(LOGO) AQUINAS FUNDS
Prospectus
APRIL 30, 1999
The funds follow a policy of socially responsible investing. Before investing
the funds' investment adviser screens issuers for policies on issues including
abortion, contraceptives, weapons of mass destruction, human rights, economic
priorities, environmental responsibility, fair employment practices and tobacco.
The funds may invest in a company whose policies on these issues do not satisfy
the adviser's criteria. In such event, the funds will attempt to change the
company's policies or activities. If the funds are unable to engage in positive
dialogue, or are unable to make reasonable progress toward their goals with
respect to these issues, they will exclude the company from their portfolios.
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed on the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
An investment in the funds is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
<PAGE>
Table of Contents
The Funds
Aquinas Equity Funds............................................ 1
Aquinas Fixed Income Fund....................................... 5
Aquinas Balanced Fund........................................... 9
Other Investment Practices and Risks
Portfolio Structure............................................ 13
Investment Objectives.......................................... 13
Year 2000...................................................... 13
Portfolio Turnover............................................. 13
Management
Investment Adviser............................................. 14
The Adviser.................................................... 14
Portfolio Managers............................................. 15
Your Investment
Determining Share Price........................................ 17
How to Open an Account......................................... 17
Buying Shares.................................................. 19
Opening an Account........................................... 19
Adding to an Account......................................... 20
Other Purchase Policies...................................... 21
Exchanging Shares.............................................. 21
How it Works................................................. 22
Other Exchange Policies...................................... 22
Selling Shares................................................. 23
Other Redemption Policies...................................... 24
Other Investment Policies...................................... 25
Dividends and Distributions.................................... 25
Taxes.......................................................... 25
Shareholder Reports............................................ 26
Financial Highlights........................................... 26
For More Information.............................................. 32
Purchase Application.............................................. 33
<PAGE>
The Funds
Aquinas Equity Funds
INVESTMENT OBJECTIVES
- - The Equity Income Fund seeks long-term capital growth and a high level of
current dividend income.
- - The Equity Growth Fund seeks long-term capital growth.
PRINCIPAL INVESTMENT STRATEGIES
Equity Income Fund
The Equity Income Fund invests primarily in dividend-paying common stocks. The
portfolio managers focus on stocks with low price/earnings ratios that they
consider to be undervalued. The fund mainly invests in companies with market
capitalizations exceeding $2 billion, but may purchase stocks of companies of
all sizes.
Equity Growth Fund
The Equity Growth Fund invests primarily in common stocks of companies the
portfolio managers believe offer above-average potential for growth in revenues,
profits or cash flow. Dividend and interest income are not important
considerations in investment selection. This fund may invest in companies of all
sizes.
In selecting investments, the portfolio managers rely primarily on fundamental
analysis, reviewing the issuing company's financial statements, the fundamentals
of other companies in the same industry, market trends and economic conditions.
Equity Income Fund and Equity Growth Fund
The funds practice socially responsible investing. The fund's investment adviser
monitors all issuers the portfolio managers select for policies on issues such
as abortion, contraceptives, weapons of mass destruction, human rights, economic
priorities, environmental responsibility, fair employment practices, and
tobacco. If a fund invests in a company whose policies don't meet the adviser's
criteria, the fund will attempt to change the company's policies. If the funds
are unable to engage in positive dialogue, or are unable to make reasonable
progress toward their goals with respect to these issues, the portfolio managers
will sell the security.
The funds generally intend to stay fully invested and are not market timers.
However, they may invest without limit in high-quality money market instruments
for temporary defensive purposes. Under these circumstances, the funds won't be
able to achieve their investment objective of long-term capital appreciation,
since money market instruments don't appreciate in value and the funds may not
participate in stock market advances or declines as they would if more fully
invested in common stocks.
- --------------------------------------------------------------------------------
The significance of P/E ratio
THE PRICE/EARNINGS RATIO SHOWS HOW THE PRICE OF A COMPANY'S STOCK RELATES TO ITS
EARNINGS AND MAY HELP INDICATE WHETHER THE STOCK IS OVER- OR UNDER-VALUED. TO
CALCULATE A COMPANY'S P/E RATIO, DIVIDE THE PRICE PER SHARE BY EARNINGS PER
SHARE.
FOR EXAMPLE, A COMPANY WHOSE STOCK IS SELLING AT $60 PER SHARE AND HAD EARNINGS
OF $4 PER SHARE HAS A P/E RATIO OF 15. IF THIS COMPANY'S P/E RATIO IS LOWER THAN
THAT OF A SIMILAR COMPANY, ITS STOCK MIGHT BE UNDERVALUED. IF ITS P/E RATIO IS
HIGHER, ITS STOCK MIGHT BE OVERVALUED. THE PORTFOLIO MANAGERS CONSIDER THE P/E
RATIO ALONG WITH MANY OTHER FACTORS BEFORE DECIDING TO INVEST.
BECAUSE P/E RATIO IS BASED ON PAST EARNINGS AND PROJECTED EARNINGS, TWO
COMPANIES WITH THE SAME RATIO MAY END UP WITH VERY DIFFERENT PERFORMANCE.
- --------------------------------------------------------------------------------
Aquinas Funds 1 Prospectus
<PAGE>
PRINCIPAL RISKS OF INVESTING
GENERAL MARKET RISKS. Factors affecting the securities markets include domestic
and foreign economic growth or decline, interest rate levels and political
events. There is a risk the portfolio managers won't accurately predict the
impact of these and other factors, in which case the securities the funds
purchase might decline in value. This means you could lose money investing in
the funds. You should consider your own investment goals, investment horizon and
risk tolerance before investing.
COMMON STOCKS. Both funds invest primarily in common stocks, whose risks
include:
- - a company not performing as anticipated. Factors affecting a company's
performance can include the strength of its management and the demand for its
products or services. Negative performance may affect the earnings growth the
portfolio managers anticipated when selecting the stock.
- - instability in the stock market. The market generally moves in cycles, with
stock prices rising and falling. The value of the funds' investments may
increase or decrease more than the stock market in general.
SOCIALLY RESPONSIBLE INVESTING. Because the adviser and the portfolio managers
consider other factors in addition to traditional investment criteria when
selecting portfolio securities, they may forego a profitable investment
opportunity or sell a security when it may be disadvantageous to do so.
VALUE INVESTING. The Equity Income Fund is primarily value oriented. There is a
risk that the portfolio managers are wrong in their assessment of a company's
value and the stocks do not reach what the portfolio managers believe are their
full values. There is also a risk that the fund may not perform as well as other
types of mutual funds when its investing style is out-of-favor with other
investors.
GROWTH INVESTING. The Equity Growth Fund is growth oriented. There is a risk
that the portfolio managers are wrong in their assessment of a company's
potential for growth and the stocks do not grow as the portfolio managers
anticipate. There is also a risk that the fund may not perform as well as other
types of mutual funds when its investing style is out-of-favor with other
investors.
Aquinas Funds 2 Prospectus
<PAGE>
BAR CHART AND PERFORMANCE TABLE
The bar chart and table below give some indication of the risks of investing in
the Equity Income Fund and the Equity Growth Fund by showing how each fund's
performance changes from year to year and how the funds' average annual returns
for one and five years compare to those of a broad measure of market
performance. Please keep in mind that the funds' past performance does not
necessarily indicate how the funds will perform in the future.
Bar Chart
The bar chart below shows each fund's total returns for the past five calendar
years (since inception).
EQUITY EQUITY
INCOME FUND GROWTH FUND
----------- -----------
1994 -2.93% -6.78%
1995 35.62% 30.29%
1996 20.43% 22.90%
1997 27.85% 28.97%
1998 5.50% 21.95%
During the period reflected in the bar chart, the Equity Income Fund's highest
quarterly return was 14.19% (for the quarter ended December 31, 1998) and its
lowest quarterly return was -12.02% (for the quarter ended September 30, 1998).
The Equity Growth Fund's highest quarterly return was 23.17% (for the quarter
ended December 31, 1998) and its lowest quarterly return was -15.04% (for the
quarter ended September 30, 1998).
Performance Table
The table below compares each fund's average annual total returns for one and
five calendar year periods ended December 31, 1998 to those of the Standard &
Poor's 500/R Composite Stock Index.
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended December 31, 1998
1 YEAR RETURN 5 YEAR RETURN<F1>
- ----------------------------------------------------------------------------
Equity Income Fund 5.50% 16.42%
- ----------------------------------------------------------------------------
Equity Growth Fund 21.95% 18.61%
- ----------------------------------------------------------------------------
S&P 500/R 28.58% 24.06%
- ----------------------------------------------------------------------------
The S&P 500/R Composite Stock Index is an unmanaged index of 500 selected common
stocks, most of which are listed on the New York Stock Exchange. The Index is
heavily weighted toward stocks with large market capitalizations and represents
approximately two-thirds of the total market value of all domestic common
stocks.
<F1> This is also each fund's return since inception on January 3, 1994.
Aquinas Funds 3 Prospectus
<PAGE>
FEES AND EXPENSES
This table describes the fees and expenses you may pay if you buy and hold
shares of the Equity Income Fund or the Equity Growth Fund.
Shareholder Fees
(fees paid directly from your investment)
There are no shareholder fees for the purchase, redemption or exchange of
shares.
Annual Fund Operating Expenses
(expenses deducted from fund assets)
EQUITY EQUITY
INCOME FUND GROWTH FUND
- ----------------------------------------------------------------------------
Management fees 1.00% 1.00%
- ----------------------------------------------------------------------------
Distribution (12b-1) and/or service fees None None
- ----------------------------------------------------------------------------
Other expenses 0.36% 0.42%
- ----------------------------------------------------------------------------
Total annual fund operating expenses 1.36% 1.42%
- ----------------------------------------------------------------------------
Example
This example is intended to help you compare the cost of investing in the Equity
Income Fund and the Equity Growth Fund with the cost of investing in other
mutual funds. It assumes that:
- - you invest $10,000 for the time indicated and then redeem all your shares at
the end of that period;
- - your investment has a 5% return each year;
- - each fund's operating expenses remain the same; and
- - you reinvest all dividends and distributions.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------------
Equity Income Fund $139 $435 $753 $1,653
- ----------------------------------------------------------------------------
Equity Growth Fund $146 $454 $785 $1,721
- ----------------------------------------------------------------------------
This expense example is for comparison purposes only. It does not represent the
funds' actual expenses or returns, past or future. Actual expenses or returns
may be higher or lower than those shown.
Aquinas Funds 4 Prospectus
<PAGE>
Aquinas Fixed Income Fund
INVESTMENT OBJECTIVE
The Fixed Income Fund seeks a high level of current income with reasonable
opportunity for capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
The Fixed Income Fund invests primarily in investment-grade debt securities of
domestic and foreign issuers, including corporations and government agencies, as
well as mortgage-backed and asset-backed securities. The fund may also invest in
unrated debt securities the portfolio managers determine are of comparable
quality. In selecting securities, the portfolio managers focus on the issuer's
credit strength as well as the security's effective duration and yield.
Effective duration is a measure of a debt security's price sensitivity to
interest rate changes. Effective duration takes into account a debt security's
cash flows over time including the possibility that a debt security might be
prepaid by the issuer or redeemed by the holder prior to its stated maturity
date. In contrast, maturity measures only the time until final payment is due.
The fund also looks for securities that appear comparatively undervalued. For
example, the fund would consider a security having a yield that is higher than
another security of similar credit quality and duration to be comparatively
undervalued.
The fund will invest at least a majority of its assets in securities rated at
least A (or an equivalent rating) at the time of purchase by a nationally
recognized rating agency, or unrated securities of comparable quality, and in
securities issued by the U.S. government, its agencies or its instrumentalities.
The fund will invest no more than 25% of its assets in securities whose highest
rating, at the time of purchase, is BBB (or an equivalent rating).
"Investment grade" securities are government securities and corporate bonds,
debentures or notes rated at least BBB (or an equivalent rating), or unrated
securities the portfolio managers consider to be of comparable quality. The fund
may retain up to 5% of its assets in securities whose ratings fall below
investment grade.
Unlike funds investing solely for income, the Fixed Income Fund also seeks
modest capital appreciation and growth of investment income. The fund may
purchase securities that are convertible into common stock or carry warrants or
common stock purchase rights when the portfolio managers believe they offer
higher return potential than nonconvertible securities. The fund may also seek
capital appreciation by investing in fixed income securities when the portfolio
managers believe interest rates on such investments may decline, thereby
increasing the market value of the fund's fixed income securities. The portfolio
managers may also purchase securities they believe have a high potential for
credit upgrade.
The value of fixed income securities tends to decrease when interest rates rise
and increase when interest rates fall. While securities with shorter maturities
generally offer lower yields, they are less affected by interest rate changes
and generally provide greater price stability than longer-term securities. When
the portfolio managers
- --------------------------------------------------------------------------------
FIXED INCOME SECURITIES MAY BE RATED BY NATIONALLY RECOGNIZED RATING AGENCIES
SUCH AS MOODY'S INVESTORS SERVICE, INC., STANDARD & POOR'S CORPORATION AND DUFF
& PHELPS, INC. EACH AGENCY HAS ITS OWN SYSTEM FOR CLASSIFYING SECURITIES, BUT
EACH TRIES TO INDICATE A COMPANY'S ABILITY TO MAKE TIMELY PAYMENTS OF PRINCIPAL
AND INTEREST.
- --------------------------------------------------------------------------------
Aquinas Funds 5 Prospectus
<PAGE>
expect interest rates to rise, they may purchase fixed income securities with
shorter maturities or invest in money market instruments. When they expect
interest rates to fall, the portfolio managers may invest in longer-term fixed
income securities.
The fund may invest in securities backed by mortgages, credit card receivables,
automobile loans and other assets.
PRINCIPAL RISKS OF INVESTING
General Market Risks
Factors affecting the securities markets include domestic and foreign economic
growth and decline, interest rate levels and political events. There is a risk
the portfolio managers will not accurately predict the impact of these and other
factors, in which case the securities the fund purchases might decline in value.
This means you could lose money investing in the fund. You should consider your
own investment goals, investment horizon and risk tolerance before investing.
Fixed Income Investing
CREDIT RISK. The value of the fund's fixed income securities is affected by the
issuers' continued ability to make interest and principal payments. The fund
could lose money if the issuers cannot meet their financial obligations or their
credit ratings are downgraded.
INTEREST RATE RISK. The value of the fund's securities is also affected by
changes in interest rates. When interest rates rise, the value of the fund's
securities and its share value will decline. A change in interest rates will
also change the amount of income the fund generates.
SECURITIES RATINGS. Securities rated in the lowest of the investment-grade
categories (e.g., Baa or BBB) are considered more speculative than higher-rated
securities. Their issuers may not be as financially strong as those of higher-
rated bonds and may be more likely to not be able to make interest or principal
payments during periods of economic uncertainty or downturn.
MORTGAGE- AND ASSET-BACKED SECURITIES. Mortgage- and asset-backed securities
involve prepayment risk, which is the risk that the underlying mortgages or
other debts may be refinanced or paid off before they mature, particularly
during periods of declining interest rates. This could lower the fund's return
and result in losses to the fund if some securities were acquired at a premium.
Asset-backed securities may also carry a greater default risk than other
securities because of the nature of the collateral. For example, credit card
receivables are generally unsecured and are subject to consumer credit laws that
may permit cardholders to reduce balances due. Holders of automobile receivables
may not have an enforceable security interest in the underlying automobiles. In
times of financial stress, these securities could become harder to value or to
sell.
Aquinas Funds 6 Prospectus
<PAGE>
BAR CHART AND PERFORMANCE TABLE
The bar chart and table below give some indication of the risks of investing in
the Fixed Income Fund by showing how the fund's performance changes from year to
year and how its average annual returns for one and five years compare to those
of a broad measure of market performance. Please keep in mind that past
performance does not necessarily indicate how the fund will perform in the
future.
Bar Chart
The bar chart below shows the fund's total returns for the past five calendar
years (since inception).
FIXED
INCOME FUND
-----------
1994 -3.09%
1995 16.26%
1996 2.83%
1997 8.54%
1998 7.17%
During the period reflected in the bar chart, the fund's highest quarterly
return was 5.53% (for the quarter ended June 30, 1995), and the lowest quarterly
return was -2.25% (for the quarter ended March 31, 1994).
Performance Table
The table below compares the fund's average annual total returns for one and
five calendar year periods ended December 31, 1998 to those of the Lehman
Brothers Government/Corporate Bond Index.
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended December 31, 1998
1 YEAR RETURN 5 YEAR RETURN<F1>
- --------------------------------------------------------------------------------
- -------
Fixed Income Fund 7.17% 6.15%
- ----------------------------------------------------------------------------
Lehman Brothers
Government/Corporate Bond Index 9.47% 7.30%
- ----------------------------------------------------------------------------
The Lehman Brothers Government/Corporate Bond Index includes all public
obligations of the U.S. Treasury, excluding flower bonds and foreign-targeted
issues; all publicly issued debt of U.S. government agencies and quasi-federal
corporations, and corporate debt guaranteed by the U.S. government; and all
publicly issued, fixed rate, nonconvertible, investment grade, dollar-
denominated, SEC-registered corporate debt (including debt issued or guaranteed
by foreign sovereign governments, municipalities, or governmental agencies, or
international agencies).
<F1> This is also the fund's return since inception on January 3, 1994.
Aquinas Funds 7 Prospectus
<PAGE>
FEES AND EXPENSES
This table describes the fees and expenses you may pay if you buy and hold
shares of the Fixed Income Fund.
Shareholder Fees
(fees paid directly from your investment)
There are no shareholder fees for the purchase, redemption or exchange of
shares.
Annual Fund Operating Expenses
(expenses deducted from fund assets)
FIXED INCOME FUND
- ----------------------------------------------------------------------------
Management fees<F1> 0.60%
- ----------------------------------------------------------------------------
Distribution (12b-1) and/or service fees None
- ----------------------------------------------------------------------------
Other expenses 0.43%
- ----------------------------------------------------------------------------
Total annual fund operating expenses 1.03%
- ----------------------------------------------------------------------------
<F1> The expenses listed above don't reflect that the adviser has agreed to
limit the fund's total expenses (excluding interest, taxes, brokerage and
extraordinary expenses) to an annual rate of 1.00% of the fund's average
net assets. This fee waiver is voluntary and may be terminated at any time.
For the fiscal year ended December 31, 1998, the adviser waived a portion
of its management fee for the Fixed Income Fund, so the actual management
fee the fund paid was 0.57% of average net assets, reducing total expenses
from 1.03% to 1.00%.
Example
This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds. It assumes that:
- - you invest $10,000 for the time indicated and then redeem all your shares at
the end of that period;
- - your investment has a 5% return each year;
- - the fund's operating expenses remain the same; and
- - you reinvest all dividends and distributions.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------------
Fixed Income Fund $106 $330 $573 $1,270
- ----------------------------------------------------------------------------
The expense example is for comparison purposes only. It does not represent the
fund's actual expenses or returns, either past or future. Actual expenses or
returns may be higher or lower than those shown.
Aquinas Funds 8 Prospectus
<PAGE>
Aquinas Balanced Fund
INVESTMENT OBJECTIVE
The Balanced Fund seeks long-term capital growth consistent with reasonable risk
to principal. It's designed to provide one vehicle for participating in the
strategies of the Equity Income, Equity Growth and Fixed Income Funds.
PRINCIPAL INVESTMENT STRATEGIES
The Balanced Fund is in effect a combination of each of the other Aquinas Funds.
The adviser allocates the fund's assets among certain of the portfolio managers
of the Equity Income, Equity Growth and Fixed Income Funds. The portfolio
managers manage the assets allocated to them in the same manner as they manage
the assets of those funds. The adviser varies this allocation according to
economic and market conditions.
The fund invests in a diversified portfolio of common stocks of established
companies and investment-grade fixed income securities, including government
securities. The portfolio managers select investments for the Balanced Fund
using the criteria set for the Equity Income, Equity Growth and Fixed Income
Funds. The portfolio managers that are also the portfolio managers for the
Equity Income Fund focus on dividend-paying common stocks with low
price/earnings ratios that they consider to be undervalued. The portfolio
managers that are also the portfolio managers for the Equity Growth Fund focus
on common stocks of companies that offer above-average potential for growth in
revenues, profits or cash flow. In selecting common stocks, the portfolio
managers rely primarily on fundamental analysis, reviewing the issuing company's
financial statements, the fundamentals of other companies in the same industry,
market trends and economic conditions.
The portfolio managers that are also the portfolio managers for the Fixed Income
Fund focus on investment-grade debt securities of domestic and foreign issuers,
as well as mortgage-backed and asset-backed securities. They may also have the
fund invest in unrated debt securities that they determine are of comparable
quality. In selecting debt securities, the portfolio managers focus on the
issuer's credit strength as well as the security's duration and yield. Duration
takes into account a debt security's cash flow over time including the
possibility that a debt security might be prepaid by the issuer or redeemed by
the holder prior to its stated maturity date. In contrast, maturity measures
only the time until final payment is due. The fund also looks for securities
that appear comparatively undervalued. The portfolio managers may also purchase
securities they believe have a high potential for credit upgrade.
The fund typically expects to invest about 60% of its assets in equities and 40%
in fixed income securities. At any time, the fund's portfolio may consist of 25%
to 50% fixed income securities and 40% to 70% equity securities.
PRINCIPAL RISKS OF INVESTING
An investment in the Balanced Fund carries the same types of risks as an
investment in the other Aquinas Funds. The risks of the Equity Income and Equity
Growth Funds apply to the extent the Balanced Fund invests in equities and the
risks of the Fixed Income Fund apply to the extent the Balanced Fund invests in
fixed income securities.
Risks of Equity Investing
COMMON STOCKS. The fund invests in common stocks, whose risks include:
Aquinas Funds 9 Prospectus
<PAGE>
- - A company not performing as anticipated. Factors affecting a company's
performance can include the strength of its management and the demand for its
products or services. Negative performance may affect the earnings growth the
portfolio managers anticipated when selecting the stock.
- - Instability in the stock market. The market generally moves in cycles, with
stock prices rising and falling. The value of the fund's investments may
increase or decrease more than the stock market in general.
VALUE INVESTING. There is a risk that the portfolio managers are wrong in their
assessment of a company's value and the stocks do not reach what the portfolio
managers believe are their full values.
GROWTH INVESTING. There is a risk that the portfolio managers are wrong in their
assessment of a company's potential for growth and the stocks do not grow as the
portfolio managers anticipate.
Risks of Fixed Income Investing
CREDIT RISK. The value of the fund's fixed income securities is affected by the
issuers' continued ability to make interest and principal payments. The fund
could lose money if the issuers cannot meet their financial obligations or their
credit ratings are downgraded.
INTEREST RATE RISK. The value of the fund's fixed income securities is also
affected by changes in interest rates. When interest rates rise, the value of
the fund's securities and its share value will decline. A change in interest
rates will also change the amount of income the fund generates.
SECURITIES RATINGS. Securities rated in the lowest of the investment-grade
categories are considered more speculative than higher-rated securities. Their
issuers may not be as financially strong as those of higher-rated bonds and may
be more likely to not be able to make interest or principal payments during
periods of economic uncertainty or downturn.
MORTGAGE- AND ASSET-BACKED SECURITIES. Mortgage- and some asset-backed
securities involve prepayment risk, which is the risk that the underlying
mortgages or other debts may be refinanced or paid off before they mature,
particularly during periods of declining interest rates. This could lower the
fund's return and result in losses to the fund if some securities were acquired
at a premium. Asset-backed securities may also carry a greater default risk than
other securities because of the nature of the collateral. For example, credit
card receivables are generally unsecured and are subject to consumer credit laws
that may permit cardholders to reduce balances due. Holders of automobile
receivables may not have an enforceable security interest in the underlying
automobiles. In times of financial stress, these securities could become hard to
value or sell.
General Market Risks
Factors affecting securities markets include domestic and foreign economic
growth or decline, interest-rate levels and political events. There is a risk
the portfolio managers won't accurately predict the impact of these and other
factors, in which case the securities the fund purchases might decline in value.
This means you could lose money investing in the fund. You should consider your
own investment goals, investment horizon and risk tolerance before investing.
Socially Responsible Investing
Because the adviser and the portfolio managers consider other factors in
addition to traditional investment criteria when selecting portfolio securities,
they may forego a
Aquinas Funds 10 Prospectus
<PAGE>
profitable investment opportunity or sell a security when it may be
disadvantageous to do so.
BAR CHART AND PERFORMANCE TABLE
The bar chart and table below give some indication of the risks of investing in
the Balanced Fund by showing how the fund's performance changes from year to
year and how its average annual returns for one and five years compare to those
of a broad measure of market performance. Please keep in mind that past
performance does not necessarily indicate how the fund will perform in the
future.
Bar Chart
The bar chart below shows the fund's total returns for the past five calendar
years (since inception).
BALANCED FUND
-------------
1994 -3.06%
1995 23.14%
1996 15.29%
1997 19.91%
1998 8.46%
During the period reflected in the bar chart, the fund's highest quarterly
return was 9.95% (for the quarter ended June 30, 1997), and the lowest quarterly
return was -6.81% (for the quarter ended September 30, 1998).
Performance Table
The table below compares the fund's average annual total returns for one and
five calendar year periods ended December 31, 1998 to the Standard & Poor's
500/R Composite Stock Index, the Lehman Brothers Government/Corporate Bond Index
and a composite index ("Composite") of the Standard & Poor's 500/R Composite
Stock Index (60%) and the Lehman Brothers Government/Corporate Bond Index (40%).
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended December 31, 1998
1 YEAR RETURN 5 YEAR RETURN<F1>
- ----------------------------------------------------------------------------
Balanced Fund 8.46% 12.35%
- ----------------------------------------------------------------------------
S&P 500/R 28.58% 24.06%
- ----------------------------------------------------------------------------
Lehman Brothers 9.47% 7.30%
- ----------------------------------------------------------------------------
Composite 20.94% 17.36%
- ----------------------------------------------------------------------------
The S&P 500/R Composite Stock Index is an unmanaged index of 500 selected common
stocks, most of which are listed on the New York Stock Exchange. The Index is
heavily weighted toward stocks with large market capitalizations and represents
approximately two-thirds of the total market value of all domestic common
stocks.
The Lehman Brothers Government/Corporate Bond Index includes all public
obligations of the U.S. Treasury, excluding flower bonds and foreign-targeted
issues; all publicly issued debt of U.S. government agencies and quasi-federal
corporations, and corporate debt guaranteed by the U.S. government; and all
publicly issued, fixed rate, nonconvertible, investment grade, dollar-
denominated, SEC-registered corporate debt (including debt issued or guaranteed
by foreign sovereign governments, municipalities, or governmental agencies, or
international agencies).
<F1> This is also the fund's return since inception on January 3, 1994.
Aquinas Funds 11 Prospectus
<PAGE>
FEES AND EXPENSES
This table describes the fees and expenses you may pay if you buy and hold
shares of the Balanced Fund.
Shareholder Fees
(fees paid directly from your investment)
There are no shareholder fees for the purchase, redemption or exchange of
shares.
Annual Fund Operating Expenses
(expenses deducted from fund assets)
BALANCED FUND
- ----------------------------------------------------------------------------
Management fee 1.00%
- ----------------------------------------------------------------------------
Distribution (12b-1) and/or service fees None
- ----------------------------------------------------------------------------
Other expenses 0.49%
- ----------------------------------------------------------------------------
Total annual fund operating expenses 1.49%
- ----------------------------------------------------------------------------
Example
This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds. It assumes that:
- - you invest $10,000 for the time indicated and then redeem all your shares at
the end of that period;
- - your investment has a 5% return each year;
- - the fund's operating expenses remain the same; and
- - you reinvest all dividends and distributions.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------------
Balanced Fund $153 $477 $823 $1,801
- ----------------------------------------------------------------------------
The expense example is for comparison purposes only. It does not represent the
fund's actual expenses or returns, either past or future. Actual expenses or
returns may be higher or lower than those shown.
Aquinas Funds 12 Prospectus
<PAGE>
Other Investment Practices and Risks
In seeking to achieve their investment objectives, the funds may follow
investment practices and assume risks in addition to those discussed previously.
PORTFOLIO STRUCTURE
The Equity Income, Equity Growth and Fixed Income Funds are each made up of at
least two basic portfolios. Each portfolio is managed by separate portfolio
managers selected and monitored by the funds' adviser. Each portfolio follows
independent but complementary strategies intended to meet the funds' overall
objectives. The Balanced Fund follows the strategies of all three of the other
funds. The adviser believes this structure offers investors the advantages of
diversification and varied investment approaches within one investment vehicle.
INVESTMENT OBJECTIVES
Each fund's investment objective may be changed by the Board of Directors
without shareholder approval. You'll receive advance written notice of any
material changes to your fund's goals.
YEAR 2000
Like other mutual funds, the funds could be adversely affected if the adviser's
computer systems and those of other service providers do not process date-
related information starting January 1, 2000. The adviser is taking what it
believes are reasonable steps to address this problem, and to obtain assurances
that the funds' other major service providers are taking comparable steps. If
the adviser and the funds' service providers aren't successful, the funds'
business, including provision of shareholder services, may be hampered.
In addition, the issuers of securities the funds hold could experience year
2000-related problems, which could hurt the value of their securities and, in
turn, the funds' performance. While the portfolio managers will gather publicly
available information about issuers' year 2000 readiness, that information may
not be accurate, relevant or complete. Moreover, an issuer's year 2000 readiness
is only one factor the portfolio managers may consider when making investment
decisions, and other factors may receive greater weight.
PORTFOLIO TURNOVER
The portfolio managers generally buy and sell portfolio securities without
regard to the length of time a fund has held a security as they seek to achieve
the funds' investment objectives. Although the funds generally do not intend to
engage in frequent short-term trading, in most years, each fund's (other than
the Equity Income Fund's) annual portfolio turnover rate has exceeded 100%. High
portfolio turnover (100% or more) may increase the funds' transaction costs and
negatively affect their performance. It may also result in increased
distributions to the funds' shareholders. These distributions, to the extent
they are short-term capital gains, will be taxed at ordinary income tax rates
for federal income tax purposes, rather than at lower capital gains rates.
Aquinas Funds 13 Prospectus
<PAGE>
Management
INVESTMENT ADVISER
Aquinas Investment Advisors, Inc., 5310 Harvest Hill Road, Suite 248, Dallas,
Texas 75230, was organized in 1993 to provide consulting, investment, and
administrative services to the funds. The adviser has a limited number of other
clients. It is a wholly owned subsidiary of The Catholic Foundation, an
endowment fund for individuals. All the adviser's profits benefit The Catholic
Foundation to support that organization's charitable, religious and educational
activities.
The Foundation, a registered investment adviser, manages its own assets and acts
as investment adviser to other religious organizations, nonprofit agencies, and
individuals with substantial portfolios. As of December 31, 1998, the Foundation
managed about $167 million in assets.
The funds use a multi-manager structure. The adviser generally manages and
oversees administration, investment activities and distribution services for the
funds, while independent portfolio managers make the specific investments for
the funds.
THE ADVISER
- - conducts the socially responsible investing activities for the funds;
- - selects and monitors portfolio managers (sub-advisers); and
- - allocates each fund's assets among the portfolio managers.
Each fund pays the adviser an annual management fee equal to the following
percentages of average daily net assets:
ANNUAL
MANAGEMENT FEE
- ----------------------------------------------------------------------------
Equity Income Fund 1.00%
- ----------------------------------------------------------------------------
Equity Growth Fund 1.00%
- ----------------------------------------------------------------------------
Fixed Income Fund 0.60%
- ----------------------------------------------------------------------------
Balanced Fund 1.00%
- ----------------------------------------------------------------------------
The adviser may elect to waive some or all of the management fees and may
terminate this waiver at any time. The adviser is responsible for paying fees to
the portfolio managers. All investment decisions the adviser makes for the funds
are made by an investment committee, and no one person is primarily responsible
for making investment recommendations to that committee. While the funds' Board
of Directors and officers generally oversee portfolio managers' activities, no
member of the board, the officers or the adviser evaluates the investment merits
of specific securities. The adviser's investment committee is responsible for
the overall day-to-day management of the Funds. Current members are:
- - Frank A. Rauscher, chief operating officer of the funds since June 1994 and
president and CEO since May 1997. Mr. Rauscher was president of American
Federal Bank, F.S.B. from 1989 to 1993.
Aquinas Funds 14 Prospectus
<PAGE>
- - John L. Strauss, a director of the funds. Mr. Strauss was a principal of
Barrow, Hanley, Mewhinney & Strauss, an investment advisory firm, from 1980
until his retirement in January 1998.
- - J. Ray Nixon, Jr., a director of the funds. Mr. Nixon has been a principal of
Barrow, Hanley, Mewhinney & Strauss since August 1994. Before that he was a
stockbroker with Smith, Barney Shearson.
- - Charles Clark, Jr., secretary, treasurer and a director of the funds. He is
president of Olmstead-Kirk Paper Company.
- - John J. Kickham, a vice president of the funds. He has been president of
Quarterdeck of Texas, Inc., a mortgage banking firm since 1994. Before that
he was CEO and president of Wing Industries from November 1994 to November
1995, and chairman of T.K.G., Inc., a private investment company, since March
1985.
- - Mark Godvin, a managing director of Merrill Lynch since 1996 and an executive
of that firm since 1998.
PORTFOLIO MANAGERS
The portfolios of the Fixed Income, Equity Income, and Equity Growth Funds are
managed by separate portfolio managers (sub-advisers) selected and monitored by
the adviser. In choosing portfolio managers, the adviser evaluates their skills
in managing assets for specific asset classes, investment styles and strategies,
looking at risks and returns over an entire market cycle. Short-term investment
performance alone does not control the adviser's decision to select or terminate
a portfolio manager.
The portfolio managers follow independent but complementary strategies intended
to contribute toward a fund's overall objective. The Balanced Fund is allocated
among the portfolio managers for the other funds and follows strategies from all
three of the other funds.
Each portfolio manager has complete discretion to buy and sell securities for
the portion of the fund it manages, within the parameters of the fund's
investment objectives, policies and restrictions, and the more specific
strategies developed by the adviser. The adviser may change the asset allocation
at any time.
The funds and the adviser have obtained an order of exemption from the SEC that
permits the adviser to enter into and materially amend portfolio management
agreements with nonaffiliated portfolio managers without obtaining shareholder
approval. THE ADVISER IS ULTIMATELY RESPONSIBLE FOR THE FUND'S INVESTMENT
PERFORMANCE BECAUSE OF ITS RESPONSIBILITY TO OVERSEE THE PORTFOLIO MANAGERS. The
adviser has the ability, subject to approval by the Board of Directors, to hire
and terminate portfolio managers and to change materially the terms of the
portfolio management agreements, including the compensation paid to the
portfolio managers by the adviser, without the approval of the shareholders of
the funds. The funds will notify shareholders of any change in portfolio
managers. The portfolio managers have no affiliations with the funds or the
adviser other than as the portfolio managers.
Aquinas Funds 15 Prospectus
<PAGE>
The adviser, not the funds, pays the fees of each portfolio manager. For details
on how individual portfolio managers are compensated, see the SAI.
The adviser has allocated the assets of each fund among the portfolio managers
listed below.
Equity Income Fund
Beutel, Goodman Capital Management, 5847 San Felipe, Suite 4500, Houston, TX
77057, provides investment advisory services to individuals, investment
companies, pension and profit sharing plans, trusts, estates, charitable
organizations and corporations. It has been sub-adviser to a registered mutual
fund since December 1993. As of December 31, 1998, it managed about $1.5 billion
in assets.
NFJ Investment Group, 2121 San Jacinto, Suite 1840, Dallas, TX 75201, provides
investment supervisory services to individuals, financial institutions,
investment companies, pension and profit sharing plans, trusts, estates and
charitable organizations and foundations. NFJ became sub-adviser to a registered
mutual fund in 1990 and currently serves four registered mutual funds. Its total
assets under management as of December 31, 1998 were about $2.4 billion.
Equity Growth Fund
Sirach Capital Management, Inc., 3323 One Union Square, 600 University Street,
Seattle, WA 98101, provides investment management services to corporations,
pension and profit sharing plans, 401(k) and thrift plans, trusts, estates and
other institutions and individuals. As of December 31, 1998, Sirach had more
than $7.2 billion in assets under management.
John McStay Investment Counsel, 5949 Sherry Lane, Suite 1560, Dallas, TX 75225,
manages a limited number of large investment accounts for employee benefit
plans, foundations, and endowments. Assets under management exceeded $3.5
billion as of December 31, 1998.
Fixed Income Fund
Income Research and Management, Inc., One Federal Street, 23rd Floor, Boston, MA
02110, serves institutions including major public and private pension plans,
insurance companies, and non-profit organizations. As of December 31, 1998, IRM
managed more than $2.8 billion in assets.
Atlantic Asset Management Partners, LLC, 2187 Atlantic Street, Stamford, CT
06902, manages fixed income portfolios and asset allocation strategies for
clients including foundations, endowments and public and corporate employee
benefit plans. As of December 31, 1998, AAM managed about $3.0 billion in
assets.
Balanced Fund
With the exception of Sirach Capital Management, each of the portfolio managers
for the Fixed Income, Equity Income and Equity Growth Funds serves as portfolio
manager to the Balanced Fund.
Aquinas Funds 16 Prospectus
<PAGE>
Your Investment
DETERMINING SHARE PRICE
NET ASSET VALUE (NAV) is the price for one share of the fund. NAV is calculated
as of the end of trading hours (typically 4 p.m. Eastern time) each day the New
York Stock Exchange is open for trading. The New York Stock Exchange is closed
on weekends and most major holidays.
If the transfer agent receives your buy or sell order in proper form before that
time, you will pay or receive the NAV as of the close of trading that day. If
the transfer agent receives your buy or sell order after that time, you will pay
or receive the NAV as of the close of the next trading day.
To calculate NAV, we divide the fund's total assets, minus any liabilities, by
the number of shares outstanding. The funds value securities, other than debt
instruments maturing within 60 days, at market prices. The funds value debt
securities maturing within 60 days at amortized cost.
HOW TO OPEN AN ACCOUNT
Getting Started
To invest in the Aquinas Funds,
- - Read this prospectus carefully. Decide which fund or funds you want to invest
in.
- - Decide how much you want to invest. The minimum initial investment is $500,
or $50 if you choose the Automatic Investment Plan.
- - Complete the account application enclosed with this prospectus. If you need
an application, call toll-free 1-877-AQUINAS (1-877-278-4627).
OR
Open your account through a broker, financial institution, or other investment
professional. These investment professionals may charge you a transaction or
service fee when you buy or sell shares; this fee goes to the service provider,
not to Aquinas Funds. Also, the funds and/or the adviser may pay fees to the
investment professionals to compensate them for the services they provide their
customers. Before investing through an investment professional, you should read
their program materials together with this prospectus.
ALL APPLICATIONS TO PURCHASE SHARES ARE SUBJECT TO ACCEPTANCE BY THE FUNDS. THE
FUNDS RESERVE THE RIGHT TO REJECT APPLICATIONS IN WHOLE OR IN PART. THE FUNDS DO
NOT ACCEPT TELEPHONE PURCHASE ORDERS.
Aquinas Funds 17 Prospectus
<PAGE>
Ways to Set Up Your Account
Check the appropriate box on the application to select account ownership:
- - INDIVIDUAL OR JOINT ACCOUNT
An individual account (for example, one in your own name) is owned by one
person. A joint account lists two or more people as the owners.
- - UNIFORM GIFT TO MINORS ACT ACCOUNT
Parents, grandparents and other adults can establish an account for a minor.
Depending on state law, you may set up the account under the Uniform Gift to
Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA).
- - TRUST, BUSINESS OR ORGANIZATION
Trusts, corporations, associations, partnerships, institutions and other
groups may invest in the funds. Such accounts may require documentation
beyond the account application. For details, call 1-800-423-6369.
- - RETIREMENT PLANS
The funds offer various retirement plans that may help investors shelter
income from taxes. These plans include:
- Traditional IRAs
- Roth IRAs
- SEP IRAs
- 403(b) plans
- 401(k) plans
- SIMPLE IRAs
You should consult your tax adviser before choosing a plan. For details on plan
applications, service fees, and contribution/withdrawal limits, call the funds'
transfer agent at 1-800-423-6369 or Aquinas Investment Advisors, Inc. at 1-972-
233-6655.
QUESTIONS? CALL TOLL-FREE 1-877-AQUINAS (1-877-278-4627)
Aquinas Funds 18 Prospectus
<PAGE>
Buying Shares
OPENING AN ACCOUNT
- --------------------------------------------------------------------------------
BY MAIL
- ------------------
- - Complete an account application, available by calling toll-free 1-877-AQUINAS
(1-877-278-4627).
- - Mail it with a check payable to The Aquinas Funds, Inc. to:
The Aquinas Funds, Inc.
c/o DST Systems, Inc.
P.O. Box 219533
Kansas City, MO 64121-9533
- - For overnight or express mail, use this address:
The Aquinas Funds
c/o DST Systems, Inc.
330 West 9th Street, First Floor
Kansas City, MO 64105
- --------------------------------------------------------------------------------
BY WIRE
- ------------------
- - Call the transfer agent at 1-800-423-6369. You need to complete and return an
account application before the wire can be sent.
- - Have your bank wire UMB Bank, n.a., as follows:
A.B.A. #101000695
For credit to Aquinas Funds Purchase Account
For further credit to The Aquinas Funds, Inc.
Deposit Account Number 9870523922
(investor account number)
(name or account registration)
(social security or taxpayer identification number)
(name of fund in which to invest)
- --------------------------------------------------------------------------------
AUTOMATICALLY
- ------------------
- - Complete the Automatic Investment Plan section on your account application.
Open your account with at least $50.
- - On the 16th of each month, the amount you specify ($50 or more) is
automatically withdrawn from your bank account and used to buy fund shares.
- - We charge no service fee for the plan, but if there's not enough money in
your account to cover the withdrawal, the transfer agent will charge you $15.
You'll also be responsible for any resulting losses to the fund.
- - You can change your investment amount, or cancel your plan, by calling or
writing the funds. The fund has up to 7 business days to make the change.
- --------------------------------------------------------------------------------
BY EXCHANGE
- ------------------
You may also buy shares in a fund by exchanging shares from another fund. See
"Exchanging Shares."
- --------------------------------------------------------------------------------
Aquinas Funds 19 Prospectus
<PAGE>
Buying Shares (continued)
- --------------------------------------------------------------------------------
ADDING TO AN ACCOUNT
- --------------------
- --------------------------------------------------------------------------------
BY MAIL
- -------
The minimum additional investment is $250 for a regular account; $100 for an
UGMA account; $50 for an IRA or Automatic Investment Plan; and $10 for a 403(b)
account.
- - Send your check, plus the "Additional Investment" form from a recent
confirmation statement or a signed note with the account's registration and
number.
- - Use the addresses on page 19.
- --------------------------------------------------------------------------------
BY WIRE
- --------
- - Follow the instructions on page 19. Be sure to include your account number
and the full registered name(s) of the account on the bank wiring
instructions.
- - Wired funds are considered received in proper form on the day they reach the
funds' bank account and all required information is provided in the wire
instructions.
- --------------------------------------------------------------------------------
AUTOMATICALLY
- -------------
- - If your account is already open, call 1-800-423-6369 to set up an Automatic
Investment Plan. Adding this plan to your account requires a signature
guarantee, described under "Other Purchase Policies."
- - When your plan is established, it follows the description on page 19.
- --------------------------------------------------------------------------------
Meet your transfer agent
THE FUNDS' TRANSFER AND DISBURSING AGENT, DST SYSTEMS INC., HANDLES THE
ADMINISTRATIVE DETAILS OF YOUR ACCOUNT. WHEN YOU BUY SHARES, YOU SEND THE
PAYMENT TO THE TRANSFER AGENT. WHEN YOU REDEEM SHARES, YOU SEND YOUR REQUEST TO
THE TRANSFER AGENT, AND THE TRANSFER AGENT SENDS YOU YOUR MONEY.
- --------------------------------------------------------------------------------
Aquinas Funds 20 Prospectus
<PAGE>
OTHER PURCHASE POLICIES
CERTIFICATES. The funds don't issue stock certificates. You'll receive a
statement confirming the details of your transaction.
PURCHASES THROUGH INTERMEDIARIES. If you buy shares from a broker/dealer,
financial institution, or other provider, their fees, policies, investment
minimums, and restrictions may differ from those described here. Any fees
charged go to the intermediary, not to Aquinas Funds.
If the intermediary is the shareholder of record, the funds may accept requests
to buy additional shares into the account only from the intermediary.
The funds may authorize intermediaries and their designees to accept purchase
orders on the funds' behalf. Such orders are considered received when the
intermediary accepts them, and priced at the next net asset value calculated.
CHECKS/INSUFFICIENT FUNDS. Your purchase must be made in U.S. dollars via checks
drawn on U.S. banks. The funds do not accept third-party checks or cash.
The transfer agent will charge a $15 fee against your account for any check
returned unpaid. You'll also be responsible for any resulting loss to the funds.
REDEMPTION REQUESTS SHORTLY AFTER PURCHASE BY CHECK. Payment for such
redemptions may be delayed up to 15 days to make sure there are sufficient funds
to cover the check. If you anticipate making a redemption soon after you buy
your shares, you may want to purchase by wire to avoid delays.
Exchanging Shares
You may exchange shares of one Aquinas Fund for those of another Aquinas Fund or
the American AAdvantage Money Market Fund. The AAdvantage Money Market Fund is
described in a separate prospectus. Call toll-free 1-877-AQUINAS (1-877-278-
4627) for a free copy, and read it carefully before investing.
Note that an exchange is treated as an ordinary sale and purchase for federal
income tax purposes; you may realize a capital gain or loss.
These conditions apply to exchanges:
- - The exchange must be between identically registered accounts.
- - Any checks used to purchase your shares must have cleared (up to 15 days).
- - Minimum purchase and redemption amounts must be met.
QUESTIONS? CALL TOLL-FREE 1-877-AQUINAS (1-877-278-4627)
Aquinas Funds 21 Prospectus
<PAGE>
HOW IT WORKS
You may request an exchange two ways:
- - In writing. Follow the procedures in "Selling Shares," on page 23. The
minimum is $500.
- - By telephone (unless you've waived telephone privileges). Call 1-800-423-
6369. The minimum is $1,000.
Shares to be sold will be redeemed at the next net asset value calculated after
the transfer agent receives your exchange request. The shares you want to
acquire will be purchased at the next net asset value calculated after the
transfer agent receives your request in proper form.
OTHER EXCHANGE POLICIES
LIMITATIONS. The funds reserve the right to terminate without notice the
exchange privilege of any shareholder, broker, investment adviser or agent who
requests more than four exchanges in a calendar year, for oneself or one's
customers. The funds will consider the number of exchanges requested, the time
within which requests are made, and the level of expense to the funds or adverse
effects to other shareholders.
FEES. There are no fees for exchanging shares.
QUESTIONS? CALL TOLL-FREE 1-877-AQUINAS (1-877-278-4627)
Aquinas Funds 22 Prospectus
<PAGE>
Selling Shares
You may take money out of your account anytime by selling (redeeming) some or
all of your shares back to the fund, at no charge. The price you receive will be
the next net asset value calculated after the fund receives your request in
proper form. Note that when you sell shares, you may realize a capital gain or
loss for federal income tax purposes.
- --------------------------------------------------------------------------------
BY MAIL
- -------
- - Send your written request with:
- the number of shares or the dollar amount to be redeemed;
- the fund's name;
- the name(s) on the account registration; and
- the account number.
- - Sign the request exactly as the account is registered. You'll need a
signature guarantee if:
- the amount requested is more than $25,000;
- the proceeds are to be sent to someone other than the shareholders of
record or to somewhere other than the address of record;
- the request is made within 30 days of a change in address; or
- the bank to receive wire transfers is changed within 30 days.
See "Signature Guarantees," under "Other Investment Policies," on page 25.
- - Include documentation required for corporate, partnership or fiduciary
accounts, or for people acting on Power of Attorney. If you have questions,
call 1-800-423-6369.
- - Mail to the transfer agent at:
The Aquinas Funds, Inc.
c/o DST Systems, Inc.
P.O. Box 219533
Kansas City, MO 64121-9533
- - For overnight or express mail, use this address:
The Aquinas Funds
C/O DST SYSTEMS, INC.
330 West 9th Street, First Floor
Kansas City, MO 64105
If you don't send your redemption request directly to the transfer agent, it may
be delayed. Please submit requests to the address above.
- --------------------------------------------------------------------------------
BY TELEPHONE
- ------------
(unless you've waived telephone privileges)
- - Call the transfer agent at 1-800-423-6369 to redeem from $1,000 to $25,000 in
shares. You must request redemptions over $25,000 in writing, with signatures
guaranteed.
- - The funds will mail proceeds to your address of record or send by wire to the
account listed in your fund records.
- - The funds do not accept redemption requests via fax.
- --------------------------------------------------------------------------------
Aquinas Funds 23 Prospectus
<PAGE>
OTHER REDEMPTION POLICIES
PAYMENT. When you redeem shares, you'll receive payment as follows:
- - Mailed payments will typically be sent within 1 or 2 days but no later than 7
days of receiving proper redemption instructions.
- - Wire payments for redemptions requested by phone will usually be made on the
next business day to the bank designated on your account application (which
must be a commercial bank within the U.S.).
The funds may delay payment for up to 7 days after receiving a redemption
request. The funds may suspend redemptions if the New York Stock Exchange closes
or for other emergencies.
REDEEMING SHARES THROUGH INTERMEDIARIES. A broker/dealer, financial institution
or other intermediary may charge a fee to redeem your fund shares. If the
intermediary is the shareholder of record, the funds accept redemption requests
only from the intermediary.
The funds may authorize intermediaries and their designees to accept redemption
requests on the funds' behalf. The redemption price you receive for redemption
requests made through intermediaries is the next determined net asset value
after the intermediary receives your request in proper form with all required
information.
REDEMPTION REQUESTS SHORTLY AFTER PURCHASE BY CHECK. Payment for such
redemptions may be delayed up to 15 days to make sure there are sufficient funds
to cover the check. If you anticipate making a redemption soon after you buy
your shares, you may want to purchase by wire to avoid delays.
TELEPHONE TRANSACTIONS. The funds won't accept telephone redemption requests for
payment by check for 30 days following an address change. You must make the
request in writing, with signatures guaranteed.
As long as reasonable measures are taken to prevent telephone fraud, neither the
funds nor the transfer agent are liable for losses from unauthorized
transactions. The funds reserve the right to refuse a telephone transaction.
During shifts in the market or economy, it may be difficult to redeem shares by
telephone or wire. You can mail your redemption requests as described above.
SMALL ACCOUNTS. If your account balance falls below $500 and it is not a Uniform
Gift to Minors Account or you don't have an Automatic Investment Plan, the funds
may ask you to add to your balance. If your account balance is still below $500
after 60 days, the funds may close your account and send you the proceeds.
SYSTEMATIC WITHDRAWAL PLAN. If your account balance is $10,000 or more, you can
request monthly, quarterly, or annual distributions of at least $250. Note that
withdrawals may result in a gain or loss for federal income tax purposes. If the
amount in the account is not enough to make your requested payment, the
remaining amount will be redeemed and the plan ended.
Aquinas Funds 24 Prospectus
<PAGE>
Call 1-800-423-6369 for a Systematic Withdrawal Plan application. To change the
withdrawal amount or cancel your plan, send a request in writing, with a
signature guarantee for each registered holder of the account. The funds may
change or eliminate this privilege at any time.
OTHER INVESTMENT POLICIES
TELEPHONE TRANSACTIONS. Unless you waive telephone privileges on your account
application or in writing, you automatically have the privilege to make
telephone inquiries, exchanges and redemptions. Once the account is established,
requests to change or add these privileges must be in writing, signed by each
registered holder of the account, with signatures guaranteed. As long as
reasonable measures are taken to prevent telephone fraud, neither the funds nor
the transfer agent are liable for losses from unauthorized transactions. The
funds reserve the right to refuse a telephone transaction.
SIGNATURE GUARANTEES. Generally, whenever you change your account, your bank
information, or your registration information, you need signature guarantees for
each registered holder. These guarantees may seem inconvenient, but they're
intended to protect you from fraud. You can have signatures guaranteed by a U.S.
commercial bank or trust company, a member of the National Association of
Securities Dealers, Inc., or other eligible institutions. A notary public is not
acceptable.
DIVIDENDS AND DISTRIBUTIONS
All the funds pay dividends of net investment income quarterly except the Fixed
Income Fund, which pays dividends of net investment income monthly. The funds
distribute any net realized capital gains annually.
Each fund will automatically reinvest dividends in shares of that fund, unless
you ask to have dividends paid in cash or invested in another of the Aquinas
Funds (account minimums apply).
TAXES
Each year the funds will give you federal tax information about the dividends
and distributions you've received. If your income is subject to tax,
distributions are taxable whether they are paid in cash or reinvested in
additional shares. In general, any dividends and net short-term capital gains
you receive from the funds are taxed at ordinary income rates. Any net long-term
capital gains you receive are taxed at capital gains rates. The funds expect
that distributions of the Fixed Income Fund will consist primarily of ordinary
income; the distributions of the Equity Growth Fund will consist primarily of
capital gains; and the distributions of the Equity Income Fund and Balanced Fund
will consist of both ordinary income and capital gains. Also, if you have
distributions from a qualified plan reinvested in a regular account, you may
face a penalty tax.
Anytime you sell or exchange shares, it is considered a taxable event. Depending
on the purchase price and the sale price of the shares you sell or exchange, you
may realize a gain or loss on the transaction for federal income tax purposes.
Aquinas Funds 25 Prospectus
<PAGE>
Because everyone's tax situation is unique, and state and local law may also
affect you, the funds strongly recommend you consult with your tax adviser.
If you don't complete the certification form included with your account
application, the funds are required by federal law to withhold 31% of any
distribution and redemption proceeds for federal income tax purposes.
SHAREHOLDER REPORTS
As a shareholder, you'll receive:
- - Confirmation statements each time you buy, sell, transfer or exchange shares.
You'll also receive a summary of transactions since the beginning of the
year. If you find any errors, notify the fund within 30 days or the
transaction is considered ratified.
- - Individual account statements, mailed within 5 business days of a purchase or
redemption. If dividend reinvestment is the only account activity, statements
will be quarterly (monthly for the Fixed Income Fund).
- - An annual statement after December 31 listing all your transactions in shares
of the funds for the year.
- - Semi-annual reports showing your fund's portfolio and other information.
- - An annual report after the close of the funds' fiscal year (December 31),
with audited financial statements.
FINANCIAL HIGHLIGHTS
The following tables show the funds' financial performance for the past five
years. Some of the information reflects results for single fund shares. "Total
return" shows how much your investment in the fund would have increased (or
decreased), assuming you had reinvested all dividends and distributions. These
figures have been audited by Arthur Andersen LLP, the funds' independent
accountants. Their report, along with the funds' financial statements, is
included in the annual report, which is available upon request.
Aquinas Funds 26 Prospectus
<PAGE>
Fixed Income Fund
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR JAN. 3, 1994<F1>
ENDED ENDED ENDED ENDED THROUGH
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.17 $9.90 $10.17 $9.24 $10.00
Income from Investment Operations:
Net investment income 0.54 0.55 0.54 0.54 0.46
Net realized and unrealized gains
(losses) on investments 0.17 0.27 (0.27) 0.93 (0.77)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.71 0.82 0.27 1.47 (0.31)
- ---------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Dividends from net investment income (0.54) (0.55) (0.54) (0.54) (0.45)
Distributions from net realized gains (0.16) - - - -
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.70) (0.55) (0.54) (0.54) (0.45)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.18 $10.17 $9.90 $10.17 $9.24
=================================================================================================================================
Total Return<F2> 7.17% 8.54% 2.83% 16.26% (3.09)%
Supplemental Data and Ratios:
Net assets, end of period (in thousands) $42,865 $40,699 $37,229 $35,617 $28,147
Ratio to Average Net Assets of:<F3>
Expenses, net of waivers and reimbursements 1.00% 0.99% 1.00% 0.98% 1.00%
Expenses, before waivers and reimbursements 1.03% 1.05% 1.03% 0.98% 1.11%
Net investment income, net of waivers
and reimbursements 5.27% 5.54% 5.44% 5.46% 4.84%
Net investment income, before waivers
and reimbursements 5.24% 5.48% 5.41% 5.46% 4.73%
Portfolio turnover rate<F2> 120% 102% 169% 126% 139%
</TABLE>
<F1> Commencement of operations.
<F2> Not annualized for the period from January 3, 1994 through December 31,
1994.
<F3> Annualized for the period from January 3, 1994 through December 31, 1994.
Aquinas Funds 27 Prospectus
<PAGE>
Equity Income Fund
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR JAN. 3, 1994<F1>
ENDED ENDED ENDED ENDED THROUGH
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $14.89 $13.26 $11.83 $9.39 $10.00
Income from Investment Operations:
Net investment income 0.23 0.26 0.23 0.28 0.32
Net realized and unrealized gains
(losses) on investments 0.57 3.40 2.18 3.03 (0.61)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.80 3.66 2.41 3.31 (0.29)
- ---------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Dividends from net investment income (0.23) (0.26) (0.23) (0.28) (0.32)
Distributions from net realized gains (2.25) (1.77) (0.75) (0.59) -
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (2.48) (2.03) (0.98) (0.87) (0.32)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $13.21 $14.89 $13.26 $11.83 $9.39
=================================================================================================================================
Total Return<F2> 5.50% 27.85% 20.43% 35.62% (2.93)%
Supplemental Data and Ratios:
Net assets, end of period (in thousands) $64,877 $73,594 $54,184 $42,102 $32,217
Ratio to Average Net Assets of:<F3>
Expenses, net of waivers and reimbursements 1.36% 1.37% 1.40% 1.37% 1.45%
Expenses, before waivers and reimbursements 1.36% 1.37% 1.40% 1.37% 1.45%
Net investment income, net of waivers
and reimbursements 1.49% 1.74% 1.79% 2.47% 3.33%
Net investment income, before waivers
and reimbursements 1.49% 1.74% 1.79% 2.47% 3.33%
Portfolio turnover rate<F2> 64% 42% 32% 40% 106%
</TABLE>
<F1> Commencement of operations.
<F2> Not annualized for the period from January 3, 1994 through December 31,
1994.
<F3> Annualized for the period from January 3, 1994 through December 31, 1994.
Aquinas Funds 28 Prospectus
<PAGE>
Equity Growth Fund
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR JAN. 3, 1994<F1>
ENDED ENDED ENDED ENDED THROUGH
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $15.12 $13.45 $12.13 $9.31 $10.00
Income from Investment Operations:
Net investment income (loss) (0.10) (0.06) (0.06) (0.01) 0.01
Net realized and unrealized gains
(losses) on investments 3.40 3.93 2.84 2.83 (0.69)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 3.30 3.87 2.78 2.82 (0.68)
- ---------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Dividends from net investment income - - - - (0.01)
Distributions from net realized gains (0.85) (2.20) (1.46) - -
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.85) (2.20) (1.46) - (0.01)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $17.57 $15.12 $13.45 $12.13 $9.31
=================================================================================================================================
Total Return<F2> 21.95% 28.97% 22.90% 30.29% (6.78)%
Supplemental Data and Ratios:
Net assets, end of period (in thousands) $47,400 $35,990 $22,593 $15,912 $10,104
Ratio to Average Net Assets of:<F3>
Expenses, net of waivers and reimbursements 1.42% 1.49% 1.50% 1.50% 1.50%
Expenses, before waivers and reimbursements 1.42% 1.49% 1.54% 1.61% 1.76%
Net investment income (loss), net of waivers
and reimbursements (0.71)% (0.66)% (0.55)% (0.10)% 0.14%
Net investment income (loss), before waivers
and reimbursements (0.71)% (0.66)% (0.59)% (0.21)% (0.12)%
Portfolio turnover rate<F2> 96% 104% 112% 102% 98%
</TABLE>
<F1> Commencement of operations.
<F2> Not annualized for the period from January 3, 1994 through December 31,
1994.
<F3> Annualized for the period from January 3, 1994 through December 31, 1994.
Aquinas Funds 29 Prospectus
<PAGE>
Balanced Fund
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR JAN. 3, 1994<F1>
ENDED ENDED ENDED ENDED THROUGH
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $11.58 $11.53 $11.03 $9.43 $10.00
Income from Investment Operations:
Net investment income 0.28 0.31 0.26 0.32 0.26
Net realized and unrealized gains
(losses) on investments 0.68 1.95 1.41 1.84 (0.57)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.96 2.26 1.67 2.16 (0.31)
- ---------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Dividends from net investment income (0.28) (0.30) (0.26) (0.33) (0.26)
Distributions from net realized gains (0.92) (1.91) (0.91) (0.23) -
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.20) (2.21) (1.17) (0.56) (0.26)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $11.34 $11.58 $11.53 $11.03 $9.43
=================================================================================================================================
Total Return<F2> 8.46% 19.91% 15.29% 23.14% (3.06)%
Supplemental Data and Ratios:
Net assets, end of period (in thousands) $27,089 $29,164 $29,670 $26,779 $30,114
Ratio to Average Net Assets of:<F3>
Expenses, net of waivers and reimbursements 1.44% 1.45% 1.44% 1.46% 1.49%
Expenses, before waivers and reimbursements 1.49% 1.52% 1.49% 1.46% 1.49%
Net investment income (loss), net of waivers
and reimbursements 2.38% 2.44% 2.23% 2.93% 2.75%
Net investment income (loss), before waivers
and reimbursements 2.33% 2.37% 2.18% 2.93% 2.75%
Portfolio turnover rate<F2> 102% 94% 111% 118% 111%
</TABLE>
<F1> Commencement of operations.
<F2> Not annualized for the period from January 3, 1994 through December 31,
1994.
<F3> Annualized for the period from January 3, 1994 through December 31, 1994.
Aquinas Funds 30 Prospectus
<PAGE>
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<PAGE>
For More Information
If you'd like more information about the funds, ask for a free copy of the
following:
STATEMENT OF ADDITIONAL INFORMATION (SAI). You'll find more detailed
information about the funds in the SAI. The SAI is incorporated by reference,
which means it is legally part of this prospectus.
ANNUAL/SEMI-ANNUAL REPORTS. These reports offer additional information about
the funds' investments. In the annual report, you'll find a discussion of the
market conditions and investment strategies that significantly affected each
fund's performance during its last fiscal year.
To request the SAI, annual and semi-annual reports, and other information
about the funds, write:
THE AQUINAS FUNDS
5310 HARVEST HILL ROAD, SUITE 248
DALLAS, TEXAS 75230
Or call 1-800-423-6369.
Prospective investors and shareholders who have questions about the funds may
also call the above number or write to the above address.
You can also review and copy information about the funds (including the SAI)
at the SEC's Public Reference Room in Washington, D.C. For information about
the operation of the Public Reference Room, call 1-800-SEC-0330.
Reports and other information about the funds are available on the SEC's
Internet site at www.sec.gov. You may obtain copies of this information for a
duplicating fee by writing to the SEC's Public Reference Section at 405 5th
Street, N.W., Washington, D.C. 20549-6009. The SAI is also available from
broker/dealers and banks through which shares of the funds may be sold.
Investment Company Act file number: 811-8122
Aquinas Funds 32 Prospectus
