce R. Laning
----------------
Bruce R. Laning
Director, President & Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No. 38 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 February 28, 2000
- ---------------------
(James M. Wade) Director
<F1>/s/Bruce R. Laning Director,
- ---------------------- President, Treasurer February 28, 2000
Bruce R. Laning
<F1>Richard Riederer Director February 28, 2000
- ---------------------
(Richard Riederer)
<F1>Jerry Remmel Director February 28, 2000
- ---------------------
(Jerry Remmel)
<F1>Glen R. Bomberger Director February 28, 2000
- ---------------------
(Glen R. Bomberger)
<F1>Charles R. Roy Director February 28, 2000
- ---------------------
(Charles R. Roy)
<F1>Bronson J. Haase Director February 28, 2000
- ---------------------
(Bronson J. Haase)
<F1>/s/By Bruce R. Laning February 28, 2000
- -------------------------
Bruce R. Laning
Attorney-in-fact
POWER OF ATTORNEY
-----------------
Glen R. Bomberger, whose signature appears below, does hereby
constitute and appoint James M. Wade, Bruce R. Laning 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: February 22, 2000 /s/ Glen R. Bomberger
----------------------
Glen R. Bomberger
POWER OF ATTORNEY
-----------------
James M. Wade, whose signature appears below, does hereby constitute
and appoint Bruce R. Laning 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: February 22, 2000 /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, Bruce R. Laning 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: February 22, 2000 /s/ Richard K. Riederer
-----------------------
Richard K. Riederer
POWER OF ATTORNEY
-----------------
Jerry Remmel, whose signature appears below, does hereby constitute
and appoint James M. Wade, Bruce R. Laning 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: February 22, 2000 /s/ Jerry Remmel
-----------------
Jerry Remmel
POWER OF ATTORNEY
-----------------
Bruce R. Laning, 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: February 22, 2000 /s/ Bruce R. Laning
-------------------
Bruce R. Laning
POWER OF ATTORNEY
-----------------
Charles R. Roy, whose signature appears below, does hereby constitute
and appoint James M. Wade, Bruce R. Laning 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: February 22, 2000 /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, Bruce R. Laning 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: February 22, 2000 /s/ Bronson J. Haase
--------------------
Bronson J. Haase
FIRSTAR FUNDS, INC.
CERTIFICATE OF SECRETARY
The following resolution was duly adopted by the Board of Directors of
Firstar Funds, Inc. (the "Company") on February 22, 2000 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 and any of them hereby is, authorized to execute a Power of
Attorney appointing James M. Wade, Bruce R. Laning 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 28, 2000
EXHIBIT INDEX
Exhibit No. Item
- ----------- ----
(a) (15) Amendment No. 14 to Articles of Incorporation dated October
15, 1999 for the Core International Equity Fund.
(a) (16) Amendment No. 15 to Articles of Incorporation dated October
15, 1999 for the MidCap Index Fund.
(d) (12) Investment Sub-Advisory Agreement between Firstar Investment
Research and Management Company, LLC and The Glenmede Trust
Company dated November 1, 1999 with respect to the Core
International Equity Fund.
(d) (13) Addendum No. 7 to the Investment Advisory Agreement between
Registrant and Firstar Investment Research and Management
Company, LLC dated November 1, 1999 with respect to the Core
International Equity Fund.
(d) (14) Addendum No. 8 to the Investment Advisory Agreement between
Registrant and Firstar Investment Research and Management
Company, LLC dated November 1, 1999 with respect to the
MidCap Index Fund.
(e)(5) Addendum No. 4 to the Distribution Agreement between
Registrant and B. C. Ziegler and Co. dated February 26, 1999
with respect to the "B" Series of Shares.
(e) (6) Addendum No. 5 to the Distribution Agreement dated November
1, 1999 between Registrant and B.C. Ziegler & Company with
respect to the Core International Equity Fund.
(e) (7) Addendum No. 6 to the Distribution Agreement dated November
1, 1999 between Registrant and B.C. Ziegler & Company with
respect to the MidCap Index Fund.
(g) (15) Letter Agreement dated November 1, 1999 with respect to the
Custodian Agreement between Registrant and Firstar Bank
Milwaukee N. A. with respect to the Core International
Equity Fund.
(g) (16) Letter Agreement dated November 1, 1999 with respect to the
Custodian Agreement between Registrant and Firstar Bank
Milwaukee N. A. with respect to the MidCap Index Fund.
(h) (11) Revised Fund Valuation and Accounting Fee Schedule dated
January 1, 2000 to the Fund Accounting Servicing Agreement
with respect 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, Intermediate Bond Market Fund,
Bond IMMDEXTM Fund, Tax-Exempt Intermediate Bond Fund,
Balanced Income Fund, Balanced Growth Fund, Growth & Income
Fund, Equity Index Fund, Growth Fund, MidCap Index Fund,
Special Growth Fund, Emerging Growth Fund, MicroCap Fund,
Core International Equity Fund and International Equity
Fund.
(h) (34) Revised Shareholder Servicing Agent Agreement Fee Schedule
dated January 1, 2000 to the Fund Accounting Servicing
Agreement with respect 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, Intermediate Bond
Market Fund, Bond IMMDEXTM Fund, Tax-Exempt Intermediate
Bond Fund, Balanced Income Fund, Balanced Growth Fund,
Growth & Income Fund, Equity Index Fund, Growth Fund, MidCap
Index Fund, Special Growth Fund, Emerging Growth Fund,
MicroCap Fund, Core International Equity Fund and
International Equity Fund.
(h) (48) Addendum No. 4 to the Co-Administration Agreement among the
Registrant, B.C. Ziegler and Company and Firstar Mutual Fund
Services, LLC dated November 1, 1999 with respect to the
Core International Equity Fund.
(h) (49) Addendum No. 5 to the Co-Administration Agreement among the
Registrant, B.C. Ziegler and Company and Firstar Mutual Fund
Services, LLC dated November 1, 1999 with respect to the
MidCap Index Fund.
(h) (50) Letter Agreement dated November 1, 1999 with respect to the
Fund Accounting and Servicing Agreement between Registrant
and Firstar Mutual Fund Services LLC with respect to the
Core International Equity Fund.
(h) (51) Letter Agreement dated November 1, 1999 with respect to the
Fund Accounting and Servicing Agreement between Registrant
and Firstar Mutual Fund Services LLC with respect to the
MidCap Index Fund.
(h) (52) Letter Agreement dated November 1, 1999 to the Shareholder
Servicing Agent Agreement between Registrant and Firstar
Mutual Fund Services, LLC with respect to the Core
International Equity Fund.
(h) (53) Letter Agreement dated November 1, 1999 to the Shareholder
Servicing Agent Agreement between Registrant and Firstar
Mutual Fund Services, LLC with respect to the MidCap Index
Fund.
(h)(54) Credit Agreement dated December 29, 1999 for Firstar Funds,
Inc. and Mercantile Mutual Funds, Inc. with Chase Manhattan
Bank.
(i) Opinion of Drinker Biddle & Reath LLP.
(j) (1) Consent of Drinker Biddle & Reath LLP.
(j) (2) Consent of PricewaterhouseCoopers LLP.
(l)(4) Purchase Agreement dated February 26, 1999 between
Registrant and B. C. Ziegler & Co. with respect to the "B"
Series of Shares.
(l) (5) Purchase Agreement dated November 3, 1999 between Registrant
and B.C. Ziegler & Company with respect to the Core
International Equity Fund.
(l) (6) Purchase Agreement dated November 3, 1999 between Registrant
and B.C. Ziegler & Company with respect to the MidCap Index
Fund.
(n) (2) Amended and Restated Plan Pursuant to Rule 18f-3 for
Operation of a Multi-Series System.
EXHIBIT (A)(15)
ARTICLES OF AMENDMENT Stock(for profit)
- -----------------------------
Joan Ohlbaum Swirsky, Esquire - Please indicate where you would like the
DRINKER BIDDLE & REATH LLP acknowledgement copy of the filed document
One Logan Square sent. Please include complete name and
18th and Cherry Street mailing address.
Philadelphia, PA 19103
- -----------------------------
Your phone number during the day: (215) 988-2601
--- --------
INSTRUCTIONS (Ref. sec. 180.1006 Wis. Stats. for document content)
- ------------
Submit one original and one exact copy to Department of Financial
Institutions, Division of Corporate and Consumer Services, P.O. Box 7846,
Madison, Wisconsin, 53707-7846. (If sent by Express or Priority U.S. mail,
address to 345 W. Washington Ave., Madison, WI 53703). The original must
include an original manual signature (sec. 180.0120(3)(c), Wis. Stats). If you
have any additional questions, please call the Corporations Division at
608-261-9555.
A. State the name of the corporation (before any changes effected by this
amendment) and the text of the amendment(s). The text should recite the
resolution adopted (e.g.) "RESOLVED, THAT, Article 1 of the Articles of
Incorporation is hereby amended to read as follows.... etc.").
If an amendment provides for an exchange, reclassification or cancellation
of issued shares, state the provisions for implementing the amendment if not
contained in the amendment itself.
B. Enter the date of adoption of the amendment(s). If there is more than one
amendment, identify the date of adoption of each. Mark one of the three choices
to indicate the method of adoption of the amendment(s).
By Board of Directors - Refer to sec. 180.1002 Wis. Stats. for specific
information on the character of amendments that may be adopted by the Board of
Directors without shareholder action.
By Board of Directors and Shareholders - Amendments proposed by the Board
of Directors and adopted by shareholder approval. Voting requirements differ
with circumstances and provisions in the articles of incorporation. See sec.
180.1003 Wis. Stats. for specific information.
By Incorporators or Board of Directors - Before issuance of shares - See
sec. 180.1005 Wis. Stats. for conditions attached to the adoption of an
amendment approved by a vote or consent of less than 2/3rds of the shares
subscribed for.
C. Enter the date of execution and the name and title of the person signing
the document. The document must be signed by one of the following: An officer
(or incorporator if directors have not been elected) of the corporation or the
fiduciary if the corporation is in the hands of a receiver, trustee, or other
court appointed fiduciary. At least one copy must bear an original manual
signature.
D. If the document is executed in Wisconsin, sec. 14.38(14) Wis. Stats.
provides that it shall not be filed unless the name of the drafter (either an
individual or a governmental agency) is printed in a legible manner. If
document is NOT drafted in Wisconsin, please so state.
FILING FEES
- -----------
Submit the document with a minimum filing fee of $40.00, payable to
SECRETARY OF STATE. If the amendment causes an increase in the number of
authorized shares, provide an additional fee of 1 cent for each new authorized
share. When the document has been filed, an acknowledgement copy stamped
"FILED" will be sent to the address indicated above.
ARTICLES OF AMENDMENT
STOCK (FOR PROFIT)
A. Name of Corporation: Firstar Funds, Inc.
---------------------------------
(prior to any change effected by this amendment)
--------
Text of Amendment (Refer to the existing articles of incorporation and
instruction A. Determine those items to changed and set forth below the
number identifying the paragraph being changed and how the amended
paragraph is to read.)
RESOLVED, THAT, the articles of incorporation be amended as follows:
SEE ATTACHED
The effective date of these Articles of Amendment shall be October 15,
1999.
B. Amendment(s) adopted on August 13, 1999 (Directors)
------------------------------------ (date)
Indicate the method of adoption by checking the appropriate choice below:
( X ) In accordance with sec. 180.1002, Wis. Stats. (By the Board of
Directors)
OR
( ) In accordance with sec. 180.1003, Wis. Stats. (By the Board of
Directors and Shareholders)
OR
( ) In accordance with sec. 180.1005, Wis. Stats. (By Incorporators or
Board of Directors, before issuance of shares)
C. Executed on behalf of the
corporation on October 15, 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 AUGUST 13, 1999
------------------------------------------------
(a) The name of the Company is Firstar Funds, Inc.
(b) and (c) The text of the Amendment which determines the terms of the
Company's Class 19-Institutional Series, Class 19-A Series,
and Class 19-B Serie Common Stock and the number of shares
thereof is as follows:
RESOLVED, that pursuant to Article V of the Articles of
Incorporation of the Company, One Hundred Million authorized,
unissued and unclassified shares of Class 19 Common Stock of the
Company be, and hereby are, divided into and classified as Class
19 - Institutional Series, One Hundred Million authorized,
unissued and unclassified shares of Class 19 Common Stock of the
Company be, and hereby are divided into and classified as Class
19-A Series Common Stock and One Hundred Million authorized,
unissued and unclassified shares of Class 19 Common Stock of
the Company be, and hereby are divided into and classified as
Class 19-B Series Common Stock, with all of the preferences,
limitations and relative rights set forth in Article V. B.
of said Articles of Incorporation.
(d) No shares of the Company's Class 19 Institutional Series,
Class 19-A Series and Class 19-B Series Common Stock have been
issued.
(e) The Amendment was adopted on August 13, 1999.
(f) The Amendment was unanimously adopted by the Board of Directors
and shareholder action was not required.
EXHIBIT (A)(16)
ARTICLES OF AMENDMENT Stock(for profit)
- ----------------------------------------
Joan Ohlbaum Swirsky, Esquire - Please indicate where you would like
DRINKER BIDDLE & REATH LLP the acknowledgement copy of the filed
One Logan Square document sent. Please include complete
18th and Cherry Street name and mailing address.
Philadelphia, PA 19103
- ----------------------------------------
Your phone number during the day: (215) 988-2601
----- --------
INSTRUCTIONS (Ref. sec. 180.1006 Wis. Stats. for document content)
- ------------
Submit one original and one exact copy to Department of Financial
Institutions, Division of Corporate and Consumer Services, P.O. Box 7846,
Madison, Wisconsin, 53707-7846. (If sent by Express or Priority U.S. mail,
address to 345 W. Washington Ave., Madison, WI 53703). The original must
include an original manual signature (sec. 180.0120(3)(c), Wis. Stats). If you
have any additional questions, please call the Corporations Division at 608-261-
9555.
A. State the name of the corporation (before any changes effected by this
amendment) and the text of the amendment(s). The text should recite the
resolution adopted (e.g.) "RESOLVED, THAT, Article 1 of the Articles of
Incorporation is hereby amended to read as follows.... etc.").
If an amendment provides for an exchange, reclassification or cancellation
of issued shares, state the provisions for implementing the amendment if not
contained in the amendment itself.
B. Enter the date of adoption of the amendment(s). If there is more than one
amendment, identify the date of adoption of each. Mark one of the three choices
to indicate the method of adoption of the amendment(s).
By Board of Directors - Refer to sec. 180.1002 Wis. Stats. for specific
information on the character of amendments that may be adopted by the Board of
Directors without shareholder action.
By Board of Directors and Shareholders - Amendments proposed by the Board
of Directors and adopted by shareholder approval. Voting requirements differ
with circumstances and provisions in the articles of incorporation. See sec.
180.1003 Wis. Stats. for specific information.
By Incorporators or Board of Directors - Before issuance of shares - See
sec. 180.1005 Wis. Stats. for conditions attached to the adoption of an
amendment approved by a vote or consent of less than 2/3rds of the shares
subscribed for.
C. Enter the date of execution and the name and title of the person signing
the document. The document must be signed by one of the following: An officer
(or incorporator if directors have not been elected) of the corporation or the
fiduciary if the corporation is in the hands of a receiver, trustee, or other
court appointed fiduciary. At least one copy must bear an original manual
signature.
D. If the document is executed in Wisconsin, sec. 14.38(14) Wis. Stats.
provides that it shall not be filed unless the name of the drafter (either an
individual or a governmental agency) is printed in a legible manner. If
document is NOT drafted in Wisconsin, please so state.
FILING FEES
- -----------
Submit the document with a minimum filing fee of $40.00, payable to
SECRETARY OF STATE. If the amendment causes an increase in the number of
authorized shares, provide an additional fee of 1 cent for each new authorized
share. When the document has been filed, an acknowledgement copy stamped
"FILED" will be sent to the address indicated above.
ARTICLES OF AMENDMENT
STOCK (FOR PROFIT)
A. Name of Corporation: Firstar Funds, Inc.
--------------------------------
(prior to any change effected by this amendment)
Text of Amendment (Refer to the existing articles of incorporation and
-----------------
instruction A. Determine those items to changed and set forth below the
number identifying the paragraph being changed and how the amended
paragraph is to read.)
RESOLVED, THAT, the articles of incorporation be amended as follows:
SEE ATTACHED
The effective date of these Articles of Amendment shall be October 15,
1999.
B. Amendment(s) adopted on August 13, 1999 (Directors)
--------------------------------------
(date)
Indicate the method of adoption by checking the appropriate choice below:
( X ) In accordance with sec. 180.1002, Wis. Stats. (By the Board of
Directors)
OR
( ) In accordance with sec. 180.1003, Wis. Stats. (By the Board of
Directors and Shareholders)
OR
( ) In accordance with sec. 180.1005, Wis. Stats. (By Incorporators or
Board of Directors, before issuance of shares)
C. Executed on behalf of the
corporation on October 15, 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 AUGUST 13, 1999
------------------------------------------------
(a) The name of the Company is Firstar Funds, Inc.
(b) and (c) The text of the Amendment which determines the terms of the
Company's Class 20-Institutional Series, Class 20-A Series, and
Class 20-B Series Common Stock and the number of shares thereof
is as follows:
RESOLVED, that pursuant to Article V of the Articles of
Incorporation of the Company, One Hundred Million authorized,
unissued and unclassified shares of Class 20 Common Stock of the
Company be, and hereby are, divided into and classified as Class
20-Institutional Series, One Hundred Million authorized, unissued
and unclassified shares of Class 20 Common Stock of the Company
be, and hereby are divided into and classified as Class 20-A
Series Common Stock and One Hundred Million authorized, unissued
and unclassified shares of Class 20 Common Stock of the Company
be, and hereby are divided into and classified as Class 20-B
Series Common Stock, with all of the preferences, limitations
and relative rights set forth in Article V. B. of said Articles
of Incorporation.
(d) No shares of the Company's Class 20-Institutional Series,
Class 20-A Series and Class 20-B Series Common Stock have been
issued.
(e) The Amendment was adopted on August 13, 1999.
(f) The Amendment was unanimously adopted by the Board of Directors
and shareholder action was not required.
Exhibit (d)(12)
INVESTMENT SUB-ADVISORY AGREEMENT
THIS AGREEMENT, made this 1st day of November, 1999, is by and among
Firstar Investment Research & Management Company, LLC, a Wisconsin corporation
registered as an investment adviser under the Investment Advisers Act of 1940,
as amended (the "Advisers Act") (the "Adviser"), The Glenmede Trust Company, a
limited purpose trust company registered as an investment adviser under the
Advisers Act (the "Sub-Adviser"), and Firstar Funds, Inc. (the "Company"), an
open-end diversified management investment company of the series type.
registered under the Investment Company Act of 1940, as amended (the "1940
Act").
WHEREAS, the Adviser is the investment adviser to the Firstar Core
International Equity Fund (the "Fund") of the Company, and the Adviser desires
to retain the Sub-Adviser to furnish it with portfolio selection and related
research and statistical services in connection with the Adviser's investment
advisory activities on behalf of the Fund, and the Sub-Adviser desires to
furnish such services to the Adviser;
NOW, THEREFORE, in consideration of the premises and the terms and
conditions hereinafter set forth, it is agreed as follows:
1. Appointment of Sub-Adviser
--------------------------
In accordance with and subject to the investment advisory agreement (the
"Investment Advisory Agreement") between the Company and the Adviser, the
Adviser hereby appoints the Sub-Adviser to perform portfolio selection and
related research and statistical services described herein for investment and
reinvestment of the Fund's investment assets, subject to the control and
direction of the Company's Board of Directors, for the period and on the terms
hereinafter set forth. The Sub-Adviser accepts such appointment and agrees to
furnish the services hereinafter set forth for the compensation herein provided.
The Sub-Adviser shall for all purposes herein be deemed to be an independent
contractor and shall, except as expressly provided or authorized. have no
authority to act for or represent the Company or the Adviser in any way or
otherwise be deemed an agent of the Company or the Adviser.
2. Obligations of and Services to be Provided by the Sub-Adviser
-------------------------------------------------------------
(a) The Sub-Adviser shall provide the following services and assume the
following obligations with respect to the Fund:
(1) The investment of the assets of the Fund shall at all times be
subject to the applicable provisions of the articles of
incorporation, the by-laws, the registration statement, the
effective prospectus and the statement of additional information
of the Company relating to the Fund (the "Fund Documents") and
shall conform to the investment objectives, policies and
restrictions of the Fund as set forth in such documents and as
interpreted from time to time by the Board of Directors of the
Company and by the Adviser. Copies of the Fund Documents have
been or will be submitted to the Sub-Adviser. The Company agrees
to provide copies of all amendments to or restatements of the
Fund Documents to the Sub-Adviser on a timely and on-going basis
but in all events prior to such time as said amendments or
restatements become effective. The Sub-Adviser will be entitled
to rely on all such documents furnished to it by the Company, the
Fund, or the Adviser. Within the framework of the investment
objectives, policies and restrictions of the Fund, and subject to
the supervision of the Adviser, the Sub-Adviser shall have
responsibility for making and executing investment decisions for
the Fund.
(2) In carrying out its obligations to manage the investments and
reinvestments of the assets of the Fund, the Sub-Adviser shall:
(1) obtain and evaluate pertinent economic, statistical,
financial and other information affecting the economy generally
and individual companies or industries, the securities of which
are included in the Fund's investment portfolio or are under
consideration for inclusion therein; (2) under the supervision of
the Adviser, formulate and implement a continuous investment
program for the Fund consistent with the investment objective and
related investment policies for the Fund as set forth in the Fund
Documents, as amended; and (3) take such steps as are necessary
to implement the aforementioned investment program by purchase
and sale of securities including the placing, or directing the
placement through an affiliate of the Sub-Adviser in accordance
with applicable regulatory requirements, of orders for such
purchases and sales.
(3) In connection with the purchase and sale of securities of the
Fund, the Sub-Adviser shall arrange for the transmission to the
Custodian for the Fund and, as directed by the Adviser, any other
persons retained by the Fund on a daily basis such confirmations,
trade tickets and other documents as may be necessary to enable
them to perform their administrative responsibilities with
respect to the Fund's investment portfolio. The Sub-Adviser
shall render such reports to the Adviser and/or to the Company's
Board of Directors concerning the investment activity and
portfolio composition of the Fund in such form and at such
intervals as the Adviser or the Board may, from time to time
require.
(4) The Sub-Adviser shall, in the name of the Fund, place or direct
the placement of orders for the execution of portfolio
transactions in accordance with the policies of the Fund, as set
forth in the Fund Documents, as amended from time to time, and
under the Securities Act of 1933, as amended (the "1933 Act"),
and the 1940 Act. In connection with the placement of orders for
the execution of the Fund's portfolio transactions, the Sub-
Adviser shall create and maintain all necessary brokerage records
of the Fund in accordance with all applicable laws, rules and
regulations, including but not limited to, records required by
Section 31(a) of the 1940 Act. All records shall be the property
of the Company and shall be available for inspection and use by
the Securities and Exchange Commission ("SEC"), the Company, the
Adviser, or any other person retained by the Company. The Sub-
Adviser agrees to surrender promptly to the Company any of such
records upon the Company's request. Where applicable, such
records shall be maintained by the Sub-Adviser for the period and
in the place required by the 1940 Act. The Sub-Adviser shall, in
the name of the Fund, vote all proxies solicited by or with
respect to the issuers of securities in which the Fund may be
invested from time to time.
(5) In placing orders or directing the placement of orders for the
execution of portfolio transactions, the Sub-Adviser shall select
brokers and dealers for the execution of the Fund's transactions.
In selecting brokers or dealers to execute such orders, the Sub-
Adviser will use its best efforts to seek on behalf of the Fund
the best overall terms available. In assessing the best overall
terms available for any transaction, the Sub-Adviser shall
consider all factors that it deems relevant, including the
breadth of the market in the security, the price of the security,
the financial condition and execution capability of the broker
or dealer, and the reasonableness of the commission, if any, both
for the specific transaction and on a continuing basis. In
evaluating the best overall terms available, and in selecting the
broker-dealer to execute a particular transaction, the Sub-
Adviser is expressly authorized to consider the fact that a
broker or dealer has furnished statistical, research or other
information or services which enhance the Sub-Adviser's
investment research and portfolio management capability
generally. Subject to the initial approval of the Sub-Adviser's
soft dollar policy by the Company's Board of Directors and
further subject to the review of the Company's Board of Directors
from time to time with respect to the extent and continuation of
such policy, the Sub-Adviser may, in accordance with Section
28(e) of the Securities Exchange Act of 1934, as amended,
negotiate with and assign to a broker a commission which may
exceed the commission which another broker would have charged for
effecting the transaction if the Sub-Adviser determines in good
faith that the amount of commission charged was reasonable in
relation to the value of brokerage and/or research services (as
defined in Section 28(e)) provided by such broker viewed in terms
either of the Fund or the Sub-Adviser's overall
responsibilities to the Sub-Adviser's discretionary accounts. In
addition, the Sub-Adviser is authorized to take into account the
sale of shares of the Company in allocating purchase and sale
orders for portfolio securities to brokers or dealers (including
brokers and dealers that are affiliated with the Adviser, Sub-
Adviser or the Company's principal underwriter), provided that
the Sub-Adviser believes that the quality of the transaction and
the commission are comparable to what they would be with other
qualified firms. In no instance, however, will portfolio
securities be purchased from or sold to the Sub-Adviser, the
Adviser, the Company's principal underwriter, or any affiliated
person of either the Company, the Adviser, Sub-Adviser or the
principal underwriter, acting as principal in the transaction,
except to the extent permitted by the SEC through rules,
regulations, decisions and no-action letters.
(b) The Sub-Adviser shall use the same skill and care in providing
services to the Fund as it uses in providing services to fiduciary
accounts for which it has investment responsibility. The Sub-Adviser
will conform with all applicable federal and state laws, rules and
regulations.
3. Expenses
--------
The Sub-Adviser will bear all expenses in connection with the performance
of its services under this Agreement, which expenses shall not include brokerage
fees or commissions in connection with the effectuation of securities
transactions for the Fund. The Fund (or the Adviser) will bear certain other
expenses to be incurred in the Fund's operation, including but not limited to:
organizational expenses, taxes, interest. brokerage fees and commissions, if
any; SEC fees and state blue sky qualification fees; expenses of custodians,
transfer and dividend disbursing agents and the Fund's co-administrators;
insurance premiums; outside auditing and legal expenses; costs of maintenance of
the Fund's existence; costs attributable to investor services, including without
limitation, telephone and personnel expenses; costs of preparing and printing
prospectuses and statements of additional information for regulatory purposes
and for distribution to existing shareholders; costs of shareholders' reports
and meetings of the shareholders of the Fund and of the officers or Board of
Directors of the Fund; and any extraordinary expenses.
4. Compensation
------------
In payment for the investment sub-advisory services to be rendered by the
Sub-Adviser in respect of the Fund hereunder, the Adviser shall pay to the Sub-
Adviser as full compensation for all services hereunder a fee computed at an
annual rate which shall be a percentage of the average net assets of the Fund.
The fee shall be accrued daily and shall be based on the net asset values of all
of the issued and outstanding shares of the Fund as determined as of the close
of each business day pursuant to the Fund Documents. The fee shall be payable
in arrears during the following calendar month.
The amount of such annual fee, as applied to the average daily value of the
net assets of the Fund shall be as described in the schedule below:
Assets Fee
------ ---
On the first $50 million in assets 0.50%
On net assets in excess of $50 million 0.30%
5. Effective Date, Renewal and Termination
----------------------------------------
This Agreement shall become effective as of the date first above written and,
unless otherwise terminated, shall continue until February 28, 2001 and from
year to year thereafter so long as approved annually in accordance with the 1940
Act and the rules thereunder. This Agreement may be terminated without penalty
on sixty (60) days' written notice to the Sub-Adviser (i) by the Adviser, (ii)
by vote of the Board of Directors of the Company, or (iii) by vote of a majority
of the outstanding voting securities of the Fund; or it may be terminated
without penalty on sixty (60) days' written notice to the Adviser by the Sub-
Adviser. This Agreement will terminate automatically in the event of its
assignment or upon any termination of the Investment Advisory Agreement. The
terms "assignment" and "vote of majority of the outstanding voting securities"
shall have the meanings set forth in the 1940 Act.
6. Representations of the Company, Adviser and the Sub-Adviser
-----------------------------------------------------------
The Company and Fund represent that (i) a copy of the Company's Articles of
Incorporation, dated February 15, 1988, together with all amendments thereto, is
on file in the office of the Wisconsin Department of Financial Institutions,
(ii) the appointment of the Adviser has been duly authorized, (iii) the
appointment of the Sub-Adviser has been duly authorized, and (iv) they have
acted and will continue to act in conformity with the 1940 Act, and other
applicable laws.
The Adviser represents that (i) it is authorized to perform the services
herein, (ii) the appointment of the Sub-Adviser has been duly authorized, and
(iii) it will act in conformity with the 1940 Act, and other applicable laws.
The Sub-Adviser represents that it is authorized to perform the services
described herein.
7. Materials
---------
Neither the Adviser, the Company, or the Fund shall publish or distribute
any information including but not limited to, registration statements,
advertising or promotional material regarding the provision of investment
advisory services by the Sub-Adviser pursuant to this Agreement, without the
prior written consent of the Sub-Adviser, which consent shall not be
unreasonably withheld or delayed. If the Sub-Adviser has not notified the
Adviser of its disapproval of sample materials within five (5) days after its
receipt thereof, such materials shall be deemed approved. Materials
substantially similar to materials approved on an earlier occasion, with the
exception of any regulatory filings, shall also be deemed approved.
Notwithstanding the foregoing, the Adviser may distribute information regarding
the provision of investment advisory services by the Sub-Adviser to the
Company's Board of Directors ("Board Materials") without the prior written
consent of the Sub-Adviser. The Adviser shall provide copies of the Board
Materials to the Sub-Adviser within a reasonable time following distribution to
the Company's Board of Directors.
The Sub-Adviser shall not publish or distribute any information including
but not limited to, registration statements, advertising or promotional material
regarding the provision of investment advisory services by the Sub-Adviser
pursuant to this Agreement, without the prior written consent of the Adviser and
the Company, which consent shall not be unreasonably withheld or delayed. If
the Adviser or Company has not notified the Sub-Adviser of its disapproval of
sample materials within five (5) days after its receipt thereof, such materials
shall be deemed approved. Materials substantially similar to materials approved
on an earlier occasion, with the exception of any regulatory filings, shall also
be deemed approved.
8. General Provisions
------------------
(a) The Sub-Adviser may rely on information reasonably believed by it to
be accurate and reliable. Except as may otherwise be provided by the
1940 Act, neither the Sub-Adviser nor its officers, directors,
employees or agents shall be subject to any liability for any error of
judgment or mistake of law or for any loss arising out of any
investment or other act or omission in the performance by the Sub-
Adviser of its duties under this Agreement or for any loss or damage
resulting from the imposition by any government or exchange control
restrictions which might affect the liquidity of the Fund's assets, or
from acts or omissions of custodians or securities depositories or
from any war or political act of any foreign government to which such
assets might be exposed, provided that nothing herein shall be deemed
to protect or purport to protect, the Sub-Adviser against any
liability to the Adviser or the Company or to its shareholders to
which the Sub-Adviser would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its
duties hereunder, or by reason of the Sub-Adviser's reckless disregard
of its obligations and duties hereunder or a breach of its fiduciary
duty.
(b) The Adviser and the Fund understand that the Sub-Adviser now acts,
will continue to act, or may act in the future, as investment adviser
or investment sub-adviser to fiduciary and other managed accounts,
including other investment companies and the Adviser and the Fund have
no objection to the Sub-Adviser so acting, provided that the Sub-
Adviser duly performs all obligations under this Agreement. The
Adviser and the Fund also understand that the Sub-Adviser may give
advice and take action with respect to any of its other clients or for
its own account which may differ from the timing or nature of action
taken by the Sub-Adviser. with respect to the Fund. Nothing in this
Agreement shall impose upon the Sub-Adviser any obligation to purchase
or sell or to recommend for purchase or sale, with respect to the
Fund, any security which the Sub-Adviser or its shareholders,
directors, officers, employees or affiliates may purchase or sell for
its or their own account(s) or for the account of any other client.
(c) Except to the extent necessary to perform its obligations hereunder,
nothing herein shall be deemed to limit or restrict the right of the
Sub-Adviser, or the right of any of its officers. directors or
employees who may also be an officer, director or employee of the
Company, or person other-wise affiliated with the Company (within the
meaning of the 1940 Act) to engage in any other business or to devote
time and attention to the management or other aspects of any other
business, whether of a similar or dissimilar nature or to render
services of any kind to any other trust corporation, firm, individual
or association.
(d) Each party agrees to perform such further acts and execute such
further documents as are necessary to effectuate the purposes hereof.
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Wisconsin. The captions in this
Agreement are included for convenience only and in no way define or
delimit any of the provisions hereof or otherwise affect their
construction or effect.
(e) Any notice under this Agreement shall be in writing, addressed and
delivered or mailed postage pre-paid to the appropriate party at the
following address: The Adviser, the Company and the Fund at 777 East
Wisconsin Avenue, Suite 800, Milwaukee, Wisconsin 53202, Attention:
Compliance Office, and the Sub-Adviser at One Liberty Place, 1650
Market Street, Philadelphia, PA 19103-7391, Attention: General
Counsel.
(f) Sub-Adviser agrees to notify Adviser of any change in Sub-Adviser's
senior officers, portfolio managers, and directors within a reasonable
time after such change. Sub-Adviser further agrees to provide Adviser
with any amendments to Parts I and II of its ADV within a reasonable
time after such amendments and notify Adviser of any regulatory, civil
or criminal proceedings, actions or complaints involving the Sub-
Adviser or its affiliates within a reasonable time.
(g) This Agreement may be amended in accordance with the 1940 Act.
(h) This Agreement constitutes the entire agreement among the parties
hereto.
(i) This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts shall
together, constitute only one instrument.
IN WITNESS WHEREOF, the parties have duly executed this Agreement on the
date first above written.
THE GLENMEDE TRUST COMPANY
One Liberty Place
1650 Market Street
Suite 1200
Philadelphia, PA 19103-7391
By: /s/James R. Belanger, Esq.
--------------------------
Name: James R. Belanger, Esq.
Title: Vice President/ Corporate Counsel
FIRSTAR INVESTMENT RESEARCH &
MANAGEMENT COMPANY, LLC
By: /s/Mary Ellen Stanek
--------------------
Name: Mary Ellen Stanek
Title: President and CEO
FIRSTAR FUNDS, INC.
By: /s/Laura Rauman
-------------------
Name: Laura Rauman
Title: Vice President
Exhibit (d)(13)
ADDENDUM NO. 7 TO INVESTMENT ADVISORY AGREEMENT
This Addendum, dated as of the 1st day of November, 1999, is entered into
between FIRSTAR FUNDS, INC. (the "Company"), a Wisconsin corporation, and
Firstar Investment Research and Management Company, LLC (the "Investment
Adviser").
WHEREAS, the Company and the Investment Adviser have entered into an
Investment Advisory Agreement dated as of March 27, 1992 (the "Advisory
Agreement"), pursuant to which the Company appointed the Investment Adviser to
act as investment adviser to the Company for its Balanced Fund;
WHEREAS, Section 1(b) of the Advisory Agreement provides that in the event
the Company establishes one or more additional investment portfolios with
respect to which it desires to retain the Investment Adviser to act as the
investment adviser under the Advisory Agreement, the Company shall so notify the
Investment Adviser in writing and if the Investment Adviser is willing to render
such services it shall notify the Company in writing, and the compensation to be
paid to the Investment Adviser shall be that which is agreed to in writing by
the Company and the Investment Adviser; and
WHEREAS, pursuant to Section 1(b) of the Advisory Agreement, the Company
has notified the Investment Adviser that it has established the Core
International Equity Fund and that it desires to retain the Investment Adviser
to act as the investment adviser therefor, and the Investment Adviser has
notified the Company that it is willing to serve as investment adviser for the
Core International Equity Fund (the "Fund");
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. APPOINTMENT. The Company hereby appoints the Investment Adviser to
-----------
act as investment adviser to the Company for the Core International Equity Fund
for the period and the terms set forth herein and in the Advisory Agreement.
The Investment Adviser hereby accepts such appointment and agrees to render the
services set forth herein and in the Advisory Agreement, for the compensation
herein provided.
2. SUBCONTRACTORS. It is understood that the Investment Adviser may from
--------------
time to time employ or associate with itself such person or persons as the
Investment Adviser may believe to be particularly fitted to assist in the
performance of this Agreement; provided, however, that the compensation of such
person or person shall be paid by the Investment Adviser; and that any person
providing investment advisory services to the Fund shall be approved in
accordance with the provisions of the 1940 Act. Each such sub-adviser is
hereinafter referred to as a "Sub-Adviser".
Notwithstanding the approval of any such Sub-Adviser(s), however, in
carrying out its obligations hereunder the Investment Adviser shall in all
events:
a. assist and consult with any Sub-Adviser with respect to the Fund
in connection with the Fund's continuous investment program;
b. establish and monitor general investment criteria and policies for
the Fund;
c. review, monitor and analyze on a periodic basis the Fund's
portfolio holdings and transactions to determine that each Sub-Adviser
performs its sub-advisory services in accordance with the Fund's investment
objective, policies and restrictions as stated in its prospectus and
statement of additional information and to determine that such portfolio
holdings are appropriate in light of the Fund's shareholder base;
d. review, monitor and analyze on a periodic basis the policies
established by any Sub-Adviser for the Fund with respect to the placement
of orders for the purchase and sale of portfolio securities;
e. review, monitor, analyze and report to the Board of Directors on
the performance of the Sub-Adviser(s);
f. furnish to the Board of Directors or the Sub-Adviser(s), reports,
statistical and economic information as may be requested; and
g. recommend, either in its sole discretion or in conjunction with
the Sub-Adviser(s), potential changes in investment policy.
In the event that any Sub-Adviser appointed hereunder is terminated, the
Investment Adviser may provide all investment advisory services pursuant to this
Agreement without a Sub-adviser or further shareholder approval.
3. COMPENSATION. For the services provided and the expenses assumed
------------
with respect to the Core International Equity Fund pursuant to the Advisory
Agreement and this Addendum, the Company will pay the Investment Adviser and the
Investment Adviser will accept as full compensation therefor (a) 4/10 of the
gross income earned by the Fund on the loan of its securities (excluding capital
gains and losses if any), plus (b) a fee, computed daily and paid monthly, at
the annual rate of 1.25% on the first $50 million of the Fund's average net
assets, and 1.05% of the Fund's average net assets exceeding $50 million.
4. MISCELLANEOUS. Except to the extent supplemented hereby, the
-------------
Advisory Agreement shall remain unchanged and in full force and effect and is
hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of the
date and year first above written.
FIRSTAR FUNDS, INC.
By: /s/ Laura Rauman
--------------------
Vice President
FIRSTAR INVESTMENT RESEARCH AND MANAGEMENT
COMPANY, LLC
By: /s/ Mary Ellen Stanek
---------------------
President
Exhibit (d)(14)
ADDENDUM NO. 8 TO THE INVESTMENT ADVISORY AGREEMENT
This Addendum, dated as of the 1st day of November, 1999, is entered into
between FIRSTAR FUNDS, INC. (the "Company"), a Wisconsin corporation, and
Firstar Investment Research and Management Company, LLC (the "Investment
Adviser").
WHEREAS, the Company and the Investment Adviser have entered into an
Investment Advisory Agreement dated as of March 27, 1992 (the "Advisory
Agreement"), pursuant to which the Company appointed the Investment Adviser to
act as investment adviser to the Company for its Balanced Fund;
WHEREAS, Section 1(b) of the Advisory Agreement provides that in the event
the Company establishes one or more additional investment portfolios with
respect to which it desires to retain the Investment Adviser to act as the
investment adviser under the Advisory Agreement, the Company shall so notify the
Investment Adviser in writing, and if the Investment Adviser is willing to
render such services it shall notify the Company in writing, and the
compensation to be paid to the Investment Adviser shall be that which is agreed
to in writing by the Company and the Investment Adviser; and
WHEREAS, pursuant to Section 1(b) of the Advisory Agreement, the Company
has notified the Investment Adviser that it has established the MidCap Index
Fund and that it desires to retain the Investment Adviser to act as the
investment adviser therefor, and the Investment Adviser has notified the Company
that it is willing to serve as investment adviser for the MidCap Index Fund (the
"Fund");
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. APPOINTMENT. The Company hereby appoints the Investment Adviser to
act as investment adviser to the Company for the MidCap Index Fund for the
period and the terms set forth herein and in the Advisory Agreement. The
Investment Adviser hereby accepts such appointment and agrees to render the
services set forth herein and in the Advisory Agreement, for the compensation
herein provided.
2. COMPENSATION. For the services provided and the expenses assumed with
respect to the MidCap Index Fund pursuant to the Advisory Agreement and this
Addendum, the Company will pay the Investment Adviser and the Investment Adviser
will accept as full compensation therefor an annual rate of 0.25% of the Fund's
average daily net assets.
3. MISCELLANEOUS. Except to the extent supplemented hereby, the Advisory
Agreement shall remain unchanged and in full force and effect and is hereby
ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of the
date and year first above written.
FIRSTAR FUNDS, INC.
By: /s/ Laura Rauman
---------------------
Title: Vice President
FIRSTAR INVESTMENT RESEARCH
AND MANAGEMENT COMPANY, LLC
By: /s/ Mary Ellen Stanek
----------------------
Title: President
Exhibit (e)(5)
ADDENDUM NO. 4 TO THE DISTRIBUTION AGREEMENT
This Addendum, dated as of the 26th 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/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 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 (e)(6)
ADDENDUM NO.5 TO THE DISTRIBUTION AGREEMENT
This Addendum, dated as of the 1st day of November, 1999, is entered into
between Firstar Funds, Inc. (the "Company"), a Wisconsin corporation, and B.C.
Ziegler and Company, a Wisconsin corporation ("BCZ").
WHEREAS, the Company and BCZ have entered into a Distribution Agreement
dated as of January 1, 1995 (the "Distribution Agreement"), pursuant to which
the Company appointed BCZ to provide distribution services to the Company for
its Money Market Fund, U.S. Treasury Money Market Fund, U.S. Government Money
Market Fund, Tax-Exempt Money Market Fund, Short-Term Bond Market Fund,
Intermediate Bond Market Fund, Tax-Exempt Intermediate Bond Fund, Bond IMMDEX/TM
Fund, Balanced Income Fund, Balanced Growth Fund, Growth and Income Fund, Equity
Index Fund, Growth Fund, Special Growth Fund, Emerging Growth Fund, MicroCap
Fund, International Equity Fund and any other Firstar Funds that may be
contemplated;
WHEREAS, the Company is establishing an additional investment portfolio to
be known as the Core International Equity Fund and desires to retain BCZ to act
as the distributor under the Distribution Agreement; and
WHEREAS, BCZ is willing to serve as distributor for the Core International
Equity Fund (the "Fund");
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. APPOINTMENT. The Company hereby appoints BCZ to act as distributor to
the Company for the Core International Equity Fund for the period and the terms
set forth herein and in the Distribution Agreement. BCZ hereby accepts such
appointment and agrees to render the services set forth herein and in the
Distribution Agreement.
2. MISCELLANEOUS. Except to the extent supplemented hereby, the
Distribution Agreement shall remain unchanged and in full force and effect and
is hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of the
date and year first above written.
FIRSTAR FUNDS, INC.
By: /s/Laura Rauman
---------------------------
Title: Vice President
B.C. ZIEGLER AND COMPANY
By: /s/Robert J. Tuszynski
---------------------------
Title: Senior Vice President
Exhibit (e)(7)
ADDENDUM NO.6 TO THE DISTRIBUTION AGREEMENT
This Addendum, dated as of the 1st day of November, 1999, is entered into
between Firstar Funds, Inc. (the "Company"), a Wisconsin corporation, and B.C.
Ziegler and Company, a Wisconsin corporation ("BCZ").
WHEREAS, the Company and BCZ have entered into a Distribution Agreement
dated as of January 1, 1995 (the "Distribution Agreement"), pursuant to which
the Company appointed BCZ to provide distribution services to the Company for
its Money Market Fund, U.S. Treasury Money Market Fund, U.S. Government Money
Market Fund, Tax-Exempt Money Market Fund, Short-Term Bond Market Fund,
Intermediate Bond Market Fund, Tax-Exempt Intermediate Bond Fund, Bond IMMDEX/TM
Fund, Balanced Income Fund, Balanced Growth Fund, Growth and Income Fund, Equity
Index Fund, Growth Fund, Special Growth Fund, Emerging Growth Fund, MicroCap
Fund, International Equity Fund and any other Firstar Funds that may be
contemplated;
WHEREAS, the Company is establishing an additional investment portfolio to
be known as the MidCap Index Fund and desires to retain BCZ to act as the
distributor under the Distribution Agreement; and
WHEREAS, BCZ is willing to serve as distributor for the MidCap Index Fund
(the "Fund");
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. APPOINTMENT. The Company hereby appoints BCZ to act as distributor to
the Company for the MidCap Index Fund for the period and the terms set forth
herein and in the Distribution Agreement. BCZ hereby accepts such appointment
and agrees to render the services set forth herein and in the Distribution
Agreement.
2. MISCELLANEOUS. Except to the extent supplemented hereby, the
Distribution Agreement shall remain unchanged and in full force and effect and
is hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of the
date and year first above written.
FIRSTAR FUNDS, INC.
By: /s/Laura Rauman
----------------------------
Title: Vice President
B.C. ZIEGLER AND COMPANY
By: /s/Robert J. Tuszynski
----------------------------
Title: Senior Vice President
Exhibit (g)(15)
CUSTODIAN AGREEMENT
(ADDITION OF THE CORE INTERNATIONAL EQUITY FUND)
Firstar Bank Milwaukee, N.A.
777 E. Wisconsin Ave.
Milwaukee, WI 53202
Gentlemen:
Pursuant to Paragraph 16 of the Custodian Agreement dated as of July 29,
1988 and amended as of May 1, 1990, between Firstar Funds, Inc. (formerly,
Portico Funds, Inc. and formerly Elan Funds, Inc.) (the "Company") and Firstar
Trust Company, as assigned to you by assignment dated October 1, 1998, the
Company requests that you render services as Custodian under the terms of said
agreement with respect to the Core International Equity Fund, an additional
portfolio which the Company is establishing. Your compensation for the services
provided under said agreement for said additional portfolio shall be determined
in accordance with the fee schedule attached hereto.
Please sign two copies of this letter where indicated to signify your
agreement to serve as Custodian and to the compensation terms set forth on the
attached fee schedule.
Sincerely,
Dated: November 1, 1999 FIRSTAR FUNDS, INC.
By: /s/Laura Rauman
----------------------
Vice President
ACKNOWLEDGED AND AGREED:
FIRSTAR BANK MILWAUKEE, N.A.
By: /s/Joseph Neuberger Dated: November 1, 1999
----------------------
Senior Vice President
FIRSTAR BANK MILWAUKEE, N.A.
MUTUAL FUND CUSTODIAL AGENT SERVICE ANNUAL FEE SCHEDULE
FOR
Core International Equity Fund
------------------------------
Annual Fee based on total assets of the Firstar Fund:
- ----------
0.02% on the first $2 billion
0.015% on the next $2 billion
0.01% on the next $1 billion
0.005% on the balance
Investment Transactions: Purchase, sale, exchange, tender, redemption
(maturity), receipt and delivery.
$12 Book Entry Securities (Depository or Federal
Reserve System).
$25 per Definitive Security (Physical).
$75 per Euroclear.
$8 per Principal reduction on pass-through certificates.
$35 per Option/Futures Contract.
$15 per variation margin transaction.
$25 per Mutual Fund trade.
$15 per Fed Wire deposit or withdrawal.
$12 per Commercial Paper.
$12 per Repurchase Agreement.
Extraordinary expenses based on time and complexity involved.
Out-of-Pocket Expenses: Charged on the account.
Fees are billed quarterly based on the value at the beginning of the quarter.
Exhibit (g)(16)
CUSTODIAN AGREEMENT
(ADDITION OF THE MIDCAP INDEX FUND)
Firstar Bank Milwaukee, N.A.
777 E. Wisconsin Ave.
Milwaukee, WI 53202
Gentlemen:
Pursuant to Paragraph 16 of the Custodian Agreement dated as of July 29,
1988 and amended as of May 1, 1990, between Firstar Funds, Inc. (formerly,
Portico Funds, Inc. and formerly Elan Funds, Inc.) (the "Company") and Firstar
Trust Company, as assigned to you by assignment dated October 1, 1999, the
Company requests that you render services as Custodian under the terms of said
agreement with respect to the MidCap Index Fund, an additional portfolio which
the Company is establishing. Your compensation for the services provided under
said agreement for said additional portfolio shall be determined in accordance
with the fee schedule attached hereto.
Please sign two copies of this letter where indicated to signify your
agreement to serve as Custodian and to the compensation terms set forth on the
attached fee schedule.
Sincerely,
Dated: November 1, 1999 FIRSTAR FUNDS, INC.
By: /s/Laura Rauman
--------------------
Vice President
ACKNOWLEDGED AND AGREED:
FIRSTAR BANK MILWAUKEE, N.A.
By: /s/Joseph Neuberger Dated: November 1, 1999
----------------------
Senior Vice President
FIRSTAR BANK MILWAUKEE, N.A.
MUTUAL FUND CUSTODIAL AGENT SERVICE ANNUAL FEE SCHEDULE
FOR
MidCap Index Fund
-----------------
Annual Fee based on total assets of the Firstar Fund:
- ----------
0.02% on the first $2 billion
0.015% on the next $2 billion
0.01% on the next $1 billion
0.005% on the balance
Investment Transactions: Purchase, sale, exchange, tender, redemption
(maturity), receipt and delivery.
$12 Book Entry Securities (Depository or Federal
Reserve System).
$25 per Definitive Security (Physical).
$75 per Euroclear.
$8 per Principal reduction on pass-through certificates.
$35 per Option/Futures Contract.
$15 per variation margin transaction.
$25 per Mutual Fund trade.
$15 per Fed Wire deposit or withdrawal.
$12 per Commercial Paper.
$12 per Repurchase Agreement.
Extraordinary expenses based on time and complexity involved.
Out-of-Pocket Expenses: Charged on the account.
Fees are billed quarterly based on the value at the beginning of the quarter.
Exhibit (h) (11)
FUND ACCOUNTING SERVICING AGREEMENT
REVISED FEE SCHEDULE
as of January 1, 2000
Firstar Mutual Fund Services, LLC
615 East Michigan Street
Milwaukee, Wisconsin 53202
Gentlemen:
You currently provide accounting services to the Fund for 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, Intermediate Bond Market Fund, Bond IMMDEXTM Fund, Tax-Exempt
Intermediate Bond Fund, Balanced Income Fund, Balanced Growth Fund, Growth and
Income Fund, Equity Index Fund, Growth Fund, MidCap Index Fund, Special Growth
Fund, Emerging Growth Fund, MicroCap Fund, CORE International Equity Fund and
International Equity Fund (the "Funds") of Firstar Funds, Inc. (the "Company")
pursuant to a Fund Accounting Servicing Agreement dated March 23, 1988 as
amended (the "Agreement"). Pursuant to Paragraph 4 of the Agreement, your
compensation for the services provided to the Funds under the Agreement shall be
determined in accordance with the Fee Schedules attached hereto.
Please sign two copies of this letter where indicated to signify
your agreement to the compensation terms set forth on the attached Fee Schedules
for the Funds effective as of the date written above.
Sincerely,
FIRSTAR FUNDS, INC.
BY: /s/ Laura Rauman
----------------------
Title: Authorized Officer
ACKNOWLEDGED AND AGREED:
FIRSTAR MUTUAL FUND SERVICES, LLC
By: /s/ Joseph P. Neuberger
------------------------
Title: Vice President
FIRSTAR MUTUAL FUND SERVICES, LLL
FUND VALUATION AND ACCOUNTING
FOR
FIRSTAR FUNDS, INC.
as of January 1, 2000
Tax-Exempt Money Market Fund
Portfolio Services
Annual fee schedule based on market value of assets.
$39,000 for first $100 million
0.02% on the next $200 million
0.01% on the balance
Out-of-Pocket Expenses: Charged on the account
Fees are billed monthly based on net asset value at month end.
FIRSTAR MUTUAL FUND SERVICES, LLL
FUND VALUATION AND ACCOUNTING
FOR
FIRSTAR FUNDS, INC.
as of January 1, 2000
Money Market Fund
Institutional Money Market Fund
U.S. Treasury Money Market Fund
U.S. Government Money Market Fund
Portfolio Services
- ------------------
Annual fee schedule based on market value of assets.
$39,000 for first $100 million
0.01% on the next $200 million
0.005% on the balance
Out-of-Pocket Expenses: Charged on the account
Fees are billed monthly based on net asset value at month end.
FIRSTAR MUTUAL FUND SERVICES, LLC
FUND VALUATION AND ACCOUNTING
FOR
FIRSTAR FUNDS, INC.
as of January 1, 2000
Short-Term Bond Market Fund
Intermediate Bond Market Fund
Bond IMMDEXTM Fund
Tax-Exempt Intermediate Bond Fund
International Equity Fund
CORE International Equity Fund
Portfolio Services
- ------------------
Annual fee schedule based on market value of assets.
$58,500 for first $100 million
0.03% on the next $200 million
0.015% on the balance
Out-of-Pocket Expenses: Charged on the account
Fees are billed monthly based on net asset value at month end.
FIRSTAR MUTUAL FUND SERVICES, LLC
FUND VALUATION AND ACCOUNTING
FOR
FIRSTAR FUNDS, INC.
as of January 1, 2000
Balanced Income Fund
Balanced Growth Fund
Portfolio Services
- ------------------
Annual fee schedule based on market value of assets.
$49,500 for first $100 million
0.0225% on the next $200 million
0.015% on the balance
Out-of-Pocket Expenses: Charged on the account
Fees are billed monthly based on net asset value at month end.
FIRSTAR MUTUAL FUND SERVICES, LLC
FUND VALUATION AND ACCOUNTING
FOR
FIRSTAR FUNDS, INC.
as of January 1, 2000
Growth and Income Fund
Equity Index Fund
Growth Fund
MidCap Index Fund
Special Growth Fund
Emerging Growth Fund
MicroCap Fund
Portfolio Services
- ------------------
Annual fee schedule based on market value of assets.
$45,000 for first $100 million
0.01875% on the next $200 million
0.01125% on the balance
Out-of-Pocket Expenses: Charged on the account
Fees are billed monthly based on net asset value at month end.
Exhibit (h) (34)
SHAREHOLDER SERVICING AGENT AGREEMENT
REVISED FEE SCHEDULE
as of January 1, 2000
Firstar Mutual Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
Gentlemen:
You currently serve as shareholder accounting agent 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, Intermediate Bond Market Fund, Bond IMMDEXTM Fund, Tax-Exempt
Intermediate Bond Fund, Balanced Income Fund, Balanced Growth Fund, Growth and
Income Fund, Equity Index Fund, Growth Fund, MidCap Index Fund, Special Growth
Fund, Emerging Growth Fund, MicroCap Fund, Core International Equity Fund and
International Equity Fund (the "Funds") of Firstar Funds, Inc. (the "Company")
pursuant to a Shareholder Servicing Agreement dated March 23, 1988 as amended
(the "Agreement"). Pursuant to Paragraph 5 of the Agreement, your compensation
for the services provided to the Funds under the Agreement shall be determined
in accordance with the Fee Schedules attached hereto.
Please sign two copies of this letter where indicated to signify your
agreement to the compensation terms set forth on the attached Fee Schedules for
the Funds as of the date written above.
Sincerely,
FIRSTAR FUNDS, INC.
BY: /s/ Laura Rauman
-------------------------
Title: Authorized Officer
ACKNOWLEDGED AND AGREED:
FIRSTAR MUTUAL FUND SERVICES, LLC
By: /s/ Joseph P. Neuberger
-----------------------
Title: Vice President
FIRSTAR MUTUAL FUND SERVICES, LLC
FOR
FIRSTAR FUNDS, INC.
as of January 1, 2000
Money Market Fund
Institutional Money Market Fund
U.S. Treasury Money Market Fund
U.S. Government Money Market Fund
Tax-Exempt Money Market Fund
Annual Fee Schedule
- -------------------
$20.00 per Shareholder account
$ 5.00 per Telephone exchange
$12.00 per Wire transfer
0.01% of the market value of assets
Minimum annual fees of $12,000 per Fund.
Fees billed monthly based on net asset value at month end.
Plus out-of-pocket expenses including, but not limited to:
Telephone (toll-free lines) Insurance
Postage Programming
Stationery/Envelopes Mailing
Proxies Retention of Records
Microfilm/Microfiche of Records Special Reports
All other out-of-pocket expenses
Plus,
$0.50 per EFT/ACH item
$0.50 per payroll item
$5.00 per return items
$5.00 per research statement
FIRSTAR MUTUAL FUND SERVICES, LLC
FOR
FIRSTAR FUNDS, INC.
as of January 1, 2000
Short-Term Bond Market Fund Intermediate Bond Market Fund
Bond IMMDEXTM Fund Tax-Exempt Intermediate Bond Fund
Balanced Income Fund Balanced Growth Fund
Growth and Income Fund Equity Index Fund
Growth Fund MidCap Index Fund
Special Growth Fund Emerging Growth Fund
MicroCap Fund Core International Equity Fund
International Equity Fund
Annual Fee Schedule
- -------------------
$15.00 per Shareholder account
$ 5.00 per Telephone exchange
$12.00 per Wire transfer
0.01% of the market value of assets
Minimum annual fees of $24,000 per Fund.
Fees billed monthly based on net asset value at month end.
Plus out-of-pocket expenses including, but not limited to:
Telephone (toll-free lines) Insurance
Postage Programming
Stationery/Envelopes Mailing
Proxies Retention of Records
Microfilm/Microfiche of Records Special Reports
All other out-of-pocket expenses
Plus,
$0.50 per EFT/ACH item
$0.50 per payroll item
$5.00 per return items
$5.00 per research statement
Exhibit (h)(48)
ADDENDUM NO. 4 TO THE CO-ADMINISTRATION AGREEMENT
This Addendum, dated as of the1st day of November, 1999, is entered into
among Firstar Funds, Inc. (formerly, Portico Funds, Inc.) (the "Company"), a
Wisconsin corporation, Firstar Mutual Fund Services, LLC, a Wisconsin
corporation ("Firstar"), and B.C. Ziegler and Company, a Wisconsin corporation
("BCZ").
WHEREAS, the Company, Firstar and BCZ have entered into a Co-Administration
Agreement dated as of January 1, 1995 and amended as of August 1, 1995 (the "Co-
Administration Agreement"), pursuant to which the Company appointed Firstar (by
assignment from Firstar Trust Company dated October 1, 1998) and BCZ to provide
certain co-administrative services to the Company for its Money Market Fund,
Tax-Exempt Money Market Fund, Growth and Income Fund, Short-Term Bond Market
Fund, Bond IMMDEXTM Fund, Special Growth Fund, U.S. Government Money Market
Fund, Equity Index Fund, Institutional Money Market Fund, U.S. Treasury Money
Market Fund, Balanced Fund, MidCore Growth Fund, Intermediate Bond Market Fund,
Tax-Exempt Intermediate Bond Fund, International Equity Fund, MicroCap Fund,
Emerging Growth Fund, and any other Firstar Funds that may be contemplated
(collectively, the "Funds");
WHEREAS, the Company is establishing an additional investment portfolio to
be known as the Core International Equity Fund and desires to retain Firstar and
BCZ to act as the co-administrators under the Co-Administration Agreement; and
WHEREAS, Firstar and BCZ are willing to serve as co-administrators for the
Core International Equity Fund;
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. APPOINTMENT. The Company hereby appoints Firstar and BCZ to act as
co-administrators to the Company for the Core International Equity Fund for the
period and the terms set forth herein and in the Co-Administration Agreement.
Firstar and BCZ hereby accept such appointment and agree to render the services
set forth herein and in the Co-Administration Agreement, for the compensation
herein provided.
2. COMPENSATION. For the services provided and the expenses assumed with
respect to the Core International Equity Fund and the other Funds pursuant to
the Co-Administration Agreement and this Addendum, the Company will pay Firstar
and BCZ, and Firstar and BCZ will accept as full compensation therefor, a fee,
computed daily and payable monthly, at the annual rate of 0.125% of the Funds'
first $2 billion of average aggregate daily net assets, plus 0.10% of the Funds'
average aggregate daily net assets in excess of $2 billion. Such fee as is
attributable to the Core International Equity Fund shall be a separate charge to
such Fund and shall be the obligation of the Core International Equity Fund.
3. MISCELLANEOUS. Except to the extent supplemented hereby, the Co-
Administration Agreement shall remain unchanged and in full force and effect and
is hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of the
date and year first above written.
FIRSTAR FUNDS, INC.
By: /s/Laura Rauman
-----------------------
Vice President
FIRSTAR MUTUAL FUND SERVICES, LLC
By: /s/Joseph Neuberger
-----------------------
Senior Vice President
B.C. ZIEGLER AND COMPANY
By: /s/Robert J. Tuszynski
-----------------------
Senior Vice President
Exhibit (h)(49)
ADDENDUM NO. 5 TO THE CO-ADMINISTRATION AGREEMENT
This Addendum, dated as of the 1st day of November, 1999, is entered into
among Firstar Funds, Inc. (formerly, Portico Funds, Inc.) (the "Company"), a
Wisconsin corporation, Firstar Mutual Fund Services, LLC, a Wisconsin
corporation ("Firstar"), and B.C. Ziegler and Company, a Wisconsin corporation
("BCZ").
WHEREAS, the Company, Firstar and BCZ have entered into a Co-Administration
Agreement dated as of January 1, 1995 and amended as of August 1, 1995 (the "Co-
Administration Agreement"), pursuant to which the Company appointed Firstar (by
assignment from Firstar Trust Company dated October 1, 1998) and BCZ to provide
certain co-administrative services to the Company for its Money Market Fund,
Tax-Exempt Money Market Fund, Growth and Income Fund, Short-Term Bond Market
Fund, Bond IMMDEX/TM Fund, Special Growth Fund, U.S. Government Money Market
Fund, Equity Index Fund, Institutional Money Market Fund, U.S. Treasury Money
Market Fund, Balanced Fund, MidCore Growth Fund, Intermediate Bond Market Fund,
Tax-Exempt Intermediate Bond Fund, International Equity Fund, MicroCap Fund,
Emerging Growth Fund and any other Firstar Funds that may be contemplated
(collectively, the "Funds");
WHEREAS, the Company is establishing an additional investment portfolio to
be known as the MidCap Index Fund, and desires to retain Firstar and BCZ to act
as the co-administrators under the Co-Administration Agreement; and
WHEREAS, Firstar and BCZ are willing to serve as co-administrators for the
MidCap Index Fund;
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. APPOINTMENT. The Company hereby appoints Firstar and BCZ to act as
co-administrators to the Company for the MidCap Index Fund for the period and
the terms set forth herein and in the Co-Administration Agreement. Firstar and
BCZ hereby accept such appointment and agree to render the services set forth
herein and in the Co-Administration Agreement, for the compensation herein
provided.
2. COMPENSATION. For the services provided and the expenses assumed with
respect to the MidCap Index Fund and the other Funds pursuant to the Co-
Administration Agreement and this Addendum, the Company will pay Firstar and
BCZ, and Firstar and BCZ will accept as full compensation therefor, a fee,
computed daily and payable monthly, at the annual rate of 0.125% of the Funds'
first $2 billion of average aggregate daily net assets, plus 0.10% of the Funds'
average aggregate daily net assets in excess of $2 billion. Such fee as is
attributable to the MidCap Index Fund shall be a separate charge to such Fund
and shall be the obligation of the MidCap Index Fund.
3. MISCELLANEOUS. Except to the extent supplemented hereby, the Co-
Administration Agreement shall remain unchanged and in full force and effect and
is hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of the
date and year first above written.
FIRSTAR FUNDS, INC.
By: /s/Laura Rauman
---------------------
Vice President
FIRSTAR MUTUAL FUND SERVICES, LLC
By: /s/Joseph Neuberger
---------------------
Senior Vice President
B.C. ZIEGLER AND COMPANY
By: /s/Robert J. Tuszynski
---------------------
Senior Vice President
Exhibit (h)(50)
FUND ACCOUNTING SERVICING AGREEMENT
(ADDITION OF CORE INTERNATIONAL EQUITY FUND)
Firstar Mutual Fund Services, LLC
615 E. Michigan Street
Milwaukee, WI 53202
Gentlemen:
Pursuant to Paragraph 4 of the Fund Accounting Servicing Agreement dated
March 23, 1988 that we have entered into with you (by way of assignment from
Firstar Trust Company dated October 1, 1998) we are writing to request that you
render accounting services under the terms of said agreement with respect to the
Core International Equity Fund, an additional portfolio we are establishing.
Your compensation for the services provided under said agreement for said
additional portfolio shall be determined in accordance with the fee schedule
attached hereto. Please sign two copies of this letter where indicated to
signify your agreement to provide said services and to the compensation terms
set forth on the attached fee schedule.
Sincerely,
Dated: November 1, 1999 FIRSTAR FUNDS, INC.
By: /s/Laura Rauman
-------------------
Vice President
ACKNOWLEDGED AND AGREED:
FIRSTAR MUTUAL FUND SERVICES, LLC
By: /s/Joseph Neuberger Dated: November 1, 1999
--------------------------------
Senior Vice President
FIRSTAR MUTUAL FUND SERVICES, LLC
FUND VALUATION AND ACCOUNTING
FOR
FIRSTAR FUNDS, INC.
Core International Equity Fund
-------------------------------
Portfolio Services
- ------------------
Annual fee schedule for the Core International Equity Fund based on market value
of assets. ------------------------------
$31,250 for first $40,000,000.00
0.025/100 of 1% on the next $200,000,000.00
0.0125/100 of 1% on the next $200,000,000.00
0.00625/100 of 1% on the balance.
Out-of-Pocket Expenses: Charged on the Account.
Fees are billed monthly.
Exhibit (h)(51)
FUND ACCOUNTING SERVICING AGREEMENT
(ADDITION OF MIDCAP INDEX FUND)
Firstar Mutual Fund Services, LLC
615 E. Michigan Street
Milwaukee, WI 53202
Gentlemen:
Pursuant to Paragraph 4 of the Fund Accounting Servicing Agreement
dated March 23, 1988 that we have entered into with you (by way of assignment
from Firstar Trust Company dated October 1, 1998), we are writing to request
that you render accounting services under the terms of said agreement with
respect to the MidCap Index Fund, an additional portfolio we are establishing.
Your compensation for the services provided under said agreement for said
additional portfolio shall be determined in accordance with the fee schedule
attached hereto. Please sign two copies of this letter where indicated to
signify your agreement to provide said services and to the compensation terms
set forth on the attached fee schedule.
Sincerely,
Dated: November 1, 1999 FIRSTAR FUNDS, INC.
By: /s/Laura Rauman
---------------------
Vice President
ACKNOWLEDGED AND AGREED:
FIRSTAR MUTUAL FUND SERVICES, LLC
By: /s/Joseph Neuberger Dated: November 1, 1999
---------------------
Senior Vice President
FIRSTAR MUTUAL FUND SERVICES, LLC
FUND VALUATION AND ACCOUNTING
FOR
FIRSTAR FUNDS, INC.
MidCap Index Fund
-----------------
Portfolio Services
- ------------------
Annual fee schedule for the MidCap Index Fund based on market value of assets.
$27,500 for first $40,000,000.00
0.0125/100 of 1% on the next $200,000,000.00
0.00625/100 of 1% on the balance.
Out-of-Pocket Expenses: Charged on the Account.
Fees are billed monthly.
Exhibit (h)(52)
LETTER AGREEMENT TO THE
SHAREHOLDER SERVICING AGENT AGREEMENT
(ADDITION OF THE CORE INTERNATIONAL EQUITY FUND)
Firstar Mutual Fund Services, LLC
615 E. Michigan Street
Milwaukee, WI 53202
Gentlemen:
Pursuant to Paragraph 7 of the Shareholder Servicing Agent Agreement dated
as of March 23, 1988 and amended as of May 1, 1990, between Firstar Funds, Inc.
(formerly, Portico Funds, Inc. and formerly Elan Funds, Inc.) (the "Company"),
and you (by assignment from Firstar Trust Company dated October 1, 1998), the
Company requests that you render services as Shareholder Servicing Agent under
the terms of said agreement with respect to the Core International Equity Fund,
an additional portfolio the Company is establishing. Your compensation for the
services provided under said agreement for said additional portfolio shall be
determined in accordance with the fee schedule attached hereto.
Please sign two copies of this letter where indicated to signify your
agreement to so serve as Shareholder Servicing Agent for the Core International
Equity Fund and to the compensation terms set forth on the attached fee schedule
for the new Fund, which terms are to become effective as of the date set forth
below.
Sincerely,
Dated: November 1, 1999 FIRSTAR FUNDS, INC.
By: /s/Laura Rauman
--------------------
Vice President
ACKNOWLEDGED AND AGREED:
FIRSTAR MUTUAL FUND SERVICES, LLC.
By: /s/Joseph Neuberger Dated: November 1, 1999
----------------------
Senior Vice President
FIRSTAR MUTUAL FUND SERVICES, LLC
MUTUAL FUND SHAREHOLDER SERVICES
FOR
FIRSTAR FUNDS, INC.
Core International Equity Fund
------------------------------
Annual Fee Schedule
- -------------------
$15 per Shareholder account
$5 per telephone exchange
$12 per wire transfer
$10 per NFS/NSCC networked account (Retail Class only)
Minimum annual fee of $24,000 per Fund.
Account fees shall be waived on the initial 0 accounts per series.
Fees billed monthly.
Plus out-of-pocket expenses including, but not limited to:
- Telephone--Toll-free lines
- Postage
- Programming
- Stationery/Envelopes
- Mailing
- Proxies
- Insurance
- Retention of Records
- Microfilm/Microfiche of Records
- Special Reports
- All other out-of pocket expenses
Plus, with respect to Two-Dimensional Transaction:
$1 per shareholder account to set-up
$1 per shareholder account to alter
AUTOMATIC INVESTMENT PLAN PROCESSING
-------------------------------------
$ .50 per cycle
$ .50 per account set-up and/or change
$ .50 per item for AIP purchases
$5.00 per correction, reversal or return item
Exhibit (h)(53)
LETTER AGREEMENT TO THE
SHAREHOLDER SERVICING AGENT AGREEMENT
(ADDITION OF THE MIDCAP INDEX FUND)
Firstar Mutual Fund Services, LLC
615 E. Michigan Street
Milwaukee, WI 53202
Gentlemen:
Pursuant to Paragraph 7 of the Shareholder Servicing Agent Agreement dated
as of March 23, 1988 and amended as of May 1, 1990, between Firstar Funds, Inc.
(formerly, Portico Funds, Inc. and formerly Elan Funds) (the "Company"), and you
(by assignment from Firstar Trust Company dated October 1, 1998)the Company
requests that you render services as Shareholder Servicing Agent under the terms
of said agreement with respect to the MidCap Index Fund, an additional portfolio
the Company is establishing. Your compensation for the services provided under
said agreement for said additional portfolio shall be determined in accordance
with the fee schedule attached hereto.
Please sign two copies of this letter where indicated to signify your
agreement to so serve as Shareholder Servicing Agent for MidCap Index Fund and
to the compensation terms set forth on the attached fee schedule for the new
Fund, which terms are to become effective as of the date set forth below.
Sincerely,
Dated: November 1, 1999 FIRSTAR FUNDS, INC.
By: Laura Rauman
-------------------
Vice President
ACKNOWLEDGED AND AGREED:
FIRSTAR MUTUAL FUND SERVICES, LLC.
By: /s/Joseph Neuberger Dated: November 1, 1999
---------------------
Senior Vice President
FIRSTAR MUTUAL FUND SERVICES, LLC
MUTUAL FUND SHAREHOLDER SERVICES
FOR
FIRSTAR FUNDS, INC.
MidCap Index Fund
-----------------
Annual Fee Schedule
- -------------------
$15 per Shareholder account
$5 per telephone exchange
$12 per wire transfer
$10 per NFS/NSCC networked account (Retail Class only)
Minimum annual fee of $24,000 per Fund.
Account fees shall be waived on the initial 800 accounts per series.
Fees billed monthly.
Plus out-of-pocket expenses including, but not limited to:
- Telephone--Toll-free lines
- Postage
- Programming
- Stationery/Envelopes
- Mailing
- Proxies
- Insurance
- Retention of Records
- Microfilm/Microfiche of Records
- Special Reports
- All other out-of pocket expenses
Plus, with respect to Two-Dimensional Transaction:
$1 per shareholder account to set-up
$1 per shareholder account to alter
AUTOMATIC INVESTMENT PLAN PROCESSING
-------------------------------------
$ .50 per cycle
$ .50 per account set-up and/or change
$ .50 per item for AIP purchases
$5.00 per correction, reversal or return it
EXHIBIT (H)(54)
EXECUTION VERSION
MERCANTILE MUTUAL FUNDS, INC.
AND
FIRSTAR FUNDS INC.
---------------
THE LENDERS NAMED HEREIN,
AND
THE CHASE MANHATTAN BANK,
AS ADMINISTRATIVE AGENT
$140,000,000
CREDIT AGREEMENT
---------------
DATED AS OF DECEMBER 29, 1999
================================================================================
================================================================================
CHASE SECURITIES INC.
AS ADVISOR, LEAD ARRANGER
AND BOOK MANAGER
TABLE OF CONTENTS
-----------------
Page
----
SECTION 1. DEFINITIONS ...............................................1
1.1 Defined Terms .............................................1
1.2 Other Definitional Provisions. ............................9
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS............................9
2.1 Commitments ...............................................9
2.2 Procedure for Borrowing ..................................10
2.3 Fees .....................................................10
2.4 Termination and Reduction of Commitment ..................11
2.5 Repayment of Loans; Evidence of Debt .....................11
2.6 Optional and Mandatory Prepayments .......................12
2.7 Interest Rates and Payment Dates .........................13
2.8 Computation of Interest and Fees .........................13
2.9 Pro Rata Treatment and Payments ..........................14
2.10 Requirements of Law ......................................14
2.11 Taxes ....................................................15
2.12 Change of Lending Office; Replacement of Lender ..........17
2.13 Swing Line Commitment ....................................17
2.14 Procedure for Swing Line Borrowing .......................17
2.15 Refunding of Swing Line Loans ............................18
2.16 Designation of Additional Borrowers;
Amendments to Schedule I .................................19
SECTION 3. REPRESENTATIONS AND WARRANTIES ...........................20
3.1 Financial Condition ......................................20
3.2 No Change ................................................20
3.3 Existence; Compliance with Law ...........................20
3.4 Power; Authorization; Enforceable Obligations ............21
3.5 No Legal Bar .............................................21
3.6 No Material Litigation ...................................21
3.7 No Default ...............................................21
3.8 Ownership of Property; Liens .............................22
3.9 No Burdensome Restrictions ...............................22
3.10 Taxes ....................................................22
3.11 Federal Regulations ......................................22
3.12 ERISA ....................................................22
3.13 Certain Regulations ......................................22
3.14 Subsidiaries .............................................22
3.15 Registration of the Funds ................................23
3.16 Offering in Compliance with Securities Laws ..............23
3.17 Investment Policies ......................................23
3.18 Permission to Borrow .....................................23
3.19 Accuracy of Information; Electronic information ..........23
3.20 Affiliated Persons .......................................23
3.21 Year 2000 ................................................24
SECTION 4. CONDITIONS PRECEDENT........................................24
4.1 Conditions to Initial Loans ..............................24
4.2 Conditions to Each Loan ..................................26
SECTION 5. AFFIRMATIVE COVENANTS......................................27
5.1 Financial Statements .....................................27
5.2 Certificates; Other Information .........................28
5.3 Payment of Obligations ...................................28
5.4 Conduct of Business and Maintenance of Existence .........28
5.5 Maintenance of Property; Insurance .......................29
5.6 Inspection of Property; Books and Records; Discussions ...29
5.7 Notices ..................................................29
5.8 Purpose of Loans .........................................30
SECTION 6. NEGATIVE COVENANTS.........................................30
6.1 Financial Condition Covenant .............................30
6.2 Limitation on Indebtedness; Derivatives ..................31
6.3 Limitation on Liens ......................................31
6.4 Limitation on Guarantee Obligations ......................31
6.5 Limitation on Fundamental Changes ........................31
6.6 Limitation on Distributions ..............................32
6.7 Limitation on Investments, Loans and Advances ............32
6.8 Limitation on Transactions with Affiliates ...............32
6.9 Limitation on Negative Pledge Clauses ....................32
6.10 Limitation on Changes to Investment Policies .............32
6.11 Permitted Activities .....................................33
6.12 Sale of Assets, Consolidation, Merger, Etc. ..............33
SECTION 7. EVENTS OF DEFAULT..........................................33
SECTION 8. THE ADMINISTRATIVE AGENT...................................36
8.1 Appointment ..............................................36
8.2 Delegation of Duties .....................................37
8.3 Exculpatory Provisions ...................................37
8.4 Reliance by Administrative Agent .........................37
8.5 Notice of Default ........................................37
8.6 Non-Reliance on Administrative Agent and Other Lenders ...38
8.7 Indemnification ..........................................38
8.8 Administrative Agent in Its Individual Capacity ..........39
8.9 Successor Administrative Agent ...........................39
SECTION 9. MISCELLANEOUS ............................................39
9.1 Amendments and Waivers ...................................39
9.2 Notices ..................................................40
9.3 No Waiver; Cumulative Remedies ...........................41
9.4 Survival of Representations and Warranties ...............41
9.5 Payment of Expenses and Taxes ............................41
9.6 Successors and Assigns; Participations and Assignments ...42
9.7 Adjustments; Set-off .....................................44
9.8 Counterparts .............................................45
9.9 Severability .............................................45
9.10 Integration ..............................................45
9.11 GOVERNING LAW ............................................46
9.12 Submission To Jurisdiction; Waivers ......................46
9.13 Acknowledgements .........................................47
9.14 WAIVERS OF JURY TRIAL ....................................47
9.16 Recourse .................................................48
9.17 Integration ..............................................48
SCHEDULES:
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Schedule I Borrowers & Pro Rata Allocations
Schedule II Commitments, Addresses, Etc.
Schedule III Investment Management Agreements
Schedule IV Custody Agreements
EXHIBITS:
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Exhibit 2.5(e) Form of Note
Exhibit 2.16(a) Form for Designation of New Borrowers
Exhibit 4.1(g) Form of Opinion
Exhibit 9.6(c) Form of Assignment and Acceptance
CREDIT AGREEMENT dated as of December 29 , 1999 (this "Agreement") among
(i) the undersigned registered open-end management investment companies (each, a
"Fund", and collectively, the "Funds"), each of which is executing this
Agreement on behalf of itself, and, if applicable, certain of its respective
investment portfolios set forth beneath such Fund's name on the signature pages
hereto (each of which Funds or investment portfolios, as the case may be, is,
individually, a "Borrower" and, collectively, the "Borrowers"), (ii) the several
banks and other financial institutions from time to time parties to this
Agreement (the "Lenders") and (iii) THE CHASE MANHATTAN BANK, a New York banking
corporation, as a Lender and as administrative agent for the Lenders hereunder
(in such capacity, the "Administrative Agent");
W I T N E S S E T H :
- - - - - - - - - - -
WHEREAS, each Fund is an open-end registered investment company under the
Investment Company Act of 1940 for which MVA or FIRMCO (as such terms are
defined below) acts as an investment manager;
WHEREAS, each Borrower has requested the Lenders to make Loans (as defined
below) severally and not jointly or jointly and severally to each Borrower and
to make available to it a credit facility for the purposes and on the terms and
conditions set forth herein; and
WHEREAS, each Lender acknowledges that each Borrower shall be liable
hereunder only for the Loans made to such Borrower hereunder and interest
thereon and for the fees and expenses associated therewith and as otherwise set
forth herein, and that, notwithstanding anything to the contrary herein, each
Borrower's obligations hereunder are several and not joint or joint or several;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties to this Agreement agree as follows:
SECTION 1. DEFINITIONS
(1) Defined Terms. As used in this Agreement, the following terms shall
have the following meanings:
"Administrative Agent": The Chase Manhattan Bank, together with its
permitted successors, as the administrative agent for the Lenders under this
Agreement and the other Loan Documents.
"Affiliate": as to any Person, any other Person (other than a Subsidiary)
which, directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person. For purposes of this definition, "control" of
a Person means the power, directly or indirectly, either to (a) vote 10% or more
of the securities having ordinary voting power for the election of directors of
such Person or (b) direct or cause the direction of the management and policies
of such Person, whether by contract or otherwise.
"Aggregate Commitment": the total of all Commitments of all Lenders, as may
be reduced from time to time in the accordance with the terms of this Agreement.
On the Closing Date at the time of closing, the Aggregate Commitment shall be
equal to $140,000,000.
"Agreement": this Credit Agreement, as amended, restated, supplemented or
otherwise modified from time to time.
"Applicable Margin": 0.50% per annum.
"Asset Coverage Ratio": with respect to any Borrower, the ratio which the
value of the Total Assets of such Borrower less all liabilities and Indebtedness
not represented by Senior Securities, bears to the aggregate amount of all
Senior Securities representing Indebtedness of such Borrower. For the purposes
of calculating the Asset Coverage Ratio, the amount of any liability or
Indebtedness deducted from Total Assets shall be equal to the greater of (x) the
outstanding amount of such liability or Indebtedness and (y) the fair market
value of all assets securing such liability or Indebtedness.
"Assignee": as defined in Section 9.6(c).
"Available Commitment": as to any Lender at any time, an amount equal to
(a) the amount of such Lender's Commitment less (b) the aggregate principal
amount of all Loans to all Borrowers made by such Lender then outstanding;
collectively, as to all the Lenders, the "Available Commitments".
"Benefited Lender": as defined in Section 9.7(a).
"Borrower" and "Borrowers": as defined in the Preamble hereto.
"Borrowing Date": any Business Day specified in a notice pursuant to
Section 2.2 or 2.14 as a date on which a Fund, on its own behalf or, if
applicable, on behalf of an investment portfolio thereof that is a Borrower,
requests the Lenders to make Loans hereunder.
"Business Day": a day other than a Saturday, Sunday or other day on which
commercial banks in New York City, St. Louis, Missouri., or Milwaukee, Wisconsin
are authorized or required by law to close.
"Chase": The Chase Manhattan Bank, a New York banking corporation.
"Closing Date": the date on which the conditions precedent set forth in
Section 4.1 shall be satisfied and the Loan Documents are signed by the parties
hereto and delivered to the offices of Pryor Cashman Sherman & Flynn LLP, at 410
Park Avenue, New York, New York 10022.
"Code": the Internal Revenue Code of 1986, as amended from time to time.
"Commitment": as to any Lender, the obligation of such Lender to make
Loans to the Borrowers hereunder in an aggregate principal amount at any one
time outstanding not to exceed the amount set forth opposite such Lender's name
on Schedule II hereto.
"Commitment Fee": as defined in Section 2.3.
"Commitment Percentage": as to any Lender at any time, the percentage
which such Lender's Commitment then constitutes of the aggregate Commitments of
all Lenders (or, at any time after the Commitments of all the Lenders shall have
expired or terminated, the percentage which the aggregate principal amount of
such Lender's Loans then outstanding constitutes of the aggregate principal
amount of the Loans of all the Lenders then outstanding).
"Commitment Period": the period from and including the Closing Date, but
not including, the Termination Date.
"Commonly Controlled Entity": an entity, whether or not incorporated,
which is under common control with any Borrower within the meaning of Section
4001 of ERISA or is part of a group which includes any Borrower and which is
treated as a single employer under Section 414 of the Code.
"Contractual Obligation": as to any Person, any provision of any security
issued by such Person or of any agreement, instrument or other undertaking to
which such Person is a party or by which it or any of its property is bound.
"Custody Agreement": as to each Fund, on its own behalf or if applicable
on behalf of each investment portfolio thereof that is a Borrower, the Custody
Agreement(s) set forth in Schedule IV hereto.
"Default": any of the events specified in Section 7, whether or not any
requirement for the giving of notice, the lapse of time, or both, or any other
condition, has been satisfied.
"Dollars" and "$": dollars in lawful currency of the United States of
America.
"Eligible Lender": an entity that is a "Bank" (as defined in the 1940 Act)
and is not otherwise prohibited by Section 17 of the 1940 Act from lending to
any of the Borrowers.
"ERISA": the Employee Retirement Income Security Act of 1974, as amended
from time to time.
"Event of Default": any of the events specified in Section 7, provided
that any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
"Federal Funds Rate": for any day, the "offered rate", as determined by
Chase, for overnight federal funds, which rate is determined day to day and will
be reasonably representative of the market conditions at the times set.
"Financing Lease": any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance with
GAAP to be capitalized on a balance sheet of the lessee.
"FIRMCO": Firstar Investment Research & Management Company, LLC, a
Wisconsin limited liability company and its Affiliates, acting as investment
manager to certain of the Borrowers as indicated on Schedule I hereto.
"Fund": as defined in the Preamble hereto.
"Fundamental Investment Policies": those policies, including investment
objectives, from which an investment portfolio of a Fund may not deviate without
obtaining shareholder consent in accordance with the 1940 Act.
"GAAP": generally accepted accounting principles in the United States of
America in effect from time to time.
"Governmental Authority": any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"Guarantee Obligation": as to any Person (the "guaranteeing person"), any
obligation of (a) the guaranteeing person or (b) another Person (including,
without limitation, any bank under any letter of credit) to induce the creation
of which the guaranteeing person has issued a reimbursement, counterindemnity or
similar obligation, in either case guaranteeing or in effect guaranteeing any
Indebtedness, leases, dividends or other obligations (the "primary obligations")
of any other third Person (the "primary obligor") in any manner, whether
directly or indirectly, including, without limitation, any obligation of the
guaranteeing person, whether or not contingent, (i) to purchase any such primary
obligation or any property constituting direct or indirect security therefor,
(ii) to advance or supply funds (A) for the purchase or payment of any such
primary obligation or (B) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (iii) to purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation or
(iv) otherwise to assure or hold harmless the owner of any such primary
obligation against loss in respect thereof; provided, however, that the term
Guarantee Obligation shall not include endorsements of instruments for deposit
or collection in the ordinary course of business. The amount of any Guarantee
Obligation of any guaranteeing person shall be deemed to be the lower of (a) an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such Guarantee Obligation is made and (b) the maximum amount
for which such guaranteeing person may be liable pursuant to the terms of the
instrument embodying such Guarantee Obligation, unless such primary obligation
and the maximum amount for which such guaranteeing person may be liable are not
stated or determinable, in which case the amount of such Guarantee Obligation
shall be such guaranteeing person's maximum reasonably anticipated liability in
respect thereof as determined by such guaranteeing person in good faith.
"Indebtedness": of any Person at any date, (a) all indebtedness of
such Person for borrowed money or for the deferred purchase price of property or
services (other than current trade liabilities incurred in the ordinary course
of business and payable in accordance with customary practices), (b) any other
indebtedness of such Person which is evidenced by a note, bond, debenture or
similar debt instrument, (c) all obligations of such Person under Financing
Leases or Interest Rate Agreements, calculated daily on a marked-to-market basis
in accordance with GAAP, (d) all obligations of such Person in respect of
acceptances (as defined in Section 3-410 of the UCC) issued or created for the
account of such Person, (e) all reimbursement obligations of such person arising
out of any letters of credit, and (f) all liabilities secured by any Lien on any
property owned by such Person even though such Person has not assumed or
otherwise become liable for the payment thereof all of which without
duplication.
"Interest Payment Date": as to any Revolving Credit Loan, the Maturity
Date for such Loan.
"Interest Rate Agreements": any interest rate protection agreement,
interest rate future, interest rate option, interest rate swap, interest rate
cap or other interest rate hedge or arrangement under which a Fund, on its own
behalf or if applicable on behalf of an investment portfolio thereof that is a
Borrower, is a party or a beneficiary.
"Investment Management Agreements": as to the Funds and each Borrower, the
Investment Advisory Agreements set forth on Schedule III hereto.
"Investment Policies": as to each Borrower, the policies and objectives
for, and limits and restrictions on, investing by such Borrower set forth in the
Prospectus relating to such Borrower.
"Lenders": as defined in the Preamble hereto.
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement and any Financing Lease
having substantially the same economic effect as any of the foregoing).
"Loan Documents": this Agreement and the Notes.
"Loans": all loans made pursuant to this Agreement; individually, a
"Loan".
"Material Adverse Effect": (with respect to a Borrower, the respective
Borrower and with respect to a Fund, the respective Fund) a material adverse
effect on (a) the business, financial condition (other than changes in net
assets of a Borrower in the ordinary course of its activities) or ability to
timely perform any of its material obligations under the Loan Documents of a
Fund or a Borrower or (b) the legality, validity, binding nature or
enforceability of the Loan Documents or the rights or remedies of the
Administrative Agent or the Lenders hereunder or thereunder.
"Maturity Date": as to each Loan, the date which is the earliest of (a) 30
days after the Borrowing Date for such Loan, (b) the Termination Date and (c)
the payment in full of such Loan.
"Moody's": Moody's Investor Service, Inc.
"MVA": Mississippi Valley Advisors Inc. a Missouri corporation, and its
Affiliates, acting as investment manager for certain of the Borrowers as
indicated on Schedule I hereto.
"1940 Act": the Investment Company Act of 1940, as amended, together with
all rules and regulations promulgated from time to time thereunder.
"Non-Excluded Taxes": as defined in Section 2.11.
"Non-Recourse Person": as defined in Section 9.15.
"Notes": the collective reference to the Revolving Credit Notes;
individually, a "Note".
"Participant": as defined in Section 9.6(b).
"Person": an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture, Governmental Authority or other entity of whatever nature.
"Plan": at a particular time, any employee benefit plan covered by ERISA
which any applicable Person maintains.
"Pro Rata Allocation": as to each Borrower, the percentage amount stated in
Schedule I to this Agreement; provided that, if no Event of Default shall have
occurred and be continuing, the Funds, on behalf of the Borrowers, without the
consent of the Lenders, by written notice to the Administrative Agent, may
change the Pro Rata Allocations from time to time in the Funds' sole discretion;
provided further, that while an Event of Default has occurred and is continuing
with respect to a Borrower, the Pro Rata Allocations may be changed in such
manner as long as the Pro Rata Allocation of any such defaulting Borrower is not
increased; and provided further, that, after any such change in Pro Rata
Allocations, the aggregate amount of all Pro Rata Allocations shall equal 100%.
The delivery of such written notice shall constitute a representation and
warranty by the Borrowers as of the date thereof that no Event of Default shall
have occurred and be continuing with respect to each Borrower whose Pro Rata
Allocation has been increased.
"Prospectus": at a particular time, shall mean (i) as to a Fund that is
itself a Borrower, the currently effective prospectuses and statements of
additional information of such Fund, and (ii) as to each other Borrower, the
applicable portions of the currently effective prospectus(es) and statement(s)
of additional information of the Fund of which such Borrower is an investment
portfolio.
"Register": as defined in Section 9.6(d).
"Registration Statement": (i) as to each Fund that is itself a Borrower,
that registration statement as filed with the Securities and Exchange Commission
under the Securities Act and the 1940 Act, and (ii) as to each other Borrower,
that portion applicable to such Borrower of the registration statement of the
Fund of which such Borrower is an investment portfolio as filed with the
Securities and Exchange Commission under the Securities Act and the 1940 Act, in
each case as amended from time to time.
"Regulation T": Regulation T of the Board of Governors of the Federal
Reserve System as in effect from time to time.
"Regulation U": Regulation U of the Board of Governors of the Federal
Reserve System as in effect from time to time.
"Regulation X": Regulation X of the Board of Governors of the Federal
Reserve System as in effect from time to time.
"Required Lenders": at any time, Lenders the Commitment Percentages of
which aggregate more than 50%.
"Requirement of Law": as to any Person, the certificate of incorporation,
by-laws, partnership agreement, or other organizational or governing documents
of such Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
"Responsible Officer": the chairman, vice chairman, president, vice
president, treasurer, secretary, assistant treasurer or assistant secretary of a
Fund, or, with respect to financial matters, the treasurer of such Fund.
"Revolving Credit Loan": as defined in Section 2.1.
"Revolving Credit Note": as defined in Section 2.5(e).
"S&P": Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies.
"Securities Act": the Securities Act of 1933, as amended, together with all
rules and regulations promulgated from time to time thereunder.
"Senior Securities Representing Indebtedness": any Senior Security other
than stock.
"Senior Security": any bond, debenture, note or similar obligation or
instrument constituting a security and evidencing indebtedness (including
without limitation all Loans under this Agreement for purposes of the 1940 Act
and this Agreement), and any share of beneficial interest or common stock, as
the case may be, of a Fund, on its own behalf or if applicable on behalf of each
investment portfolio thereof that is a Borrower, of a class (other than a class
established in accordance with Rule 18f-3 of the 1940 Act) having priority over
any other class of shares of such Fund as to distribution of assets or payment
of dividends.
"Subsidiary": as to any Person, a corporation, partnership or other entity
of which shares of stock or other ownership interests having ordinary voting
power (other than stock or such other ownership interests having such power only
by reason of the happening of a contingency) to elect a majority of the board of
directors or other managers of such corporation, partnership or other entity are
at the time owned, or the management of which is otherwise controlled, directly
or indirectly through one or more intermediaries, or both, by such Person.
"Swap Obligation": as to any Person, any obligation of such Person arising
out of (i) any "swap agreement" (as defined in Section 101(53B) of the
Bankruptcy Code), (ii) any equity swap, floor, collar, cap or option
transaction, (iii) any option to enter into any of the foregoing or (iv) any
combination of the foregoing.
"Swing Line Commitment": the obligation of the Swing Line Lender to make
Swing Line Loans pursuant to Section 2.13 hereof in an aggregate principal
amount at any one time outstanding not to exceed the amount set forth opposite
the Swing Line Lender's name on Schedule II hereto.
"Swing Line Lender": Chase.
"Swing Line Loans": as defined in Section 2.13 hereof.
"Swing Line Participation Amount": as defined in Section 2.15(c) hereof.
"Termination Date": the date which is 364 days following the Closing Date
or such earlier date on which the Commitments shall terminate as provided
herein.
"Total Assets": at any time, all assets of a Borrower which in accordance
with GAAP would be classified as assets on a balance sheet of such Borrower
prepared as of such time; provided, however, that the term Total Assets shall
not include (a) equipment, (b) securities owned by a Borrower which are in
default except to the extent of the fair value assigned such defaulted
securities by the board of directors or trustees of the Fund in accordance with
its standard practice and (c) deferred organizational and offering expenses.
"Transferee": as defined in Section 9.6(f).
"UCC": the Uniform Commercial Code as from time to time in effect in the
State of New York.
1.2 Other Definitional Provisions. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have such defined meanings
when used in any Notes or any certificate or other document made or delivered
pursuant hereto.
(b) As used herein and in any Notes, and any certificate or other
document made or delivered pursuant hereto, accounting terms
relating to any Fund or Borrower not defined in Section 1.1 and
accounting terms partly defined in Section 1.1, to the extent not
defined, shall have the respective meanings given to them under
GAAP (as consistently applied).
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement
as a whole and not to any particular provision of this Agreement,
and Section, subsection, Schedule and Exhibit references are to
this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
1.3 Assumptions Regarding Structure. For the sake of clarity and
construction, the parties hereto hereby set forth their acknowledgement and
agreement that each Borrower is an investment portfolio of a Fund and is not a
separately existing legal entity entitled to enter into contractual agreements
or to execute instruments and, for these reasons, any such Fund is executing
this Agreement and each respective Note on behalf of its investment portfolios,
as Borrowers, and that such investment portfolios, as Borrowers, and that such
investment portfolios will utilize the Loans thus made on their behalf.
Notwithstanding anything to the contrary in this Agreement, each Borrower shall
be liable hereunder only for the Loans made to such Borrower hereunder and
interest thereon and for the fees and expenses associated therewith and as
otherwise set forth herein, and in no event shall any Borrower or its assets be
held liable for the Loans made to any other Borrower hereunder or interest
thereon or for the fees and expenses associated therewith.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 Commitments. Subject to the terms and conditions hereof, each Lender
severally agrees to make revolving credit loans ("Revolving Credit Loans") to
each Borrower, from time to time during the Commitment Period, in an aggregate
principal amount at any one time outstanding not to exceed the amount of such
Lender's Commitment. During the Commitment Period, each Borrower may use
Commitments by borrowing, prepaying Loans in whole or in part, and reborrowing,
all in accordance with the terms and conditions hereof and with such procedures
as may be agreed to among the Borrowers from time to time; provided that at no
time may the aggregate principal amount outstanding of Revolving Credit Loans to
all Borrowers exceed the Aggregate Commitment.
2.2 Procedure for Borrowing. (a) A Borrower may borrow under the
Commitments during the Commitment Period on any Business Day, provided that the
Borrower (or a Fund on its behalf) shall give the Administrative Agent
irrevocable notice (which notice must be received by the Administrative Agent
prior to 1:00 P.M. New York City time on the requested Borrowing Date in
accordance with Section 9.2 hereof), specifying (i) the amount to be borrowed,
(ii) the requested Borrowing Date, and (iii) instructions to apply a specific
amount of the proceeds of such borrowing to repay the Swing Line Lender in an
amount equal to the Swing Line Loans to such Borrower then outstanding (as
contemplated by Section 2.2(b) below). Subject to Section 2.15 hereof, the
aggregate amount of all borrowings by the Borrowers then borrowing on any
Borrowing Date shall be in an amount equal to $3,000,000 or a whole multiple of
$1,000,000 in excess thereof (or, if the then Available Commitments are less
than $3,000,000, such lesser amount). Upon receipt of any such notice from a
Borrower (or a Fund on its behalf), the Administrative Agent shall promptly
notify each Lender thereof. Each Lender will make the amount of its pro rata
share of each borrowing available to the Administrative Agent for the account of
such Borrower at the office of the Administrative Agent specified in Section 9.2
prior to 3:00 P.M., New York City time, on the Borrowing Date requested by such
Borrower in funds immediately available to the Administrative Agent. Such
borrowing will then be made available to such Borrower on such Borrowing Date by
the Administrative Agent transferring by wire to the custodian of and for the
account of such Borrower the aggregate of the amounts made available to the
Administrative Agent by the Lenders and in like funds as received by the
Administrative Agent.
(b) If, on the Borrowing Date of any Revolving Credit Loans of a
Borrower, any Swing Line Loans to such Borrower shall be outstanding, the
proceeds of such Revolving Credit Loans to such Borrower shall first be applied
to pay in full such Swing Line Loans, with any remaining proceeds to be made
available to such Borrower as provided above.
2.3 Fees. (a) Each Borrower severally, and neither jointly nor jointly
and severally, agrees to pay to the Administrative Agent for the account of each
Lender such Borrower's Pro Rata Allocation (as adjusted from time to time in
accordance with the terms hereof) of a commitment fee ("Commitment Fee") during
the period which shall begin on the first day of the Commitment Period and shall
extend to the Termination Date, which Commitment Fee shall be a quarterly fee,
computed at the rate of 0.10% per annum on the average daily amount of the
Available Commitments during each calendar quarter. Such Commitment Fee shall
be payable quarterly in arrears on the last Business Day of each March, June,
September and December and on the Termination Date, commencing on the first of
such dates to occur after the date hereof. Solely for the purpose of calculating
the Commitment Fee, Swing Line Loans will not be deemed a utilization of the
Aggregate Commitments of any Lender.
(b) Each Borrower severally agrees to pay the Administrative Agent for
the account of the Administrative Agent the fees to which it has separately
agreed.
2.4 Termination and Reduction of Commitments. (a) Each Borrower shall
have the right, upon not less than three Business Days' notice to the
Administrative Agent, to terminate all Commitments with respect to such
Borrower. Any termination of all Commitments to a Borrower shall be accompanied
by prepayment in full of the Loans to such Borrower then outstanding, and
payment of such Borrower's Pro Rata Allocation of (i) any accrued Commitment
Fees payable by such Borrower hereunder and (ii) any other accrued fees,
expenses or indemnified liabilities payable by such Borrower hereunder. The
amount of the Aggregate Commitment shall not be affected by any Borrower's
termination. Prior to such termination, the Funds shall notify the
Administrative Agent in writing as to the Pro Rata Allocations of the remaining
Borrowers, effective as of the termination, which notice shall constitute a
representation and warranty by each of the remaining Borrowers that no Event of
Default has occurred and is continuing with respect to each Borrower whose Pro
Rata Allocation has been increased.
(b) Interest accrued on the amount of any prepayment relating to such
termination and any unpaid Commitment Fee accrued hereunder shall be paid on the
date of such termination.
(c) Upon the effective date of such termination, the terminating Borrower
shall no longer be obligated to pay Commitment Fees hereunder or any share of
any other fees, expenses, or indemnified liabilities that may accrue thereafter.
(d) The Borrowers shall have the right, upon not less than five Business
Days' notice to the Administrative Agent, to reduce the Aggregate Commitment.
Any such reduction shall be accompanied by prepayment in full of the Loans to
the Borrowers then outstanding that are in excess of the Aggregate Commitment as
reduced. Prior to such reduction, MVA and FIRMCO, on behalf of the Borrowers
jointly, shall notify the Administrative Agent in writing as to the Pro Rata
Allocation of the reduced Aggregate Commitment among the Borrowers, effective as
of the reduction.
(e) The Administrative Agent shall provide each Lender with prompt notice
of any Commitment changes pursuant to this Section 2.4.
2.5 Repayment of Loans; Evidence of Debt. (a) Each Borrower hereby
severally and unconditionally, but not jointly or jointly and severally,
promises to pay to the Administrative Agent for the account of each Lender the
then unpaid principal amount of each Loan of such Lender to such Borrower on the
Maturity Date for such Loan (or such earlier date on which the Loans become due
and payable pursuant to Section 2.6(b) or Section 7). Each Borrower hereby
further severally, but not jointly or jointly and severally, agrees to pay to
the Administrative Agent for the account of each Lender interest on the unpaid
principal amount of the Loans to such Borrower from time to time outstanding
from the date hereof until payment in full thereof at the rates per annum, and
on the dates, set forth in Section 2.7.
(b) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing indebtedness of each Borrower to such Lender
resulting from each Loan of such Lender from time to time, including the amounts
of principal and interest payable and paid to such Lender from time to time
under this Agreement.
(c) The Administrative Agent shall maintain the Register pursuant to
Section 9.6(d), and a subaccount therein for each Lender, in which shall be
recorded (i) the amount of each Loan made hereunder, (ii) the amount of any
principal or interest due and payable or to become due and payable from each
Borrower to each Lender hereunder and (iii) the amount of any principal or
interest and any other payments received by the Administrative Agent hereunder
from each Borrower and each Lender's share thereof. The Administrative Agent
shall provide a copy of the Register to each Borrower upon request.
(d) The entries made in the Register and the accounts of each Lender
maintained pursuant to Section 2.5(b) shall, to the extent permitted by
applicable law, be prima facie evidence of the existence and amounts of the
obligations of the Borrowers therein recorded, provided, however, that the
failure of any Lender or the Administrative Agent to maintain the Register or
any such account, or any error therein, shall not in any manner affect the
obligation of any Borrower to repay (with applicable interest) the Loans made to
such Borrower by such Lender in accordance with the terms of this Agreement.
(e) Each Fund, on its own behalf or, if applicable, on behalf of each
investment portfolio thereof that is a Borrower, agrees that, upon the request
of any Lender through the Administrative Agent, such Fund will execute and
deliver to such Lender a promissory note evidencing the Loans of such Lender to
such Fund, or if applicable such Borrower, substantially in the form of Exhibit
2.5(e) with appropriate insertions as to date and principal amount (a "Revolving
Credit Note").
(f) The obligations of each Borrower under its Notes and this Agreement
shall be several and neither joint nor joint and several. Notwithstanding
anything to the contrary contained in this Agreement, the parties hereto
acknowledge and agree that the sole source of payment of the obligations of each
Borrower hereunder, including, without limitation, the principal of and interest
on each Loan made hereunder to any Borrower, the Commitment Fee payable pursuant
to Section 2.3 and any other amounts attributable to the Loans made hereunder to
any Borrower shall be the revenues and assets of such Borrower, and not the
revenues and assets of any other Borrower (except as provided in Section 9.5(b))
or the revenues and assets of a Fund acting on behalf of a Borrower (except to
the extent of the revenues and assets of such Borrower).
2.6 Optional and Mandatory Prepayments. (a) Each Borrower may prepay the
Loans made to it, in whole or in part, without premium or penalty, upon at least
one Business Day's irrevocable notice to the Administrative Agent, specifying
the date and amount of prepayment. Upon receipt of any such notice the
Administrative Agent shall promptly notify each Lender thereof. If any such
notice is given, the amount specified in such notice shall be due and payable on
the date specified therein. The aggregate amount of all partial prepayments by
the Borrowers then repaying shall be in a principal amount of $500,000 or an
integral multiple of $500,000 in excess thereof.
(b) If, at any time and from time to time, for each Borrower, the
Asset Coverage Ratio for all borrowings of such Borrower shall be less than 300%
for such Borrower, or (ii) the aggregate amount of all borrowings of a Borrower
(including without limitation the Loans made to a Borrower) then outstanding
exceeds the borrowing limits provided in such Borrower's Prospectus; then in
each case within three Business Days thereafter such Borrower shall repay Loans
made to such Borrower to the extent necessary to ensure that (x) the Asset
Coverage Ratio of all borrowings of such Borrower after such payments is in
compliance with applicable covenants concerning minimum Asset Coverage Ratios
set forth in this Agreement and (y) the aggregate amount of all borrowings made
to such Borrower then outstanding does not after such payments exceed such
limits, as the case may be.
2.7 Interest Rates and Payment Dates. (a) Each Loan shall bear interest
at a rate per annum equal to the Federal Funds Rate plus the Applicable Margin.
(b) Upon (i) the occurrence and continuance of any Event of Default
specified in Section 7(e) with respect to a Borrower or (ii) notice given by the
Administrative Agent or the Required Lenders to the Borrower of any other Event
of Default, all Loans outstanding to such Borrower shall bear interest at a rate
per annum which is the rate that would otherwise be applicable thereto pursuant
to the provisions of section 2.7(a), plus 2% per annum. If all or a portion of
(i) the principal amount of any Loan, (ii) any interest payable thereon or (iii)
any Commitment Fee or other amount payable hereunder shall not be paid when due
(whether at the stated maturity, by acceleration or otherwise), such overdue
amount shall bear interest at a rate per annum equal to the Federal Funds Rate
plus the Applicable Margin plus 2% per annum from the date of such non-payment
until such amount is paid in full. For the avoidance of doubt, the parties
hereby agree that the maximum amount of interest payable on the principal amount
of any Loan pursuant to this Section 2.7 shall not exceed the sum of the Federal
Funds Rate plus the Applicable Margin plus 2% per annum.
(c) Interest shall be payable in arrears on each Interest Payment Date,
provided that interest accruing pursuant to the second sentence of paragraph (b)
of this section 2.7 shall be payable from time to time on demand.
2.8 Computation of Interest and Fees. (a) Commitment Fees and interest
shall be calculated on the basis of a 360-day year for the actual days elapsed.
Any change in the interest rate on a Loan resulting from a change in the Federal
Funds Rate shall become effective as of the opening of business on the day on
which such change becomes effective. The Administrative Agent shall as soon as
practicable notify the Borrowers and the Lenders of the effective date and the
amount of each such change in interest rate.
(b) Each determination of an interest rate by the Administrative Agent
pursuant to any provision of this Agreement shall be conclusive and binding on
each Borrower and the Lenders in the absence of manifest error. The
Administrative Agent shall, at the request of a Borrower, deliver to such
Borrower a statement showing the quotations used by the Administrative Agent in
determining any interest rate pursuant to Section 2.7(a).
2.9 Pro Rata Treatment and Payments. (a) Other than provided in Sections
2.13, 2.14 and 2.15, each borrowing by a Borrower from the Lenders hereunder,
each payment by a Borrower on account of any Commitment Fee hereunder and any
reduction of the Commitments of the Lenders shall be made pro rata according to
the respective Commitment Percentages of the Lenders. Each payment (including
each prepayment) by a Borrower on account of principal of and interest on the
Loans shall be made pro rata according to the respective outstanding principal
amounts of the Loans of such Borrower then held by the Lenders. All payments
(including prepayments) to be made by a Borrower hereunder, whether on account
of principal, interest, fees or otherwise, shall be made without set off or
counterclaim and shall be made no later than 1:00 P.M. New York City time, on
the due date thereof to the Administrative Agent, for the account of the
Lenders, at the Administrative Agent's office specified in Section 9.2 hereof,
in Dollars and in immediately available funds. The Administrative Agent shall
distribute such payments to the Lenders promptly upon receipt in like funds as
received. If any payment hereunder becomes due and payable on a day other than
a Business Day, such payment shall be extended to the next succeeding Business
Day, and, with respect to payments of principal, interest thereon shall be
payable at the then applicable rate during such extension.
(b) Unless the Administrative Agent shall have been notified in writing
by any Lender prior to a borrowing that such Lender will not make the amount
that would constitute its Commitment Percentage of such borrowing available to
the Administrative Agent, the Administrative Agent may assume that such Lender
is making such amount available to the Administrative Agent, and the
Administrative Agent may, in reliance upon such assumption, make available to a
Fund, on its own behalf or, if applicable, on behalf of an investment portfolio
thereof that is a Borrower, a corresponding amount. If such amount is not made
available by a Lender to the Administrative Agent by the required time on the
Borrowing Date therefor, such Lender shall pay to the Administrative Agent, on
demand, such amount with interest thereon at a rate equal to the daily average
Federal Funds Rate for the period commencing with such Borrowing Date until such
Lender makes such amount immediately available to the Administrative Agent (it
being understood that none of the Borrowers shall be obligated to repay any such
interest paid by the non-funding Lender). A certificate of the Administrative
Agent submitted to any Lender with respect to any amounts owing under this
Section 2.9(b) shall be conclusive in the absence of manifest error. If such
Lender's Commitment Percentage of such borrowing is not made available to the
Administrative Agent by such Lender within three Business Days of such Borrowing
Date, the Administrative Agent shall also be entitled to recover such amount
with interest thereon from the date of borrowing at the rate per annum
applicable to Loans hereunder, on or before three Business Days following demand
therefor, from the relevant Borrower (and such Borrower may borrow under the
Commitments or under the Swing Line Commitment to satisfy such demand; provided
that, for purposes of determining the Available Commitment, the Commitment of
any non-funding Lender shall be excluded). The Administrative Agent shall
request of each Lender other than the non-funding Lender that it fund the non-
funding Lender's defaulted Commitment (each such other Lender having no
commitment or obligation so to fund such Commitment), and if such funding does
not occur the Administrative Agent shall use its reasonable efforts to obtain
funding of such defaulted Commitment from third-party lenders.
2.10 Requirements of Law. (a) If any Lender shall have determined that
the adoption of or any change in any Requirement of Law (in each case after the
date hereof) of any Governmental Authority regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the effect of reducing
the rate of return on such Lender's or such corporation's capital as a
consequence of its obligations hereunder to a level below that which such Lender
or such corporation could have achieved but for such adoption, change or
compliance (taking into consideration such Lender's or such corporation's
policies with respect to capital adequacy) by an amount determined by such
Lender, in its reasonable discretion, to be material, then from time to time,
each Borrower shall promptly pay to such Lender such additional amount or
amounts as will compensate such Lender for such reduction.
(b) If any Lender becomes entitled to claim any additional amounts
pursuant to this Section, it shall promptly notify the Borrowers (with a copy to
the Administrative Agent) of the event by reason of which it has become so
entitled by providing a certificate setting forth in reasonable detail the basis
for the claim for additional amounts and the amounts required to be paid by the
Borrowers to such Lender; provided that such Lender shall not be required to
disclose any confidential information. Such certificate as to any additional
amounts payable pursuant to this Section submitted by such Lender to the
Borrowers (with a copy to the Administrative Agent) shall be conclusive in the
absence of manifest error. The agreements in this Section shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder. No Borrower shall be responsible to compensate such Lender
for additional amounts attributable to another Borrower's Loans.
(c) Failure or delay on the part of any Lender to demand compensation
pursuant to this Section shall not constitute a waiver of such Lender's right to
demand such compensation; provided that the Borrowers shall not be required to
compensate a Lender pursuant to this Section for any increased costs or
reductions of the rate of return incurred more than 180 days prior to the date
that such Lender notifies the Borrowers of the change in the Requirement of Law
giving rise to such increased costs or reductions of the rate of return and of
such Lender's intention to claim compensation therefor; provided further that,
if the change in the Requirement of Law giving rise to such increased costs or
reductions of the rate of return is retroactive, then the 180-day period
referred to above shall be extended to include the period of retroactive effect
thereof.
2.11 Taxes. (a) All payments made by any Borrower under this Agreement
and any Notes shall be made free and clear of, and without deduction or
withholding for or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now
or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority, excluding all present and future income taxes and
franchise taxes (imposed in lieu of net income taxes) imposed on the
Administrative Agent or any Lender as a result of a present or former connection
between the Administrative Agent or such Lender and the jurisdiction of the
Governmental Authority imposing such tax or any political subdivision or taxing
authority thereof or therein (other than any such connection arising solely from
the Administrative Agent or such Lender having executed, delivered or performed
its obligations or received a payment under, or enforced, this Agreement or any
Note). If any such non-excluded taxes, levies, imposts, duties, charges, fees
deductions or withholdings ("Non-Excluded Taxes") are required to be withheld
from any amounts payable to the Administrative Agent or any Lender hereunder or
under any Note, the amounts so payable to the Administrative Agent or such
Lender shall be increased to the extent necessary to yield to the Administrative
Agent or such Lender (after payment of all Non-Excluded Taxes) interest or any
such other amounts payable hereunder at the rates or in the amounts specified in
this Agreement, provided, however, that a Borrower shall not be required to
increase any such amounts payable to any Lender that is organized under the laws
of a jurisdiction outside the United States of America if such Lender fails to
comply with the requirements of paragraph (b) of this Section. Whenever any
Non-Excluded Taxes are payable by a Borrower, as promptly as possible thereafter
such Borrower shall send to the Administrative Agent for its own account or for
the account of such Lender, as the case may be, a certified copy of an original
official receipt received by such Borrower showing payment thereof. If a
Borrower fails to pay any Non-Excluded Taxes when due to the appropriate taxing
authority or fails to remit to the Administrative Agent the required receipts or
other required documentary evidence, such Borrower shall indemnify the
Administrative Agent and the Lenders for any incremental taxes, interest or
penalties that may become payable by the Administrative Agent or any Lender as a
result of any such failure. The agreements in this Section shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.
(b) Each Lender that is organized under the laws of a jurisdiction
outside the United States of America shall:
(i) deliver to MVA and FIRMCO, on behalf of the appropriate Fund and
any Borrower which is an investment portfolio of such Fund, and the
Administrative Agent prior to any payments being made under this Agreement
or the Notes (A) two properly completed copies of United States Internal
Revenue Service Form 1001 or 4224, or successor applicable form, as the
case may be, and (B) a properly completed Internal Revenue Service Form W-8
or W-9, or successor applicable form, as the case may be;
(ii) deliver to MVA and FIRMCO, on behalf of the appropriate Fund and
any Borrower which is an investment portfolio of such Fund, and the
Administrative Agent two further properly completed copies of any such form
or certification on or before the date that any such form or certification
expires or becomes obsolete and after the occurrence of any event requiring
a change in the most recent form previously delivered by it to MVA and
FIRMCO on behalf of the appropriate Fund and any Borrower which is an
investment portfolio of such Fund; and
(iii) obtain such extensions of time for filing and complete such
forms or certifications as may reasonably be requested by MVA and FIRMCO on
behalf of the appropriate Fund and any Borrower which is an investment
portfolio of such Fund, or the Administrative Agent;
unless in any such case an event (including, without limitation, any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Lender from lawfully completing and delivering any
such form with respect to it and such Lender so advises MVA and FIRMCO, on
behalf of the appropriate Fund and any Borrower which is an investment portfolio
of such Fund, and the Administrative Agent. Such Lender shall certify (A) in
the case of a Form 1001 or 4224, that it is entitled to receive payments under
this Agreement without deduction or withholding of any United States federal
income taxes and (B) in the case of a Form W-8 or W-9, that it is entitled to an
exemption from United States backup withholding tax. Each Person that shall
become a Lender or a Participant pursuant to Section 9.6 shall, upon the
effectiveness of the related transfer, be required to provide all of the forms
and statements required pursuant to this Section, provided that in the case of a
Participant such Participant shall furnish all such required forms and
statements to the Lender from which the related participation shall have been
purchased.
2.12 Change of Lending Office; Replacement of Lender. (a) Each Lender
agrees that if it makes any demand for payment under Section 2.10, or any
additional amounts are payable under Section 2.11, it will use reasonable
efforts (consistent with its internal policy and legal and regulatory
restrictions and so long as such efforts would not be disadvantageous to it, as
determined in its sole discretion) to designate a different lending office if
the making of such a designation would reduce or obviate the need for a Borrower
to make payments under Section 2.10 or payment of additional amounts under
Section 2.11.
(b) If any Lender shall have required compensation pursuant to Section
2.10, or payment of additional amounts under Section 2.11, the Borrowers shall
have the right, with the consent of the Administrative Agent (which shall not be
unreasonably withheld), to substitute such Lender with an Eligible Lender (a
"Replacement Lender") satisfactory to the Borrowers (which may be one or more of
the other then existing Lenders if they, in their sole discretion, elect to
become such Replacement Lender) to assume the Commitment of such Lender and to
purchase the Notes held by such Lender, if any, for an amount equal to the
principal of, and accrued and unpaid interest on, such Notes, together with the
fee specified in Section 9.6(e) and any other costs reasonably incurred by such
Lender in connection with its sale of such Notes and the assignment of such
Commitment (without recourse to or warranty by such Lender and subject to all
amounts due and owing to such Lender under this Agreement having been paid in
full). Upon the exercise of such right by the Borrowers and the satisfaction of
such conditions thereto, such Lender shall convey its interest to the
Replacement Lender in accordance with the procedures set forth in Section
9.6(c).
2.13 Swing Line Commitment: Subject to the terms and conditions hereof,
the Swing Line Lender agrees to make available to each Borrower a portion of the
credit otherwise available under the Commitments from time to time during the
Commitment Period by making swing line loans ("Swing Line Loans") to such
Borrower in an aggregate principal amount not to exceed at any one time
outstanding the Swing Line Commitment (provided, however, notwithstanding the
foregoing the Swing Line Loans made by the Swing Line Lender outstanding at any
time, when aggregated with the Swing Line Lender's other outstanding Revolving
Credit Loans hereunder, may not exceed the Swing Line Lender's Commitment then
in effect); provided, further, however, that on the date of the making of any
Swing Line Loan, the sum of the aggregate principal amount of all outstanding
Revolving Credit Loans and Swing Line Loans shall not exceed the total
Commitments (less the Commitment of any non-funding Lender referred to in
Section 2.9(b)). During the Commitment Period applicable to each Borrower, such
Borrower may use the Swing Line Commitment by borrowing, repaying and
reborrowing, all in accordance with the terms and conditions hereof. Each Swing
Line Loan shall bear interest at a rate per annum equal to the Federal Funds
Rate plus the Applicable Margin.
2.14 Procedure for Swing Line Borrowing. Whenever a Borrower desires that
the Swing Line Lender make Swing Line Loans under Section 2.13, the Borrower (or
the Fund of which it is an investment portfolio) shall give the Swing Line
Lender irrevocable telephonic notice confirmed promptly in writing (which
telephonic notice must be received by the Swing Line Lender not later than 3:00
p.m., New York City time, on the proposed Borrowing Date, and must specify the
amount of each requested Swing Line Loan. Each borrowing under the Swing Line
Commitment shall be in an amount equal to $50,000 or provided, however, that on
the date of the making of any Swing Line Loan (1) the aggregate principal amount
of all Swing Line Loans outstanding shall not exceed the Swing Line Commitment
and (2) the sum of the aggregate principal amount of all outstanding Revolving
Credit Loans and Swing Line Loans by the Swing Line Lender shall not exceed the
total Commitment of the Swing Line Lender. The proceeds of such Swing Line Loan
will then be made available to such Borrower on such Borrowing Date by the Swing
Line Lender transferring by wire to the custodian of and for the account of such
Borrower the aggregate of the amounts made available to the Swing Line Lender in
immediately available funds.
2.15 Refunding of Swing Line Loans. (a) The Swing Line Lender, at any
time in its sole and absolute discretion may, and on the seventh day (or if such
day is not a Business Day, the next Business Day following the seventh day)
after the Borrowing Date with respect to any Swing Line Loans to a Borrower
shall, on behalf of such Borrower and each Borrower hereby irrevocably directs
the Administrative Agent no later than 10:00 A.M., New York City time, on the
relevant refunding date, to request each Lender to make, and each Lender hereby
agrees to make, a Revolving Credit Loan to such Borrower, at the rate applicable
to the Swing Line Loans of such Borrower, in an amount equal to such Lender's
Commitment Percentage of the amount of such Swing Line Loans of such Borrower
(the "Refunded Swing Line Loans") outstanding on the date of such notice, to
repay the Swing Line Lender. Each Lender shall make the amount of such
Revolving Credit Loan available to the Administrative Agent at its office set
forth in Section 9.2 in immediately available funds, no later than 1:00 P.M.,
New York City time, on the date of such notice. The proceeds of such Revolving
Credit Loans shall be distributed by the Administrative Agent to the Swing Line
Lender and immediately applied by the Swing Line Lender to repay the Refunded
Swing Line Loans. Effective on the day such Revolving Credit Loans are made,
the portion of the Swing Line Loans so paid shall no longer be outstanding as
Swing Line Loans.
(b) The making of any Swing Line Loan hereunder at the request of a
Borrower shall be subject to the satisfaction of the applicable conditions
precedent thereto set forth in Section 4 (unless otherwise waived in accordance
with Section 9.1).
(c) If prior to the making of a Revolving Credit Loan to a Borrower
pursuant to Section 2.15(a) one of the events described in paragraph (e) of
Section 7 shall have occurred with respect to such Borrower, each Lender
severally, unconditionally and irrevocably agrees that it shall purchase a
participating interest in the applicable Swing Line Loans ("Unrefunded Swing
Line Loans") in an amount equal to the amount of Revolving Credit Loans which
would otherwise have been made by such Lender pursuant to Section 2.15(a). Each
Lender will immediately transfer to the Administrative Agent, in immediately
available funds, the amount of its participation (the "Swing Line Participation
Amount"), and the proceeds of such participation shall be distributed by the
Administrative Agent to the Swing Line Lender in such amount as will reduce the
amount of the respective participating interest retained by the Swing Line
Lender in its Swing Line Loans to the amount of the Revolving Credit Loans which
were to have been made by it pursuant to Section 2.15(a).
(d) Whenever, at any time after the Swing Line Lender has received from
any Lender such Lender's Swing Line Participation Amount, such Swing Line Lender
receives any payment on account of the Swing Line Loans, such Swing Line Lender
will distribute to such Lender its Swing Line Participation Amount
(appropriately adjusted, in the case of interest payments, to reflect the period
of time during which such Lender's participating interest was outstanding and
funded and, in the case of principal and interest payments, to reflect such
Lender's pro rata portion of such payment if such payment is not sufficient to
pay the principal of and interest on all Swing Line Loans then due); provided,
however, that in the event that such payment received by such Swing Line Lender
is required to be returned, such Lender will return to such Swing Line Lender
any portion thereof previously distributed to it by such Swing Line Lender.
(e) Each Lender's obligation to make the Loans referred to in Section
2.15(a) and to purchase participating interests pursuant to Section 2.15(c)
shall be absolute and unconditional and shall not be affected by any
circumstance, including, without limitation, (i) any setoff, counterclaim,
recoupment, defense or other right which such Lender may have against the Swing
Line Lender or any other Person for any reason whatsoever; (ii) the occurrence
or continuance of a Default or an Event of Default or the failure to satisfy any
of the other conditions specified in Section 4; (iii) any adverse change in the
condition (financial or otherwise) of any Borrower; (iv) any breach of this
Agreement or any other Loan Document by any Borrower or any Lender; or (v) any
other circumstance, happening or event whatsoever, whether or not similar to any
of the foregoing.
2.16 Designation of Additional Borrowers; Amendments to Schedule I. (a)
Other portfolios of the Funds and other investment companies registered under
the 1940 Act, in either case (a) which have at least $2,000,000 in Total Assets,
(b) are (I) equity funds, (II) fixed income funds or (III) any combination
thereof, in each case whether investing in domestic or foreign securities or any
combination thereof and (c) for which MVA, FIRMCO or an Affiliate thereof, as
appropriate, acts as the investment manager, may, with the prior written consent
of the Administrative Agent, each Lender and each Fund, which consent shall not
be unreasonably withheld, become parties to this Agreement in addition to those
Borrowers listed on Schedule I, and be deemed Borrowers for all purposes of this
Agreement by executing an instrument substantially in the form of Exhibit
2.16(a) hereto (with such changes therein as may be approved by the
Administrative Agent and the Lenders), which instrument shall (x) have attached
to it a copy of this Agreement (as the same may have been amended) with a
revised Schedule I reflecting the participation of such additional portfolio or
investment company and any prior revisions to Schedule I effected in accordance
with the terms hereof and (y) be accompanied by the documents and instruments
required to be delivered by the Borrowers pursuant to Section 4.1, including,
without limitation, an opinion of counsel for the Borrower substantially in the
form of Exhibit 4.1(g) hereto.
(b) No Person shall be admitted as a party to this Agreement as a
Borrower unless at the time of such admission and after giving effect thereto:
(i) the representations and warranties set forth in Section 3 shall be true and
correct with respect to such Borrower; (ii) such Borrower shall be in compliance
in all material respects with all of the terms and provisions set forth herein
on its part to be observed or performed at the time of the admission and after
giving effect thereto; and (iii) no Default or Event of Default with respect to
such Borrower shall have occurred and be continuing.
SECTION 3. REPRESENTATIONS AND WARRANTIESSECTION
To induce the Administrative Agent and the Lenders to enter into this
Agreement and to make the Loans, each Fund, on behalf of itself and, if
applicable, on behalf of each investment portfolio thereof that is a Borrower,
hereby represents and warrants to the Administrative Agent and each Lender that
(it being agreed that each Fund represents and warrants only to matters with
respect to itself and, if applicable, each Borrower that is an investment
portfolio thereof):
3.1 Financial Condition. For each Borrower, the statement of assets and
liabilities as of such Borrower's most recently ended fiscal year for which
annual reports have been prepared and the related statements of operations and
of changes in net assets for the fiscal year ended on such date, copies of which
financial statements, certified by the independent public accountants for the
Fund, have heretofore been delivered to each Lender, fairly present, in all
material respects, the financial position of such Borrower as of such date and
the results of its operations for such period, in conformity with GAAP (as
consistently applied).
3.2 No Change. For each Borrower, since the date of the statement of
assets and liabilities for the most recently ended fiscal year for which annual
reports have been prepared for such Borrower, there has been no development or
event which has had or could reasonably be expected to have a Material Adverse
Effect with respect to such Borrower.
3.3 Existence; Compliance with Law. Each Fund (a) is duly organized and
validly existing under the laws of the jurisdiction of its organization, (b) has
the corporate power and authority as to those Funds that are organized as
corporations, and the trust power and authority as to those Funds that are
organized as trusts; and in each case the legal right to own its property and to
conduct the business in which it is currently engaged, (c) is duly qualified as
a foreign corporation or business trust and, if a corporation, is in good
standing under the laws of each jurisdiction where its ownership of property or
the conduct of its business requires such qualification and (d) is in compliance
with all Requirements of Law, except to the extent that the failure to comply
therewith, and with clause (c) of this Section 3.3, could not, in the aggregate,
reasonably be expected to have a Material Adverse Effect. The shares of each
Fund have been validly authorized.
3.4 Power; Authorization; Enforceable Obligations. Each Fund, acting on
its own behalf and if applicable on behalf of each investment portfolio thereof
that is a Borrower, has the corporate power and authority as to those Funds that
are organized as corporations and the trust power and authority as to the Funds
that are organized as trusts, and in each case the legal right, to execute,
deliver and perform the Loan Documents to which it is a party and to borrow
hereunder and thereunder on its own behalf or if applicable on behalf of each
investment portfolio thereof that is a Borrower, and has taken all necessary
action to authorize the borrowings on the terms and conditions of this Agreement
and any Notes and to authorize the execution, delivery and performance of the
Loan Documents to which it is a party including, but not limited to, receiving
the approval of the majority of non-interested members of the board of trustees
or board of directors of each Fund as to entering into the transactions
contemplated hereby. No consent or authorization of, filing with, notice to or
other act by or in respect of, any Governmental Authority or any other Person is
required in connection with the borrowings hereunder or with the execution,
delivery, performance, validity or enforceability of the Loan Documents to which
such Fund, on its own behalf or if applicable on behalf of the investment
portfolios thereof which are Borrowers, is a party. This Agreement has been,
and each other Loan Document to which a Fund is a party will be, duly executed
and delivered by such Fund, on its own behalf or if applicable on behalf of the
investment portfolios thereof that are Borrowers. This Agreement constitutes,
and each other Loan Document to which a Fund is a party when executed and
delivered will constitute, a legal, valid and binding obligation of such Fund
(individually and on behalf of each Borrower severally and not jointly or
jointly and severally as applicable) enforceable against such Fund (individually
and on behalf of each Borrower severally and not jointly or jointly and
severally as applicable) in accordance with its terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles (whether enforcement is sought by proceedings in
equity or at law).
3.5 No Legal Bar. The execution, delivery and performance of the Loan
Documents to which each Fund, on its own behalf or, if applicable, on behalf of
an investment portfolio thereof that is a Borrower, is a party, the borrowings
hereunder and the use of the proceeds thereof (i) will not violate any material
Requirement of Law (including, without limitation, the 1940 Act) or Contractual
Obligation of any Fund or any Borrower (assuming no Lender is "an affiliated
person or an affiliate of an affiliated person" in accordance with the 1940 Act)
and (ii) will not result in, or require, the creation or imposition of any
material Lien on any of their respective material properties or revenues
pursuant to any such Requirement of Law or Contractual Obligation.
3.6 No Material Litigation. No litigation, investigation or proceeding
of or before any arbitrator or Governmental Authority is pending or, to the
knowledge of each Fund, on its own behalf or if applicable on behalf of the
investment portfolios thereof which are Borrowers, threatened by or against such
Fund or such Borrowers or against any of their respective properties or revenues
(a) with respect to any of the Loan Documents or any of the transactions
contemplated hereby or thereby, or (b) which could reasonably be expected to
have a Material Adverse Effect.
3.7 No Default. No Fund nor any Borrower is in default under or with
respect to any of its Contractual Obligations in any respect which could
reasonably be expected to have a Material Adverse Effect. No Default or Event
of Default has occurred and is continuing.
3.8 Ownership of Property; Liens. Each Fund, on its own behalf or, if
applicable, on behalf of the investment portfolios thereof which are Borrowers,
has good title to all its property, and none of such property is subject to any
Lien except as permitted by Section 6.3.
3.9 No Burdensome Restrictions. No Requirement of Law or Contractual
Obligation of any Fund or any Borrower could reasonably be expected to have a
Material Adverse Effect.
3.10 Taxes. Each Fund, on its own behalf or, if applicable, on behalf of
the investment portfolios thereof which are Borrowers, has filed all material
tax returns which, to the knowledge of such Fund and such Borrowers, are
required to be filed and has paid all taxes shown to be due and payable on said
returns or on any assessments made against it or any of its property and all
other taxes, fees or other charges imposed on it or any of its property by any
Governmental Authority (other than any the amount or validity of which are
currently being contested in good faith by appropriate proceedings and with
respect to which reserves in conformity with GAAP have been provided on the
books of such Fund or such Borrowers); no tax Lien has been filed, and, to the
knowledge of such Fund and such Borrowers, no claim is being asserted, with
respect to any such tax, fee or other charge.
3.11 Federal Regulations. If requested by any Lender or the
Administrative Agent from time to time, each Fund, on its own behalf or, if
applicable, on behalf of the investment portfolios thereof which are Borrowers,
will furnish to the Administrative Agent and each Lender a statement and current
list of the assets of each Borrower in conformity with the requirements of FR
Form U-1 referred to in said Regulation U. Other than the furnishing of such
statement and such list, no filing or other action is required under the
provisions of Regulations T, U or X in connection with the execution and
delivery of the Agreement and the making of the Loans hereunder. No part of the
proceeds of any Revolving Credit Loans made hereunder will be used in a manner
that violates Regulation U.
3.12 ERISA. Neither any Fund nor any Borrower has currently or has had at
any time any liability or obligation under ERISA or the Code with respect to any
Plan maintained by any of them that could reasonably be expected to have a
Material Adverse Effect.
3.13 Certain Regulations. Neither any Fund nor any Borrower is subject to
regulation under any Federal or State statute or regulation (other than
Regulations U and X of the Board of Governors of the Federal Reserve System and
the 1940 Act) which limits its ability to incur Indebtedness, and with respect
to such Regulations and the 1940 Act, neither any Fund nor any Borrower has
failed to be in compliance with such statutes and regulations.
3.14 Subsidiaries. No Fund has any Subsidiaries and no equity investment
or interest in any other Person (other than portfolio securities which have been
acquired in the ordinary course of business).
3.15 Registration of the Fund. Each Fund is a registered open-end
management investment company under the 1940 Act.
3.16 Offering in Compliance with Securities Laws. Each Fund that is an
open-end investment company, on its own behalf or, if applicable, on behalf of
the investment portfolios thereof which are Borrowers, has issued all of its
securities pursuant to an effective Registration Statement on Form N-1A, or as
may otherwise be required by Federal and State securities laws applicable
thereto in all material respects.
3.17 Investment Policies. Each Borrower is in compliance in all material
respects with all of its Fundamental Investment Policies.
3.18 Permission to Borrow. Each Borrower is permitted to borrow hereunder
pursuant to the limits and restrictions set forth in its Prospectus.
3.19 Accuracy of Information; Electronic Information. (a) All factual
information heretofore or contemporaneously furnished by or on behalf of each
Fund, on its own behalf or, if applicable, on behalf of the investment
portfolios thereof which are Borrowers, in writing to the Administrative Agent
or any Lender for purposes of or in connection with this Agreement or any
transaction contemplated hereby (in each case, as amended, superseded,
supplemented or otherwise modified with the knowledge of the Administrative
Agent or such Lender) is, and all other such factual information hereafter
furnished by or on behalf of such Fund and such Borrowers to the Administrative
Agent or any Lender (in each case, as amended, superseded, supplemented or
otherwise modified with the knowledge of the Administrative Agent or such
Lender) will be, true and accurate in every material respect on the date as of
which such information is dated or certified, and to the extent such information
was furnished to the Administrative Agent or such Lender heretofore or
contemporaneously, as of the date of execution and delivery of this Agreement by
the Administrative Agent or such Lender, and such information is not, or shall
not be, as the case may be, incomplete by omitting to state any material fact
necessary to make such information not misleading.
(b) Neither the Administrative Agent nor any Lender shall be liable to any
Fund or Borrower for any damages arising from the Administrative Agent and any
Lender's respective use of information or other materials obtained through
transmission by e-mail, Intralinks or another similarly secured website, which
damages are waived and forgiven.
3.20 Affiliated Persons. To the best knowledge of each Fund, such Fund,
and if applicable each portfolio thereof that is a Borrower, is not an
"affiliated person" (as defined in the 1940 Act) of the Administrative Agent or
any Lender; provided, however, that for purposes of this Section 3.20, (i) the
record ownership, without the power to vote, of five percent or more of the
outstanding voting securities of any Person shall be deemed not to constitute
the direct or indirect ownership of, control of, or holding with the power to
vote of, such securities, and (ii) securities of such Fund or such Borrower, as
the case may be, held of record by the Administrative Agent or any Lender shall
be deemed conclusively, absent written notice to the contrary, to be held
without the power to vote such securities.
3.21 Year 2000. Each Fund has used commercially reasonable efforts to
obtain assurances deemed reasonable by such Fund from its investment adviser,
administrator, transfer agent, distributor and custodian (together, the "Service
Providers") that the services provided to such Fund will not be materially
disrupted due to the inability of the Service Providers' computer systems to
process properly dates on and after January 1, 2000 and distinguish between the
year 2000 and the year 1900 ("Year 2000 Problem"). Each Fund has been advised
by the Service Providers that they anticipate that the transition to the 21st
century will not result in a Material Adverse Effect. The disclosures contained
herein regarding Year 2000 readiness are designated as Year 2000 readiness
disclosures related to the Year 2000 Information & Readiness Disclosure Act.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions to Initial Loans. The agreement of each Lender to make
the initial Loan requested to be made by it hereunder is subject to the
satisfaction, prior to or concurrently with the making of such Loan, of the
following conditions precedent (it being agreed that each Fund need only satisfy
the following conditions precedent with respect to itself and, if applicable,
each Borrower that is an investment portfolio thereof):
(a) Executed Agreement. The Administrative Agent shall have received
this Agreement, executed and delivered by a duly authorized officer of each
Fund, on its own behalf or, if applicable, on behalf of the investment
portfolios thereof which are Borrowers, with a counterpart for each Lender.
(b) Notes. The Administrative Agent shall have received Notes for
each Lender which has requested Notes pursuant to Section 2.5(e), executed
and delivered by a duly authorized officer of each Fund, on its own behalf
or, if applicable, on behalf of the investment portfolios thereof which are
Borrowers.
(c) Related Agreements. The Administrative Agent shall have
received, with a copy for each Lender, true and correct copies, certified
as to authenticity by a Responsible Officer of each Fund, of the most
recent Prospectus for each Borrower, the Custody Agreement of each Fund,
with respect to each Borrower if applicable, the Investment Management
Agreement of each Fund, with respect to each Borrower if applicable, the
current Statement of Additional Information and, if requested by the
Lenders, the current Registration Statement for each Borrower, the most
recent annual and semi-annual financial reports for each Borrower and such
other documents or instruments as may be reasonably requested by the
Administrative Agent, including, without limitation, a copy of any debt
instrument, security agreement or other material contract to which any
Borrower may be a party.
(d) Proceedings of the Fund and the Borrowers. The Administrative
Agent shall have received, with a counterpart for each Lender, a copy of
the resolutions, in form and substance satisfactory to the Administrative
Agent, of the board of trustees or directors, as the case may be, of each
Fund, on its own behalf or, if applicable, on behalf of the investment
portfolios thereof which are Borrowers, authorizing (i) the execution,
delivery and performance of this Agreement and the other Loan Documents to
which each Fund, on its own behalf or, if applicable, on behalf of the
investment portfolios thereof which are Borrowers, is a party and (ii) the
borrowings contemplated hereunder, certified by a Responsible Officer of
such Fund as of the Closing Date, which certificate shall be in form and
substance satisfactory to the Administrative Agent and shall state that the
resolutions thereby certified have not been amended, modified, revoked or
rescinded and are in full force and effect.
(e) Incumbency Certificate. The Administrative Agent shall have
received, with a counterpart for each Lender, a Certificate of each Fund,
on its own behalf or, if applicable, on behalf of the investment portfolios
thereof which are Borrowers, dated the Closing Date, as to the incumbency
and signature of the officers of such Fund executing any Loan Document
executed by a Responsible Officer of the Fund, satisfactory in form and
substance to the Administrative Agent.
(f) Organizational Documents. The Administrative Agent shall have
received, with a counterpart for each Lender, true and complete copies of
the charter or certificate, as the case may be, and by-laws of each Fund,
certified as of the Closing Date as complete and correct copies thereof by
a Responsible Officer of such Fund, including without limitation those
organizational documents establishing the investment portfolios which are
Borrowers thereof.
(g) Legal Opinions. The Administrative Agent shall have received,
with a counterpart for each Lender, the executed legal opinion of counsel
to each Fund and each Borrower, in the form of Exhibit 4.1(g) hereto.
Such legal opinion shall cover such other matters incident to the
transactions contemplated by this Agreement as the Administrative Agent or
any Lender may reasonably require.
(h) Financial Information. The Administrative Agent shall have
received, with a copy for each Lender, the most recent publicly available
financial information (which includes a list of portfolio securities) for
each Borrower.
(i) Termination of other Credit Facilities. All other credit
facilities to which any Borrower is a party shall have been terminated.
4.2 Conditions to Each Loan. The agreement of each Lender to make any
Loan requested by a particular Fund, on its own behalf or, if applicable, on
behalf of an investment portfolio thereof that is a Borrower, to be made by it
on any date (including, without limitation, its initial Loan) is subject to the
satisfaction of the following conditions precedent:
(a) Representations and Warranties. Each of the representations and
warranties (other than Section 3.2) made by a Fund, on its own behalf and,
if applicable, on behalf of each investment portfolio thereof which is a
Borrower, in or pursuant to the Loan Documents shall be true and correct in
all material respects on and as of such date as if made on and as of such
date (it being understood that any representation and warranty which by its
terms is made as of a specific date shall be required to be true and
correct in all material respects only as of such specified date).
(b) No Default. No Default or Event of Default shall have occurred
with respect to the requesting Fund, on its own behalf or, if applicable,
on behalf of the investment portfolio thereof which is a Borrower, and be
continuing on such date or after giving effect to the Loans requested to be
made on such date.
(c) Maximum Borrowing Limits. After giving effect to the proposed
Loans to be made, (i) the Asset Coverage Ratio for all borrowings of such
Borrower shall not be less than 300% or exceeds the borrowing limits set
forth in its Prospectus and/or Registration Statement or the 1940 Act
("Maximum Borrowing Limits") and (ii) the requesting Borrower shall not
have violated any Requirements of Law (except such violations as could
reasonably be expected not to be material).
(d) Regulation U; Form U-1. The Lenders shall be satisfied that the
Loans and the use of proceeds thereof comply in all respects with
Regulation U. To the extent required by Regulation U, the Administrative
Agent shall have received a copy of either (i) FR Form U-1, duly executed
and delivered by each Fund, on its own behalf or if applicable on behalf of
the investment portfolios thereof which are Borrowers and completed for
delivery to each Lender, in form acceptable to the Administrative Agent, or
(ii) a current list of the assets of each Borrower (including all "margin
stock" (as defined in Regulation U) from each Borrower), in form acceptable
to the Administrative Agent and in compliance with Section 221.3(c)(2) of
Regulation U.
(e) Additional Matters. All corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement and the other Loan Documents
shall be reasonably satisfactory in form and substance to the
Administrative Agent, and the Administrative Agent shall have received such
other documents and legal opinions in respect of any aspect or consequence
of the transactions contemplated hereby or thereby as it shall reasonably
request.
Each borrowing by a Borrower hereunder shall constitute a representation and
warranty by the Fund of which such Borrower is a portfolio, on its own behalf
and on behalf of such Borrower, as of the date thereof that the conditions
contained in this Section have been satisfied with respect to such Borrower, and
the Fund of which it is an investment portfolio if applicable.
SECTION 5. AFFIRMATIVE COVENANTS
Each Fund, on its own behalf or if applicable on behalf of the investment
portfolios thereof which are Borrowers, hereby agrees that, so long as (i) the
Commitments remain in effect with respect to it or any Borrower or (ii) any
amount is owing by it or any Borrower to any Lender or the Administrative Agent
hereunder or under any other Loan Document, it and any Borrower that is a part
of the Fund shall (it being agreed that the Fund covenants only to matters with
respect to itself and if applicable each Borrower several and not jointly or
jointly and severally that is an investment portfolio thereof):
5.1 Financial Statements. Furnish to the Administrative Agent (with
copies for each Lender):
(a) as soon as available and in any event within 75 days after the
end of each fiscal year of such Borrower, a statement of assets and
liabilities of such Borrower as at the end of such fiscal year, a statement
of operations for such fiscal year, a statement of changes in net assets
for such fiscal year and the preceding fiscal year, a portfolio of
investments as at the end of such fiscal year and the per share and other
data for such fiscal year prepared in accordance with GAAP (as consistently
applied) and all regulatory requirements, and all presented in a manner
acceptable to the Securities and Exchange Commission or any successor or
analogous Governmental Authority and certified by either with respect to
Borrowers (i) which are investment portfolios of Firstar Funds, Inc.,
Pricewaterhouse Coopers LLP and (ii) which are portfolios of Mercantile
Mutual Funds, Inc., KPMG LLP, or any other independent certified public
accountants of recognized standing;
(b) as soon as available and in any event within 60 days after the
close of the first six-month period of each fiscal year of such Borrower, a
statement of assets and liabilities as at the end of such six-month period,
a statement of operations for such six-month period, a statement of changes
in net assets for such six-month period and a portfolio of investments as
at the end of such six-month period, all prepared in accordance with
regulatory requirements and all certified (subject to normal year end
adjustments) as to fairness of presentation, GAAP (as consistently applied)
and consistency by a Responsible Officer; and
(c) as soon as available, but in any event not later than 10 days
after the end of each month of each fiscal year of each Borrower, the net
asset value sheet of such Borrower as at the end of such month, in the form
and detail similar to those customarily prepared by the Fund's management
for internal use and reasonably satisfactory to the Administrative Agent,
certified by a Responsible Officer, as being fairly stated in all material
respects; provided, however, that if any Borrower has Loans outstanding,
such Borrower shall provide each Lender with (i) such net asset value sheet
described above in this Section and (ii) a certificate of a Responsible
Officer showing in reasonable detail the calculations supporting such
Borrower's compliance with Section 6.1, within two Business Days after the
end of each calendar week so long as any Loans to such Borrower remain
outstanding;
all such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the case may be,
and disclosed therein).
5.2 Certificates; Other Information. Furnish to the Administrative
Agent (with copies for each Lender):
(a) concurrently with the delivery of the financial statements
referred to in Sections 5.1(a), (b) and (c) and the quarterly report in
Section 5.2(c), a certificate of a Responsible Officer stating that (i) to
the best of such Officer's knowledge, such Borrower during such period has
observed or performed all of its covenants and other agreements, and
satisfied every condition, contained in this Agreement and the other Loan
Documents to be observed, performed or satisfied by it, and (ii) no Default
or Event of Default has occurred and is continuing except as specified in
such certificate;
(b) within five days after they are sent, copies of all financial
statements and reports which each Borrower sends to its investors, and
within five Business Days after they are filed, copies of all financial
statements and reports which each Borrower may make to, or file with, the
Securities and Exchange Commission or any successor or analogous
Governmental Authority;
(c) as soon as available, but in any event not later than 10 days
after the end of each quarter, a certificate of a Responsible Officer (i)
stating that the list of each Borrower's portfolio securities attached to
such certificate is true and correct and (ii) showing in reasonable detail
the calculations supporting such Borrower's compliance with Section 6.1;
and
(d) promptly, such additional financial and other information as any
Lender may from time to time reasonably request, including, but not limited
to, copies of all changes to each Borrower's Prospectus and Registration
Statement.
5.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, all such
Borrower's obligations of whatever nature, except where (i) the amount or
validity thereof is currently being contested in good faith by appropriate
proceedings and reserves in conformity with GAAP with respect thereto have been
provided on the books of such Borrower, as the case may be, or (ii) the failure
to timely make payment thereof could not reasonably be expected to have a
Material Adverse Effect.
5.4 Conduct of Business and Maintenance of Existence. Except as otherwise
permitted herein, continue to engage in (i) such Borrower's investment business
in accordance with its Investment Policies, Prospectus and Registration
Statement and preserve, renew and keep in full force and effect its existence
and (ii) take all reasonable action to maintain all rights, privileges and
franchises necessary or desirable in the normal conduct of its business except
to the extent that failure to take such actions could not, in the aggregate, be
reasonably expected to have a Material Adverse Effect; comply with all
Contractual Obligations and Requirements of Law except to the extent that
failure to comply therewith could not, in the aggregate, be reasonably expected
to have a Material Adverse Effect; maintain at all times its status as an
investment company or a series of an investment company registered under the
1940 Act; maintain at all times its current primary custodians responsible for
the safekeeping of portfolio securities, or replacement custodians (1) which are
a bank or trust company organized under the laws of the United States or a
political subdivision thereof having assets of at least $10,000,000,000 and a
long-term debt or deposit rating of at least A from S&P or A2 from Moody's or
(2) with the prior written consent of the Required Lenders, which consent shall
not be unreasonably withheld, any other bank or trust company organized under
the laws of the United States or political subdivision thereof.
5.5 Maintenance of Property; Insurance. Keep all property useful and
necessary in such Borrower's business, if any, in good working order and
condition; maintain with financially sound and reputable insurance companies
insurance on all its property in at least such amounts and against at least such
risks as are usually insured against in the same general area by entities
engaged in the same or similar business or as may otherwise be required by the
Securities and Exchange Commission or any successor or analogous Governmental
Authority (including, without limitation, (a) fidelity bond coverage as shall be
required by Rule 17g-1 promulgated under the 1940 Act or any successor provision
and (b) errors and omissions insurance); and furnish to each Lender, upon
written request, full information as to the insurance carried.
5.6 Inspection of Property; Books and Records; Discussions. Keep proper
books of records and account in which full, true and correct, in all material
respects, entries in conformity with GAAP and all material Requirements of Law
shall be made of all dealings and transactions in relation to its business and
activities; and permit representatives of (i) the Administrative Agent, upon its
own discretion or at the reasonable request of any Lender, and (ii) upon the
occurrence and during the continuance of an Event of Default, any Lender, to
visit and inspect any of such Borrower's properties and examine and make
abstracts from any of its books and records during normal business hours and to
discuss the business, operations, properties and financial and other condition
of such Borrower with officers and employees of such Borrower and with its
independent certified public accountants; provided that, unless a Default or an
Event of Default shall have occurred and be continuing, the Administrative Agent
shall provide the Borrowers with five Business Days' prior notice of such visit
and shall conduct such visit not more than once a year.
5.7 Notices. Promptly give notice to the Administrative Agent and each
Lender of:
(a) the occurrence of any Default or Event of Default with respect to
such Borrower;
(b) any (i) default or event of default under any Contractual
Obligation of such Borrower or such Fund or (ii) litigation, investigation
or proceeding which may exist at any time between such Fund, on its own
behalf or if applicable on behalf of the investment portfolios thereof
which are Borrowers and any Governmental Authority, which in either case,
if not cured or if adversely determined, as the case may be, could
reasonably be expected to have a Material Adverse Effect;
(c) any litigation or proceeding affecting such Borrower, or the Fund
of which it is an investment portfolio if applicable, in which the amount
reasonably determined to be at risk is more than 5% of such Borrower's net
assets and not covered by insurance or in which injunctive or similar
relief is sought;
(d) any change in such Borrower's Prospectus or Registration
Statement involving Investment Policies which could materially increase the
risks to the shareholders of the Borrower or which would increase the
borrowing limits provided for in such Borrower's Prospectus; and
(e) any development or event in the business activities of a Borrower
which could reasonably be expected to have a Material Adverse Effect on any
such Borrower.
Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and if appropriate stating what action such Fund or such Borrower proposes to
take with respect thereto.
5.8 Purpose of Loans. Use the proceeds of the Loans for temporary or
emergency purposes, including, without limitation, funding of shareholder
redemptions or the payment of dividends (i) which are required by law or in
connection with the maintenance of the Borrower's tax status or (ii) for the
purpose of avoiding imposition of federal excise tax. Without limiting the
foregoing, no Borrower will, directly or indirectly, use any part of such
proceeds for any purpose which would violate any provision of its Registration
Statement or any applicable statute, regulation, order or restriction, including
but not limited to Regulation U; provided, however, that neither the
Administrative Agent nor any Bank shall have any responsibility as to the use of
any of such proceeds.
SECTION 6. NEGATIVE COVENANTS
Each Fund, on its own behalf or if applicable on behalf of the investment
portfolios thereof which are Borrowers, hereby agrees that, so long as (i) the
Commitments remain in effect with respect to it or any such Borrower or (ii) any
amount is owing by it or any such Borrower to any Lender or the Administrative
Agent hereunder or under any other Loan Document, it and any such Borrower shall
not, without the prior written consent of the Lenders, directly or indirectly
(it being agreed that each Fund agrees only to matters with respect to itself
and if applicable each Borrower, severally and not jointly and severally, that
is an investment portfolio thereof):
6.1 Financial Condition Covenant. Permit the Asset Coverage Ratio of such
Borrower to be less than 300% for such Borrower; or allow borrowings and/or
Indebtedness of such Borrower to exceed the limits set forth in such Borrower's
Prospectus or allow borrowings and/or Indebtedness to exceed the requirements of
the 1940 Act.
6.2 Limitation on Indebtedness; Derivatives. (a) Create, incur, assume or
suffer to exist any Indebtedness of such Borrower, except Indebtedness of such
Borrower or Subsidiary incurred (i) under this Agreement and the Notes, (ii) in
the ordinary course of business of such Borrower (including liens arising from
securities lending, margin accounts, reverse repos and similar investment
activities) or (iii) in the form of reverse repurchase transactions, dollar
rolls or other transactions entered into primarily for investment purposes which
have the effect of borrowing and, in each case, which is not otherwise
prohibited by law, is in the ordinary course of business, is not in
contravention of such Borrower's Prospectus, or in such Fund's certificate of
incorporation or by-laws, with respect to such Funds, and is reflected properly
in the calculation of the Asset Coverage Ratio.
(b) Invest in, or incur Indebtedness or other liability to any Person with
respect to, any Swap Obligation or derivative instrument (including without
limitation any swap, collar, cap, puts, calls, equity derivative or mortgage-
backed or debt-backed derivative) unless each of the following is true: (i) such
Swap Obligation or derivative instrument, if marked-to-market on a net daily
basis (or marked to value in a manner reasonably acceptable to the
Administrative Agent), is appropriately reflected in the calculation of Asset
Coverage Ratio, and (ii) the purpose of the investment in such Swap Obligation
or derivative instrument is to augment the capital appreciation or current
income of or by such Borrower, or to hedge or manage the risk of various current
or future exposures of the Borrower.
6.3 Limitation on Liens. Create, incur, assume or suffer to exist any
Lien upon any of the property, assets or revenues, whether now owned or
hereafter acquired of such Borrower, except for (i) Liens for taxes not yet due
or which are being contested in good faith by appropriate proceedings, provided
that adequate reserves with respect thereto are maintained on the books of such
Borrower in conformity with GAAP, (ii) Liens arising in connection with claims
for advances made by or payments due to any custodian under the Custody
Agreements set forth in Schedule IV hereto, (iii) Liens created, incurred,
assumed or suffered to exist in compliance with the Prospectus and statement of
additional information of such or organizational documents of such Subsidiary
and (iv) any other Liens created, incurred, assumed or suffered to exist in the
ordinary course of such Borrower's business, and which, in each case, are not
otherwise prohibited by any Requirement of Law.
6.4 Limitation on Guarantee Obligations. Create, incur, assume or suffer
to exist any material Guarantee Obligation of such Borrower, except as may occur
in the ordinary course of such Borrower's business and which is not otherwise
prohibited by any Requirement of Law.
6.5 Limitation on Fundamental Changes. Enter into, or permit any of its
Subsidiaries to enter into, any merger, consolidation or amalgamation, or
liquidate, wind up or dissolve itself or such Borrower (or suffer any
liquidation or dissolution), or convey, sell, lease, assign, transfer or
otherwise dispose of all of the property, business or assets of itself, such
Borrower, or such Subsidiary in a single transaction or in related transactions,
or make any material change in its present method of conducting business; except
that, so long as no Default or Event of Default shall have occurred and be
continuing, a Borrower will be permitted to (i) enter into any merger,
consolidation or amalgamation with one or more Borrowers or, with the consent of
the Required Lenders (such consent which shall not be unreasonably withheld),
one or more Affiliates of such Borrower if, in each case, MVA or FIRMCO or one
of its respective Affiliates, as appropriate, is the investment manager to the
entity surviving such merger, consolidation or amalgamation and such entity
assumes the obligations of such Borrower under the Loan Documents and complies
with the provisions hereof or (ii) liquidate, wind up or convey, sell lease,
assign, transfer or otherwise dispose of all of the property, business or assets
of such Borrower if it repays all Loans made to it prior to liquidation. Any
Borrower undertaking any action described in clause (ii) above shall comply with
the termination provisions described in Section 2.4 hereof.
6.6 Limitation on Distributions. At any time, make any distribution to
the shareholders of such Borrower, whether now or hereafter existing, either
directly or indirectly, whether in cash or property or in obligations of the
Borrower if such distribution results in a Default or Event of Default. During
the occurrence and continuation of an Event of Default specified in paragraphs
(a) or (e) of Section 7 or an Event of Default arising in connection with a
Borrower's having failed to comply with Section 6.1, make any distribution to
the shareholders of such Borrower, whether now or hereafter existing, either
directly or indirectly, whether in cash or property or in obligations of the
Borrower. Notwithstanding the foregoing, nothing herein shall prevent a Borrower
from making (i) distributions that are required to enable such Borrower to
qualify as a "regulated investment company" under Sections 851-855 of the Code
or otherwise to minimize or eliminate federal or state income or excise taxes
payable by such Borrower, or (ii) distributions that are required by any other
Requirement of Law.
6.7 Limitation on Investments, Loans and Advances. Make any advance,
loan, extension of credit or capital contribution to, or purchase any stock,
bonds, notes, debentures or other securities of or any assets constituting a
business unit of or make any other investment in, any Person, except those not
inconsistent with such Borrower's Investment Policies.
6.8 Limitation on Transactions with Affiliates. Enter into any
transaction, including, without limitation, any purchase, sale, lease or
exchange of property or the rendering of any service, with any Affiliate unless
such transaction is (a) not otherwise prohibited under this Agreement and not in
violation of the 1940 Act, (b) in the ordinary course of such Borrower's
business, and (c) upon terms which are fair and reasonable in light of
comparable quality services it would obtain in a comparable arm's length
transaction with a Person which is not an Affiliate.
6.9 Limitation on Negative Pledge Clauses. Enter into with any Person any
agreement, other than this Agreement or the other Loan Documents, which
prohibits or limits the ability of such Borrower to create, incur, assume or
suffer to exist any Lien upon any of its property, assets or revenues, whether
now owned or hereafter acquired, except such agreements entered into in the
ordinary course of such Borrower's business and which are not otherwise
prohibited by any Requirement of Law.
6.10 Limitation on Changes to Investment Policies. Except as may be
required by law; make any amendment to a Borrower's Prospectus or the
registration statement of the relevant Fund (i) relating to any changes in the
Fundamental Investment Policies of such Borrower or (ii) increasing the Maximum
Borrowing Limits without the consent of the Required Lenders (which consent
shall not be unreasonably withheld).
SECTION 7. EVENTS OF DEFAULT
Subject to the final paragraph of this Section 7, if any of the following
events shall occur and be continuing with respect to any Fund, on its own behalf
or if applicable on behalf of the investment portfolios thereof which are
Borrowers, as the case may be (each an "Event of Default") or with respect to
any Fund in the case of a Fund Event or Default (as defined below):
(a) A Borrower shall fail to pay any principal of any Loan when due
in accordance with the terms thereof or hereof, including without
limitation any failure to make a mandatory prepayment due pursuant to the
provisions of Sections 2.6(b) or 6.1; or a Borrower shall fail to pay any
interest on any Loan, or any other amount payable hereunder, within five
days after any such interest or other amount becomes due in accordance with
the terms thereof or hereof; or
(b) Any representation or warranty made or deemed made by any Fund,
on its own behalf or if applicable on behalf of the investment portfolios
thereof which are Borrowers, or made or deemed made at such Fund's or
Borrower's request, herein or in any other Loan Document or which is
contained in any certificate, document or financial or other statement
furnished by it at any time under or in connection with this Agreement or
any such other Loan Document shall prove to have been incorrect in any
material respect on or as of the date made or deemed made; or
(c) A Fund, on its own behalf or if applicable on behalf of the
investment portfolios thereof which are Borrowers, shall default in the
observance or performance of any other agreement contained in this
Agreement or any other Loan Document (other than as provided in paragraphs
(a) and (b) of this Section), and such default shall continue unremedied
for a period of 30 days or, solely in the case of such default arising
under Sections 5.4, 5.7 or 6.5 hereof, five Business Days; or
(d) A Fund, on its own behalf or if applicable on behalf of the
investment portfolios thereof which are Borrowers, shall (i) default in any
payment of principal of or interest on any Indebtedness (other than the
Loans), Interest Rate Agreement, Swap Obligation or in the payment of any
Guarantee Obligation, beyond the grace period (not to exceed 30 days), if
any, provided in the instrument or agreement under which such Indebtedness,
Interest Rate Agreement, Swap Obligation or Guarantee Obligation was
created, if the aggregate amount of the Indebtedness, Interest Rate
Agreement, Swap Obligations and/or Guarantee Obligations in respect of
which such default or defaults shall have occurred is equal to the lesser
of (A) $10,000,000 or (B) an amount equal to 5% of such Fund's or such
Borrower's net assets; or (ii) default in the observance or performance of
any other agreement or condition relating to any such Indebtedness,
Interest Rate Agreement, Swap Obligation or Guarantee Obligation or
contained in any instrument or agreement evidencing, securing or relating
thereto, or any other event shall occur or condition exist, the effect of
which default or other event or condition is to cause, or to permit the
holder or holders of such Indebtedness or beneficiary or beneficiaries of
such Guarantee Obligation, Interest Rate Agreement, or Swap Obligation (or
a trustee or agent on behalf of such holder or holders or beneficiary or
beneficiaries) to cause, with the giving of notice if required, such
Indebtedness, Interest Rate Agreement or Swap Obligation to become due
prior to its stated maturity or such Guarantee Obligation to become payable
if the aggregate amount of the Indebtedness, Interest Rate Agreement, Swap
Obligations and/or Guarantee Obligations subject to becoming so due or so
payable is equal to the lesser of (A) $10,000,000 or (B) 5% of such
Borrower's or Fund's net assets; or
(e) (i) A Fund, on its own behalf or if applicable on behalf of the
investment portfolios thereof which are Borrowers, shall commence any case,
proceeding or other action with respect to itself or any such Borrower (A)
under any then applicable law of any jurisdiction, domestic or foreign,
relating to bankruptcy, insolvency, reorganization or relief of debtors,
seeking to have an order for relief entered with respect to it, or seeking
to adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition
or other relief with respect to it or its debts, or (B) seeking appointment
of a receiver, trustee, custodian, conservator or other similar official
for it or for all or any substantial part of its assets, or a Fund, on its
own behalf or if applicable on behalf of any investment portfolio thereof
which is a Borrower, shall make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against such a Fund or
Borrower, any case, proceeding or other action of a nature referred to in
clause (i) above which (A) results in the entry of an order for relief or
any such adjudication or appointment and (B) remains undismissed,
undischarged, unstayed, unvacated or unbonded pending appeal within 30 days
from the entry thereof; or (iii) there shall be commenced against a Fund,
on its own behalf or if applicable on behalf of the investment portfolios
thereof which are Borrowers, any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets which results in
the entry of an order for any such relief which shall not have been
vacated, discharged, or stayed or bonded pending appeal within 30 days from
the entry thereof; or (iv) such a Fund or Borrower shall take any action in
material furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i), (ii), or (iii)
above; or (v) a Fund, on its own behalf or if applicable on behalf of the
investment portfolios thereof which are Borrowers, shall not, or shall be
unable to, pay its debts as they become due for ten (10) days after written
notice thereof to such Fund or actual knowledge thereof by such Fund, or
shall admit in writing its inability to pay its debts as they become due;
or
(f) Either a Borrower or any Commonly Controlled Entity of such
Borrower incurs any liability to any Plan maintained by any of them which
could reasonably be expected to have a Material Adverse Effect; or
(g) One or more judgments or decrees shall be entered against a Fund,
on its own behalf or if applicable on behalf of the investment portfolios
thereof which are Borrowers, involving in the aggregate a liability (not
fully covered by insurance or otherwise paid or discharged) equal to the
lesser of (A) $2,500,000 or (B) 5% or more of such Fund's or such
Borrower's net assets, and all such judgments or decrees shall not have
been vacated, discharged, stayed or bonded pending appeal within 30 days
from the entry thereof; or
(h) Unless consented to by the Lenders, MVA or FIRMCO, as the case
may be, or a Person directly controlling, controlled by, or under common
control with MVA or FIRMCO, as the case may be, shall no longer act as
investment manager for the Borrowers; or
(i) A Fund's or a Borrower's registration under the 1940 Act shall
lapse or be suspended (or proceedings for such purpose shall have been
instituted); or
(j) A Borrower shall fail to materially comply with its Fundamental
Investment Policies;
then, and in any such event, (A) if such event is an Event of Default specified
in paragraph (e) of this Section with respect to such Borrower (or the Fund
acting on behalf of one or more Borrowers), automatically the Commitments
available to such Borrower (or all of such Borrowers if the Fund is acting on
behalf of one or more Borrowers) shall immediately terminate and the Loans
hereunder made to any such Borrower (with accrued interest thereon) and all
other amounts owing under this Agreement by such Borrower shall immediately
become due and payable, and (B) if such event is any other Event of Default with
respect to such Borrower, any or all of the following actions may be taken: (i)
with the consent of the Required Lenders, the Administrative Agent may, or upon
the request of the Required Lenders, the Administrative Agent shall, by notice
to such Borrower declare the Commitments available to such Borrower (or all of
the Borrowers which are investment portfolios of such Fund if such Event of
Default is the Fund Event of Default (as defined below)) to be terminated
forthwith, whereupon such Commitments shall immediately terminate; and (ii) with
the consent of the Required Lenders, the Administrative Agent may, or upon the
request of the Required Lenders, the Administrative Agent shall, by notice to
such Borrower, declare the Loans to such Borrower (with accrued interest
thereon) and all other amounts owing under this Agreement by such Borrower (or
all of the Borrowers which are investment portfolios of such Fund if such Event
of Default is a Fund Event of Default) to be due and payable forthwith,
whereupon the same shall immediately become due and payable. Except as
expressly provided above in this Section, presentment, demand, protest and all
other notices of any kind are hereby expressly waived.
Notwithstanding any other provision herein to the contrary, Defaults and
Events of Default shall have the following results:
(i) a Default or Event of Default with respect to one Borrower shall not
constitute a Default or Event of Default with respect to any other
Borrower;
(ii) except as set forth in clause (iii) below, a Default or Event of
Default with respect to a Fund acting on behalf of one or more
Borrowers that is an investment portfolio of such Fund shall
constitute a Default or Event of Default, as the case may be, only
with respect to the Borrower(s) implicated in, or affected by, the act
or omission causing such Default or Event of Default;
(iii) a Fund Default or a Fund Event of Default (each as defined below) with
respect to a Fund acting on behalf of one or more Borrowers that is an
investment portfolio thereof shall constitute a Default or Event of
Default, as the case may be, with respect to all such Borrowers that
are an investment portfolio of such Fund; and
(iv) an Event of Default of the type described in paragraph (h) of this
Section 7 shall constitute an Event of Default with respect to all
Borrowers for which MVA or FIRMCO, as the case may be, no longer acts
as investment manager.
"Fund Event of Default" shall mean an Event of Default with respect to a
Fund as a whole and not with respect to any Borrower or a Fund acting on behalf
of a Borrower (A) of any of the types described in paragraphs (d), (e), (g), or
(i) of this Section 7, or (B) arising from such Fund's failure to comply with
the covenants set forth in Sections 5.3, 5.4, 5.5 or 6.5. "Fund Default" shall
mean any of the events giving rise to Fund Events of Default, whether or not any
requirement for the giving of notice, the lapse of time, or both, or any other
condition, has been satisfied. Notwithstanding anything herein to the contrary,
a Default or Event of Default with respect to one Borrower shall not constitute
a Default or Event of Default with respect to any other Borrower.
SECTION 8. THE ADMINISTRATIVE AGENT
8.1 Appointment. Each Lender hereby irrevocably designates and appoints
the Administrative Agent as the agent of such Lender under this Agreement and
the other Loan Documents, and each such Lender irrevocably authorizes the
Administrative Agent, in such capacity, to take such action on such Lender's
behalf under the provisions of this Agreement and the other Loan Documents and
to exercise such powers and perform such duties as are expressly delegated to
the Administrative Agent by the terms of this Agreement and the other Loan
Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Administrative Agent shall not have any duties or responsibilities, except those
expressly set forth herein, or any fiduciary relationship with any Lender, and
no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Administrative Agent.
8.2 Delegation of Duties. The Administrative Agent may execute any of its
duties under this Agreement and the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Administrative Agent shall not be
responsible for the negligence, willful misfeasance, bad faith or misconduct of
any agents or attorneys in-fact selected by it with reasonable care.
8.3 Exculpatory Provisions. Neither the Administrative Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or Affiliates
shall be (a) liable for any action lawfully taken or omitted to be taken by it
or such Person under or in connection with this Agreement or any other Loan
Document (except for its or such Person's own gross negligence or willful
misconduct) or (b) responsible in any manner to any of the Lenders for any
recitals, statements, representations or warranties made by any Fund or any
Borrower or any officer thereof contained in this Agreement or any other Loan
Document or in any certificate, report, statement or other document referred to
or provided for in, or received by the Administrative Agent under or in
connection with, this Agreement or any other Loan Document or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document or for any failure of any Borrower or any
Fund to perform its obligations hereunder or thereunder. The Administrative
Agent shall not be under any obligation to any Lender to ascertain or to inquire
as to the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any other Loan Document, or to inspect the
properties, books or records of any Fund or any Borrower.
8.4 Reliance by Administrative Agent. The Administrative Agent shall be
entitled to rely, and shall be fully protected in relying, upon any Note,
writing, resolution, notice, consent, certificate, affidavit, letter, telecopy,
telex or teletype message, statement, order or other document or conversation
reasonably believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons and upon advice and statements of
legal counsel (including, without limitation, counsel to a Fund or a Borrowers),
independent accountants and other experts selected by the Administrative Agent.
The Administrative Agent may deem and treat the payee of any Note as the owner
thereof for all purposes unless a written notice of assignment, negotiation or
transfer thereof shall have been filed with the Administrative Agent. The
Administrative Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Required Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Administrative Agent shall
in all cases be fully protected in acting, or in refraining from acting, under
this Agreement and the other Loan Documents in accordance with a request of the
Required Lenders or all of the Lenders, as applicable, and such request and any
action taken or failure to act pursuant thereto shall be binding upon all the
Lenders and all future holders of the Loans.
8.5 Notice of Default. The Administrative Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Administrative Agent has received notice from a Lender or a
Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". In the event
that the Administrative Agent receives such a notice, the Administrative Agent
shall give notice thereof to the Lenders and each Borrower. The Administrative
Agent shall take such action with respect to such Default or Event of Default as
shall be reasonably directed by the Required Lenders or all of the Lenders, as
applicable; provided that unless and until the Administrative Agent shall have
received such directions, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable in the best
interests of the Lenders.
8.6 Non-Reliance on Administrative Agent and Other Lenders. Each Lender
expressly acknowledges that neither the Administrative Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates has made
any representations or warranties to it and that no act by the Administrative
Agent hereinafter taken, including any review of the affairs of a Fund or
Borrower, shall be deemed to constitute any representation or warranty by the
Administrative Agent to any Lender. Each Lender represents to the
Administrative Agent that it has, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Borrowers and made its own decision to
make its Loans hereunder and enter into this Agreement. Each Lender also
represents that it will, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigation as
it deems necessary to inform itself as to the business, operations, property,
financial and other condition and creditworthiness of the Borrowers. Except for
notices, reports and other documents expressly required to be furnished to the
Lenders by the Administrative Agent hereunder, the Administrative Agent shall
not have any duty or responsibility to provide any Lender with any credit or
other information concerning the business, operations, property, condition
(financial or otherwise), prospects or creditworthiness of any Fund or any
Borrower which may come into the possession of the Administrative Agent or any
of its officers, directors, employees, agents, attorneys-in-fact or Affiliates.
8.7 Indemnification. The Lenders agree to indemnify the Administrative
Agent in its capacity as such (to the extent not reimbursed by the Borrowers and
without limiting the obligation of the Borrowers to do so), ratably according to
their respective Commitment Percentages in effect on the date on which
indemnification is sought (or, if indemnification is sought after the date upon
which the Commitments shall have terminated and the Loans shall have been paid
in full, ratably in accordance with their Commitment Percentages immediately
prior to such date), from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind whatsoever which may at any time (including, without
limitation, at any time following the payment of the Loans) be imposed on,
incurred by or asserted against the Administrative Agent in any way relating to
or arising out of the Commitments, this Agreement, any of the other Loan
Documents or any documents contemplated by or referred to herein or therein or
the transactions contemplated hereby or thereby or any action taken or omitted
by the Administrative Agent under or in connection with any of the foregoing;
provided that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting solely from the Administrative
Agent's gross negligence or willful misconduct. The agreements in this Section
shall survive the payment of the Loans and all other amounts payable hereunder.
8.8 Administrative Agent in Its Individual Capacity. The Administrative
Agent and its Affiliates may make loans to, accept deposits from and generally
engage in any kind of business with any Fund or any Borrower as though the
Administrative Agent were not the Administrative Agent hereunder and under the
other Loan Documents. With respect to the Loans made by it, the Administrative
Agent shall have the same rights and powers under this Agreement and the other
Loan Documents as any Lender and may exercise the same as though it were not the
Administrative Agent, and the terms "Lender" and "Lenders" shall include the
Administrative Agent in its individual capacity.
8.9 Successor Administrative Agent. The Administrative Agent may resign
as Administrative Agent upon 30 Business Days' notice to the Lenders and the
Borrowers and shall refund to the Borrowers a portion of the administrative
agency fee (referenced in the Fee Letter signed by the Administrative Agent and
the Funds) calculated on a pro rata basis for the period beginning but not
including the thirtieth day following notice of resignation from the
Administrative Agent to and including the Termination Date. The Lenders shall
use reasonable best efforts to appoint a successor Administrative Agent within
the thirty-day period. If the Administrative Agent shall resign as
Administrative Agent under this Agreement and the other Loan Documents, then the
Required Lenders shall appoint from among the Lenders a successor agent for the
Lenders whereupon such successor agent shall succeed to the rights, powers and
duties of the Administrative Agent, and the term "Administrative Agent" shall
mean such successor agent effective upon such appointment and approval, and the
former Administrative Agent's rights, powers and duties as Administrative Agent
shall be terminated, without any other or further act or deed on the part of
such former Administrative Agent or any of the parties to this Agreement or any
holders of the Loans. After any retiring Administrative Agent's resignation as
Administrative Agent, the provisions of this Section 8 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement and the other Loan Documents.
SECTION 9. MISCELLANEOUS
9.1 Amendments and Waivers. Neither this Agreement nor any other Loan
Document, nor any terms hereof or thereof, may be amended, supplemented or
modified except in accordance with the provisions of this Section. The Required
Lenders may, or, with the written consent of the Required Lenders, the
Administrative Agent may, from time to time, (a) enter into with each Fund, on
its own behalf or if applicable on behalf of the investment portfolios thereof
which are Borrowers, written amendments, supplements or modifications hereto and
to the other Loan Documents for the purpose of adding any provisions to this
Agreement or the other Loan Documents or changing in any manner the rights of
the Lenders or of such Borrowers hereunder or thereunder or (b) waive, on such
terms and conditions as the Required Lenders or the Administrative Agent, as the
case may be, may specify in such instrument, any of the requirements of this
Agreement or the other Loan Documents or any Default or Event of Default and its
consequences; provided, however, that no such waiver and no such amendment,
supplement or modification shall (i) reduce the amount or extend the scheduled
date of maturity of any Loan or of any installment thereof, or reduce the stated
rate of any interest or fee payable hereunder or extend the scheduled date of
any payment thereof or increase the amount or extend the expiration date of any
Lender's Commitment, in each case without the consent of each Lender affected
thereby, or (ii) amend, modify or waive any provision of this subsection or
reduce the percentage specified in the definition of Required Lenders, or
consent to the assignment or transfer by any Borrower of any of its rights and
obligations under this Agreement and the other Loan Documents, in each case
without the written consent of all the Lenders except as specifically provided
herein, or (iii) amend, waive or modify the first two sentences of Section
2.9(a), in each case without the written consent of all the Lenders, or (iv)
amend, waive or modify the requirement contained in the first sentence of
Section 2.16(a) that consent of all the Lenders is required to approve the
addition of Borrowers to this Agreement, in each case without the written
consent of all the Lenders, or (v) amend, waive or modify Section 2.6(b) without
the written consent of all the Lenders, or (vi) amend, waive or modify Section
6.1 without the written consent of all the Lenders, or (vii) amend, modify or
waive any provision of Section 8 without the written consent of the then
Administrative Agent. Any such waiver and any such amendment, supplement or
modification shall be effective (A) only for such Borrower(s) on whose behalf a
Fund executed such document(s) and (B) in the specific instance and for the
specific purpose for which given.
9.2 Notices. All notices, requests and demands to or upon the respective
parties hereto to be effective shall be in writing (which writing may be in the
form of a facsimile transmission), and, unless otherwise expressly provided
herein, shall be deemed to have been duly given or made when delivered, or five
days after being deposited in the mail, postage prepaid, or, in the case of
facsimile notice, when received, addressed as follows in the case of any Fund,
any Borrower and the Administrative Agent, and as set forth in Schedule II in
the case of the other parties hereto, or to such other address as may be
hereafter notified by the respective parties hereto:
Mercantile Mutual Funds, Inc.
and all Borrowers that are
Investment portfolios thereof:
Mercantile Mutual Funds, Inc.
c/o Mississippi Valley Advisors, Inc.
One Mercantile Center
7th & Washington Streets
St. Louis, MO 63101
Attn: Timothy S. Engelbrecht
Telephone: 314-418-2692
Facsimile: 314-418-1827
Firstar Funds, Inc.
and all Borrowers
that are investment
portfolios therof:
Firstar Funds, Inc.
c/o Firstar Investment Research &
Management Company, LLC
777 E. Wisconsin Avenue
Suite 800
Milwaukee, WI 53222
Attn: Laura Rauman
Telephone: 414-765-6090
Facsimile: 414-276-9986
The Administrative
Agent:
The Chase Manhattan Bank
Loan and Agency Services Group
One Chase Manhattan Plaza
8th Floor
New York, New York 10081
Attention: Ms. Laura Rebecca
Facsimile: (212) 552-7490
and
The Chase Manhattan Bank
270 Park Avenue
15th Floor
New York, New York 10017
Attention: Mr. Roger A. Parke
Facsimile: (212) 270-1789
provided that any notice, request or demand to or upon the Administrative Agent
or the Lenders pursuant to Section 2.2, 2.4, 2.6, or 2.8 shall not be effective
until received.
9.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay
in exercising, on the part of any party hereto, any right, remedy, power or
privilege hereunder or under the other Loan Documents shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges herein provided are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.
9.4 Survival of Representations and Warranties. All representations and
warranties made hereunder, in the other Loan Documents and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement and the making of the
Loans hereunder.
9.5 Payment of Expenses and Taxes; Indemnification. (a) Each Fund, on its
own behalf or if applicable on behalf of the investment portfolios thereof which
are Borrowers, agrees severally (subject to Section 9.5(b) below) (i) to
reimburse the Administrative Agent for its reasonable out-of-pocket costs and
expenses incurred in connection with the development, preparation and execution
of, and any amendment, supplement or modification to, this Agreement and the
other Loan Documents and any other documents prepared in connection herewith or
therewith, and the consummation and administration of the transactions
contemplated hereby and thereby, including, without limitation, the reasonable
fees and disbursements of counsel to the Administrative Agent, (ii) to reimburse
each Lender and the Administrative Agent for all its costs and expenses incurred
in connection with the enforcement or preservation of any rights under this
Agreement with respect to such Borrower, the other Loan Documents and any such
other documents, including, without limitation, the reasonable fees and
disbursements of counsel to each Lender and of counsel to the Administrative
Agent, (iii) to indemnify and hold each Lender and the Administrative Agent
harmless from any and all recording and filing fees and any and all liabilities
with respect to, or resulting from any delay in paying, stamp, excise and other
taxes, if any, which may be payable or determined to be payable in connection
with the execution and delivery of, or consummation or administration of any of
the transactions contemplated by, or any amendment, supplement or modification
of, or any waiver or consent under or in respect of, this Agreement, the other
Loan Documents and any such other documents with respect to such Borrower, and
(iv) to indemnify and hold each Lender and the Administrative Agent (and their
respective affiliates, directors, officers, agents and employees (collectively
with the Administrative Agent and the Lenders, the "Indemnified Parties"))
harmless from and against any and all other liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, reasonable costs, reasonable out-
of-pocket expenses or disbursements of any kind or nature whatsoever arising
from or in connection with the execution, delivery, enforcement, performance and
administration of this Agreement, the actual or proposed use of proceeds, the
other Loan Documents and any such other documents (all the foregoing in this
clause (iv), collectively, the "indemnified liabilities"), provided, that such
Fund, on its own behalf or if applicable on behalf of the investment portfolios
thereof which are Borrowers shall have no obligation hereunder to any
Indemnified Party with respect to indemnified liabilities arising from (A) with
respect to any Indemnified Party, the gross negligence or willful misconduct of
such Indemnified Party, (B) disputes arising between or among the Lenders or (C)
with respect to any such Indemnified Party, the failure of such Indemnified
Party (and its Affiliates) to comply with any Requirement of Law. The
agreements in this Section shall survive repayment of the Loans and all other
amounts payable hereunder.
(b) Notwithstanding any other provision in this Agreement to the contrary,
to the extent any obligation to reimburse or indemnify any Indemnified Party
that arises pursuant to Section 9.5(a) is not attributable to any particular
Borrower, then such reimbursement or indemnification shall be made by each
Borrower (ratably, in accordance with its Pro Rata Allocation). To the extent
any such obligation to reimburse or indemnify any Indemnified Party is
attributable to one or more Borrowers, then such reimbursement or
indemnification shall be made by each such Borrower to the extent of its
liability therefor.
9.6 Successors and Assigns; Participations and Assignments. (a) This
Agreement shall be binding upon and inure to the benefit of the Funds, the
Borrowers, the Lenders, the Administrative Agent and their respective successors
and assigns, except that, neither any Fund nor any Borrower may assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of each Lender, except as may otherwise be provided herein.
(b) Any Lender may, in the ordinary course of its commercial banking
business and in accordance with applicable laws, at any time sell to one or more
Eligible Lenders ("Participants") participating interests in any Loan owing to
such Lender, any Commitment of such Lender or any other interest of such Lender
hereunder and under the other Loan Documents. In the event of any such sale by
a Lender of a participating interest to a Participant, such Lender's obligations
under this Agreement to the other parties to this Agreement shall remain
unchanged, such Lender shall remain solely responsible for the performance
thereof, such Lender shall remain the holder of any such Loan for all purposes
under this Agreement and the other Loan Documents, and the Borrowers and the
Administrative Agent shall continue to deal solely and directly with such Lender
in connection with such Lender's rights and obligations under this Agreement and
the other Loan Documents. Any agreement pursuant to which any Lender may grant
such a participating interest shall provide that such Lender shall retain the
sole right and responsibility to enforce the obligations of the Borrowers
hereunder, including the right to approve any amendment, modification or waiver
of any provision of this Agreement; provided that such participation agreement
may provide that (i) such Lender will not agree to any modification, amendment
or waiver of this Agreement described in clause (i) of the proviso in Section
9.1 without the consent of the Participant and (ii) the Participant may obtain
voting rights limited to changes in respect of the principal amount, interest
rates, fees and term of the Loans. Each Borrower agrees that if amounts
outstanding under this Agreement are due or unpaid, or shall have been declared
or shall have become due and payable upon the occurrence of an Event of Default,
each Participant shall, to the maximum extent permitted by applicable laws, be
deemed to have the right of setoff in respect of its participating interest in
amounts owing under this Agreement to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under this
Agreement, provided that, in purchasing such participating interest, such
Participant shall be deemed to have agreed to share with the Lenders the
proceeds thereof as provided in Section 9.7(a) as fully as if it were a Lender
hereunder. Each Borrower also agrees that each Participant shall be entitled to
the benefits of Sections 2.10 and 2.11 with respect to its participation in the
Commitments and the Loans outstanding from time to time as if it was a Lender;
provided that, in the case of Section 2.11, such Participant shall have complied
with the requirements of said Section and provided, further, that no Participant
shall be entitled to receive any greater amount pursuant to any such Section
than the transferor Lender would have been entitled to receive in respect of the
amount of the participation transferred by such transferor Lender to such
Participant had no such transfer occurred.
(c) Any Lender may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time and from time to
time assign to (1) any Lender or any affiliate thereof that is an Eligible
Lender or (2) so long as no Default or Event of Default has occurred and is
continuing, with the consent of the Borrowers, which consent is not to be
unreasonably delayed or withheld, and, in any event, with the reasonable consent
of the Administrative Agent, to an additional Eligible Lender (an "Assignee")
all or any part of its rights and obligations under this Agreement and the other
Loan Documents pursuant to an Assignment and Acceptance, substantially in the
form of Exhibit 9.6(c), executed by such Assignee, such assigning Lender and the
Administrative Agent (and, provided (i) no Default or Event of Default shall
have occurred and be continuing and (ii) the Assignee is not an Affiliate of the
assigning Lender, the Funds, on behalf of the Borrowers) and delivered to the
Administrative Agent for its acceptance and recording in the Register; provided,
however, that assignments to entities other than Lenders or Affiliates thereof
must be in amounts of at least $5,000,000. Upon such execution, delivery,
acceptance and recording, from and after the effective date determined pursuant
to such Assignment and Acceptance, (x) the Assignee thereunder shall be a party
hereto and, to the extent provided in such Assignment and Acceptance, have the
rights and obligations of a Lender hereunder with a Commitment as set forth
therein, and (y) the assigning Lender thereunder shall, to the extent provided
in such Assignment and Acceptance, be released from its obligations under this
Agreement (and, in the case of an Assignment and Acceptance covering all or the
remaining portion of an assigning Lender's rights and obligations under this
Agreement, such assigning Lender shall cease to be a party hereto and the
Commitment of the Assignee shall be in an amount equal to that of such assigning
Lender prior to the execution of such Assignment and Acceptance).
(d) The Administrative Agent, on behalf of the Borrowers, shall maintain
at the address of the Administrative Agent referred to in Section 9.2 a copy of
each Assignment and Acceptance delivered to it and a register (the "Register")
for the recordation of the names and addresses of the Lenders and the Commitment
of, and principal amount of the Loans owing to, each Lender from time to time.
The entries in the Register shall be conclusive, in the absence of manifest
error, and each Fund, on its own behalf or if applicable on behalf of the
investment portfolios thereof which are Borrowers, the Administrative Agent and
the Lenders may (and, in the case of any Loan or other obligation hereunder not
evidenced by a Note, shall) treat each Person whose name is recorded in the
Register as the owner of a Loan or other obligation hereunder as the owner
thereof for all purposes of this Agreement and the other Loan Documents,
notwithstanding any notice to the contrary. Any assignment of any Loan or other
obligation hereunder not evidenced by a Note shall be effective only upon
appropriate entries with respect thereto being made in the Register. The
Register shall be available for inspection by the Borrowers or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an Assignee (and the Administrative Agent and consented to
in writing by the Borrowers if the assignment is not to an Affiliate of a Lender
and no Default or Event of Default has occurred) together with payment by the
assigning Lender or Assignee to the Administrative Agent of a registration and
processing fee of $3,000 (for which no Borrower shall have an obligation to
reimburse), the Administrative Agent shall (i) promptly accept such Assignment
and Acceptance and (ii) on the effective date determined pursuant thereto record
the information contained therein in the Register and give notice of such
acceptance and recordation to the Lenders and to each Fund, on its own behalf or
if applicable on behalf of the investment portfolios thereof which are
Borrowers.
(f) Each Fund, on its own behalf or if applicable on behalf of the
investment portfolios thereof which are Borrowers, authorizes each Lender to
disclose to any Participant or Assignee (each, a "Transferee") and any
prospective Transferee any and all financial information in such Lender's
possession concerning such Fund or such Borrower and their Affiliates which has
been delivered to such Lender by or on behalf of such Fund or such Borrowers
pursuant to this Agreement or which has been delivered to such Lender by or on
behalf of such Fund or such Borrowers in connection with such Lender's credit
evaluation of such Funds, Borrowers and their Affiliates prior to becoming a
party to this Agreement.
(g) For avoidance of doubt, the parties to this Agreement acknowledge
that the provisions of this Section concerning assignments of Loans and Notes
relate only to absolute assignments and that such provisions do not prohibit
assignments creating security interests, including, without limitation, any
pledge or assignment by a Lender of any Loan or Note to any Federal Reserve Bank
in accordance with applicable law.
9.7 Adjustments; Set-off. (a) If any Lender (a "Benefited Lender") shall
at any time receive any payment of all or part of its Loans, or interest
thereon, or receive any collateral in respect thereof (whether voluntarily or
involuntarily, by set-off, pursuant to events or proceedings of the nature
referred to in Section 7(e), or otherwise), in a greater proportion than any
such payment to or collateral received by any other Lender, if any, in respect
of such other Lender's Loans, or interest thereon, such Benefited Lender shall
purchase for cash from the other Lenders a participating interest in such
portion of each such other Lender's Loan, or shall provide such other Lenders
with the benefits of any such collateral, or the proceeds thereof, as shall be
necessary to cause such Benefited Lender to share the excess payment or benefits
of such collateral or proceeds ratably with each of the Lenders; provided,
however, that if all or any portion of such excess payment or benefits is
thereafter recovered from such Benefited Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest.
(b) In addition to any rights and remedies of the Lenders provided by law,
each Lender shall have the right, with prompt notice subsequent to the exercise
of such rights but without prior notice to such Borrower, any such notice being
expressly waived by each Fund, on its own behalf or if applicable, on behalf of
such Borrower, to the extent permitted by applicable law, upon any amount
becoming due and payable by a Borrower hereunder (whether at the stated
maturity, by acceleration or otherwise) to set-off and appropriate and apply
against such amount any and all deposits (general or special, time or demand,
provisional or final), in any currency, and any other credits, indebtedness or
claims, in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by such Lender or
any branch or agency thereof to or for the credit or the account of such
Borrower. Each Lender agrees promptly to notify such Borrower and the
Administrative Agent after any such set-off and application made by such Lender,
provided that the failure to give such notice shall not affect the validity of
such set-off and application.
9.8 Counterparts. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts (including by
facsimile transmission), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument. A set of the copies of this
Agreement signed by all the parties shall be lodged with the Funds and the
Administrative Agent.
9.9 Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
9.10 Waiver of Conflicts; Confidentiality. (a) Each Fund, on its own
behalf or on behalf of the investment portfolios thereof which are Borrowers,
acknowledges that each of the Administrative Agent and each Lender and their
respective affiliates (collectively, the "Bank Parties") may be providing debt
financing, equity capital or other services (including financial advisory
services) to other companies in respect of which such Funds and Borrowers may
have conflicting interests regarding the transactions described herein and
otherwise. The Bank Parties will not use Confidential Information obtained from
such Funds and/or Borrowers by virtue of the transactions contemplated by this
Agreement or their other relationships with such Funds and/or Borrowers in
connection with the performance by each of the Bank Parties of services for
other companies, and each of the Bank Parties will not furnish any such
Confidential Information to other companies. Such Funds and Borrowers also
acknowledge that no Bank Party has any obligation to use in connection with the
transactions contemplated by this Agreement, or to furnish to any Fund or
Borrower, confidential information obtained from other companies. The
obligations of the Lenders hereunder shall survive the repayment of the Loans
and termination of this Agreement.
(b) For purposes of this Section, "Confidential Information" shall mean
all information received from any of the Funds, the Borrowers or MVA or FIRMCO
relating to any of them or their business, other than any such information that
is available to the Administrative Agent or any Lender on a nonconfidential
basis other than as a result of a breach of this Agreement. Each of the
Administrative Agent and each Lender agrees to maintain the confidentiality of,
and not to use the Confidential Information, except that Confidential
Information may be disclosed (i) to its and its Affiliates' directors, officers,
employees and agents, including without limitation accountants, legal counsel
and other advisors for purposes relating to the transactions contemplated by
this Agreement or for conducting legitimate audits (it being understood that the
Persons to whom such disclosure is made will be informed of the confidential
nature of such Confidential Information and will have agreed to keep such
Confidential Information confidential), (ii) to the extent requested by any
legal or regulatory authority having or claiming jurisdiction over such Person,
(iii) to the extent required by applicable laws or regulations or by any
subpoena or similar legal process provided, however, that the Administrative
Agent or such Lender, as the case may be, shall have given such Borrower, such
Fund, MVA or FIRMCO, as appropriate, notice thereof and an opportunity to seek
protection from disclosure of such information form a court of competent
jurisdiction, (iv) to any other party to this Agreement for purposes relating to
the transactions contemplated hereby, (v) in connection with the exercise of any
remedies hereunder or any suit, action or proceeding relating to this Agreement
or the enforcement of rights hereunder, (vi) subject to an agreement containing
provisions substantially the same as those of this subsection, to any Assignee
or Participant or any prospective Assignee or Participant which executes such
agreement, or (vii) with the written consent of the Borrowers. Any Person
required to maintain the confidentiality of Confidential Information as provided
in this Section shall be considered to have complied with its obligation to do
so if such Person has exercised its best reasonable efforts to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information.
9.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
FOR ITS CHOICE OF LAW RULES.
9.12 Submission To Jurisdiction; Waivers 9.12 Submission To
Jurisdiction; Waivers{tc \l 2 " 9.12 Submission To Jurisdiction; Waivers"}.
Each Fund, on its own behalf or if applicable on behalf of the investment
portfolios thereof which are Borrowers, the Administrative Agent and the Lenders
hereby irrevocably and unconditionally:
(a) submit for themselves and their respective property in any legal
action or proceeding relating to this Agreement and the other Loan
Documents to which they are a party, or for recognition and enforcement of
any judgment in respect thereof, to the non-exclusive general jurisdiction
of the Courts of the State of New York, the courts of the United States of
America for the Southern District of New York, and appellate courts from
any thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to such Fund
or such Borrower at its address set forth in Section 9.2 or at such other
address of which the Administrative Agent shall have been notified pursuant
thereto;
(d) agrees that nothing herein shall affect the right of any party
hereto to effect service of process in any other manner permitted by law or
shall limit the right of any party hereto to sue in any other jurisdiction;
and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this Section any special, exemplary, indirect, punitive or consequential
damages.
9.13 Acknowledgments. Each Fund, on its own behalf or if applicable on
behalf of the investment portfolios thereof which are Borrowers, hereby
acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents;
(b) neither the Administrative Agent nor any Lender has any fiduciary
relationship with or duty to such Fund or any such Borrower arising out of
or in connection with this Agreement or any of the other Loan Documents,
and the relationship between the Administrative Agent and the Lenders, on
the one hand, and such Fund and each Borrower, on the other hand, in
connection herewith or therewith is solely that of creditor and debtor; and
(c) no joint venture is created hereby or by the other Loan Documents
or otherwise exists by virtue of the transactions contemplated hereby among
the Lenders or among such Fund, such Borrowers and the Lenders.
9.14 WAIVERS OF JURY TRIAL. EACH FUND, ON ITS OWN BEHALF AND IF
APPLICABLE ON BEHALF OF THE INVESTMENT PORTFOLIOS THEREOF WHICH ARE BORROWERS,
THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
9.15 Non-Recourse. The Administrative Agent and the Lenders hereby agree
for the benefit of each and every shareholder, trustee, director and officer of
the Funds and the Borrowers and any successor, assignee, heir, estate, executor,
administrator or personal representative of any such shareholder, trustee,
director and officer (a "Non-Recourse Person") that: (a) no Non-Recourse Person
shall have any personal liability for any obligation of any Fund or Borrower
under this Agreement or any Loan Document or any other instrument or document
delivered pursuant hereto or thereto; (b) no claim against any Non-Recourse
Person may be made for any obligation of any Fund or any Borrower under this
Agreement or any Loan Document or other instrument or document delivered
pursuant hereto or thereto, whether for payment of principal of, or interest on,
the Loans or for any fees, expense, or other amounts payable by any Fund or any
Borrower hereunder or thereunder, or otherwise; and (c) the obligations of each
Borrower under this Agreement or any Loan Document or other instrument or
document delivered pursuant hereto or thereto are enforceable solely against
such Borrower and its properties and assets.
9.16 Integration. This Agreement and the other Loan Documents represent
the agreement of each Fund, on its own behalf or if applicable on behalf of the
investment portfolios thereof which are Borrowers, the Administrative Agent and
the Lenders with respect to the subject matter hereof, and there are no
promises, undertakings, representations or warranties by the Administrative
Agent or any Lender relative to the subject matter hereof not expressly set
forth or referred to herein or in the other Loan Documents.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first written above.
THE CHASE MANHATTAN BANK,
as Administrative Agent and as a Lender
By:/s/Roger A. Parker
---------------------
Name: Roger A. Parker
Title: Vice President
MERCANTILE MUTUAL FUNDS, INC.
on behalf of :
Treasury Money Market Portfolio
Money Market Portfolio
Tax-Exempt Money Market Portfolio
U.S. Government Securities Portfolio
Intermediate Corporate Bond Portfolio
Bond Index Portfolio
Government & Corporate Bond Portfolio
Short-Intermediate Municipal Portfolio
Missouri Tax-Exempt Bond Portfolio
National Municipal Bond Portfolio
Balanced Portfolio
Equity Income Portfolio
Equity Index Portfolio
Growth & Income Equity
Growth Equity Portfolio
Small Cap Equity Portfolio
Small Cap Equity Index Portfolio
International Equity Portfolio
Conning Money Market Portfolio
By: /s/Jerry Woodham
--------------------
Name: Jerry Woodham
Title: President
FIRSTAR FUNDS, INC.
on behalf of
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,
Intermediate Bond Market Fund
Tax-Exempt Intermediate Bond Fund
Bond IMMDEX/TM Fund
Balanced Income Fund
Balanced Growth Fund
Growth and Income Fund
Growth Fund
Equity Index Fund
Special Growth Fund
MicroCap Fund
Emerging Growth Fund
International Equity Fund
Core International Equity Fund
MidCap Index Fund
By: /s/Mary Ellen Stanek
-----------------------
Name: Mary Ellen Stanek
Title: President
SIGNATURE PAGE TO MERCANTILE FUNDS
AND FIRSTAR FUNDS CREDIT AGREEMENT
BANQUE NATIONALE DE PARIS, NEW YORK
BRANCH
By: /s/Laurent Vanderzyppe
-------------------------
Name: Laurent Vanderzyppe
Title: Vice President
By: /s/Phil Truesdale
-------------------------
Name: Phil Truesdale
Title: Vice President
SIGNATURE PAGE TO MERCANTILE FUNDS
AND FIRSTAR FUNDS CREDIT AGREEMENT
MELLON BANK, N.A.
By:/s/John R. Cooper
-------------------------
Name: John R. Cooper
Title: Vice President
SIGNATURE PAGE TO MERCANTILE FUNDS
AND FIRSTAR FUNDS CREDIT AGREEMENT
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
By: /s/Vicki M. McIntyre
-------------------------
Name: Vicki M. McIntyre
Title: Vice President
SCHEDULE A
-----------
BORROWERS & ALLOCATIONS
-----------------------
BORROWERS ALLOCATION (%) ISSUING FUND
--------- -------------- ------------
Money Market 32.14% Mercantile Mutual Funds, Inc.
Treasury Money Market 6.4% Mercantile Mutual Funds, Inc.
Tax-Exempt Money Market 3.6% Mercantile Mutual Funds, Inc.
Government & Corporate 2.9% Mercantile Mutual Funds, Inc.
US Government Securities 1.8% Mercantile Mutual Funds, Inc.
Missouri Tax-Exempt Bond 2.9% Mercantile Mutual Funds, Inc.
Growth & Income Equity 12.14% Mercantile Mutual Funds, Inc.
Small Cap Equity 3.2% Mercantile Mutual Funds, Inc.
Balanced 2.9% Mercantile Mutual Funds, Inc.
International Equity 3.6% Mercantile Mutual Funds, Inc.
Short-Intermediate Muni .7% Mercantile Mutual Funds, Inc.
National Muni Bond 6.8% Mercantile Mutual Funds, Inc.
Bond Index 3.6% Mercantile Mutual Funds, Inc.
Intermediate Corporate 1.1% Mercantile Mutual Funds, Inc.
Equity Income 2.1% Mercantile Mutual Funds, Inc.
Equity Index 2.1% Mercantile Mutual Funds, Inc.
Growth Equity 2.9% Mercantile Mutual Funds, Inc.
Small Cap Equity Index 1.4% Mercantile Mutual Funds, Inc.
Conning Money Market .7% Mercantile Mutual Funds, Inc.
SUB-TOTAL 92.98%
--------- ======
BORROWERS ALLOCATION (%) ISSUING FUND
--------- --------------- ------------
Money Market 0 Firstar Funds, Inc.
Tax-Exempt Money Market 0 Firstar Funds, Inc.
U.S. Government Money Market 0 Firstar Funds, Inc.
U.S. Treasury Money Market 0 Firstar Funds, Inc.
Institutional Money Market 0 Firstar Funds, Inc.
Short Term Bond .07% Firstar Funds, Inc.
Intermediate Money Market .07% Firstar Funds, Inc.
Tax-Exempt Intermediate Bond .07% Firstar Funds, Inc.
Bond IMMDEX .07% Firstar Funds, Inc.
Balanced Income .14% Firstar Funds, Inc.
Balanced Growth .14% Firstar Funds, Inc.
Growth & Income .21% Firstar Funds, Inc.
Equity Index .21% Firstar Funds, Inc.
Growth .21% Firstar Funds, Inc.
Special Growth .36% Firstar Funds, Inc.
MidCap Index .21% Firstar Funds, Inc.
Emerging Growth .36% Firstar Funds, Inc.
MicroCap 2.1% Firstar Funds, Inc.
International Equity 1.4% Firstar Funds, Inc.
Core International Equity 1.4% Firstar Funds, Inc.
TOTAL 100%
----- ====
SCHEDULE II
COMMITMENTS, ADDRESSES, ETC.
AMOUNT OF AMOUNT OF
NAME AND ADDRESS OF LENDER COMMITMENT SWING LINE
- -------------------------- ---------- ----------
THE CHASE MANHATTAN BANK $40,000,000 $10,000,000
270 Park Avenue
New York, New York 10017
Attention: Roger A. Parker
Telephone: (212) 270-3751
Facsimile: (212) 270-1789
MELLON BANK, N.A $40,000,000
One Mellon Bank Center
Room 4425
Pittsburgh, PA 15258
Attention: John Cooper
Tel: (412) 234-3187
Fax: (412) 234-8087
BANQUE NATIONALE DE PARIS, $30,000,000
499 Park Avenue
New York, New York 10022
Attention: Laurent Vanderzyppe
Facsimile: (212) 415-9707
Telephone: (212) 415-9406
NORWEST BANK MINNESOTA, $30,000,000
6th Street and Marquette Ave.
MAC N9305-071
Minneapolis, MN 55479
Attention: Vicki M. McIntyre
Phone: 612-667-8056
Fax: 612-667-3510
SCHEDULE III
INVESTMENT MANAGEMENT AGREEMENTS
--------------------------------
I. Firstar Funds, Inc.
-------------------
1. Investment Advisory Agreement dated as of August 29, 1991 between
Firstar Funds, Inc. (formerly "Portico Funds") and First Wisconsin
Trust Company with respect to the Money Market Fund, Institutional
Money Market Fund, U.S. Treasury Money Market Fund (formerly U.S.
Federal Money Market Fund), U.S. Government Money Market Fund, Tax-
Exempt Money Market Fund, Growth and Income Fund (formerly Income and
Growth Fund), Short-Term Bond Market Fund (formerly Short-Intermediate
Fixed Income), Special Growth Fund, Bond IMMDEX/TM Fund and Equity
Index portfolios.
2. Assumption and Guarantee dated as of February 3, 1992 pursuant to which
Firstar Investment Research and Management Company ("FIRMCO") became
the investment adviser to the Money Market Fund, Institutional Money
Market Fund, U.S. Treasury Money Market Fund (formerly U.S. Federal
Money Market Fund), U.S. Government Money Market Fund, Tax-Exempt Money
Market Fund, Growth and Income Fund (formerly Income and Growth Fund),
Short-Term Bond Market Fund (formerly Short-Intermediate Fixed Income),
Special Growth Fund, Bond IMMDEX/TM Fund and Equity Index portfolios.
3. Investment Advisory Agreement dated March 27, 1992 between FIRMCO and
Firstar Funds, Inc. with respect to the Balanced Growth Fund.
4. Addendum No. 1 dated December 27, 1992 between FIRMCO and Firstar
Funds, Inc. with respect to the Growth (formerly MidCore Growth) and
Intermediate Bond Market Funds.
5. Addendum No. 2 dated as of February 5, 1993 between FIRMCO and Firstar
Funds, Inc. with respect to the Tax-Exempt Intermediate Bond Fund.
6. Assumption and Guarantee dated June 17, 1993 pursuant to which FIRMCO
became investment adviser with respect to the Growth and Income Fund.
7. Addendum No. 3 dated as of April 26, 1994 between FIRMCO and Firstar
Funds, Inc. as amended and restated on September 2, 1997 with respect
to the International Equity Fund.
8. Addendum No. 4 dated as of August 1, 1995 between FIRMCO and Firstar
Funds, Inc. with respect to the MicroCap Fund.
9. Addendum No. 5 dated as of August 15, 1997 between FIRMCO and Firstar
Funds, Inc. with respect to the Emerging Growth Fund.
10. Addendum No. 6 dated as of December 1, 1997 between FIRMCO and Firstar
Funds, Inc. with respect to the Balanced Income Fund.
11. Addendum No. 7 dated as of November 1, 1999 between FIRMCO and Firstar
Funds, Inc. with respect to the Core International Equity Fund.
12. Addendum No. 8 dated as of November 1, 1999 between FIRMCO and Firstar
Funds, Inc. with respect to MidCap Index Fund.
13. Sub-Advisory Agreement among Firstar Funds, Inc., FIRMCO and Hansberger
Global Investors, Inc. dated June 13, 1997 with respect to
International Equity Fund.
14. Sub-Advisory Agreement among Firstar Fund, Inc., FIRMCO and The
Glenmede Trust Company dated November 1, 1999 with respect to Core
International Equity Fund.
II. Mercantile Mutual Funds, Inc.
-----------------------------
1. Amended and Restated Advisory Agreement dated as of April 1, 1991
between Mercantile Mutual Funds, Inc. (formerly known as The ARCH Fund,
Inc.) and Mississippi Valley Advisors Inc. ("MVA") with respect to the
Money Market, Growth & Income Equity (formerly Capital Appreciation),
Government & Corporate Bond (formerly Diversified Fixed Income) and
U.S. Government Securities Portfolios.
2. Addendum No. 1 dated as of September 27, 1991 to the Amended and
Restated Advisory Agreement between Mercantile Mutual Funds, Inc. and
MVA adding the Treasury Money Market Portfolio.
3. Addendum No. 2 dated as of April 1, 1992 to the Amended and Restated
Advisory Agreement between Mercantile Mutual Funds, Inc. and MVA adding
the Small Cap Equity (formerly Emerging Growth) Portfolio.
4. Addendum No. 3 dated as of April 1, 1993 to the Amended and Restated
Advisory Agreement between Mercantile Mutual Funds, Inc. and MVA adding
the Balanced Portfolio.
5. Addendum No. 4 dated as of March 15, 1994 to the Amended and Restated
Advisory Agreement between Mercantile Mutual Funds, Inc. and MVA adding
the International Equity Portfolio.
6. Addendum No. 5 dated as of July 10, 1995 to the Amended and Restated
Advisory Agreement between Mercantile Mutual Funds, Inc. and MVA adding
the Short-Intermediate Municipal Portfolio.
7. Addendum No. 6 dated as of September 29, 1995 to the Amended and
Restated Advisory Agreement between Mercantile Mutual Funds, Inc. and
MVA adding the Tax-Exempt Money Market, Missouri Tax-Exempt Bond and
Kansas Tax-Exempt Bond Portfolios.
8. Addendum No. 7 dated as of November 15, 1996 to the Amended and
Restated Advisory Agreement between Mercantile Mutual Funds, Inc. and
MVA adding the Equity Income, National Municipal Bond and Intermediate
Corporate Bond (formerly Short-Intermediate Corporate Bond) Portfolios.
9. Addendum No. 8 dated as of February 14, 1997 to the Amended and
Restated Advisory Agreement between Mercantile Mutual Funds, Inc. and
MVA adding the Equity Index and Bond Index Portfolios.
10. Addendum No. 9 dated as of November 21, 1997 to the Amended and
Restated Advisory Agreement between Mercantile Mutual Funds, Inc. and
MVA adding the Growth Equity Portfolio.
11. Addendum No. 10 dated as of December 29, 1998 to the Amended and
Restated Advisory Agreement between Mercantile Mutual Funds, Inc. and
MVA adding the Small Cap Equity Index Portfolio.
12. Addendum No. 11 dated as of February 12, 1999 to the Amended and
Restated Advisory Agreement between Mercantile Mutual Funds, Inc. and
MVA adding the Conning Money Market Portfolio.
13. Sub-Advisory Agreement between MVA and Clay Finlay Inc. dated as of
August 29, 1996 with respect to the International Equity Portfolio.
14. Sub-Advisory Agreement between MVA and Conning Asset Management Company
dated as of February 12, 1999 with respect to the Conning Money Market
Portfolio.
SCHEDULE IV
CUSTODY AGREEMENTS
------------------
I. Firstar Funds, Inc.
-------------------
1. Custodian Agreement dated July 29, 1988 between Firstar Funds, Inc.
(formerly Elan Funds, Inc. and Portico Funds Inc.) and Firstar Trust
Company (formerly First Wisconsin Trust Company) with respect to the
Money Market Fund, U.S. Government Money Market Fund, Tax-Exempt Money
Market Fund, Income Equity Fund, Short-Intermediate Bond Fund, Bond
Index Fund and Growth Equity Fund.
2. Letter Agreement dated December 28, 1989 to the Custodian Agreement
between Firstar Funds, Inc. and Firstar Trust Company with respect to
the Equity Index Fund.
3. Amendment to Custodian Agreement dated May 1, 1990 between Firstar
Funds, Inc. and Firstar Trust Company.
4. Letter Agreement dated April 19, 1991 to the Custodian Agreement
between Firstar Funds, Inc. and Firstar Trust Company with respect to
the Institutional Money Market Fund and the U.S. Treasury Money Market
Fund (formerly U.S. Federal Money Market Fund).
5. Letter Agreement dated March 27, 1992 to the Custodian Agreement
between Firstar Funds, Inc. and Firstar Trust Company with respect to
the Balanced Fund.
6. Letter Agreement dated December 27, 1992 to the Custodian Agreement
between Firstar Funds, Inc. and Firstar Trust Company with respect to
the Growth Fund (formerly MidCore Growth) and Intermediate Bond Market
Fund.
7. Letter Agreement dated February 5, 1993 to the Custodian Agreement
between Firstar Funds, Inc. and Firstar Trust Company with respect to
the Tax-Exempt Intermediate Bond Fund.
8. Letter Agreement dated August 1, 1995 to the Custodian Agreement
between Firstar Funds, Inc. and Firstar Trust Company with respect to
the MicroCap Fund.
9. Custodian Agreement Revised Fee Schedule March 1, 1997 between Firstar
Funds, Inc. and Firstar Trust Company 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, Intermediate Bond Market Fund, Tax-Exempt
Intermediate Bond Fund, Bond IMMDEX Fund, Balanced Fund, Growth and
Income Fund, Equity Index Fund, MidCore Growth Fund, Special Growth
Fund, MicroCap Fund, and International Equity Fund.
10. Letter Agreement dated August 15, 1997 to the Custodian Agreement
between Firstar Funds, Inc. and Firstar Trust Company with respect to
the Emerging Growth Fund.
11. Letter Agreement dated August 19, 1997 to the Custodian Agreement
between Firstar Funds, Inc. and Firstar Trust Company with respect to
the International Equity Fund.
12. Letter Agreement dated December 1, 1997 to the Custodian Agreement
between Firstar Funds, Inc. and Firstar Trust Company with respect to
the Balanced Income Fund.
13. Assignment of Contract dated as of October 1, 1998 pusuant to which
Firstar Bank Milwaukee, N.A. became custodian of the Fund's portfolios.
14. Global Custody Agreement dated November 1, 1999 among Firstar Bank,
N.A. and Firstar Funds, Inc. and The Chase Manhattan Bank with respect
to International Equity Fund and Core International Equity Fund.
15. Letter Agreement dated November 1, 1999 to the Custodian Agreement
between Firstar Funds, Inc. and Firstar Bank Milwaukee, N.A. with
respect to the Core International Equity Fund.
16. Letter Agreement dated November 1, 1999 to the Custodian Agreement
between Firstar Funds, Inc. and Firstar Bank Milwaukee, N.A. with
respect to the MidCap Index Fund.
II. Mercantile Mutual Funds, Inc.
-----------------------------
1. Custodian Agreement dated as of April 1, 1992 between Mercantile Mutual
Funds, Inc. (formerly known as The ARCH Fund, Inc.) and Mercantile Bank
of St. Louis National Association.
2. Global Sub-Custodian Agreement dated April 1, 1994 among Mercantile
Mutual Funds, Inc., Bankers Trust Company and Mercantile Bank of St.
Louis National Association with respect to the International Equity
Portfolio.
3. Securities Lending Amendment to Custody Agreement dated as of August 4,
1994.
4. Amendment dated December 4, 1998 to Custody Agreement regarding the
Delegation of Responsibilities as a Foreign Custody Manager.
5. Assignment and Delegation Agreement dated December 1, 1998 between
Mercantile Bank National Association and Mercantile Trust Company
National Association ("Mercantile Trust").
6. Custody Fee Letter dated February 1, 1999 between Mercantile Mutual
Funds, Inc. (formerly known as The ARCH Fund, Inc.) and Mercantile
Trust with respect to the Treasury Money Market, Money Market, Tax-
Exempt Money Market, U.S. Government Securities, Intermediate Corporate
Bond, Bond Index, Government & Corporate Bond, Short-Intermediate
Municipal, Missouri Tax-Exempt Bond, National Municipal Bond, Balanced,
Equity Income, Equity Index, Growth & Income Equity, Growth Equity,
Small Cap Equity, Small Cap Equity Index and International Equity
Portfolios.
7. Custody Fee Letter dated February 12, 1999 between Mercantile Mutual
Funds, Inc. and Mercantile Trust with respect to the Conning Money
Market Portfolio.
EXHIBIT 2.5(E)
--------------
FORM OF NOTE
$ New York, New York
---------------------------- , 199
----------- --
FOR VALUE RECEIVED, [the Borrower] (the "Borrower"), hereby unconditionally
promises to pay to the order of __________________________, at the office of The
Chase Manhattan Bank, as administrative agent for the Lenders (the "Lenders")
under the Credit Agreement, as hereinafter defined (in such capacity, the
"Administrative Agent"), located at 270 Park Avenue, New York, New York 10017,
in lawful money of the United States of America and in immediately available
funds, on the Maturity Date the principal amount of (a)__________DOLLARS
($ ), or, if less (b) the aggregate unpaid principal amount of all
Loans made by the Lenders to the Borrower pursuant to subsection 2.1 of the
Credit Agreement, as hereinafter defined.
The undersigned further agrees to pay interest in like money at such office
on the unpaid principal amount hereof from time to time from the Closing Date at
the applicable rates per annum set forth in subsection 2.7 of the Credit
Agreement referred to below until any such amount shall become due and payable
(whether at the stated maturity, by acceleration or otherwise), and thereafter
on such overdue amount at the rate per annum set forth in subsection 2.7(b) of
the Credit Agreement until paid in full (both before and after judgment).
Interest shall be payable in arrears on each applicable Interest Payment Date,
commencing on the first such date to occur after the date hereof and terminating
upon payment (including prepayment) in full of the unpaid principal amount
hereof; provided that interest accruing on any overdue amount shall be payable
on demand.
The holder of this Note is authorized to endorse on the schedule annexed
hereto and made a part hereof the date and amount of each Loan made to the
Borrower pursuant to the Credit Agreement and the date and amount of each
payment or prepayment of principal thereof. Each such endorsement shall
constitute prima facie evidence of the accuracy of the information endorsed. The
failure to make any such endorsement shall not affect the obligations of the
Borrower in respect of such Loan.
This Note (a) is one of the Notes referred to in the Credit Agreement,
dated as of December __, 1999 (as amended, supplemented or otherwise modified
from time to time, the "Credit Agreement"), among the Borrower, those other
Borrowers named therein, the Lenders and the Administrative Agent, (b) is
subject to the provisions of the Credit Agreement and (c) is subject to optional
and mandatory prepayment in whole or in part as provided in the Credit
Agreement.
Upon the occurrence of one or more Events of Default, all amounts then
remaining unpaid on this Note shall become, or may be declared to be,
immediately due and payable, all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit Agreement
and used herein shall have the meanings given to them in the Credit Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK.
[NAME OF FUND] on behalf
of [NAME OF BORROWER]
By:
------------------------------------
Name:
Title:
Schedule A to Note
LOANS AND REPAYMENTS OF LOANS
================================================================================
AMOUNT OF UNPAID
PRINCIPAL PRINCIPAL
AMOUNT OF OF LOANS BALANCE OF NOTATION
DATE LOANS REPAID LOANS MADE BY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
EXHIBIT 2.16(A)
FORM FOR DESIGNATION OF NEW BORROWERS
---------- ---, -----
The Chase Manhattan Bank, as Administrative Agent
[List Lenders]
Ladies and Gentlemen:
Reference is made to that certain Amended and Restated Credit Agreement
dated as of ________ (as amended supplemented or otherwise modified from me to
time, the "Credit Agreement") by and among each registered open-end management
investment company party thereto (each a "Fund") on behalf of itself and the
accounts, series or portfolios of the Fund, which accounts, series and
portfolios are listed on Schedule I thereto (each such account, series or
portfolio, a "Borrower" and, collectively, the "Borrowers"), (ii) the several
banks and other financial institutions from time to time parties thereto (the
"Lenders") and (iii) THE CHASE MANHATTAN BANK, a New York banking corporation,
as administrative agent for the Lenders thereunder (in such capacity, the
"Administrative Agent"). Capitalized terms used but not defined herein shall
have the meanings ascribed to them in the Credit Agreement.
The undersigned new borrower (the "New Borrower") hereby requests, pursuant
to Section 2.16 of the Credit Agreement, that such New Borrower be admitted as
an additional Borrower under the Credit Agreement. Furthermore, the New
Borrower requests that Schedule I to the Credit Agreement be replaced with the
form of Schedule I attached hereto.
The New Borrower hereby represents and warrants to the Administrative Agent
and each Lender (it being agreed that the New Borrower represents and warrants
only with respect to itself) that as of the date hereof and after giving effect
to the admission of the New Borrower as an additional Borrower under the Credit
Agreement: (i) the representations and warranties set forth in Section 3 of the
Credit Agreement are true and correct with respect to the New Borrower; (ii) the
New Borrower is in compliance in all material respects with all the terms and
provisions set forth in the Credit Agreement on its part to be observed or
performed as of the date hereof and after giving effect to the admission; (iii)
no Default or Event of Default with respect to the New Borrower has occurred and
is continuing.
The New Borrower agrees to be bound by the terms and conditions of the
Credit Agreement in all respects as a Borrower thereunder and hereby assumes all
of the obligations of a Borrower thereunder.
Please indicate your assent to the admission of the New Borrower as an
additional Borrower under the Credit Agreement and the replacement of Schedule I
to the Credit Agreement by signing below where indicated.
[FUND, ON BEHALF OF NEW BORROWER]
By:
----------------------------------
Name:
Title:
AGREED AND ACCEPTED:
THE CHASE MANHATTAN BANK
as Administrative Agent and as a Lender
By:
-----------------------------------
Name:
Title:
[LENDERS]
EXHIBIT 9.6(C)
FORM OF ASSIGNMENT AND ACCEPTANCE
Reference is made to the Amended and Restated Credit Agreement dated as
of _______ (as amended supplemented or otherwise modified from time to time, the
"Credit Agreement") by and among each registered open-end management investment
company parties thereto (the "Funds") on behalf of itself and the accounts,
series or portfolios of each such Fund, which accounts, series and portfolios
are listed on Schedule I thereto (each such account, series or portfolio, a
"Borrower" and, collectively, the "Borrowers"), (ii) the several banks and other
financial institutions from time to time parties thereto (the "Lenders") and
(iii) THE CHASE MANHATTAN BANK, a New York banking corporation, as
administrative agent for the Lenders thereunder (in such capacity, the
"Administrative Agent"). Unless otherwise defined herein, terms defined in the
Credit Agreement and used herein shall have the meanings given to them in the
Credit Agreement.
(the "Assignee") and
-----------------------
(the "Assignor") agrees and follows:
--------------------
1. The Assignor hereby irrevocably sells and assigns to the Assignee
without recourse to the Assignor and the Assignee hereby irrevocably purchases
and assumes from the Assignor without recourse to the Assignor, as of the
Effective Date (as defined below) the interest described in Schedule 1 hereto
(the "Assigned Interest") in and to the Assignor's rights and obligations under
the Credit Agreement.
2. The Assignor (a) makes no representation or warranty and assumes no
responsibility with respect to the Credit Agreement or with respect to the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Credit Agreement, any other Loan Document or any other instrument or
document furnished pursuant thereto, other than that the Assignor has not
created any adverse claim upon the interest being assigned by it hereunder and
that such interest is free and clear of any such adverse claim; (b) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of any Borrower, or any other obligor or the performance or
observance by any Borrower, or any other obligor of any of their respective
obligations under the Credit Agreement or any other Loan Document or any other
instrument or document furnished pursuant hereto or thereto; and (c) attaches
any Notes held by it evidencing the Assigned Interest and (i) requests that the
Administrative Agent, upon request by the Assignee, exchange the attached Notes
for a new Note or Notes payable to the Assignee and (ii) if the Assignor has
retained any interest in the Assigned Interest, requests that the Administrative
Agent exchange the attached Notes for a new Note or Notes payable to the
Assignor, in each case in amounts which reflect the assignment being made hereby
(and after giving effect to any other assignments which have become effective on
the Effective Date).
3. The Assignee (a) represents and warrants that it is an Eligible
Lender; (b) confirms that it has received a copy of the Credit Agreement,
together with copies of such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment and Acceptance; (c) agrees that it will, independently and without
reliance on the Assignor, the Administrative Agent or any other Lender and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Credit Agreement, the other Loan Documents or any other instrument or
document furnished pursuant hereto or thereto; (d) appoints and authorizes the
Administrative Agent to take such action as on its behalf and to exercise such
powers and discretion under the Credit Agreement, the other Loan Documents or
any other instrument or document furnished pursuant hereto or thereto as are
delegated to the Administrative Agent by the terms thereof, together with such
powers as are incidental thereto; and (e) agrees that it will perform in
accordance with its terms all the obligations which by the terms of the Credit
Agreement are required to be performed by it as a Lender including, if it is
organized under the laws of a jurisdiction outside the United States, its
obligation pursuant to subsection 2.11(b) of the Credit Agreement.
4. The effective date of this Assignment and Acceptance shall be
_________________ (the "Effective Date"). Following the execution of this
Assignment and Acceptance, it will be delivered to the Administrative Agent for
acceptance by it and recording by the Administrative Agent pursuant to the
Credit Agreement, effective as of the Effective Date (which shall not, unless
otherwise agreed to by the Administrative Agent, be earlier than five Business
Days after the date of such acceptance and recording by the Administrative
Agent).
5. Upon such acceptance and recording, from and after the Effective Date,
the Administrative Agent shall make all payments in respect of the Assigned
Interest (including payments of principal, interest, fees and other amounts) to
the Assignee whether such amounts have accrued prior to the Effective Date or
accrue subsequent to the Effective Date. The Assignor and the Assignee shall
make all appropriate adjustments in payments by the Administrative Agent for
periods prior to the Effective Date or with respect to the making of this
assignment directly between themselves.
6. From and after the Effective Date, (a) the Assignee shall be a party
to the Credit Agreement and, to the extent provided in this Assignment and
Acceptance, have the rights and obligations of a Lender thereunder and under the
other Loan Documents and shall be bound by the provisions thereof and (b) the
Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Credit
Agreement.
7. This Assignment and Acceptance shall be governed by and construed in
accordance with the substantive laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed as of the date first above written by their respective
duly authorized officers on Schedule 1 hereto.
SCHEDULE 1 TO ASSIGNMENT AND ACCEPTANCE RELATING TO THE
CREDIT AGREEMENT DATED AS OF DECEMBER__, 1999
================================================================================
Name of Assignor:
Name of Assignee:
Effective Date of Assignment:
Principal Commitment Percentage
Amount Assigned Assigned
---------------- ---------
$
---------------- ---------------------
[NAME OF ASSIGNEE] [NAME OF ASSIGNOR]
By: By:
------------------------ ------------------------
Name: Name:
Title: Title:
Accepted and Consented To:
THE CHASE MANHATTAN BANK,
as Administrative Agent
By:
-----------------------------
Name:
Title:
- -------------------
Calculate the Commitment Percentage that is assigned to at least 15 decimal
places and show as a percentage of the aggregate commitments of all
Lenders.
Exhibit (i)
October 15, 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 20 into three series,
designated as Institutional Series, Series A and Series B. The Board has also
previously authorized the issuance of shares of these series to the public. The
shares of Common Stock classified into each such series are referred to herein
as the "Current Series Common Stock"; the shares of Common Stock that are not
classified 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. 38 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
19-Institutional 100,000,000
19-A 100,000,000
19-B 100,000,000
19-Unclassified as to Series 1,700,000,000
2,000,000,000
20
20-Institutional 100,000,000
20-A 100,000,000
20-B 100,000,000
20-Unclassified as to Series 1,700,000,000
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.
38 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. 38 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 28, 2000
Exhibit (j)(2)
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in this Registration
Statement on Form N-1A of our report dated December 28, 1999, relating to the
financial statements and financial highlights of Firstar Funds, Inc., which are
also incorporated by reference into the Registration Statement. We also consent
to the references to us under the headings "Financial Highlights" and
"Independent Accountants and Financial Statements" in such Registration
Statement.
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
February 23, 2000
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 $130.00, one share of
beneficial interest of the Special Growth Fund - Series B, one share of the Bond
IMMDEX_ 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 for a purchase price of $10.00 per
share.
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 (l)(5)
PURCHASE AGREEMENT
Firstar Funds, Inc., a Wisconsin corporation (the "Company"), and B.C.
Ziegler & Company ("B.C. Ziegler") hereby agree as follows:
1. The Company hereby offers B.C. Ziegler and B.C. Ziegler hereby
purchases, in consideration for the payment of $10.00 for each share, one share
of beneficial interest of the Core International Equity Fund - Institutional,
one share of the Core International Equity Fund - Series A, and one share of the
Core International Equity Fund - Series B for a purchase price corresponding to
the net asset value per share as listed in Exhibit 1 to this agreement.
2. B.C. Ziegler acknowledges that the shares purchased hereunder have not
been registered under the federal securities laws and that the Company is
relying on certain exemptions from such registration requirements. B.C. Ziegler
represents and warrants that it is acquiring such shares solely for investment
purposes and that B.C. Ziegler has no present intention to redeem, sell or
otherwise dispose of the shares.
3. This Agreement shall be governed by the law of the State of Wisconsin.
Firstar Funds is a corporation organized under the laws of Wisconsin and under
Articles of Incorporation, to which reference is hereby made and a copy of which
is on file at the office of the Secretary of State of Wisconsin as required by
law, and to any and all amendments thereto so filed or hereafter filed.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the 3rd day of November, 1999.
(SEAL)
FIRSTAR FUNDS, INC.
By: /s/Laura Rauman
------------------------------------
Name: Laura Rauman
----------------------------
Title: Vice President
---------------------------
B.C. ZIEGLER & COMPANY
By: /s/Robert J. Tuszynski
------------------------------------
Name: Robert J. Tuszynski
----------------------------
Title: Vice President
---------------------------
EXHIBIT 1
---------
Firstar Core International Equity Fund - Institutional $10.00
------
Firstar Core International Equity Fund - Series A $10.00
------
Firstar Core International Equity Fund - Series B $10.00
------
Total consideration for one share of each series $30.00
------
Exhibit (l)(6)
PURCHASE AGREEMENT
Firstar Funds, Inc., a Wisconsin corporation (the "Company"), and B.C.
Ziegler & Company ("B.C. Ziegler") hereby agree as follows:
1. The Company hereby offers B.C. Ziegler and B.C. Ziegler hereby
purchases, in consideration for the payment of $10.00 for each share, one share
of beneficial interest of the MidCap Index Fund - Institutional, one share of
the MidCap Index Fund - Series A, and one share of the MidCap Index Fund -
Series B for a purchase price corresponding to the net asset value per share as
listed in Exhibit 1 to this agreement.
2. B.C. Ziegler acknowledges that the shares purchased hereunder have not
been registered under the federal securities laws and that the Company is
relying on certain exemptions from such registration requirements. B.C. Ziegler
represents and warrants that it is acquiring such shares solely for investment
purposes and that B.C. Ziegler has no present intention to redeem, sell or
otherwise dispose of the shares.
3. This Agreement shall be governed by the law of the State of Wisconsin.
Firstar Funds is a corporation organized under the laws of Wisconsin and under
Articles of Incorporation, to which reference is hereby made and a copy of which
is on file at the office of the Secretary of State of Wisconsin as required by
law, and to any and all amendments thereto so filed or hereafter filed.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the 3rd day of November, 1999.
(SEAL)
FIRSTAR FUNDS, INC.
By: /s/Laura Rauman
--------------------
Name: Laura Rauman
-----------------
Title: Vice President
-----------------
B.C. ZIEGLER & COMPANY
By: /s/Robert J. Tuszynski
----------------------
Name: Robert J. Tuszynski
-------------------
Title: Vice President
-------------------
EXHIBIT 1
---------
Firstar MidCap Index Fund - Institutional $10.00
------
Firstar MidCap Index - Series A $10.00
------
Firstar MidCap Index Fund - Series B $10.00
------
Total consideration for one share of each series $30.00
------
Exhibit (n)(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. The Board of Directors of the Company approved
an amendment and restatement of the Plan on December 18, 1998, to reflect the
creation of the Series B shares, which became effective on March 1, 1999. The
Board of Directors of the Company approved an amended and restated version of
the Plan on June 17, 1999, reflecting a revision to provisions reciting those
eligible to purchase Series A or Institutional shares, which became effective on
June 18, 1999. This Amended and Restated Plan pursuant to Rule 18f-3 was
approved by the Board of Directors on September 23, 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 IMMDEXO Fund, Equity Index Fund, Balanced Growth
Fund, Growth Fund, Intermediate Bond Market Fund, Tax-Exempt Intermediate Bond
Fund, International Equity Fund, MicroCap Fund, Balanced Income Fund, Emerging
Growth Fund, Core International Equity Fund and MidCap Index Fund (the "Non-
Money Market Funds") shall be offered to the general public and shall be subject
to a shareholder servicing and/or distribution fee payable pursuant to the
Series A Plans which shall not initially exceed 0.25% (on an annual basis) of
the average daily net assets attributable to the outstanding Series A shares of
the Non-Money Market Funds. Series A shares of the Growth and Income Fund,
Special Growth Fund, Equity Index Fund, Balanced Growth Fund, Growth Fund,
International Equity Fund, Balanced Income Fund, MicroCap Fund, Emerging Growth
Fund, Core International Equity Fund and MidCap Index Fund shall be further
subject to a sales charge which shall not initially exceed 4.5% of the offering
price of the Series A shares of those Funds (subject to the reductions and
exemptions described in the prospectus for such shares, as amended and
supplemented from time to time). Series A shares of the Short-Term Bond Market
Fund, Bond IMMDEXO Fund, Intermediate Bond Market Fund and Tax-Exempt
Intermediate Bond Fund shall be further subject to a sales charge which shall
not initially exceed 3.75% of the offering price of the Series A shares of those
Funds (subject to the reductions and exemptions described in the prospectus for
such shares, as amended or supplemented from time to time).
Shareholder services under the Plans may include: (i) processing
dividend and distribution payments; (ii) providing information periodically to
customers showing their positions in Series A shares; (iii) arranging for bank
wires; (iv) responding to customer inquiries relating to the services performed
by shareholder service organizations; (v) providing subaccounting with respect
to Series A shares beneficially owned by customers or the information necessary
for subaccounting; (vi) forwarding shareholder communications (such as proxies,
shareholder reports, annual and semi-annual financial statements and dividend,
distribution and tax notices) to customers; (vii) processing exchange and
redemption requests from customers and placing net exchange and redemption
orders with the Company's service contractors; and (viii) assisting customers in
changing dividend options, account designations and addresses. In addition,
distribution services may be provided under the Distribution and Services Plan
for Series A shares such as assistance by broker/dealers in forwarding sales
literature and advertising to customers.
b. Series B Shares
Series B shares of the Non-Money Market Funds shall be offered to the
general public and shall be subject to a shareholder servicing and/or
distribution fee payable under the Distribution and Services Plan and/or the
Services Plan adopted with respect to the Series B shares, each on the terms set
forth in the applicable Fund's prospectus, as amended or supplemented from time
to time.
If a shareholder redeems Series B shares which have been held for less
than the time period specified in the applicable prospectus following the time
of purchase, a deferred sales charge, on the terms set forth in the applicable
prospectus, as amended or supplemented from time to time, shall be imposed at
the time of redemption of such Series B shares. The deferred sales charge may
be waived in the circumstances set forth in the applicable prospectus.
Shareholder services under the Series B Plans may include: (i)
processing dividend and distribution payments; (ii) providing information
periodically to customers showing their positions in Series B shares; (iii)
arranging for bank wires; (iv) responding to customer inquiries relating to the
services performed by shareholder service organizations; (v) providing
subaccounting with respect to Series B shares beneficially owned by customers or
the information necessary for subaccounting; (vi) forwarding shareholder
communications (such as proxies, shareholder reports, annual and semi-annual
financial statements and dividend or distribution and tax notices) to customers;
(vii) processing exchange and redemption requests from customers and placing net
exchange and redemption orders with the Company's service contractors; and
(viii) assisting customers in changing dividend options, account designations
and addresses. In addition, distribution services may be provided under the
Distribution and Services Plan for the Series B shares, as described in the
applicable prospectus, as amended or supplemented from time to time.
c. Institutional Shares
Institutional shares of the Non-Money Market Funds initially shall be offered to
(i) all trust, agency or custodial accounts opened through Firstar Bank,
Milwaukee, N.A., (ii) all employer-sponsored qualified retirement plans other
than those serviced by certain external organizations who have service
agreements with Firstar Mutual Fund Services, LLC ("Firstar") or its affiliates,
and other than plans administered by Firstar with assets less than $1 million at
the time Firstar begins plan administration (but including plans administered by
Firstar which owned Institutional shares prior to June 18, 1999) (plans
administered by Firstar with assets less than $1 million at the time Firstar
begins plan administration will become eligible for Institutional shares as
described in the Statement of Additional Information from time to time); (iii)
all clients of Firstar Investment Research & Management Company and (iv) those
purchasing through certain broker-dealers who have agreed to provide certain
services with respect to shares of the Non-Money Market Funds, including
Waterhouse Securities, Inc. and Jack White & Co., a division of Waterhouse
Securities, Inc. Institutional shares shall be offered without a sales charge
and shall not be subject to a shareholder servicing and/or distribution fee
payable pursuant to the Plans.
2. MONEY MARKET FUNDS
a. Series A Shares
Series A shares of the Money Market Fund, Tax-Exempt Money Market
Fund, U.S. Government Money Market Fund and U.S. Treasury Money Market Fund and
the Institutional Money Market Fund (the "Money Market Funds") shall be offered
to institutional investors and the general public and, except for the
Institutional Money Market Fund, shall be subject to a shareholder servicing
and/or distribution fee payable pursuant to the Series A Plans which shall not
initially exceed 0.25% (on an annual basis) of the average daily net assets
attributable to Series A shares of the Money Market Funds. Series A shares of
the Money Market Funds shall not be subject to a sales charge.
b. Series B Shares
The Company shall not initially offer Series B shares for the Money
Market Funds.
c. Institutional Shares
The Company shall not initially offer Institutional shares for the
Money Market Funds.
C. Exchange Privileges
-------------------
1. SERIES A SHARES
Series A shareholders initially shall be generally permitted to
exchange their shares in a Fund for Series A shares of other Funds of the
Company without charge or commission by the Fund (except a wire redemption fee
which may be waived). A sales charge shall be imposed on the exchange, in
accordance with the regulations of the Commission, if the shares of the Fund
being acquired have a sales charge and the shares being redeemed were purchased
without a sales charge. The exchange privilege does not initially apply to
shares of the Institutional Money Market Fund.
2. SERIES B SHARES
Series B shareholders initially shall be generally permitted to
exchange their shares for Series B shares of another Fund offered by the Company
without paying any exchange fee or contingent deferred sales charge at the time
the exchange is made, but a deferred sales charge may be payable upon subsequent
redemption of the Series B shares acquired on exchange as provided in the Funds'
prospectuses from time to time.
3. INSTITUTIONAL SHARES
Institutional shareholders initially shall be generally permitted to
exchange their shares for Institutional shares of another Fund offered by the
Company without paying any exchange fee or contingent deferred sales charge at
the time the exchange is made.
D. Shareholder Services
--------------------
1. PERIODIC INVESTMENT PLAN
------------------------
a. Series A and B Shares
Series A and B shares of the Funds shall initially offer a periodic
investment plan whereby a shareholder may automatically make purchases of shares
of a Fund on a regular, periodic basis.
b. Institutional Shares
The Company shall not initially offer Institutional shares a periodic
investment plan.
2. CONVERTIFUND/TM TRANSACTIONS
a. Series A Shares
Series A shall initially permit shareholders to effect ConvertifundO
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.
