Filed with the Securities and Exchange Commission on May 12, 2000
1933 Act Registration File No. 33-18255
1940 Act File No. 811-5380
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
Pre-Effective Amendment No. |_|
Post-Effective Amendment No. 39 |X|
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
Amendment No. 40 |X|
FIRSTAR FUNDS, INC.
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(Exact Name of Registrant as Specified in Charter)
615 East Michigan Street
Milwaukee, WI 53201-3011
(Address of Principal Executive Offices) (Zip Code)
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, PA 19103
(Name and Address of Agent for Service)
Copies of all communications to:
Suzanne E. Riley, Esq.
Firstar Mutual Fund Services, LLC
615 East Michigan Street, 2nd Floor
Milwaukee, WI 53202
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b)
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on pursuant to paragraph (b)
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60 days after filing pursuant to paragraph (a)(1)
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on ____________ pursuant to paragraph (a)(1)
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X 75 days after filing pursuant to paragraph (a)(2)
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on pursuant to paragraph (a)(2) of Rule 485.
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Title of securities being registered: Small Cap Aggressive Growth Fund.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MAY 12, 2000
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS
__________, 2000
SMALL CAP AGGRESSIVE GROWTH FUND
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved any shares of this fund or determined if this prospectus
is truthful or complete. Anyone who tells you otherwise is committing a criminal
offense.
FIRSTAR FUNDS
FIRSTAR FUNDS(R)
_____________, 2000
TABLE OF CONTENTS
THE FUND PAGE
The Fund's Objective and Strategy, Principal Risks and Expenses
TYPES OF INVESTMENT RISK
INVESTING WITH FIRSTAR FUNDS
Share Classes Available
Sales Charges and Waivers
Purchasing Shares
Redeeming Shares
Exchanging Shares
Additional Shareholder Services
ADDITIONAL INFORMATION
Dividends, Capital Gains Distributions and Taxes
Management of the Fund
Net Asset Value and Days of Operation
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.
SMALL CAP AGGRESSIVE GROWTH FUND
OBJECTIVE
The investment objective of the Small Cap Aggressive Growth 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.
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
SMALL SIZED COMPANIES. The Fund generally invests at least 65% of its
assets in small-sized companies with stock market capitalizations up to $2
billion that the Adviser considers to be well managed and to have attractive
fundamental financial characteristics. If the market capitalization of a company
in which the Fund has invested increases above $2 billion, the Fund may continue
to hold the security. The Fund may also invest a portion of its assets in
companies with larger or smaller market capitalizations.
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 10% 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, as rated by at least one rating
agency, at time of purchase or be unrated but deemed comparable by the Adviser.
Investment grade securities are securities rated in the highest four categories
by S&P, Moody's or another nationally recognized rating agency. Average quality
for the 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.
The Fund may emphasize, from time to time, particular companies or
market sectors, such as technology, in attempting to achieve its investment
objective.
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. 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 appreciation.
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 SMALL CAP STOCK RISKS. Smaller
capitalization stocks involve greater risks than those associated with larger,
more established companies. Small company stocks may be subject to more abrupt
or erratic price movements, for reasons including that the stocks are traded in
lower volume and that the issuers are more sensitive to changing conditions and
have less certain growth prospects. Also, there are fewer market makers for
these stocks and wider spreads between quoted bid and asked prices in the
over-the-counter market for these stocks. Small cap stocks tend to be less
liquid 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, particularly during periods of market disruption. There normally is
less publicly available information concerning these securities. Small companies
in which the Fund may invest may have limited product lines, markets or
financial resources, or may be dependent on a small management group. In
particular, investments in unseasoned companies present risks considerably
greater than investments in more established companies.
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.
To the extent that the Fund emphasizes particular companies or market
sectors, such as technology, it will be especially susceptible to the risks
associated with investments in those companies or market sectors. Stocks of
technology companies may be subject to greater price volatility than stocks of
companies in other sectors. Technology companies may produce or use products or
services that prove commercially unsuccessful, become obsolete or become
adversely impacted by government regulation. Technology stocks may experience
significant price movements caused by disproportionate investor optimism or
pessimism.
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.
Because the Fund is new, no performance information for the Fund is included in
this Prospectus.
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 Small Cap Aggressive Growth Fund.
<TABLE>
<CAPTION>
INSTITUTIONAL RETAIL A RETAIL B
SHARES SHARES SHARES
-----------------------------------
<S> <C> <C> <C>
SHAREHOLDER FEES
(fees paid directly from your investment)
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%1
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends None None None
Redemption Fees None2 None2 None2
Exchange Fees None None None
</TABLE>
<TABLE>
<CAPTION>
INSTITUTIONAL RETAIL A RETAIL B
SHARES SHARES SHARES
-----------------------------------
<S> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)
Management Fees3 1.25% 1.25% 1.25%
Distribution and Service (12b-1) Fees4 0.00% 0.00% 0.75%
Other Expenses5 0.95% 1.20% 1.20%
Total Annual Fund Operating Expenses6 2.20% 2.45% 3.20%
</TABLE>
- --------------------------------------------------------------------------------
1 A contingent deferred sales charge is imposed on Retail B Shares redeemed
within six years of purchase at a rate of 5% in the first year, 4% in the second
year, 3% in the third year and fourth year, 2% in the fifth year declining to 1%
in the sixth year. Thereafter the Retail B Shares convert to Retail A Shares,
which do not bear a contingent deferred sales charge.
2 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.
3 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 0.55% 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.
4 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.
5 "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.
6 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 1.50%, 1.75% and 2.50%, 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
that your investment has a 5% return each year and that the Fund's operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
1 YEAR 3 YEARS
Retail A Shares $784 $1,272
Retail B Shares
Assuming complete redemption at end of 823 1,286
period
Assuming no redemption 323 986
Institutional 223 688
TYPES OF INVESTMENT RISK
The principal risks of investing in the Fund are described previously
in this Prospectus. The following list provides more detail about some of those
risks, along with information on additional types of risks which may apply to
the Fund. Risks associated with particular types of investments the Fund makes
are described in this section and in the Additional Statement referred to on the
back page.
GENERAL RISKS OF INVESTING IN THE FUND
COMPLETE INVESTMENT PROGRAM
An investment in a single Fund, by itself, does not constitute a complete
investment plan.
CREDIT RISK
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 into which the 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 the Fund purchases or holds convertible or other
securities that are below investment grade, a greater risk exists as to the
timely repayment of the principal of, and the timely payment of interest or
dividends on, such securities.
DERIVATIVES RISK
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.
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
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
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, restricted securities which the Fund may purchase, and the futures
contracts in which the Fund may engage. Illiquid securities also include
repurchase agreements and time deposits with notice/termination dates of greater
than seven days and certain unlisted over-the-counter options and other
securities traded in the U.S. but are subject to trading restrictions because
they are not registered under the Securities Act of 1933. There may be no active
secondary market for these securities. The Fund may invest up to 15% of its net
assets at the time of purchase, in securities that are illiquid. A domestically
traded security which is not registered under the Securities Act of 1933 will
not be considered illiquid if the Adviser determines an adequate investment
trading market exists for that security. Because illiquid and restricted
securities may be difficult to sell at an acceptable price, they may be subject
to greater volatility and may result in a loss to the Fund.
MANAGEMENT RISK
A strategy which the Adviser uses may fail to produce the intended results. The
particular securities and types of securities the Fund holds may underperform
other securities and types of securities. There can be no assurance the Fund
will achieve its investment objective. The Adviser may not change certain
investment practices of the Fund without shareholder vote. These policies of the
Fund, which may not be changed without a shareholder vote, are described in the
Additional Statement.
MARKET RISK
The value of the securities in which the Fund invests may go up or down in
response to the prospects of individual companies and/or general economic
conditions. Price changes may be temporary or last for extended periods. The
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
This Prospectus describes the Fund's principal investment strategies, and the
types of securities in which the Fund principally invests. The Fund may, from
time to time, make other types of investments and pursue other investment
strategies in support of its overall investment goal. These supplemental
investment strategies - and the risk involved - are described in detail in the
Additional Statement, which is referred to on the back cover of this Prospectus.
PORTFOLIO TURNOVER RISK
The Adviser will not consider the portfolio turnover rate a limiting factor in
making investment decisions for the Fund. The expected maximum portfolio
turnover rate for the Fund for the current fiscal year is expected to be in
excess of 100%. A high rate of portfolio turnover (100% or more) involves
correspondingly greater expenses which must be borne by the Fund and its
shareholders. It may also result in higher short-term capital gains taxable to
shareholders.
VALUATION RISK
This is a risk that the Fund has valued certain securities at a higher or lower
price than the Fund can sell them.
FOREIGN RISKS
When the Fund invests in foreign securities, it will be subject to special risks
not typically associated with domestic issuers resulting from less government
regulation, less public information and less economic, political and social
stability. Foreign securities, and in particular foreign debt securities, are
sensitive to changes in interest rates. In addition, investment in securities of
foreign governments involves the risk that foreign governments may default on
their obligations or may otherwise not respect the integrity of their debt. The
Fund will also be subject to the diplomatic risk that an adverse change in the
diplomatic relations between the U.S. and another country might reduce the value
or liquidity of investments. Future political and economic developments, the
possible imposition of withholding taxes on dividend income, the possible
seizure or nationalization of foreign holdings, the possible establishment of
exchange controls or freezes on the convertibility of currency, or the adoption
of other governmental restrictions might adversely affect an investment in
foreign securities. Additionally, foreign banks and foreign branches of domestic
banks may be subject to less stringent reserve requirements, and to different
accounting, auditing and recordkeeping requirements.
Foreign risks will normally be greatest when the Fund invests in issuers located
in emerging markets. Securities issued in emerging market countries, in
particular, may be more sensitive to certain economic changes and less liquid.
These countries are located in the Asia/Pacific region, Eastern Europe, Latin
and South America and Africa. In general, the securities markets of these
countries are less liquid, are subject to greater price volatility, have smaller
market capitalizations and have problems with securities registration and
custody. In addition, because the securities settlement procedures are less
developed in these countries, the Fund may be required to deliver securities
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 the Fund.
Investment in foreign securities also involves higher costs than investment in
U.S. securities, including higher transaction and custody costs as well as the
imposition of additional taxes by foreign governments.
The Fund also may invest in foreign currency denominated securities and be
subject to the risk of negative foreign currency rate fluctuations. A change in
the exchange rate between U.S. dollars and foreign currency may reduce the value
of an investment made in a security denominated in that foreign currency. The
Fund may hedge against foreign currency risk on unsettled trades, but it is not
required to do so.
EUROPEAN CURRENCY UNIFICATION - TO THE EXTENT THE FUND 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 the Fund invests and may result in the Fund facing additional risks in
pursuing its investment objective. These risks, which include, but are not
limited to, uncertainty as to proper tax treatment of the currency conversion,
volatility of currency exchange rates as a result of the conversion, uncertainty
as to capital market reaction, conversion costs that may affect issuer
profitability and creditworthiness, and lack of participation by some European
countries, may increase the volatility of the Fund's net asset value per share.
SMALL AND MIDCAP STOCK RISK
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 Fund may
invest may have limited product lines, markets or financial resources, or may be
dependent on a small management group. In particular, investments in unseasoned
companies present risks considerably greater than investments in more
established companies.
TEMPORARY INVESTMENT RISK
The Fund may invest up to 30% of its assets in money market instruments for
temporary defensive purposes. This may occur for example, when the Fund is
attempting to respond to adverse market, economic, political or other
conditions. (Taxable obligations purchased by the Fund normally will not exceed
20% of total assets at times of purchase.) When the 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
BORROWINGS, REVERSE REPURCHASE AGREEMENTS
The 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 the Fund decline in value while these transactions are outstanding, the
net asset value of the Fund's outstanding shares will decline in value by
proportionately more than the decline in value of the securities. In addition,
reverse repurchase agreements involve the risks that the interest income earned
by 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 the
Fund will decline below the price the Fund is obligated to pay to repurchase the
securities, and that the securities may not be returned to the Fund.
SHORT SALES
Short selling is the selling of securities which have been borrowed on the
expectation that the market price will drop. These transactions may result in
gains if a security's price declines, but may result in losses if a security's
price does not decline in price.
OPTIONS
An option is a type of derivative instrument that gives the holder the right
(but not the obligation) to buy (a "call") or sell (a "put") an asset in the
future at an agreed upon price prior to the expiration date of the option.
Options can be used to manage exposure to certain markets, enhance income or
hedge against a decline in value of portfolio securities. Options may relate to
particular securities or various stock or bond indices and may or may not be
listed on a national securities exchange and issued by the Options Clearing
Corporation. Purchasing options is a specialized investment technique which
entails a substantial risk of a complete loss of the amount paid as premiums to
the writer of the option.
The value of options can be highly volatile, and their use can result in loss if
the Adviser is incorrect in its expectation of price fluctuations. The
successful use of options for hedging purposes also depends in part on the
ability of the Adviser to manage future price fluctuations and the degree of
correlation between the options and securities markets.
The Fund may purchase put and call options in an amount not to exceed 5% of its
net assets.
In addition, the Fund may write call options on securities and on various stock
or bond indices. The Fund may write a call option only if the option is covered.
The Fund may cover a call option by owning the security underlying the option or
through other means which would allow for immediate satisfaction of its
obligation. Such options will be listed on a national securities exchange. The
aggregate value of the Fund's assets subject to options written by the Fund will
not exceed 5% of the value of its net assets during the current year. In order
to close out an option position, the Fund will be required to enter into a
"closing purchase transaction" (the purchase of a call option on a security or
an index with the same exercise price and expiration date as the call option
which it previously wrote on the same security or index).
The Fund 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.
Risks associated with the use of options on securities include (i) imperfect
correlation between the change in market value of the securities the Fund holds
and the prices of options relating to the securities purchased or sold by the
Fund; and (ii) the possible lack of a liquid secondary market for an option. The
Additional Statement includes additional information relating to option trading
practices and related risks.
FUTURES CONTRACTS AND RELATED OPTIONS
A futures contract is a type of derivative instrument that obligates the holder
to buy or sell an asset in the future at an agreed upon price. For example, a
futures contract may obligate the Fund, at maturity, to take or make delivery of
certain domestic or foreign securities, the cash value of a securities index or
a stated quantity of a foreign currency. When the Fund purchases an option on a
futures contract, it has the right to assume a position as a purchaser or seller
of a futures contract at a specified exercise price during the option period.
When the Fund sells an option on a futures contract it becomes obligated to
purchase or sell a futures contract if the option is exercised.
Futures contracts and options present the following risks: imperfect correlation
between the change in market value of the Fund's securities and the price of
futures contracts and options; the possible inability to close a futures
contract when desired; losses due to unanticipated market movements which are
potentially unlimited; and the possible inability of the investment management
team to correctly predict the direction of securities prices, interest rates,
currency exchange rates and other economic factors. The Fund may buy and sell
futures contracts and related options on foreign exchanges or boards of trade
(which do not offer the same protections as U.S. exchanges).
The Fund's commodities transactions must constitute bona fide hedging or other
permissible transactions pursuant to regulations promulgated by the Commodities
and Futures Trading Commission ("CFTC"). In addition, the Fund may not engage in
such transactions if the sum of the amount of initial margin deposits and
premiums paid for unexpired commodity options, other than for bona fide hedging
transactions, would exceed 5% of the liquidation value of its assets, after
taking into account unrealized profits and unrealized losses on such contracts
it has entered into; provided, however, that in the case of an option that is
in-the-money at the time of purchase, the in-the-money amount may be excluded in
calculating the percentage limitation. Pursuant to SEC requirements, the Fund
may be required to segregate cash or high quality money market instruments in
connection with its commodities transactions in an amount generally equal to the
value of the underlying commodity. The Company intends to comply with the
regulations of the CFTC exempting the Fund from registration as a "commodity
pool operator."
For a more detailed description of futures contracts and futures options,
including a discussion of the limitations imposed by federal tax law, see
Appendix B to the Additional Statement.
INVESTING WITH FIRSTAR FUNDS
This section describes for you the procedures for opening an account and how to
buy, sell or exchange Fund shares.
SHARE CLASSES AVAILABLE
The Fund offers three classes of Shares: Retail A, Retail B and Institutional.
INSTITUTIONAL SHARES
o No sales charge
o Available for;
o Trust, agency or custodial accounts opened through Firstar Bank, N.A.;
o 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;
o all clients of FIRMCO; and
o 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
o Initial sales charge of 5.50% or less
o No deferred sales charge
o Reduced sales charge for larger investments. See "Sales Charges and Waivers"
for more information
o Available to any investor who does not qualify to purchase Institutional
shares
RETAIL B SHARES
o No initial sales charge
o 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
o Converts to Retail A shares after six years
o 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 the Fund:
The public offering price for Retail A Shares is the net asset value of the
Retail A Shares purchased plus any applicable front-end sales charge. A sales
charge will not be assessed on Retail A Shares purchased through reinvestment of
dividends or capital gains distributions. The sales charge is as follows:
<TABLE>
<CAPTION>
Shareholder Organization
Sales Charge as a Sales Charge as Percentage Reallowance as a
Amount of Transaction at Offering Percentage of Offering of Net Asset Value Percentage of Offering
Price Price Price
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 5.50% 5.82% 5.00%
$50,000 To $100,000 4.50% 4.71% 4.00%
$100,000 to $249,999 3.50% 3.63% 3.00%
$250,000 to $499,999 2.50% 2.56% 2.00%
$500,000 to $999,999 2.00% 2.04% 1.50%
$1,000,000 and above 0.50% 0.50% 0.40%
</TABLE>
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 Fund, including Charles Schwab
Mutual Fund Marketplace(R). CHECK WITH YOUR BROKER-DEALER TO SEE IF YOU QUALIFY
FOR THIS EXEMPTION.
REDUCING YOUR SALES CHARGES - RETAIL A SHARES
o Right of Accumulation - Existing Retail A Shares of the Fund and Retail A
Shares of any other Equity, Balanced or Bond Fund of Firstar Funds and existing
Retail A Shares of any Firstar family of funds can be combined with new
purchases for purposes of calculating reduced sales charges.
o 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 Retail A
Shares of the Fund or Retail A Shares of any other Equity, Balanced or Bond Fund
of Firstar Funds or Retail 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.
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
contributions.
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 Fund reserves 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.
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
The Fund has adopted a distribution and service plan for the Retail A shares.
The Fund also has adopted a service plan for the Retail A shares, under which
the Fund 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 the 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 the 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 Fund has 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
the Fund at an annual rate of up to 0.25% of the average daily net asset value
of the shares covered by their agreement for 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 Fund also has adopted a service plan for the Retail B shares, under which
the 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.
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 the Fund's assets on an ongoing basis, over time, these fees will
increase the cost of your investment and may cost you more than paying other
types of sales charges.
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, the 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
Shares of the Fund are offered and sold on a continuous basis by the distributor
for the Fund, B.C. Ziegler and Company (the "Distributor"), which is 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 INVESTMENTS
RETAIL SHARES
The minimum initial investment for Retail Shares in the Fund is $1,000. The
minimum subsequent investment is $50. The minimum initial investment will be
waived if you participate in the Periodic Investment Plan.
INSTITUTIONAL SHARES
There is no minimum initial or subsequent investment for Institutional Shares of
the Fund.
BUYING SHARES
Purchase requests accompanied by a check or wire payment for the Fund which are
received by the transfer agent before 3:00 p.m. Central time on a business day
for the Fund will be executed the same day, at that day's closing price provided
that payment is received by the close of regular trading hours. Orders received
after 3:00 p.m. Central time and orders for which payment is not received by the
close of regular trading hours on the New York Stock Exchange (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>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
<S> <C> <C>
Through a o Contact your Shareholder Organization o Contact your Shareholder Organization
Shareholder
Organization
- --------------------- -------------------------------------------------- ---------------------------------------------------
By Mail o Complete an application and mail it o Make your check payable to Firstar
along with a check payable to Firstar Funds. Please include your sixteen-digit
Funds, P.O. Box 3011, account number on your check and mail it to
Milwaukee, WI 53201-3011: the address at the left.
For overnight delivery mail to:
615 E. Michigan St., Milwaukee, WI 53202.
- --------------------- -------------------------------------------------- ---------------------------------------------------
Automatically o Call 1-800-677-FUND to obtain a o Complete a Periodic Investment Plan
(Retail A and B purchase application, which includes Application to automatically purchase more
Shares) information for a Periodic Investment Plan shares.
or ConvertiFund(R)Account.
o Open a ConvertiFund(R)account to automatically
invest proceeds from one account to another
account of the Firstar Family of Funds.
- --------------------- -------------------------------------------------- ---------------------------------------------------
By Wire o Call 1-800-677-FUND prior to sending o Call 1-800-677-FUND prior to sending the
the wire in order to obtain a confirmation wire in order to obtain a confirmation
number and to ensure prompt and accurate number and to ensure prompt and accurate
handling of funds. Ask your bank to handling of funds. Ask your bank to transmit
transmit immediately available funds by immediately available funds by wire as
wire in the amount of your purchase to: described at the left. Please include your
Firstar Bank, N.A. sixteen-digit account number. The Fund and
ABA # 0750-00022 its transfer agent are not responsible for
Firstar Trust Department the consequences of delays resulting from
Account # 112-952-137 the banking or Federal Reserve Wire system,
for further credit to [name of Fund] or from 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 o Not available o Use Firstar Funds Direct to exchange
www.firstarfunds.com from another Firstar Fund account with the
same registration including name, address
and taxpayer ID number.
o Purchase additional shares using an electronic
funds transfer from your banking institution
for payment.
Call 1-800-677-FUND to authorize this service.
- --------------------- -------------------------------------------------- ---------------------------------------------------
By Telephone o Call 1-800-677-FUND to exchange from o Call 1-800-677-FUND to exchange from
Exchange another Firstar Fund account with the same another Firstar Fund account with the same
registration including name, address and registration including name, address and
taxpayer ID number. 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 Fund's transfer agent if any check used for investment in an account does
not clear, and the investor involved will be responsible for any loss incurred
by the Fund. Prior to the transfer agent receiving a completed application,
investors may make an initial investment. However, redemptions will not be paid
until the transfer agent has received the completed application.
ADDITIONAL INFORMATION ON BUYING SHARES
o The Fund will not accept payment in cash or third party checks for the
purchase of shares.
o Federal regulations require that each investor provide a Social Security
number or other certified taxpayer identification number upon opening or
reopening an account. The Fund reserves 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.
o Payment for shares of the Fund in the amount of $1,000,000 or more may, at the
discretion of the Adviser, be made in the form of securities that are
permissible investments for the Fund.
The Fund may authorize one or more brokers and other 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
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 Fund should contact
their account representatives.
In the case of participants in certain employee benefit plans investing in the
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.
The Fund 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 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
previously stated.
REDEEMING SHARES
SELLING SHARES
Redemption requests received by the transfer agent before 3:00 p.m. Central time
on a business day for the Fund will be executed the same day, at that day's
closing price. Orders received after 3:00 p.m. Central time will be executed on
the next business day.
<TABLE>
<CAPTION>
- --------------------- -----------------------------------------------------------------------------------------------
<S> <C>
Through a o Contact your Shareholder Organization
Shareholder
Organization
- --------------------- -----------------------------------------------------------------------------------------------
By Phone o 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 o 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 o Use Firstar Funds Direct to redeem up to $25,000. Call 1-800-677-FUND to authorize
www.firstarfunds.com this service.
- --------------------- -----------------------------------------------------------------------------------------------
Automatically o Call 1-800-677-FUND for a Systematic Withdrawal
Plan application ($5,000 account minimum and $50
minimum per transaction).
- --------------------- -----------------------------------------------------------------------------------------------
</TABLE>
Guarantees must be signed by an eligible guarantor institution and "Signature
Guaranteed" must appear with the signature.
The Fund may require additional supporting documents for redemptions made by
corporations, executors, administrators, trustees and guardians. A redemption
request will not be deemed to be properly received until the transfer agent
receives all required documents in proper form as specified above. Purchases of
additional shares concurrently with withdrawals could be disadvantageous because
of the sales charge involved in the additional purchases.
ADDITIONAL TRANSACTION INFORMATION
TELEPHONE REQUESTS
In order to arrange for telephone redemptions after you have opened your account
or to change the bank or account designated to receive redemption proceeds, send
a written request to Firstar Mutual Fund Services, LLC or contact your
registered representative. Each shareholder of the account must sign the
request. The Fund may request further documentation from corporations,
executors, administrators, trustees and guardians.
The Fund reserves 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 Fund 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 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.
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 Fund will make payment for redeemed shares typically within one or two
business days, but no later than the seventh day after receipt by the transfer
agent of a request in proper form 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 FUND WILL DELAY THE PAYMENT OF THE REDEMPTION
PROCEEDS UNTIL THE TRANSFER AGENT IS REASONABLY SATISFIED THAT THE CHECK HAS
BEEN COLLECTED, WHICH MAY TAKE 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
Fund 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. The 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
You may exchange your Shares for Money Market Fund shares (except that Retail B
shares are not exchangeable for Institutional Money Market Fund shares) or for
shares of other Firstar Funds within the same share class if you are eligible to
purchase the class at the time of the exchange. Unless you qualify for a sales
charge exemption, an initial sales charge will be imposed on the exchange if the
shares of the Fund being acquired have an initial sales charge and the shares
being redeemed were purchased without a sales charge. Retail B shares acquired
in an exchange 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.
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 Fund 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, the Fund will delay the acquisition of new shares in an exchange until
the transfer agent is reasonably satisfied that the check has been collected,
which may take up to twelve days from the purchase date.
- -- It may be difficult to make telephone exchanges in times of drastic economic
or market changes. If this happens, you may initiate transactions in your share
accounts by mail or as otherwise described in this Prospectus.
Shares of the Fund also may be exchanged with shares of corresponding classes of
the Firstar Stellar Funds and 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 after each purchase, reinvestment of dividends
and redemption. Statements of accounts shall be conclusive if not objected to in
writing within 10 days after transmitted by mail. Generally, the Fund does not
send statements for funds held in brokerage, retirement or other similar
accounts.
FIRSTAR FUNDS WEBSITE (www.firstarfunds.com)
The site offers educational information and interactive financial planning tools
as well as product-specific information.
Generally, 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 on-line 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 Fund on-line. If this happens, you may
initiate transactions in your share accounts by mail or as otherwise described
in the Prospectus.
AUTOMATED TELERESPONSE SERVICE
Shareholders using a touch-tone(R) telephone can access information on the Fund
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
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Reinvested dividends and distributions receive the same tax treatment as
those paid in cash.
Dividends from net investment income of the Fund are declared and paid annually.
Any capital gains are distributed annually. A 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
The Fund contemplates declaring as dividends each year all, or substantially
all, of its taxable income, including its net capital gain (the excess of
long-term capital gain over short-term capital loss). Distributions attributable
to the net capital gain of the Fund will be taxable to you as long-term capital
gain, regardless of how long you have held your Shares. Other Fund distributions
will generally be taxable as ordinary income. You will be 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.
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 subject to income tax on the entire amount of the
distribution received, even though, as an economic matter, the distribution
simply constitutes a return of capital. This is known as "buying into a
dividend."
You will recognize taxable gain or loss on a sale, exchange or redemption of
your shares, including an exchange for shares of another fund, based on the
difference between your tax basis in the Shares and the amount you receive for
them. (To aid in computing your tax basis, you generally should retain your
account statements for the periods during which you held Shares.) Any loss
realized on Shares held for six months or less will be treated as a long-term
capital loss to the extent of any capital gain dividends that were received on
the Shares.
The one major exception to these tax principles is that distributions on, and
sales, exchanges and redemptions of, Shares held in an IRA (or other
tax-qualified plan) will not be currently taxable.
The 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 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 the
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.
MANAGEMENT OF THE FUND
ADVISORY SERVICES
Firstar Investment Research & Management Company, LLC ("FIRMCO"), a Wisconsin
Limited Liability Company and subsidiary of Firstar Corporation, a bank holding
company, serves as investment adviser to the Fund. FIRMCO, with principal
offices at Firstar Center, 777 East Wisconsin Avenue, 8th Floor, Milwaukee,
Wisconsin 53202, has provided investment advisory services since 1986. FIRMCO
currently has $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 investment objective and policies of the Fund, the Adviser manages the
Fund's portfolio securities and maintains records relating to such purchases and
sales.
The Adviser is authorized to allocate purchase and sale orders for portfolio
securities to 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.
The Adviser will receive from the Fund a fee calculated daily and payable
monthly, at the annual rate (as a percentage of the Fund's average daily net
assets) of 0.25%.
FUND MANAGER
Chartered Financial Analyst (CFA) designation is a globally recognized standard
for measuring the competence and integrity of financial analysts.
Joe Frohna, CFA, CPA manages the 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 the Fund's inception.
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 Fund and receives fees for these services. Inquiries to the transfer
agent may be sent to: Firstar Mutual Fund Services, LLC, P.O. Box 3011,
Milwaukee, Wisconsin 53201-3011. Firstar Bank, N.A., an affiliate of the
Adviser, provides custodial services for the Fund and receives fees for those
services.
NET ASSET VALUE AND DAYS OF OPERATION
The price of the Retail A, Retail B and Institutional Shares (each, a
"class") is based on net asset value per share. This amount is calculated
separately for each class of shares by dividing the value of all securities and
other assets attributable to the class, less the liabilities attributable to
that class, by the number of outstanding shares of that class. The price at
which a purchase or redemption is effected is based on the next calculation of
net asset value after the order is accepted.
Net asset value for purposes of pricing purchase and redemption orders
is determined as of the close of regular trading hours on the Exchange,
normally, 3:00 p.m. Central time, on each day the Exchange is open for trading.
The Fund's investments are valued based on market quotations, except
that restricted securities and securities for which market quotations are not
readily available and other assets are valued at fair value by the Adviser under
the supervision of the Board of Directors. Short-term investments having a
maturity of 60 days or less are valued at amortized cost, unless the amortized
cost does not approximate market value.
Portfolio securities which are primarily traded on foreign securities
exchanges are generally valued at the preceding closing values of such
securities on their respective exchanges, except when an occurrence subsequent
to the time a value was so established is likely to have changed such value. In
such an event, the fair value of those securities will be determined through the
consideration of other factors by or under the direction of the Board of
Directors. The Fund's foreign securities may trade on weekends or other days
when the Fund does not price its shares. Accordingly, the net asset value per
share of the Fund may change on days when shareholders will not be able to
purchase or redeem the Fund's shares.
The Fund's securities may be valued based on valuations provided by an
independent pricing service. The Adviser reviews these valuations. If the
Adviser believes that a valuation received from the service does not represent a
fair value, it values the security by a method that the Board of Directors
believes will determine a fair value. Any pricing service used may employ
electronic data processing techniques, including a "matrix" system, to determine
valuations.
Quotations of foreign securities in foreign currency are converted to
U.S. dollar equivalents using the foreign exchange quotation in effect at the
time net asset value is computed.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S ADDITIONAL
STATEMENT INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE OFFERING MADE
BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR ITS
DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND OR BY
ITS DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE
MADE.
FOR MORE INFORMATION
STATEMENT OF ADDITIONAL INFORMATION
Additional information about the Fund and its policies is also available in the
Fund's 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 Fund's Additional Statement is available free upon request by calling
Firstar Funds at 1-800-677-FUND or 1-414-287-3808.
To obtain other information and for 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 Fund's documents are located online
and may be downloaded from the 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
SUBJECT TO COMPLETION
PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION DATED MAY 12, 2000
THE INFORMATION IN THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT
COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE
REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS
EFFECTIVE. THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT AN OFFER TO SELL
THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY
STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
FIRSTAR FUNDS, INC.
Statement of Additional Information
Small Cap Aggressive Growth Fund
____________, 2000
TABLE OF CONTENTS
PAGE
Firstar Funds, Inc.............................................................
Description of the Fund and its Investments and Risks..........................
Investment Strategies and Risks................................................
Net Asset Value................................................................
Additional Purchase and Redemption Information.................................
Description of Shares..........................................................
Additional Information Concerning Taxes........................................
Management of the Company......................................................
Custodian, Transfer Agent and Accounting Services Agent........................
Expenses.......................................................................
Independent Accountants........................................................
Counsel........................................................................
Performance Calculations.......................................................
Performance History............................................................
Miscellaneous..................................................................
Appendix A.................................................................. A-1
Appendix B.................................................................. B-1
This Statement of Additional Information ("SAI"), which is not a
prospectus, supplements and should be read in conjunction with Firstar Fund,
Inc.'s prospectus ("Prospectus") dated __________, 2000, for Institutional,
Retail A and Retail B Shares of the Small Cap Aggressive Growth Fund (the
"Fund") and is incorporated by reference in its entirety into the Prospectus.
Copies of the Prospectus for the Fund may be obtained by writing the Firstar
Funds Center at 615 East Michigan Street, P.O. Box 3011, Milwaukee, WI
53201-3011 or by calling 1-800-677-FUND.
FIRSTAR FUNDS, INC.
Firstar Funds, Inc. (the "Company") is a Wisconsin corporation 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 Fund is currently divided into three series, Retail A, Retail B and
Institutional series. This SAI pertains to Retail A Shares, Retail B Shares and
Institutional Shares of one diversified portfolio, the Small Cap Aggressive
Growth Fund (the "Fund"). The Fund commenced operations on _________, 2000. 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 FUND AND ITS INVESTMENTS AND RISKS
The Company is a diversified, open-end management investment company.
The following policies supplement the Fund's investment objectives and policies
as set forth in the Prospectus.
PORTFOLIO TRANSACTIONS
Subject to the general supervision of the Board of Directors, Firstar
Investment Research & Management Company, LLC ("FIRMCO" or the "Adviser") is
responsible for, makes decisions with respect to, and places orders for all
purchases and sales of portfolio securities for the Fund.
The portfolio turnover rate for the 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 Fund to receive favorable tax
treatment. Portfolio turnover will not be a limiting factor in making portfolio
decisions, and the Fund may engage in short-term trading to achieve its
investment objective.
Transactions on U.S. stock exchanges involve the payment of negotiated
brokerage commissions. On exchanges on which commissions are negotiated, the
cost of transactions may vary among different brokers. Unlike transactions on
U.S. stock exchanges 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 will normally deal directly with dealers who make a
market in the securities involved except in those circumstances where better
prices and execution are available elsewhere or as described below.
The Fund 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 Fund will engage in this practice, however, only when the Adviser, in its
sole discretion, believes such practice to be in the Fund's interests.
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 commissions, if any, both
for the specific transaction and on a continuing basis. In addition, the
Agreement authorizes the Adviser to cause the Fund 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 Fund. 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 Fund. The Directors will
periodically review the commissions paid by the Fund to consider whether the
commissions paid over representative periods of time appear to be reasonable in
relation to the benefits inuring to the Fund. 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, the 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, or B.C. Ziegler and Company (the
"Distributor") or an affiliated person of either of them (as such term is
defined in the Investment Company Act of 1940, as amended (the "1940 Act"))
acting as principal. In addition, the Fund will not purchase securities during
the existence of any underwriting or selling group relating thereto of which the
Distributor or its 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 Fund are made independently from those for
other investment companies and accounts advised or managed by its Adviser. Such
other investment companies and accounts may also invest in the same securities
as the Fund. When a purchase or sale of the same security is made at
substantially the same time on behalf of the 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 the 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 the Fund with those to be sold or purchased for other
investment companies or accounts in executing transactions.
INVESTMENT STRATEGIES AND RISKS
RATINGS. The ratings of Standard & Poor's, Moody's and other nationally
recognized rating agencies represent their opinions as to the quality of debt
securities. It should be emphasized, however, that ratings are general and are
not absolute standards of quality, and debt securities with the same maturity,
interest rate and rating may have different yields while debt securities of the
same maturity and interest rate with different ratings may have the same yield.
The payment of principal and interest on most debt securities purchased
by the 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 the 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 involved should continue to hold the security. For a more
detailed description of ratings, see Appendix A.
SECURITIES LENDING. The Fund 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 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 the 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 the 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, the Fund will
maintain such value by the daily marking-to-market of the collateral.
MONEY MARKET INSTRUMENTS. The Fund 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 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.
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 Fund will invest in money market obligations
of foreign banks or foreign branches of U.S. banks only where the Adviser
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 the Fund in the
obligations of foreign banks and foreign branches of U.S. banks will not exceed
25% of the Fund's total assets at the time of purchase. The Fund 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 the 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 Fund 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 the Fund as previously described.
The Fund 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, the 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, the 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 Fund invests in
variable amount master demand notes only when the Adviser deems the investment
to involve minimal credit risk.
REPURCHASE AGREEMENTS. The 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 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 the 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 Fund's 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. The 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 Fund 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 Fund within the
limits prescribed by the 1940 Act. As a shareholder of another investment
company, the Fund 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 Fund bears directly in connection with its own operations.
U.S. GOVERNMENT OBLIGATIONs. The Fund 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 Fund 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.
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. The 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 Fund 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 Fund may have
difficulty valuing these holdings and may be unable to sell these holdings at
the time or price desired. Restricted securities may include Rule 144 Securities
and private placement securities. Private placement securities are securities
that have not been registered under the Securities Act of 1933. Rule 144
Securities are restricted securities that are eligible for resale pursuant to
Rule 144A under the Securities Act of 1933. The 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. The 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 the
Fund should decline in value while borrowings are outstanding, the net asset
value of the Fund's outstanding shares will decline in value by proportionately
more than the decline in value suffered by the Fund's securities. As a result,
the 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 the 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
ensure 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 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.
WHEN-ISSUED PURCHASES, DELAYED DELIVERY AND FORWARD COMMITMENTS. The Fund
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. The Fund's forward commitments and when-issued purchases
are limited to 20% of the value of its total assets absent unusual market
conditions. When the 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 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 commitments ever exceeded 20% of the value of its assets. In the
case of a forward commitment to sell portfolio securities, the Fund's custodian
will hold the portfolio securities themselves in a segregated account while the
commitment is outstanding. When-issued and forward commitment transactions
involve the risk that the price or yield obtained in a transaction (and
therefore the value of a security) may be less favorable than the price or yield
(and therefore the value of a security) available in the market when the
securities delivery takes place.
The Fund 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,
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 capital gain or loss.
When the Fund engages in when-issued, delayed delivery 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 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 the 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 the 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.
EQUITIES. The Fund maintains a long-term investment horizon with
respect to investments in equity securities. However, when a company's growth in
earnings and valuation results in price appreciation that reaches a level 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 Fund's investment criteria. The Fund's investment in equity securities
may include limited partnership interests.
The increase or decrease of cash equivalents in the Fund is primarily
the residual effect of the research process. The portion of the Fund invested in
cash equivalents tends to rise when the pool of acceptable securities is limited
and tends to fall when the Fund's valuation screening process identifies a large
number of attractive securities. Short-term forecasts for the economy and
financial markets are not an important determinant of the level of cash
equivalents in the Fund. Under normal market conditions, at least 65% of the
value of the Fund's total assets will be invested in equity securities. The Fund
does not attempt to "time" the securities market.
Certain securities owned by the 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 and the Fund may have 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.
FOREIGN EQUITIES. The Fund's 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 Fund does
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 the Fund's net asset value (positively or negatively)
irrespective of the performance of the portfolio securities held by the Fund.
The Fund and its 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 Fund may be subject to greater fluctuation in price than
securities of domestic companies.
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 the 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 the 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 Adviser.
OTHER PORTFOLIO INFORMATION
OPTIONS TRADING. As stated in the Prospectus, the Fund may purchase put
and call options. Option purchases by the Fund will not exceed 5% of its net
assets. 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. This is a highly specialized activity which
entails greater than ordinary investment risks, including the complete loss of
the amount paid as premiums to the writer of the option. Regardless of how much
the market price of the underlying security or index increases or decreases, the
option buyer's risk is limited to the amount of the original investment for the
purchase of the option. However, options may be more volatile than the
underlying securities or indices, and therefore, on a percentage basis, an
investment in options may be subject to greater fluctuation than an investment
in the underlying securities. In contrast to an option on a particular security,
an option on an index provides the holder with the right to make or receive a
cash settlement upon exercise of the option. The amount of this settlement will
be equal to the difference between the closing price of the index at the time of
exercise and the exercise price of the option expressed in dollars, times a
specified multiple.
Closing transactions in certain options are usually effected directly
with the same broker-dealer that effected the original option transaction. The
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 the Fund will be valued at the last sale price or, in the
absence of such a price, at the mean between bid and asked prices.
The 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, the 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 the 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 the 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 the Fund, prior to the exercise of the option that it has purchased, of an
option of the same series), and profit or loss from the sale will depend on
whether the amount received is more or less than the premium paid for the option
plus the related transaction costs. In addition, the Fund may sell covered call
options listed on a national securities exchange. Such options may relate to
particular securities or to various indices. A call option on a security is
covered if the 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 the Fund maintains with its custodian cash or cash equivalents
equal to the contract value. A call option is also covered if the 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 the 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 Fund will not exceed 5% of the value
of its net assets during the current year.
The 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 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 transaction costs
may be greater than the premium received upon the original option, in which
event the 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. The 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, the 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 Fund. When the 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 the Fund and net gains from closing purchase transactions are treated as
short-term capital gains for federal income tax purposes, and losses on closing
purchase transactions are short-term capital losses.
As noted previously, there are several risks associated with
transactions in options on securities and indices. These risks include (i) an
imperfect correlation between the change in market value of the securities the
Fund holds and the prices of options relating to the securities purchased or
sold by the Fund; and (ii) the possible lack of a liquid secondary market for an
option. A decision as to whether, when and how to use options involves the
exercise of skill and judgment, and a transaction may be unsuccessful to some
degree because of market behavior or unexpected events.
FUTURES CONTRACTS AND RELATED OPTIONS. The Adviser may determine that
it would be in the best interest of the Fund to purchase or sell futures
contracts, or options thereon, as a hedge against changes resulting from market
conditions in the value of the securities held by the 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. For example, the 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 the Fund to purchase or sell interest rate futures contracts, or
options thereon, which provide for the future delivery of specified fixed-income
securities.
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 the 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 the 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 Adviser's
ability to correctly predict movements in the direction of the market. For
example, if the 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 the 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.
The 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, the Fund may
not engage in such transactions if the sum of the amount of initial margin
deposits and premiums paid for unexpired commodity options, other than for bona
fide hedging transactions, would exceed 5% of the liquidation value of its
assets, after taking into account unrealized profits and unrealized losses on
such contracts it has entered into; provided, however, that in the case of an
option that is in-the-money at the time of purchase, the in-the-money amount may
be excluded in calculating the percentage limitation. 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".
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"). In
addition to the direct investments in foreign securities that the Fund may make,
the Fund may invest in sponsored ADRs. ADRs are receipts issued by an American
bank or trust company evidencing ownership of underlying securities issued by a
foreign issuer. ADRs may be listed on a national securities exchange or may
trade in the over-the-counter market. ADR prices are denominated in U.S.
dollars; the underlying security may be denominated in a foreign currency. The
underlying security may be subject to foreign government taxes which would
reduce the yield on such securities. Investments in foreign securities and ADRs
also involve certain inherent risks, such as political or economic instability
of the country of issue, the difficulty of predicting international trade
patterns and the possibility of imposition of exchange controls. Such securities
may also be subject to greater fluctuations in price than securities of domestic
corporations. In addition, there may be less publicly available information
about a foreign company than about a domestic company. Foreign companies
generally are not subject to uniform accounting, auditing and financial
reporting standards comparable to those applicable to domestic companies. With
respect to certain foreign countries, there is a possibility of expropriation or
confiscatory taxation, or diplomatic developments which could affect investment
in those countries.
While "sponsored" and "unsponsored" ADR programs are similar, there are
differences regarding ADR holders' rights and obligations and the practices of
market participants. A depository may establish an unsponsored facility without
participation by (or acquiescence of) the underlying issuer; typically, however,
the depository requests a letter of non-objection from the underlying issuer
prior to establishing the facility. Holders of unsponsored ADRs generally bear
all the costs of the ADR facility. The depository usually charges fees upon the
deposit and withdrawal of the underlying securities, the conversion of dividends
into U.S. dollars, the disposition of non-cash distribution, and the performance
of other services. The depository of an unsponsored facility frequently is under
no obligation to distribute shareholder communications received from the
underlying issuer or to pass through voting rights to ADR holders in respect of
the underlying securities.
Sponsored ADR facilities are created in generally the same manner as
unsponsored facilities, except that sponsored ADRs are established jointly by a
depository and the underlying issuer through a deposit agreement. The deposit
agreement sets out the rights and responsibilities of the underlying issuer, the
depository and the ADR holders. With sponsored facilities, the underlying issuer
typically bears some of the costs of the ADR (such as dividend payment fees of
the depository), although ADR holders may bear costs such as deposit and
withdrawal fees. Depositories of most sponsored ADRs agree to distribute notices
of shareholder meetings, voting instructions, and other shareholder
communications and information to the ADR holders at the underlying issuer's
request.
ZERO COUPON BONDS. Zero coupon obligations have greater price
volatility than coupon obligations and will not result in the payment of
interest until maturity, provided that the 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 the Fund and distributed
to its shareholders. These distributions must be made from the 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 Fund 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, the 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 the 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; or (2) are unrated and have not been
determined by the Adviser to be of comparable quality to a security rated
investment grade. Securities rated below investment grade are predominantly
speculative and are commonly referred to as junk bonds. To the extent the 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 the 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 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
non-investment grade as a result of these events and that exceed 5% of the
Fund's net assets.
As described in the Prospectus, the Fund may invest a portion of its
assets in convertible securities that are rated below investment grade.
WARRANTS. The Fund 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 the 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 the Fund's net assets will be invested in warrants. This 5% limit includes
warrants that are not listed on any stock exchange.
SHORT SALES. The Fund may engage in short sales. In a short sale
transaction, the 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. If the
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. 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. 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.
SMALL COMPANIES AND UNSEASONED ISSUERS. Small companies in which the
Fund 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.
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 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.
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 Fund when the Adviser believes such investments offer
possibilities of attractive capital appreciation.
PORTFOLIO TURNOVER. The 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
The Fund is subject to the investment limitations enumerated in this
subsection which may be changed only by a vote of the holders of a majority of
the Fund's outstanding shares (as defined under "Miscellaneous" below).
The Fund may not:
1. Make loans, except that the 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 the 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 the 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 except that (a) this investment limitation shall not apply to the Fund's
transactions in futures contracts and related options and short sales against
the box, and (b) the 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 the 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) there is no limitation with respect to
instruments issued or guaranteed by the United States, its agencies or
instrumentalities and repurchase agreements secured by such instruments; (b)
wholly owned finance companies will be considered to be in the industries of
their parents if their activities are primarily related to financing the
activities of the parents; and (c) utilities will be divided according to their
services, for example, gas, gas transmission, electric and gas, electric and
telephone will each be considered a separate industry.
11. Borrow money or issue senior securities, except that the Fund may
borrow from banks and enter into reverse repurchase agreements for temporary
purposes in amounts up to one-third of the value of the total assets at the time
of borrowing; or mortgage, pledge or hypothecate any assets, except in
connection with any borrowing and in amounts not in excess of the lesser of the
dollar amounts borrowed or one-third of the value of the Fund's total assets at
the time of borrowing. The Fund will not purchase securities while its
borrowings (including reverse repurchase agreements) in excess of 5% of its
total assets are outstanding. The 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.
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 violation of such
limitation.
The 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 total assets of the
Fund fall below 300% of its borrowings, the Fund will reduce its borrowings in
compliance with the 1940 Act.
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. 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 the 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 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 the Fund consist of the consideration received upon
the issuance of shares of the 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 Fund 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 the Fund are borne by each share of the Fund,
except for certain payments under the Fund's Distribution and Service Plan and
Shareholder Servicing Plan 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
the 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 the 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 at the current bid prices.
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 the Fund is not calculated. The calculation of the net asset
value of the 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 the Fund.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
COMPUTATION OF OFFERING PRICE OF THE FUND. An illustration of the
computation of the initial offering price per share of the Retail A Shares based
on the value of the Fund's net assets and number of outstanding securities at
September 1, 2000 follows:
SMALL CAP
AGGRESSIVE
GROWTH FUND
Net Asset Value Per Share $10.00
Sales Charge, 5.50% of offering
price (5.82% of net asset value
per share) 0.58
Public Offering Price $10.58
Shareholder organizations or Institutions may be paid by the Fund 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 Fund 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 Fund may also suspend or postpone the recording
of the transfer of its 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 Fund's Prospectus under
"Redemption of Shares," the Fund may redeem shares involuntarily when
appropriate under the 1940 Act, such as to reimburse the Fund 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 $1,000, the sales charge applicable
to the subsequent purchase would be reduced to 3.50% 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
Firstar Funds included in the transaction.
A. Retail A Shares of the 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 Firstar Fund offered by the Company.
B. Retail A Shares of the 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 Firstar 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 the 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 the 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 the Fund may be exchanged without a sales load
for Retail A Shares in any other Firstar Fund that are offered without a sales
load.
F. Institutional Shares of the Fund may be exchanged for Institutional
Shares of any other Firstar Fund.
Except as stated above, a sales load will be imposed when shares of the
Fund that were purchased or otherwise acquired without a sales load are
exchanged for Retail A Shares of another Firstar Fund which are sold with a
sales load.
Retail A Shares of the 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 Firstar 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 Firstar 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 Fund may be exchanged with
shares of corresponding classes of the Firstar Stellar Fund and the Mercantile
Mutual Fund, Inc. The Firstar Stellar Fund 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, 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 Fund's
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 FIRMCO. 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 FUND
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 Fund 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 Fund. 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 Fund offer a Periodic
Investment Plan whereby a shareholder may automatically make purchases of shares
of the 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 the 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 Fund permit shareholders to
effect ConvertiFund(R) 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 Fund, as the case may be.
Such proceeds include dividend distribution, capital gain distributions and
systematic withdrawals. ConvertiFund(R) transactions may be used to invest
funds from a regular account to another regular account, from a qualified plan
account to another qualified plan account, or from a qualified plan account to a
regular account.
The Retail A and Retail B Shares of the Fund offer shareholders a
Systematic Withdrawal Plan, which allows a shareholder who owns shares of the
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 the 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, the 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"). The 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 the Fund name in the table
below:
Class-Series of Fund in which Stock Number of Authorized
COMMON STOCK REPRESENTS INTEREST SHARES IN EACH SERIES
21-Institutional Small Cap Aggressive Growth 100 Million
21-A 100 Million
21-B 100 Million
The Board of Directors has also authorized the issuance of classes 1
through 20 common stock representing interests in twenty other separate
investment portfolios which are described in a separate statement of additional
information. The remaining authorized shares are classified into nine 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 the
Fund, shareholders of the Fund would be entitled to receive the assets available
for distribution belonging to the 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 Fund's Prospectus, shareholders of the Fund are entitled to participate
equally in the net distributable assets of the 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 Fund are entitled to one vote for
each full share held and proportionate fractional votes for fractional shares
held. Shareholders of the Fund, 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 the 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 the Fund
represents an equal proportionate interest with other Retail Shares in the 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 Fund do
not have preemptive rights.
When issued for payment as described in the Fund's Prospectus and this
SAI, shares of the Fund 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
The 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 the 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. Moreover, if the Fund were to fail to make
sufficient distributions in a year, the Fund would be subject to corporate
income taxes and/or excise taxes in respect of the shortfall or, if the
shortfall is large enough, the Fund could be disqualified as a regulated
investment company.
A 4% non-deductible excise tax is imposed on regulated investment
companies that fail to distribute with respect to each calendar year at least
98% of their ordinary taxable income for the calendar year and capital gain net
income (excess of capital gains over capital losses) for the one year period
ending October 31 of such calendar year and 100% of any such amounts that were
not distributed in the prior year. The Fund intends to make sufficient
distributions or deemed distributions of its ordinary taxable income and any
capital gain net income prior to the end of each calendar year to avoid
liability for this excise tax.
Dividends declared in October, November or December of any year that
are payable to shareholders of record on a specified date in such months will be
deemed to have been received by shareholders and paid by the Fund on December 31
of such year if such dividends are actually paid during January of the following
year.
The Fund will be required in certain cases to withhold and remit to the
United States Treasury 31% of taxable dividends or gross sale proceeds paid to
any shareholder who (i) has failed to provide a correct tax identification
number, (ii) is subject to back-up withholding by the Internal Revenue Service
for failure to properly include on his or her return payments of taxable
interest or dividends, or (iii) has failed to certify to the Fund that he or she
is not subject to back-up withholding when required to do so or that he or she
is an "exempt recipient."
MANAGEMENT OF THE COMPANY
The business and affairs of the Fund 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:
<TABLE>
<CAPTION>
Position(s) held with Principal Occupations During Past 5 Years and Other
Name, Address & Age the Company Affiliations
- ------------------------------------ ------------------------ -------------------------------------------------------
<S> <C> <C>
James M. Wade Chairman of the Board Vice President and Chief Financial Officer, Johnson
2802 Wind Bluff Circle Controls, Inc. (a controls manufacturing company),
Wilmington, NC 28409 January 1987-May 1991.
Age: 56
Glen R. Bomberger Director Executive Vice President, Chief Financial Officer and
One Park Plaza Director, A.O. Smith Corporation (a diversified
11270 West Park Place manufacturing company) since January 1987; Director
Milwaukee, WI 53224-3690 of companies affiliated with A.O. Smith Corporation;
Age: 62 Director, Smith Investment Company; Director of
companies affiliated with Smith Investment Company.
Jerry G. Remmel Director Vice President, Treasurer and Chief Financial Officer
16650A Lake Circle of Wisconsin Energy Corporation 1994-1996; Treasurer
Brookfield, WI 53005 of Wisconsin Electric Power Company 1973-1996;
Age: 68 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 Officer of Weirton
400 Three Springs Drive Steel since 1995; Director of Weirton Steel since
Weirton, WV 26062-4989 1993; Executive Vice President and Chief Financial
Age: 55 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 Financial Officer and
14245 Heatherwood Court Secretary, Rexnord Corporation (an equipment
Elm Grove, WI 53122 manufacturing company), 1988 - 1992; Vice President -
Age: 69 Finance and Administration, Rexnord Inc., 1982 -
1988; Officer and Director of several Rexnord
subsidiaries until 1992.
Bruce Laning Director, President President and CEO, FIRMCO since 2000; Director,
777 E. Wisconsin Avenue, and Treasurer FIRMCO since 2000; Senior Vice President, FIRMCO
Suite 800 since 1999; Vice President, FIRMCO since 1994.
Milwaukee, WI 53202
Age: 40
W. Bruce McConnel, III Secretary Partner of the law firm of Drinker Biddle & Reath
One Logan Square LLP.
18th & Cherry Streets
Philadelphia, PA 19103
Age: 56
Laura J. Rauman Vice President Vice President of Operations, FIRMCO since 1995;
777 E. Wisconsin Avenue, Senior Auditor, Price Waterhouse, LLP, prior
Suite 800 thereto.
Milwaukee, WI 53202
Age: 31
Joseph C. Neuberger Assistant Treasurer Senior Vice President, Firstar Mutual Fund
615 E. Michigan Street Services, LLC since 1994; Manager, Arthur Andersen
Milwaukee, WI 53202 LLP, prior thereto.
Age: 38
Bronson J. Haase* Director President and CEO of Wisconsin Gas Company, WICOR
626 E. Wisconsin Avenue Energy, FieldTech and Vice President of WICOR, Inc.
Milwaukee, WI 53202 since 1998; President and CEO of Ameritech -
Age: 55 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.
</TABLE>
* Mr. Haase and Mr. Laning are considered by the Company to be "interested
persons" of the Company as defined in the 1940 Act.
The following chart provides certain information about the Director
fees for the year ended October 31, 1999 of the Company's Directors.
<TABLE>
<CAPTION>
TOTAL COMPENSATION
PENSION OR FROM
RETIREMENT COMPANY
AGGREGATE BENEFITS ACCRUED ESTIMATED AND FUND
NAME OF COMPENSATION FROM AS PART OF FUND ANNUAL BENEFITS COMPLEX* PAID TO
PERSON/POSITION THE COMPANY EXPENSES UPON RETIREMENT DIRECTORS
<S> <C> <C> <C> <C>
James M. Wade $18,500 $0 $0 $18,500
Chairman of the Board
Glen R. Bomberger $15,000+ $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
</TABLE>
* The "Fund Complex" includes only the Company. The Company is comprised
of 21 separate portfolios. +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 April 30, 2000, the Directors and Officers of the Company, as a group,
owned less than 1% of the outstanding shares of the Fund.
Directors, employees, retirees and their families of Firstar
Corporation or its affiliates are exempt and do not have to pay front-end sales
charges (provided the status of the investment is explained at the time of
investment) on purchases of Retail A Shares. These exemptions to the imposition
of a front-end sales charge are due to the nature of the investors and/or the
reduced sales efforts that will be needed in obtaining such investments.
ADVISORY SERVICES
FIRMCO is the investment adviser to the 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 Fund.
In addition to the compensation stated in the Prospectus, the Adviser
is entitled to 4/10ths of the gross income earned by the 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 Fund.
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 Fund 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 the Fund to a
financial intermediary in connection with the investment of fiduciary funds in
the 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 Fund 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 Fund
involves risks including possible loss of principal.
ADMINISTRATION AND DISTRIBUTION SERVICES
Firstar Mutual Fund Services, LLC and B.C. Ziegler and Company
("Ziegler") are Co-Administrators to the Fund. 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 Fund's 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 Fund; 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 Fund, 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
Fund; monitor the Fund's expense accruals and cause all appropriate expenses to
be paid on proper authorization from the Fund; monitor the Fund's status as a
regulated investment company under Subchapter M of the Code; maintain the Fund's
fidelity bond as required by the 1940 Act; and monitor compliance with the
policies and limitations of the 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 Fund 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, located at 215 North Main Street, West Bend, Wisconsin
53095, provides distribution services for the Fund as described in the Fund's
Prospectus pursuant to a Distribution Agreement with the Fund under which the
Distributor, as agent, sells shares of the 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 Fund (excluding
preparation and printing expenses necessary for the continued registration of
the Fund's shares) and of printing and distributing all sales literature.
SHAREHOLDER ORGANIZATIONS
Retail A Shares
As stated in the Fund's Prospectus the Fund intends 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 Fund 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
the 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 Fund. 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 Fund's
Retail A Shares.
The Fund's 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
Fund. 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 the 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 the 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 the 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 Fund's 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 Fund (as defined in the 1940 Act) and
have no direct or indirect financial interest in such arrangements (the
"Disinterested Directors").
The Fund believes that there is a reasonable likelihood that their
arrangements with Shareholder Organizations will benefit the Fund and the
holders of Retail A or Retail B Shares as a way of allowing Shareholder
Organizations to participate with the Fund 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 the Fund must be approved by the holders of a
majority of the outstanding Retail A or Retail B Shares of the Fund. 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 Fund will be committed to the discretion of such Disinterested Directors.
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.
CUSTODIAN, TRANSFER AGENT AND ACCOUNTING SERVICES AGENT
Firstar Bank, N.A. serves as custodian of all the Fund's assets. Under
the Custody Agreement, Firstar Bank, N.A. has agreed to (i) maintain a separate
account in the name of the Fund, (ii) make receipts and disbursements of money
on behalf of the Fund, (iii) collect and receive all income and other payments
and distributions on account of the 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 the Fund's
operations. Firstar Bank, N.A. may, at its own expense, open and maintain a
custody account or accounts on behalf of the 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 the
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 Fund, (ii) make dividend and other distributions to
shareholders of the Fund, (iii) respond to correspondence by Fund shareholders
and others relating to its duties, (iv) maintain shareholder accounts, and (v)
make periodic reports to the Fund. 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 plus a 0.01% asset - based fee, and certain other transaction charges
and reimbursement for expenses.
In addition, the Fund has 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 Fund in compliance with the 1940 Act and to provide other
accounting services to the Fund. 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 the Fund's assets: $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.
EXPENSES
Operating expenses of the Fund 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 Fund also pays any brokerage
fees, commissions and other transactions charges (if any) incurred in connection
with the purchase or sale of portfolio securities.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, independent accountants, 100 East Wisconsin
Avenue, Suite 1500, Milwaukee, Wisconsin, 53202, serve as auditors for the
Company.
COUNSEL
Drinker Biddle & Reath LLP (of which Mr. McConnel, Secretary of the
Company, is a partner), One Logan Square, 18th and Cherry Streets, Philadelphia,
PA 19103-6996, serve as counsel to the Company and will pass upon the legality
of the shares offered by the Fund's Prospectus.
CODE OF ETHICS
The Company and the Adviser have adopted codes of ethics that permit
personnel subject to the codes to invest in securities, including securities
that may be purchased or held by the Fund.
PERFORMANCE CALCULATIONS
From time to time, the total return of the Retail A Shares, Retail B
Shares and Institutional Shares of the 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.
TOTAL RETURN CALCULATIONS
The 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 Fund may compute aggregate total return, which reflects the total
percentage change in value over the measuring period. The Fund computes its
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 Fund's
average annual total return and aggregate total return reflect the deduction of
the 5.50% maximum front-end sales charge in connection with the purchase of
Retail A Shares and the 5.00% maximum sales load charged in connection with
redemptions of Retail B Shares. The Fund 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 of the Fund's Shares may be compared in publications
to those of other mutual funds with similar investment objectives and to stock
and other relevant indices, to rankings, or other information prepared by
independent services or other financial or industry publications that monitor
the performance of mutual funds or to investments for which reliable performance
data is available. For example, the total return of the Fund's shares may be
compared to data prepared by Lipper Analytical Services, Inc. In addition, the
total return of the 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. Total return 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 Fund.
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 the 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 the Fund cannot necessarily be used to compare an
investment in the 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 the Fund will not be included in the Fund's
calculations of total return and will reduce the total return received by the
accounts.
In addition, the 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.
The Fund 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 the Fund
investment are reinvested by being paid in additional Fund shares, any future
income or capital appreciation of the 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 Fund may also include discussions or illustrations of the potential
investment goals of a prospective investor, investment management techniques,
policies or investment suitability of the 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 the Fund), as well as the views of the Adviser as to market,
economic, trade and interest trends, legislative, regulatory and monetary
developments, investment strategies and related matters believed to be of
relevance to the Fund. The Fund 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 the Fund. In addition, advertisement or
shareholder communications may include a discussion of certain attributes or
benefits to be derived by an investment in the 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 Fund's Prospectus, a majority of the
outstanding shares of the Company or the Fund 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 Company or the
Fund represented at a meeting at which the holders of more than 50% of the
outstanding shares of the Company or the Fund are present in person or by proxy,
or (2) more than 50% of the outstanding shares of the Company or the Fund .
As of April 30, 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 94.0%
Tax-Exempt Money Market 65.0%
U.S. Treasury Money Market 51.0%
U.S. Government Money Market 74.0%
Growth and Income 68.0%
Short-Term Bond Market 63.0%
Intermediate Bond Market 68.0%
Bond IMMDEXTM 70.0%
Tax-Exempt Intermediate Bond 83.0%
Balanced Income 84.0%
Balanced Growth 74.0%
Growth and Income 67.0%
Equity Index 77.0%
Growth 84.0%
Special Growth 77.0%
MidCap Index 60.0%
Emerging Growth 93.0%
MicroCap 82.0%
Core International Equity 100.0%
International Equity 89.0%
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.
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.
LOCAL CURRENCY AND FOREIGN CURRENCY RISKS
Country risk considerations are a standard part of Standard & Poor's
analysis for credit ratings on any issuer or issue. Currency of repayment is a
key factor in this analysis. An obligor's capacity to repay foreign obligations
may be lower than its capacity to repay obligations in its local currency due to
the sovereign government's own relatively lower capacity to repay external
versus domestic debt. These sovereign risk considerations are incorporated in
the debt ratings assigned to specific issues. Foreign currency issuer ratings
are also distinguished from local currency issuer ratings to identify those
instances where sovereign risks make them different for the same issuer.
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 uncertain 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 a capacity for meeting financial commitments which is highly uncertain
and 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. Indicates that no rating has been requested, that there
is insufficient information on which to base a rating, or that Standard & Poor's
does not rate a particular obligation as a matter of policy. 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" and "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," - A rating of BB suggests that the likelihood of default
is considerably less than for lower-rated issues, although there are significant
uncertainties that could affect the ability to adequately service debt
obligations.
"B" - Issues rated B show a higher degree of uncertainty and
therefore greater likelihood of default than higher-rated issues. Adverse
developments could negatively affect the payment of interest and principal on a
timely basis.
"CCC" - Issues rated CCC clearly have a high likelihood of
default, with little capacity to address further adverse changes in financial
circumstances.
"CC" - This rating is applied to issues that are subordinate
to other obligations rated CCC and are afforded less protection in the event of
bankruptcy or reorganization.
"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, the Fund 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, the 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.
The Fund presently could accomplish a similar result to that which it
hopes 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 the Fund, through
using futures contracts.
DESCRIPTION OF INTEREST RATE FUTURES CONTRACTS. An interest rate
futures contract sale would create an obligation by the 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 the 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 the 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 the 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 Fund
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. The 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. The 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 the 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. The 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. The 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.
The Fund may sell index futures contracts as set forth in the
Prospectus. The 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, the Fund may purchase
index futures contracts. In a substantial majority of these transactions, the
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, the Fund may utilize index futures contracts in
anticipation of changes in the composition of its portfolio holdings. For
example, in the event that the 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. The 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.
IV. MARGIN PAYMENTS.
Unlike when the 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 Fund 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 the 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 the 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 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 the
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, the 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, the 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 the 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 the 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 the 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 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 the 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, the 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 the Fund is also subject to the
Adviser's ability to predict correctly movements in the direction of the
market. For example, if the 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. The Fund may have to sell securities at a time when it may be
disadvantageous to do so.
VI. OPTIONS ON FUTURES CONTRACTS.
The 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. The 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, the 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 the 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 the 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 Fund
does 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 the 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.
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 filed October 15, 1999
with respect to Core International Equity Fund is incorporated by reference
to Exhibit (a)(15) to Post-Effective Amendment No. 38.
(16) Amendment No. 15 to Articles of Incorporation filed October 15, 1999
with respect to MidCap Index Fund is incorporated by reference to
Exhibit (a)(16) to Post-Effective Amendment No. 38.
(17) Form of Amendment No. 16 to Articles of Incorporation with respect to
the Small Cap Aggressive Growth Fund.
(b) (1) Registrant's By-laws dated September 9, 1988 are incorporated by
reference to Exhibit (2)(a) to Post-Effective Amendment No. 28.
(2) Amendment to By-Laws as approved by the Registrant's Board of Directors
on February 23, 1990 is incorporated by reference to Exhibit (2)(b) to
Post-Effective Amendment No. 28.
(3) Amendment to By-Laws as approved by the Registrant's Board of Directors
on February 15, 1991 is incorporated by reference to Exhibit (2)(c) to
Post-Effective Amendment No. 28.
(4) Amendment to By-Laws as approved by the Registrant's Board of Directors
on June 21, 1991 is incorporated by reference to Exhibit (2)(d) to
Post-Effective Amendment No. 28.
(c) (1) See Articles V and VII of the Articles of Incorporation which are
included as Exhibit (a)(14) and incorporated by reference to
Exhibits (1)(a) and (1)(i) to Post-Effective Amendment No. 28 and Article
II, Sections 1, 9 and 10 of Article III, Sections 1, 2 and 3 of Article V
and Section II of Article VII of the By-laws which are incorporated by
reference to Exhibits 2(a)-2(d) of Post-Effective Amendment No. 28.
(d) (1) Investment Advisory Agreement between Registrant and First Wisconsin
Trust Company dated August 29, 1991 with respect to the Money Market Fund,
U.S. Government Money Market Fund, Tax-Exempt Money Market Fund, Income and
Growth Fund, Short-Intermediate Fixed Income Fund, Special Growth Fund,
Bond IMMDEX(TM) Fund, Equity Index Fund, Institutional Money Market Fund
and U.S. Federal Money Market Fund is incorporated by reference to
Exhibit (5)(a) to Post-Effective Amendment No. 28.
(2) Assumption and Guarantee Agreement between First Wisconsin Trust
Company and First Wisconsin Asset Management dated February 3, 1992 is
incorporated by reference to Exhibit (5)(b) to Post-Effective Amendment
No. 28.
(3) Investment Advisory Agreement between Registrant and First Wisconsin
Asset Management dated March 27, 1992 with respect to the Balanced Fund is
incorporated by reference to Exhibit (5)(c) to Post-Effective Amendment
No. 28.
(4) Addendum No. 1 dated December 27, 1992 to Investment Advisory Agreement
between Registrant and Firstar Investment Research and Management Company
dated March 27, 1992 with respect to the Growth Fund (formerly the MidCore
Growth Fund) and Intermediate Bond Market Fund is incorporated by reference
to Exhibit (5)(d) to Post-Effective Amendment No. 28.
(5) Addendum No. 2 dated February 5, 1993, to Investment Advisory Agreement
between the Registrant and Firstar Investment Research and Management
Company dated March 27, 1992 with respect to the Tax-Exempt Intermediate
Bond Fund is incorporated by reference to Exhibit (5)(e) to Post-Effective
Amendment No. 28.
(6) Assumption and Guarantee Agreement between Firstar Trust Company and
Firstar Investment Research and Management Company dated June 17, 1993 with
respect to the Income and Growth Fund is incorporated by reference to
Exhibit (5)(f) to Post-Effective Amendment No. 28.
(7) Addendum No. 3 dated September 2, 1997, to Investment Advisory
Agreement between the Registrant and Firstar Investment Research and
Management Company dated March 27, 1992 with respect to the International
Equity Fund is incorporated by reference to Exhibit (5)(g) to
Post-Effective Amendment No. 32.
(8) Amended and Restated Sub-Advisory Agreement among Firstar Investment
Research and Management Company, the Registrant and Hansberger Global
Investors, Inc. dated June 15, 1997 with respect to the International
Equity Fund is incorporated by reference to Exhibit (5)(h) to
Post-Effective Amendment No. 32.
(9) Addendum No. 4 to the Investment Advisory Agreement between Registrant
and Firstar Investment Research and Management Company dated March 27, 1992
with respect to the MicroCap Fund is incorporated by reference to
Exhibit (5)(i) to Post-Effective Amendment No. 28.
(10) Addendum No. 6 to the Investment Advisory Agreement between Registrant
and Firstar Investment Research & Management Company dated December 1, 1997
with respect to the Balanced Income Fund is incorporated by reference to
Exhibit (5)(j) to Post-Effective Amendment No. 34.
(11) Addendum No. 5 to the Investment Advisory Agreement between Registrant
and Firstar Investment Research & Management Company dated as of August 15,
1997 with respect to the Emerging Growth Fund is incorporated by reference
to Exhibit (5)(k) to Post-Effective Amendment No. 32.
(12) 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 is incorporated by reference to Exhibit (d)(12) to
Post-Effective Amendment No. 38.
(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 is incorporated
by reference to Exhibit (d)(13) to Post-Effective Amendment No. 38.
(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 is incorporated by reference to
Exhibit (d)(14) to Post-Effective Amendment No. 38.
(15) Form of Addendum No. 9 to the Investment Advisory Agreement between
Registrant and Firstar Investment Research & Management Company LLC, with
respect to the Small Cap Aggressive Growth Fund.
(e) (1) Distribution Agreement between Registrant and B.C. Ziegler & Company
dated as of January 1, 1995, with respect to Money Market Fund, U.S.
Government Money Market Fund, Tax-Exempt Money Market Fund, Growth and
Income Fund, Short-Term Bond Market Fund, Special Growth Fund, Bond
IMMDEX(TM)Fund, Equity Index Fund, Institutional Money Market Fund, U.S.
Treasury Money Market Fund, Balanced Fund, Intermediate Bond Market Fund,
Growth Fund (formerly the MidCore Growth Fund), Tax-Exempt Intermediate
Bond Fund and International Equity Fund is incorporated by reference to
Exhibit (6)(a) to Post-Effective Amendment No. 28.
(2) Addendum No. 1 to the Distribution Agreement between Registrant and
B.C. Ziegler and Company dated as of January 1, 1995 with respect to the
MicroCap Fund is incorporated by reference to Exhibit (6)(b) to
Post-Effective Amendment No. 28.
(3) Addendum No. 3 to the Distribution Agreement between Registrant and
B.C. Ziegler and Company dated as of December 1, 1997 with respect to the
Balanced Income Fund is incorporated by reference to Exhibit (6)(c) to
Post-Effective Amendment No. 34.
(4) Addendum No. 2 to the Distribution Agreement between Registrant and
B.C. Ziegler and Company dated as of August 15, 1997 with respect to the
Emerging Growth Fund is 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 is incorporated by reference to Exhibit (e)(5) to Post-Effective
Amendment No. 38.
(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 is incorporated by reference to Exhibit (e)(6) to
Post-Effective Amendment No. 38.
(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 is incorporated by reference to Exhibit (e)(7) to
Post- Effective Amendment No. 38.
(8) Form of Addendum No. 7 to the Distribution Agreement between the
Registrant and B.C. Ziegler and Company with respect to the Small Cap
Aggressive Growth Fund.
(f) Deferred Compensation Plan dated September 16, 1994 and Deferred
Compensation Agreement between Registrant and its Directors is incorporated by
reference to Exhibit (7) to Post-Effective Amendment No. 28.
(g) (1) Custodian Agreement between Registrant and First Wisconsin Trust
Company dated July 29, 1988 is incorporated by reference to Exhibit (8)(a)
to Post-Effective Amendment No. 28.
(2) Letter dated December 28, 1989 with respect to the Custodian Agreement
with respect to the Equity Index Fund is incorporated by reference to
Exhibit (8)(b) to Post-Effective Amendment No. 28.
(3) Revised Mutual Fund Custodial Agent Service Annual Fee Schedule dated
March 1, 1997 to the Custodian Agreement with respect to the Money Market
Fund, U.S. Government Money Market Fund, Intermediate Bond Market Fund,
Bond IMMDEX(TM) Fund, Growth and Income Fund, MidCore Growth Fund, MicroCap
Fund, Tax-Exempt Money Market Fund, U.S. Treasury Money Market Fund,
Short-Term Bond Market Fund, Tax-Exempt Intermediate Bond Fund, Balanced
Fund, Equity Index Fund, Special Growth Fund and International Equity Fund
is incorporated by reference to Exhibit (8)(c) to Post-Effective Amendment
No. 34.
(4) Amendment dated May 1, 1990 to the Custodian Agreement between
Registrant and First Wisconsin Trust Company is incorporated by reference
to Exhibit (8)(d) to Post-Effective Amendment No. 28.
(5) Letter dated April 19, 1991 with respect to the Custodian Agreement
with respect to the Institutional Money Market Fund and U.S. Federal Money
Market Fund is incorporated by reference to Exhibit (8)(e) to
Post-Effective Amendment No. 28.
(6) Letter dated March 27, 1992 with respect to the Custodian Agreement
with respect to the Balanced Fund is incorporated by reference to
Exhibit (8)(f) to Post-Effective Amendment No. 28.
(7) Letter dated December 27, 1992 with respect to the Custodian Agreement
with respect to the Intermediate Bond Market Fund and Growth Fund (formerly
the MidCore Growth Fund) is incorporated by reference to Exhibit (8)(g)
to Post-Effective Amendment No. 28.
(8) Letter dated February 5, 1993 with respect to the Custodian Agreement
with respect to the Tax-Exempt Intermediate Bond Fund is incorporated by
reference to Exhibit (8)(h) to Post-Effective Amendment No. 28.
(9) Letter Agreement with respect to the Custodian Agreement dated as of
September 2, 1997 with respect to the International Equity Fund is
incorporated by reference to Exhibit No. (8)(i) to Post-Effective Amendment
No. 32.
(10) Letter Agreement dated August 1, 1995 with respect to the Custodian
Agreement with respect to the MicroCap Fund is incorporated by reference to
Exhibit No. (8)(j) to Post-Effective Amendment No. 28.
(11) Letter Agreement with respect to the Custodian Agreement with respect
to the Balanced Income Fund dated December 1, 1997 is incorporated by
reference to Exhibit (8)(k) to Post-Effective Amendment No. 34.
(12) Letter Agreement with respect to the Custodian Agreement with respect
to the Emerging Growth Fund dated as of March 1, 1997 is incorporated by
reference to Exhibit (8)(l) to Post-Effective Amendment No. 34.
(13) Foreign Custodian Monitoring Agreement between Registrant and Firstar
Investment Research and Management Company dated June 13, 1997 with respect
to the International Equity Fund is incorporated by reference to
Exhibit 8(m) to Post-Effective Amendment No. 32.
(14) Assignment dated October 1, 1998 of Custodian Agreement between
Registrant and Firstar Trust Company, dated as of July 29, 1988 to Firstar
Bank Milwaukee, N.A. is incorporated by reference to Exhibit (g)(14) to
Post-Effective Amendment No. 36.
(15) 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 is incorporated by reference
to Exhibit (g)(15) to Post-Effective Amendment No.38.
(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 is incorporated by reference to
Exhibit (g)(16) to Post-Effective Amendment No. 38.
(17) Global Custody Agreement dated November 3, 1999 between Registrant and
Chase Manhattan Bank.
(18) Form of Letter Agreement with respect to the Custodian Agreement
between the Registrant and Firstar Bank, N.A., (formerly Firstar Bank
Milwaukee, N.A.), with respect to the Small Cap Aggressive Growth 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 is incorporated by
reference to Exhibit (h)(11) to Post-Effective Amendment No. 38.
(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)(a)
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 is
incorporated by reference to Exhibit (h)(34) to Post-Effective Amendment
No. 38.
(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 is incorporated by reference to Exhibit (h)(48)
to Post-Effective Amendment No. 38.
(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 is incorporated by reference to Exhibit (h)(49) to Post-Effective
Amendment No. 38.
(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 is incorporated by
reference to Exhibit (h)(50) to Post-Effective Amendment No. 38.
(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 is incorporated by reference to
Exhibit (h)(51) to Post-Effective Amendment No. 38.
(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 is incorporated by
reference to Exhibit (h)(52) to Post-Effective Amendment No. 38.
(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 is incorporated by reference to
Exhibit (h)(53) to Post-Effective Amendment No. 38.
(54) Credit Agreement dated December 29, 1999 for Firstar Funds, Inc. and
Mercantile Mutual Funds, Inc. with Chase Manhattan Bank is incorporated by
reference to Exhibit (h)(54) to Post-Effective Amendment No. 38.
(55) Exchange Agreement dated November 2, 1999 between Registrant and
Firstar Corporation Pension Trust.
(56) Form of Addendum No. 6 to the Co-Administration Agreement among the
Registrant, B.C. Ziegler and Company and Firstar Mutual Fund Services, LLC
with respect to the Small Cap Aggressive Growth Fund.
(57) Form of Letter Agreement to the Fund Accounting Servicing Agreement
between Registrant and Firstar Mutual Fund Services, LLC, with respect to
the Small Cap Aggressive Growth Fund.
(58) Form of Letter Agreement to the Shareholder Servicing Agent Agreement
between the Registrant and Firstar Mutual Fund Services, LLC, with respect
to the Small Cap Aggressive Growth Fund.
(59) Form of Amendment to Shareholder Servicing Agent Agreement date March
23, 1988 and assigned as of October 1, 1998.
(i) Opinion of Drinker Biddle & Reath LLP is incorporated by reference to
Exhibit (i) to Post-Effective Amendment No. 38.
(j) (1) Consent of Drinker Biddle & Reath 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 is incorporated by
reference to Exhibit (l)(4) to Post-Effective Amendment No. 38.
(5) Purchase Agreement dated November 3, 1999 between Registrant and B.C.
Ziegler & Company with respect to the Core International Equity Fund is
incorporated by reference to Exhibit (l)(5) to Post-Effective Amendment
No. 38.
(6) Purchase Agreement dated November 3, 1999 between Registrant and B.C.
Ziegler & Company with respect to the MidCap Index Fund is incorporated by
reference to Exhibit (l)(6) to Post-Effective Amendment No. 38.
(7) Form of Purchase Agreement between Registrant and B.C. Ziegler and
Company with respect to the Small Cap Aggressive Growth 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 is incorporated by reference to Exhibit (n)(2) to
Post-Effective Amendment No. 38.
(3) Form of Amended and Restated Plan Pursuant to Rule 18f-3 for Operation
of a Multi-Series System.
(o) None.
(p) (1) Code of Ethics of the Adviser.
(2) Code of Ethics of Hansberger Global Investors, Inc. as Sub-Adviser to
the International Equity Fund.
(3) Code of Ethics of The Glenmede Trust Company as Sub-Adviser to the Core
International Equity Fund.
(4) Code of Ethics of the Registrant.
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 (a)(1) 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 (b)(1) 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 (e)(1) hereto, Section 11 of the Custodian Agreement,
incorporated by reference as Exhibit (g)(1) hereto, and Section 6(c) of the
Shareholder Servicing Agent Agreement incorporated by reference as Exhibit
(h)(16) 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 IMMDEX(TM) Fund, Equity Index Fund, Balanced Growth Fund
(formerly the Balanced Fund), Intermediate Bond Market Fund, Growth Fund
(formerly the MidCore Growth Fund), Tax-Exempt Intermediate Bond Fund,
International Equity Fund, MicroCap Fund, 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
<TABLE>
<CAPTION>
Position with
Firstar Investment
Research and Other Business Type of
NAME MANAGEMENT COMPANY CONNECTIONS BUSINESS
<S> <C> <C> <C>
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
</TABLE>
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.
<TABLE>
<CAPTION>
HANSBERGER GLOBAL INVESTORS, INC.
==================================== ============================== ===================================== ==========================
Name and Principal Position with Hansberger Other Business Connections and TYPE OF BUSINESS
BUSINESS ADDRESS Global INVESTORS, INC. ADDRESS*
- ------------------------------------ ------------------------------ ------------------------------------- --------------------------
<S> <C> <C> <C>
Thomas L. Hansberger Chairman, CEO, President, Director, Mutual Fund
Director and Treasurer Schroder Korea Fund PLC
33 Gutter Lane
London,
EC2B-A124 8AS
- ------------------------------------ ------------------------------ ------------------------------------- --------------------------
Director, Mutual Fund
The Bangkok Fund
Bangkok, Thailand
- ------------------------------------ ------------------------------ ------------------------------------- --------------------------
Advisory Board Member, The India Mutual Fund
Fund
India
- ------------------------------------ ------------------------------ ------------------------------------- --------------------------
Kimberly Ann Scott Director, Senior Vice None
President, Chief
Administrative Officer,
Chief Compliance Officer and
Secretary
- ------------------------------------ ------------------------------ ------------------------------------- --------------------------
J. Christopher Jackson Director, Senior Vice None
President, General Counsel
and Assistant Secretary
- ------------------------------------ ------------------------------ ------------------------------------- --------------------------
James Everett Chaney Chief Investment Officer None
- ------------------------------------ ------------------------------ ------------------------------------- --------------------------
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>
* 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.
<TABLE>
<CAPTION>
THE GLENMEDE TRUST COMPANY
- ---------------------------------------- -------------------------------------- --------------------------------------
DIRECTOR ORGANIZATION AFFILIATION
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
SUSAN W. CATHERWOOD The Glenmede Corporation Director
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
The Glenmede Trust Company Director
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
The Glenmede Trust Company of New Director
Jersey
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
PECO Energy Director
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
University of Pennsylvania Vice Chairman, Board of Trustees
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
The World Affairs Council of Member, Board
Philadelphia
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
Monell Chemical Senses Center Director
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
The Christopher Ludwick Foundation Member, Board of Managers, Vice
Chairman
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
Executive Service Corps of the Vice Chairman, Board of Directors
Delaware Valley
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
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 of New Director
Jersey
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
The Glenmede Trust Company, N.A Director, Chairman of the Board
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
Rittenhouse Square Indemnity Ltd. Board Member and Officer
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
Assoc. for Investment Mgm't & Committee Member-Performance
Research (AIMR) Presentation Standards
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
Elwyn, Inc. Board Member
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
THOMAS W. LANGFITT, M.D. The Glenmede Corporation Director
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
The Glenmede Trust Company Director
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
General Motors Medical Committee on Chairman
Automotive Safety
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
University of Pennsylvania Medical Board of Trustees
Center
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
Greater Philadelphia Urban Affairs Member
Coalition
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
The Philadelphia Public Member
School/Business Partnership for
Reform Governing Board
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
Secretary's Advisory Committee on Member
Infant Mortality Department of
Health and Human Services
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
Institute of Medicine Member
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
American Philosophical Society Member
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
Community College of Philadelphia Director
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
Nat'l Museum of American History Trustee
Smithsonian Institution
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
ARTHUR E. PEW, III The Glenmede Corporation Director
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
The Glenmede Trust Company Director
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
Manitou Island Association (White Member, Board of Directors
Bear Lake, MN)
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
Minnesota Transportation Museum, Member, Board of Trustees
Inc. (Mpls, MN)
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
Museum of Transport. Development Chairman, Board of Directors
Corp.(St. Paul, MN)
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
Osceola & St. Croix Valley Railway Member, Board of Directors
(Osceola, WI)
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
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 Philadelphia Vice President and Board Member,
Executive Committee
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
Philadelphia Charity Ball, Inc. Board Member, Past President
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
Philadelphia Zoo "Zoobilee" Committee Member
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
Academy of Music Philadelphia, Inc. AOM Committee, Board
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
(SEA) Sea Education Association Board Member
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
Corinthian Historical Foundation President, Board Member
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
Devon Horse Show Trophy Committee Member
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
Corinthian Yacht Club Committee Member
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
American Health Care (China) Director
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
Benchmark School Chairperson, Annual Giving
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
Special Opportunities Group (Guilder Board Member
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 of New Director
Jersey
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
Joseph N. Pew, IV, M.D., PC President
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
Flying Hills Self Storage, Inc. President
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
American Red Cross, Berks County Director
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
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, N.A. Director
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
Sun Company, Inc. Director
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
Academy of Music Philadelphia, Inc. Member, AOM Committee
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
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 Trustees
Philadelphia
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
The Curtis Institute of Music Member, Board of Trustees
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
The Jackson Laboratory Member, Corporation Board of Trustees
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
RICHARD F. PEW The Glenmede Corporation Director
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
The Glenmede Trust Company Director
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
Yellowstone Center for Mountain Director
Environments
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
r Mountain Research Center, Montana Director
State University
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
Teton Science School; Kelly, Wyoming Director
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
REBECCA W. RIMEL The Glenmede Trust Company Director
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
Deutsche Banc Alex. Brown Flag Director
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 Foundation Board of Directors
(Monticello)
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
Gilder Lehrman Institute of American Advisory Board
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 of New Director
Jersey
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
Coriell Institute for Medical Trustee, Chairman Investment
Research Committee
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
Elizabeth Haddon Housing Corp President / Director
(affordable housing)
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
Estaugh Corporation (aka Medford President / Trustee
Leas)
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
Upland Corp. President
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
ETHEL BENSON WISTER The Glenmede Corporation Director
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
The Glenmede Trust Company Director
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
Academy of Music Philadelphia, Inc. Committee Member
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
Concerto Soloists Orchestra Arts Award 1997 Recipient
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
Scheie Eye Institute - Department of Recipient, Guest of Honor Award 1998
Ophthalmology University of - Scheie Odyssey Ball
Pennsylvania
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
Philadelphia Television Network, Board Member
Inc.
- ---------------------------------------- -------------------------------------- --------------------------------------
</TABLE>
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:
<TABLE>
<CAPTION>
============================================= ======================================= ==============================
Positions and Offices with
Name and Principal Position and Offices WITH B. C. REGISTRANT
BUSINESS ADDRESS ZIEGLER
- --------------------------------------------- --------------------------------------- ------------------------------
<S> <C> <C>
Peter D. Ziegler Chairman, President, Chief Executive None
Officer and Director
- --------------------------------------------- --------------------------------------- ------------------------------
S. Charles O'Meara Senior Vice President and General None
Counsel, Corporate Secretary and
Director
- --------------------------------------------- --------------------------------------- ------------------------------
D. A. Wallestad Senior Vice President - Acquisition None
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 - Retail None
Operations
- --------------------------------------------- --------------------------------------- ------------------------------
Ronald N. Spears Senior Vice President None
- --------------------------------------------- --------------------------------------- ------------------------------
Jeffrey C. Vredenbregt Vice President, Treasurer, Controller None
and Director
- --------------------------------------------- --------------------------------------- ------------------------------
Charles G. Stevens Vice President - Marketing Director None
- --------------------------------------------- --------------------------------------- ------------------------------
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 and None
Training Coordinator
- --------------------------------------------- --------------------------------------- ------------------------------
Lay C. Rosenheimer Vice President - Bond Sales Control None
- --------------------------------------------- --------------------------------------- ------------------------------
Darrell P. Frank Vice President - Director of None
Strategic Change
- --------------------------------------------- --------------------------------------- ------------------------------
M.L. McBain Vice President - None
Equity Securities
- --------------------------------------------- --------------------------------------- ------------------------------
James L. Brendemuehl Vice President - Managed Products None
- --------------------------------------------- --------------------------------------- ------------------------------
Ronald C. Strzok Senior Vice President - Administration None
- --------------------------------------------- --------------------------------------- ------------------------------
Roxanne Dalnodar Vice President - Operations None
- --------------------------------------------- --------------------------------------- ------------------------------
Kathleen A. Lochen Assistant Secretary None
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
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 has duly caused this
Post-Effective Amendment No. 39 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 12th day of May, 2000.
FIRSTAR FUNDS, INC.
Registrant
By BRUCE R. LANING
------------------
Bruce R. Laning
Director, President & Treasurer
Pursuant to the requirements of the Securities Act of 1933,
this Post-Effective Amendment No. 39 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
--------- ----- ----
*JAMES M. WADE Chairman and May 12, 2000
- ------------------------------------
(James M. Wade) Director
BRUCE R. LANING Director,
- -------------------------------------
Bruce R. Laning President, Treasurer May 12, 2000
*RICHARD RIEDERER Director May 12, 2000
- ------------------------------------
(Richard Riederer)
*JERRY REMMEL Director May 12, 2000
- ------------------------------------
(Jerry Remmel)
*GLEN R. BOMBERGER Director May 12, 2000
- ------------------------------------
(Glen R. Bomberger)
*CHARLES R. ROY Director May 12, 2000
- ------------------------------------
(Charles R. Roy)
*BRONSON J. HAASE Director May 12, 2000
- ------------------------------------
(Bronson J. Haase)
*BY BRUCE R. LANING May 12, 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, 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/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. on May 10, 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 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: May 12, 2000
EXHIBIT INDEX
EXHIBIT NO. ITEM
(a)(17) Form of Amendment No. 16 to Articles of Incorporation with respect to
the Small Cap Aggressive Growth Fund.
(d)(15) Form of Addendum No. 9 to the Investment Advisory Agreement between
Registrant and Firstar Investment Research & Management Company, LLC
with respect to the Small Cap Aggressive Growth Fund.
(e)(8) Form of Addendum No. 7 to the Distribution Agreement between
Registrant and B.C. Ziegler and Company with respect to the Small Cap
Aggressive Growth Fund.
(g)(17) Global Custody Agreement dated November 3, 1999 between Registrant and
Chase Manhattan Bank.
(g)(18) Form of Letter Agreement with respect to the Custodian Agreement
between Registrant and Firstar Bank, N.A.(formerly Firstar Bank
Milwaukee, N.A.) with respect to the Small Cap Aggressive Growth Fund.
(h)(55) Exchange Agreement dated November 2, 1999 between Registrant and Firstar
Corporation Pension Trust.
(h)(56) Form of Addendum No. 6 to the Co-Administration Agreement among the
Registrant, B.C. Ziegler and Company and Firstar Mutual Fund Services,
LLC with respect to the Small Cap Aggressive Growth Fund.
(h)(57) Form of Letter Agreement to the Fund Accounting Servicing Agreement
between Registrant and Firstar Mutual Fund Services, LLC with respect to
the Small Cap Aggressive Growth Fund.
(h)(58) Form of Letter Agreement to the Shareholder Servicing Agent Agreement
between Registrant and Firstar Mutual Fund Services, LLC with respect to
the Small Cap Aggressive Growth Fund.
(h)(59) Form of Amendment to Shareholder Servicing Agent Agreement dated March
23, 1988 and assigned as of October 1, 1998.
(j)(1) Consent of Drinker Biddle & Reath LLP.
(l)(7) Form of Purchase Agreement between Registrant and B.C. Ziegler and
Company with respect to the Small Cap Aggressive Growth Fund.
(n)(3) Form of Amended and Restated Plan Pursuant to Rule 18f-3 for Operation
of a Multi-Series System.
(p)(1) Code of Ethics of the Adviser.
(p)(2) Code of Ethics of Hansberger Global Investors, Inc. as Sub-Adviser to
the International Equity Fund.
(p)(3) Code of Ethics of The Glenmede Trust Company as Sub-Adviser to the Core
International Equity Fund.
(p)(4) Code of Ethics of the Registrant.
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 sent.
Please One Logan Square include complete name and mailing address.
18th and Cherry Street
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 June __,
2000.
B. Amendment(s) adopted on June __, 2000 (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
JUNE __, 2000
-------------
(DATE)
/S/ BRUCE R. LANING
-------------------
(SIGNATURE)
BRUCE R. LANING
---------------
(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 JUNE __, 2000
(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 21-Institutional
Series, Class 21-A Series, and Class 21-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
21 Common Stock of the Company be, and hereby are,
divided into and classified as Class 21 -
Institutional Series, One Hundred Million authorized,
unissued and unclassified shares of Class 21 Common
Stock of the Company be, and hereby are divided into
and classified as Class 21-A Series Common Stock and
One Hundred Million authorized, unissued and
unclassified shares of Class 21 Common Stock of the
Company be, and hereby are divided into and
classified as Class 21-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 21 - Institutional
Series, Class 21-A Series and Class 21-B Series
Common Stock have been issued.
(e) The Amendment was adopted on June __, 2000.
(f) The Amendment was unanimously adopted by the Board of
Directors and shareholder action was not required.
FORM OF ADDENDUM NO. 9 TO THE INVESTMENT ADVISORY AGREEMENT
This Addendum, dated as of the __ day of May, 2000, 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 Small
Cap Aggressive Growth 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
Small Cap Aggressive Growth 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 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 Fund pursuant to the Advisory Agreement and this Addendum,
the Company will pay the Investment Adviser and the Investment Adviser will
accept as full compensation therefor ___________.
3. MISCELLANEOUS. Except to the extent supplemented hereby, the
Advisory Agreement shall remain unchanged and in full force and effect and is
hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of
the date and year first above written.
FIRSTAR FUNDS, INC.
By: _____________________
Title: __________________
FIRSTAR INVESTMENT RESEARCH AND MANAGEMENT
COMPANY, LLC
By: ____________________
Title: _________________
FORM OF ADDENDUM NO.7 TO THE DISTRIBUTION AGREEMENT
This Addendum, dated as of the __ day of June, 2000, 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, Core International Equity Fund, MidCap
Index Fund and any other Firstar Funds that may be contemplated;
WHEREAS, the Company is establishing an additional investment portfolio
to be known as the Small Cap Aggressive Growth 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 Small Cap
Aggressive Growth 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 Fund for the period and the terms set forth
herein and in the Distribution Agreement. BCZ hereby accepts such appointment
and agrees to render the services set forth herein and in the Distribution
Agreement.
2. MISCELLANEOUS. Except to the extent supplemented hereby, the
Distribution Agreement shall remain unchanged and in full force and effect and
is hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of
the date and year first above written.
FIRSTAR FUNDS, INC.
By: ________________________
Title: _____________________
B.C. ZIEGLER AND COMPANY
By: ________________________
Title: _____________________
CHASE
-----------------------------------------------------
GLOBAL CUSTODY AGREEMENT
BETWEEN
[ FIRSTAR BANK MILWAUKEE N.A. AND FIRSTAR FUNDS, INC.
AND
THE CHASE MANHATTAN BANK
November 3, 1999
GLOBAL CUSTODY AGREEMENT
TABLE OF CONTENTS
PAGE
1. INTENTION OF THE PARTIES; DEFINITIONS.......................................1
1.1 Intention of the Parties...........................................1
1.2 Definitions........................................................1
2. WHAT BANK IS REQUIRED TO DO.................................................3
2.1 Set Up Accounts....................................................3
2.2 Cash Account.......................................................4
2.3 Segregation of Assets; Nominee Name................................4
2.4 Settlement of Trades...............................................4
2.5 Contractual Settlement Date Accounting.............................5
2.6 Actual Settlement Date Accounting..................................5
2.7 Income Collection; Autocredit......................................5
2.8 Fractions/ Redemptions by Lot......................................6
2.9 Presentation of Coupons; Certain Other Ministerial Acts............6
2.10 Corporate Actions..................................................6
2.11 Proxy Voting.......................................................7
2.12 Statements and Information Available On-Line.......................8
2.13 Access to Bank's Records...........................................9
2.14 Maintenance of Financial Assets at Bank and Subcustodian
Locations..........................................................9
2.15 Tax Reclaims.......................................................9
2.16 Foreign Exchange Transactions......................................9
3. INSTRUCTIONS...............................................................10
3.1 Acting on Instructions; Unclear Instructions......................10
3.2 Confirmation of Oral Instructions/ Security Devices...............10
3.3 Instructions; Contrary to Law/Market Practice.....................11
3.4 Cut-Off Times.....................................................11
4. FEES, EXPENSES AND OTHER AMOUNTS OWING TO BANK.............................11
4.1 Fees and Expenses.................................................11
4.2 Overdrafts........................................................11
4.3 Bank's Right Over Securities; Set-off.............................11
5. SUBCUSTODIANS, SECURITIES DEPOSITORIES, AND OTHER AGENTS...................12
5.1 Appointment of Subcustodians; Use of Securities Depositories......12
5.2 Liability for Subcustodians.......................................13
5.3 Use of Agents.....................................................13
6. ADDITIONAL PROVISIONS RELATING TO CUSTOMER.................................14
6.1 Representations of Customer.......................................14
6.2 Customer to Provide Certain Information to Bank...................14
6.3 Customer is Liable to Bank Even if it is Acting for
Another Person....................................................14
7. WHEN BANK IS LIABLE TO CUSTOMER............................................14
7.1 Standard of Care; Liability.......................................14
7.2 Force Majeure.....................................................15
7.3 Bank May Consult With Counsel.....................................15
7.4 Bank Provides Diverse Financial Services and May Generate
Profits as a Result...............................................15
8. TAXATION...................................................................16
8.1 Tax Obligations...................................................16
8.2 Tax Reclaims......................................................16
9. TERMINATION................................................................17
10.MISCELLANEOUS..............................................................17
10.1 Notices...........................................................17
10.2 Successors and Assigns............................................18
10.3 Interpretation....................................................18
10.4 Entire Agreement..................................................18
10.5 Information Concerning Deposits at Bank's London Branch...........18
10.6 Confidentiality...................................................18
10.7 Insurance.........................................................19
10.8 Governing Law and Jurisdiction....................................19
10.9 Severability and Waiver; Counterparts.............................19
10.10 Year 2000.........................................................19
10.11 Separate Portfolios...............................................20
GLOBAL CUSTODY AGREEMENT
This Agreement, dated as of October , 1999, is among THE CHASE
MANHATTAN BANK ("BANK"), with a place of business at 270 Park Avenue, New York,
NY; Firstar Bank Milwaukee, N.A. ("CUSTOMER") with a place of business at 777 E.
Wisconsin Ave., Milwaukee, WI 53202; and Firstar Funds, Inc. ("Company"), with a
place of business at 615 E. Michigan St., Milwaukee, WI 53202 on behalf of its
International Equity Fund and its Core International Equity Fund.
1. INTENTION OF THE PARTIES; DEFINITIONS
1.1 INTENTION OF THE PARTIES.
(a) This Agreement sets out the terms governing custodial, settlement and
certain other associated services offered by Bank to Customer. Bank will be
responsible for the performance of only those duties that are set forth in this
Agreement or expressly contained in Instructions that are consistent with the
provisions of this Agreement and with Bank's operations and procedures. Customer
acknowledges that Bank is not providing any legal, tax or investment advice in
providing the services hereunder.
(b) Investing in foreign markets may be a risky enterprise. The holding of
Financial Assets and cash in foreign jurisdictions may involve risks of loss or
other special features. Bank will not be liable for any loss that results from
the general risks of investing or Country Risk.
1.2 DEFINITIONS.
(a) As used herein, the following terms have the meaning hereinafter stated.
"ACCOUNT" has the meaning set forth in Section 2.1 of this Agreement.
"AFFILIATE" means an entity controlling, controlled by, or under common
control with, Bank.
"AFFILIATED SUBCUSTODIAN" means a Subcustodian that is an Affiliate.
"APPLICABLE LAW" means any statute, whether national, state or local,
applicable in the United States or any other country, the rules of the treaty
establishing the European Community, any other law, rule, regulation or
interpretation of any governmental entity, any applicable common law, and any
decree, injunction, judgment, order, ruling, or writ of any governmental entity.
"AUTHORIZED PERSON" means any person (including an investment manager
or other agent) who has been designated by written notice from Customer or its
designated agent to act on behalf of Customer hereunder. Such persons will
continue to be Authorized Persons until such time as Bank receives Instructions
from Customer or its designated agent that any such person is no longer an
Authorized Person.
"BANK INDEMNITEES" means Bank, its Subcustodians, and their respective
nominees, directors, officers, employees and agents.
"BANK'S LONDON BRANCH" means the London branch office of The Chase
Manhattan Bank.
"CASH ACCOUNT" has the meaning set forth in Section 2.1 (a)(ii).
"CORPORATE ACTION" means any subscription right, bonus issue, stock
repurchase plan, redemption, exchange, tender offer, or similar matter with
respect to a Financial Asset in the Securities Account that require
discretionary action by the holder, but does not include proxy voting.
"COUNTRY RISK" means the risk of investing or holding assets in a
particular country or market, including, but not limited to, risks arising from
nationalization, expropriation or other governmental actions; regulations of
banking or securities industries, including changes in market rules; currency
restrictions, devaluations or fluctuations; and market conditions affecting the
orderly execution of securities transactions or the value of assets.
"ENTITLEMENT HOLDER" means the person named on the records of a
Securities Intermediary as the person having a Securities Entitlement against
the Securities Intermediary.
"FINANCIAL ASSET" means, as the context requires, either the asset
itself or the means by which a person's claim to it is evidenced, including a
Security, a security certificate, or a Securities Entitlement. "FINANCIAL ASSET"
does not include cash.
"INSTRUCTIONS" has the meaning set forth in Section 3.1 of this
Agreement.
"LIABILITIES" means any liabilities, losses, claims, costs, damages,
penalties, fines, obligations, or expenses of any kind whatsoever (including,
without limitation, reasonable attorneys', accountants', consultants' or
experts' fees and disbursements).
"SECURITIES" means stocks, bonds, rights, warrants and other negotiable
and non-negotiable instruments, whether issued in certificated or uncertificated
form, that are commonly traded or dealt in on securities exchanges or financial
markets. "SECURITIES" also means other obligations of an issuer, or shares,
participations and interests in an issuer recognized in the country in which it
is issued or dealt in as a medium for investment and any other property as may
be acceptable to Bank for the Securities Account.
"SECURITIES ACCOUNT" means each Securities custody account on Bank's
records to which Financial Assets are or may be credited pursuant hereto.
"SECURITIES DEPOSITORY" has the meaning set forth in Section 5.1 of
this Agreement.
"SECURITIES ENTITLEMENT" means the rights and property interest of an
Entitlement Holder with respect to a Financial Asset as set forth in Part 5 of
Article 8 of the Uniform Commercial Code of the State of New York, as the same
may be amended from time to time.
"SECURITIES INTERMEDIARY" means Bank, a Subcustodian, a Securities
Depository, and any other financial institution which in the ordinary course of
business maintains custody accounts for others and acts in that capacity.
"SUBCUSTODIAN" has the meaning set forth in Section 5.1 and includes
Affiliated Subcustodians.
(b) All terms in the singular will have the same meaning in the plural unless
the context otherwise provides and visa versa.
2. WHAT BANK IS REQUIRED TO DO
2.1 SET UP ACCOUNTS.
(a) Bank will establish and maintain the following accounts ("ACCOUNTS"):
(i) a Securities Account in the name of Customer on
behalf of Company's International Equity Fund and a
Securities Account in the name of Customer on behalf
of Company's Core International Equity Fund for
Financial Assets, which may be received by Bank or
its Subcustodian for the account of Customer on
behalf of Company's International Equity Fund or on
behalf of Company's Core International Equity Fund,
including as an Entitlement Holder; and
(ii) an account in the name of Customer on behalf of
Company's International Equity Fund and an account in
the name of Customer on behalf of Company's Core
International Equity Fund (each a "CASH ACCOUNT") for
any and all cash in any currency received by Bank or
its Subcustodian for the account of Customer.
Notwithstanding paragraph (ii), cash held in respect of those markets where
Customer is required to have a cash account in its own name held directly with
the relevant Subcustodian will be held in that manner and will not be part of a
Cash Account.
(b) At the request of Customer, additional Accounts may be opened in the future,
which will be subject to the terms of this Agreement.
2.2 CASH ACCOUNT.
Except as otherwise provided in Instructions acceptable to Bank, all
cash held in the Cash Account will be deposited during the period it is credited
to the Accounts in one or more deposit accounts at Bank or at Bank's London
Branch. Any cash so deposited with Bank's London Branch will be payable
exclusively by Bank's London Branch in the applicable currency, subject to
compliance with any applicable laws, regulations, governmental decrees or
similar orders.
2.3 SEGREGATION OF ASSETS; NOMINEE NAME.
(a) Bank will identify in its records that Financial Assets credited to
Customer's Securities Account belong to Customer on behalf of Company's
International Equity Fund or to Customer on behalf of Company's Core
International Equity Fund (except as otherwise may be agreed by Bank and
Customer).
(b) Bank will require each Subcustodian to identify in its own records that
Financial Assets credited to Customer's Securities Account belong to customers
of Bank (to the extent permitted by Applicable Law or market practice), such
that it is readily apparent that the Financial Assets do not belong to Bank or
the Subcustodian.
(c) Bank is authorized, in its discretion, to hold in bearer form, such
Financial Assets as are customarily held in bearer form; and to register in the
name of Customer on behalf of Company's International Equity Fund or Customer on
behalf of Company's Core International Equity Fund, Bank, a Subcustodian, a
Securities Depository, or their respective nominees, such Financial Assets as
are customarily held in registered form. Customer authorizes Bank or its
Subcustodian to hold Financial Assets in omnibus accounts and will accept
delivery of Financial Assets of the same class and denomination as those
deposited with Bank or its Subcustodian.
2.4 SETTLEMENT OF TRADES.
When Bank receives an Instruction directing settlement of a trade in
Financial Assets that includes all information required by Bank, Bank will use
reasonable care to effect such settlement as instructed. Settlement of purchases
and sales of Financial Assets will be conducted in accordance with prevailing
standards of the market in which the transaction occurs. The risk of loss will
be Customer's whenever Bank delivers Financial Assets or payment in accordance
with applicable market practice in advance of receipt or settlement of the
expected consideration. In the case of the failure of Customer's counterparty to
deliver the expected consideration as agreed, Bank will contact the counterparty
to seek settlement, but Bank will not be obligated to institute legal
proceedings, file proof of claim in any insolvency proceeding, or take any
similar action. In connection with the foregoing, Bank may act for Customer (at
Customer's expense) upon Instructions after consultation with Customer.
2.5 CONTRACTUAL SETTLEMENT DATE ACCOUNTING.
(a) Bank will effect book entries on a "contractual settlement date accounting"
basis as described below with respect to the settlement of trades in those
markets where Bank generally offers contractual settlement day accounting and
will notify Customer of these markets from time to time.
(i) SALES: On the settlement date for a sale, Bank will
credit the appropriate Cash Account with the sale
proceeds of the sale and transfer the relevant
Financial Assets to an account pending settlement of
the trade if not already delivered.
(ii) PURCHASES: On the settlement date for the purchase
(or earlier, if market practice requires delivery of
the purchase price before the settlement date), Bank
will debit the appropriate Cash Account with the
settlement monies and credit a separate account. Bank
then will post the appropriate Securities Account as
awaiting receipt of the expected Financial Assets.
Customer will not be entitled to the delivery of
Financial Assets that are awaiting receipt until Bank
or a Subcustodian actually receives them.
Bank reserves the right to restrict in good faith the availability of
contractual day settlement accounting for credit reasons.
(b) Bank may (in its discretion) upon oral or written notification to Customer
reverse any debit or credit made pursuant to Section 2.5(a) prior to a
transaction's actual settlement, and Customer will be responsible for any costs
or liabilities resulting from such reversal. Customer acknowledges that the
procedures described in this sub-section are of an administrative nature, and
Bank does not undertake to make loans and/or Financial Assets available to
Customer.
2.6 ACTUAL SETTLEMENT DATE ACCOUNTING.
With respect to any sale or purchase transaction that is not posted to
the Account on the contractual settlement date as referred to in Section 2.5,
Bank will post the transaction on the date on which the cash or Financial Assets
received as consideration for the transaction is actually received by Bank.
2.7 INCOME COLLECTION; AUTOCREDIT.
(a) Bank will credit the appropriate Cash Account with income and redemption
proceeds on Financial Assets in accordance with the times notified by Bank from
time to time on or after the anticipated payment date, net of any taxes that are
withheld by Bank or any third party. Where no time is specified for a particular
market, income and redemption proceeds from Financial Assets will be credited
only after actual receipt and reconciliation. Bank may reverse such credits upon
oral or written notification to Customer that Bank believes that the
corresponding payment will not be received by Bank within a reasonable period or
such credit was incorrect.
(b) Bank will make reasonable endeavors in its discretion to contact appropriate
parties to collect unpaid interest, dividends or redemption proceeds, but
neither Bank nor its Subcustodians will be obliged to file any formal notice of
default, institute legal proceedings, file proof of claim in any insolvency
proceeding, or take any similar action.
2.8 FRACTIONS/ REDEMPTIONS BY LOT.
Bank may sell fractional interests in Financial Assets and credit the
appropriate Cash Account with the proceeds of the sale. If some, but not all, of
an outstanding class of Financial Asset is called for redemption, Bank may allot
the amount redeemed among the respective beneficial holders of such class of
Financial Asset in any manner Bank deems to be fair and equitable.
2.9 PRESENTATION OF COUPONS; CERTAIN OTHER MINISTERIAL ACTS.
Until Bank receives Instructions to the contrary, Bank will:
(a) present all Financial Assets for which Bank has received notice of a call
for redemption or that have otherwise matured, and all income and interest
coupons and other income items that call for payment upon presentation;
(b) execute in the name of Customer such certificates as may be required to
obtain payment in respect of Financial Assets; and
(c) exchange interim or temporary documents of title held in the Securities
Account for definitive documents of title.
2.10 CORPORATE ACTIONS.
(a) Bank will follow Corporate Actions and promptly advise Customer of those
Corporate Actions of which Bank's central corporate actions department receives
notice from the issuer or from the Securities Depository in which such Financial
Assets are maintained or notice published in publications and reported in
reporting services routinely used by Bank for this purpose.
(b) If an Authorized Person fails to provide Bank with timely Instructions with
respect to any Corporate Action, neither Bank nor its Subcustodians or their
respective nominees will take any action in relation to that Corporate Action,
except as otherwise agreed in writing by Bank and Customer or as may be set
forth by Bank as a default action in the advice it provides under Section 2.10
(a) with respect to that Corporate Action. Until further Instruction from
Customer to the contrary, where a rights entitlement or a fractional interest
resulting from a rights issue, stock dividend, stock split or similar Corporate
Action is received which bears an expiration date, Bank shall use reasonable
efforts to obtain Instructions from Customer or its Authorized Person, but if
Instructions are not received in time for Bank to take timely action, or actual
notice of such Corporate Action was received too late to seek Instructions, Bank
is authorized to sell such rights entitlement or fractional interest and to
credit the Deposit Account with the proceeds or take any other action it deems,
in good faith and without negligence, to be appropriate in which case it shall
be held harmless for any such action.
2.11 PROXY VOTING.
(a) Subject to and upon the terms of this sub-section, Bank will provide
Customer with information which it receives on matters to be voted upon at
meetings of holders of Financial Assets ("NOTIFICATIONS"), and Bank will act in
accordance with Customer's Instructions in relation to such Notifications ("THE
ACTIVE PROXY VOTING SERVICE"). If information is received by Bank at its proxy
voting department too late to permit timely voting by Customer, Bank's only
obligation is to provide, so far as reasonably practicable, a Notification (or
summary information concerning a Notification) on an "information only" basis.
(b) The active proxy voting service is available only in certain markets,
details of which are available from Bank on request. Provision of the active
proxy voting service is conditional upon receipt by Bank of a duly completed
enrollment form as well as additional documentation that may be required for
certain markets.
(c) Bank will act upon Instructions to vote on matters referred to in a
Notification, provided Instructions are received by Bank at its proxy voting
department by the deadline referred to in the relevant Notification. If
Instructions are not received in a timely manner, Bank will not be obligated to
provide further notice to Customer.
(d) Bank reserves the right to provide Notifications or parts thereof in the
language received. Bank will attempt in good faith to provide accurate and
complete Notifications, whether or not translated.
(e) Customer acknowledges that Notifications and other information furnished
pursuant to the active proxy voting service ("INFORMATION") are proprietary to
Bank and that Bank owns all intellectual property rights, including copyrights
and patents, embodied therein, except that the foregoing shall not apply to
information which is in the public domain or which Customer can demonstrate by
written evidence was obtained independently by Customer or Company without
wrongdoing. Accordingly, Customer will not make any use of such information
except in connection with the active proxy voting service.
(f) In markets where the active proxy voting service is not available or where
Bank has not received a duly completed enrollment form or other relevant
documentation, Bank will not provide Notifications to Customer but will endeavor
to act upon Instructions to vote on matters before meetings of holders of
Financial Assets where it is reasonably practicable for Bank (or its
Subcustodians or nominees as the case may be) to do so and where such
Instructions are received in time for Bank to take timely action (the "PASSIVE
PROXY VOTING SERVICE").
(g) Customer acknowledges that the provision of proxy voting services (whether
active or passive) may be precluded or restricted under a variety of
circumstances. These circumstances include, but are not limited to: (i) the
Financial Assets being on loan or out for registration, (ii) the pendency of
conversion or another corporate action, or (iii) Financial Assets being held at
Customer's request in a name not subject to the control of Bank or its
Subcustodian, in a margin or collateral account at Bank or another bank or
broker, or otherwise in a manner which affects voting, local market regulations
or practices, or restrictions by the issuer. Additionally, in some cases Bank
may be required to vote all shares held for a particular issue for all of Bank's
customers in the same way. Bank will inform Customer where this is the case.
(h) Notwithstanding the fact that Bank may act in a fiduciary capacity with
respect to Customer under other agreements or otherwise hereunder, in performing
active or passive voting proxy services Bank will be acting solely as the agent
of Customer, and will not exercise any discretion with regard to such proxy
services or vote any proxy except when directed by an Authorized Person.
2.12 STATEMENTS AND INFORMATION AVAILABLE ON-LINE.
(a) Bank will issue statements to Customer at times mutually agreed identifying
the Financial Assets and cash in the Accounts. Bank also will provide additional
statements containing this information upon Customer's request. Additionally,
Bank will send (or, if agreed to in writing by Customer) make available on-line
to) Customer an advice or notification of any transfers of cash or Financial
Assets with respect to the Accounts. Bank will be not be liable with respect to
any matter set forth in those portions of any such statement to which Customer
has not given Bank a written exception or objection within sixty (60) days of
receipt of the statement, except that Bank shall be liable for its negligence in
preparing any such statement and in maintaining its own records.
(b) Prices and other information obtained from third parties which may be
contained in any statement sent to Customer have been obtained from sources Bank
believes to be reliable. Bank does not, however, make any representation as to
the accuracy of such information or that the prices specified necessarily
reflect the proceeds that would be received on a disposal of the relevant
Financial Assets. References in this Agreement to statements include any
statements in electronic form.
(c) Customer acknowledges that records and unaudited reports available to it
on-line will be unaudited and may not be accurate due to inaccurate pricing,
delays in updating Account records, and other causes. Bank will not be liable
for any loss or damage arising out of the inaccuracy of any such records or
unaudited reports accessed on-line.
2.13 ACCESS TO BANK'S RECORDS.
Bank will allow Customer's and a given Company's independent public
accountants such reasonable access to the records of Bank relating to Financial
Assets as is required in connection with their examination of books and records
pertaining to Customer's and a given Company's affairs. Subject to restrictions
under Applicable Law, Bank will also obtain an undertaking to permit Customer's
and a given Company's independent public accountants reasonable access to the
records of any Subcustodian of Securities held in the Securities Account as may
be required in connection with such examination.
2.14 MAINTENANCE OF FINANCIAL ASSETS AT BANK AND SUBCUSTODIAN LOCATIONS.
(a) Unless Instructions (as detailed in Article 3) require another location
acceptable to Bank, Financial Assets will be held in the country or jurisdiction
in which their principal trading market is located, where such Financial Assets
may be presented for payment, where such Financial Assets were acquired, or
where such Financial Assets are held. Bank reserves the right to refuse to
accept delivery of Financial Assets or cash in countries and jurisdictions other
than those referred to in Schedule 1 to this Agreement, as in effect from time
to time.
(b) Bank will not be obliged to follow an Instruction to hold Financial Assets
with, or have them registered or recorded in the name of, any person not chosen
by Bank. However, if Customer does instruct Bank to hold Securities with or
register or record Securities in the name of a person not chosen by Bank, the
consequences of doing so are at Customer's own risk and Bank will not be liable
therefor.
2.15 TAX RECLAIMS.
Bank will provide tax reclamation services as provided in Section 8.2.
2.16 FOREIGN EXCHANGE TRANSACTIONS.
To facilitate the administration of Customer's trading and investment
activity, Bank may, but will not be obliged to, enter into spot or forward
foreign exchange contracts with Customer, or an Authorized Person, and may also
provide foreign exchange contracts and facilities through its Affiliates or
Subcustodians. Instructions, including standing instructions, may be issued with
respect to such contracts, but Bank may establish rules or limitations
concerning any foreign exchange facility made available. In all cases where
Bank, its Affiliates or Subcustodians enter into a master foreign exchange
contract that covers foreign exchange transactions for the Accounts, the terms
and conditions of that foreign exchange contract and, to the extent not
inconsistent, this Agreement, will apply to such transactions.
3. INSTRUCTIONS
3.1 ACTING ON INSTRUCTIONS; UNCLEAR INSTRUCTIONS.
(a) Bank is authorized to act under this Agreement (or to refrain from taking
action) in accordance with the instructions received by Bank, via telephone,
telex, facsimile transmission, or other teleprocess or electronic instruction or
trade information system acceptable to Bank ("Instructions"). Bank will have no
responsibility for the authenticity or propriety of any Instructions that Bank
believes in good faith to have been given by Authorized Persons or which are
transmitted with proper testing or authentication pursuant to terms and
conditions that Bank may specify. Customer authorizes Bank to accept and act
upon any Instructions received by it without inquiry provided that such
acceptance and action was in good faith. Provided that the manner in which Chase
performed an Instruction did not constitute negligence or willful misconduct,
Customer will indemnify the Bank Indemnitees against, and hold each of them
harmless from, any Liabilities that may be imposed on, incurred by, or asserted
against the Bank Indemnitees as a result of any action or omission taken in
accordance with any Instructions or other directions upon which Bank is
authorized to rely under the terms of this Agreement.
(b) Unless otherwise expressly provided, all Instructions will continue in full
force and effect until canceled or superseded.
(c) Bank may (in its sole discretion and without affecting any part of this
Section 3.1) seek clarification or confirmation of an Instruction from an
Authorized Person and may decline to act upon an Instruction if it does not
receive clarification or confirmation satisfactory to it. Bank will not be
liable for any loss arising from any delay while it seeks such clarification or
confirmation.
(d) In executing or paying a payment order Bank may rely upon the identifying
number (e.g. Fedwire routing number or account) or any party as instructed in
the payment order. Customer assumes full responsibility for any inconsistency
between the name and identifying number of any party in payment orders issued to
Bank in Customer's name.
3.2 CONFIRMATION OF ORAL INSTRUCTIONS/ SECURITY DEVICES.
Any Instructions delivered to Bank by telephone will promptly
thereafter be confirmed in writing by an Authorized Person. Each confirmation is
to be clearly marked "Confirmation." Bank will not be liable for having followed
such Instructions notwithstanding the failure of an Authorized Person to send
such confirmation in writing or the failure of such confirmation to conform to
the telephone Instructions received. Either party may record any of their
telephonic communications. Customer will comply with any security procedures
reasonably required by Bank from time to time with respect to verification of
Instructions. Customer will be responsible for safeguarding any test keys,
identification codes or other security devices that Bank will make available to
Customer or any Authorized Person.
3.3 INSTRUCTIONS; CONTRARY TO LAW/MARKET PRACTICE.
Bank need not act upon Instructions which it reasonably
believes to be contrary to law, regulation or market practice but will be under
no duty to investigate whether any Instructions comply with Applicable Law or
market practice.
3.4 CUT-OFF TIMES.
Bank has established cut-off times for receipt of some categories of
Instruction, which will be made available to Customer. If Bank receives an
Instruction after its established cut-off time, it will attempt to act upon the
Instruction on the day requested if Bank deems it practicable to do so or
otherwise as soon as practicable after that day.
4. FEES, EXPENSES AND OTHER AMOUNTS OWING TO BANK
4.1 FEES AND EXPENSES.
Customer will pay Bank for its services hereunder the fees set forth in
Schedule B hereto or such other amounts as may be agreed upon in writing from
time to time, together with Bank's reasonable out-of-pocket or incidental
expenses, including, but not limited to, legal fees. Customer authorizes Bank to
charge any Cash Accounts, for any such fees or expenses.
4.2 OVERDRAFTS.
If a debit to the Cash Account results (or will result) in a debit
balance, then Bank may, in its discretion, (i) advance an amount equal to the
overdraft, (ii) or reject the settlement in whole or in any part, or (iii) if
posted to the Securities Account, reverse the posting of the Financial Assets
credited to the Securities Account. If Bank elects to make such an advance, the
advance will be deemed a loan to Customer, payable on demand, bearing interest
at the rate charged by Bank from time to time, for overdrafts incurred by
customers similar to Customer, from the date of such advance to the date of
payment (both after as well as before judgment) and otherwise on the terms on
which Bank makes similar overdrafts available from time to time. No prior action
or course of dealing on Bank's part with respect to the settlement of
transactions on Customer's behalf will be asserted by Customer against Bank for
Bank's refusal to make advances to the Cash Account or to settle any transaction
for which Customer does not have sufficient available funds in the Account.
4.3 BANK'S RIGHT OVER SECURITIES; SET-OFF.
(a) Customer grants Bank a security interest in and a lien on the Financial
Assets held in the Securities Account as security for any and all amounts which
are now or become owing to Bank under any provision of this Agreement, whether
or not matured or contingent ("Indebtedness").
(b) Bank will be further entitled to set any such Indebtedness off against any
cash or deposit account with Bank or any of its Affiliates of which Customer is
the beneficial owner, regardless of the currency involved. Bank will notify
Customer in advance of any such charge unless Bank reasonably believes that it
might prejudice its interests to do so and, in such event, Bank will notify
Customer promptly afterwards.
5. SUBCUSTODIANS, SECURITIES DEPOSITORIES, AND OTHER AGENTS
5.1 APPOINTMENT OF SUBCUSTODIANS; USE OF SECURITIES DEPOSITORIES.
(a) Bank is authorized under this Agreement to act through and hold Customer's
Financial Assets with subcustodians, being at the date of this Agreement the
entities listed in Schedule 1 and/or such other entities as Bank may appoint as
subcustodians ("SUBCUSTODIANS"). Bank will give Customer reasonable notice of
the anticipated appointment of additional Subcustodians Bank will use reasonable
care in the selection and continued appointment of such Subcustodians. In
addition, Bank and each Subcustodian may deposit Financial Assets with, and hold
Financial Assets in, any securities depository (as defined in Securities and
Exchange Commission Rule l7f-4 under the Investment Company Act of 1940, as
amended ("1940 Act")), settlement system, dematerialized book entry system or
similar system (together a "SECURITIES DEPOSITORY") on such terms as such
systems customarily operate and Customer will provide Bank with such
documentation or acknowledgements that Bank may require to hold the Financial
Assets in such systems.
(b) Any Financial Assets in the Accounts held by a Subcustodian shall be subject
only to the instructions of Bank or its agent. Any Financial Assets held in a
securities depository for the account of a Subcustodian shall be subject only to
the instructions of such Subcustodian. Any agreement Bank enters into with a
Subcustodian for holding Bank's customers' assets shall provide that such assets
shall not be subject to any right, charge, security interest, lien or claim of
any kind in favor of such Subcustodian or its creditors except a claim of
payment for their safe custody or administration or, in the case of cash
deposits, except for liens or rights in favor of creditors of the Subcustodian
arising under bankruptcy, insolvency or similar laws, and that the beneficial
ownership of such assets shall be freely transferable without the payment of
money or value other than for safe custody or administration. Where a
Subcustodian deposits Securities with a Securities Depository, Bank will cause
the Subcustodian to identify on its records as belonging to Bank, as agent the
Securities shown on the Subcustodian's account at such Securities Depository.
The foregoing will not apply to the extent of any special agreement or
arrangement made by Customer with any particular Subcustodian.
(c) Bank will have no responsibility for any act or omission by (or the
insolvency of) any Securities Depository. In the event Customer incurs a loss
due to the negligence, willful misconduct, or insolvency of a Securities
Depository, Bank will make reasonable endeavors, in its discretion, to seek
recovery from the Securities Depository.
5.2 LIABILITY FOR SUBCUSTODIANS.
(a) Subject to Section 7.1(b), Bank will be liable for direct losses incurred by
Customer that result from:
(i) the failure by the Subcustodian to use reasonable
care in the provision of custodial services by it in
accordance with the standards prevailing in the
relevant market or from the fraud or willful default
of such Subcustodian in the provision of custodial
services by it; or
(ii) the insolvency of any Affiliated Subcustodian.
(b) Subject to Section 5.1(a) and Bank's duty to use reasonable care in the
monitoring of a Subcustodian's financial condition as reflected in its published
financial statements and other publicly available financial information
concerning it, Bank will not be responsible for the insolvency of any
Subcustodian which is not a branch or an Affiliated Subcustodian.
(c) Bank reserves the right to add, replace or remove Subcustodians. Bank will
give prompt notice of any such action, which will be advance notice if
practicable. Upon request by Customer, Bank will identify the name, address and
principal place of business of any Subcustodian and the name and address of the
governmental agency or other regulatory authority that supervises or regulates
such Subcustodian.
5.3 USE OF AGENTS.
(a) Bank may provide certain services under this Agreement through third
parties. These third parties may be Affiliates. Except to the extent provided in
Section 5.2 with respect to Subcustodians, Bank will not be responsible for any
loss as a result of a failure by any broker or any other third party that it
selects and retains using reasonable care to provide ancillary services, such as
pricing, proxy voting, and corporate action services, that it does not
customarily provide itself except that Bank shall be responsible for negligence
or bad faith in the appointment of any such broker or any other third party.
Nevertheless, Bank will be liable for the performance of any such service
provider selected by Bank that is an Affiliate to the same extent as Bank would
have been liable if it performed such services itself.
(b) Bank will execute transactions involving Financial Assets of United States
origin through a broker which is an Affiliate (i) in the case of the sale under
Section 2.8 of a fractional interest or (ii) if an Authorized Person directs
Bank to use the affiliated broker or otherwise requests that Bank select a
broker for that transaction, unless, in either case, the Affiliate does not
execute similar transactions in such Financial Assets. The affiliated broker may
charge its customary commission (or retain its customary spread) with respect to
either such transaction.
6. ADDITIONAL PROVISIONS RELATING TO CUSTOMER
6.1 REPRESENTATIONS OF CUSTOMER.
Customer represents and warrants that (i) it has full authority and
power, and has obtained all necessary authorizations and consents, to deposit
and control the Financial Assets and cash in the Accounts, to use Bank as its
custodian in accordance with the terms of this Agreement and to incur
indebtedness, pledge Financial Assets as contemplated by Section 4.3, and enter
into foreign exchange transactions; and (ii) this Agreement is its legal, valid
and binding obligation, enforceable in accordance with its terms and it has full
power and authority to enter into and has taken all necessary corporate action
to authorize the execution of this Agreement. Bank may rely upon the above or
the certification of such other facts as may be required to administer Bank's
obligations hereunder.
6.2 CUSTOMER TO PROVIDE CERTAIN INFORMATION TO BANK.
Upon request, Customer will promptly provide to Bank such information
about itself and its financial status as Bank may reasonably request, including
Customer's organizational documents and its current audited and unaudited
financial statements.
6.3 CUSTOMER IS LIABLE TO BANK EVEN IF IT IS ACTING FOR ANOTHER PERSON.
If Customer is acting as an agent for a disclosed or undisclosed
principal in respect of any transaction, cash, or Financial Asset, Bank
nevertheless will treat Customer as its principal for all purposes under this
Agreement. In this regard, Customer will be liable to Bank as a principal in
respect of any transactions relating to the Account. The foregoing will not
affect any rights Bank might have against Customer's principal.
7. WHEN BANK IS LIABLE TO CUSTOMER
7.1 STANDARD OF CARE; LIABILITY.
(a) Bank will use reasonable care in performing its obligations under this
Agreement. Bank will not be in violation of this Agreement with respect to any
matter as to which it has satisfied its obligation of reasonable care.
(b) Bank will be liable for Customer's and Company's direct damages to the
extent they result from Bank's negligence or willful misconduct in performing
its duties as set out in this Agreement and to the extent provided for in
Section 5.2(a). Nevertheless, under no circumstances will Bank be liable for any
indirect, consequential or special damages (including, without limitation, lost
profits) of any form, whether or not foreseeable and regardless of the type of
action in which such a claim may be brought, with respect to the Accounts or
Bank's performance hereunder or its role as custodian.
(c) Customer will indemnify the Bank Indemnitees against, and hold them harmless
from, any Liabilities that may be imposed on, incurred by or asserted against
any of the Bank Indemnitees in connection with or arising out of Bank's
performance under this Agreement, provided the Bank Indemnitees have not acted
with negligence or engaged in fraud or willful misconduct in connection with the
Liabilities in question. Nevertheless, Customer will not be obligated to
indemnify any Bank Indemnity under the preceding sentence with respect to any
Liability for which Bank is liable under Section 5.2 of this Agreement.
(d) Without limiting Subsections 7.1 (a), (b) or (c), Bank will have no duty or
responsibility to: (i) question Instructions or make any suggestions to Customer
or an Authorized Person regarding such Instructions; (ii) supervise or make
recommendations with respect to investments or the retention of Financial
Assets; (iii) advise Customer or an Authorized Person regarding any default in
the payment of principal or income of any security other than as provided in
Section 2.7(b) of this Agreement; (iv) evaluate or report to Customer or an
Authorized Person regarding the financial condition of any broker, agent or
other party to which Bank is instructed to deliver Financial Assets or cash
(other than an Affiliate); or (v) review or reconcile trade confirmations
received from brokers (and Customer or its Authorized Persons issuing
Instructions will bear any responsibility to review such confirmations against
Instructions issued to and statements issued by Bank).
7.2 FORCE MAJEURE.
Bank will maintain and update from time to time business
continuation and disaster recovery procedures with respect to its global custody
business that it determines from time to time meet reasonable commercial
standards. Bank will have no liability, however, for any damage, loss, expense
or liability of any nature that Customer may suffer or incur, caused by an act
of God, fire, flood, civil or labor disturbance, war, act of any governmental
authority or other act or threat of any authority (de jure or de facto), legal
constraint, fraud or forgery, malfunction of equipment or software (except to
the extent such malfunction is attributable to Bank's negligence in maintaining
the equipment or software), failure of or the effect of rules or operations of
any external funds transfer system, inability to obtain or interruption of
external communications facilities, or any cause beyond the reasonable control
of Bank (including without limitation, the non-availability of appropriate
foreign exchange).
7.3 BANK MAY CONSULT WITH COUNSEL.
Bank will be entitled to rely on, and may act upon the advice of
professional advisers in relation to matters of law, regulation or market
practice (which may be the professional advisers of Customer), and will not be
liable to Customer for any action reasonably taken or omitted pursuant to such
advice.
7.4 BANK PROVIDES DIVERSE FINANCIAL SERVICES AND MAY GENERATE PROFITS AS A
RESULT.
Customer acknowledges that Bank or its Affiliates may have a material
interest in the transaction or that circumstances are such that Bank may have a
potential conflict of duty or interest. For example, Bank or its Affiliates may
act as a market maker in the Financial Assets to which Instructions relate,
provide brokerage services to other customers, act as financial adviser to the
issuer of such Financial Assets, act in the same transaction as agent for more
than one customer, have a material interest in the issue of the Financial
Assets; or earn profits from any of these activities. Customer acknowledges that
Bank or its Affiliates may be in possession of information tending to show that
the Instructions received may not be in the best interests of Customer. Bank is
not under any duty to disclose any such information.
8. TAXATION
8.1 TAX OBLIGATIONS.
(a) Customer confirms that Bank is authorized to deduct from any cash received
or credited to the Cash Accounts any taxes or levies required by any revenue or
governmental authority for whatever reason in respect of Customer's Accounts.
(b) If Bank does not receive appropriate declarations, documentation and
information then additional United Kingdom taxation will be deducted from all
income received in respect of the Financial Assets issued outside the United
Kingdom and United States non-resident alien tax will be deducted from United
States source income. Customer will provide to Bank such certifications,
documentation, and information as it may require in connection with taxation,
and warrants that, when given, this information is true and correct in every
respect, not misleading in any way, and contains all material information.
Customer undertakes to notify Bank immediately if any information requires
updating or correcting.
(c) Customer will be responsible for the payment of all taxes relating to the
Financial Assets in the Securities Accounts, and Customer will pay, indemnify
and hold Bank harmless from and against any and all liabilities, penalties,
interest or additions to tax with respect to or resulting from, any delay in, or
failure by, Bank (1) to pay, withhold or report any U.S. federal, state or local
taxes or foreign taxes imposed on, or (2) to report interest, dividend or other
income paid or credited to the Cash Accounts, whether such failure or delay by
Bank to pay' withhold or report tax or income is the result of (x) Customer's
failure to comply with the terms of this paragraph, or (y) Bank's own acts or
omissions; provided however, Customer will not be liable to Bank for any penalty
or additions to tax due as a result of Bank's failure to pay or withhold tax or
to report interest, dividend or other income paid or credited to the Cash
Account to the extent resulting from Bank's negligent acts or omissions.
8.2 TAX RECLAIMS.
(a) Subject to the provisions of this Section, Bank will apply for a reduction
of withholding tax and any refund of any tax paid or tax credits in respect of
income payments on Financial Assets credited to the Securities Account that Bank
believes may be available.
(b) The provision of a tax reclamation service by Bank is conditional upon Bank
receiving from Customer (i) a declaration of its identity and place of residence
and (ii) certain other documentation (pro forma copies of which are available
from Bank). If Financial Assets credited to the Account are beneficially owned
by someone other than Customer, this information will be necessary with respect
to the beneficial owner. Customer acknowledges that Bank will be unable to
perform tax reclamation services unless it receives this information.
(c) Bank will perform tax reclamation services only with respect to taxation
levied by the revenue authorities of the countries advised to Customer from time
to time and Bank may, by prior notification in writing, in its absolute
discretion, supplement or amend the countries in which the tax reclamation
services are offered. Other than as expressly provided in this Section 8.2 Bank
will have no responsibility with regard to Customer's tax position or status in
any jurisdiction.
(d) Customer confirms that Bank is authorized to disclose any information
requested by any revenue authority or any governmental body in relation to the
processing of any tax reclaim.
9. TERMINATION
Any party may terminate this Agreement on sixty days' notice in writing
to the other parties. If Customer gives notice of termination, it must provide
full details of the persons to whom Bank must deliver Financial Assets and cash.
If Bank gives notice of termination, then Customer must, within sixty days,
notify Bank of details of its new custodian, failing which Bank may elect (at
any time after the sixty day notice period) either to retain the Financial
Assets and cash until such details are given, continuing to charge fees due (in
which case Bank's sole obligation will be for the safekeeping of the Financial
Assets and cash), or deliver the Financial Assets and cash to Customer. Bank
will in any event be entitled to deduct any amounts owing to it prior to
delivery of the Financial Assets and cash (and, accordingly, Bank will be
entitled to sell Financial Assets and apply the sale proceeds in satisfaction of
amounts owing to it). Customer will reimburse Bank promptly for all
out-of-pocket expenses it incurs in delivering Financial Assets upon
termination. Termination will not affect any of the liabilities either party
owes to the other arising under this Agreement prior to such termination.
10. MISCELLANEOUS
10.1 NOTICES.
Notices (other than Instructions) will be served by registered mail or
hand delivery to the address of the respective parties as set out on the first
page of this Agreement, unless notice of a new address is given to the other
party in writing. Notice will not be deemed to be given unless it has been
received.
10.2 SUCCESSORS AND ASSIGNS.
This Agreement will be binding on each of the parties' successors and
assigns, but the parties agree that no party can assign its rights and
obligations under this Agreement without the prior written consent of the other
parties, which consent will not be unreasonably withheld.
10.3 INTERPRETATION.
Headings are for convenience only and are not intended to affect
interpretation. References to sections are to sections of this Agreement and
references to sub-sections and paragraphs are to subsections of the sections and
paragraphs of the sub-sections in which they appear.
10.4 ENTIRE AGREEMENT.
(a) The following Rider(s) are incorporated into this Agreement:
____ Cash Trade Execution;
X Mutual Fund
____ Domestic
(b) This Agreement, including the Schedules, Exhibits, and Riders (and any
separate agreement which Bank and Customer may enter into with respect to any
Cash Account), sets out the entire Agreement between the parties in connection
with the subject matter, and this Agreement supersedes any other agreement,
statement or representation relating to custody, whether oral or written.
Amendments must be in writing and signed by both parties.
10.5 INFORMATION CONCERNING DEPOSITS AT BANK'S LONDON BRANCH.
Bank's London Branch is a member of the United Kingdom Deposit
Protection Scheme (the "SCHEME") established under Banking Act 1987 (as
amended). The Scheme provides that in the event of Bank's insolvency payments
may be made to certain customers of Bank's London Branch. Payments under the
Scheme are limited to 90% of a depositor's total cash deposits subject to a
maximum payment to any one depositor of f.18,000 (or ECU 20,000 if greater).
Most deposits denominated in sterling and other European Economic Area
Currencies and ECU made with Bank within the United Kingdom are covered. Further
details of the Scheme are available on request.
10.6 CONFIDENTIALITY.
Bank will not disclose any confidential information concerning the
Financial Assets and/or cash held for Customer except as is reasonably necessary
to provide services to Customer, as required by law or regulation or the
organizational documents of the issuer of any Financial Asset, or otherwise with
the consent of Customer. Customer agrees to keep this Agreement confidential
and, except where disclosure is required by law or regulation, will only
disclose it (or any part of it) with the prior written consent of Bank. Bank
acknowledges that this Agreement will be filed as an exhibit to the Company's
Registration Statement under the 1940 Act.
10.7 INSURANCE.
Bank will not be required to maintain any insurance coverage for the
benefit of Customer.
10.8 GOVERNING LAW AND JURISDICTION.
This Agreement will be construed, regulated, and administered under the
laws of the United States or State of New York, as applicable, without regard to
New York's principles regarding conflicts of law. The United States District
Court for the Southern District of New York will have the sole and exclusive
jurisdiction over any lawsuit or other judicial proceeding relating to or
arising from this Agreement. If that court lacks federal subject matter
jurisdiction, the Supreme Court of the State of New York, New York County will
have sole and exclusive jurisdiction. Either of these courts will have proper
venue for any such lawsuit or judicial proceeding, and the parties waive any
objection to venue or their convenience as a forum. The parties agree to submit
to the jurisdiction of any of the courts specified and to accept service of
process to vest personal jurisdiction over them in any of these courts. The
parties further hereby knowingly, voluntarily and intentionally waive, to the
fullest extent permitted by applicable law, any right to a trial by jury with
respect to any such lawsuit or judicial proceeding arising or relating to this
Agreement or the transactions contemplated hereby.
10.9 SEVERABILITY AND WAIVER; COUNTERPARTS.
(a) If one or more provisions of this Agreement are held invalid, illegal or
unenforceable in any respect on the basis of any particular circumstances or in
any jurisdiction, the validity, legality and enforceability of such provision or
provisions under other circumstances or in other jurisdictions and of the
remaining provisions will not in any way be affected or impaired. This Agreement
may be executed in several counterparts each of which will be deemed to be an
original and together will constitute one and the same agreement.
(b) Except as otherwise provided herein, no failure or delay on the part of
either party in exercising any power or right hereunder operates as a waiver,
nor does any single or partial exercise of any power or right preclude any other
or further exercise, or the exercise of any other power or right. No waiver by a
party of any provision of this Agreement or waiver of any breach or default, is
effective unless in writing and signed by the party against whom the waiver is
to be enforced.
10.10 YEAR 2000.
YEAR 2000. Bank confirms that it is aware of the problem that may be
presented for certain computer systems by use of date fields and the like on and
after January 1, 2000 and that it has developed and has substantially completed
implementation of a program to help assure that its systems as the same relate
to services provided hereunder will be unaffected by such problems.
10.11 SEPARATE PORTFOLIOS.
The parties acknowledge that each of the International Equity Fund and
the Core International Equity Fund is a separate investment portfolio of the
Company and that the obligations of the Company hereunder are limited to the
International Equity Fund and the Core International Equity Fund, as the case
may be, and any amounts owed by the Company hereunder shall be paid out of the
assets and property of the International Equity Fund and the Core International
Equity Fund, as the case may be.
FIRSTAR BANK MILWAUKEE, N.A.
By: /S/ MICHAEL R. MCVOY
Title: Michael R. McVoy, Vice President
THE CHASE MANHATTAN BANK
By: /S/ KATHLEEN H. ROEDER
Title: Kathleen H. Roeder, Vice President
Chase Manhattan Bank
FIRSTAR FUNDS, INC.
By: /S/ LAURA J. RAUMAN
Title: Laura J. Rauman, Vice President
CHASE GLOBAL SECURITIES SERVICES
FEE AGREEMENT BETWEEN
THE CHASE MANHATTAN BANK, N.A.
AND
FIRSTAR TRUST COMPANY
I. PORTFOLIO BASIS POINT FEE
MARKET VALUE BASIS POINTS
$0 TO $ 150MM 14.0
$151MM TO $200MM 12.0
0VER$S200MM 10.0
II. GLOBAL STANDARD PRICE BY COUNTRY BANDS (SEE ATTACHED)
ASSET HOLDINGS FEE PER TRANSACTION FEE
BAND "A" -0- BASIS POINTS $30.00
BAND "B" -0- BASIS POINTS $40.00
BAND "C" -0- BASIS POINTS $60.00
BAND "D" -0- BASIS POINTS $90.00
BAND "E" -0- BASIS POINTS $100.00
BAND "F" -0- BASIS POINTS $120.00
BAND "G" 20.0 BASIS POINTS $135.00
BAND "H" 25.0 BASIS POINTS $140.00
III. OUT OF POCKET EXPENSES
BILLED AS INCURRED (E.G. SCRIP FEES, TRANSPORTING SECURITIES OUT OF THE LOCAL
MKT.)
IV. GLOBAL SECURITIES LENDING
60%/40% SPLIT IN CLIENTS FAVOR (50%/50% WITH INDEMNIFICATION)
V. INFOSTATION
CURRENT INSTALLATIONS AT FIRSTAR ARE FREE. ADDITIONAL OR CLIENT INSTALLS ARE
SUBJECT TO A $2500/INSTALLATION FEE PLUS EXPENSES
VI. ANNUAL VIP ACCOUNTING FEES VII. PROXY SERVICE FEES
MONTHLY - $15,000 PER PORTFOLIO NOTIFICATION - CDS $25 PER MEETING
FAX/TELEX $50 PER ACCOUNT
VOTING - $75/ACCOUNT
CHASE GLOBAL SECURITIES SERVICES
GLOBAL CUSTODY
GLOBAL BANDS
BAND "A" BAND "B" BAND "C"
- -------- -------- --------
JAPAN GERMANY AUSTRALIA NEW ZEALAND
CEDEL NETHERLANDS BELGIUM NORWAY
UNITED STATES CANADA DENMARK SWEDEN
EUROCLEAR SWITZERLAND FRANCE UNITED KINGDOM
IRELAND
BAND "D" BAND "E" BAND "F"
-------- -------- --------
AUSTRIA LUXEMBOURG MEXICO ARGENTINA JORDAN
FINLAND MALAYSIA SPAIN BRAZIL PAKISTAN
HONG KONG SINGAPORE THAILAND CHILE PHILIPPINES
ITALY TURKEY GREECE PORTUGAL
INDONESIA TAIWAN
EMERGING MARKETS BANDS
BAND "G" BAND "H"
Columbia Poland Peru
Hungary Shenzen
India Sri Lanka
Korea Venezuela
Investment Company Rider to Global Custody Agreement
Between The Chase Manhattan Bank and
FIRSTAR BANK MILWAUKEE, N.A. AND FIRSTAR FUNDS, INC.
effective November 3, 1999
The following modifications are made to the Agreement:
A. Add a new Section 2.17 to the Agreement as follows:
"2.17. COMPLIANCE WITH SEC RULE 17F-5.
(a) Company's board of directors (or equivalent body) (hereinafter `Board')
hereby delegates to Bank, and, except as to the country or countries as to which
Bank may, from time to time, advise Company that it does not accept such
delegation, Bank hereby accepts the delegation to it, of the obligation to
perform as Company's `Foreign Custody Manager' (as that term is defined in SEC
rule 17f-5(a)(2) as promulgated under the 1940 Act, both for the purpose of
selecting Eligible Foreign Custodians (as that term is defined in SEC rule
l7f-5(a)(1), and as the same may be amended from time to time, or that have
otherwise been made exempt pursuant to an SEC exemptive order) to hold Financial
Assets and Cash and of evaluating the contractual arrangements with such
Eligible Foreign Custodians (as set forth in SEC rule 17f-5(c)(2)); provided
that, the term Eligible Foreign Custodian shall not include any `Eligible
Securities Depository'. An Eligible Securities Depository for purposes hereof
shall have the same meaning as in SEC rule 17f-7 as proposed on April 29, 1999.
(Eligible Securities Depositories used by Bank as of the date hereof are set
forth in Appendix I -A hereto, and as the same may be amended on notice to
Customer from time to time.)
(b) In connection with the foregoing, Bank shall:
(i) provide written reports notifying Company's Board of the placement of
Financial Assets and Cash with particular Eligible Foreign Custodians and of any
material change in the arrangements with such Eligible Foreign Custodians, with
such reports to be provided to Company's Board at such times as the Board deems
reasonable and appropriate based on the circumstances of Company's foreign
custody arrangements (and until further notice from Company such reports shall
be provided not less than quarterly with respect to the placement of Financial
Assets and Cash with particular Eligible Foreign Custodians and with reasonable
promptness upon the occurrence of any material change in the arrangements with
such Eligible Foreign Custodians);
(ii) exercise such reasonable care, prudence and diligence in performing as
Company's Foreign Custody Manager as a person having responsibility for the
safekeeping of Financial Assets and cash would exercise;
(iii) in selecting an Eligible Foreign Custodian, first have determined
that Financial Assets and cash placed and maintained in the safekeeping of such
Eligible Foreign Custodian shall be subject to reasonable care, based on the
standards applicable to custodians in the relevant market, after having
considered all factors relevant to the safekeeping of such Financial Assets and
cash, including, without limitation, those factors set forth in SEC rule
l7f-5(c)(l)(i)-(iv);
(iv) determine that the written contract with an Eligible Foreign Custodian
requires that the Eligible Foreign Custodian will provide reasonable care for
Financial Assets and Cash based on the standards applicable to custodians in the
relevant market.
(v) have established a system to monitor the continued appropriateness of
maintaining Financial Assets and cash with particular Eligible Foreign
Custodians and of the governing contractual arrangements; it being understood,
however, that in the event that Bank shall have determined that the existing
Eligible Foreign Custodian in a given country would no longer afford Financial
Assets and cash reasonable care and that no other Eligible Foreign Custodian in
that country would afford reasonable care, Bank shall promptly so advise
Customer and Company and shall then act in accordance with the Instructions of
Customer with respect to the disposition of the affected Financial Assets and
cash.
Subject to (b)(i)-(v) above, Bank is hereby authorized to place and maintain
Financial Assets and cash on behalf of Company with Eligible Foreign Custodians
pursuant to a written contract deemed appropriate by Bank.
(c) Except as expressly provided herein, Customer shall be solely responsible to
assure that the maintenance of Financial Assets and cash hereunder complies with
the rules, regulations, interpretations and exemptive orders promulgated by or
under the authority of the SEC.
(d) Bank represents to Customer and Company that it is a U.S. Bank as defined in
Rule 17f5(a)(7). Company represents to Bank that: (1) the Financial Assets and
cash being placed and maintained in Bank's custody are subject to the 1940 Act,
as the same may be amended from time to time; (2) its Board: (i) has determined
that it is reasonable to rely on Bank to perform as Company's Foreign Custody
Manager (ii) or its investment adviser shall have determined that Company may
maintain Financial Assets and cash in each country in which Company's Financial
Assets and cash shall be held hereunder and determined to accept the risks
arising therefrom (including, but not limited to, a country's financial
infrastructure), prevailing custody and settlement practices, laws applicable to
the safekeeping and recovery of Financial Assets and cash held in custody, and
the likelihood of nationalization, currency controls and the like) (collectively
("Country Risk")). Nothing contained herein shall require Bank to make any
selection or to engage in any monitoring on behalf of Company that would entail
consideration of Country Risk.
(e) Bank shall provide to Customer and Company such information relating to
Country Risk as is specified in Appendix 1 -B hereto. Each of Company and
Customer hereby acknowledges that: (i) such information is solely designed to
inform Customer of market conditions and procedures and is not intended as a
recommendation to invest or not invest in particular markets; and (ii) Bank has
gathered the information from sources it considers reliable, but that Bank shall
have no responsibility for inaccuracies or incomplete information. For each
Eligible Securities Depository utilized or intended to be utilized by the
Company and as to which client assets are held by Bank, Bank shall provide the
Company with Bank's analysis of the clearing and settlement risks associated
with maintaining Assets with such Depositories to assist the Company in
determining the appropriateness of placing Company assets therein. The parties
shall amend or supplement this Amendment to accommodate subsequent amendments to
or clarifications by the SEC of Rule 17f-5 or other Rules (including, but not
limited to, proposed Rule 17f-7), promulgated under Section 17(f) of the Act as
they relate to the duties of a delegate under such Rules.
B. Add the following after the first sentence of Section 5.1(a) of the
Agreement: "At the request of Customer or Company, Bank may, but need not, add
to Schedule 1-A an Eligible Foreign Custodian where Bank has not acted as
Foreign Custody Manager with respect to the selection thereof. Bank shall notify
Customer and Company in the event that it elects to add any such entity."
C. Add the following language as Section 5.1 (d) of the Agreement:
(d) The term Subcustodian as used herein shall mean the following:
(i) a `U.S. Bank,' which shall mean a U.S. bank as defined in SEC rule
17f-5(a)(7);
(ii) an `Eligible Foreign Custodian,' which shall mean (i) a banking
institution or trust company, incorporated or organized under the laws of a
country other than the United States, that is regulated as such by that
country's government or an agency thereof, (ii) a majority-owned direct or
indirect subsidiary of a U.S. bank or bank holding company which subsidiary is
incorporated or organized under the laws of a country other than the United
States; and (iii) any other entity that shall have been so qualified by
exemptive order, rule or other appropriate action of the SEC.
For purposes of clarity, it is agreed that as used in Section 5.3(a), the term
Subcustodian shall not include any Eligible Foreign Custodian as to which Bank
has not acted as Foreign Custody Manager."
Appendix 1 -A
<TABLE>
<CAPTION>
ELIGIBLE SECURITIES DEPOSITORIES
- -------------------------------------------------------------------------------------------------------------------------------
SECURITIES DEPOSITORIES
AS OF SEPTEMBER 1999
- -------------------------------------------------------------------------------------------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
COUNTRY DEPOSITORY INSTRUMENT
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
<S> <C> <C>
Argentina Caja de Valores, S.A. Equity, Corporate + Government Debt
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Australia Austraclear Limited Corporate Debt, Money Market +
Semi-Government Debt
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Australia CHESS Equity
(The Cleaning House Electronic Sub-register System)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Australia RITS Government Debt
(Reserve Bank Information and Transfer System)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Austria OKA Equity, Corporate + Government Debt
(Ostorreichische Kontrolbank AG)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Belgium CIK Equity + Corporate Debt
(Cause interprofessionelle de Depots et de
Virements de Titres s.a.)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Belgium BNB Government Debt
(Belgium National Bank)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Brazil CBLC Equity
(Companhia Brasileira de Liquidacao e Custodia)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Brazil CLC Equity
(Camora de Liquidaeso e Custodia)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Brazil CETIP Corporate Debt
(Central de Custodia e Liquidaeso Financiera de
Titulos)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Bulgaria BNB Government Debt
(Bulgaria National Bank)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Bulgaria Central Depository A.D. Equity
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Canada CDS Equity, Corporate + Government Debt
(The Canadian Depository for Securities Limited)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
China DCV Equity, Corporate + Government Debt
(Deposito Central de Valores S.A.)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
China SSCCRC Equity
Shanghai (Shanghai Securities Central Clearing and
Registration Corporation)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
China SSCC Equity
Sheezhen (Shenzhen Securities Clearing Company, Limited)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Columbia DCV Government Debt
(Deposito Central de Valores)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Columbia DECEVAL Equity, Corporate + Government Debt
(Deposito Central deValores S.A)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Croatia CDA Equity + Government Debt
(Central Depository Agency)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Croatia Ministry of Finance Registry Short-term debt issued by the Ministry
of Finance
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Croatia National Bank of Croatia Registry Short-term debt issued by the National
Bank of Croatia
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Czech Republic SCP Equity, Corporate + Government Debt
(Stredisko cennych papiru)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Denmark VP Equity, Corporate + Government Debt
(Vaerdipapicentralen)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Egypt MCSD Equity + Corporate Debt
(MISR for Clearing, Settlement and Depository,
S.A.E.)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Estonia EVK Equity
(Easti Vastpaberite Keskdepositoorium)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Euromarket Cedelbank Euro-Debt
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Euromarket Euroclear Euro-Debt
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Finland APK Equity, Corporate + Government Debt
(The Finnish Central Securities Depository)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
France SICOVAM Equity, Corporate + Government Debt
(Societe Interprofessionnelle pour la Compensation
des Valeurs Mobilieres, S.A.
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Germany DBC Equity, Corporate + Government Debt
(Deutsche Boerse Cleaning AG)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Greece Apothetirlo Tition A.E. Equity + Corporate Debt
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Greece Bank of Greece Government Debt
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Hong Kong HKSCC Equity
(Hongkong Securities Clearing Company Limited)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Hong Kong CMU Corporate + Government Debt
(Central Moneymarkets Unit)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Hungary KELLER Ltd. Equity, Corporate + Government Debt
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
India NSDL Equity
(National Securities Depository Limited)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Ireland CREST Equity + Corporate Debt
(CRESTCo. Limited)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Ireland CBISSO Government Debt
(Central Bank of Ireland Securities Settlements
Office)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Israel TASE Clearing House Equity, Corporate + Governmemt Debt
(Tel Aviv Stock Exchange Clearing House)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Italy Monte Titoli S.p.A. Equity+ Corporate Debt
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Italy Bank of Italy Government Debt
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Ivory Coast Central Depository Equity
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Japan JASDEC Equity + Convertible Debt
(Japan Securities Despository Center)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Japan BOJ Registered Government Debt
(Bank of Japan)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Kazahkstan Central Securities Depository Closed Joint Stock Equity
Company
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Latvia LCD Equity, Corporate + Government Debt
(Latvian Central Depository)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Lebanon Midclear S.A.L. Equity
(Custodian and Clearing Center of Lebanon and the
Middle East)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Lithuania CSDL Equity + Government Debt
(Central Securities Depository of Lithuania)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Luxembourg Cedelbank Equity
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Malaysia MCD Equity + Corporate Debt
(Malaysian Central Depository Snd Bhd)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Mauritlius CDS Equity + Corporate Debt
(Central Depository and Settlement Company Limited)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Mexico INDEVAL Equity, Corporate + Government Debt
(S.D. INDEVAL S.A. de C.V.)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Morocco Maroclear Equity, Corporate + Government Debt
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Netherlands NECIGEF Equity, Corporate + Government Debt
(Netherlands Centraal Insinut voor Giraal
Effectenverkeer B.V.)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
New Zealand Austraclear New Zealand Equity, Corporate + Government Debt
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Nigeria CSCS Equity, Corporate + Government Debt
(Central Securities Clearing Systems Limited)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Norway VPS Equity, Corporate + Government Debt
(Verdipapirsentralen)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Oman MSM Equity
(Muscat Securities Market)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Pakistan CDC Equity + Corporate Debt
(Central Depository Company of Pakistan Limited)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Peru CAVALI Equity, Corporate + Government Debt
(CAVALI ICLV S.A.)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Phillippines PCD Equity
(Philippine Central Depository Inc.)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Poland NDS Equity + Long Term Government Debt
(National Depository for Securities S.A.)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Poland CRT Short-Term Government Debt
(Central Registry of Treasury-Bills)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Portugal Interbolsa Equity, Corporate + Government Debt
(Central de Valores Mobiliarios e Sistera de
Liquidacao e Compensacao)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Romania SNCDD Equity
(National Company for Clearing, Settlement and
Depository for Securities)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Romania BSE Equity
(Bucharest Stock Exchange Registry)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Russia VTB Government Debt (Ministry of Finance
(Vnestorgbank) Bonds)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Singapore CDP Equity + Corporate Debt
(Central Depository (Ptc.) Ltd.)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Singapore SGS Government Debt
(Singapore Government Securities Book-Entry System)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Slovak Republic SCP Equity, Corporate + Government Debt
(Stredisko cennych papierov)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Slovenia KDD Equity + Corporate Debt
(Centralna Klirinsko Depotns Druzba d.d.)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
South Africa Central Depository (Pty) Limited Corporate + Government Debt
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
South Africa STRATE Equity
(Share Transactions Totally Electronic)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
South Korea KSD Equity, Corporate + Government Debt
(Korea Securities Depository)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Spain SCLV Equity + Corporate Debt
(Service de Compensation y Liquidacion de Valores,
S.A.)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Spain CBEO Government Debt
(Central Book Entry Office)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Sri Lanka CDS Equity
(Central Depository System (pte) Limited)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Sweden VPC Equity, Corporate + Government Debt
(Vardepapperscemntraem AB)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Switzerland SIS Equity, Corporate + Government Debt
(SIS SegainterSettle AG)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Taiwan TSCD Equity + Government Debt
(Taiwan Securities Central Depository Co., Ltd)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Thailand TSD Equity, Corporate + Government Debt
(Thailand Securities Depository Company Limited)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Tunisia STICODEVAM Equity + Corporate Debt
(Societe Tunisienne Interprofessioinnelle pour la
Compensation et le Depot des Valeurs Mobilieres)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Turkey TAKASBANK Equity + Corporate Debt
(MKB Takas ve Saklarua Bankard A.S.)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Turkey Central Bank of Turkey Government Debt
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
United Kingdom CREST Equity + Corporate Debt
(CRESTCo. Limited)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
United Kingdom CMO Sterling & Euro CDs + CP
(Central Moneymarket Office)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
United Kingdom CGO Gilts
(Central Gilts Office)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
United States DTC Equity + Corporate Debt
(Depository Trust Company)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
United States PTC Mortgage Back Debt
(Participants Trust Company)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
United States Fed Book-Entry System Government Debt
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Venezuela BCV Government Debt
(Banco Central de Venezuela)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
- ------------------------------ ----------------------------------------------------- ------------------------------------------
Zambia CSD Equity +Government Debt
(LuSE Central Shares Depository Limited)
- ------------------------------ ----------------------------------------------------- ------------------------------------------
</TABLE>
Appendix 1-B
INFORMATION REGARDING COUNTRY RISK
1. To aid Customer in its determination regarding County Risk, Bank
shall furnish annually and upon the initial placing of Financial Assets and cash
into a country the following information (check items applicable):
A. Opinions of local counsel concerning:
X i. Whether applicable foreign law would restrict the access
afforded Customer's independent public accountants to books
and records kept by an eligible foreign custodian located in
that country.
X ii. Whether applicable foreign law would restrict the
Customer's ability to recover its Financial Assets and cash in
the event of the bankruptcy of an Eligible Foreign Custodian
located in that country.
X iii. Whether applicable foreign law would restrict the
Customer's ability to recover Financial Assets that are lost
while under the control of an Eligible Foreign Custodian
located in the country.
B. Written information concerning:
X i. The foreseeability of expropriation, nationalization,
freezes, or confiscation of Customer's
Financial Assets.
X ii. Whether difficulties in converting Customer's cash and
cash equivalents to U.S. dollars are
reasonably foreseeable.]
C. A market report with respect to the following topics:
(i) securities regulatory environment, (ii) foreign ownership
restrictions, (iii) foreign exchange, (iv) securities
settlement and registration, (v) taxation, and (vi)
depositories (including depository evaluation), if any.
2. To aid Customer in monitoring Country Risk, Bank shall
furnish board the following additional information:
Market flashes, including with respect to changes in the information in
market reports.
DOMESTIC AND GLOBAL
SPECIAL TERMS AND CONDITIONS RIDER
DOMESTIC CORPORATE ACTIONS AND PROXIES
With respect to domestic U.S. and Canadian Financial Assets (the latter if held
in The Depository Trust Company), the following provisions shall apply rather
than the pertinent provisions of Sections 2.10-2.11 of the Agreement:
Bank shall send to Customer or the Authorized Person for a Custody
Account, such proxies (signed in blank, if issued in the name of Bank's
nominee or the nominee of a central depository) and communications with
respect to Financial Assets in the Custody Account as call for voting
or relate to legal proceedings within a reasonable time after
sufficient copies are received by Bank for forwarding to its customers.
In addition, Bank shall follow coupon payments, redemptions, exchanges
or similar matters with respect to Financial Assets in the Custody
Account and advise Customer or the Authorized Person for such Account
of rights issued, tender offers or any other discretionary rights with
respect to such Financial Assets, in each case, of which Bank has
received notice from the issuer of the Financial Assets, or as to which
notice is published in publications routinely utilized by Bank for this
purpose.
FORM OF CUSTODIAN AGREEMENT
(ADDITION OF THE SMALL CAP AGGRESSIVE GROWTH FUND)
Firstar Bank, 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 (formerly Firstar Bank Milwaukee,
N.A.) 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
Small Cap Aggressive Growth 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: June __, 2000 FIRSTAR FUNDS, INC.
By: ______________________
(Authorized Officer)
ACKNOWLEDGED AND AGREED:
FIRSTAR BANK, N.A.
(formerly Firstar Bank Milwaukee, N.A.)
By: Dated: June __, 2000
--------------------------------
(Authorized Officer)
FIRSTAR BANK, N.A.
MUTUAL FUND CUSTODIAL AGENT SERVICE ANNUAL FEE SCHEDULE
FOR
SMALL CAP AGGRESSIVE GROWTH FUND
ANNUAL FEE based on total assets of the Firstar Fund:
_____% on the first $2 billion
_____% on the next $2 billion
_____% on the balance in excess of $4 billion
Investment Transactions: Purchase, sale, exchange, tender, redemption (
maturity), receipt and delivery.
$_____ per Book Entry Securities (Depository or Federal
Reserve System).
$_____ per Definitive Security (Physical).
$_____ per Euroclear.
$_____ per Principal reduction on pass-through certificates.
$_____ per Option/Futures Contract.
$_____ per variation margin transaction.
$_____ per Mutual Fund trade.
$_____ per Fed Wire deposit or withdrawal.
$_____ per Commercial Paper.
$_____ per Repurchase Agreement.
Extraordinary expenses based on time and complexity involved.
Out-of-Pocket Expenses: Charged on the account.
Fees are billed quarterly based on the value at the beginning of the quarter.
EXCHANGE AGREEMENT
Agreement dated as of November 2, 1999 between Firstar Funds, Inc., a
Wisconsin corporation (the "Company"), and Firstar Bank, N.A. ("Firstar"),
Trustee of the Firstar Corporation Pension Trust (the "Trust").
BACKGROUND
1. The Company is an open-end management investment company registered under the
Investment Company Act of 1940, consisting of twenty separate investment
portfolios, including the Core International Equity Fund (the "Portfolio"),
advised by Firstar Investment Research & Management Company, LLC.
2. Firstar maintains the Trust pursuant to a trust agreement entered into
between Firstar Corporation as the employer of certain participants (and as the
parent of certain direct and indirect subsidiaries that employ participants) in
the Firstar Employees' Pension Plan, an employee pension benefit plan as defined
in Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") (the "Plan"), and Firstar as Trustee of the Trust, in
accordance with Section 401(a) of the Internal Revenue Code of 1986, as amended
(the "Code") and Section 403(a) of ERISA.
3. Firstar believes that it is in the interests of Plan participants to transfer
certain assets of the Trust to the Portfolio. As Trustee of the Trust, Firstar
has, therefore, determined that Firstar (i) will transfer to the Portfolio, on
behalf of Plan participants, the portfolio securities and cash of the Trust
listed on Exhibit A hereto (the "Assets") in exchange for shares of beneficial
interest ("Shares") of the Portfolio as hereinafter provided; and (ii) will
subsequently hold, on behalf of Plan participants, the Shares received in such
exchange. It is contemplated that the transactions will qualify for
nonrecognition treatment pursuant to Section 351(a) of the Internal Revenue
Code.
4. Firstar believes that the foregoing procedure for transferring the Assets to
the Portfolio will be beneficial to Plan participants, and will eliminate
brokerage and other costs associated with the transfer of the Assets.
5. The Company and Firstar intend that the transfer of the Assets to the
Portfolio will meet the conditions set forth in Department of Labor Prohibited
Transaction Class Exemption 77-3, as extended by the Department of Labor in
Opinion Letter 98-06A, to the in-kind exchange of plan assets for shares of a
registered investment company.
NOW, THEREFORE, in consideration of the premises and mutual convenants
herein contained, the parties hereto, intending to be legally bound, agree as
follows:
1. EXCHANGE OF FUND ASSETS FOR PORTFOLIO SHARES. Subject to the terms and
conditions hereof and on the basis of and in reliance upon the covenants,
agreements, and representations and warranties set forth herein, prior to 4:00
P.M. (Eastern Time) on November 4, 1999 Firstar, shall transfer all of the
Assets to the Company in exchange for Shares of the Portfolio, at a per Share
value of $10 and an aggregate net asset value equal to the aggregate market
value of such Assets determined in accordance with Section 2 hereof, provided
that all of the Assets so transferred shall constitute permissible investments
under the investment policies and limitations of the Portfolio as set forth in
the Company's registration statement and (except for cash) shall have readily
available market quotations. No brokerage commissions, fees (except for
customary transfer fees) or other remuneration will be paid by the Company or
the Trust in connection with the transactions contemplated hereby. From and
after the exchange of the Trust's Assets for Shares of the Portfolio (the
"Exchange"), Firstar shall hold the Shares as Trustee in accordance with the
terms of the Plan and Trust.
2. DETERMINATION OF MARKET VALUE. The aggregate market value of the Assets of
the Trust shall be any cash plus the sum of the independent current market price
of each security being exchanged hereunder determined as of the close of
business on November 4, 1999. For purposes of this Agreement, the "current
market price" shall be determined pursuant to paragraph (b) of Rule 17a-7 under
the Investment Company Act of 1940 as interpreted and applied by the staff of
the Securities and Exchange Commission.
Securities may be valued on the basis of prices provided by independent
pricing services when such prices are believed by Firstar to reflect the fair
market value of such securities.
3. REPRESENTATIONS OF FIRSTAR. Firstar hereby represents and warrants as
follows:
(a) Firstar is entering into this Agreement as Trustee of the Trust. The
execution and delivery of this Agreement by Firstar has been duly authorized by
all requisite corporate action and (assuming the due authorization, execution
and delivery hereof by the Company) constitutes the valid and binding obligation
of Firstar, as Trustee, enforceable in accordance with its terms.
(b) At the time of the transfer of the Assets to the Portfolio, the Trust will
have good title to the Assets, free and clear of all mortgages, security
interests, liens, charges, pledges and encumbrances whatsoever. Upon transfer of
the Assets to the Portfolio, the Portfolio will acquire good title thereto, free
and clear of all such mortgages, security interests, liens, charges, pledges and
encumbrances whatsoever.
4. REPRESENTATIONS OF THE COMPANY. The Company hereby represents and warrants
as follows:
(a) The Company is entering into this Agreement on behalf of the Portfolio. The
execution and delivery of this Agreement by the Company has been duly authorized
by all requisite action and (assuming the due authorization, execution and
delivery hereof by Firstar) constitutes the valid and binding obligation of the
Company, enforceable in accordance with its terms.
(b) The transfer of shares of the Portfolio in accordance with the terms of this
Agreement has been duly authorized by all requisite action and such shares, when
so transferred against payment therefor in accordance with the provisions
hereof, will be duly and validly issued, fully paid and nonassessable by the
Company, except as provided in Section 180.0622(b) of the Wisconsin Business
Corporation Law, as amended.
(c) The Portfolio expects to qualify as a regulated investment company under
Section 851 of the Code and will expect to so qualify for the taxable year that
includes the Transfer Time.
(d) Dealings between the Trust and the Company will be on a basis no less
favorable to the Trust than such dealings will be with other shareholders of the
Company.
5. COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS THEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers designated below as of the day, month
and year first above written.
Attest: FIRSTAR FUNDS, INC.
/S/ JEFFREY M. SQUIRES By: /S/ LAURA RAUMAN
- ------------------------------------ ----------------
Attest: FIRSTAR BANK, N.A., acting as
Trustee for The Firstar Corporation
Pension Trust
/S/ ILLEGIBLE By: /S/ DANIEL REYNOLDS, JR.
- ------------------------------------ ------------------------
Exhibit A
to Agreement between
Firstar Funds, Inc. and
Firstar Bank, N.A. as Trustee
Dated as of November 4, 1999
Month End Reconciliation: Holdings, Cost, Market
Firstar Corporation Pension Trust
November 4, 1999
<TABLE>
<CAPTION>
Risk Local
Security Country Total
SECURITY SYMBOL CODE QUANTITY COST
- -------- ------ ---- -------- ----
<S> <C> <C> <C> <C>
Australian Gas Light Company 6064969 au 52,600.00 486,859.13
Westpac Banking Corp 6076146 au 26,200.00 241,834.34
Commonwealth Bank of Australia 6215035 au 15,800.00 365,757.82
Fosters Brewing Company 6349268 au 117,200.00 534,863.38
Lend Lease Corporation Limited 6512004 au 16,700.00 315,722.62
Bank Austria 4999621 at 4,700.00 229,347.78
Electrabel 4294791 be 900.00 319,533.64
Magna Intl Inc CL A USD 559222401 ca 5,000.00 254,262.50
Uni Danmark 4914185 dk 4,000.00 1,968,406.44
Nokia Oyj 5655212 fi 3,900.00 326,444.12
Group Danone 4070236 fr 1,400.00 335,406.31
Alcatel 4216825 fr 1,800.00 241,595.25
Lafarge SA 4502706 fr 3,900.00 398,251.67
Lagardere Groupe S.C.A. 4547213 fr 4,700.00 202,229.18
Pernod Richard 4682329 fr 4,800.00 321,650.61
Compagnie de St-Gobain 4768371 fr 1,300.00 230,214.15
SCOR 4797364 fr 4,900.00 231,758.49
Elf Aquitaine SA 4824080 fr 6.00 1,024.66
Total Fina 4905413 fr 4,522.00 549,244.84
Valeo SA 4937579 fr 3,900.00 286,230.43
Continental AG 4598589 de 13,200.00 284,197.43
Veba AG 4942904 de 4,900.00 276,513.74
Bayer 5069211 de 6,500.00 257,397.14
Hoechst AG 5070376 de 9,100.00 359,036.99
</TABLE>
<TABLE>
<CAPTION>
US$ Local US$
Total Market Market
SECURITY COST VALUE VALUE
- -------- ---- ----- -----
<S> <C> <C> <C>
Australian Gas Light Company 318,162.44 458,146.00 291,979.89
Westpac Banking Corp 157,027.87 273,790.00 174,488.43
Commonwealth Bank of Australia 237,493.87 423,124.00 269,660.11
Fosters Brewing Company 347,297.49 491,068.00 312,961.33
Lend Lease Corporation Limited 205,005.01 317,300.00 202,217.68
Bank Austria 238,888.66 220,900.00 230,711.83
Electrabel 333,049.90 286,650.00 299,382.28
Magna Intl Inc CL A USD 254,262.50 211,562.50 211,562.50
Uni Danmark 275,899.32 2,132,000.00 299,534.92
Nokia Oyj 340,024.21 423,618.00 442,434.06
Group Danone 349,640.96 342,300.00 357,504.11
Alcatel 251,848.56 261,000.00 272,592.97
Lafarge SA 415,153.48 374,400.00 391,029.92
Lagardere Groupe S.C.A. 210,811.79 182,830.00 190,950.85
Pernod Richard 335,301.47 303,840.00 317,335.82
Compagnie de St-Gobain 239,984.44 215,800.00 225,385.30
SCOR 241,594.33 240,002.00 250,662.29
Elf Aquitaine SA 1,077.42 784.20 819.03
Total Fina 572,554.81 551,231.80 575,716.14
Valeo SA 298,378.06 263,250.00 274,942.91
Continental AG 296,020.06 277,200.00 289,512.53
Veba AG 288,016.72 251,615.00 262,791.11
Bayer 268,104.87 257,725.00 269,172.50
Hoechst AG 376,968.05 413,595.00 431,965.86
</TABLE>
Exhibit A
to Agreement between
Firstar Funds, Inc. and
Firstar Bank, N.A. as Trustee
Dated as of November 4, 1999
<TABLE>
<CAPTION>
Risk Local US$
Security Country Total Total
SECURITY SYMBOL CODE QUANTITY COST COST
- -------- ------ ---- -------- ---- ----
<S> <C> <C> <C> <C> <C>
Daimlerchrysler 5529027 de 3,100.00 211,228.02 220,015.12
Siemens AG 5727973 de 4,400.00 356,492.14 371,322.23
Celanese AG 5791558 de 910.00 12,921.86 13,567.21
ENI S.P.A. 4436399 it 45,800.00 268,977.31 280,166.78
Telecom Italia S.P.A. 5297506 it 43,000.00 387,343.14 405,896.89
Benetton Group S.P.A. 5486672 it 206,800.00 410,390.98 427,463.26
Acom Co Ltd 6049784 jp 4,000.00 53,475,422.00 500,734.33
Canon Inc 6172323 jp 11,000.00 32,787,755.00 307,018.70
Chugai Pharmaceutical 6196408 jp 28,000.00 34,123,089.00 319,522.53
Dai Nippon Printing Co 6250906 jp 17,000.00 32,590,559.00 305,172.19
East Japan Railway Co 6298542 jp 30.00 20,231,211.00 189,441.46
Eisai Co 6307200 jp 6,000.00 15,915,900.00 149,033.65
FamilyMart 6331276 jp 6,600.00 36,118,082.00 338,203.29
Fuji Heavy Industries 6356406 jp 52,000.00 44,947,901.00 420,884.14
Fuji Photo Film Co Ltd 6356525 jp 7,000.00 25,785,760.00 241,453.27
Honda Motor Co 6435145 jp 7,000.00 30,040,010.00 281,289.30
Jusco Co Ltd 6480048 jp 12,000.00 24,179,155.00 226,409.30
Kao Corp 6483809 jp 9,000.00 27,447,420.00 257,012.75
Kubota 6497509 jp 106,000.00 39,839,049.00 375,441.35
Nintendo Co 6639550 jp 3,300.00 59,065,006.00 553,074.20
Rohm Co 6747204 jp 1,600.00 37,141,104.00 347,782.68
Sony 6821506 jp 2,000.00 31,193,162.00 292,087.21
Wacoal Corp 6932204 jp 20,000.00 22,927,905.00 214,692.82
Hagemeyer 5209073 nl 12,500.00 275,561.02 289,826.87
ABN-Amro Hldgs N.V. 5250769 nl 16,600.00 368,961.63 384,310.45
Akzo Nobel 5458314 nl 7,600.00 315,773.22 328,909.40
TNT Post Group 5481558 nl 4,200.00 109,228.90 113,772.83
Koninklijke KPN NV 5490800 nl 4,200.00 179,879.22 187,362.20
Telecom Corporation of New Zea 6881436 nz 39,100.00 313,856.44 165,471.39
</TABLE>
Local US$
Market Market
SECURITY VALUE VALUE
- -------- ----- -----
Daimlerchrysler 223,665.00 233,599.64
Siemens AG 398,640.00 416,346.60
Celanese AG 15,515.50 16,204.66
ENI S.P.A. 252,358.00 263,567.11
Telecom Italia S.P.A. 357,330.00 373,201.71
Benetton Group S.P.A. 421,872.00 440,610.50
Acom Co Ltd 46,000,000.00 440,022.72
Canon Inc 32,065,000.00 306,724.53
Chugai Pharmaceutical 35,532,000.00 339,888.85
Dai Nippon Printing Co 32,980,000.00 315,477.16
East Japan Railway Co 18,540,000.00 177,348.29
Eisai Co 16,350,000.00 156,399.38
FamilyMart 45,804,000.00 438,147.84
Fuji Heavy Industries 49,140,000.00 470,059.05
Fuji Photo Film Co Ltd 24,710,000.00 236,368.72
Honda Motor Co 31,850,000.00 304,667.90
Jusco Co Ltd 27,660,000.00 264,587.57
Kao Corp 28,080,000.00 268,605.17
Kubota 46,640,000.00 446,144.77
Nintendo Co 53,625,000.00 512,961.26
Rohm Co 40,192,000.00 384,465.07
Sony 33,320,000.00 318,729.50
Wacoal Corp 22,220,000.00 212,550.10
Hagemeyer 271,375.00 283,428.80
ABN-Amro Hldgs N.V. 390,598.00 407,947.39
Akzo Nobel 313,956.00 327,901.14
TNT Post Group 99,582.00 104,005.18
Koninklijke KPN NV 211,680.00 221,082.30
Telecom Corporation of New Zea 307,326.00 158,224.66
Exhibit A
to Agreement between
Firstar Funds, Inc. and
Firstar Bank, N.A. as Trustee
Dated as of November 4, 1999
<TABLE>
<CAPTION>
Risk Local US$
Security Country Total Total
SECURITY SYMBOL CODE QUANTITY COST COST
- -------- ------ ---- -------- ---- ----
<S> <C> <C> <C> <C> <C>
Christiania Bank OG Kreditkass 4204110 no 83,700.00 2,851,997.15 361,699.07
Norsk Hydro 4645805 no 7,000.00 2,508,015.51 318,074.26
Singapore Air Ltd. Foreign 6811734 sg 20,000.00 337,036.60 199,029.53
Hidro Iberica Iberduero SA ord 4424640 es 20,100.00 267,194.93 278,310.25
Endesa 5271782 es 10,800.00 195,296.02 203,420.34
Banco Popular Espanol 5286140 es 3,300.00 221,567.20 230,784.41
Repsol SA 5669354 es 21,800.00 420,658.84 438,158.27
Grupo Dragados SA 5687000 es 30,100.00 349,780.33 364,331.21
Telefonica S.A. 5732524 es 18,900.00 284,443.77 296,276.64
SKF AB B Shares 4767066 se 7,800.00 1,492,929.44 180,598.85
Volvo AB B Shares 4937739 se 10,600.00 2,524,473.95 305,384.22
Electrolux Ab Series B 5466782 se 23,300.00 3,695,653.85 447,061.21
AstraZeneca 5659902 se 6,600.00 2,194,976.78 265,525.13
Nestle AG Reg 4616696 ch 100.00 293,471.92 190,503.09
BOC Group 0108120 gb 14,000.00 181,948.38 295,356.79
Caradon PLC 0176268 gb 29,800.00 46.,305.26 75,167.33
Allied Zurich PLC 0287579 gb 21,400.00 155,344.63 252,170.93
British American Tobacco PLC 0287580 gb 36,900.00 193,235.44 313,679.08
Gallaher Group PLC 0383369 gb 35,200.00 158,135.79 256,701.82
Iceland Group PLC 0455871 gb 30,500.00 95,730.96 155,400.06
Johnson Matthey 0476407 gb 56,200.00 338,375.15 549,284.36
Mirror Group PLC 0596275 gb 71,300.00 197,965.83 321,110.94
Cadbury Schweppes 0610700 gb 52,100.00 228,518.94 370,954.78
Associated British Foods PLC 0673123 gb 21,800.00 93,118.17 151,158.72
Scottish Power PLC 0690070 gb 45,000.00 270,501.83 439,105.60
Rio Tinto Zinc PLC Ord 0718875 gb 15,600.00 161,258.02 261,770.13
Invensys 0807041 gb 69,600.00 210,872.00 342,308.50
Corus Group PLC 0828053 gb 93,000.00 114,408.27 185,718.95
Tate & Lyle PLC 0875413 gb 39,100.00 158,518.44 257,322.97
Tomkins PLC 0896265 gb 65,900.00 180,383.16 292,815.97
Pound Sterling Cash gb 32,580.66 32,580.66 75,278.22
US Cash - Principal uscash-Prin us 841,300.72 841,300.72 841,300.72
Firstar Corporation Pension Trust 2,828,049.38 ____________ 24,875,666.44
2,828,049.38 601,351,645.07 24,875,666.44
==============
</TABLE>
Local US$
Market Market
VALUE VALUE
SECURITY ----- -----
- -------- 3,423,330.00 433,360.02
Christiania Bank OG Kreditkass 2,135,000.00 270,270.07
Norsk Hydro 348,000.00 208,845.87
Singapore Air Ltd. Foreign 282,003.00 294,528.87
Hidro Iberica Iberduero SA ord 209,412.00 218,713.56
Endesa 215,160.00 224,716.87
Banco Popular Espanol 432,730.00 451,950.79
Repsol SA 298,893.00 312,169.08
Grupo Dragados SA 319,221.00 333,400.00
Telefonica S.A. 1,349,400.00 161,749.17
SKF AB B Shares 2,289,600.00 274,448.57
Volvo AB B Shares 3,797,900.00 455,244.67
Electrolux Ab Series B 2,471,700.00 296,276.43
AstraZeneca 296,500.00 192,106.68
Nestle AG Reg 184,660.00 302,639.25
BOC Group 45,445.00 74,479.80
Caradon PLC 164,138.00 269,005.75
Allied Zurich PLC 147,600.00 241,901.62
British American Tobacco PLC 130,856.00 214,459.88
Gallaher Group PLC 80,672.50 132,214.15
Iceland Group PLC 314,439.00 515,334.04
Johnson Matthey 188,588.50 309,077.67
Mirror Group PLC 207,618.50 340,265.93
Cadbury Schweppes 83,930.00 137,552.87
Associated British Foods PLC 263,925.00 432,546.65
Scottish Power PLC 160,524.00 263,083.76
Rio Tinto Zinc PLC Ord 201,840.00 330,795.55
Invensys 104,857.50 171,850.94
Corus Group PLC 164,415.50 269,460.54
Tate & Lyle PLC 142,014.50 232,747.55
Tomkins PLC 32,580.66 53,396.44
Pound Sterling 841,300.72 841,300.72
US Cash - Principal
618,473,883.38 24,944,474.70
Firstar Corporation Pension Trust 618,473,883.38 24,944,474.70
FORM OF ADDENDUM NO. 6 TO THE CO-ADMINISTRATION AGREEMENT
This Addendum, dated as of the __ day of June, 2000, 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, Core International Equity
Fund, MidCap Index 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 Small Cap Aggressive Growth 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 Small Cap Aggressive Growth 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 Small Cap Aggressive Growth 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 Small Cap Aggressive Growth Fund and the other Funds
pursuant to the Co-Administration Agreement and this Addendum, the Company will
pay Firstar and BCZ, and Firstar and BCZ will accept as full compensation
therefor, a fee, computed daily and payable monthly, at the annual rate of ____%
of the Funds' first $2 billion of average aggregate daily net assets, plus ____%
of the Funds' average aggregate daily net assets in excess of $2 billion. Such
fee as is attributable to the Small Cap Aggressive Growth Fund shall be a
separate charge to such Fund and shall be the obligation of the Small Cap
Aggressive Growth Fund.
3. MISCELLANEOUS. Except to the extent supplemented hereby, the
Co-Administration Agreement shall remain unchanged and in full force and effect
and is hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of
the date and year first above written.
FIRSTAR FUNDS, INC.
By: _________________________
(Authorized Officer)
FIRSTAR MUTUAL FUND SERVICES, LLC
By: _________________________
(Authorized Officer)
B.C. ZIEGLER AND COMPANY
By: ________________________
(Authorized Officer)
FORM OF FUND ACCOUNTING SERVICING AGREEMENT
(ADDITION OF SMALL CAP AGGRESSIVE GROWTH 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 Small Cap Aggressive Growth 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: June __, 2000 FIRSTAR FUNDS, INC.
By: ________________________
(Authorized Officer)
ACKNOWLEDGED AND AGREED: ______________________
FIRSTAR MUTUAL FUND SERVICES, LLC
By: Dated: June __, 2000
--------------------------------
(Authorized Officer)
FIRSTAR MUTUAL FUND SERVICES, LLC
FUND VALUATION AND ACCOUNTING
FOR
FIRSTAR FUNDS, INC.
SMALL CAP AGGRESSIVE GROWTH FUND
PORTFOLIO SERVICES
Annual fee schedule for the Small Cap Aggressive Growth Fund based on market
value of assets.
$______ for first $40,000,000.00
____/100 of 1% on the next $200,000,000.00
____/100 of 1% on the balance.
Out-of-Pocket Expenses: Charged on the Account.
Fees are billed monthly.
FORM OF LETTER AGREEMENT TO THE SHAREHOLDER SERVICING AGENT AGREEMENT
(ADDITION OF THE SMALL CAP AGGRESSIVE GROWTH 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 Small Cap Aggressive
Growth 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 Small Cap
Aggressive Growth 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: __, 2000 FIRSTAR FUNDS, INC.
By: __________________________
(Authorized Officer)
ACKNOWLEDGED AND AGREED: ________________________
FIRSTAR MUTUAL FUND SERVICES, LLC.
By: Dated: __, 2000
----------------------------
(Authorized Officer)
FIRSTAR MUTUAL FUND SERVICES, LLC
MUTUAL FUND SHAREHOLDER SERVICES
FOR
FIRSTAR FUNDS, INC.
SMALL CAP AGGRESSIVE GROWTH FUND
ANNUAL FEE SCHEDULE
$_____ per Shareholder account
$ ____ per telephone exchange
$_____ per wire transfer
$_____ per NFS/NSCC networked account (Retail Class only)
Minimum annual fee of $______ per Fund.
Account fees shall be waived on the initial ___ accounts per series.
Fees billed monthly.
Plus out-of-pocket expenses including, but not limited to:
- Telephone--Toll-free lines
- Postage
- Programming
- Stationery/Envelopes
- Mailing
- Proxies
- Insurance
- Retention of Records
- Microfilm/Microfiche of Records
- Special Reports
- All other out-of pocket expenses
Plus, with respect to Two-Dimensional Transaction:
$____ per shareholder account to set-up
$____ per shareholder account to alter
AUTOMATIC INVESTMENT PLAN PROCESSING
$______ per cycle
$ ____ per account set-up and/or change
$ ____ per item for AIP purchases
$ ____ per correction, reversal or return item
FORM OF
AMENDMENT TO
SHAREHOLDER SERVICING AGENT AGREEMENT
FIRSTAR FUNDS, INC., a Wisconsin corporation (formerly, Portico Funds,
Inc.) and FIRSTAR MUTUAL FUND SERVICES, LLC, a Wisconsin limited liability
company, parties to a Shareholder Servicing Agent Agreement dated as of March
23, 1988 and assigned as of October 1, 1998, hereby amend and restate Sections 3
and 4 of such Agreement in their entirety as follows:
3. DUTIES OF THE AGENT. Agent hereby agrees to perform the following duties
in accordance with this Agreement and the Prospectus of each Fund:
A. Process new accounts.
B. Process purchases, both initial and subsequent.
C. Transfer Shares to an existing account or to a new account upon receipt
of required documentation in good order.
D. Redeem uncertificated and/or certificated Shares upon receipt of
required documentation in good order and disburse the redemption proceeds
therefor.
E. Issue and/or cancel certificates as instructed; replace lost, stolen or
destroyed certificates upon receipt of satisfactory indemnification or
bond.
F. Distribute dividends and/or capital gain distributions. This includes
disbursements as cash or reinvestment and to change the disbursement option
at the request of shareholders.
G. Process exchanges between Funds (process and direct purchase/redemption
and initiate new account or process to existing account).
H. Make miscellaneous changes to records, including, but not necessarily
limited to, address changes and changes in plans (such as systematic
withdrawal, dividend reinvestment, etc.).
I. Prepare and mail a year-to-date confirmation and statement as each
transaction is recorded in a shareholder account.
J. Handle telephone calls and correspondence in reply to shareholder
requests except those items set forth in referrals to Firstar Funds and
Firstar Investment Research and Management, LLC ("FIRMCO").
K. Provide reports to Firstar Funds with respect to each Fund:
Daily - transaction journal with analysis of accounts.
Monthly - analysis of transactions and accounts by types.
Quarterly - state sales analysis; sales by size; analysis of
systematic withdrawals, Keogh, IRA and 403(b)(7) plans; printout of
shareholder balances.
L. Prepare a daily control and reconciliation of each Fund's shares with
Agent's records and Firstar Funds' office records.
M. Prepare address labels or confirmations for four reports to shareholders
per year.
N. Mail and tabulate proxies (and mail proxy solicitation materials) for
meetings of shareholders, including preparation of certified shareholder
list and daily report to Firstar Funds' management, if required. All proxy
related expenses including stationery and postage shall be an
"out-of-pocket" expense in accordance with paragraph 5.
O. Prepare and mail annual Form 1099, Form W-2P and 5498 to shareholders to
whom dividends or distribution are paid, with a copy for the IRS, as well
as any other notices and information relating to exempt-interest dividends,
capital gains or other items required under the Internal Revenue Code of
1986, the Investment Company Act of 1940 (the "1940 Act") or state law.
P. Provide readily obtainable data which may from time to time be requested
for audit purposes.
Q. Replace lost or destroyed checks.
R. Continuously maintain all records for active and closed accounts during
the current year.
S. Furnish shareholder data information for a current calendar year in
connection with IRA and Keogh Plans in a format suitable for mailing to
shareholders.
T. Withhold such sums as are required to be withheld under applicable
Federal and state income tax laws, rules and regulations.
U. Maintain registry records with respect to the Shares of each Fund in
usual form.
4. Referrals to Firstar Funds' distributor or FIRMCO. Agent hereby agrees
to refer to Firstar Funds' distributor or FIRMCO for reply to the following as
appropriate:
A. Requests for investment information, including performance and outlook.
B. Requests for information about specific plans: (such as IRA, Keogh,
Automatic Investment, Systematic Withdrawal).
C. Requests for information about exchanges between the Funds.
D. Requests for historical Fund prices.
E. Requests for information about the value and timing of dividend
payments.
F. Questions regarding correspondence from the Funds and newspaper
articles.
G. Any requests for information from non-shareholders.
IN WITNESS WHEREOF, the parties have executed this Amendment as
of ___________.
Very truly yours,
FIRSTAR FUNDS, INC.
By: ___________________________
(Authorized Officer)
FIRSTAR MUTUAL FUND SERVICES, LLC
By: ____________________________
(Authorized Officer)
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. 39 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
May 12, 2000
FORM OF PURCHASE AGREEMENT
Firstar Funds, Inc., a Wisconsin corporation (the "Company"),
and B.C. Ziegler & Company ("B.C. Ziegler") hereby agree as follows:
1. The Company hereby offers B.C. Ziegler and B.C. Ziegler
hereby purchases, in consideration for the payment of $_______, one share of
beneficial interest of the Small Cap Aggressive Growth Fund - Institutional, one
share of the Small Cap Aggressive Growth Fund - Series A, and one share of the
Small Cap Aggressive Growth Fund - Series B for a purchase price corresponding
to the net asset value per share as listed in Exhibit 1 to this agreement.
2. B.C. Ziegler acknowledges that the shares purchased
hereunder have not been registered under the federal securities laws and that
the Company is relying on certain exemptions from such registration
requirements. B.C. Ziegler represents and warrants that it is acquiring such
shares solely for investment purposes and that B.C. Ziegler has no present
intention to redeem, sell or otherwise dispose of the shares.
3. This Agreement shall be governed by the law of the State of
Wisconsin. Firstar Funds is a corporation organized under the laws of Wisconsin
and under Articles of Incorporation, to which reference is hereby made and a
copy of which is on file at the office of the Secretary of State of Wisconsin as
required by law, and to any and all amendments thereto so filed or hereafter
filed.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the __ day of ____, 2000.
(SEAL)
FIRSTAR FUNDS, INC.
By:________________________
Name: _______________
Title: ______________
B.C. ZIEGLER & COMPANY
By: _______________________
Name: _______________
Title: ______________
EXHIBIT 1
Firstar Small Cap Aggressive Growth Fund - Institutional $________
Firstar Small Cap Aggressive Growth Fund - Series A $________
Firstar Small Cap Aggressive Growth Fund - Series B $________
Total consideration for one share of each series $________
FIRSTAR FUNDS, INC.
(THE "COMPANY")
FORM OF AMENDED AND RESTATED
PLAN PURSUANT TO RULE 18F-3 FOR OPERATION OF
A MULTI-SERIES SYSTEM
I. INTRODUCTION
On February 23, 1995, the Securities and Exchange Commission
(the "Commission") promulgated Rule 18f-3 under the Investment Company Act of
1940, as amended (the "1940 Act"), which permits the creation and operation of a
multi-class distribution structure (or in the case of the Company, a
multi-series distribution structure) without the need to obtain an exemptive
order under Section 18 of the 1940 Act. Rule 18f-3, which became effective on
April 3, 1995, requires an investment company to file with the Commission a
written plan specifying all of the differences among the classes, including the
various services offered to shareholders, the different distribution
arrangements for each class, the methods for allocating expenses relating to
those differences, and any conversion features or exchange privileges.
Initially, the Company operated a multi-series distribution structure pursuant
to an exemptive order granted by the Commission on December 6, 1994. On March
17, 1995, however, the Board of Directors authorized the Company to operate its
multi-series distribution structure in compliance with Rule 18f-3. The Company's
Board approved and the Company filed with the Commission a Plan pursuant to Rule
18f-3 for operation of a multi-series system. The Plan became effective on April
3, 1995. The Board of Directors of the Company approved the extension of the
Plan to new Portfolios on June 16, 1995 and September 15, 1995, and the adoption
of an Amended and Restated Plan pursuant to Rule 18f-3 for operation of a
multi-series system on June 13, 1997. The Board of Directors of the Company
approved an amendment and restatement of the Plan on December 18, 1998, to
reflect the creation of the Series B shares, which became effective on March 1,
1999. The Board of Directors of the Company approved an amended and restated
version of the Plan on June 17, 1999, reflecting a revision to provisions
reciting those eligible to purchase Series A or Institutional shares, which
became effective on June 18, 1999. The Board of Directors approved an amended
and restated version of the Plan on September 23, 1999 to reflect the creation
of new series, which became effective on November 4, 1999. This Amended and
Restated Plan pursuant to Rule 18f-3 was approved by the Board of Directors on
_____________, 2000, and supersedes these prior plans.
II. ATTRIBUTES OF SERIES
A. GENERALLY
The Company shall offer three series of shares: Institutional,
Series A, and Series B. In general, shares of each series shall be identical
except for different expense variables (which will result in different returns
for each series), certain related rights and certain shareholder services. More
particularly, the three series of shares of an investment portfolio (a "Fund")
of the Company shall represent interests in the same portfolio of investments of
the particular Fund, and shall be identical in all respects, except for: (a) the
impact of (i) expenses assessed to a series pursuant to a Distribution and
Services Plan and a Services Plan applicable to the Series A shares (the "Series
A Plans") and pursuant to a Distribution and Services Plan and a Services Plan
applicable to the Series B shares (the "Series B Plans;" the Series A Plans and
the Series B Plans being referred to herein collectively, as the "Plans"), and
(ii) any other incremental expenses subsequently identified that should be
properly allocated to one series so long as any subsequent changes in expense
allocations are reviewed and approved by a vote of the Board of Directors,
including a majority of the independent directors; (b) the fact that the series
shall vote separately with respect to a Fund's Plans and any matter submitted to
shareholders relating to series expenses; (c) the different exchange privileges
of the series of shares; (d) the designation of each series of shares of a Fund;
(e) the front-end sales load applicable to the Series A shares and the
contingent deferred sales load applicable to the Series B shares; (f) the
conversion feature of the Series B shares and (g) the different shareholder
services relating to a series of shares.
B. DISTRIBUTION ARRANGEMENTS, EXPENSES AND SALES CHARGES
1. NON-MONEY MARKET FUNDS
A. SERIES A SHARES
Series A shares of the Growth and Income Fund, Short-Term Bond
Market Fund, Special Growth Fund, Bond IMMDEX(TM) Fund, Equity Index Fund,
Balanced Growth Fund, Growth Fund, Intermediate Bond Market Fund, Tax-Exempt
Intermediate Bond Fund, International Equity Fund, MicroCap Fund, Balanced
Income Fund, Emerging Growth Fund, Core International Equity Fund, MidCap Index
Fund and Small Cap Aggressive Growth Fund (the "Non-Money Market Funds") shall
be offered to the general public and shall be subject to a shareholder servicing
and/or distribution fee payable pursuant to the Series A Plans which shall not
initially exceed 0.25% (on an annual basis) of the average daily net assets
attributable to the outstanding Series A shares of the Non-Money Market Funds.
Series A shares of the Growth and Income Fund, Special Growth Fund, Equity Index
Fund, Balanced Growth Fund, Growth Fund, International Equity Fund, Balanced
Income Fund, MicroCap Fund, Emerging Growth Fund, Core International Equity
Fund, MidCap Index Fund and Small Cap Aggressive Growth Fund shall be further
subject to a sales charge which shall not initially exceed 5.5% of the offering
price of the Series A shares of those Funds (subject to the reductions and
exemptions described in the prospectus for such shares, as amended and
supplemented from time to time). Series A shares of the Short-Term Bond Market
Fund, Bond IMMDEX(TM) Fund, Intermediate Bond Market Fund and Tax-Exempt
Intermediate Bond Fund shall be further subject to a sales charge which shall
not initially exceed 4.0% 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, N.A.
(formerly Firstar Bank, Milwaukee, N.A.), (ii) all employer-sponsored qualified
retirement plans other than those serviced by certain external organizations who
have service agreements with Firstar Mutual Fund Services, LLC ("Firstar") or
its affiliates, and other than plans administered by Firstar with assets less
than $1 million at the time Firstar begins plan administration (but including
plans administered by Firstar which owned Institutional shares prior to June 18,
1999) (plans administered by Firstar with assets less than $1 million at the
time Firstar begins plan administration will become eligible for Institutional
shares as described in the Statement of Additional Information from time to
time); (iii) all clients of Firstar Investment Research & Management Company and
(iv) those purchasing through certain broker-dealers who have agreed to provide
certain services with respect to shares of the Non-Money Market Funds, including
Waterhouse Securities, Inc. and Jack White & Co., a division of Waterhouse
Securities, Inc. Institutional shares shall be offered without a sales charge
and shall not be subject to a shareholder servicing and/or distribution fee
payable pursuant to the Plans.
2. MONEY MARKET FUNDS
A. SERIES A SHARES
Series A shares of the Money Market Fund, Tax-Exempt Money
Market Fund, U.S. Government Money Market Fund and U.S. Treasury Money Market
Fund and the Institutional Money Market Fund (the "Money Market Funds") shall be
offered to institutional investors and the general public and, except for the
Institutional Money Market Fund, shall be subject to a shareholder servicing
and/or distribution fee payable pursuant to the Series A Plans which shall not
initially exceed 0.25% (on an annual basis) of the average daily net assets
attributable to Series A shares of the Money Market Funds. Series A shares of
the Money Market Funds shall not be subject to a sales charge.
B. SERIES B SHARES
The Company shall not initially offer Series B shares for the
Money Market Funds.
C. INSTITUTIONAL SHARES
The Company shall not initially offer Institutional shares for
the Money Market Funds.
C. EXCHANGE PRIVILEGES
1. SERIES A SHARES
Series A shareholders initially shall be generally permitted
to exchange their shares in a Fund for Series A shares of other Funds of the
Company without charge or commission by the Fund (except a wire redemption fee
which may be waived). A sales charge shall be imposed on the exchange, in
accordance with the regulations of the Commission, if the shares of the Fund
being acquired have a sales charge and the shares being redeemed were purchased
without a sales charge. The exchange privilege does not initially apply to
shares of the Institutional Money Market Fund.
2. SERIES B SHARES
Series B shareholders initially shall be generally permitted
to exchange their shares for Series B shares of another Fund offered by the
Company without paying any exchange fee or contingent deferred sales charge at
the time the exchange is made, but a deferred sales charge may be payable upon
subsequent redemption of the Series B shares acquired on exchange as provided in
the Funds' prospectuses from time to time.
3. INSTITUTIONAL SHARES
Institutional shareholders initially shall be generally
permitted to exchange their shares for Institutional shares of another Fund
offered by the Company without paying any exchange fee or contingent deferred
sales charge at the time the exchange is made.
D. SHAREHOLDER SERVICES
1. PERIODIC INVESTMENT PLAN
A. SERIES A AND B SHARES
Series A and B shares of the Funds shall initially offer a
periodic investment plan whereby a shareholder may automatically make purchases
of shares of a Fund on a regular, periodic basis.
B. INSTITUTIONAL SHARES
The Company shall not initially offer Institutional shares a
periodic investment plan.
2. CONVERTIFUND(TM) TRANSACTIONS
A. SERIES A SHARES
Series A shall initially permit shareholders to effect
Convertifund(TM) transactions whereby a Series A shareholder may invest
proceeds, including dividend distributions, capital gain distributions and
systematic withdrawals, from one account to another account of the Series A
shares of the Company. Convertifund(TM) transactions may be used to invest funds
from a regular account to another regular account, from a qualified plan to
another qualified plan account or from a qualified plan account to a regular
account.
B. SERIES B SHARES
Series B shares shall initially permit shareholders to effect
Convertifund(TM) transactions whereby a Series B shareholder may invest
proceeds, including dividend distributions, capital gain distributions and
systematic withdrawals, from one account to another account of the Series B
shares of the Company. Convertifund(TM) transactions may be used to invest funds
from a regular account to another regular account, from a qualified plan to
another qualified plan account or from a qualified plan account to a regular
account.
C. INSTITUTIONAL SHARES
The Company shall not initially offer Institutional shares the
Convertifund(TM) transaction service.
3. SYSTEMATIC WITHDRAWAL PLAN
A. SERIES A AND B SHARES
Series A and B shares shall initially offer a systematic
withdrawal plan which allows a shareholder to designate a fixed sum to be
distributed to the shareholder or as otherwise directed at regular intervals.
B. INSTITUTIONAL SHARES
The Company shall not initially offer Institutional shares a
systematic withdrawal plan.
E. CONVERSION FEATURES
1. SERIES A SHARES
The Company shall not initially offer a conversion feature to
holders of Series A shares.
2. SERIES B SHARES
Series B shares, including Series B shares issued upon
exchange of or reinvestment of distributions from such Series B shares, shall
automatically convert to Series A shares of the same Fund such period after
purchase as shall be specified in the applicable prospectus, as amended or
supplemented from time to time.
3. INSTITUTIONAL SHARES
The Company will not initially offer a conversion feature to
holders of Institutional shares.
F. METHODOLOGY FOR ALLOCATING EXPENSES AMONG SERIES
In allocating expenses, a determination shall be made as to
which expenses are series level and which expenses are Fund level. Expenses that
are treated as series level expenses under this Plan will be borne by a Fund's
respective series. Fund level expenses will be allocated daily to the respective
shares classes in accordance with Rule 18f-3(c) as now or hereafter in effect,
subject to the oversight of the Board of Directors.
FIRSTAR INVESTMENT RESEARCH & MANAGEMENT COMPANY, LLC
CODE OF ETHICS
This Code of Ethics has been adopted by Firstar Investment Research & Management
Company, LLC (FIRMCO) in compliance with section 204A and rule 204-2(a)(12) of
the Investment Advisers Act of 1940 (the "Act") as well as rule 17j-1 of the
Investment Company Act of 1940 (the "40 Act") to establish standards and
procedures to ensure persons having knowledge of the investments and investment
intentions of FIRMCO's clients uphold their fiduciary duties to the firm's
clients. This Code is also intended to establish procedures reasonably designed
to prevent the misuse of material, nonpublic information by FIRMCO or any person
associated with FIRMCO.
I. OBJECTIVE
No employee of FIRMCO shall use any information concerning investments or
investment intentions of our clients, or his or her ability to influence such
investment intentions, for personal gain or in a manner detrimental to the
interest of our clients. All investments and investment practices of FIRMCO
employees involving a possible conflict of interest should be avoided so as to
prevent any impairment of a person's ability to be disinterested in making
investment decisions on behalf of FIRMCO clients. No employee shall use material
inside information in connection with any decision or recommendation to purchase
or sell any security, and no employee shall engage in transactions which violate
federal or state securities laws. FIRMCO encourages its employees to utilize
FIRMCO advised common trust funds or mutual funds, other open-end mutual funds
or other exempt securities for the investment of personal assets.
II. DEFINITIONS (as used in this Code)
A. "Beneficial Ownership" means any interest by which an employee
or any member of his or her immediate family sharing the same
household can directly or indirectly derive a monetary benefit
from the purchase or sale or ownership of a security. As a
general matter, "beneficial ownership" will be attributed to
an employee in all instances where the person (i) possesses
the ability to purchase or sell the security (or the ability
to direct the disposition of the security); (ii) possesses the
voting power (including the power to vote or to direct the
voting) over such security; or (iii) receives any benefits
substantially equivalent to those of ownership.
Although the following is not an exhaustive list, a person
generally would be regarded to be the beneficial owner of the
following:
1. securities held in the person's own name;
2. securities held with another in joint tenancy, as tenants in
common, or in other joint ownership arrangements;
3. securities held by a bank or broker as a nominee or custodian on
such person's behalf or pledged as collateral for a loan;
4. securities held by members of the person's immediate family sharing
the same household ("immediate family" means any child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law or sister-in-law, including adoptive relationships);
5. securities held by a relative not residing in the person's home if
the person is a custodian, guardian, or otherwise has controlling
influence over the purchase, sale, or voting of such securities;
6. securities held by a trust for which the person serves as a trustee
and in which the person has a pecuniary interest (including pecuniary
interests by virtue of performance fees and by virtue of holdings by
the person's immediate family);
7. securities held by a trust in which the person is a beneficiary and
has or shares the power to make purchase or sale decisions;
8. securities held by a general partnership or limited partnership in
which the person is a general partner; and
9. securities owned by a corporation which is directly or indirectly
controlled by, or under common control with, such person.
Any uncertainty as to whether an employee beneficially owns a
security should be brought to the attention of the Compliance
Officer.
B. "EMPLOYEE" means any officer, member of the Board of Managers or
employee of FIRMCO.
C. "PERSONAL ACCOUNT" means any and all accounts of which an employee is
a beneficial owner.
D. "PURCHASE OR SALE OF A SECURITY" includes, among other things, an
option to purchase or sell a security, and a purchase or sale of any
security convertible into or exchangeable for a covered security.
E. "EXEMPT SECURITY" means:
1. direct obligations of the Government of the United States;
2. bankers' acceptances, bank certificates of deposit, commercial
paper, and high quality short-term debt instruments (any instrument
that has a maturity at issuance of less than 366 days and that is
rated in one of the two highest rating categories by a nationally
recognized statistical rating organization), including repurchase
agreements;
3. shares of registered open-end investment companies; and
4. units of common trust funds;
5. Firstar Corporation Stock.
F. "Exempt Transactions" means that the restrictions of Sections IV and V
shall not apply to:
1. Securities acquired through stock dividends, automatic
dividend reinvestments, stock splits, reverse stock
splits, mergers, consolidations, spin-offs, or other
similar corporate reorganizations or distributions
generally applicable to all holders of the same class of
securities;
2. Securities acquired upon the exercise of rights issued by
an issuer pro rata to all holders of a class of its
securities, to the extent such rights were acquired from
such issuer, and sales of such rights so acquired.
G. "MATERIAL INSIDE INFORMATION" means confidential information of
such a nature that there is a substantial likelihood that a
reasonable investor would consider it important in deciding
whether to buy, sell or hold securities.
III. STANDARDS OF CONDUCT
A. CONFLICTS OF INTEREST. In any matter involving both the personal
accounts of an employee and securities held or to be acquired by a FIRMCO
client account managed by such employee, the employee shall resolve any
known or reasonably anticipated conflict of interest in favor of the FIRMCO
managed account. All investments and investment practices involving a
possible conflict of interest shall be avoided to the extent practicable in
order to prevent any impairment of an employee's ability to be
disinterested in connection with his or her services for the FIRMCO managed
accounts and to avoid the possible use for a personal account of investment
recommendations and other information generated on behalf of FIRMCO managed
accounts. Strict adherence to the provisions of this Code of Ethics should
assist the employee in avoiding such conflicts of interest.
B. DISCLOSURE OF MATERIAL POSITIONS OR RECENT TRADING. At no time may
any employee recommend or authorize the holding, purchase or sale
of any security by any FIRMCO managed account without first
disclosing the existence of any material (in relationship to
personal financial circumstances) position (long or short) in such
security held by, or recent trading in such security by, any
personal account of such employee. This disclosure should be made
to the Compliance Officer.
C. REPORTS AND OTHER INFORMATION. Reports and all other information
relating to a particular security or to an industry prepared or
acquired for use by FIRMCO or any FIRMCO managed account are the
property of FIRMCO and shall not go outside the office without
permission of the President or an officer designated by her/him,
and shall not be used for personal accounts of an employee under
any circumstances.
IV. PERSONAL TRADING RESTRICTIONS
A. BLACKOUT PERIODS. No employee may purchase or sell shares of any
security in which he or she has or thereby acquires a direct or indirect
beneficial ownership interest if:
1. FIRMCO's trading desk has a pending buy or sell order in that same
security;
2. FIRMCO's trading desk has executed a buy or sell order in that
security during that day;
3. The security has been purchased or sold in a FIRMCO account managed
by the employee within the last seven business days;
4. The security will be purchased or sold in a FIRMCO account managed
by the employee within the next seven business days; or
5. The employee, in connection with his/her job responsibilities, has
recommended an investment rating change in that security within the
last seven business days or is considering an investment rating change
within the next seven business days.
B. BLACKOUT EXEMPTIONS. Blackout periods do not apply to:
1. Exempt securities;
2. Exempt transactions; and
3. S&P 500 Securities as discussed in Section V.(D).
C. INITIAL PUBLIC OFFERINGS ("IPOS"). No employee may acquire any
securities in an initial public offering.
D. PRIVATE PLACEMENTS. No employee may acquire any securities in a
private placement from a publicly traded company. No employee may
acquire any securities in a private placement from a non-publicly
traded company without prior approval from the President after
consultation with the Compliance Officer. In a request for
approval, the employee should document that there is no conflict
with any FIRMCO client account or the investment strategy of the
firm. In determining whether approval should be granted, the
following should be considered and documented:
1. Whether the investment opportunity should be reserved for FIRMCO
and its managed accounts; and
2. Whether the opportunity is being offered to an individual by virtue
of his/her position with FIRMCO.
In the event approval is granted, the employee must disclose the
investment when he/she plays a material role in FIRMCO's
subsequent consideration of an investment in the issuer. In such
circumstances, FIRMCO's decision to purchase securities of the
issuer will be subject to an independent review by investment
personnel with no personal interest in the issuer.
E. SHORT-TERM TRADING PROFITS. In general, FIRMCO advocates long-term
investing. No employee may profit from the purchase and sale, or
sale and repurchase, of the same or equivalent securities within
60 calendar days if, at any time during those 60 days, the
securities were included on any FIRMCO model portfolio or purchase
list. All other short-term profits realized require the approval
of the Compliance Officer before the transaction that triggers the
short-term gain is executed. Any profits realized in violation of
this policy should be disgorged, as discussed in Section XII.(B).
F. SHORT SALES. No employee may short sell any security.
V. PRE-CLEARANCE FOR PERSONAL SECURITY TRANSACTIONS
A. GENERAL PRE-CLEARANCE PROVISIONS. All employees must obtain
advance written clearance using the form provided in Exhibit C
from the President, Vice President of Operations or Compliance
Officer for every purchase, sale or gift of any security in which
he or she has or thereby acquires a direct or indirect beneficial
ownership interest in a personal account. Exhibit C may be
obtained on the Lotus Notes Policy Database.
B. PRE-CLEARANCE EXEMPTIONS. Advance clearance is not required for:
1. Exempt securities;
2. Exempt transactions;
3. Stock in closely held corporations, service corporations,
professional corporations, units in a LLC, partnership interests, or
similar family businesses;
4. Securities purchased through a matching program of an
employer-sponsored retirement plan by any member of the person's
immediate family sharing the same household;
5. Stock in highly leveraged institutions ("hedge funds");
6. Securities whose performance are directly tied to an index (for
example, SPDRS); and
7. Gifts received and employer sponsored stock purchase programs
described below (Sections V(F)(3) and (4)).
C. FACTORS CONSIDERED. Generally the following factors will be considered
in determining whether or not to clear a proposed transaction:
1. Whether the amount or nature of the transaction is likely to affect
the price or market for the security;
2. Whether the individual proposing the purchase or sale is likely to
benefit from purchases or sales being made or being considered by
FIRMCO for any of its clients;
3. Whether the transaction is likely to harm any FIRMCO client.
D. S&P 500 SECURITIES. Advance clearance will generally be provided
for purchases or sales of securities issued by any company
included in the Standard and Poor's 500 Stock Index and in an
amount of 500 or fewer shares each day (considered to be a DE
MINIMIS trade) as long as (1) the nature of the transaction is
unlikely to affect the price or market for the security; (2) the
individual proposing the purchase or sale is unlikely to benefit
from purchases or sales being made or considered by FIRMCO for any
of its clients; and (3) the transaction is unlikely to harm any
FIRMCO client.
E. APPROVAL WINDOW. Once approved, a trade authorization is effective for
the remainder of the trading day. Failing to execute the transaction will
void the pre-clearance approval, and a new request for pre-clearance must
be submitted. Gifts of shares of personal securities are provided three
business days to direct the gift.
F. OTHER PRE-CLEARANCE CONSIDERATIONS.
1. DENIED AUTHORIZATION. Advance clearance of a personal transaction
may be refused without specifying any reason for the refusal.
2. GIFTED SECURITIES. It is generally understood that the physical
transfer of gifted shares may occur several days after the employee
directs the broker to transfer the shares, for reasons beyond the
employee's control. Therefore, the employee must direct his/her broker
to transfer the shares within the three-day trading window provided by
the clearance. The employee should then monitor the physical transfer
of the security to ensure that it occurs in a timely manner, and the
employee shall notify the Compliance Officer of the specific date of
transfer if the actual physical transfer occurs outside of the
approved trading window.
3. GIFTS RECEIVED. Gifts received in a personal account do not require
advance clearance. However, the employee should disclose the receipt
of such gift to the Compliance Officer in connection with the
quarterly reporting requirements, as discussed in Section VI.
4. EMPLOYER SPONSORED STOCK PURCHASE PROGRAMS. Members of an
employee's immediate family sharing the same household may participate
in employer sponsored individual security purchase programs, either
through an employer sponsored retirement account or through a taxable
program. Such transactions do not require pre-clearance. However, the
employee is required to notify the Compliance Officer prior to initial
enrollment in such a program and to report purchases in the individual
security in connection with the quarterly reporting requirements, as
discussed in Section VI. In reporting information related to
participation in such programs, the employee may hide any information
on the account statement that does not relate to the individual
security.
VI. REPORTING REQUIREMENTS
A. QUARTERLY TRANSACTION REPORTS. Within ten calendar days after the
end of each calendar quarter, each employee shall make a written
report to the Compliance Officer of all transactions (including
those which received advance clearance) occurring in the quarter
by which they acquired or disposed of a beneficial ownership
interest in any security. Employees are not required to report
transactions for exempt securities. The report must contain the
following information with respect to each reportable transaction:
1. Date and nature of transaction (i.e. purchase, sale, gift or other
acquisition or disposition);
2. Title, the interest rate and maturity date (if applicable), the
number of shares and the principal amount of the security involved;
3. Price at which it was effected;
4. Name of the broker, dealer or bank with or through whom the
transaction was effected; and
5. Date of the report.
The report also must contain the following information with
respect to any account established by the employee in which
any non-exempt securities were held during the quarter for the
direct or indirect benefit of the employee:
1. Name of the broker, dealer or bank with whom the employee
established the account;
2. Date the account was established; and
3. Date of the report.
The report must be filed by all employees even if no
reportable transactions were made during the quarter. The
report may be on the form attached hereto as Exhibit A and may
consist of broker statements that provide at least the same
information.
B. ANNUAL HOLDINGS REPORTS. Within 30 calendar days after the end of each
calendar year, each employee shall make a written report to the Compliance
Officer of all security holdings in which he or she has a direct or
indirect beneficial ownership interest. Employees are not required to
report holdings of exempt securities. The report must contain the following
information:
1. Title, number of shares and principal amount of each covered
security in which the employee had any direct or indirect beneficial
ownership interest;
2. Name of any broker, dealer or bank with whom the employee maintains
an account in which any securities are held for the direct or indirect
benefit of the employee; and
3. Date of the report.
The report may be on the form attached hereto as Exhibit B.
C. INITIAL HOLDINGS REPORTS. Within ten calendar days after commencement of
employment with FIRMCO, each new employee shall make a written report to
the Compliance Officer of all security holdings in which he or she has a
direct or indirect beneficial ownership interest. New employees are not
required to report holdings of exempt securities. The report must contain
the following information:
1. Title, number of shares and principal amount of each covered
security in which the new employee had any direct or indirect
beneficial ownership interest when the person became an employee;
2. Name of any broker, dealer or bank with whom the new employee
maintained an account in which any securities were held for the direct
or indirect benefit of the new employee as of the date the person
became an employee; and
3. Date of the report.
The report may be on the form attached hereto as Exhibit B
(New Employee Version).
D. BROKERAGE ACCOUNTS. All employees are required to direct their
broker/dealer(s) to supply the Compliance Officer with duplicate copies of
all trade confirmations and periodic statements for every account in which
he or she has a direct or indirect beneficial ownership interest and in
which non-exempt securities are held.
E. CERTIFICATION OF COMPLIANCE. Each employee is required to reconfirm
adherence to this Code of Ethics on an annual basis within thirty days
following year-end (refer to Exhibit B).
VII. MATERIAL INSIDE INFORMATION
A. INSIDER TRADING. No employee may purchase or sell shares of any
security, either personally or on behalf of others (including private
accounts managed by the employee), while in possession of material,
nonpublic information about the security, or communicate material,
nonpublic information to others in violation of the law. This conduct is
frequently referred to as "insider trading."
B. IDENTIFYING MATERIAL INSIDE INFORMATION. If you are unsure whether you
are in possession of material inside information, ask yourself the
following questions:
1. Is the information material?
2. Is this information an investor would consider important in making
his or her investment decisions?
3. Is this information that could reasonably affect the market price
of the securities if generally disclosed?
4. Is the information non-public?
5. To whom has this information been provided?
6. Has the information effectively been communicated to the
marketplace? (For example, published in Reuters, THE WALL STREET
JOURNAL or other publications of general circulation?)
C. PROCEDURES. If upon consideration of the above you believe the
information may be material and non-public, you should promptly report it
to the President, Vice President of Operations or Compliance Officer. Upon
determination by one or all of them that the information is material inside
information, the following actions, as deemed necessary, will promptly be
taken:
1. Halt all trading in the security or securities of the pertinent
issuer and all recommendations thereof;
2. Ascertain the validity and nonpublic nature of the information with
the issuer of the securities;
3. Request the issuer or other appropriate parties to disseminate the
information promptly to the public if the information is valid and
nonpublic;
4. In the event the information is not publicly disseminated and is of
a significant nature, notify legal counsel and request advice as to
what further steps should be taken before transactions or
recommendations in the securities are resumed.
D. RESTRICTED LIST. The security will be added to the firm's Restricted
List, a listing of those securities about which FIRMCO has material,
nonpublic information. FIRMCO employees are restricted from trading or
recommending any security included on the Restricted List. The list is
maintained by the Compliance Officer and access to the list is restricted
to those individuals required to review the list, at the discretion of the
Compliance Officer. Those individuals may include, but are not limited to
the President, Vice President of Operations, Director of Equity Research
and Equity Traders.
VIII. SERVICE ON PUBLIC COMPANY BOARDS
FIRMCO employees must obtain the prior approval of the President to serve as a
director on the board of a publicly traded company. A determination by the
President that the board service would be consistent with the interests of the
firm and its clients should be noted in the approval. In any instance in which
board service is authorized, employees serving as directors must not participate
in making investment decisions regarding the purchase or sale of that company's
securities in FIRMCO managed accounts. In addition, the employee should make
appropriate disclosures on their conflict acknowledgment forms annually
thereafter.
IX. GIFTS
All employees are prohibited from receiving moneys in any form (other than their
FIRMCO compensation package) or receiving gifts, gratuities, hospitalities or
other things of more than $100 in face or retail value annually from any person
or entity that does business with or on behalf of FIRMCO or any of its clients.
Such prohibition shall not apply to seasonal gifts made generally available to
all employees at FIRMCO's offices or to meals and/or entertainment provided in
the ordinary course of business and consistent in cost with FIRMCO's standards
for employee expenditures.
X. EXTERNAL COMMUNICATION
Employees should not communicate information about Firstar Corporation to
outside entities. All questions or comments regarding Firstar should be directed
to the Chief Financial Officer of Firstar Corporation. All Firstar specific
press inquiries should be directed to Firstar's Head of Public Relations. All
FIRMCO specific press inquiries should be directed to FIRMCO's President or an
officer designated by her/him.
XI. CONFIDENTIALITY OF CLIENT TRANSACTIONS
All information concerning securities being considered for purchase or sale by
FIRMCO for any of its clients shall be kept confidential by all employees. It
shall be the responsibility of the Compliance Officer to report any inadequacy
found to FIRMCO's Board of Managers.
XII. SANCTIONS FOR VIOLATION OF THE CODE
A. PERSONAL TRADING VIOLATIONS. Upon discovering a violation of the Code,
FIRMCO's President and/or Board of Managers may impose such sanctions as
deemed appropriate, including a verbal or written warning, letter of
censure, suspension or termination of employment of the violator.
B. DISGORGEMENT. If a security is purchased in violation of FIRMCO's
Code, the Compliance Officer may, upon review of the facts and
circumstances surrounding the violation, require the employee to "break the
trade" or reverse the transaction immediately, regardless of whether a
profit or loss occurs from the transaction. The employee must disgorge any
profits and assume any losses, even if the transaction was done innocently
and discovered afterward.
Any moneys accrued in the event of a personal trading violation
shall not benefit the employee or FIRMCO. Employees are required
to remit the disgorged profits to FIRMCO within five days of the
reversing transaction (calculating their personal capital gain
resulting from the reversal, and retaining the amount to pay the
tax due on the gain.). A net payment in the form of a cashier's
check made payable to a charity of the employee's choice should
be given to FIRMCO for mailing. However, should FIRMCO managed
accounts incur a loss as a result of the personal trade, then
full disgorgement regardless of taxes due must be made to the
accounts.
C. INSIDER TRADING VIOLATIONS. Trading securities while in possession of
material, nonpublic information or improperly communicating that
information to others may expose violators to stringent penalties. Criminal
sanctions may include a fine of up to $1,000,000 and/or ten years
imprisonment. The SEC can recover the profits gained or losses avoided
through the violative trading, impose a penalty of up to three times the
illicit windfall, and issue an order permanently barring the person or
persons from the securities industry. Finally, the violator may be sued by
investors seeking to recover damages for insider trading violations. In
addition to the foregoing, any violation of FIRMCO's policies with respect
to insider trading can be expected to result in serious sanctions by FIRMCO
as set forth in Section A above, including dismissal of the person or
persons involved.
XIII. APPROVED EXCEPTIONS TO THE CODE
Exceptions to the Code may be extended in rare circumstances with the approval
of one of the following: Compliance Officer, Vice President of Operations, or
the President. Exceptions will only be granted in circumstances where strict
adherence to the Code results in unfavorable treatment to any FIRMCO client or
inequitable or unfair treatment to an employee with no harm to a FIRMCO client.
In no circumstances shall an exception be granted which is likely to harm any
FIRMCO client. All approved exceptions will be reported to the Board of Managers
in a timely manner.
XIV. REQUIRED BOARD REPORTING
All violations of the Code of Ethics shall be reported to the Board of Managers
in a timely manner with a summary of corrective action taken. If no corrective
action is deemed necessary, the report shall state the reason for no such
action. The Compliance Officer shall report any other transaction deemed
necessary for Board review.
XV. REQUIRED RECORDS
The Compliance Officer shall maintain and review the required records to
evidence compliance with this Code.
Approved by FIRMCO's Board of Directors, June 1994 Amended by FIRMCO's Board of
Managers, February 2000
Exhibit A
FIRSTAR INVESTMENT RESEARCH &
MANAGEMENT COMPANY, LLC
SECURITY TRANSACTION REPORT
FOR THE QUARTER ENDED
The following lists all transactions in securities in which I had any direct or
indirect beneficial ownership interest during the last calendar quarter. (IF NO
TRANSACTIONS TOOK PLACE, WRITE "NONE REPORTABLE.") Copies of quarterly brokerage
statements are acceptable forms of reporting. Please write "see attached" and
attach a copy of brokerage statement(s) which accurately reports securities
transactions. I have excluded all transactions in Exempt Securities as defined
within the FIRMCO Code of Ethics. This report has been signed, dated and
returned to the Compliance Officer no later than 10 days after the calendar
quarter end.
<TABLE>
<CAPTION>
- ---------------- ------------------ ---------------------- -------------- -------------- ------------------------
PURCHASE, TITLE OF SECURITY PRINCIPAL
DATE SALE, OTHER AND NUMBER OF SHARES AMOUNT PRICE BROKER, DEALER OR BANK
- ---------------- ------------------ ---------------------- -------------- -------------- ------------------------
- ---------------- ------------------ ---------------------- -------------- -------------- ------------------------
<S> <C> <C> <C> <C> <C>
- ---------------- ------------------ ---------------------- -------------- -------------- ------------------------
- ---------------- ------------------ ---------------------- -------------- -------------- ------------------------
- ---------------- ------------------ ---------------------- -------------- -------------- ------------------------
- ---------------- ------------------ ---------------------- -------------- -------------- ------------------------
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- ---------------- ------------------ ---------------------- -------------- -------------- ------------------------
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</TABLE>
Of the transactions identified above, if any, I have listed below the
transactions in securities that I have purchased/sold or considered
purchasing/selling in a FIRMCO managed account. IF NO SUCH TRANSACTIONS TOOK
PLACE, WRITE "NONE REPORTABLE."
<TABLE>
<CAPTION>
- ---------------- ------------------ ---------------------- -------------- -------------- ------------------------
PURCHASE, TITLE OF SECURITY PRINCIPAL
DATE SALE, OTHER AND NUMBER OF SHARES AMOUNT PRICE BROKER, DEALER OR BANK
- ---------------- ------------------ ---------------------- -------------- -------------- ------------------------
- ---------------- ------------------ ---------------------- -------------- -------------- ------------------------
<S> <C> <C> <C> <C> <C>
- ---------------- ------------------ ---------------------- -------------- -------------- ------------------------
- ---------------- ------------------ ---------------------- -------------- -------------- ------------------------
- ---------------- ------------------ ---------------------- -------------- -------------- ------------------------
- ---------------- ------------------ ---------------------- -------------- -------------- ------------------------
- ---------------- ------------------ ---------------------- -------------- -------------- ------------------------
</TABLE>
All employees are required to direct their broker/dealer(s) to supply the
Compliance Officer with duplicate copies of all trade confirmations and periodic
statements for every account in which he or she has a direct or indirect
beneficial ownership interest and in which non-exempt securities are held. I
have identified below any account opened during the last calendar quarter which
requires reporting under the Code.
NAME OF BROKER, DEALER OR BANK ACCOUNT NUMBER DATE ESTABLISHED
Signature _____________________
Name __________________________
Date __________________________
Exhibit B
FIRSTAR INVESTMENT RESEARCH &
MANAGEMENT COMPANY, LLC
ANNUAL REPORTING
FOR THE YEAR ENDED ______
SECTION 1: CONFIRMATION OF COMPLIANCE
I have received a copy of the FIRMCO Code of Ethics as amended by the Board of
Managers in February 2000. I agree to comply with my responsibilities as
described within such Code.
SECTION 2: REPORT OF SECURITY HOLDINGS
The following lists all security holdings in which I have a direct or indirect
beneficial ownership interest as of the date indicated below. Copies of year-end
brokerage statements are acceptable forms of reporting.
I have excluded any holdings of Firstar Corporation stock, open-end mutual
funds, common trust funds, U.S. Treasury obligations, and other securities
defined as exempt within the Code of Ethics. (If I hold no reportable holdings I
have written "none reportable".)
Number Principal Broker, Dealer
TITLE OF SECURITY OF SHARES AMOUNT OR BANK
SECTION 3: BROKERAGE STATEMENTS AND CONFIRMATIONS
FIRMCO's Code of Ethics requires all employees to direct their broker/dealer or
bank to supply the Compliance Officer with duplicate copies of all trade
confirmations and periodic statements for every account in which he or she has
or had a direct or indirect beneficial ownership interest.
FIRMCO currently receives duplicate statements and corresponding trade
confirmations for the following accounts:
In compliance with FIRMCO's Code of Ethics, the above listing of accounts is
accurate with the exceptions, if any, listed below. Accounts that solely hold
exempt securities as defined within the Code of Ethics may be excluded.
This report has been signed, dated and returned to the Compliance Officer no
later than 30 days after the calendar year end.
Signature ____________________
Name _________________________
Date _________________________
FIRSTAR INVESTMENT RESEARCH &
MANAGEMENT COMPANY, LLC
ANNUAL REPORTING
(NEW EMPLOYEE VERSION)
SECTION 1: CONFIRMATION OF COMPLIANCE
I have received a copy of the FIRMCO Code of Ethics as amended by the Board of
Managers in February 2000. I agree to comply with my responsibilities as
described within such Code.
SECTION 2: REPORT OF SECURITY HOLDINGS
The following lists all security holdings in which I have a direct or indirect
beneficial ownership interest as of the date indicated below. Copies of
brokerage statements are acceptable forms of reporting.
I have excluded any holdings of Firstar Corporation stock, open-end mutual
funds, common trust funds, U.S. Treasury obligations, and other securities
defined as exempt within the Code of Ethics. (If I hold no reportable holdings I
have written "none reportable".)
Number Principal Broker, Dealer
TITLE OF SECURITY OF SHARES AMOUNT OR BANK
SECTION 3: BROKERAGE STATEMENTS AND CONFIRMATIONS
FIRMCO's Code of Ethics requires all employees to direct their broker/dealer or
bank to supply the Compliance Officer with duplicate copies of all trade
confirmations and periodic statements for every account in which he or she has
or had a direct or indirect beneficial ownership interest.
The following lists the accounts for which I have directed my broker/dealer(s)
to provide FIRMCO with duplicate statements and corresponding trade
confirmations. Accounts which solely hold exempt securities as defined within
the Code of Ethics may be excluded.
This report has been signed, dated and returned to the Compliance Officer no
later than 10 days after my start date with FIRMCO.
Signature _______________________
Name ____________________________
Date ____________________________
Exhibit C
FIRSTAR INVESTMENT RESEARCH & MANAGEMENT COMPANY, LLC
PERSONAL SECURITIES TRANSACTION PRE-CLEARANCE FORM
<TABLE>
<CAPTION>
Employee Name:
- ------------------- ---------------------------------------- --------------- ------------------ ----------------------
PURCHASE/ APPROXIMATE BROKER/DEALER
SALE/OTHER SECURITY QUANTITY PRICE BANK
- ------------------- ---------------------------------------- --------------- ------------------ ----------------------
- ------------------- ---------------------------------------- --------------- ------------------ ----------------------
<S> <C> <C> <C> <C>
- ------------------- ---------------------------------------- --------------- ------------------ ----------------------
- ------------------- ---------------------------------------- --------------- ------------------ ----------------------
- ------------------- ---------------------------------------- --------------- ------------------ ----------------------
- ------------------- ---------------------------------------- --------------- ------------------ ----------------------
- ------------------- ---------------------------------------- --------------- ------------------ ----------------------
- ------------------- ---------------------------------------- --------------- ------------------ ----------------------
- ------------------- ---------------------------------------- --------------- ------------------ ----------------------
- ------------------- ---------------------------------------- --------------- ------------------ ----------------------
- ------------------- ---------------------------------------- --------------- ------------------ ----------------------
- ------------------- ---------------------------------------- --------------- ------------------ ----------------------
- ------------------- ---------------------------------------- --------------- ------------------ ----------------------
</TABLE>
o Being traded by:
( ) Self ( ) Spouse ( ) Child ( ) Other - Please describe
o I have research responsibility over this security:
( ) Yes ( ) No ( ) N/A
o This transaction triggers a short-term profit, as defined within the Code:
( ) Yes ( ) No
o Security has been purchased by me in FIRMCO managed accounts within the last
6 months:
( ) Yes ( ) No ( ) N/A
To the best of my knowledge, this proposed transaction does not violate the
provisions of the FIRMCO Code of Ethics.
TIME AND DATE
EMPLOYEE SIGNATURE: __________________________ REQUESTED: _____________
- --------------------------------------------------------------------------------
FOR COMPLIANCE USE ONLY
- --------------------------------------------------------------------------------
S&P 500 security:( ) Yes ( ) No Security held in lead accounts:( ) Yes ( ) No
Security traded in managed accounts of the employee within last 7 business days:
( ) Yes ( ) No
Comments: ______________________________________________________________________
Contact in Trading: ____________________________________________________________
Contact in Portfolio Management/Research, if necessary:
Pending Trades:( ) Yes ( ) No Trades executed within the day:( ) Yes ( ) No
COMPLIANCE COMPLETED/CHECKED BY:
- --------------------------------------------------------------------------------
NOTIFICATION OF APPROVAL OR DENIAL
- --------------------------------------------------------------------------------
Date: Time Responded:
-------------------------------
Approved: Denied: Approved Trading Window:
--------- ----
Comments: ______________________________________________________________________
Authorized/Denied By: ___________________________
HANSBERGER GLOBAL INVESTORS, INC.
AMENDED CODE OF ETHICS
This Amended Code of Ethics (the "Code") has been adopted by Hansberger Global
Investors, Inc. ("HGII"). The Code is based on the principle that the officers,
directors and employees of HGII owe a fiduciary duty to their advisory clients
to conduct personal securities transactions in a manner that does not interfere
with client transactions or otherwise take unfair advantage of their
relationship with HGII and its clients. Persons covered by this Code must adhere
to this general principle as well as comply with the Code's specific provisions.
Technical compliance with the Code's procedures will not automatically insulate
from scrutiny trades that show a pattern of abuse of the individual's fiduciary
duties to HGII's advisory clients. The Code has been adopted pursuant to Rule
17j-1 under the 1940 Act and Section 204A of the Advisers Act, and to comply
with the reporting requirements of Rule 204-2 under the Advisers Act.
I. DEFINITIONS
A. "1940 Act" means the U.S. Investment Company Act of 1940, as amended.
B. "Access Person" means any director or officer of the Company. The term also
means: (i) any employee of the Company (or of any company in a control
relationship to the Company) who, in connection with his or her regular
functions or duties, makes, participates in, or obtains information regarding
the purchase or sale of a Security by a Company advisory client, or whose
functions relate to the making of any recommendations with respect to such
purchases or sales; and (ii) any person in a control relationship to HGII
(including any affiliate of such person and any affiliate of such affiliate)
who obtains information concerning recommendations made to Company clients.
C. "Advisers Act" means the U.S. Investment Advisers Act of 1940, as amended.
D. A Security is "being considered for purchase or sale" when a recommendation
to purchase a Security has been made and communicated to the HGII research group
or posted on the Company's research bulletin board.
E. "Beneficial ownership" shall be interpreted in the same manner as it would be
in determining whether a person is subject to the provisions of Section 16 of
the U.S. Securities Exchange Act of 1934, as amended (the "1934 Act") and Rule
16a-1(a)(2) thereunder, except that the determination of direct or indirect
beneficial ownership shall apply to all securities which an Access Person has or
acquires. In addition, a person should consider himself or herself the
beneficial owner of securities held by his or her spouse, his or her minor
children, a relative who shares his or her home, or other persons by reason of
any contract, arrangement, understanding or relationship that provides him or
her with sole or shared voting or investment power.
F. "Company" means HGII and its subsidiaries.
G. "Compliance Department" means the Company's compliance department located in
Fort Lauderdale, Florida or its successor.
H. "Compliance Officer" means Kimberley A. Scott or her successor.
I. "Control" shall have the same meaning as that set forth in Section 2(a)(9) of
the 1940 Act.
J. "Employee" means any officer or employee of the Company, but does not mean
any Outside Director.
K. "EmployeeAccount" means all accounts in the name of or for the benefit of an
Employee, his or her spouse, dependent children or any person living with an
Employee or to whom an Employee contributes economic support, as well as any
other account with respect to which an Employee exercises investment discretion
or provides investment advice.
L. "General Counsel" means J. Christopher Jackson or his successor.
M. "Initial public offering" means an offering of securities registered under
the U.S. Securities Act of 1933, as amended (the "1933 Act"), the issuer which,
immediately before registration, was not subject to the reporting requirements
of Section 13 or Section 15(d) of the 1934 Act.
N. "Legal Department" means the Company's legal department located in Fort
Lauderdale, Florida or its successor.
O. "Outside Director" means a director of the Company who is not an "interested
person" of the Company within the meaning of Section 2(a)(19)(B) of the 1940
Act.
P. "Portfolio Manager" means any person who exercises investment discretion on
behalf of the Company or any Company client.
Q. "Private placement" means an offering that is exempt from registration under
the 1933 Act pursuant to Section 4(2), Section 4(6), Rule 504, Rule 505 or Rule
506.
R. "Purchase or sale of a Security" includes, among other things, the writing of
an option to purchase or sell a Security.
S. "Security" shall have the meaning set forth in Section 2(a)(36) of the 1940
Act and, for purposes of this Code of Ethics, shall include options on
Securities and transactions in related futures contracts, except that it shall
not include shares of registered open-end investment companies, direct
obligations of the Government of the United States, high quality short-term debt
securities (including repurchase agreements), bankers' acceptances, bank
certificates of deposit, and commercial paper.
T. "Security held or to be acquired" means: (a) any Security which, within the
most recent 15 days (i) is or has been held by a client or (ii) is being or has
been considered for purchase by the Company for a client; and (b) any option to
purchase or sell, and any Security convertible into or exchangeable for, a
Security described in (a) above.
II. STANDARDS OF CONDUCT
No Access Person shall in connection with the purchase or sale, directly or
indirectly, of a Security held or to be acquired by a Company client (including
an investment company managed or advised by the Company):
A. employ any device, scheme or artifice to defraud a client;
B. make to a client any untrue statement of a material fact or omit to state to
a client a material fact necessary in order to make the statements made, in
light of the circumstances under which they are made, not misleading;
C. engage in any act, practice, or course of business which operates or would
operate as a fraud or deceit upon a client; or
D. engage in any manipulative practice with respect to a client.
III. EXEMPTED TRANSACTIONS
A. The prohibitions of Section IV. E and F of this Code shall not apply to:
1. Purchases or sales of Securities that are not eligible for purchase or
sale by Company clients;
2. Purchases or sales which are nonvolitional on the part of the person;
3. Purchases that are part of an automatic dividend reinvestment plan;
4. Purchases effected upon the exercise of rights issued by an issuer
PRO-RATA to all holders of a class of its securities, to the extent such
rights were acquired from such issuer, and sales of such rights so
acquired;
5. Purchases or sales effected in any account over which the person has no
direct or indirect influence or control; and
6. Purchases or sales through any profit sharing, pension or other benefit
plan of the Company.
B. In addition, the prohibitions of Section IV. A. 5 and the preclearance
requirements of Section V . A. of this Code shall not apply to:
1. Purchases or sales which are nonvolitional on the part of the person;
2. Purchases that are part of an automatic dividend reinvestment plan;
3. Purchases or sales effected in any account over which the person has no
direct or indirect influence or control; and
4. Purchases or sales through any profit sharing, pension or other benefit
plan of the Company.
C. The Compliance Officer or General Counsel may approve a purchase or sale of a
Security that would otherwise violate the provisions set forth in Section IV
below if he or she determines after appropriate inquiry that the transaction is
consistent with the fiduciary duty owed to the Company's clients and is not
potentially harmful to clients because: (a) it does not conflict with any
Security being considered for purchase by any current advisory client and (b)
the decision to purchase or sell the Security is not the result of information
obtained in the course of a person's relationship with an advisory client or the
Company.
IV. PROHIBITED CONDUCT; REQUIRED ACTIONS
A. Employees are prohibited from the following activities unless they have
obtained prior written approval from the Compliance Officer or the Legal
Department:
1. Employees may not join an investment club or enter into an investment
partnership;
2. Employees may not purchase any security in a private placement;
3. Employees may not serve on the boards of directors of either publicly
traded or privately held companies nor may they serve as members of any
creditor committees;
4. Employees may not purchase any security in an initial public offering;
and
5. Employees may not profit from the purchase and sale, or sale and
purchase, of the same or equivalent Securities within 60 business days. Any
profits realized on such trades shall be disgorged to a charitable
organization.
B. Every Employee shall direct his or her broker(s) (if any) to provide
duplicate confirmations and account statements to the Compliance Department
regarding his or her own accounts and for any account in which securities were
held for his or her direct or indirect benefit (together, "Beneficial
Accounts").
C. For the purpose of purchasing Company sponsored mutual funds at net asset
value, Employees may have joint accounts only with spouses, their children under
age 21, parents, step-parents, parents-in-law, brothers, sisters, grandchildren
or grandparents and a trustee or custodian of any qualified pension or profit
sharing plan or IRA established for the benefit of such persons.
D. Employees may not speak in or to the media, on or off the record, regarding
any client or security without the prior authorization of the Compliance Officer
or the Legal Department.
E. All Employees are prohibited from purchasing or selling any Security for ten
(10) business days from the date that: (a) the Company first approves an initial
recommendation for the Buy, Alt-Buy or Hold List; or (b) a Security already on
the research database is moved from the Hold to the Buy or Alt Buy List.
F. No Employee shall execute a Securities transaction on a day during which a
Company client has a pending "buy" or "sell" order in such Security.
G. No Employee shall accept a gift of more than de minimis value from any person
or entity that does business on behalf of the Company. For purposes of this
prohibition, de minimis value is considered to be a value of $100 or less.
V. PRE-CLEARANCE REQUIREMENT AND PROCEDURES; ANNUAL REPORTING
A. No Employee shall purchase or sell any Security for any Beneficial Account,
unless the proposed purchase or sale has been reported to and pre-cleared by the
Compliance Officer, or in his or her absence, the Legal Department.
1. All proposed personal securities transactions shall be documented either
on a Personal Security Trade Authorization Form (a copy of which is
attached as Exhibit A) or on an electronic form provided on the Employee's
personal computer and forwarded to the Compliance Officer.
2. Subject to the further provisions set forth herein, the Compliance
Officer, or in his or her absence, the Legal Department, shall pre-clear
the purchase or sale of a Security if the transaction does not violate this
Code of Ethics. Such determination shall be by:
a. Reviewing the portfolios managed by the Company; and
b. Determining if the security is currently on the Company's then
current research database or is then currently under consideration for
adding to the Company's database pending review by the Company's
research committee.
3. After review, if the Compliance Officer, or in his or her absence, the
Legal Department, determines to pre-clear the trade, the Compliance Officer
(or Legal Department) will authorize the Employee to execute the trade as
follows.
a. The Compliance Officer shall execute a Trade Authorization Form.
b. The Compliance Officer shall communicate authorization of the trade
to the Employee.
c. The time at which the trade authorization is communicated to the
Employee shall be documented on the Trade Authorization Form.
4. The trade authorization is effective for forty-eight hours after the
pre-clearance is granted, unless otherwise indicated by the Compliance
Officer.
5. The Compliance Officer shall maintain the originally executed Trade
Authorization Form. A copy of the executed Trade Authorization Form will be
available to the Employee upon request.
B. All Access Persons shall disclose all personal Securities holdings and
Beneficial Accounts upon commencement of employment or association as an Access
Person and thereafter on an annual basis to the Compliance Department. Any such
report may contain a statement that the report shall not be construed as an
admission by the person making such report that he or she has any direct or
indirect beneficial ownership in the Security to which the report relates. All
Access Persons must complete an acknowledgment upon commencement of employment
or association as an Access Person, and thereafter on an annual basis (a copy of
which is attached as Exhibit B).
VI. QUARTERLY REPORTING
A. Every Access Person shall submit a quarterly report to the Compliance Officer
with the information described in paragraph B below with respect to any
Beneficial Accounts opened during the quarter and transactions in any Security
in which such Access Person had, or by reason of such transaction acquired,
any direct or indirect beneficial ownership in the Security during such quarter.
Access Persons need not, however, report on the following transactions:
1. Purchases or sales that are nonvolitional on the part of the person;
2. Purchases that are part of an automatic dividend reinvestment plan;
3. Purchases effected upon the exercise of rights issued by an issuer
PRO-RATA to all holders of a class of its securities, to the extent such
rights were acquired from such issuer, and sales of such rights so
acquired; and
4. Purchases or sales effected in any account over which the person has no
direct or indirect influence or control.
B. Every report shall be made not later than 10 calendar days after the end of
the calendar quarter in which the transactions to which the report relates were
effected, and shall contain the following information:
1. The date of the transaction, the title and the number of shares, and the
principal amount, interest rate and maturity date of each security
involved;
2. The nature of the transaction (i.e., purchase, sale or any other type of
acquisition or disposition);
3. The price at which the transaction was effected;
4. The name of the broker, dealer or bank with or through whom the
transaction was effected;
5. With respect to any Beneficial Account established during the quarter,
the name of the broker, dealer or bank with whom the account was
established and the date the account was established; and
6. The date the report was submitted.
C. Any such report may contain a statement that the report shall not be
construed as an admission by the person making such report that he or she has
any direct or indirect beneficial ownership in the security to which the report
relates.
VII. INSIDER TRADING PROCEDURES UNDER ADVISERS ACT SECTION 204A
The following rules apply to all employees, officers and directors:
A. Identifying Inside Information
Before trading for yourself, an Employee Account or Company clients (including
investment companies or private accounts managed by the Company) in the
securities of a company about which you may have potential inside information,
ask yourself the following questions:
Is the information material? Is this information that an investor would consider
important in making his or her investment decisions? Is this information that
would substantially affect the market price of the securities if generally
disclosed?
Is the information non-public? To whom has this information been provided? Has
the information been effectively communicated to the marketplace? (For example,
published in REUTERS, THE WALL STREET JOURNAL or other publications of general
circulation.)
If, after consideration of the above, you believe that the information may be
material and non-public, you should take the steps listed below. If you have any
doubts as to whether information may be material and non-public, you should
assume that the information IS material and non-public.
1. Report the matter immediately to the Compliance Officer.
2. Do not purchase or sell the securities on behalf of yourself or others
(including investment companies or private accounts managed by the
Company).
3. Do not communicate the information inside or outside the Company, other
than to the Compliance Officer.
4. After the Compliance Officer has reviewed the issue, you will be
instructed either to continue the prohibitions against trading and
communication noted in paragraphs 2 and 3 above, or you will be allowed
to trade and communicate the information.
B. Restricting Access to Material Non-Public Information
Information in your possession that is identified as material and non-public
may not be communicated to anyone, including persons within the Company, except
to the Compliance Officer. In addition, care should be taken so that such
information is secure. For example, files containing material non-public
information should be sealed; access to computer files containing material
non-public information should be restricted.
To implement the proper restriction of access to material non-public
information, various Company employees and/or departments are responsible for
the following:
1. General Access Control Procedures
The Company has established a process by which access to sensitive company files
that may contain non-public information is limited. Since most of the Company's
files that might have insider-trading implications are stored in computers,
personal identification numbers, passwords and/or code access numbers are
distributed to specified individuals only. The limitations on access are
monitored on an ongoing basis. In addition, access to certain physical areas of
the Company's offices that are likely to contain sensitive information is
restricted through the use of access codes.
Employees, officers and directors are made aware of their duties with respect to
information being stored in non-accessible file cabinets. Employees, officers
and directors are reminded that they should log off of their computers once
having completed a task so as to limit information availability; places within
the Company where any non-public information would be accessible are limited;
specific fax machines are used to relay sensitive, potentially non-public
information; access to all areas of the Company are limited through one main
reception area so that outsiders are immediately identified and escorted to
their proper destinations; and draft memoranda that may contain insider
information are destroyed immediately after their use.
2. Personnel Department Procedures
Prior to an individual's formal offer of employment, the Personnel Department
provides the individual with the Company's Insider Trading Procedures and
clarifies that the Company views that the person's willingness to adhere to
these policies and procedures to be a condition precedent to accepting
employment with the Company.
The Compliance Officer assists the Personnel Department by responding to
insider policy questions from prospective employees, officers and directors so
that it is clear what they can or cannot do with respect to insider trading as
an employee, officer or director of the Company.
New employees, officers and directors are provided with an acknowledgment form
to execute before formally commencing employment in which the individual
represents that he or she has received the Company's Insider Trading Procedures,
has read and understands them, and that he or she understands that continued
employment with the Company is dependent upon compliance with those procedures.
Annually, the Personnel Department elicits a written statement from all Company
employees, officers and directors that they have not violated any of the
Company's Insider Trading Procedures.
C. Supervisory Procedures for Effectuating Compliance
The roles of the Compliance Department and the Legal Department are critical to
the implementation and maintenance of HGII's Insider Trading Procedures.
Supervisory procedures can be divided into three categories - Prevention of
Insider Trading, Detection of Insider Trading and Control of Inside Information.
1. Prevention of Insider Trading
To prevent insider trading, the Compliance and/or Legal Departments:
a. provide, on a regular basis, an educational program to familiarize
employees, officers and directors with, and meet on a selective basis
with newly hired personnel to inform them of, the Company's Insider
Trading Procedures;
b. answer questions regarding the Company's Insider Trading
Procedures;
c. resolve issues of whether information received by an employee,
officer or director of the Company is material and non-public; and
d. review on a regular basis and update as necessary the Company's
Insider Trading Procedures.
2. Detection of Insider Trading
To detect insider trading, the Compliance Department is responsible for:
a. reviewing the trading activity reports filed by each employee,
officer and director with particular emphasis on employees, officers
and directors that have access to non-public information and sample
testing of all employees, officers and directors;
b. reviewing the trading activity of investment companies and private
accounts managed by the Company;
c. reviewing the trading activity of the Company's own account;
d. coordinating the review of such reports with other appropriate
employees, officers or directors of the Company; and
e. periodically generating reports for management on those tests.
3. Control of Inside Information
When it has been determined that an employee, officer or director of the Company
has material non-public information, measures will be implemented to prevent
dissemination of such information. For example:
a. All employees, officers and directors of the Company will be
notified that they are prohibited from disclosing to other persons
("tippees") inside information about the issuer in question and from
trading in the securities in question in "personal securities
transactions" or for the accounts of clients (notwithstanding the
inclusion of such securities on any Buy, Alt-Buy or Hold Lists
compiled by the Company), until further notice.
b. Following receipt of notice prohibiting certain trades and until
receipt of further notice, every employee, officer and director with
material non-public information shall file with the Compliance
Officer a weekly written report of all personal securities
transactions effected during the prior week. This weekly report is in
addition to the standard Form (Exhibit A) filed with the Compliance
Officer.
c. The Compliance Department will review such reports weekly as well
as the Company's records of trades for client's accounts in order to
determine if these procedures or any provision in this Code of Ethics
have been violated.
d. The Compliance Department will maintain and regularly update a list
of every employee, officer and director who has indicated or about
whom it has been indicated that he or she has come into contact with
material non-public information so that it can better monitor these
particular Insiders.
e. The Compliance Department will place any written materials
containing the inside information in a confidential file.
4. Special Reports to Management
Promptly upon learning of a violation of the Company's Insider Trading
Procedures, the Compliance Department should determine whether a written report
to senior management, the Company Executive Committee, and/or the appropriate
Board of Directors is warranted taking into consideration the nature of the
violation in light of all relevant facts and circumstances.
5. Annual Reports to Management
On an annual basis, the Compliance Department should prepare a written report
to the Management of the Company setting forth a summary of existing procedures
to detect and prevent insider trading and recommendations for improvement, if
any, and a description of HGII's continuing educational program regarding
insider trading, including the dates and attendees of such programs since the
last report to management.
VIII. SANCTIONS
The Compliance Officer shall report any material code violations to the
Management of the Company, which may then impose such sanctions as it
deems appropriate, up to and including termination.
Amended May ___, 2000
Exhibit A
================================================================================
HANSBERGER GLOBAL INVESTORS
================================================================================
PERSONAL SECURITIES TRANSACTION REQUEST FORM
================================================================================
NAME:_________________________________________________________
LEGAL NAME OF ACCOUNT:___________________________________________________
TRANSACTION DATE:____________________ TIME REQUESTED:_______________
BUY__________ SELL____________ SECURITY:______________________
NUMBER OF SHARES/FACE VALUE:___________ APPROX. PRICE:____________
BROKER:____________________________ ACCOUNT #:____________________
CONTACT IN COMPLIANCE DEPARTMENT: Kimberley A. Scott
To the best of my knowledge this proposed transaction does not violate the
provisions of the HGI Code of Ethics.
SIGNATURE:_________________ DATE:________________________
================================================================================
FOR COMPLIANCE USE ONLY
CONTACT IN TRADING:______________________________________________________
CONTACT IN RESEARCH:_____________________________________________________
COMMENTS: This security has no pending trade tickets, nor is it listed on the
database, value or source of funds lists.
COMPLIANCE COMPLETED/CHECKED BY:________________________________________
COMPLIANCE OFFICER:______________________________________________________
================================================================================
NOTIFICATION OF APPROVAL OR DENIAL
DATE:_______________________________ TIME RESPONDED:______________
APPROVED:_______ DENIED:_______
COMMENTS:_____________________________________________________________
FORM COMPLETED BY:_____________________________________________________
EXHIBIT B
HANSBERGER GLOBAL INVESTORS, INC.
AMENDED CODE OF ETHICS
ACKNOWLEDGMENT
I have received and reviewed the amended Hansberger Global Investors, Inc. Code
of Ethics. I understand its provisions and their applicability to me.
NAME: ______________________________________________________________________
(Please Print)
POSITION: __________________________________________________________________
DATE: ______________________________________________________________________
COMPANY: ___________________________________________________________________
SIGNATURE: _________________________________________________________________
DETACH AND RETURN THIS ACKNOWLEDGMENT TO: KIMBERLY A. SCOTT, 515 EAST LAS OLAS
BLVD., SUITE 1300, FORT LAUDERDALE, FL 33301.
[GRAPHIC OMITTED][GRAPHIC OMITTED]
POLICY OF PROFESSIONAL RESPONSIBILITY
INTRODUCTION
This Policy should be read carefully and retained for future reference. As an
associate, you are expected to be familiar with it. It is important that you
understand this material as you may be asked to certify in writing that you have
followed the Policy.
This Policy should help associates recognize their ethical, legal and moral
responsibilities. It formalizes the principles, obligations, and high standards
of behavior Glenmede expects. It does not attempt to detail all
responsibilities, but rather sets general guidelines of professional conduct to
be followed by all associates.
The penalty for violating any provision of this Policy may be disciplinary
action up to and including dismissal. In addition, all violations of criminal
laws applicable to Glenmede's business are reported to the appropriate
authorities for prosecution.
If you have any questions about this Policy, ask your supervisor. All
communications will be handled in a confidential manner.
For your convenience, terms used in this Policy are defined below:
* appropriate officer - head of the department
* approval - formal written consent
* associate - any employee of Glenmede
* Glenmede - The Glenmede Corporation, its subsidiaries and all Divisions
* officer - those individuals identified in the Corporation's Annual Report
* supervisor - your immediate boss
I. YOUR RESPONSIBILITIES
As an associate, you are obliged to monitor your personal and professional
affairs so as not to discredit Glenmede. Your personal conduct should reflect
the highest professional standards of behavior. Your behavior at work reflects
Glenmede's ethics, so you will be expected to:
* Obey all laws and regulations that apply to Glenmede's business.
* Avoid activities that could create conflicts of interest or even the
appearance of conflicts of interest with Glenmede.
* Respect the confidentiality of information about those with whom Glenmede
has business relationships.
Details of the above obligations are presented in the remainder of this Policy.
It is important that you read it, understand it and use it, along with the
Policy Manual for Performance of Fiduciary Duties, in discharging your
responsibilities at Glenmede. Remember, the standards and examples that are
given are guidelines.
II. OBEYING LAWS AND REGULATIONS
Numerous national, state and local laws of the U.S. and other countries apply to
Glenmede. As an associate, you are expected to conduct all business dealings
according to these laws. Violating any of them could subject you or Glenmede to
criminal and civil penalties. If you have questions about any laws or how they
apply to particular situations, ask your supervisor.
A. CRIMINAL LAWS
A number of criminal statutes apply to employees of all financial institutions.
These laws forbid criminal activities such as:
* Accepting a fee, commission or gift for obtaining a service.
* Stealing, embezzling or misapplying corporate funds or assets.
* Using threats, physical force or other unauthorized means to collect money.
* Recording false entries.
* Using corporate funds or assets to finance campaigns for political
office.
* Lending trust funds to an officer, director or employee.
* Making a loan or giving a gift to a bank examiner who has the authority to
examine a Bank.
* Misusing federal records and documents.
Criminal statues also provide a penalty for those who are "accessories after the
fact". An accessory after the fact is one who knows that a criminal offense has
been committed and who helps the criminal avoid capture or punishment.
B. ANTI-COMPETITIVE ACTIVITIES
The Sherman Antitrust Act prohibits any combination, conspiracy or agreement
among competitors to restrict or prevent competition. A specific violation of
this Act could be a formal or informal agreement between you and a competitor of
Glenmede to (i) fix prices, (ii) allocate markets, (iii) allocate funds or (iv)
refuse to deal with particular suppliers or customers.
If you are in contact with Glenmede's competitors, you must avoid any agreements
with them (or even circumstances that might give the appearance of such
agreements) relating to how Glenmede conducts its business. You should be
especially careful at social or professional gatherings and at trade association
meetings. Discussions or exchanges of information relating to competitive
matters have occurred on such occasions in other industries.
The Federal Bank Holding Company Act prohibits bank employees from participating
in certain "tying arrangements". A tying arrangement is one in which a seller
conditions his sale of a product or service on a buyer's purchase of a separate
product or service.
Employees may not tie services to obtaining or assisting in obtaining a grant
from The Pew Charitable Trusts or other such accounts at Glenmede. Glenmede
employees may not vary the consideration for services and products on the
condition that the customer obtain another such service or product. (see
Appendix A-STATEMENT OF POLICY RE:
BUSINESS AND PHILANTHROPIC ACTIVITIES, dated April 19, 1985)
You must be sure you do not require customers to participate in tying
arrangements such as those described.
C. ILLEGAL USE OF CORPORATE FUNDS
The purpose of any transaction that relates to corporate funds or assets must be
revealed and recorded at the time of the transaction. As an associate:
* You may not record or participate in the recording of incorrect or
fictitious entries in the books or records of Glenmede.
* You may not use Glenmede funds or assets for political contributions in
connection with federal, state or local elections. Your time during
regular working hours, Glenmede equipment and supplies, office space,
clerical help and advertising facilities are all considered corporate
assets.
* You may not make any payment for an expressed purpose on Glenmede's
behalf to any individual who intends to use the money for a different
purpose.
* You may not make payments, whether corporate or personal, of cash or
other items of value to political candidates or government officials,
or to businesses that are designed to influence their judgment or
actions in connection with any Glenmede activity.
D. EQUAL OPPORTUNITY LAWS
Several equal opportunity laws may apply to Glenmede. Glenmede strongly supports
the principles of these laws and expects all associates to comply with them.
E. SUN COMPANY AND ORYX ENERGY CO. STOCK
Due to The Pew Charitable Trusts' holdings in Sun Company and Oryx Energy Co.
stock, if an officer of Glenmede purchases shares of Sun Company and/or Oryx
Energy Co. stock federal law may require that The Pew Charitable Trusts sell an
equal number of shares.
Officers of Glenmede are discouraged from purchasing shares of Sun Company and
Oryx Energy Co. If shares are purchased they must be reported to the Chief
Investment Officer.
III. AVOIDING CONFLICTS OF INTEREST
In business, a conflict of interest is generally defined as a clash between an
employee's personal interests and those of the employer. At Glenmede, a conflict
of interest occurs when you allow any interest, activity or influence outside of
Glenmede to:
* Influence your judgment when acting on behalf of Glenmede;
* Compete against Glenmede in any business activity;
* Diminish the efficiency with which you perform your regular duties; or
* Harm or impair Glenmede's financial or professional reputation.
As an associate, you are not permitted to participate in any activity which
could cause a conflict of interest or give the appearance of a conflict of
interest.
Areas which are frequently involved in conflicts of interest and examples of
prohibited activities are described below:
A. INVESTMENT DECISIONS
Because investments can lead to conflicts of interest, you must follow a set of
guidelines in two distinct areas:
1. Investment You May Not Make
When considering investment, you may not invest (directly or indirectly) in a
publicly held security whenever:
* Such a transaction would place Glenmede under obligation (financial or
other) to any investment banking or brokerage firm or to the seller or
issuer of the security;
* You know Glenmede is in the process of buying or selling the security for its
own account or for the account of others;
* You possess information not available to the general public that is
likely to affect the price of the security;
* You are considering acting as advisor to the issuer of the security; or
* You are recommending the sale or purchase of the security.
2. Investments That Require Approval
You are required to obtain approval from the CIO (Bruce Simon):
* Before you invest (directly or indirectly) in a privately held company which
is a Glenmede customer;
* If you subsequently become aware that you hold (directly or indirectly)
stock in a privately held company which is a Glenmede customer; or
* If you have responsibility for providing services to a company that is
a Glenmede customer and attempt to acquire or hold more that 5% of the
shares of that company's stock.
Rules of various stock exchanges require brokers to obtain bank approval for the
opening of margin accounts for non-officer bank employees. Because margin
trading can create serious financial problems, all associates are urged to avoid
margin transactions.
B. SELF-DEALING
To further avoid conflicts of interest, you are restricted from becoming
involved in certain business dealings with Glenmede. As an associate, you are
prohibited from:
* Directly or indirectly buying assets from or selling assets to Glenmede
or any account for which Glenmede acts as a fiduciary unless:
* You have prior consent from the appropriate officer.
* You have court or regulatory approval as required.
* Representing Glenmede in any transactions requiring your judgment or
discretion with a person or organization in which you have a financial
or material interest. For example, managing an account of a relative or
close personal friend might impair or appear to impair your
professional judgment or the performance of your duties. Therefore,
such transactions are prohibited.
C. MONITORING OUTSIDE ACTIVITIES
As an associate, you are expected to avoid any outside interest or activity that
will interfere with your duties.
1. General Guidelines
Generally, your outside interests or activities:
* Should not significantly encroach on the time or attention you devote to your
duties;
* Should not adversely affect the quality of your work;
* Should not involve any significant use of Glenmede's equipment, facilities, or
supplies;
* Should not imply Glenmede's sponsorship or support (for example,
through the use of Glenmede's stationery for personal purposes); or
* Should not adversely affect the reputation of Glenmede.
2. Limiting Outside Employment
While an associate, you may not accept outside employment as a representative
who prepares, audits, or certifies statements or documents pertinent to
Glenmede's business.
In addition, you must obtain approval from the appropriate officer before you
accept employment:
* As a broker, contractor, or agent who engages in real estate
transactions such as negotiating and selling mortgages, making
investments for others, appraising property, or collecting rents; or
* As an attorney, tax or investment counselor or insurance broker or agent.
If you are a Glenmede associate, you may be prohibited by federal law from
participating in "interlocking affiliations", that is, dual service, in the
following areas:
* As an employee of an organization which is primarily engaged in the
issue, flotation, underwriting, public sale or distribution of stocks,
bonds or other securities;
* As a director, officer or employee of any commercial bank, banking
association, trust company or savings bank not owned by Glenmede; or
* As a director or officer of a registered public utility holding company
or subsidiary.
When a Bank acts as trustee under an indenture, there are certain limitations on
a Bank's affiliation with a registered investment company.
3. Accepting Honoraria
Nether you nor any member of your immediate family may accept cash honoraria for
your public speaking or writing services on behalf of Glenmede. If a cash
honorarium is tendered, you may request that it be donated to a charity of your
choice. You may accept non-cash honoraria of limited value (not more than 1/2 of
1% of your annual salary. You may also accept reimbursement of related expenses.
4. Accepting Appointments
In most cases, you need to obtain approval from the appropriate officer before
you accept any appointment or position.
A. FIDUCIARY APPOINTMENTS
A fiduciary appointment is an appointment as an administrator, executor,
guardian, trustee or managing agent.
Unless you are acting on behalf of a member of your family or you have obtained
approval from the appropriate officer:
* You may not accept a fiduciary or co-fiduciary appointment.
* You may not act as deputy or co-tenant of a safe deposit box or act as
agent or attorney-in-fact (including signer of co-owner) on a
customers's account.
If you are acting on behalf of a family member or receive approval to act as
fiduciary or co-fiduciary you are expected to follow these guidelines:
* Avoid any representations that you are performing (or have access to)
the same professional services that are performed by a Bank.
* Do not accept a fee for acting as co-fiduciary with a Bank unless you
received approval from the Board of Directors of that Bank.
* Do not permit your appointment to interfere with the time and attention
you devote to your duties.
B. OUTSIDE DIRECTORSHIPS AND PARTNERSHIPS
Unless you have prior approval of the appropriate officer;
* You may not represent any non-Glenmede company in any transaction with
Glenmede which involves the exercise of discretion on the part of
either party.
* You may not accept a position as an officer or director of a
corporation or become a member of a business partnership. The only
exceptions to this provision are limited partnerships solely for
investment purposes or services as director or officer of purely
social, civil, religious or charitable institutions.
5. Participating in Political Activities
Glenmede encourages you to take an active interest in political and governmental
affairs and to keep informed concerning political issues and candidates.
However, if you do participate in any political activity, you may not act as a
representative of Glenmede unless you are specifically authorized to do so by
the appropriate officer.
D. DEALING WITH CUSTOMERS AND SUPPLIERS
In your dealings with customers and suppliers, situations sometimes occur that
may create a conflict or the appearance of a conflict of interest. To avoid such
conflicts, corporate policies were developed in the following areas:
1. Giving and Receiving Gifts
You may not accept personal gifts or cash (except for required service fees)
from customers for providing Glenmede services. In addition, you may not offer
or accept gifts or cash under circumstances intended to influence you or the
customer or supplier in conducting business.
Examples of gifts are property, securities, special discounts, and free
services.
You may not accept cash or gifts under wills or trust instruments of customers
unless you have prior approval of the appropriate officer.
You may not accept cash or gifts from attorneys, insurance and real estate
agents, salesmen, brokers, accountants, etc., for giving or referring business
to them.
These restrictions do not apply to:
* Cash, gifts or bequests you receive based on family relationships;
* Food and entertainment you receive at a regular luncheon, dinner or business
meeting;
* Loans from banks or other financial institutions you receive on regular terms
to finance proper credit needs;
* Advertising or promotional material you receive which has value not exceeding
$75;
* Awards you receive from charitable, civic, religious or similar organizations
for contributions or service; or
* Non-cash gifts of nominal value ($25) you give to customers or suppliers for
Christmas, holidays, or special occasions.
2. Borrowing from Customers
You are not permitted to borrow from or lend your personal funds to customers,
brokers, or suppliers of Glenmede. Credit transactions in the normal course of
business (for example, transacting business with a recognized lending
institution or charging items at a department store) are not included in this
restriction.
3. Giving Advice to Customers
A. LEGAL ADVICE
You may be asked by a customer to make a statement regarding the legal
implications of a proposed transaction. You cannot give legal advice to
customers unless giving such advice is part of your corporate responsibilities.
Therefore, be sure nothing you say might be interpreted as giving legal advice.
4. Recommending Professional Services
Customers may ask your help to find qualified professional people or firms.
However, unless you name several candidates without indicated favoritism, you
may not recommend attorneys, accountants, insurance brokers or agents, stock
brokers, real estate agents, etc. to customers, associates or others. Under no
circumstances may you make a recommendation if you expect to benefit from making
it.
IV. RESPECTING CONFIDENTIAL INFORMATION
As an associate, you may have knowledge, reports or statements about Glenmede's
business or possess confidential information about the private or business
affairs of Glenmede's customers and suppliers. Such information is privileged
and must be held in the strictest confidence.
Confidential information is to be used only for corporate purposes. Under no
circumstances may you use such information for personal gain or pass it on to
any person outside of Glenmede, including family or friends, or even to other
associates who do not need such information to carry out their duties.
Confidentiality must be maintained in communications between The Pew Charitable
Trusts, The Glenmede Corporation and The Glenmede Trust Company. No information
that could be construed as influencing grant making may be communicated to The
Pew Charitable Trusts Division. Likewise, information on grants or offering
assistance in obtaining a grant, may not be used to benefit customers of
Glenmede or in soliciting new customers.
(See Appendix A)
A. INFORMATION OBTAINED FROM BUSINESS RELATIONS
You may possess confidential information about those with whom Glenmede has
business relations. If released, such information could have a significant
effect on their operations, business reputation or the market price of their
securities. Disclosing such information could expose both you and Glenmede to
liability for damages.
B. GLENMEDE FINANCIAL INFORMATION
Financial information about Glenmede is confidential unless it has been
published in reports to shareholders or otherwise has been made available to the
public. Except as required by law, financial information is not to be released
to any person. If you have any questions about disclosing financial information,
contact the Chief Financial Officer.
C. GLENMEDE EXAMINATION INFORMATION
Banks and some other subsidiaries are periodically examined by regulatory
examiners. Any reports made by those regulatory agencies are the property of
those agencies and strictly confidential. Giving information from those reports
to anyone not officially connected with Glenmede is a criminal offense.
D. GLENMEDE PROPRIETARY INFORMATION
Certain non-financial information developed by Glenmede, such as business plans,
methods of doing business, computer software and databases, is information that
is proprietary and confidential. You are not to disclose it to anyone outside of
Glenmede or use it directly or indirectly for your personal benefit or for the
benefit of any third party who is not entitled to such information.
E. INSIDER INFORMATION
Insider information is material non-public information relating to securities
issued by any corporation. Information is considered "material" if it is
important enough:
* To affect the judgment of investors about whether to buy, sell or hold
stock.
* To influence the market price of the stock.
The courts have ruled that insider information about securities must be made
public before anyone possessing it can trade it or recommend the purchase or
sale of the securities concerned.
Under federal and state securities laws, you, Glenmede and the person who
receives the information (the "tippee") could be held legally responsible for
misusing insider information.
Obviously, the insider information rule is very difficult to apply to given
circumstances. Associates must be extremely cautious in discussing corporate
affairs with any person outside of Glenmede. If you have any doubts about
whether or not an item is insider information or whether or not it has been or
should be revealed, consult with the appropriate officer.
F. CHINESE WALL POLICY
You may not use insider information when making investment decisions for
Glenmede or for Glenmede Customers. The Corporation has guidelines for
determining what kind of information might be considered insider information
(Appendix B) and how it must be treated. These guidelines are presented in
STATEMENT OF POLICY, RE: MATERIAL INSIDE INFORMATION dated February 12, 1987,
which details:
* Restricted activities of investment personnel; and
* Procedures for reporting the receipt of material non-public information
by investment personnel.
You should know this policy (i) if you work in an area that handles investment
decisions or (ii) if you supply or are asked to supply information to associates
in the trust and investment areas.
Under no circumstances should you receive or pass on information which may
interfere with the fiduciary obligations of the trust and investment areas.
V. REPORTS REQUIRED OF CERTAIN TRUST AND INVESTMENT ASSOCIATES
Certain associates of the Trust and Investment Departments of Banks must report
all securities transactions made by them or in their behalf in which they have a
beneficial interest. These reports should be made to the Chief Investment
Officer.
This report must be made within ten days after the end of each calendar quarter.
This report must indicate the kind of security, whether it was purchased or
sold, and the date and amount of each transaction.
Associates must file a report if they:
* Make investment recommendations or decisions for the account of customers;
* Participate in the determination of such recommendations or decisions; or
* Obtain information concerning which securities are being purchased,
sold, or recommended for such actions.
This report does not apply to:
* Transactions for your benefit over which you have no control;
* Transactions in mutual fund shares, or in U. S. Government or federal agency
obligations; or
* Transactions during any quarter involving an aggregate amount of $10,000
or less.
QUARTERLY REPORT ON SECURITY TRANSACTIONS
The Glenmede Trust Company's "Policy of Professional Responsibility" requires
that all associates and officers who participate in the recommendation of
investment for accounts or in obtaining information on securities which are
being recommended, must report security transactions made by them or on their
behalf within 10 days after the end of the calendar quarter.
Transactions involving mutual funds, U. S. Government or federal agency
obligations or transactions that in any quarter involve an aggregate amount of
$10,000 or less need not be reported.
List below reportable securities transactions made with the calendar quarter
ending 3/31, 6/30, 9/30, 12/31 (circle one).
(Use additional sheets as necessary.)
TRADE COST OR
DATE PURCHASE/SALE NAME OF SECURITY SALE PROCEEDS
_______________________________ _____________
Signature Date
------------------------------- -------------
Reviewed by CIO Date
Form Name: 12CFR12.6(d) revised 7/91
Appendix A
STATEMENT OF POLICY
RE: BUSINESS AND PHILANTHROPIC ACTIVITIES
April 18, 1985
The policy reaffirmed in this statement is promulgated for the information and
guidance of Directors, officers and employees of The Glenmede Trust Company,
grant applicants and beneficiaries of The Pew Charitable Trusts and business
clients of the Company.
1. Except for Directors, officers and employees necessarily involved in the
grants program who also do business with the Company, clients whose assets are
managed by or who have other business relationships with The Glenmede Trust
Company shall not have any influence over or unusual access to information
relating to grant applications made to The Pew Charitable Trusts administered by
the Company as Trustee or relating to the Trusts' grants program specifically or
generally.
2. The existence or non-existence of a business relationship between a grantee
or potential grantee of any of The Pew Charitable Trusts and the Company will be
disregarded and not taken into account in determining and monitoring funding
relationships with The Pew Charitable Trusts.
3. The Directors and officers of the Company will share this policy with
clients, grantees and other parties as appropriate. The Officers in charge of
each department will review this policy with officers and employees in their
departments. Any questions about the policy should be referred to these officers
or to the President.
Appendix B
STATEMENT OF POLICY
RE: MATERIAL INSIDE INFORMATION
(Adopted February 12, 1987 Amended October 31, 1988)
It is the general policy of The Glenmede Trust Company ("Glenmede") that no
investment decisions or recommendations respecting the securities of any company
be made by Glenmede, in its fiduciary capacity or otherwise, when personnel
responsible for such investment decisions or recommendations are in possession
of material undisclosed information about that company unless it is determined
that, under the circumstances, continuation of such activities is legally
permissible. This Statement of Policy has been promulgated (1) to provide
protection against actual and constructive disclosure of material undisclosed
information about Sun Company, Inc. ("Sun"), Oryx Energy Co. ("Oryx") and other
corporations in which Glenmede has made fiduciary investments to Glenmede
personnel responsible for making investment decisions or recommendations so that
Glenmede (unless Glenmede is advised by counsel to suspend trading in the stock
of Sun, Oryx or another issuer) may continue to buy, sell and recommend
securities of Sun, Oryx and other issuers of securities without violating legal
prohibitions against trading in securities on the basis of or while in
possession of material undisclosed information and (2) to establish procedures
to protect Glenmede in the event that any such information is disclosed to such
personnel of Glenmede.
Material information as used herein refers to matters relating to a company
which have a substantial likelihood of being considered important to a
reasonable investor in deciding whether he should buy, sell or hold securities
of such company or which, if disclosed, reasonably could be expected to have a
substantial market impact. Material undisclosed information is material
information which has not been adequately disclosed and disseminated to the
investing public.
INFORMATION ABOUT SUN CO. AND ORYX ENERGY CO.
1. Material undisclosed information obtained from Sun and/or Oryx by any
director of Sun or Oryx associated with Glenmede, in his capacity as a director
of Sun or Oryx, and conclusions or recommendations based thereon will not be
disclosed by any of them to other people at Glenmede and in particular to any
member of the Investment Department or the Account Review Committee. A director
of Sun or Oryx associated with Glenmede may disclose in his discretion such
information or any other confidential information of which he has personal
knowledge to the Board of Directors of Glenmede, to the President of Glenmede
and to lawyers, accountants and other persons advising Glenmede with respect to
matters involving Sun and Oryx as to which disclosure in confidence is
appropriate. Any material undisclosed information which is communicated to
others for the purpose of carrying out their responsibilities to Glenmede shall
be clearly identified as non-public information which is not to be disclosed
orally or in writing for any other purpose.
2. The magnitude of Glenmede's fiduciary investment in Sun and Oryx and the
explicit and implicit requirements of the instruments which established the Pew
Charitable Trusts mandate the participation of all members of the Glenmede Board
in monitoring that investment and in formulating basic policies involving
retention or disposition of Sun and Oryx stock. However, neither a director of
Sun or Oryx associated with Glenmede nor the President of Glenmede shall serve
as a member of the Accounts Review Committee or any other committee of Glenmede
which considers on a regular basis the purchase, sale or retention of Sun or
Oryx securities. Subject to the limitations set forth herein, the Manager of the
Investment Department shall have plenary authority and responsibility to
implement the recommendations of the Board of Directors or the Account Review
Committee in respect to the purchase, retention or sale of Sun or Oryx stock and
associated investment decisions without the approval or involvement of the
President or any directors of Sun or Oryx associated with Glenmede.
3. If any member of the Account Review Committee or any employee of Glenmede who
participates in discussion or decisions respecting investment in securities of
Sun or Oryx acquires from any director of Sun or Oryx associated with Glenmede
or from any other source material undisclosed information about Sun or Oryx,
then Glenmede shall not make or participate in decisions respecting the purchase
or sale of Sun or Oryx securities for its fiduciary clients (other than to
perform purely ministerial acts, not involving the exercise of investment
discretion or the rendering of investment advice, in accordance with the duly
authorized specific instructions of clients or co-trustees) or for the account
of Glenmede until such information has been publicly disclosed and disseminated.
4. In evaluating the worthiness of the common stock of Sun Company, Inc. and
Oryx Energy Co., the Board of Directors may properly involve the Investment
Department. However, the common Directors of Sun, Oryx, and Glenmede will
continue to shield Investment Department personnel from inside information about
Sun and Oryx which has not been made public.
INFORMATION ABOUT OTHER COMPANIES
6. Members of the Account Review Committee and employees, officers and Directors
of Glenmede who otherwise participate in discussions or decisions respecting
investments in securities of companies other than Sun and Oryx who acquire from
any source undisclosed information relating to such a company shall disclose
such information directly to the President so that appropriate action may be
taken to ensure that Glenmede does not make decisions respecting the purchase or
sale of securities of such company (other than to perform purely ministerial
acts, not involving the exercise of investment discretion or the rendering of
investment advice, in accordance with specific instructions of clients or
co-fiduciaries) until such information has been publicly disclosed or
disseminated. The President shall maintain a current list of boards of directors
of public companies on which any employee, officer or Director of Glenmede
serves as a member.
It shall be the duty of the appropriate officers to review compliance with this
Statement of Policy periodically with the personnel subject to their
supervision. The Board of Directors may, in its discretion, amend this Statement
of Policy and adopt such additional procedures as it deems necessary or
appropriate to carry out the intent of this Policy or to ensure compliance with
legal requirements. Any questions as to the applicability or interpretation of
this Statement of Policy should be promptly referred to the President, who shall
be ultimately responsible for the administration of this Policy.
THE GLENMEDE TRUST COMPANY
PERSONAL TRADING GUIDELINES
Revised June 1, 1998
The Glenmede Trust Company has an ethical code of conduct written into its
Policy of Professional Responsibility. These Guidelines are a supplement to the
Policy of Professional Responsibility, primarily to document the internal
control structure employed by Glenmede. Glenmede implemented these Guidelines as
investment manager for The Glenmede Fund, Inc. and The Glenmede Portfolios, both
registered investment companies as well as other registered investment company
clients of Glenmede (collectively, the "Funds").
Glenmede's investment staff includes Chartered Financial Analysts (CFA) and
voluntarily holds itself to the standards of the Association for Investment
Management and Research (AIMR). Each CFA must abide by the code of ethics
established by their professional organization. One of the overriding principles
of AIMR's Code of Ethics and Standards of Professional Conduct endorsed at
Glenmede is that THE INTEREST OF CLIENTS, THEN THE EMPLOYER, MUST TAKE PRIORITY
OVER THE PERSONAL INVESTING INTERESTS OF THE INDIVIDUAL.
BACKGROUND
While the Funds may or may not be members, the Investment Company Institute
(ICI) is the investment company industry's trade association. In May 1994, ICI
issued the REPORT OF THE ADVISORY GROUP ON PERSONAL INVESTING which recommended
all investment companies adopt 15 measures (including 6 substantive restrictions
and 6 compliance procedures) to obviate conflicts, prevent and detect abusive
practices, and preserve the confidence of investors. In June 1994, ICI's Board
of Governors unanimously recommended that all members and other investment
companies, their investment advisors, and their principal underwriters, adopt
the Advisory Group's recommendations by January 1, 1995.
The mutual funds operate in a regulated environment, subject to examination by
the Securities and Exchange Commission (SEC) and the Rules established under the
Investment Company Act of 1940. As an advisor to registered investment
companies, The Glenmede Trust Company is subject specifically to Rule 17j-1.
The SEC's Division of Investment Management endorsed ICI's recommendations and
stated that they "expect that all funds and advisers will adopt these
recommendations, in whole or substantial part, absent special circumstances."
Further, SEC Chairman Levitt instructed the Division to assess the industry's
compliance with the recommendations.
An ICI survey initiated in February 1995 and released April 21, 1995 to the
SEC's Division of Investment Management showed that the overwhelming majority of
member fund complexes have voluntarily implemented the recommendations.
MUTUAL FUND ACTION
In March 1995, the Board of Directors of The Glenmede Fund, Inc. and The
Glenmede Portfolios adopted at the fund level, a new Code of Ethics based upon
the ICI recommendations.
TRUST COMPANY RESPONSE
The Glenmede Trust Company and The Glenmede Trust Company of New Jersey (
hereinafter, "Glenmede") have evaluated ICI's recommendations and considered the
comments offered by the SEC. It is our intent to apply a practical approach to
these suggestions within our closely held fiduciary business, as we function in
the highly competitive mutual fund marketplace. Glenmede expects that its
officers and employees will conduct their personal investment activities in
accordance with the fundamental standard that mutual fund investment advisor's
should not take inappropriate advantage of their position.
The restrictions listed below may not fit every personal trading situation that
develops for Glenmede and its employees. Should an individual feel compelled to
enter into transactions outside the scope of these restrictions, the Chief
Investment Officer, or designee, shall have sole discretion to approve
deviations to these restrictions using the ICI's REPORT TO THE DIVISION OF
INVESTMENT MANAGEMENT U.S. SECURITIES AND EXCHANGE COMMISSION IMPLEMENTATION OF
THE INSTITUTE'S RECOMMENDATIONS ON PERSONAL INVESTING dated April 21, 1995 as
the consensus of all the permutations used throughout the industry in putting
personal trading restrictions in place. Subsequent to such approval of unique
transactions, the Trust Investment Committee shall be apprised of the Chief
Investment Officer's actions.
I. DEFINITIONS
1. ACCESS PERSON - any director, officer or other associate of Glenmede
who makes any recommendation, participates in the determination of
which recommendation shall be made, or whose principal function or
duties relate to the determination of which recommendation shall be
made; or who, in connection with his duties, obtains any information
concerning securities recommendations being made by Glenmede. For
purposes of these Guidelines, a Glenmede "Access Person" includes the
Securities Analysts, Securities Trading, Portfolio Managers and all
support staff to such persons.
The approved list of domestic equity securities is proprietary
information of Glenmede and used for portfolio management decisions of
client accounts at Glenmede. Any director, officer or employee, who
obtains this proprietary information may be deemed an Access Person and
become subject to these Guidelines.
2. MUTUAL FUND ACCESS PERSON - Any Access Person, as previously
defined, who manages any portfolio of the Funds and all support staff
to such persons. Unless otherwise indicated, all requirements,
restrictions and prohibitions contained within these Guidelines
applicable to Access Persons shall include and be applicable to Mutual
Fund Access Persons.
II. PERSONAL TRADING RESTRICTIONS
1. PRE-CLEARANCE
Access Persons are required to pre-clear all personal securities
investments of $1,000 or more, or any series of transactions in the
same security aggregating $1,000 in any T+3 day period. This provision
applies to all equities and fixed income securities permitted in the
Funds. No pre-clearance is required for any security that is exempt
from quarterly reporting (See Part III., Item 7 below for a list of
exempt securities).
2. BLACKOUT PERIODS
a. Glenmede prohibits any Access Person from pre-clearing a securities
transaction when Glenmede's trading desk has a pending buy or sell
order in that same security.
b. Glenmede prohibits any Mutual Fund Access Person from pre-clearing a
securities transaction when Glenmede's trading desk has executed a
trade in that security during that day, the previous day or has a
pending transaction in that same security.
c. A Mutual Fund Access Person may not trade in a security within at
least seven calendar days before and after the Fund he or she manages
trades in that security.
These provisions apply to all equities and fixed income securities
permitted in the Funds.
3. DISGORGEMENT
If a security is purchased in violation of Glenmede's Personal Trading
Guidelines, then the Access Person must "break the trade" by
immediately reversing the transaction regardless of whether a profit or
loss occurs from the transaction. An Access Person must disgorge any
profits and assume any losses, even if the transaction was done
innocently and discovered afterward.
Any moneys accrued in the event of a personal trading violation shall
not benefit the Access Person or Glenmede. Access Persons are required
to remit the disgorged profits to Glenmede within five business days of
the reversing transaction (calculating their personal capital gain
resulting from the reversal, and retaining the amount to pay the tax
due on the gain.). However, should the Funds incur a loss as a result
of the personal trade, then full disgorgement regardless of taxes due
must be made to the Funds. A net payment in the form of a cashier's
check made payable to a charity of their choice (one holding an
appropriate IRS determination letter), should be given to Glenmede for
mailing.
4. INITIAL PUBLIC OFFERINGS
Glenmede prohibits Access Persons from acquiring any equity or
equity-related securities in an IPO, except for the purchase of
government issues such as municipal bonds and/or other government
securities.
5. PRIVATE PLACEMENTS
Glenmede prohibits all Access Persons from personally investing in
private placements issued by A PUBLIC COMPANY. For all OTHER ACTIVITY
IN PRIVATE PLACEMENTS, the Access Person must submit a written request
to the Compliance Officer, documenting that there is no conflict with
any Glenmede client account or the investment strategy of the Funds,
and it must be approved by the Chief Investment Officer prior to
executing the transaction. Access Persons who have been authorized to
acquire securities in a private placement must disclose that investment
when they play a part in any Fund's subsequent consideration of an
investment in the issuer. In such circumstances, the Fund's decision to
purchase securities of the issuer should be subject to an INDEPENDENT
REVIEW by investment personnel with no personal interest in the issuer.
6. SHORT-TERM TRADING PROFITS
In general, Glenmede advocates long-term investing. All Access Persons
are prohibited from profiting in the purchase and sale, or sale and
repurchase of the same or equivalent securities within 60 calendar
days. Any profits realized on such short-term trades should be
disgorged, as discussed above in Item 3. Disgorgement. This provision
applies to all equities and fixed income securities permitted in the
Funds.
7. GIFTS
All Access Persons are prohibited from receiving moneys in any form
(other than their Glenmede compensation package) from any person or
entity that does business with or on behalf of the Funds. Receipt of
gifts, gratuities, hospitalities, or other things of more than $100
face or retail value, is also prohibited.
Access Persons are expected to use particular care and good judgment to
achieve and maintain independence and objectivity. To this end, any
unsolicited entertainment at a social, cultural or sporting event,
provided by any person or entity that does business with or on behalf
of the Funds, MUST INCLUDE BOTH the Access Person AND the
representative of the sponsoring firm. If tickets to these types of
events are provided to the Access Person WITHOUT a representative of
the sponsor in attendance, then the prior approval of the Compliance
Officer or Chief Investment Officer is required.
Exception - the rules on gifts do not apply to:
a. Food and entertainment relating to a regular luncheon, dinner, or
business meeting;
b. Awards received for contributions or service to charitable, civic,
religious or industry related organizations; or
c. Honoraria for speaking engagements.
8. SERVICE AS DIRECTORS
Glenmede has no prohibition on Access Persons serving on the boards of
publicly traded companies (subject to provisions of our governing state
charters), provided the individual receives the prior approval of
Executive Management and makes the appropriate disclosures on their
conflict acknowledgment forms, at the time of appointment and annually
thereafter. A determination by Executive Management that the board
service would be consistent with the interests of the Funds and its
shareholders should be noted in the disclosure.
III. COMPLIANCE PROCEDURES
1. APPLICABLE ACCOUNTS
The previous restrictions and the following procedures apply to the
following types of accounts of Access Persons:
a. Accounts of the Access Person;
b. Accounts of the Access Person's spouse,
c. Accounts of minor children of the Access Person and all
members of the Access Person's household;
d. Accounts subject to the discretion or control of the Access
Person or any member of the Access Person's household (i.e.
relatives, in-laws, non-married couples living together,
custodial accounts, trust accounts, IRA's, 401(k) plan
accounts not invested in exempt securities (refer to Part II.
Item 7.), and
e. Any other accounts in which the Access Person or a member
of the Access Person's household has an interest or an ability
to influence transactions (i.e. joint tenant accounts,
co-trustee accounts, investment clubs, etc.).
2. PRE-CLEARANCE PROCEDURES
Access Persons are required to pre-clear all personal securities
investments of $1,000 or more, or any series of transactions in the
same security aggregating $1,000 in any T+3 day period. This provision
applies to all equities and fixed income securities permitted in the
Funds. No pre-clearance is required for any security that is exempt
from quarterly reporting (See this Part III., Item 7 below for a list
of exempt securities).
a. A pre-clearance trading form must be completed and
submitted to the Trading Desk for approval. Forms may be
obtained on the LAN at i:share\shared\access_person_documents.
b. The Trading Desk will check for prior or pending activity
(as applicable) in the requested security. If there are no
pending orders, no open limit orders, or any knowledge by the
trader of anticipated activity of a program nature that day,
the Access Person's request will be approved. In addition, if
there has been no prior activity in such security during that
day and the prior day, the Mutual Fund Access Person's request
will be approved.
c. The Trading Desk will sign, date and time the request,
giving the original to the Access Person and send a copy to
the Compliance Officer.
d. Once approved, the requesting party must execute the trade
within 1 business day of approval. Failure to do so will void
the pre-clearance approval, and a new request for
pre-clearance must be submitted.
e. If a request is denied because of prior or pending
activity, the Trading Desk will note the date a new request
may be submitted in accordance with the Blackout Period as
described in Part II, item 2, of these Guidelines.
f. Personal trades by Glenmede's Securities Traders shall be
pre-cleared by their respective supervisors.
3. RECORDS OF SECURITIES TRANSACTIONS
Access Persons are further required to direct their broker to supply
the Compliance Officer with duplicate copies of regular statements and
confirmation of all personal securities transactions executed.
The Compliance Officer will compare all approved trades to the
confirmations and statements and on a monthly basis identify any trades
executed in violation of these Guidelines. The Compliance Officer will
contact the Access Person to confirm a violation and issue a memo to
the Access Person outlining the facts and circumstances of any
violation and any corrective action. The memo will be included in the
Compliance Officer's report to the Trust Investment Committee and the
Access Person will be given the opportunity to attend the meeting when
such report is considered.
All personal trading activity will be reported in summary form to the
Trust Investment Committee. The Committee will determine if additional
corrective action is necessary in the event of a violation of these
Guidelines.(see Part IV Sanctions).
4. CERTIFICATION OF COMPLIANCE
Glenmede requires all Access Persons to certify in writing annually
that they have read and understand these Guidelines as well as the
associated Policy of Professional Responsibility, and recognize that
they are subject thereto. Further, all Access Persons will be required
to certify annually that they have complied with all the requirements
of these Personal Trading Guidelines and that they have disclosed or
reported all personal securities transactions required of same
5. REVIEW BY THE FUND'S BOARD OF DIRECTORS
The Trust Company's Compliance Officer will prepare an annual report to
the Board of Directors of the Funds that discusses the following
criteria:
a. A summary of existing procedures concerning personal investing
b. Highlights of any changes in procedures from year to year
c. Identification of any violations requiring remedial action
d. Identification of recommendations for change in existing
restrictions or procedures
6. QUARTERLY REPORT OF PERSONAL SECURITIES TRANSACTIONS
Every Access Person, as well as every member of the Trust Investment
Committee shall be required to submit a report of all personal
securities transactions as follows:
1st Quarter Report as of March 31st must be submitted by April
10th. 2nd Quarter Report as of June 30th must be submitted by
July 10th. 3rd Quarter Report as of September 30th must be
submitted by October 10th. 4th Quarter Report as of December
31st must be submitted by January 10th of next year.
The Report shall include at a minimum the following detailed
information:
Number of shares or par value of bond.
Type of Security - name, ticker symbol, or description if a bond.
Nature of transaction - buy or sell.
Trade Date.
Net amount in U.S. dollars.
Identification of broker transacted through.
The Compliance Officer shall be responsible for collecting such Reports
and reporting to the Trust Investment Committee any delinquencies. The
Trust Investment Committee shall determine what, if any, action needs
to be taken with respect to a delinquent Access Person. (See Part IV
Sanctions)
7. EXEMPT SECURITIES
Certain securities are exempt from the reporting and pre-clearance
requirements directed above. They include:
a. Securities issued by the Government of the United States (i.e. U.S.
Treasuries), short-term debt securities which are "government
securities" within the meaning of the 1940 Act, bankers' acceptances,
bank certificates of deposit, and commercial paper.
b. Shares of any registered open-end investment companies.
c. Securities purchased or sold in any account over which the Access
Person has no direct or indirect influence or control.
d. Securities purchased or sold in a transaction which is
non-volitional on the part of either the Access Person or the Company.
e. Securities acquired as part of an automatic dividend reinvestment
plan.
f. Securities acquired upon the exercise of rights issued by an issuer
PRO RATA to all holders of a class of its securities, to the extent
such rights were acquired from such issuer, and sales of such
rights so acquired
IV. SANCTIONS
Access Persons violating the provisions of the Policy of Professional
Responsibility or these Guidelines may be subject to sanctions, which may
include, among other things, restrictions on such individual's personal
securities trading, a letter of censure, suspension, or termination of the
employment of such associates.
An Access Person who innocently forgets to have a trade pre-cleared, will be
subject to a "three strikes and your out" approach. The first omission will be
noted in the minutes of the Trust Investment Committee; the second omission will
incur a written warning that will be included in the employee file; the third
omission will be cause for termination. Any Access Person who receives a
"strike" will have such strike removed and no notation to their employee file
made if they continuously adhere to all of the requirements of the Policy of
Professional Responsibility, Policy of Fiduciary Administration and these
Personal Trading Guidelines for three (3) consecutive months.
V. COMPLIANCE OFFICER
The Vice President and Corporate Counsel acts as the Compliance Officer. The VP
and General Auditor, Audit Officer or such other person as from time to time
designated by the Compliance Officer, will act as back-up compliance
professionals.
revised 06/01/98
FIRSTAR FUNDS, INC.
(THE "COMPANY")
CODE OF ETHICS
I. LEGAL REQUIREMENT.
Rule 17j-1(b) under the Investment Company Act of 1940, as amended (the
"1940 Act"), makes it unlawful for any officer or director of the Company in
connection with the purchase or sale by such person of a security "held or to be
acquired" by the Company:
1. To employ any device, scheme or artifice to defraud the Company;
2. To make to the Company any untrue statement of a material fact or
omit to state to the Company a material fact necessary in order to
make the statements made, in light of the circumstances under which
they are made, not misleading;
3. To engage in any act, practice, or course of business which
operates or would operate as a fraud or deceit upon the Company; or
4. To engage in any manipulative practice with respect to the
Company's investment portfolios.
II. PURPOSE OF THE CODE OF ETHICS.
The Company expects that its officers and directors will conduct their
personal investment activities in accordance with (1) the duty at all times to
place the interests of the Company's shareholders first, (2) the requirement
that all personal securities transactions be conducted consistent with this Code
of Ethics and in such a manner as to avoid any actual or potential conflict of
interest or any abuse of an individual's position of trust and responsibility,
and (3) the fundamental standard that investment company personnel should not
take inappropriate advantage of their positions.
In view of the foregoing, the provisions of Section 17(j) of the 1940
Act, the Securities and Exchange Commission's 1940 Act Release No. 23958
"Personal Investment Activities of Investment Company Personnel" (August 24,
1999), the "Report of the Advisory Group on Personal Investing" issued by the
Investment Company Institute on May 9, 1994 and the Securities and Exchange
Commission's September 1994 Report on "Personal Investment Activities of
Investment Company Personnel," the Company has determined to adopt this Code of
Ethics on behalf of the Company to specify a code of conduct for certain types
of personal securities transactions which might involve conflicts of interest or
an appearance of impropriety, and to establish reporting requirements and
enforcement procedures.
III. DEFINITIONS.
A. An "Access Person" means: (1) each director or officer of the Company;
(2) each employee (if any) of the Company (or of any company in a control
relationship to the Company) who, in connection with his or her regular
functions or duties, makes, participates in, or obtains information regarding
the purchase or sale of a security by the Company or whose functions relate
to the making of any recommendations with respect to such purchases or sales;
and (3) any natural person in a control relationship to the Company who obtains
information concerning recommendations made to the Company with regard to the
purchase or sale of a security.
For purposes of this Code of Ethics, an "Access Person" does not include
any person who is subject to the securities transaction pre-clearance
requirements and securities transaction reporting requirements of the Code of
Ethics adopted by the Company's investment adviser, subadviser or principal
underwriter in compliance with Rule 17j-1 of the 1940 Act and Rule 204-2(a)(12)
of the Investment Advisers Act of 1940 or Section 15(f) of the Securities
Exchange Act of 1934, as applicable.
B. "Restricted Director" or "Restricted Officer" means each director or
officer of the Company who is not also a director, officer, partner, employee or
controlling person of the Company's investment adviser, subadviser,
administrator, custodian, transfer agent, or distributor.
C. An Access Person's "immediate family" includes a spouse, minor children
and adults living in the same household as the Access Person.
D. A security is "held or to be acquired" if within the most recent 15 days
it (1) is or has been held by the Company, or (2) is being or has been
considered by the Company, its investment adviser or subadviser for purchase by
the Company. A purchase or sale includes the writing of an option to purchase or
sell and any security that is exchangeable for or convertible into, any security
that is held or to be acquired by a fund.
E. An "Initial Public Offering" means an offering of securities registered
under the Securities Act of 1933, the issuer of which, immediately before the
registration, was not subject to the reporting requirements of Sections 13 or
15(d) of the Securities Exchange Act of 1934.
F. "Investment Personnel" of the Company means:
(i) Any employee of the Company (or of any company in
a control relationship to the Company) who, in connection with
his or her regular functions or duties, makes or participates
in making recommendations regarding the purchase or sale of
securities by the Company.
(ii) Any natural person who controls the Company and
who obtains information concerning recommendations made to the
Company regarding the purchase or sale of securities by the
Company.
G. A "Limited Offering" means an offering that is exempt from registration
under the Securities Act of 1933 pursuant to Section 4(2) or Section 4(6) or
pursuant to Rule 504, Rule 505, or Rule 506 under the Securities Act of 1933.
H. "Exempt Security" means:
1. Direct obligations of the Government of the United States; banker's
acceptances; bank certificates of deposit; commercial paper; high quality
short-term debt instruments (any instrument having a maturity at issuance
of less than 366 days and that is rated in one of the two highest rating
categories by a nationally recognized statistical rating organization),
including repurchase agreements; and shares of registered open-end
investment companies.
2. Securities purchased or sold in any account over which the Access Person
has no direct or indirect influence or control.
3. Securities purchased or sold in a transaction which is non-volitional on
the part of either the Access Person or the Company.
4. Securities acquired as a part of an automatic dividend reinvestment
plan.
5. Securities acquired upon the exercise of rights issued by an issuer PRO
RATA to all holders of a class of its securities, to the extent such rights
were acquired from such issuer, and sales of such rights so acquired.
6. Securities which the Company's investment portfolios are not permitted
to purchase under the investment objectives and policies set forth in the
Company's then current prospectus(es) under the Securities Act of 1933 or
the Company's registration statement on Form N-1A.
I. "De Minimis Security" means securities issued by any company included in
the Standard and Poor's 500 Stock Index and in an amount less than $10,000.
IV. POLICIES OF THE COMPANY REGARDING PERSONAL SECURITIES TRANSACTIONS.
A. GENERAL POLICY.
No Access Person of the Company shall engage in any act, practice or course of
business that would violate the provisions of Rule 17j-1(b) set forth above, or
in connection with any personal investment activity, engage in conduct
inconsistent with this Code of Ethics.
B. SPECIFIC POLICIES.
1. RESTRICTIONS ON PERSONAL SECURITIES TRANSACTIONS BY ACCESS PERSONS OTHER
THAN RESTRICTED DIRECTORS AND RESTRICTED OFFICERS.
a. No Access Person who is not a Restricted Director or Restricted
Officer may buy or sell securities other than Exempt Securities
and De Minimis Securities for his or her personal portfolio or the
portfolio of a member of his or her immediate family without obtaining
oral authorization from the Compliance Officer of the Company's
investment adviser PRIOR to effecting such security transaction.
A written authorization for such security transaction will be provided by
the investment adviser's Compliance Officer to the person receiving the
authorization (if granted) and to the Company's administrator to
memorialize the oral authorization that was granted.
NOTE: If an Access Person has questions as to whether purchasing or selling
a security for his or her personal portfolio or the portfolio of a member
of his or her immediate family requires prior oral authorization, the
Access Person should consult the investment adviser's Compliance Officer
for clearance or denial of clearance to trade PRIOR to effecting any
securities transactions.
b. Pre-clearance approval under paragraph (a) will expire at the close
of business on the trading day after the date on which oral
authorization is received, and the Access Person is required to renew
clearance for the transaction if the trade is not completed before the
authority expires.
c. No clearance will be given to an Access Person other than a
Restricted Director or Restricted Officer to purchase or sell any
security (1) on a day when any portfolio of the Company has a pending
"buy" or "sell" order in that same security until that order is
executed or withdrawn or (2) when the Compliance Officer has been
advised by the investment adviser or subadviser that the same security
is being considered for purchase or sale for any portfolio of the
Company.
d. The pre-clearance requirement contained in paragraph IV.B.1.a,
above, shall apply to ALL purchases of a beneficial interest in
any security through an Initial Public Offering or a Limited Offering
by any Access Person who is also classified as Investment Personnel. A
record of any decision and the reason supporting such decision to
approve the acquisition by Investment Personnel of Initial Public
Offerings or Limited Offerings shall be made by the Compliance
Officer.
2. RESTRICTIONS ON PERSONAL SECURITIES TRANSACTIONS BY RESTRICTED DIRECTORS
AND RESTRICTED OFFICERS.
The Company recognizes that a Restricted Director and a Restricted Officer
do not have on-going, day-to-day involvement with the operations of the
Company. In addition, it has been the practice of the Company to give
information about securities purchased or sold by the Company or considered
for purchase or sale by the Company to Restricted Directors and Restricted
Officers in materials circulated more than 15 days after such securities
are purchased or sold by the Company or are considered for purchase or sale
by the Company. Accordingly, the Company believes that less stringent
controls are appropriate for Restricted Directors and Restricted Officers,
as follows:
a. The securities pre-clearance requirement contained in paragraph
IV.B.1.a. above shall only apply to a Restricted Director or
Restricted Officer if he or she knew or, in the ordinary course of
fulfilling his or her official duties as a director or officer, should
have known, that during the fifteen day period before the transaction
in a security (other than an Exempt Security or a De Minimis Security)
or at the time of the transaction that the security purchased or
sold by him or her other than an Exempt Security or a De Minimis
Security was also purchased or sold by the Company or considered for
the purchase or sale by the Company.
b. If the pre-clearance provisions of the preceding paragraph apply,
no clearance will be given to a Restricted Director or Restricted
Officer to purchase or sell any security (1) on a day when any
portfolio of the Company has a pending "buy" or "sell" order in that
same security until that order is executed or withdrawn or (2) when
the Compliance Officer has been advised by the investment adviser or
subadviser that the same security is being considered for purchase or
sale for any portfolio of the Company.
V. PROCEDURES.
A. In order to provide the Company with information to enable it to
determine with reasonable assurance whether the provisions of this Code are
being observed by its Access Persons:
1. Each Access Person of the Company other than a director who is not an
"interested person" of the Company (as defined in the 1940 Act) will submit
to the administrator an Initial Holdings Report in the form attached hereto
as Exhibit A that lists ALL securities other than Exempt Securities
beneficially owned1 by the Access Person. This report must be submitted
within ten days of becoming an Access Person (or for persons already
designated as Access Person within 10 days of the adoption of this Code of
Ethics), and must include the title of each security, the number of shares
held, and the principal amount of the security. The Report must also
include a list of any securities accounts maintained with any broker,
dealer or bank.
2. Each Access Person of the Company other than a director who is not an
"interested person" of the Company (as defined in the 1940 Act) will also
submit to the administrator an Annual Holdings Report attached hereto as
Exhibit A no later than thirty days after the end of the calendar year. The
Annual Holdings Report must list ALL securities other than Exempt
Securities beneficially owned by the Access Person, the title of each
security, the number of shares held, and the principal amount of the
security, as well as a list of any securities accounts maintained with any
broker, dealer or bank.
3. Each Access Person of the Company other than a Restricted Director or
Officer shall direct his or her broker to supply to the Compliance Officer
of the Company's administrator, on a timely basis, duplicate copies of
confirmations of all securities transactions in which the person has, or by
reason of such transaction acquires any direct or indirect beneficial
ownership and copies of periodic statements for all securities accounts.
4. Each Access Person of the Company, other than a director who is not an
"interested person" (as defined in the 1940 Act), shall submit reports in
the form attached hereto as Exhibit B to the Company's administrator,
showing all transactions in securities other than Exempt Securities in
which the person has, or by reason of such transaction acquires, any
direct or indirect beneficial ownership, as well as all accounts
established with brokers, dealers or banks during the quarter in which any
securities were held for the direct or indirect beneficial interest of the
Access Person.2 Such reports shall be filed no later than 10 days after the
end of each calendar quarter. An Access Person of the Company need not make
a quarterly transaction report under this paragraph if all of the
information required by this paragraph 4 is contained in the brokerage
confirmations or account statements required to be submitted under
paragraph 3.
5. Each director who is not an "interested person" of the Company need not
make an initial or annual holdings report but shall submit the same
quarterly report as required under paragraph 4 to the administrator, but
only for a transaction in a security other than an Exempt Security where he
or she knew at the time of the transaction or, in the ordinary course of
fulfilling his or her official duties as a director, should have known that
during the 15-day period immediately preceding or after the date of the
transaction, such security is or was purchased or sold, or considered for
purchase or sale, by the Company.
6. The administrator of the Company shall notify each Access Person of the
Company who may be subject to the pre-clearance requirement or required to
make reports pursuant to this Code that such person is subject to the
pre-clearance or reporting requirements and shall deliver a copy of this
Code to each such person.
7. The administrator of the Company shall review the initial holdings
reports, annual holdings reports, and quarterly transaction reports
received, and as appropriate compare the reports with the pre-clearance
authorization received, and report to the Company's Board of Directors:
a. with respect to any transaction that appears to evidence a possible
violation of this Code; and
b. apparent violations of the reporting requirement stated herein.
8. The Board shall consider reports made to it hereunder and shall
determine whether the policies established in Sections IV and V of this
Code of Ethics have been violated, and what sanctions, if any, should be
imposed on the violator, including but not limited to a letter of censure,
suspension or termination of the employment of the violator, or the
unwinding of the transaction and the disgorgement of any profits to
the Company. The Board shall review the operation of this Code of Ethics at
least once a year.
9. The Company's investment adviser, subadviser, and principal underwriter
shall adopt, maintain and enforce separate codes of ethics with respect to
their personnel in compliance with Rule 17j-1 and Rule 204-2(a)(12) of the
Investment Advisers Act of 1940 or Section 15(f) of the Securities Exchange
Act of 1934, as applicable, and shall forward to the Company's
administrator and the Company's counsel copies of such codes and all
future amendments and modifications thereto. The Board shall review and
approve such codes at least once a year. Furthermore, any material changes
to an investment adviser's or principal underwriter's code will be approved
by the Board at the next scheduled quarterly board meeting and in no case
more than six months after such change.
10. At each quarterly Board of directors' meeting the administrator,
investment adviser, subadviser and principal underwriter of the Company
shall provide a written report to the Company's Board of Directors
stating:
a. any reported securities transaction that occurred during the prior
quarter that may have been inconsistent with the provisions of the
codes of ethics adopted by the Company's investment adviser,
subadviser or principal underwriter; and
b. all disciplinary actions3 taken in response to such violations.
11. At least once a year, the Company's investment adviser, subadviser and
principal underwriter shall provide to the Board a written report which
contains: (a) a summary of existing procedures concerning personal
investing by advisory persons and any changes in the procedures during the
past year; (b) an evaluation of current compliance procedures and a report
on any recommended changes in existing restrictions or procedures based
upon the Company's experience under this Code of Ethics, industry
practices, or developments in applicable laws and regulations; (c)
describes any issues arising under the code of ethics or procedures since
the last report, including but not limited to, information about material
violations of the code or procedures and sanctions imposed in response to
material violations; and (d) a certification that the procedures which have
been adopted are those reasonably necessary to prevent Access Persons from
violating the respective Codes of Ethics.
12. This Code, the codes of the investment adviser, subadviser and
principal underwriter, a copy of each report by an Access Person, any
record of any violation of this Code and any action taken as a result
thereof, any written report hereunder by the Company's administrator,
investment adviser, subadviser or principal underwriter, records of
approvals relating to Initial Public Offerings and Limited Offerings, lists
of all persons required to make reports and a list of all persons
responsible for reviewing such reports shall be preserved with the
Company's records for the period required by Rule 17j-1.
VI. CERTIFICATION.
Each Access Person will be required to certify annually that he or she
has read and understood this Code of Ethics, and will abide by it. Each Access
Person will further certify that he or she has disclosed or reported all
personal securities transactions required to be disclosed or reported under the
Code of Ethics. A form of such certification is attached hereto as Exhibit B.
The Board of Directors of Firstar Funds
Approved: __________________________
EXHIBIT A
FIRSTAR FUNDS, INC.
(THE "COMPANY")
QUARTERLY TRANSACTION REPORT*
For the Calendar Quarter Ended _______________________
(month/day/year)
To: Firstar Mutual Fund Services, LLC, as administrator to the Company
A. SECURITIES TRANSACTIONS. During the quarter referred to above, the
following transactions were effected in securities of which I had, or by reason
of such transactions acquired, direct or indirect beneficial ownership, and
which are required to be reported pursuant to the Code of Ethics of the Company:
<TABLE>
<CAPTION>
Interest Rate Number of Nature of Broker/Dealer
and Maturity Shares or Transaction or Bank
Title of Date (If Date of Principal Dollar Amount (Purchase, Through Whom
SECURITY APPLICABLE) TRANSACTION AMOUNT of TRANSACTION SALE, OTHER) PRICE EFFECTED
-------- ----------- ----------- ------ -------------- ------------ ----- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
* Transactions that are asterisked indicate transactions in a security where I
knew at the time of the transaction or, in the ordinary course of fulfilling my
official duties as a director or officer, should have known that during the
15-day period immediately preceding or after the date of the transaction, such
security was purchased or sold, or such security was being considered for
purchase or sale, by the Company.
B. NEW BROKERAGE ACCOUNTS. During the quarter referred to above, I
established the following accounts in which securities were held during the
quarter for my direct or indirect benefit:
NAME OF BROKER, DEALER OR BANK DATE ACCOUNT WAS ESTABLISHED
C. OTHER MATTERS. This report (i) excludes transactions with respect to
which I had no direct or indirect influence or control, (ii) excludes other
transactions not required to be reported, and (iii) is not an admission that I
have or had any direct or indirect beneficial ownership in the securities listed
above.
Date: ____________________ Signature: ______________________
Print Name: _____________________
EXHIBIT B
FIRSTAR FUNDS, INC.
SECURITIES TRANSACTION REPORT
For the Calendar Quarter Ended _______________________
(month/day/year)
To: _____________________, as Administrator of the above listed Fund
During the quarter referred to above, the following
transactions were effected in securities of which I had, or by reason of such
transactions acquired, direct or indirect beneficial ownership, and which are
required to be reported pursuant to the Code of Ethics of the Company:
<TABLE>
<CAPTION>
Interest Rate Nature of Broker/Dealer
and Maturity Transaction or Bank
Date of Number of Principal Date (if (Purchase, Through Whom
SECURITY TRANSACTION SHARES AMOUNT APPLICABLE) SALE, OTHER) PRICE EFFECTED
-------- ----------- ------------ --------- ------------- ------------ ----- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
During the quarter referred to above, I established the following accounts
in which securities were held during the quarter for my direct or indirect
benefit:
1. The name of the broker, dealer or bank with whom I established the
account:
2. The date the account was established:
THIS REPORT (I) EXCLUDES TRANSACTIONS WITH RESPECT TO WHICH I HAD NO DIRECT
OR INDIRECT INFLUENCE OR CONTROL, (II) EXCLUDES OTHER TRANSACTIONS NOT REQUIRED
TO BE REPORTED, AND (III) IS NOT AN ADMISSION THAT I HAVE OR HAD ANY DIRECT OR
INDIRECT BENEFICIAL OWNERSHIP IN THE SECURITIES LISTED ABOVE.
Date: ___________________ Signature: _______________________
Print Name: ______________________
EXHIBIT C
FIRSTAR FUNDS, INC.
ANNUAL CERTIFICATE
Pursuant to the requirements of the Code of Ethics of Firstar Funds, Inc.,
the undersigned hereby certifies as follows:
1. I have read the Company's Code of Ethics.
2. I understand the Code of Ethics and acknowledge that I am subject to it.
3. Since the date of the last Annual Certificate (if any) given pursuant to
the Code of Ethics, I have reported all personal securities transactions
and provided any securities holding reports required to be reported under
the requirements of the Code of Ethics.
Date: __________________ ___________________________________
Print Name
___________________________________
Signature
1. You will be treated as the "beneficial owner" of a security under this
policy only if you have a direct or indirect pecuniary interest in the
security.
(a) A direct pecuniary interest is the opportunity, directly or
indirectly, to profit, or to share the profit, from the transaction.
(b) An indirect pecuniary interest is any nondirect financial
interest, but is specifically defined in the rules to include
securities held by members of your immediate family sharing
the same household; securities held by a partnership of which
you are a general partner; securities held by a trust of which
you are the settlor if you can revoke the trust without the
consent of another person, or a beneficiary if you have or
share investment control with the trustee; and equity
securities which may be acquired upon exercise of an option or
other right, or through conversion.
For interpretive guidance on this test, you should consult counsel.
2. See footnote 1 above.
3. Disciplinary action includes but is not limited to any action that has a
material financial effect upon the employee, such as fining, suspending, or
demoting the employee, imposing a substantial fine or requiring the
disgorgement of profits.
