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Title: |
Statement of Additional Information |
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Entities: |
Chase Manhattan Bank; Cincinnati Bell Inc.; First American Investment Funds Inc; First Union Corp.; U.S. Bank, NA; Federal National Mortgage Association; University of Missouri; Drinker Biddle & Reath LLP |
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Date: |
2001 |
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Preview shows 48KB of 557KB total |
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$82 |
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#2389221 |
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Statement of Additional Information for
Institutional, Retail A, Retail B and Y Shares of the
Firstar Short-Term Bond, Intermediate Bond, U.S.
Government Securities, Aggregate Bond, Bond
IMMDEX(TM), Strategic Income, Tax-Exempt Intermediate
Bond, Missouri Tax-Exempt Bond, National Municipal
Bond, Balanced Income, Balanced Growth, Growth &
Income, Equity Income, Relative Value, Equity Index,
Large Cap Core Equity, Large Cap Growth,
International Value, Global Equity, International
Growth, MidCap Index, MidCap Core Equity, Small Cap
Index, Small Cap Core Equity, Science & Technology
and MicroCap Funds dated March 1, 2001. Statement of
Additional Information for Retail A, Retail B, Y and
Institutional Shares of the Firstar REIT Fund dated March 1, 2001
{PAGE} 2
FIRSTAR FUNDS, INC.
Statement of Additional Information
{TABLE}
{S} {C} {C}
Short-Term Bond Fund National Municipal Bond Fund International Value Fund
Intermediate Bond Fund Balanced Income Fund Global Equity Fund
U.S. Government Securities Fund Balanced Growth Fund International Growth Fund
Aggregate Bond Fund Growth & Income Fund MidCap Index Fund
Bond IMMDEX(TM) Fund Equity Income Fund MidCap Core Equity Fund
Strategic Income Fund Relative Value Fund Small Cap Index Fund
Tax-Exempt Intermediate Bond Equity Index Fund Small Cap Core Equity Fund
Fund Large Cap Core Equity Fund Science & Technology Fund
Missouri Tax-Exempt Bond Fund Large Cap Growth Fund MicroCap Fund
{/TABLE}
March 1, 2001
TABLE OF CONTENTS
{TABLE}
{CAPTION}
Page
--
{S} {C}
FIRSTAR FUNDS, INC................................................... 3
DESCRIPTION OF THE FUNDS AND THEIR INVESTMENTS AND RISKS............. 6
INVESTMENT STRATEGIES AND RISKS...................................... 12
NET ASSET VALUE...................................................... 78
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION....................... 80
DESCRIPTION OF SHARES................................................ 87
ADDITIONAL INFORMATION CONCERNING TAXES.............................. 91
MANAGEMENT OF THE COMPANY............................................ 93
CUSTODIAN, TRANSFER AGENT AND ACCOUNTING SERVICES AGENT.............. 112
EXPENSES............................................................. 113
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS..................... 113
COUNSEL.............................................................. 114
CODE OF ETHICS....................................................... 114
PERFORMANCE CALCULATIONS............................................. 114
PERFORMANCE HISTORY.................................................. 124
MISCELLANEOUS........................................................ 132
APPENDIX A........................................................... A-1
APPENDIX B........................................................... B-1
{/TABLE}
This Statement of Additional Information ("SAI"), which is not a
prospectus, supplements and should be read in conjunction with Firstar Funds,
Inc.'s prospectuses (the "Prospectuses") dated March
1, 2001, for Institutional, Retail A, Retail B and Y Shares of the Short-Term
Bond Fund, Intermediate Bond Fund, U.S. Government Securities Fund, Aggregate
Bond Fund, Bond IMMDEX(TM) Fund, Strategic Income Fund, Tax-Exempt Intermediate
Bond Fund, Missouri Tax-Exempt Bond Fund, National Municipal Bond Fund, Balanced
Income Fund, Balanced Growth Fund, Growth & Income Fund, Equity Income Fund,
Relative Value Fund, Equity Index Fund, Large Cap Core Equity Fund, Large Cap
{PAGE} 3
Growth Fund, International Value Fund, Global Equity Fund, International Growth
Fund, MidCap Index Fund, MidCap Core Equity Fund, Small Cap Index Fund, Small
Cap Core Equity Fund, Science & Technology Fund and MicroCap Fund (collectively
referred to as the "Funds") and is incorporated by reference in its entirety
into the Prospectuses. The U.S. Government Securities Fund, Aggregate Bond Fund,
Strategic Income Fund, Missouri Tax-Exempt Bond Fund, National Municipal Bond
Fund, Equity Income Fund, Relative Value Fund, Large Cap Growth Fund, Global
Equity Fund, Small Cap Index Fund and Science & Technology Fund commenced
operations as a portfolio of either the Firstar Stellar Funds or Mercantile
Mutual Funds, Inc. (the "Shell Predecessor Funds"), as further explained herein.
On December 11, 2000, each Shell Predecessor Fund was reorganized as a new
portfolio of Firstar Funds, Inc.
On November 27, 2000, the International Equity Portfolio and Small Cap
Equity Portfolio of Mercantile Mutual Funds, Inc. (the "Historical Predecessor
Funds") reorganized into the Firstar International Growth Fund and the Firstar
Small Cap Core Equity Fund, respectively. The financial history of the
Historical Predecessor Funds survived these reorganizations. The Shell
Predecessor Funds and the Historical Predecessor Funds are hereinafter known as
the "Predecessor Funds."
Copies of the Prospectuses may be obtained, without charge, by writing
Firstar Mutual Fund Services, LLC at 615 East Michigan Street, P.O. Box 3011,
Milwaukee, WI 53201-3011 or by calling 1-800-677-FUND. The financial statements
and the independent accountants reports are incorporated by reference into this
SAI from the Funds' Annual Reports dated October 31, 2000, which may be obtained
by writing the address above or calling the toll-free number above. No other
parts of the Annual Reports are incorporated herein by reference.
FIRSTAR FUNDS, INC.
Firstar Funds, Inc. (the "Company") is a Wisconsin corporation that was
incorporated on February 15, 1988 as a management investment company. The
Company, formerly known as Portico Funds, Inc., changed its name effective
February 1, 1998. The Company is authorized to issue separate classes of shares
of Common Stock representing interests in separate investment portfolios. Each
class of the Funds is currently divided into four series, a Retail A, Retail B,
Y and Institutional series. This SAI pertains to Retail A Shares, Retail B
Shares, Y Shares and Institutional Shares of twenty-five diversified portfolios,
the Short-Term Bond Fund, Intermediate Bond Fund, U.S. Government Securities
Fund, Aggregate Bond Fund, Bond IMMDEX(TM) Fund, Strategic Income Fund, Tax-
Exempt Intermediate Bond Fund, Missouri Tax-Exempt Bond Fund, National Municipal
Bond Fund, Balanced Income Fund, Balanced Growth Fund, Growth & Income Fund,
Equity Income Fund, Relative Value Fund, Equity Index Fund, Large Cap Core
Equity Fund, Large Cap Growth Fund, International Value Fund, International
Growth Fund, MidCap Index Fund, MidCap Core Equity Fund, Small Cap Index Fund,
Small Cap Core Equity Fund, Science & Technology Fund and MicroCap Fund and to Y
Shares and Institutional Shares of one additional portfolio, the Global Equity
Fund (collectively the "Funds").
Stellar/Mercantile Reorganization
On November 27, 2000, Mercantile Mutual Funds, Inc. and Firstar Stellar
Funds were reorganized into the Company. As a result of this reorganization,
certain portfolios offered by Mercantile Mutual Funds, Inc. and Firstar Stellar
Funds reorganized into certain of the Company's Funds that existed prior to the
reorganization as follows:
{PAGE} 4
{TABLE}
{CAPTION}
Portfolio(s) of Firstar Stellar Funds and/or
Mercantile Mutual Funds, Inc. that
Reorganized into Firstar Fund Firstar Fund
----------------------------- ------------
{S} {C}
Mercantile Intermediate Corporate Bond Portfolio Intermediate Bond Fund
Mercantile U.S. Government Securities Portfolio U.S. Government Securities Fund
("Predecessor U.S. Government Securities Fund")
and Firstar Stellar U.S. Government Income Fund
Mercantile Government & Corporate Bond Portfolio Aggregate Bond Fund
("Predecessor Aggregate Bond Fund") and
Mercantile Bond Index Portfolio
Mercantile Short-Intermediate Municipal Portfolio Tax-Exempt Intermediate Bond Fund
Mercantile National Municipal Bond Portfolio National Municipal Bond Fund
("Predecessor National Municipal Bond Fund") and
Firstar Stellar Insured Tax-Free Bond Fund
Firstar Stellar Fund Balanced Income Fund
Mercantile Balanced Portfolio Balanced Growth Fund
Mercantile Growth & Income Equity Portfolio Growth & Income Fund
Mercantile Equity Index Portfolio Equity Index Fund
Mercantile Growth Equity Portfolio Large Cap Core Equity Fund
Mercantile International Equity Portfolio International Growth Fund
("Predecessor International Growth Fund")
Firstar Stellar Capital Appreciation Fund MidCap Index Fund
Mercantile Small Cap Equity Portfolio Small Cap Core Equity Fund
("Predecessor Small Cap Core Equity Fund")
{/TABLE}
For the periods prior to November 27, 2000, the performance history,
historical data and certain of the expense information related to the U.S.
Government Securities Fund, Aggregate Bond Fund, National Municipal Bond Fund,
International Growth Fund and Small Cap Core Equity Fund that is set forth in
this SAI is that of the Predecessor U.S. Government Securities Fund, Predecessor
Aggregate Bond Fund, Predecessor National Municipal Bond Fund, Predecessor
International Growth Fund and Predecessor Small Cap Core Equity Fund,
respectively.
The fiscal year end of the Aggregate Bond Fund, U.S. Government
Securities Fund and National Municipal Bond Fund was changed from November 30 to
October 31 effective October 31, 2000. Therefore, certain information for these
Funds set forth in this SAI is for the eleven-month fiscal period ended October
31, 2000 and/or the fiscal years ended November 30, 1999 and 1998.
{PAGE} 5
Additionally, the following Funds were originally organized as
investment portfolios of the following investment companies under the following
names:
{TABLE}
{CAPTION}
Formerly an Investment Portfolio
Portfolio of the Following Name at Predecessor
Firstar Fund Name Investment Company Investment Company
----------------- ------------------ -----------------
{S} {C} {C}
Strategic Income Fund Firstar Stellar Funds Firstar Stellar Strategic
Income Fund ("Predecessor
Strategic Income Fund")
Missouri Tax-Exempt Bond Fund Mercantile Mutual Funds, Mercantile Missouri Tax-Exempt
Inc. Bond Portfolio ("Predecessor
Missouri Tax-Exempt Bond Fund")
Equity Income Fund Mercantile Mutual Funds, Mercantile Equity Income
Inc. Portfolio ("Predecessor Equity
Income Fund")
Relative Value Fund Firstar Stellar Funds Firstar Stellar Relative Value
Fund ("Predecessor Relative
Value Fund")
Large Cap Growth Fund Firstar Stellar Funds Firstar Stellar Growth Equity
Fund ("Predecessor Large Cap
Growth Fund")
Global Equity Fund Firstar Stellar Funds Firstar Stellar International
Equity Fund ("Predecessor
Global Equity Fund")
Small Cap Index Fund Mercantile Mutual Funds, Mercantile Small Cap Equity
Inc. Index Portfolio ("Predecessor
Small Cap Index Fund")
Science & Technology Fund Firstar Stellar Funds Firstar Stellar Science &
Technology Fund ("Predecessor
Science & Technology Fund")
{/TABLE}
On December 11, 2000, each of these Funds was reorganized as an investment
portfolio of the Company. For the periods prior to December 11, 2000, the
performance history, historical data and certain of the expense information
related to these Funds that is set forth in this SAI is that of the Predecessor
Funds set forth above.
These Funds also changed their fiscal year end from November 30 to October
31 effective October 31, 2000. Therefore, certain information for the
Predecessor Funds set forth in this SAI is for the eleven-month fiscal period
ended October 31, 2000 and/or the fiscal years ended November 30, 1999 and 1998.
The Short Term Bond, Intermediate Bond, Bond IMMDEX(TM), Tax-Exempt
Intermediate Bond, Balanced Income, Balanced Growth, Growth & Income, Equity
Index, Large Cap Core Equity, International Value, MidCap Index, MidCap Core
Equity and MicroCap Funds all existed as portfolios of the Company prior to the
reorganization and have maintained their performance histories and investment
policies. These portfolios are referred to herein as the "Continuing Funds."
The U.S. Government Securities, Aggregate Bond, Strategic Income, Missouri
{PAGE} 6
Tax-Exempt Bond, National Municipal Bond, Equity Income, Relative Value, Large
Cap Growth, Global Equity, International Growth, Small Cap Index, Small Cap Core
Equity and Science & Technology Funds are referred to herein as the "New Funds."
Name Changes
The Short-Term Bond Fund changed its name from Short-Term Bond Market Fund
on December 11, 2000, and had previously changed its name from Short-
Intermediate Fixed Income Fund effective January 1, 1993. The Intermediate Bond
Fund changed its name from the Intermediate Bond Market Fund on November 27,
2000. The Balanced Growth Fund changed its name from the Balanced Fund
effective February 1, 1998. The Growth & Income Fund changed its name from the
Income and Growth Fund effective August 16, 1993. The Large Cap Core Equity
Fund changed its name from the Growth Fund on November 27, 2000, and had
previously changed its name from the MidCore Growth Fund effective May 30, 1997.
The International Value Fund changed its name from the International Equity Fund
on December 11, 2000. The International Growth Fund changed its name from the
Core International Equity Fund on November 27, 2000. The MidCap Core Equity
Fund changed its name from the Special Growth Fund on December 11, 2000. The
Small Cap Core Equity Fund changed its name from the Emerging Growth Fund on
November 27, 2000.
Commencement of Operations
The MidCap Core Equity Fund commenced operations on December 28, 1989; the
Short-Term Bond Fund, Bond IMMDEX(TM) Fund, Growth & Income Fund and Equity
Index Fund commenced operations on December 29, 1989; the Balanced Growth Fund
commenced operations on March 30, 1992; the Large Cap Core Equity Fund commenced
operations on December 29, 1992; the Intermediate Bond Fund commenced operations
on January 5, 1993; the Tax-Exempt Intermediate Bond Fund commenced operations
on February 8, 1993; the International Value Fund commenced operations on April
28, 1994; the MicroCap Fund commenced operations on August 1, 1995; the Small
Cap Core Equity Fund commenced operations on August 15, 1997 and adopted the
investment policies and performance and financial history of the Mercantile
Small Cap Equity Portfolio (which commenced operations on May 6, 1992) on
November 27, 2000; the Balanced Income Fund commenced operations on December 1,
1997; and the International Growth Fund and MidCap Index Fund commenced
operations on November 4, 1999, with the International Growth Fund adopting the
investment policies and performance and financial history of the Mercantile
International Equity Portfolio (which commenced operations on April 4, 1994) on
November 27, 2000.
The Funds listed below commenced operations as portfolios of the Company on
December 11, 2000. These funds continued the investment policies and
performance and financial history of their respective Predecessor Funds, each of
which commenced operations on the date set forth after the name of each Fund:
U.S. Government Securities Fund (February 1, 1991); Aggregate Bond Fund
(February 1, 1991); Strategic Income Fund (December 12, 1994); Missouri Tax-
Exempt Bond Fund (July 15, 1988); National Municipal Bond Fund (November 18,
1996); Equity Income Fund (February 27, 1997); Relative Value Fund (June 5,
1991); Large Cap Growth Fund (December 12, 1994); Global Equity Fund (December
3, 1997); Small Cap Index Fund (December 30, 1998); and Science & Technology
Fund (August 9, 1999).
The Company also offers other investment portfolios that are described in
separate statements of additional information. For information concerning these
other portfolios, contact Firstar Mutual Fund Services, LLC at 1-800-677-FUND or
write to 615 East Michigan Street, P.O. Box 3011, Milwaukee, Wisconsin 53201-
3011.
{PAGE} 7
DESCRIPTION OF THE FUNDS AND THEIR INVESTMENTS AND RISKS
The Company is a diversified, open-end management investment company. The
following policies supplement the Funds' respective investment objectives and
policies as set forth in the Prospectuses.
Portfolio Transactions
Subject to the general supervision of the Board of Directors, Firstar
Investment Research & Management Company, LLC ("FIRMCO" or the "Adviser") is
responsible for, makes decisions with respect to, and places orders for all
purchases and sales of portfolio securities for each Fund except the
International Value Fund and International Growth Fund. Subject to the general
supervision of the Board of Directors, the Adviser is responsible for the
portfolio management of the International Value Fund and International Growth
Fund. Pursuant to the terms of the Adviser's Advisory Agreements with the
Funds, the Adviser has delegated certain of its duties to Hansberger Global
Investors, Inc. ("HGI") and Clay Finlay, Inc. ("Clay Finlay") (HGI and Clay
Finlay are collectively referred to as the "Sub-Advisers"). Within the framework
of the investment objectives, policies and restrictions of each Fund, and
subject to the supervision of the Adviser, HGI and Clay Finlay each is
responsible for, makes decisions with respect to, and places orders for all
purchases and sales of portfolio securities for the International Value Fund and
International Growth Fund, respectively.
The portfolio turnover rate for each Fund is calculated by dividing
the lesser of purchases or sales of portfolio securities for the reporting
period by the monthly average value of the portfolio securities owned during the
reporting period. The calculation excludes all securities, including options,
whose maturities or expiration dates at the time of acquisition are one year or
less. Portfolio turnover may vary greatly from year to year as well as within a
particular year, and may be affected by cash requirements for redemption of
shares and by requirements which enable the Funds to receive favorable tax
treatment. Portfolio turnover will not be a limiting factor in making portfolio
decisions, and each Fund may engage in short-term trading to achieve its
investment objective. The expected maximum portfolio turnover rate for the
International Value Fund for the current fiscal year is 75%, and the expected
maximum portfolio turnover rate for the MidCap Index Fund for the current fiscal
year is 30%. Although the Strategic Income Fund does not intend to invest for
short-term profits, securities in the Fund's portfolio will be sold whenever the
Adviser believes it is appropriate to do so in light of its investment
objective. The Adviser disregards the length of time a particular security may
have been held by the Fund.
The Fund may sell a portfolio investment soon after its acquisition if
the Adviser believes that such a disposition is consistent with attaining the
investment objective of the Fund. Portfolio investments may be sold for a
variety of reasons, such as a more favorable investment opportunity or other
circumstances bearing on the desirability of continuing to hold such
investments. A high rate of portfolio turnover (over 100%) may involve
correspondingly greater brokerage commission expenses and other transaction
costs, which must be borne directly by the Fund and ultimately by its
shareholders. High portfolio turnover may result in the realization of
substantial net capital gains; to the extent short-term capital gains are
realized, distributions relating from such gains will be ordinary income for
federal income tax purposes. The Strategic Income Fund's turnover rates for the
past two fiscal years are shown below.
{TABLE}
{CAPTION}
October 31, 2000 November 30, 1999
---------------- -----------------
{S} {C}
63% 73%
{/TABLE}
{PAGE} 8
Transactions on U.S. stock exchanges involve the payment of negotiated
brokerage commissions. On exchanges on which commissions are negotiated, the
cost of transactions may vary among different brokers. Unlike transactions on
U.S. stock exchanges that involve the payment of negotiated brokerage
commissions, transactions in foreign securities generally involve the payment of
fixed brokerage commissions that are generally higher than those in the United
States; and
Transactions in the over-the-counter market are generally principal
transactions with dealers and the costs of such transactions involve dealer
spreads rather than brokerage commissions. With respect to over-the-counter
transactions, the Adviser and Sub-Advisers will normally deal directly with
dealers who make a market in the securities involved except in those
circumstances where better prices and execution are available elsewhere or as
described below.
Fixed income securities purchased and sold by the Funds are generally
traded in the over-the-counter market on a net basis (i.e., without commission)
through dealers, or otherwise involve transactions directly with the issuer of
an instrument. The cost of securities purchased from underwriters includes an
underwriting commission or concession, and the prices at which securities are
purchased from and sold to dealers include a dealer's mark-up or mark-down.
The Funds may participate, if and when practicable, in bidding for the
purchase of portfolio securities directly from an issuer in order to take
advantage of the lower purchase price available to members of a bidding group.
The Funds will engage in this practice, however, only when the Adviser (or the
respective Sub-Adviser), in its sole discretion, believes such practice to be in
the Funds' interests.
For the fiscal years ended October 31, 2000, 1999, 1998 and, the Company paid
brokerage commissions as follows:
{TABLE}
{CAPTION}
Fund 2000 1999 1998
---- ---- ---- ----
{S} {C} {C} {C}
Short-Term Bond $ 0 $ 0 $ 0
Intermediate Bond 0 0 0
Bond IMMDEX(TM) 0 0 0
Tax-Exempt Intermediate Bond 0 0 0
Balanced Income 81,198 35,386 17,012
Balanced Growth 237,249 269,930 183,767
Growth & Income 1,119,522 944,299 521,009
Equity Index 44,415 103,834 100,414
Large Cap Core Equity 296,518 347,203 187,935
International Value 265,095 125,280 183,485
MidCap Index 67,421 - -
MidCap Core Equity 1,618,878 1,732,758 912,455
MicroCap 311,350 171,579 151,906
{/TABLE}
For the fiscal years ended October 31, 2000, and November 30, 1999, and 1998,
brokerage commissions were paid for the Predecessor Funds as follows:
{PAGE} 9
{TABLE}
{CAPTION}
Fund 2000 1999 1998
---- ---- ---- ----
{S} {C} {C} {C}
U.S. Government Securities $ 0 $ 0 $ 0
Aggregate Bond 0 0 0
Strategic Income 240,724 334,889 395,862
Missouri Tax-Exempt Bond 0 0 0
National Municipal Bond 0 0 0
Equity Income 143,387 275,891 361,966
Relative Value 129,016 219,478 315,245
Large Cap Growth 227,042 305,414 286,979
Global Equity 6,000 70,829 50,105
{/TABLE}
{TABLE}
{CAPTION}
Fund 2000 1999 1998
---- ---- ---- ----
{S} {C} {C} {C}
International Growth 694,953 387,288 293,093
Small Cap Index 18,766 98,519 -
Small Cap Core Equity 244,212 319,318 550,114
Science & Technology 71,478 21,635 -
{/TABLE}
None of the brokerage commissions were paid to affiliates of the Company, the
Adviser, Sub-Advisers or the Administrator.
The Advisory Agreement between the Company and the Adviser, and with
respect to the International Value Fund, the Sub-Advisory Agreement among the
Company, the Adviser and HGI, and with respect to the International Growth Fund,
the Sub-Advisory Agreement among the Company, the Adviser and Clay Finlay,
provide that, in executing portfolio transactions and selecting brokers or
dealers, the Adviser and Sub-Advisers will seek to obtain the best overall terms
available. In assessing the best overall terms available for any transaction,
the Adviser (or the respective Sub-Adviser) shall consider factors it deems
relevant, including the breadth of the market in the security, the price of the
security, the financial condition and execution capability of the broker or
dealer, and the reasonableness of the commissions, if any, both for the specific
transaction and on a continuing basis. In addition, the Agreements authorize
the Adviser and Sub-Advisers to cause the Funds to pay a broker-dealer which
furnishes brokerage and research services a higher commission than that which
might be charged by another broker-dealer for effecting the same transaction,
provided that the Adviser or respective Sub-Adviser determines in good faith
that such commission is reasonable in relation to the value of the brokerage and
research services provided by such broker-dealer, viewed in terms of either the
particular transaction or the overall responsibilities of the Adviser and Sub-
Adviser to the Funds. Such brokerage and research services might consist of
reports and statistics relating to specific companies or industries, general
summaries of groups of stocks or bonds and their comparative earnings and
yields, or broad overviews of the stock, bond and government securities markets
and the economy.
Supplementary research information so received is in addition to, and not
in lieu of, services required to be performed by the Adviser or Sub-Advisers and
does not reduce the advisory fees payable to it by the Funds. The Directors
will periodically review the commissions paid by the Funds to consider whether
the commissions paid over representative periods of time appear to be reasonable
in relation to the benefits inuring to the Funds. It is possible that certain
of the supplementary research or other services received will primarily benefit
one or more other investment companies or other accounts for which investment
discretion is exercised. Conversely, a Fund may be the primary beneficiary of
{PAGE} 10
the research or services received as a result of portfolio transactions effected
for such other account or investment company.
Portfolio securities will not be purchased from or sold to (and savings
deposits will not be made in and repurchase and reverse repurchase agreements
will not be entered into with) the Adviser, the Sub-Advisers, and the
Distributor or an affiliated person of any of them (as such term is defined in
the 1940 Act) acting as principal. In addition, the Funds will not purchase
securities during the existence of any underwriting or selling group relating
thereto of which the Distributor or their Adviser or Sub-Advisers, or an
affiliated person of any of them, is a member, except to the extent permitted by
the Securities and Exchange Commission ("SEC").
Investment decisions for the Funds are made independently from those for
other investment companies and accounts advised or managed by their Adviser or
Sub-Advisers. Such other investment companies and accounts may also invest in
the same securities as the Funds. When a purchase or sale of the same security
is made at substantially the same time on behalf of a Fund and another
investment company or account, the transaction will be averaged as to price and
available investments allocated as to amount, in a manner which the Adviser or
respective Sub-Adviser believes to be equitable to the Fund and such other
investment company or account. In some instances, this investment procedure may
adversely affect the price paid or received by a Fund or the size of the
position obtained or sold by the Fund. To the extent permitted by law, the
Adviser or respective Sub-Adviser may aggregate the securities to be sold or
purchased for a Fund with those to be sold or purchased for other investment
companies or accounts in executing transactions.
As of October 31, 2000, each Firstar Fund held securities of its regular brokers
or dealers (as defined under the 1940 Act) or their parents as follows:
{TABLE}
{CAPTION}
Fund Broker/Dealer Total Holdings
---- ------------- --------------
{S} {C} {C}
Short-Term Bond Paine Webber $ 1,011,000
Donaldson, Lufkin & Jenrette $ 3,966,708
Associated Corp. 1,952,080
Lehman Brothers 7,375,658
Goldman Sachs 1,961,912
Bear Stearns 809,762
Intermediate Bond Lehman Brothers 10,022,405.33
Merrill Lynch 6,843,032
Goldman Sachs 4,904,780
Paine Webber 3,547,275
Salomon 1,094,949
Bear Stearns 2,166,773
Donaldson, Lufkin & Jenrette 2,956,047
Bond IMMDEX(TM) Lehman Brothers 13,276,883
Goldman Sachs 9,809,560
Paine Webber 6,543,088
Merrill Lynch 4,813,820
Salomon 5,537,000
Associated Corp. 4,777,716
Balanced Income Merrill Lynch 804,544
Morgan Stanley 747,340
Lehman Brothers 520,709
Goldman Sachs 392,382
Banc One Capital Corp. 244,580
Donaldson, Lufkin & Jenrette 197,070
Balanced Growth Paine Webber 1,045,000
{/TABLE}
{PAGE} 11
{TABLE}
{S} {C} {C}
Donaldson, Lufkin & Jenrette 1,772,545
Morgan Stanley 939,656
Lehman Brothers 1,572,454
Goldman Sachs 1,471,434
Salomon 1,260,744
Merill Lynch 1,149,000
Banc One Capital Corp. 293,496
Growth & Income Merrill Lynch 7,959,000
Morgan Stanley 6,312,563
Equity Index Merrill Lynch 3,430,000
{/TABLE}
{TABLE}
{CAPTION}
Fund Broker/Dealer Total Holdings
---- ------------- --------------
{S} {C} {C}
Lehman Brothers 928,800
Paine Webber 619,875
Bear Stearns 467,843
Banc One Capital Corp. 2,591,281
Morgan Stanley 7,237,000
Large Cap Core Equity Morgan Stanley 3,517,688
{/TABLE}
As of October 31, 2000, the International Value, MidCap Index, MidCap Core
Equity and MicroCap Funds did not hold any securities of their respective
regular brokers or dealers (as defined under the 1940 Act) or their
parents.
As of October 31, 2000, each Predecessor Fund held securities of its regular
brokers or dealers (as defined under the 1940 Act) or their parents as
follows:
{TABLE}
{CAPTION}
Fund Broker/Dealer Total Holdings
---- ------------- --------------
{S} {C} {C}
Equity Income Merrill Lynch $2,542,000
Strategic Income Banc One Capital Corp. 1,971,000
First Union Corp. Capital Trust 1,797,000
Morgan Stanley 458,000
Large Cap Growth Merrill Lynch 3,080,000
{/TABLE}
As of October 31, 2000, the Predecessor Equity Income, Predecessor Relative
Value, Predecessor Global Equity, Predecessor International Growth, Predecessor
Small Cap Index, Predecessor Small Cap Core Equity and Predecessor Science &
Technology Funds did not hold any securities of their respective regular
brokers or dealers (as defined under the 1940 Act) or their parents.
INVESTMENT STRATEGIES AND RISKS
Temporary Defensive Positions. The Missouri Tax-Exempt Bond Fund may hold
uninvested cash reserves pending investment during temporary defensive periods
or if, in the opinion of the Adviser, suitable municipal securities are
unavailable. There is no percentage limitation on the amount of assets that may
{PAGE} 12
be held uninvested during temporary defensive periods. In addition, during
temporary defensive periods or if, in the opinion of the Adviser, suitable
municipal securities are unavailable and subject to the Fund's quality
standards, the Fund may invest up to 20% of its assets in money market
instruments, the income from which is subject to federal income tax. Such
instruments may include obligations of the U.S. Government, its agencies or
instrumentalities; debt securities (including commercial paper) of issuers
having, at the time of purchase, a quality rating within the highest rating
category by a rating agency; certificates of deposit or bankers' acceptances of
domestic branches of U.S. banks with total assets at the time of purchase of $1
billion or more; or repurchase agreements with respect to such obligations.
The Equity Income Fund reserves the right to hold, as a temporary defensive
measure during abnormal market or economic conditions, up to 100% of its total
assets in cash and short-term obligations (having remaining maturities of 13
months or less) at such times and in such proportions as, in the opinion of the
Adviser, such abnormal market or economic conditions warrant. Short-term
obligations in which the Fund may invest include (i) money market instruments,
such as commercial paper, including variable and floating rate instruments,
rated at the time of purchase in one of the two highest rating categories
assigned by a rating agency or, if unrated, deemed to be of comparable quality
by the Adviser at the time of purchase, and bank obligations, including bankers'
acceptances, negotiable certificates of deposit and non-negotiable time deposits
of U.S. and foreign banks having total assets at the time of purchase in excess
of $1 billion, (ii) obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, and (iii) repurchase agreements.
The Relative Value Fund may invest in temporary investments from time to
time for defensive purposes. The Fund may invest in securities issued and/or
guaranteed as to payment of principal and interest by the U.S. government, its
agencies or instrumentalities, repurchase agreements and short-term money market
instruments such as:
. instruments of domestic and foreign banks and savings associations if
they have capital, surplus, and undivided profits of over $100,000,000,
or if the principal amount of the instrument is federally insured; or
. commercial paper rated A-1 by S&P, Prime-1 by Moody's, or F-1 by Fitch.
For temporary defensive purposes (up to 100% of total assets) and to
maintain liquidity (up to 35% of total assets), the Global Equity Fund may
invest in U.S. and foreign short-term money market instruments including:
. commercial paper rated A-1 or A-2 by S&P, Prime-1 or Prime-2 by Moody's
or F-1 or F-2 by Fitch. In the case where commercial paper has received
different ratings from different rating services, such commercial paper
is acceptable so long as at least one rating is in the two highest
categories of the NRSROs described above;
. instruments of domestic and foreign banks and savings associations
(such as certificates of deposit, demand and time deposits and bankers'
acceptances) if they have capital, surplus, and undivided profits of
over $100,000,000, or if BIF or SAIF insures the principal amount of
the instrument. These instruments may include Eurodollar Certificates
of Deposit, Yankee Certificates of Deposit, and Eurodollar Time
Deposits;
. obligations of the U.S. government or its agencies or
instrumentalities;
. repurchase agreements; and
{PAGE} 13
. other short-term instruments that are not rated but are determined by
the Adviser to be of comparable quality to the other obligations in
which the Fund may invest.
During temporary defensive periods, when deemed necessary by the Adviser or
Sub-Adviser, the International Growth Fund may invest up to 100% of its assets
in U.S. government obligations, debt obligations of companies incorporated and
having their principal business activities in the United States, or cash and
short-term obligations (having remaining maturities of 13 months or less). The
Fund does not intend to invest in such securities for the purpose of meeting its
investment objective.
The Small Cap Core Equity Fund and MicroCap Fund each reserve the right to
hold, as a temporary defensive measure, up to 100% of its total assets in cash
and short-term obligations (having remaining maturities of 13 months or less) at
such times and in such proportions as, in the opinion of the Adviser, prevailing
market or economic conditions warrant.
Ratings. The ratings of Standard & Poor's, Moody's and other nationally
recognized rating agencies represent their opinions as to the quality of debt
securities. It should be emphasized, however, that ratings are general and are
not absolute standards of quality, and debt securities with the same maturity,
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