<PAGE>
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, For Use of the
Commission Only (as permitted By
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Under Rule 14a-11(c) or Rule 14a-12
Firstar Funds, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11. (Set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
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[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
September 22, 2000
Dear Shareholder:
The Board of Directors of Firstar Funds, Inc. (the "Company") is pleased to
announce a special meeting of shareholders of the Core International Equity Fund
(the "Fund") on November 8, 2000, at 11:00 a.m. (Eastern time) at the offices of
the Company's legal counsel, Drinker Biddle & Reath LLP, One Logan Square,
18/th/ and Cherry Streets, Philadelphia, Pennsylvania, 19103 (the "Special
Meeting"), to act on a proposal to change the sub-adviser for the Fund.
As part of the reorganization between the mutual fund portfolios of the
Company and Mercantile Mutual Funds, Inc. ("Mercantile"), the Mercantile
International Equity Portfolio will be reorganized into the Fund upon approval
of the Mercantile International Equity Portfolio's shareholders. In conjunction
with the proposed reorganization with Mercantile, however, the Company's
investment adviser has proposed the hiring of Clay Finlay, Inc. ("Clay Finlay"),
the current sub-adviser to the Mercantile International Equity Portfolio, to
provide sub-advisory services to the Fund.
The Board of Directors has unanimously approved the proposal, which is
described in detail in the enclosed proxy materials.
The formal Notice of Special Meeting, Proxy Statement and Proxy Card is
enclosed.
Whether or not you plan to attend the Special Meeting, you may vote by
proxy in any of the following ways:
1. Internet - Instructions for casting your vote via the Internet can be
--------
found in the enclosed proxy voting materials. The required control
number is printed on your enclosed Proxy Card. If this feature is
used, you are giving authorization for another person to execute your
proxy and there is no need to mail the Proxy Card.
2. Telephone - Instructions for casting your vote via telephone can be
---------
found in the enclosed proxy voting materials. The toll-free 800 number
and required control number are printed on your enclosed Proxy Card.
If this feature is used, you are giving authorization for another
person to execute your proxy and there is no need to mail the Proxy
Card.
3. By mail - If you vote by mail, please indicate your voting
-------
instructions on the enclosed Proxy Card, date and sign the Proxy Card,
and return it in the envelope provided, which is addressed for your
convenience and needs no postage if mailed in the United States.
<PAGE>
YOUR VOTE IS IMPORTANT TO US. PLEASE REVIEW THE ENCLOSED MATERIALS AND, IF YOU
DO NOT PLAN TO ATTEND THE SPECIAL MEETING, COMPLETE, SIGN, DATE AND RETURN THE
ENCLOSED PROXY CARD TODAY. IT IS IMPORTANT THAT YOU RETURN THE PROXY CARD TO
ENSURE THAT YOUR SHARES WILL BE REPRESENTED AT THE SPECIAL MEETING. YOU MAY
ALSO VOTE YOUR PROXY BY A TOLL-FREE PHONE CALL OR BY VOTING ON-LINE AS INDICATED
IN THE ENCLOSED MATERIALS.
We look forward to your attendance at the Special Meeting or receiving your
Proxy Card or your on-line or telephone instructions so that your shares may be
VOTED AT THE SPECIAL MEETING. THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY
RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL DESCRIBED IN THE PROXY STATEMENT.
Sincerely,
James M. Wade
Chairman of the Board of Directors
<PAGE>
FIRSTAR FUNDS, INC.
615 EAST MICHIGAN STREET
MILWAUKEE, WISCONSIN 53201-3011
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 8, 2000
SEPTEMBER 22, 2000
TO THE SHAREHOLDERS OF THE
CORE INTERNATIONAL EQUITY FUND:
A Special Meeting of Shareholders (the "Special Meeting") of the Core
International Equity Fund (the "Fund") of Firstar Funds, Inc. (the "Company")
will be held on November 8, 2000, at 11:00 a.m. (Eastern time), at the offices
of the Company's legal counsel, Drinker Biddle & Reath LLP, One Logan Square,
18th and Cherry Streets, Philadelphia, Pennsylvania 19103.
Shareholders will be asked to consider and act upon the following matters
at the Special Meeting:
1) The approval or disapproval of a new investment sub-advisory agreement
on behalf of the Fund by and among the Company, Firstar Investment
Research & Management Company, LLC and Clay Finlay, Inc.; and
2) The transaction of such other business as may properly come before the
Special Meeting or any adjournment thereof.
The proposal stated above is discussed in detail in the attached Proxy
Statement. Shareholders of record as of the close of business on September 11,
2000 are entitled to notice of, and to vote at, the special meeting or any
ADJOURNMENT THEREOF. YOUR DIRECTORS UNANIMOUSLY RECOMMEND THAT YOU VOTE FOR THE
PROPOSAL.
YOU ARE REQUESTED TO MARK, DATE, SIGN AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE THE PROXY CARD THAT IS BEING SOLICITED BY THE COMPANY'S BOARD OF
DIRECTORS. YOU ALSO MAY RETURN PROXIES BY: 1) TOUCH-TONE TELEPHONE VOTING OR 2)
VOTING ON-LINE. THIS IS IMPORTANT TO ENSURE A QUORUM AT THE SPECIAL MEETING.
PROXIES MAY BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY SUBMITTING TO
THE SECRETARY OF THE COMPANY A WRITTEN NOTICE OF REVOCATION OR A SUBSEQUENTLY
EXECUTED PROXY OR BY ATTENDING THE SPECIAL MEETING AND VOTING IN PERSON.
-----------------------
W. Bruce McConnel, III
Secretary
<PAGE>
FIRSTAR FUNDS, INC.
615 EAST MICHIGAN STREET
MILWAUKEE, WISCONSIN 53201-3011
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") of Firstar Funds, Inc. (the
"Company") for use at a Special Meeting of Shareholders of the Core
International Equity Fund (the "Fund") of the Company and any adjournment(s)
thereof (the "Special Meeting") to be held on November 8, 2000 at 11:00 a.m.
(Eastern time), at the offices of the Company's legal counsel, Drinker Biddle &
Reath LLP, One Logan Square, 18th and Cherry Streets, Philadelphia,
Pennsylvania.
Proxies will be solicited by mail. Officers and service contractors of the
Company or Firstar Investment Research and Management Company, LLC ("FIRMCO"),
the Fund's investment adviser, may also solicit proxies by telephone, facsimile,
Internet, telegraph or personal interview. FIRMCO, with principal offices at 777
East Wisconsin Avenue, Suite 800, Milwaukee, Wisconsin 53202, will bear all
proxy solicitation costs. Any shareholder giving a proxy may revoke it at any
time before it is exercised by submitting to the Company a written notice of
revocation or a subsequently executed proxy or by attending the Special Meeting
and electing to vote in person. The Proxy Statement and the enclosed proxy card
is expected to be distributed to shareholders of record on or about September
22, 2000.
Only shareholders of record at the close of business on September 11, 2000
("Record Date") will be entitled to notice of, and to vote at, the Special
Meeting. On the Record Date, the following number of shares were outstanding and
entitled to vote at the Special Meeting: _____ Class 19 - Institutional Series
Common Stock, _____ Class 19 - A Series Common Stock, ____ Class 19 - B Series
Common Stock ___, and ___ Class 19 - Y Series Common Stock.
Although shares of the Fund have been divided into four series, the
Proposal to be presented at the Special Meeting, will be voted upon by all
shares of the Fund in the aggregate and not on a series by series basis. Each
shareholder of record on the Record Date is entitled to one vote for each full
share held and a proportionate fractional vote for any fractional shares held.
The following Proposal will be voted on at the Special Meeting:
To approve a new investment sub-advisory agreement on behalf of the Fund by
and among the Company, FIRMCO and Clay Finlay, Inc.
Signed proxies received by the Company in time for voting and not revoked
will be voted in accordance with the directions specified therein. THE BOARD
RECOMMENDS A VOTE FOR THE PROPOSAL. If no specification is made, the proxy will
be voted FOR the Proposal.
<PAGE>
PROPOSAL: APPROVAL OF A NEW INVESTMENT
SUB-ADVISORY AGREEMENT FOR THE FUND
At a regular meeting of the Company's Board held on June 16, 2000, the
Board unanimously approved the reorganization of the mutual funds of Mercantile
Mutual Funds, Inc. (the "Mercantile Funds") into corresponding mutual funds of
the Company (the "Reorganization"). Upon approval of the Reorganization by the
shareholders of the Mercantile Funds and completion of the Reorganization, the
International Equity Portfolio of Mercantile Mutual Funds, Inc. (the "Mercantile
International Portfolio") will be reorganized into the Fund. In connection with
the Reorganization, it is proposed that a new Investment Sub-Advisory Agreement
among the Company, FIRMCO and Clay Finlay, Inc. ("Clay Finlay"), the current
sub-adviser to the Mercantile International Portfolio (the "New Sub-Advisory
Agreement"), be entered into on behalf of the Fund. Clay Finlay would replace
The Glenmede Trust Company ("Glenmede") as sub-adviser to the Fund. A copy of
the New Sub-Advisory Agreement is attached to this Proxy Statement as Exhibit A.
(Also in connection with the Reorganization, the Fund's name will be changed to
the International Growth Fund. Shareholder approval is not required to effect
this change.)
Headquartered in New York, Clay Finlay has research offices in London,
Geneva, Tokyo and Melbourne. The International Equity team has eighteen members
(six portfolio managers, eleven analysts and one investment strategist).
Research is produced both by research analysts and by the portfolio managers,
with a focus on large and medium capitalization stocks. Glenmede operates from a
centralized location in Philadelphia, with a team of 55 professionals. The
company's focus is primarily on large capitalization securities.
FIRMCO currently serves as the Fund's investment adviser pursuant to
Addendum No. 7 dated as of November 1, 1999 (the "Addendum") to an Investment
Advisory Agreement dated as of March 27, 1992 (the "Advisory Agreement") between
the Company and FIRMCO. The Addendum authorizes FIRMCO to employ, at FIRMCO's
expense, one or more sub-advisers to assist FIRMCO in performing its
responsibilities under the Advisory Agreement. FIRMCO has appointed Glenmede to
serve as sub-adviser to the Fund, pursuant to an Investment Sub-Advisory
Agreement among the Company, FIRMCO and Glenmede dated as of November 1, 1999
(the "Current Sub-Advisory Agreement"). The Current Sub-Advisory Agreement was
approved by the Fund's sole initial shareholder on November 3, 1999. Glenmede's
principal offices are at One Liberty Place, 1650 Market Street, Suite 1200,
Philadelphia, Pennsylvania 19103. Under the terms of the Current Sub-Advisory
Agreement, subject to the oversight and supervision of the Company's Board and
FIRMCO, Glenmede formulates and implements a continuous investment program for
the Fund. Glenmede furnishes investment advisory and portfolio management
services to the Fund with respect to its investments. Glenmede is responsible
for decisions to buy and sell the Fund's investments. Glenmede negotiates
brokerage commissions and places orders for purchases and sales of the Fund's
portfolio securities. Glenmede bears all expenses incurred by it in connection
with its services under the Current Sub-Advisory Agreement. For the services
performed and expenses assumed under the Current Sub-Advisory Agreement,
Glenmede is entitled to a fee, payable by FIRMCO, computed daily and paid
monthly at the following annual rates: 0.50% of the Fund's first $50 million in
average daily net assets plus 0.30% of the Fund's average daily net assets in
excess of $50 million.
-2-
<PAGE>
The Current Sub-Advisory Agreement provides that in executing portfolio
transactions and in selecting brokers or dealers to execute transactions,
Glenmede will use its best efforts to seek on behalf of the Fund the best
overall terms available. The Current Sub-Advisory Agreement authorizes Glenmede
to consider brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934) provided to the Fund
and/or other accounts over which Glenmede or its affiliates exercise investment
discretion. In addition, Glenmede is authorized to take into account the sales
of shares of the Company in allocating purchase and sale orders for portfolio
securities to brokers or dealers (including brokers and dealers that are
affiliated with FIRMCO, Glenmede, or the Company's principal underwriter),
provided that Glenmede believes the quality of the transactions and the
commissions are comparable to what they would be with other qualified firms.
The Current Sub-Advisory Agreement provides that Glenmede will not be
liable for any error of judgment or mistake of law or for any loss relating to
its services, provided that this protection does not relieve Glenmede of
liability for which Glenmede would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties, or
from reckless disregard of its obligations and duties under the Current Sub-
Advisory Agreement.
The Current Sub-Advisory Agreement is terminable at any time, without the
payment of any penalty, by Glenmede, FIRMCO or by the Company (by vote of the
Board or by the vote of a majority of the outstanding voting securities of the
Fund) on sixty days' written notice. The Current Sub-Advisory Agreement will
automatically terminate in the event of its assignment, and will also terminate
upon the termination of the Advisory Agreement.
The terms of the New Sub-Advisory Agreement and responsibilities of Clay
Finlay thereunder are substantially the same as those stated above for the
Current Sub-Advisory Agreement except for the compensation payable to Clay
Finlay. If the Proposal is approved and the New Sub-Advisory Agreement takes
effect, Clay Finlay will be entitled to a fee, computed daily and paid monthly,
at the following annual rates: 0.75% of the first $50 million of the Fund's
average daily net assets; plus 0.50 % of the next $50 million of average daily
net assets; plus 0.25% of average daily net assets in excess of $100 million.
THIS COMPENSATION WILL BE PAID BY FIRMCO FROM ITS FEE UNDER THE ADVISORY
AGREEMENT AND WILL NOT RESULT IN ANY CHANGE IN THE TOTAL ADVISORY FEES PAYABLE
BY THE FUND.
Clay Finlay, which was founded in 1982, is a registered investment adviser
and a wholly owned subsidiary of United Asset Management Corporation ("UAM"), a
financial services holding company. Clay Finlay is an experienced international
investment manager. As of June 30, 2000 Clay Finlay had approximately $5.7
billion of assets under management for separate private and institutional
accounts and investment companies. For more information about Clay Finlay see
"Additional Information - Clay Finlay."
-3-
<PAGE>
If approved by a majority of the outstanding shares of the Fund (as defined
below under "Voting Information - Required Vote"), the New Sub-Advisory
Agreement will become effective at the time of the Reorganization and will
continue in effect until February 28, 2002. Thereafter, if not terminated, the
New Sub-Advisory Agreement will continue in effect for successive annual
periods, provided such continuance is approved at least annually (i) by the vote
of a majority of those members of the Board who are not "interested persons" of
any party to the New Sub-Advisory Agreement (as that term is defined in the 1940
Act), cast in person at a meeting called for the purpose of voting on such
approval, and (ii) by the Board or by vote of a majority of the outstanding
voting securities of the Fund.
EVALUATION BY THE COMPANY'S BOARD. The New Sub-Advisory Agreement was
unanimously approved by the Board and by a majority of those members of the
Board who are not "interested persons" (as that term is defined in the 1940 Act)
of any party to the New Sub-Advisory Agreement at a meeting held on June 16,
2000. In reaching its decision, the Board considered the following factors to be
material and of greatest importance: (1) the proposed reorganization of the
Mercantile International Portfolio into the Fund and the fact that the asset
base of the Mercantile International Portfolio is approximately three times
larger than the asset base of the Fund, and (2) Clay Finlay's investment
management style, qualifications, and experience. Based on its evaluation, the
Board concluded that approval of the New Sub-Advisory Agreement would be in the
best interests of the Fund and its shareholders.
THE COMPANY'S BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE
FOR THE APPROVAL OF THE NEW SUB-ADVISORY AGREEMENT.
VOTING INFORMATION
GENERAL INFORMATION. The Company's Board is furnishing this Proxy Statement
in connection with the solicitation of proxies for the Special Meeting. It is
expected that the solicitation of proxies will be primarily by mail. Officers
and service contractors of the Company may also solicit proxies by telephone or
otherwise. In this connection, the Trust has retained ADP Proxy Services ("ADP")
to assist in the solicitation of proxies for the Reorganization. Shareholders
may vote by (1) mail by marking, signing, dating and returning the enclosed
proxy card in the enclosed postage-paid envelope, (2) by touch-tone voting, or
(3) by on-line voting. Any shareholder giving a proxy may revoke it at any time
before it is exercised by submitting to the Company a written notice of
revocation or a subsequently executed proxy or by attending the Special Meeting
and voting in person. As the Special Meeting date approaches, certain
shareholders may receive a telephone call from a representative of ADP if their
votes have not yet been received. Authorization to permit ADP to execute proxies
may be obtained by telephonic or electronically transmitted instructions from
shareholders of the Fund. Proxies that are obtained telephonically will be
recorded in accordance with the procedures set forth below. The Trust's trustees
believe that these procedures are reasonably designed to ensure that the
identity of the shareholder casting the vote is accurately determined and that
the voting instructions of the shareholder are accurately determined.
-4-
<PAGE>
In all cases where a telephonic proxy is solicited, the ADP representative
is required to ask for each shareholder's full name, address, social security or
employer identification number, title (if the shareholder is authorized to act
on behalf of an entity, such as a corporation), and the number of shares owned,
and to confirm that the shareholder has received the proxy materials in the
mail. If the information solicited agrees with the information provided to ADP
then the ADP representative has the responsibility to explain the process, to
read the proposal on the proxy card, and ask for the shareholder's instructions
on the Proposal. The ADP representative, although he or she is permitted to
answer questions about the process, is not permitted to recommend to the
shareholder how to vote, other than to read any recommendation set forth in this
Proxy Statement. ADP will record the shareholder's instructions on the card.
Within 72 hours, the shareholder will be sent a letter or mailgram to confirm
his or her vote and asking the shareholder to call ADP immediately if his or her
instructions are not correctly reflected in the confirmation.
Any expenses incurred as a result of hiring ADP or any other proxy
solicitation agent will be borne by FIRMCO or its affiliates. It is anticipated
that the cost associated with using a proxy solicitation agent will be
approximately $________________.
QUORUM. A quorum for the transaction of business at the Special Meeting is
constituted by the presence in person or by proxy of holders of a majority of
the outstanding shares entitled to vote on the Proposal. In the event that a
quorum is not present at the Special Meeting or in the event that a quorum is
present at the Special Meeting but sufficient votes to approve the Proposal
described in this Proxy Statement are not received, the persons named as
proxies, or their substitutes, may propose one or more adjournments of the
Special Meeting to permit further solicitation of proxies. Any such adjournment
will require the affirmative vote of a majority of those shares affected by the
adjournment that are represented and voting at the Special Meeting in person or
by proxy. If a quorum is present, the persons named as proxies will vote those
proxies which they are entitled to vote FOR the Proposal in favor of such
adjournments, and will vote those proxies required to be voted AGAINST the
Proposal against any adjournment. Under the Company's By-laws, a quorum is
constituted with respect to the Fund by the presence in person or by proxy of
the holders of more than 50% of the outstanding shares of the Fund entitled to
vote at the Special Meeting. For purposes of determining the presence of a
quorum for transacting business at the Special Meeting, abstentions, but not
broker "non-votes" (i.e., proxies from brokers or nominees indicating that such
persons have not received instructions from the beneficial owners or other
persons entitled to vote shares on the Proposal with respect to which the
brokers or nominees do not have discretionary power), will be treated as shares
that are present at the Special Meeting but which have not been voted.
Abstentions and broker "non-votes" will have the effect of a vote against the
Proposal for purposes of obtaining the requisite approval of the Proposal.
REQUIRED VOTE. Approval of the Proposal requires the affirmative vote of a
"majority of the outstanding voting securities" of the Fund. The term "majority
of the outstanding voting securities" means the vote of (a) 67% or more of the
voting securities of the Fund present at such meeting, if the holders of more
than 50% of the outstanding voting securities of such Fund are present or
represented by proxy; or (b) more than 50% of the outstanding voting securities
of the Fund, whichever is less.
-5-
<PAGE>
OTHER SHAREHOLDER INFORMATION. As of the Record Date, the name, address and
share ownership of each person who may have possessed sole or shared voting or
investment power with respect to more than 5% of the outstanding shares of the
Fund's respective share series were as follows:
<TABLE>
<CAPTION>
SERIES AND AMOUNT PERCENTAGE
OF OF SERIES PERCENTAGE OF FUND
NAME AND ADDRESS SHARES OWNED OWNED SHARES OWNED
---------------- ------------ ----- ------------
<S> <C> <C> <C>
</TABLE>
For purposes of the 1940 Act, any person who owns directly or through one
or more controlled companies more than 25% of the voting securities of a company
is presumed to "control" such company. Accordingly, to the extent that a
shareholder is identified above as the beneficial holder of more than 25% of the
outstanding shares of the Fund, or is identified as the holder of record of more
than 25% of the outstanding shares of the Fund and has voting and/or investment
power, such shareholder may be presumed to control the Fund.
The Company has been advised by Firstar Bank, N.A. that with respect to the
shares of the Fund over which Firstar Bank, N.A. and its affiliates have voting
power, such shares may be voted by Firstar Bank, N.A. itself in its capacity as
fiduciary.
ADDITIONAL INFORMATION
BENEFICIAL OWNERSHIP BY DIRECTORS. The following table sets forth certain
information as of the Record Date about the beneficial ownership of shares by
directors of the Company:
<TABLE>
<CAPTION>
NAME OF AMOUNT
FUND/CLASS BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP PERCENT OF CLASS
---------- ---------------- ----------------------- ----------------
<S> <C> <C> <C>
</TABLE>
-6-
<PAGE>
CLAY FINLAY. Clay Finlay, a New York corporation, is registered as an
investment adviser under the Investment Advisers Act of 1940 and maintains its
principal offices at 200 Park Avenue, 56/th/ Floor, New York, New York 10066. As
mentioned above, Clay Finlay is a wholly owned subsidiary of United Asset
Management Corporation ("UAM"), a financial services holding company with
principal executive offices at One International Place, Boston, Massachusetts
02110. Clay Finlay has been engaged in the business of providing investment
advisory services since 1982. It is expected that prior to the date of the
Special Meeting UAM will be acquired by Old Mutual plc ("Old Mutual"), a London
based financial services group with a substantial life insurance business in
South Africa and an integrated, international portfolio of activities in asset
management, banking and general insurance. Following the acquisition, UAM will
be a wholly owned subsidiary, and Clay Finlay will be an indirect subsidiary, of
Old Mutual. Old Mutual's corporate headquarters is located at 3/rd/ Floor,
Lansdowne House, 57 Berkeley Square, London W1X 5DH.
Set forth below are the names and principal occupations of the directors
and the principal executive officer of Clay Finlay:
<TABLE>
<CAPTION>
POSITION WITH
NAME CLAY FINLAY OCCUPATION
---- ----------- ----------
<S> <C> <C>
D. Francis Finlay President President, Chief Executive
Chief Executive Officer Officer and Co-Chairman of
Co-Chairman of the Board Clay Finlay
D. Arthur Barton Director Principal and Chief
Administration Officer of Clay
Finlay
John P. Clay Principal Co-Chairman of Clay Finlay
Co-Chairman of the Board
Frances R. E. Dakers Director Principal and Senior Portfolio
Manager of Clay Finlay
Gregory M. Jones Director Principal and Senior Portfolio
Manager of Clay Finlay
Susan B. Kenncally Director Principal and Senior Portfolio
Manager of Clay Finlay
Peter G R Lyon Director Principal of Clay Finlay
Virginia Maisonneuvc Director Principal and Senior Portfolio
Manager of Clay Finlay
</TABLE>
-7-
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH
NAME CLAY FINLAY OCCUPATION
---- ----------- ----------
<S> <C> <C>
Robert C. Schletter Director Principal and Senior Portfolio
Manager of Clay Finlay
</TABLE>
The address for each of the persons listed above is c/o Clay Finlay, Inc.,
200 Park Avenue, 56/th/ Floor, New York, New York 10066.
Clay Finlay serves as investment adviser to the following U.S. registered
investment company portfolios, which have similar investment objectives to the
Fund. The portfolios, the approximate net assets and the annual advisory fees
payable by the portfolios to Clay Finlay are as follows:
APPROXIMATE NET ASSETS ANNUAL ADVISORY
FUND NAME (AS OF APRIL 30, 2000) FEE PAYABLE
--------- ---------------------- -----------
Mercantile International $130,282,084 $0-$50 million 0.75%
Equity Portfolio Next-$50 million 0.50%
Over $100 million 0.25%
INVESTMENT ADVISER. 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, 8/th/ Floor, Milwaukee, Wisconsin 53202 had $33 billion in
assets under management as of June 30, 2000.
DISTRIBUTOR AND ADMINISTRATOR. Quasar Distributors, LLC, with principal
offices at 615 East Michigan Street, Milwaukee, Wisconsin 53202, serves as the
distributor of the Company's shares. Firstar Mutual Fund Services, LLC, with
principal offices at 615 East Michigan Street, Milwaukee, Wisconsin 53202 serves
as the administrator of the Company.
PRINCIPAL OFFICE. The principal office of the Company is 615 East Michigan
Street, Milwaukee, Wisconsin 53202.
SHAREHOLDER MEETINGS. The Company's Board of Directors has adopted a By-Law
in accordance with the Wisconsin Business Corporation Law that requires the
Company to hold an annual shareholder meeting for the election of directors and
other business only in a year in which certain specified items are required to
be acted upon by shareholders under the 1940 Act. Under certain circumstances,
however, shareholders have the right to call a meeting of shareholders to
consider the removal of one or more directors or other business. To the extent
required by law, the Company will assist in shareholder communications in such
matters. Shareholders wishing to submit proposals for inclusion in the proxy
statement for a subsequent shareholders meeting should send their written
proposals to the Company at its principal office.
-8-
<PAGE>
OTHER MATTERS. No business other than the Proposal described above is
expected to come before the Special Meeting, but should any other matter
requiring a vote of shareholders arise, including any question as to an
adjournment of the Special Meeting, the persons named in the enclosed proxy will
vote thereon according to their best judgment in the interests of the Company.
DATED: SEPTEMBER 22, 2000
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE SPECIAL MEETING AND WHO WISH
TO HAVE THEIR SHARES VOTED ARE REQUESTED TO DATE AND SIGN THE ENCLOSED PROXY
CARD AND RETURN IT IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN
THE UNITED STATES.
THE COMPANY WILL FURNISH, WITHOUT CHARGE, COPIES OF THE FUND'S ANNUAL REPORT TO
SHAREHOLDERS DATED OCTOBER 31, 1999 AND SEMI-ANNUAL REPORT TO SHAREHOLDERS DATED
APRIL 30, 2000 (TOGETHER, "SHAREHOLDER REPORTS") TO ANY SHAREHOLDER UPON
REQUEST. THE SHAREHOLDER REPORTS MAY BE OBTAINED FROM THE COMPANY BY WRITING TO
THE COMPANY AT 615 EAST MICHIGAN STREET, MILWAUKEE, WISCONSIN 53202 OR BY
CALLING (800) 677-FUND OR (414) 287-3808. SHAREHOLDER REPORTS ARE NOT TO BE
REGARDED AS PROXY SOLICITING MATERIAL.
-9-
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EXHIBIT A
INVESTMENT SUB-ADVISORY AGREEMENT
THIS AGREEMENT, made this ____ day of _______, 2000, is by and among
Firstar Investment Research & Management Company, LLC, a Wisconsin corporation
registered as an investment adviser under the Investment Advisers Act of 1940,
as amended (the "Advisers Act") (the "Adviser"), Clay Finlay, Inc., a New York
corporation registered as an investment adviser under the Advisers Act (the
"Sub-Adviser"), and Firstar Funds, Inc. (the "Company"), an open-end diversified
management investment company of the series type. registered under the
Investment Company Act of 1940, as amended (the "1940 Act").
WHEREAS, the Adviser is the investment adviser to the Firstar Clay Finlay
International Equity Fund (the "Fund") of the Company, and the Adviser desires
to retain the Sub-Adviser to furnish it with portfolio selection and related
research and statistical services in connection with the Adviser's investment
advisory activities on behalf of the Fund, and the Sub-Adviser desires to
furnish such services to the Adviser;
NOW, THEREFORE, in consideration of the premises and the terms and
conditions hereinafter set forth, it is agreed as follows:
1. Appointment of Sub-Adviser
In accordance with and subject to the investment advisory agreement (the
"Investment Advisory Agreement") between the Company and the Adviser, the
Adviser hereby appoints the Sub-Adviser to perform portfolio selection and
related research and statistical services described herein for investment and
reinvestment of the Fund's investment assets, subject to the control and
direction of the Company's Board of Directors, for the period and on the terms
hereinafter set forth. The Sub-Adviser accepts such appointment and agrees to
furnish the services hereinafter set forth for the compensation herein provided.
The Sub-Adviser shall for all purposes herein be deemed to be an independent
contractor and shall, except as expressly provided or authorized. have no
authority to act for or represent the Company or the Adviser in any way or
otherwise be deemed an agent of the Company or the Adviser.
2. Obligations of and Services to be Provided by the Sub-Adviser
(a) The Sub-Adviser shall provide the following services and
assume the following obligations with respect to the Fund:
(i) The investment of the assets of the Fund shall at all times
be subject to the applicable provisions of the articles of incorporation, the
by-laws, the registration statement, the effective prospectus and the statement
of additional information of the Company relating to the Fund (the "Fund
Documents") and shall conform to the investment objectives, policies and
restrictions of the Fund as set forth in such documents and as interpreted from
time
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to time by the Board of Directors of the Company and by the Adviser. Copies of
the Fund Documents have been or will be submitted to the Sub-Adviser. The
Company agrees to provide copies of all amendments to or restatements of the
Fund Documents to the Sub-Adviser on a timely and on-going basis but in all
events prior to such time as said amendments or restatements become effective.
The Sub-Adviser will be entitled to rely on all such documents furnished to it
by the Company, the Fund, or the Adviser. Within the framework of the investment
objectives, policies and restrictions of the Fund, and subject to the
supervision of the Adviser, the Sub-Adviser shall have responsibility for making
and executing investment decisions for the Fund.
(ii) In carrying out its obligations to manage the investments
and reinvestments of the assets of the Fund, the Sub-Adviser shall: (1) obtain
and evaluate pertinent economic, statistical, financial and other information
affecting the economy generally and individual companies or industries, the
securities of which are included in the Fund's investment portfolio or are under
consideration for inclusion therein; (2) under the supervision of the Adviser,
formulate and implement a continuous investment program for the Fund consistent
with the investment objective and related investment policies for the Fund as
set forth in the Fund Documents, as amended; and (3) take such steps as are
necessary to implement the aforementioned investment program by purchase and
sale of securities including the placing, or directing the placement through an
affiliate of the Sub-Adviser in accordance with applicable regulatory
requirements, of orders for such purchases and sales.
(iii) In connection with the purchase and sale of securities of
the Fund, the Sub-Adviser shall arrange for the transmission to the Custodian
for the Fund and, as directed by the Adviser, any other persons retained by the
Fund on a daily basis such confirmations, trade tickets and other documents as
may be necessary to enable them to perform their administrative responsibilities
with respect to the Fund's investment portfolio. The Sub-Adviser shall render
such reports to the Adviser and/or to the Company's Board of Directors
concerning the investment activity and portfolio composition of the Fund in such
form and at such intervals as the Adviser or the Board may, from time to time
require.
(iv) The Sub-Adviser shall, in the name of the Fund, place or
direct the placement of orders for the execution of portfolio transactions in
accordance with the policies of the Fund, as set forth in the Fund Documents, as
amended from time to time, and under the Securities Act of 1933, as amended (the
"1933 Act"), and the 1940 Act. In connection with the placement of orders for
the execution of the Fund's portfolio transactions, the Sub-Adviser shall create
and maintain all necessary brokerage records of the Fund in accordance with all
applicable laws, rules and regulations, including but not limited to, records
required by Section 31(a) of the 1940 Act. All records shall be the property of
the Company and shall be available for inspection and use by the Securities and
Exchange Commission ("SEC"), the Company, the Adviser, or any other person
retained by the Company. The Sub-Adviser agrees to surrender promptly to the
Company any of such records upon the Company's request. Where applicable, such
records shall be maintained by the Sub-Adviser for the period and in the place
required by the 1940 Act. The Sub-Adviser shall, in the name of the Fund, vote
all proxies solicited by or with respect to the issuers of securities in which
the Fund may be invested from time to time.
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(v) In placing orders or directing the placement of orders for
the execution of portfolio transactions, the Sub-Adviser shall select brokers
and dealers for the execution of the Fund's transactions. In selecting brokers
or dealers to execute such orders, the Sub-Adviser will use its best efforts to
seek on behalf of the Fund the best overall terms available. In assessing the
best overall terms available for any transaction, the Sub-Adviser shall consider
all factors that it deems relevant, including the breadth of the market in the
security, the price of the security, the financial condition and execution
capability of the broker or dealer, and the reasonableness of the commission, if
any, both for the specific transaction and on a continuing basis. In evaluating
the best overall terms available, and in selecting the broker-dealer to execute
a particular transaction, the Sub-Adviser is expressly authorized to consider
the fact that a broker or dealer has furnished statistical, research or other
information or services which enhance the Sub-Adviser's investment research and
portfolio management capability generally. Subject to the initial approval of
the Sub-Adviser's soft dollar policy by the Company's Board of Directors and
further subject to the review of the Company's Board of Directors from time to
time with respect to the extent and continuation of such policy, the Sub-Adviser
may, in accordance with Section 28(e) of the Securities Exchange Act of 1934, as
amended, negotiate with and assign to a broker a commission which may exceed the
commission which another broker would have charged for effecting the transaction
if the Sub-Adviser determines in good faith that the amount of commission
charged was reasonable in relation to the value of brokerage and/or research
services (as defined in Section 28(e)) provided by such broker viewed in terms
either of the Fund or the Sub-Adviser's overall responsibilities to the Sub-
Adviser's discretionary accounts. In addition, the Sub-Adviser is authorized to
take into account the sale of shares of the Company in allocating purchase and
sale orders for portfolio securities to brokers or dealers (including brokers
and dealers that are affiliated with the Adviser, Sub-Adviser or the Company's
principal underwriter), provided that the Sub-Adviser believes that the quality
of the transaction and the commission are comparable to what they would be with
other qualified firms. In no instance, however, will portfolio securities be
purchased from or sold to the Sub-Adviser, the Adviser, the Company's principal
underwriter, or any affiliated person of either the Company, the Adviser, Sub-
Adviser or the principal underwriter, acting as principal in the transaction,
except to the extent permitted by the SEC through rules, regulations, decisions
and no-action letters.
(b) The Sub-Adviser shall use the same skill and care in
providing services to the Fund as it uses in providing services to fiduciary
accounts for which it has investment responsibility. The Sub-Adviser will
conform with all applicable federal and state laws, rules and regulations.
3. Expenses
The Sub-Adviser will bear all expenses in connection with the performance
of its services under this Agreement, which expenses shall not include brokerage
fees or commissions in connection with the effectuation of securities
transactions for the Fund. The Fund (or the Adviser) will bear certain other
expenses to be incurred in the Fund's operation, including but not limited to:
organizational expenses, taxes, interest. brokerage fees and commissions, if
any; SEC fees and state blue sky qualification fees; expenses of custodians,
transfer and dividend
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disbursing agents and the Fund's co-administrators; insurance premiums; outside
auditing and legal expenses; costs of maintenance of the Fund's existence; costs
attributable to investor services, including without limitation, telephone and
personnel expenses; costs of preparing and printing prospectuses and statements
of additional information for regulatory purposes and for distribution to
existing shareholders; costs of shareholders' reports and meetings of the
shareholders of the Fund and of the officers or Board of Directors of the Fund;
and any extraordinary expenses.
4. Compensation
In payment for the investment sub-advisory services to be rendered by the
Sub-Adviser in respect of the Fund hereunder, the Adviser shall pay to the Sub-
Adviser as full compensation for all services hereunder a fee computed at an
annual rate which shall be a percentage of the average net assets of the Fund.
The fee shall be accrued daily and shall be based on the net asset values of all
of the issued and outstanding shares of the Fund as determined as of the close
of each business day pursuant to the Fund Documents. The fee shall be payable
in arrears during the following calendar month.
The amount of such annual fee, as applied to the average daily value of the
net assets of the Fund shall be as described in the schedule below:
Assets Fee
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On the first $50 million in assets 0.75%
On net assets in excess of $50 million 0.50%
but less than $100 million
On net assets in excess of $100 million 0.25%
5. Effective Date, Renewal and Termination
This Agreement shall become effective as of the date first above written and,
unless otherwise terminated, shall continue until February 28, 2002 and from
year to year thereafter so long as approved annually in accordance with the 1940
Act and the rules thereunder. This Agreement may be terminated without penalty
on sixty (60) days' written notice to the Sub-Adviser (i) by the Adviser, (ii)
by vote of the Board of Directors of the Company, or (iii) by vote of a majority
of the outstanding voting securities of the Fund; or it may be terminated
without penalty on sixty (60) days' written notice to the Adviser by the Sub-
Adviser. This Agreement will terminate automatically in the event of its
assignment or upon any termination of the Investment Advisory Agreement. The
terms "assignment" and "vote of majority of the outstanding voting securities"
shall have the meanings set forth in the 1940 Act.
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6. Representations of the Company, Adviser and the Sub-Adviser
The Company and Fund represent that (i) a copy of the Company's Articles of
Incorporation, dated February 15, 1988, together with all amendments thereto, is
on file in the office of the Wisconsin Department of Financial Institutions,
(ii) the appointment of the Adviser has been duly authorized, (iii) the
appointment of the Sub-Adviser has been duly authorized, and (iv) they have
acted and will continue to act in conformity with the 1940 Act, and other
applicable laws.
The Adviser represents that (i) it is authorized to perform the services
herein, (ii) the appointment of the Sub-Adviser has been duly authorized, and
(iii) it will act in conformity with the 1940 Act, and other applicable laws.
The Sub-Adviser represents that it is authorized to perform the services
described herein.
7. Materials
Neither the Adviser, the Company, or the Fund shall publish or distribute
any information including but not limited to, registration statements,
advertising or promotional material regarding the provision of investment
advisory services by the Sub-Adviser pursuant to this Agreement, without the
prior written consent of the Sub-Adviser, which consent shall not be
unreasonably withheld or delayed. If the Sub-Adviser has not notified the
Adviser of its disapproval of sample materials within five (5) days after its
receipt thereof, such materials shall be deemed approved. Materials
substantially similar to materials approved on an earlier occasion, with the
exception of any regulatory filings, shall also be deemed approved.
Notwithstanding the foregoing, the Adviser may distribute information regarding
the provision of investment advisory services by the Sub-Adviser to the
Company's Board of Directors ("Board Materials") without the prior written
consent of the Sub-Adviser. The Adviser shall provide copies of the Board
Materials to the Sub-Adviser within a reasonable time following distribution to
the Company's Board of Directors.
The Sub-Adviser shall not publish or distribute any information including
but not limited to, registration statements, advertising or promotional material
regarding the provision of investment advisory services by the Sub-Adviser
pursuant to this Agreement, without the prior written consent of the Adviser and
the Company, which consent shall not be unreasonably withheld or delayed. If
the Adviser or Company has not notified the Sub-Adviser of its disapproval of
sample materials within five (5) days after its receipt thereof, such materials
shall be deemed approved. Materials substantially similar to materials approved
on an earlier occasion, with the exception of any regulatory filings, shall also
be deemed approved.
8. General Provisions
(a) The Sub-Adviser may rely on information reasonably believed
by it to be accurate and reliable. Except as may otherwise be provided by the
1940 Act, neither the Sub-Adviser nor its officers, directors, employees or
agents shall be subject to any liability for
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any error of judgment or mistake of law or for any loss arising out of any
investment or other act or omission in the performance by the Sub-Adviser of its
duties under this Agreement or for any loss or damage resulting from the
imposition by any government or exchange control restrictions which might affect
the liquidity of the Fund's assets, or from acts or omissions of custodians or
securities depositories or from any war or political act of any foreign
government to which such assets might be exposed, provided that nothing herein
shall be deemed to protect or purport to protect, the Sub-Adviser against any
liability to the Adviser or the Company or to its shareholders to which the Sub-
Adviser would otherwise be subject by reason of willful misfeasance, bad faith
or gross negligence in the performance of its duties hereunder, or by reason of
the Sub-Adviser's reckless disregard of its obligations and duties hereunder or
a breach of its fiduciary duty.
(b) The Adviser and the Fund understand that the Sub-Adviser now
acts, will continue to act, or may act in the future, as investment adviser or
investment sub-adviser to fiduciary and other managed accounts, including other
investment companies and the Adviser and the Fund have no objection to the Sub-
Adviser so acting, provided that the Sub-Adviser duly performs all obligations
under this Agreement. The Adviser and the Fund also understand that the Sub-
Adviser may give advice and take action with respect to any of its other clients
or for its own account which may differ from the timing or nature of action
taken by the Sub-Adviser. with respect to the Fund. Nothing in this Agreement
shall impose upon the Sub-Adviser any obligation to purchase or sell or to
recommend for purchase or sale, with respect to the Fund, any security which the
Sub-Adviser or its shareholders, directors, officers, employees or affiliates
may purchase or sell for its or their own account(s) or for the account of any
other client.
(c) Except to the extent necessary to perform its obligations
hereunder, nothing herein shall be deemed to limit or restrict the right of the
Sub-Adviser, or the right of any of its officers. directors or employees who may
also be an officer, director or employee of the Company, or person other-wise
affiliated with the Company (within the meaning of the 1940 Act) to engage in
any other business or to devote time and attention to the management or other
aspects of any other business, whether of a similar or dissimilar nature or to
render services of any kind to any other trust corporation, firm, individual or
association.
(d) Each party agrees to perform such further acts and execute such
further documents as are necessary to effectuate the purposes hereof. This
Agreement shall be construed and enforced in accordance with and governed by the
laws of the State of Wisconsin. The captions in this Agreement are included for
convenience only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
(e) Any notice under this Agreement shall be in writing, addressed
and delivered or mailed postage pre-paid to the appropriate party at the
following address: The Adviser, the Company and the Fund at 777 East Wisconsin
Avenue, Suite 800, Milwaukee, Wisconsin 53202, Attention: Compliance Office, and
the Sub-Adviser at 200 Park Avenue, New York, NY 10166, Attention: General
Counsel.
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(f) Sub-Adviser agrees to notify Adviser of any change in Sub-
Adviser's senior officers, portfolio managers, and directors within a reasonable
time after such change. Sub-Adviser further agrees to provide Adviser with any
amendments to Parts I and II of its ADV within a reasonable time after such
amendments and notify Adviser of any regulatory, civil or criminal proceedings,
actions or complaints involving the Sub-Adviser or its affiliates within a
reasonable time.
(g) This Agreement may be amended in accordance with the 1940 Act.
(h) This Agreement constitutes the entire agreement among the parties
hereto.
(i) This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but such counterparts shall
together, constitute only one instrument.
IN WITNESS WHEREOF, the parties have duly executed this Agreement on the
date first above written.
CLAY FINLAY, INC.
200 Park Avenue
New York, NY 10166
By:____________________________________
__________, 2000
FIRSTAR INVESTMENT RESEARCH &
MANAGEMENT COMPANY, LLC
By:____________________________________
Name:
Title:
FIRSTAR FUNDS, INC.
By:____________________________________
Name:
Title:
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VOTE THIS PROXY CARD TODAY
FIRSTAR FUNDS, INC.
615 EAST MICHIGAN STREET
P.O. BOX 3011
MILWAUKEE, WISCONSIN 53201-3011
CORE INTERNATIONAL EQUITY FUND SPECIAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF FIRSTAR FUNDS, INC. (THE
"COMPANY") FOR USE AT A SPECIAL MEETING OF SHAREHOLDERS OF THE ABOVE-REFERENCED
FUND OF THE COMPANY TO BE HELD ON NOVEMBER 8, 2000 AT 11:00 A.M. (EASTERN TIME)
AT THE OFFICES OF THE COMPANY'S LEGAL COUNSEL, DRINKER BIDDLE & REATH LLP, ONE
LOGAN SQUARE, 18TH AND CHERRY STREETS, PHILADELPHIA, PENNSYLVANIA 19103.
The undersigned hereby appoints W. Bruce McConnel III, Joan Ohlbaum Swirsky,
Kathryn R. Williams, Laura Rauman, Jeffrey Squires and Doug Hess and each of
them, with full power of substitution, as proxies of the undersigned to vote at
the above-referenced Special Meeting of Shareholders, and at all adjournments
thereof, all shares of common stock of the Fund held of record by the
undersigned on the record date for the Special Meeting, upon the following
matters, and at their discretion upon any other matter which may properly come
before the Special Meeting.
THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE ACTION TO BE
TAKEN ON THE FOLLOWING PROPOSAL. IN THE ABSENCE OF ANY SPECIFICATION, THIS
PROXY WILL BE VOTED "FOR" THE PROPOSAL.
FOR AGAINST ABSTAIN
1. To approve a new Investment Sub-Advisory Agreement [_] [_] [_]
on behalf of the Fund among the Company, Firstar
Investment Research & Management Company, LLC and
Clay Finlay, Inc.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS OF THE COMPANY AND THE PROXY STATEMENT DATED SEPTEMBER 22, 2000.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD
PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
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Signature(s), (Title(s), if applicable)
Please sign above exactly as name(s) appear(s)
hereon. Corporate or partnership proxies should be
signed in full corporate or partnership name by an
authorized officer. Each joint owner should sign
personally. When signing as a fiduciary, please
give full title as such.
DATE:____________________, 2000
