(LOGO)
AQUINAS FUNDS
Prospectus
NOVEMBER 1, 2000
The Funds follow a policy of socially responsible 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.
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Table of Contents
The Funds
Aquinas Equity Funds............................................ 1
Aquinas Fixed Income Fund....................................... 6
Other Investment Practices and Risks
Portfolio Structure............................................ 10
Investment Objectives.......................................... 10
Portfolio Turnover............................................. 10
Management
Investment Adviser............................................. 11
The Adviser.................................................... 11
Portfolio Managers............................................. 12
Service and Distribution Plan...................................14
Your Investment
Determining Share Price........................................ 15
How to Open an Account......................................... 15
Buying Shares.................................................. 17
Opening an Account........................................... 17
Adding to an Account......................................... 18
Other Purchase Policies...................................... 19
Exchanging Shares.............................................. 19
How it Works................................................. 20
Other Exchange Policies...................................... 20
Selling Shares................................................. 21
Other Redemption Policies...................................... 22
Other Investment Policies...................................... 23
Dividends and Distributions.................................... 23
Taxes.......................................................... 23
Shareholder Reports............................................ 24
Financial Highlights........................................... 24
Directors and Officers............................................ 29
For More Information.............................................. 30
Purchase Application.............................................. 31
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The Funds
Aquinas Equity Funds
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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 SIMILAR COMPANIES, 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. -
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INVESTMENT OBJECTIVES
- The Value Fund seeks long-term capital growth and a high level of current
dividend income.
- The Growth Fund seeks long-term capital growth.
- The Small-Cap Fund seeks capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
Value Fund
The Value 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.
Growth Fund
The 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.
Small-Cap Fund
The Small-Cap Fund invests primarily in companies with market capitalizations of
$2 billion or less. This Fund may utilize both a value investment style or a
growth investment style. The portfolio managers of this Fund may actively trade
the Fund's portfolio.
Value Fund, Growth Fund and Small-Cap Fund
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.
The Funds practice socially responsible investing. The Funds' 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.
Aquinas Funds 1 Prospectus
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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 objectives of capital growth or 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.
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. The Aquinas Equity Funds invest primarily in common stocks, whose
risks include:
- a company not performing as anticipated. Factors affecting a company's
perform-ance 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 Value Fund is primarily, and the Small-Cap Fund at times
may be, 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
Funds may not perform as well as other types of mutual funds when this investing
style is out-of-favor with other investors.
GROWTH INVESTING. The Growth Fund is, and the Small-Cap Fund at times may be,
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 Funds may not
perform as well as other types of mutual funds when this investing style is out-
of-favor with other investors.
SMALLER CAPITALIZATION COMPANIES. Smaller capitalization companies, such as
those in which the Small-Cap Fund will primarily invest, typically have
relatively lower revenues, limited product lines and lack of management depth,
and may have a smaller market share of the market for their products or
services, than larger capitalization companies. The stocks of smaller
capitalization companies tend to have less trading volume than stocks of larger
capitalization companies. Less trading volume may make
Aquinas Funds 2 Prospectus
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it more difficult for our portfolio managers to sell securities of smaller
capitalization companies at quoted market prices. Finally, there are periods
when investing in smaller capitalization company stocks falls out of favor with
investors and the stocks of smaller companies underperform.
HIGH PORTFOLIO TURNOVER. High portfolio turnover, which will be characteristic
of each of the Growth Fund, the Value Fund and the Small-Cap Fund, necessarily
results in corresponding greater transaction costs (such as brokerage
commissions or markups or markdowns) which the Funds must pay and increased
realized gains (or losses) to investors. Distribution to shareholders of short-
term capital gains are taxed as ordinary income under Federal income tax laws.
BAR CHART AND PERFORMANCE TABLE
The bar chart and table below give some indication of the risks of investing in
the Value Fund, the Growth Fund and the Small-Cap Fund by showing how each
Fund's performance changes from year to year and how each Fund's average annual
returns for various periods compare to those of various broad-based measures of
market performance. Prior to November 1, 2000, the Small-Cap Fund was known as
the "Balanced Fund" and it was designed to provide one investment vehicle for
participating in the investment strategies of the Value Fund, Growth Fund and
Fixed Income Fund. 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 six calendar
years (since inception).
Value Fund Growth Fund Small-Cap Fund
1994 -2.93% -6.78% -3.06%
1995 35.62% 30.29% 23.14%
1996 20.43% 22.90% 15.29%
1997 27.85% 28.97% 19.91%
1998 5.50% 21.95% 8.46%
1999 1.12% 23.12% 4.06%
During the period reflected in the bar chart, the Value 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
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). During the period reflected in the bar chart, the
Small-Cap Fund's highest quarterly return was 9.95% (for the quarter ended June
30, 1997) the lowest quarterly return was -6.81% (for the quarter ended
September 30, 1998).
The Value Fund's 2000 total return through September 30, 2000 was -2.29%, the
Growth Fund's total return through September 30, 2000 was 12.68%, and the Small-
Cap Fund's total return through September 30, 2000 was 6.21%.
Aquinas Funds 3 Prospectus
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Performance Table
The table below compares each Fund's average annual total returns over various
periods ended December 31, 1999 to those of the Standard & Poor's 500R Composite
Stock Index, the Russell 3000 Value Index and the Russell 3000 Index.
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended December 31, 1999
SINCE INCEPTION
1 YEAR RETURN 5 YEAR RETURN JANUARY 3, 1994
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Value Fund 1.12% 17.37% 13.73%
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Growth Fund 23.12% 25.40% 19.37%
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Small-Cap Fund 4.06% 13.95% 10.93%
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S&P 500(R) 21.04% 28.56% 23.58%
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Russell 3000 Value Index 6.65% 22.15% 17.78%
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Russell 3000 Index 20.90% 26.94% 22.05%
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Russell 2000 Index 21.26% 16.69% 13.39%
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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 Russell 3000 Value Index measures the performance of those Russell 3000
Index companies with lower price-to-book ratios and lower forecasted growth
values.
The Russell 3000 Index is composed of the 3,000 largest U.S. securities, as
determined by total market capitalization. This portfolio of securities
represents approximately 98% of the investable U.S. market.
The Russell 2000 Index is an unmanaged index which assumes reinvestment of
dividends on securities in the index. The Russell 2000 Index is composed of the
2000 smallest stocks in the Russell 3000 Index.
FEES AND EXPENSES
This table describes the fees and expenses you may pay if you buy and hold
shares of the Value Fund, the Growth Fund or the Small-Cap 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)
VALUE FUND GROWTH FUND SMALL-CAP FUND
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Management fees 1.00% 1.00% 1.25%<F1>
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Distribution (12b-1) and/or
service fees None None 0.25%<F1>
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Other expenses 0.38% 0.41% 0.53%<F2>
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Total annual fund operating expenses 1.38% 1.41% 2.03%<F2>
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<F1> Management fees and distribution (12b-1) and/or service fees have been
restated to reflect current management fees and current distribution
(12b-1) and/or service fees, respectively.
<F2> The expenses listed above do not reflect that the adviser has agreed to
limit the Small-Cap Fund's total expense (excluding interest, taxes,
brokerage and extraordinary expenses) to an annual rate of 1.95% of the
Small-Cap Fund's average net assets. This fee waiver is voluntary and may
be terminated at any time.
Aquinas Funds 4 Prospectus
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Example
This example is intended to help you compare the cost of investing in the Value
Fund, Growth Fund and the Small-Cap 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
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Value Fund $141 $437 $755 $1,657
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Growth Fund $144 $446 $771 $1,691
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Small-Cap Fund $206 $637 $1,093 $2,358
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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 5 Prospectus
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Aquinas Fixed Income Fund
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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. -
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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 secur-ities 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 secur-ities 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
Aquinas Funds 6 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.
HIGH PORTFOLIO TURNOVER. High portfolio turnover, which will be characterisic of
the Fixed Income Fund, necessarily results in corresponding greater transaction
costs (such as brokerage commissions or markups or markdowns) which the Fixed
Income Fund must pay and increased realized gain (or losses) to investors.
Distributions to shareholders of short-term capital gains are taxed as ordinary
under Federal Income Tax laws.
Aquinas Funds 7 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 various periods 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 six calendar
years (since inception).
1994 -3.09%
1995 16.26%
1996 2.83%
1997 8.54%
1998 7.17%
1999 -1.86%
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).
The Fixed Income Fund's 2000 total return through September 30, 2000 was 5.79%.
Performance Table
The table below compares the Fund's average annual total returns over various
periods ended December 31, 1999 to those of the Lehman Brothers Government/
Credit Bond Index.
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended December 31, 1999
SINCE INCEPTION
1 YEAR RETURN 5 YEAR RETURN JANUARY 3, 1994
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Fixed Income Fund -1.86% 6.41% 4.77%
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Lehman Brothers
Government/Credit Bond Index -2.15% 7.60% 5.67%
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The Lehman Brothers Government/Credit 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).
Aquinas Funds 8 Prospectus
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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
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Management fees(a) 0.60%
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Distribution (12b-1) and/or service fees None
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Other expenses 0.42%
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Total annual fund operating expenses 1.02%
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(a) The expenses listed above do not 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, 1999, the adviser waived a portion
of its management fee for the Fixed Income Fund, so the actual management
fee the Fund paid was 0.58% of average net assets, reducing total expenses
from 1.02% 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
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Fixed Income Fund $104 $325 $563 $1,248
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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 9 Prospectus
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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 Value, 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
Small-Cap Fund currently consists of one basic portfolio, but the adviser
anticipates that it will subsequently consist of at least two basic portfolios
managed by separate portfolio managers. The adviser believes a multi-portfolio
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.
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 (with the exception of the
Small-Cap Fund) generally do not intend to engage in frequent short-term
trading, in most years, each Fund's (other than the Value 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 10 Prospectus
<PAGE>
Management
INVESTMENT ADVISER
Aquinas Investment Advisers, 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, 1999, the Foundation
managed about $156 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
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Value Fund 1.00%
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Growth Fund 1.00%
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Fixed Income Fund 0.60%
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Small-Cap Fund 1.25%
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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 11 Prospectus
<PAGE>
- J. Ray Nixon, Jr., a director of the adviser. Mr. Nixon has been a principal
of Barrow, Hanley, Mewhinney & Strauss, an investment advisory firm, since
August 1994. Before that he was a stockbroker with Smith, Barney Shearson.
- Charles Clark, Jr., secretary and director of the Funds, and a director of the
adviser. He is president of Olmstead-Kirk Paper Company.
- John J. Kickham, a director of the adviser. 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 director of the adviser. He is a managing director of Merrill
Lynch since 1996 and an executive of that firm since 1998.
- John Hughes, a director of the adviser. Mr. Hughes is chief financial officer
of Associates First Capital Corp.
- Joe Pete Wilbert, a director of the adviser. Mr. Wilbert is president and
chief executive officer of Central Hardwoods.
PORTFOLIO MANAGERS
The portfolios of each of the 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.
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 ADVISER IS ULTIMATELY RESPONSIBLE FOR THE FUND'S INVESTMENT PERFORMANCE
BECAUSE OF ITS RESPONSIBILITY TO OVERSEE THE PORTFOLIO MANAGERS. Pursuant to an
order of exemption from the SEC, 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 portfolio managers.
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.
Aquinas Funds 12 Prospectus
<PAGE>
Value Fund
Waite & Associates L.L.C., 350 South Grand Avenue, Suite 3970, Los Angeles, CA
90071, provides investment management services to corporations, investment
companies, pension and profit-sharing plans and other institutions and
individuals. It has been a sub-adviser to a registered mutual fund since
December 1997. As of December 31, 1999, Waite had about $650 million in assets
under management.
Iridian Asset Management LLC, 276 Post Road West, Westport, CT 06880 provides
investment supervisory services to endowments, foundations, pension funds,
public institutions, insurance companies, trusts, limited partnerships and other
organizations. Its total assets under management as of August 31, 2000 were
about $9.6 billion.
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, 1999, Sirach had about
$7.5 billion in assets under management.
John McStay Investment Counsel, L.L.C. 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
$5.2 billion as of December 31, 1999.
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, 1999, IRM
managed more than $3.4 billion in assets.
Atlantic Asset Management, 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, 1999, AAM managed about $5.0 billion in assets.
Small-Cap Fund
John McStay Investment Counsel, L.L.C. serves as portfolio manager to the Small-
Cap Fund.
John McStay Investment Counsel, L.L.C. has experience managing accounts with the
same investment objective as the Small-Cap Fund. The data set forth below
illustrates the investment performance of all separately managed accounts that
are managed with substantially similar (although not identical) objectives,
policies and strategies of those of the Small-Cap Fund and compares the
performance to the Russell 2000 Index. This composite, the Institutional Small
Cap Equity Accounts Composite, does not include all of the assets under
management of John McStay Investment Counsel, L.L.C. and may not accurately
reflect the performance of all accounts managed by John McStay Investment
Counsel, L.L.C. The accounts included in the Institutional Small Cap Equity
Accounts Composite were managed with substantially similar (although not
identical) objectives, policies and strategies as those used by the Small-Cap
Fund. All performance data is historical and investors should not consider this
performance data as an indication of the future performance of the Small-Cap
Fund or the results an individual investor might achieve by investing in the
Small-Cap Fund. Investors should not rely on the historical performance of John
McStay Investment Counsel, L.L.C. when making an investment decision.
All returns are time-weighted total rates of return and include the reinvestment
of dividends. The performance information for the Institutional Small Cap
Equity Accounts Composite is net of the advisory fees charged by John McStay
Investment Counsel, L.L.C. to the accounts comprising the Institutional Small
Cap Equity Accounts Composite and all other expenses (except custody expenses).
The performance information for the Institutional Small Cap Equity Accounts
Composite does not reflect the assessment of the Small-Cap Fund's advisory fee
or other expenses equivalent to the Small-Cap Fund's operating expenses. The
fees and expenses of the Institutional Small Cap Equity Accounts Composite were
less than the annual expenses of the Small-Cap Fund. The performance of the
Institutional Small Cap Equity Accounts Composite would have been lower had the
Institutional Small Cap Equity Accounts Composite incurred higher fees and
expenses. The net effect of the deduction of the Small-Cap Fund's advisory fee
and other operating expenses on annualized performance, including the compounded
effect over time, may be significant. The Institutional Small Cap Equity
Accounts Composite was not subject to certain investment limitations,
diversification requirements and other restrictions imposed by the Investment
Company Act of 1940 and the Internal Revenue Code, nor was it managed with the
Small-Cap Fund's socially responsible investing mandate.
If it had been, its performance may have been adversely affected.
The performance information for the Institutional Small Cap Equity Accounts
Composite and the Russell 2000 Index is based on data supplied by the adviser or
from statistical services, reports or other sources which the adviser believes
are reliable. This performance information has not been verified by any third
party and is unaudited.
COMPOUNDED ANNUAL RATES OF RETURN
(FOR THE PERIODS ENDED JUNE 30, 2000) 1 YEAR 3 YEARS 5 YEARS 10 YEARS
-----------------------------------------------------------------------------
Institutional Small Cap
Equity Accounts Composite<F1> 14.7% 13.4% 19.2% 17.7%
Russell 2000<F2> 14.3% 10.6% 14.3% 13.6%
<F1> The calculation of the rates of return was performed in accordance with the
principles set forth in the Performance Presentation Standards endorsed by
the Association for Investment Management and Research ("AIMR") except that
prior to January 1, 1993 all portfolios were equally weighted without
regard to dollar value in determining the performance of the Institutional
Small Cap Equity Accounts Composite. This equal weighting method follows
the standards promulgated by the Investment Management Consultants'
Association which predates standards established by AIMR. Other perform-
ance calculation methods, including the SEC method may produce different
results. The AIMR perform-ance presentation criteria require the
presentation of at least a ten-year performance record or performance for
the period since inception, if shorter.
<F2> The Russell 2000 Index is an unmanaged index which assumes reinvestment of
dividends on securities in the index. The Russell 2000 Index is composed
of the 2000 smallest stocks in the Russell 3000 Index.
Please remember that past performance is not necessarily an indication of future
performance. Investors should also be aware that other performance calculation
methods may produce different results, and that comparisons of investment
results should consider qualitative circumstances and should be made only for
portfolios with generally similar investment objectives.
Service and Distribution Plan
The Funds have adopted a Service and Distribution Plan pursuant to Rule 12b-1
under the Investment Company Act. This Plan allows each of the Funds to use up
to 0.25% of its average daily net assets to pay sales, distribution and other
fees for the sale of its shares and for services provided to investors. Because
these fees are paid out of a
Aquinas Funds 14 Prospectus
<PAGE>
Fund's assets, over time these fees will increase the cost of your investment
and may cost more than paying other types of sales charges. Although all of the
Funds adopted the Service and Distribution Plan, only the Small-Cap Fund
currently intends to make any payments pursuant to the Plan.
Your Investment
DETERMINING SHARE PRICE
NET ASSET VALUE (NAV) is the price for one share of a Fund. Each Fund calculates
its NAV 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 calculated 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 calculated as of the close of the next trading day.
To calculate each Fund's NAV, we divide that 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 you can go to
our Web page at www.aquinasfunds.com and download an application.
--------------------
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 15 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 Advisers, Inc. at 1-972-
233-6655.
QUESTIONS? Call toll-free 1-877-AQUINAS (1-877-278-4627)
Aquinas Funds 16 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 your bank sends the wire.
- 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 17 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 17.
-------------------------------------------------------------------------------
BY WIRE
- Follow the instructions on page 17. 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 17.
-------------------------------------------------------------------------------
MEET YOUR TRANSFER AGENT
THE FUNDS' TRANSFER AND DIVIDEND 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 18 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 by the Funds
when the intermediary accepts them, and are priced at the next calculated net
asset value.
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 requirements apply.
QUESTIONS? Call toll-free 1-877-AQUINAS (1-877-278-4627)
Aquinas Funds 19 Prospectus
<PAGE>
HOW IT WORKS
You may request an exchange two ways:
- In writing. Follow the procedures in "Selling Shares," on page 21. The minimum
is $500.
- By telephone (unless you've waived telephone privileges). Call 1-800-423-6369.
The minimum is $1,000.
The Funds redeem the shares to be sold at the net asset value next calculated
after the transfer agent receives your exchange request. The shares you want to
acquire will be purchased at the net asset value next 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 20 Prospectus
<PAGE>
Selling Shares
You may take money out of your account anytime at no charge by selling some or
all of your shares back to the Fund (redeeming). The price you receive will be
the net asset value next 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 23.
- 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 21 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 22 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
an acceptable guarantor.
DIVIDENDS AND DISTRIBUTIONS
All the Funds pay dividends of net investment income quarterly except the Fixed
Income Fund and the Small-Cap Fund, which pay dividends of net investment income
monthly and annually, respectively. 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 Growth Fund and Small-Cap Fund will consist
primarily of capital gains; and the distributions of the Value 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 23 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. If you do not, the
Fund will not be obli-gated to correct the error.
- 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 and for the period from January 1, 2000 through June 30, 2000. 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 (other than
the information for the period from January 1, 2000 through June 30, 2000) 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 24 Prospectus
<PAGE>
Fixed Income Fund
<TABLE>
<CAPTION>
SIX
MONTHS YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
JUNE 30, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
2000 1999 1998 1997 1996 1995
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $9.47 $10.18 $10.17 $9.90 $10.17 $9.24
Income from Investment Operations:
Net investment income 0.29 0.53 0.54 0.55 0.54 0.54
Net realized and unrealized gains
(losses) on investments _ (0.71) 0.17 0.27 (0.27) 0.93
---------------------------------------------------------------------------------------------------
Total from Investment
Operations 0.29 (0.18) 0.71 0.82 0.27 1.47
---------------------------------------------------------------------------------------------------
Less Distributions:
Dividends from net investment income (0.29) (0.53) (0.54) (0.55) (0.54) (0.54)
Distributions from net realized gains _ _ (0.16) _ _ _
---------------------------------------------------------------------------------------------------
Total Distributions (0.29) (0.53) (0.70) (0.55) (0.54) (0.54)
---------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $9.47 $9.47 $10.18 $10.17 $9.90 $10.17
===================================================================================================
Total Return<F1> 3.14% (1.86)% 7.17% 8.54% 2.83% 16.26%
Supplemental Data and Ratios:
Net assets, end of period
(in thousands) $39,524 $42,154 $42,865 $40,699 $37,229 $35,617
Ratio to Average Net Assets of:<F2>
Expenses, net of waivers and
reimbursements 1.00% 1.00% 1.00% 0.99% 1.00% 0.98%
Expenses, before waivers and
reimbursements 1.04% 1.02% 1.03% 1.05% 1.03% 0.98%
Net investment income,
net of waivers and reimbursements 6.11% 5.37% 5.27% 5.54% 5.44% 5.46%
Net investment income, before waivers
and reimbursements 6.07% 5.35% 5.24% 5.48% 5.41% 5.46%
Portfolio turnover rate<F1> 53% 131% 120% 102% 169% 126%
</TABLE>
<F1> Not annualized for the period from January 1, 2000 through June 30, 2000.
<F2> Annualized for the period from January 1, 2000 through June 30, 2000.
Aquinas Funds 25 Prospectus
<PAGE>
Value Fund
<TABLE>
<CAPTION>
SIX
MONTHS YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
JUNE 30, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
2000 1999 1998 1997 1996 1995
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $11.34 $13.21 $14.89 $13.26 $11.83 $9.39
Income from Investment Operations:
Net investment income 0.10 0.21 0.23 0.26 0.23 0.28
Net realized and unrealized gains
(losses) on investments (0.87) (0.09) 0.57 3.40 2.18 3.03
----------------------------------------------------------------------------------------------------
Total from Investment Operations (0.77) 0.12 0.80 3.66 2.41 3.31
----------------------------------------------------------------------------------------------------
Less Distributions:
Dividends from net investment income (0.10) (0.20) (0.23) (0.26) (0.23) (0.28)
Distributions from net realized gains _ (1.79) (2.25) (1.77) (0.75) (0.59)
----------------------------------------------------------------------------------------------------
Total Distributions (0.10) (1.99) (2.48) (2.03) (0.98) (0.87)
----------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.47 $11.34 $13.21 $14.89 $13.26 $11.83
====================================================================================================
Total Return<F1> (6.75)% 1.12% 5.50% 27.85% 20.43% 35.62%
Supplemental Data and Ratios:
Net assets, end of period
(in thousands) $49,531 $57,813 $64,877 $73,594 $54,184 $42,102
Ratio to Average Net Assets of:<F2>
Expenses, net of waivers and
reimbursements 1.39% 1.38% 1.36% 1.37% 1.40% 1.37%
Expenses, before waivers and
reimbursements 1.39% 1.38% 1.36% 1.37% 1.40% 1.37%
Net investment income, net of waivers
and reimbursements 1.90% 1.56% 1.49% 1.74% 1.79% 2.47%
Net investment income, before waivers
and reimbursements 1.90% 1.56% 1.49% 1.74% 1.79% 2.47%
Portfolio turnover rate<F1> 16% 100% 64% 42% 32% 40%
</TABLE>
<F1> Not annualized for the period from January 1, 2000 through June 30, 2000.
<F1> Annualized for the period from January 1, 2000 through June 30, 2000.
Aquinas Funds 26 Prospectus
<PAGE>
Growth Fund
<TABLE>
<CAPTION>
SIX
MONTHS YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
JUNE 30, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
2000 1999 1998 1997 1996 1995
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $19.48 $17.57 $15.12 $13.45 $12.13 $9.31
Income from Investment Operations:
Net investment income (loss) (0.07) (0.14) (0.10) (0.06) (0.06) (0.01)
Net realized and unrealized gains
(losses) on investments 1.45 4.20 3.40 3.93 2.84 2.83
----------------------------------------------------------------------------------------------------
Total from Investment Operations 1.38 4.06 3.30 3.87 2.78 2.82
----------------------------------------------------------------------------------------------------
Less Distributions:
Dividends from net investment income _ _ _ _ _ _
Distributions from net realized gains _ (2.15) (0.85) (2.20) (1.46) _
----------------------------------------------------------------------------------------------------
Total Distributions _ (2.15) (0.85) (2.20) (1.46) _
----------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $20.86 $19.48 $17.57 $15.12 $13.45 $12.13
====================================================================================================
Total Return<F1> 7.08% 23.12% 21.95% 28.97% 22.90% 30.29%
Supplemental Data and Ratios:
Net assets, end of period
(in thousands) $68,104 $59,867 $47,400 $35,990 $22,593 $15,912
Ratio to Average Net Assets of:<F3>
Expenses, net of waivers and
reimbursements 1.38% 1.41% 1.42% 1.49% 1.50% 1.50%
Expenses, before waivers and
reimbursements 1.38% 1.41% 1.42% 1.49% 1.54% 1.61%
Net investment income (loss),
net of waivers and reimbursements (0.76)% (0.83)% (0.71)% (0.66)% (0.55)% (0.10)%
Net investment income (loss),
before waivers and reimbursements (0.76)% (0.83)% (0.71)% (0.66)% (0.59)% (0.21)%
Portfolio turnover rate<F1> 53% 99% 96% 104% 112% 102%
</TABLE>
<F1> Not annualized for the period from January 1, 2000 through June 30, 2000.
<F2> Annualized for the period from January 1, 2000 through June 30, 2000.
Aquinas Funds 27 Prospectus
<PAGE>
Small-Cap Fund<F3>
<TABLE>
<CAPTION>
SIX
MONTHS YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
JUNE 30, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
2000 1999 1998 1997 1996 1995
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.40 $11.34 $11.58 $11.53 $11.03 $9.43
Income from Investment Operations:
Net investment income 0.14 0.27 0.28 0.31 0.26 0.32
Net realized and unrealized gains
(losses) on investments 0.01 0.17 0.68 1.95 1.41 1.84
----------------------------------------------------------------------------------------------------
Total from Investment Operations 0.15 0.44 0.96 2.26 1.67 2.16
----------------------------------------------------------------------------------------------------
Less Distributions:
Dividends from net investment income (0.14) (0.26) (0.28) (0.30) (0.26) (0.33)
Distributions from net
realized gains _ (1.12) (0.92) (1.91) (0.91) (0.23)
----------------------------------------------------------------------------------------------------
Total Distributions (0.14) (1.38) (1.20) (2.21) (1.17) (0.56)
----------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.41 $10.40 $11.34 $11.58 $11.53 $11.03
====================================================================================================
Total Return<F1> 1.47% 4.06% 8.46% 19.91% 15.29% 23.14%
Supplemental Data and Ratios:
Net assets, end of period
(in thousands) $23,623 $24,936 $27,089 $29,164 $29,670 $26,779
Ratio to Average Net Assets of:<F2>
Expenses, net of waivers and
reimbursements 1.50% 1.50% 1.44% 1.45% 1.44% 1.46%
Expenses, before waivers and
reimbursements 1.53% 1.53% 1.49% 1.52% 1.49% 1.46%
Net investment income, net of waivers
and reimbursements 2.73% 2.39% 2.38% 2.44% 2.23% 2.93%
Net investment income, before waivers
and reimbursements 2.70% 2.36% 2.33% 2.37% 2.18% 2.93%
Portfolio turnover rate<F1> 59% 118% 102% 94% 111% 118%
</TABLE>
<F1> Not annualized for the period from January 1, 2000 through June 30, 2000.
<F2> Annualized for the period from January 1, 2000 through June 30, 2000.
<F3> Prior to November 1, 2000, the Small-Cap Fund was known as the "Balanced
Fund" and it was designed to provide one vehicle for participating in the
investment strategies of the Value Fund, Growth Fund and Fixed Income
Fund.
Aquinas Funds 28 Prospectus
<PAGE>
Directors and Officers
Directors:
Michael R. Corboy
Imelda Gonzalez, CDP
Thomas J. Marquez
John L. Strauss
Charles Clark, Jr.
Kathleen Muldoon
Levy Curry
Principal Officers:
Frank Rauscher, President and Treasurer
Christy Frazer, Vice President
Joe Pete Wilbert, Vice President
Charles Clark, Jr., Secretary
INVESTMENT ADVISER
Aquinas Investment Advisers, Inc.
5310 Harvest Hill Road
Suite 248
Dallas, Texas 75230
ADMINISTRATOR
Sunstone Financial Group, Inc.
803 West Michigan Street, Suite A
Milwaukee, Wisconsin 53233
CUSTODIAN
UMB Bank, n.a.
Securities Services Division
P.O. Box 419226
Kansas City, Missouri 64141
INDEPENDENT ACCOUNTANTS
Arthur Andersen LLP
100 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
LEGAL COUNSEL
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
For regular mail, use this address:
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, Inc.
c/o DST Systems, Inc.
330 West 9th Street, First Floor
Kansas City, MO 64105
Aquinas Funds 29 Prospectus
<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 1-202-
942-8090.
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 electronic request at the following e-mail
address: public [email protected], or 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
(LOGO)
AQUINAS FUNDS
5310 Harvest Hill Road, Suite 248, Dallas, Texas 75230
Call toll free 1-877 AQUINAS (278-4627)
Visit our web page at http://www.aquinasfunds.com
Aquinas Funds 30 Prospectus
<PAGE>
