<PAGE> 1
As filed with the Securities and Exchange Commission on November 1, 1996
Registration Nos. 333-______
811-______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
======================
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [x]
Pre-Effective Amendment No. ____ [ ]
Post-Effective Amendment No. ____ [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [x]
Amendment No. ____
(Check appropriate box or boxes)
===============
BCM INSTITUTIONAL FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
111 EAST KILBOURN AVENUE, SUITE 1000, MILWAUKEE, WISCONSIN 53202
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: 414-319-4400
Name and Address of Agent for Service: With a copy to:
DANA J. RUSSART CONRAD G. GOODKIND
DIRECTOR OF OPERATIONS QUARLES & BRADY
BAIRD CAPITAL MANAGEMENT LLC 411 EAST WISCONSIN AVENUE
111 EAST KILBOURN AVENUE, SUITE 1000 MILWAUKEE, WISCONSIN 53202
MILWAUKEE, WISCONSIN 53202
Approximate Date of Proposed Public Offering: As soon as practicable after
this Registration Statement becomes effective.
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[x] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the
Registrant hereby elects to register an indefinite number of shares of its
Common Stock, $0.001 par value, by this Registration Statement under the
Securities Act of 1933.
<PAGE> 2
BCM INSTITUTIONAL FUNDS, INC.
FORM N-1A
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
FORM N-1A
ITEM NO. PROSPECTUS HEADING
PART A
<S> <C> <C>
1. Cover Page . . . . . . . . . . . . . . . . . . . . Cover Page
2. Synopsis . . . . . . . . . . . . . . . . . . . . . Funds At A Glance; Expense Information
3. Condensed Financial Information . . . . . . . . . Not Applicable
4. General Description of Registrant . . . . . . . . The Funds in Detail; Investing in BCM Funds; Capital Structure
5. Management of the Fund . . . . . . . . . . . . . . Management of the Funds; Investing in BCM Funds;
Determination of Net Asset Value
5A. Management's Discussion of Fund
Performance . . . . . . . . . . . . . . . . . . . Not applicable
6. Capital Stock and Other Securities . . . . . . . . Capital Structure; Distributions; Taxes; Investing in BCM Funds
7. Purchase of Securities Being Offered . . . . . . . Investing in BCM Funds - How to Purchase BCM Fund Shares;
- Exchange Privilege; Determination of Net Asset Value
8. Redemption or Repurchase . . . . . . . . . . . . . Investing in BCM Funds - How to Sell (Redeem) BCM Fund Shares
9. Pending Legal Proceedings . . . . . . . . . . . . None
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
FORM N-1A STATEMENT OF
ITEM NO. ADDITIONAL INFORMATION HEADING
- --------- ------------------------------
<S> <C> <C>
PART B
10. Cover Page . . . . . . . . . . . . . . . . . . . . Cover Page
11. Table of Contents . . . . . . . . . . . . . . . . Cover Page
12. General Information and History . . . . . . . . . General Information
13. Investment Objectives and Policies . . . . . . . . Investment Objectives and Policies; Investment Limitations
14. Management of the Fund . . . . . . . . . . . . . . Management of the Company
15. Control Persons and Principal Holders
of Securities . . . . . . . . . . . . . . . . . . Management of the Company
16. Investment Advisory and Other Services . . . . . . Management of the Company
17. Brokerage Allocation . . . . . . . . . . . . . . . Portfolio Transactions
18. Capital Stock and Other Securities . . . . . . . . Description of Shares
19. Purchase, Redemption and Pricing
of Securities Being Offered . . . . . . . . . . . Additional Purchase and Redemption Information
20. Tax Status . . . . . . . . . . . . . . . . . . . . Additional Information Concerning Taxes
21. Underwriters . . . . . . . . . . . . . . . . . . . Not Applicable
22. Calculation of Performance Data . . . . . . . . . Additional Information on Performance
23. Financial Statements . . . . . . . . . . . . . . . Financial Statements
</TABLE>
<PAGE> 4
BCM INSTITUTIONAL FUNDS, INC.
----------
BCM GROWTH FUND
BCM SMALL CAP GROWTH FUND
Prospectus
December 31, 1996
BCM Institutional Funds, Inc. ("BCM Funds") offers two diversified
equity mutual funds, each with its own investment objective and policies:
BCM GROWTH FUND
This Fund (the "Growth Fund") seeks long-term growth of capital. It
pursues its objective by investing primarily in common stocks of mid to
large-sized companies. Such companies have market capitalizations between $750
million and $5 billion at time of purchase.
BCM SMALL CAP GROWTH FUND
This Fund (the "Small Cap Fund") seeks long-term growth of capital.
It pursues its objective by investing primarily in common stocks of small-sized
companies. Such companies have market capitalizations between $100 million and
$1 billion at time of purchase.
Baird Capital Management LLC ("Adviser") serves as the Funds'
investment adviser. See "Management of the Funds." BCM Funds are "no-load"
funds, which means investors can purchase, redeem or exchange shares without a
sales charge. See "Investing in BCM Funds."
This Prospectus gives you information about BCM Funds that you should
know before investing. Please read it carefully and retain it for future
reference. Additional information is contained in the Statement of Additional
Information dated December 31, 1996, which is incorporated by reference into
this Prospectus, and has been filed with the Securities and Exchange Commission
(the "SEC"). To obtain a copy without charge, call BCM Funds at 1-800-___-____
or (414)-___-____.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
1
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
FUNDS AT A GLANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 3
EXPENSE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 3
THE FUNDS IN DETAIL . . . . . . . . . . . . . . . . . . . . . . . . . 4
MANAGEMENT OF THE FUNDS . . . . . . . . . . . . . . . . . . . . . . . 9
INVESTING IN BCM FUNDS . . . . . . . . . . . . . . . . . . . . . . . 12
How to Purchase BCM Fund Shares . . . . . . . . . . . . . . 13
Exchange Privilege . . . . . . . . . . . . . . . . . . . . . 16
How to Sell (Redeem) BCM Fund Shares . . . . . . . . . . . . 17
DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . 21
CAPITAL STRUCTURE . . . . . . . . . . . . . . . . . . . . . . . . . . 21
PERFORMANCE ADVERTISING . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
2
<PAGE> 6
FUNDS AT A GLANCE
BCM GROWTH FUND
FUND FOCUS: A diversified fund that seeks long-term growth of capital by
investing primarily in common stock of mid to large-sized companies.
FUND MANAGER: R. Bart Wear
FUND INCEPTION: January 1997
BCM SMALL CAP GROWTH FUND
FUND FOCUS: A diversified fund that seeks long-term growth of capital by
investing primarily in common stock of small-sized companies.
FUND MANAGER: Joseph J. Docter
FUND INCEPTION: January 1997
EXPENSE INFORMATION
The tables and example below are designed to assist you in understanding the
various costs and expenses that you will bear directly or indirectly as
an investor in each of the Funds. See "Investing in the BCM Funds" and
"Management of the Funds" for more information.
- -----------------------------------------------------------------------------
INVESTOR TRANSACTION EXPENSES
Growth Small Cap
Fund Fund
---- ----
Maximum sales load imposed on purchases None None
Maximum sales load imposed on None None
reinvested dividends
Deferred sales charges None None
Redemption fees(a) None None
Exchange fees None None
- -----------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES(b) (AFTER REIMBURSEMENT) (as a percentage of
average net assets)
<TABLE>
<CAPTION>
Growth Small Cap
Fund Fund
---- ----
<S> <C> <C>
Management fees .90% .90%
Other Expenses(c) (after reimbursement)(d) .10% .10%
----- -----
TOTAL FUND OPERATING EXPENSES (after
reimbursement)(d) 1.00% 1.00%
</TABLE>
- ---------------------------------
(a) Redemption proceeds sent by wire are subject to a $___ processing fee.
(b) The fees and expenses in this table are based on the estimated fees
and expenses that each Fund expects to incur, and on the estimated
size of each Fund, during its initial fiscal year.
(c) Such expenses include custody, transfer agency, accounting and legal
fees and other customary Fund expenses.
(d) The Adviser has committed to reimburse the Funds' Other Expenses to
the extent necessary to ensure that Total Fund Operating Expenses for
each Fund for the year ending December 31, 1997 will not exceed 1.00%
of average net assets. Without such reimbursement, Total Fund
Operating Expenses for each Fund would be 1.80% and Other Expenses
would be 0.90%.
3
<PAGE> 7
EXAMPLE
You would pay the following expenses on a hypothetical $1,000
investment, assuming (1) a 5% annual return and (2) redemption at the end of
each time period.
GROWTH SMALL CAP
FUND FUND
---- ----
One Year $10 $10
Three Years $32 $32
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR RETURNS WHICH MAY BE MORE OR LESS THAN THOSE SHOWN.
THE FUNDS IN DETAIL
BCM Institutional Funds, Inc. (the "Company" or "BCM Funds") was
organized as a Maryland corporation on October 31, 1996. The Company is an
open-end, diversified management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"). The Growth Fund
and Small Cap Fund are each a diversified mutual fund series of the Company.
This section takes a closer look at the Funds' investment objectives, policies
and the securities in which they invest.
If you have any inquiries about investing in the Funds, please call
BCM Funds at [ ] or write to BCM Funds at 111 East Kilbourn Avenue,
Suite 1000, Milwaukee, Wisconsin 53202.
GROWTH FUND
The investment objective of this Fund is long term growth of capital.
It is a diversified fund that pursues its objective by normally investing at
least 65% of its total assets in common stocks of mid to large-sized companies.
Mid to large-sized companies are those with market capitalizations between $750
million and $5 billion at the time of purchase.
SMALL CAP FUND
The investment objective of this Fund is long term growth of capital.
It is a diversified fund that pursues its objective by normally investing at
least 65% of its total assets in common stocks of small-sized companies.
Small-sized companies are those with market capitalizations between $100
million and $1 billion at the time of purchase.
4
<PAGE> 8
TYPES OF INVESTMENTS
Each Fund generally invests in companies its portfolio manager
considers to be well-managed and to have attractive fundamental characteristics
which include, among other factors, low debt, high return on equity and
consistent revenue and earnings per share growth over the prior three to five
years. So long as a sufficient number of such common stocks are available,
each Fund intends to stay fully invested in these securities regardless of the
movement of stock prices generally. In most circumstances, each Fund's actual
level of cash and cash equivalents will fluctuate between 0% and 10% of total
assets with 90% to 100% of its assets committed to equity and equity equivalent
investments. Each Fund may invest from time to time a portion of its assets,
not to exceed 20% at the time of purchase, in companies with market
capitalizations outside the ranges specified above.
Each Fund may invest up to 25% of its total assets in securities of
foreign issuers traded in domestic securities markets, 15% of its net assets in
illiquid securities, and 5% of its net assets in securities of issuers with a
record of less than three years of continuous operation, including the
operation of any predecessor business. Each Fund may also invest up to 5% of
its total assets in a combination of preferred stocks, warrants, convertible
securities and debt securities when its portfolio manager perceives an
opportunity for capital growth from such securities or to receive a return on
idle cash, and under normal circumstances neither Fund will invest more than
10% of its total assets in short-term instruments to meet cash flow needs,
pending investment or for temporary defensive purposes. See "Other Investment
Practices and Risk Factors." The Funds do not intend to effect any short sales
or options or futures transactions.
OTHER INVESTMENT PRACTICES AND RISK FACTORS
COMMON STOCKS OF SMALLER COMPANIES
Both Funds invest primarily in common stocks, including those of
companies with smaller market capitalizations. Although such companies have
potential for rapid growth, investments in smaller companies often involve
greater risks than investments in larger, more established companies. Smaller
companies may have shorter operating histories, a relative lack of management
experience, financial resources and product diversification, and less market
liquidity than larger companies. The securities of smaller companies are, in
many cases, traded only over-the-counter or on regional securities exchanges,
and the frequency and volume of their trading are substantially less than is
typical of larger companies. For these reasons, smaller company stocks may be
subject to greater and more abrupt price fluctuations. The Adviser's research
skills and ability to select securities for the Funds are very important
because the stocks of smaller companies are not followed as closely as large
company stocks. Investors in the BCM Funds should consider their holdings to
be long-term investments, given the risks associated with equity investing,
especially in stocks of smaller companies.
5
<PAGE> 9
FOREIGN SECURITIES
Each Fund invests primarily in common stocks of domestic companies,
although up to 25% of its total assets may be invested, directly or through
investments in American Depository Receipts, in common stocks of foreign
issuers which are traded in U.S. securities exchanges and markets. American
Depository Receipts are generally issued by banks or trust companies, evidence
ownership of underlying foreign securities and are traded on a registered
national securities exchange or on The NASDAQ National Market. Although
investments in foreign securities are intended to reduce risk by providing
further diversification, such investments may present certain risks of their
own, including those resulting from fluctuations in currency exchange rates,
future political and economic developments or social instability, the
imposition of foreign withholding taxes, exchange controls or expropriation or
nationalization measures, reduced availability of public information concerning
issuers, and the fact that foreign issuers are not generally subject to uniform
accounting, auditing and financial reporting standards or to other regulatory
practices and requirements comparable to those applicable to domestic issuers.
ILLIQUID AND RULE 144A SECURITIES
Each Fund may invest up to 15% of its net assets in illiquid
securities. Illiquid securities are those securities that are not readily
marketable, including restricted securities and repurchase obligations, within
seven days at approximately the price used in determining the net asset value
of a Fund's shares. Under the supervision of, and pursuant to guidelines
adopted by the BCM Funds' Board of Directors, the Adviser determines which
securities should be classified as illiquid. The Board monitors the Adviser's
implementation of such guidelines.
Each Fund may, from time to time, purchase Rule 144A securities when
they present attractive investment opportunities that otherwise meet the
Adviser's criteria for selection. Rule 144 securities are securities that are
privately placed with and traded among qualified institutional buyers rather
than the general public. Although Rule 144A securities are considered
"restricted securities," they are not necessarily illiquid. The liquidity of
such securities is a question of fact for the Board of Directors to determine,
based upon the trading markets, the availability of reliable pricing
information and relevant contractual restrictions and other information. The
Board of Directors has developed guidelines and procedures for making such
determinations and, as is the case with illiquid securities, has delegated to
the Adviser the day-to-day functions of determining the liquidity of Rule 144A
securities pursuant to such guidelines and procedures.
If Rule 144A securities are determined by the Adviser to be liquid,
the Funds may invest in them without regard to the restrictions on illiquid
securities described above. However, the secondary market for Rule 144A
securities is necessarily limited and to the extent qualified institutional
buyers are no longer interested in purchasing such securities, a Fund may hold
a Rule 144A security that subsequently becomes illiquid. In such an event, the
Adviser will consider appropriate remedies to minimize the effect on such
Fund's liquidity and, in any event, will include the security in calculating
the percentage of such
6
<PAGE> 10
Fund's net assets invested in illiquid securities prior to investing in any
additional illiquid securities.
SHORT-TERM INSTRUMENTS
The Funds may hold short-term U.S. Government obligations, high
quality money market instruments (i.e., rated A-1 or better by Standard and
Poor's Ratings Group ("S&P") or Prime-1 by Moody's Investors Service, Inc.
("Moody's") or unrated instruments deemed by the Adviser to be of comparable
quality), certificates of deposit, repurchase agreements, bank obligations and
cash equivalents, (i) to meet anticipated redemption requests and other cash
flow needs, (ii) when, in the opinion of the Adviser, other suitable securities
are unavailable, or (iii) for temporary defensive purposes. Under normal
conditions, it is not anticipated that more than 10% of the total assets of
either Fund will be invested in short-term instruments. The foregoing
instruments may also include, among other things, commercial paper, variable
amount master demand notes and corporate bonds with remaining maturities of
thirteen months or less, short-term obligations of foreign banks and foreign
branches of U.S. banks and money market mutual funds. In addition to the
advisory fees and other expenses the Funds bear directly in connection with its
own operations, as an investor of another mutual fund, each Fund would bear its
pro rata portion of the other mutual fund's advisory fees and other expenses,
and such fees and other expenses will be borne indirectly by the Fund's
investors.
SECURITIES LENDING
For incremental income purposes, a Fund may lend its portfolio
securities constituting up to 30% of its total assets. Usually these loans
will be made to brokers, dealers or financial institutions. Loans will be
fully secured by collateral deposited with the Funds' Custodian in the form of
cash and/or securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities. This collateral must be increased within one
business day in the event that its value becomes less than the market value of
the loaned securities. While there may delays in recovery or even loss of
rights in the collateral should the borrower fail financially, the loans will
be made only to firms deemed by the Adviser to be of good standing. Loans will
not be made unless, in the judgment of the Adviser, the anticipated earnings
from such loans justifies the risk.
BORROWINGS
Each Fund may borrow money in amounts up to 10% of the value of the
total assets at the time of entering into the borrowing, for temporary or
emergency purposes (including to meet redemption requests prior to the
settlement of securities already sold or in the process of being sold by the
Fund). If the securities held by a Fund should decline in value while
borrowings are outstanding, the net asset value of a Fund's outstanding shares
will decline in value by proportionately more than the decline in market value
of the Fund's portfolio securities. As a result, a Fund's share price may be
subject to greater fluctuation until the borrowing is repaid.
7
<PAGE> 11
Reverse repurchase agreements are considered to be borrowings under
the 1940 Act. At the time a Fund enters into a reverse repurchase agreement
(an agreement under which the Fund sells portfolio securities and agrees to
repurchase them at an agreed-upon date and price), it will place in a
segregated custodial account U.S. Government securities or other liquid
high-grade debt securities having a value equal to or greater than the
repurchase price (including accrued interest), and subsequently will monitor
the custodial account to ensure that such value is maintained. Reverse
repurchase agreements involve the risk that the market value of the securities
sold by a Fund may decline below the price of the securities it is obligated to
repurchase.
PORTFOLIO TURNOVER
Each 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
investors. High portfolio turnover may result in the realization of
substantial net capital gains. To the extent short-term net capital gains are
realized, distributions resulting from such gains will be ordinary income for
federal income tax purposes. See "Taxes". The Adviser believes that the
portfolio turnover for each Fund will not exceed 300% per year.
EXPERIENCE OF ADVISER
Although the Funds' portfolio managers and other officers of the
Company have substantial experience in investment advisory and administrative
matters, especially with regard to separately managed accounts, the Adviser has
only recently been formed and has no previous experience managing a registered
investment company such as the BCM Funds.
CERTAIN INVESTMENT RESTRICTIONS
The Funds' investment objectives and, except as otherwise stated
herein or in the Statement of Additional Information, their investment policies
and restrictions are not fundamental and may be changed by the Board of
Directors without investor approval. As a matter of non- fundamental policy,
neither Fund will, among other matters described herein under "Types of
Investments" and "Other Investment Practices and Risk Factors," (i) engage in
short sales or options or futures transactions or purchase securities on
margin; (ii) invest more than 5% of its total assets in securities of companies
which, including any predecessors, have a record of less than three years of
continuous operation; or (iii) invest in securities of other investment
companies except as permitted by the 1940 Act.
Among other fundamental restrictions described in the Statement of
Additional Information which cannot be changed without investor approval,
neither Fund may (i) invest more than 25% of its total assets in securities of
issuers in any single industry (other than securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities);
8
<PAGE> 12
(ii) with respect to 75% of its total assets, invest more than 5% of the fair
market value of its assets in securities of any one issuer (other than
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities); (iii) invest in a company to get control or manage it or,
with respect to 75% of its total assets, purchase more than 10% of the
outstanding voting securities of an issuer; (iv) purchase a security if, as a
result, more than 15% of the Fund's net assets are invested in illiquid
securities; (v) issue any senior securities, except for permissible borrowings
under the 1940 Act; (vi) make loans, except to the extent permitted by the 1940
Act; or (vii) invest in commodities.
You will be notified of any changes to a Fund's investment objective,
policies or restrictions that are material. If there is a material change to a
Fund's investment objective, policies or restrictions, you should consider
whether that Fund remains an appropriate investment for you. For further
information regarding the Funds' investment restrictions, see the Statement of
Additional Information.
MANAGEMENT OF THE FUNDS
The business and affairs of the Funds are managed by the Adviser under
the supervision and direction of the Board of Directors. The officers of the
Company are responsible for the Funds' daily operations. The Statement of
Additional Information contains the name and background information of each
Director and officer of the Company.
INVESTMENT ADVISER
Baird Capital Management LLC ("Adviser"), 111 East Kilbourn Avenue,
Suite 1000, Milwaukee, WI 53202, serves as the Investment Adviser pursuant to
an Investment Advisory Agreement (the "Agreement"), which provides that the
Adviser will furnish continuous investment advisory and administrative services
to the Funds. The Adviser supervises and manages the investment portfolios,
and administers the operations, of the Funds, and subject to such policies as
the Board of Directors of the Funds may determine, directs the purchase or sale
of investment securities in the day-to-day management of the Funds' investment
portfolios. Under the Agreement, the Adviser, at its own expense and without
reimbursement from the Funds, furnishes office space and all necessary office
facilities, equipment and executive personnel for making the investment
decisions necessary for managing the Funds and maintaining the Company's
organization, and pays the salaries and fees of all officers and Directors of
the Company (except the fees paid to disinterested Directors). The Funds pay
all of their own expenses, including, without limitation, the cost of preparing
and printing registration statements, the expense of registering their shares
with the SEC and qualifying them for sale in the various states, advisory fees,
costs of organization and maintenance of corporate existence, the printing and
distribution costs of prospectuses mailed to existing investors, reports to
investors, reports to government authorities and proxy statements, costs of
meetings of investors, fees paid to Directors who are not interested persons of
the Adviser, the cost of office supplies, travel expenses, interest charges,
costs of fidelity bonds and errors and omissions insurance, taxes, legal
expenses, association membership dues, auditing services, insurance premiums,
brokerage commissions and expenses in connection with portfolio transactions,
fees and expenses of the
9
<PAGE> 13
custodian of the Funds' assets, charges of fund accounting and pricing services,
charges and expenses of dividend disbursing agents, accounting services agents,
registrars and stock transfer agents.
For its services, the Adviser receives a management fee from each Fund
computed at the annual rate of 0.90% of the Fund's average daily net assets.
The fee is paid monthly. The management fees paid by the Funds are higher than
those paid by most other mutual funds. The Adviser has committed to reimburse
expenses of the Funds to the extent necessary to ensure that the total
operating expenses (including management fees) of each Fund during the fiscal
year ending December 31, 1997 will not exceed 1.00% of such Fund's average net
assets.
The Adviser was formed in June 1996 as a member managed limited
liability company between the principals of the Adviser, including R. Bart
Wear and Joseph J. Docter, and Robert W. Baird & Co., Incorporated ("Baird").
Baird, a registered broker-dealer, owns 60% of the Adviser's equity and is a
subsidiary of Northwestern Mutual Life Insurance Company. In addition to the
Funds, the Adviser serves as investment adviser to individual and institutional
clients. The Adviser had a total of approximately $____________ under its
management as of December 31, 1996.
PORTFOLIO MANAGERS
R. Bart Wear manages the Growth Fund. Mr. Wear, a Chartered Financial
Analyst, has had more than 14 years of experience as a securities
analyst/portfolio manger. Prior to joining the Adviser on June 18, 1996, he
was employed at Firstar Investment Research & Management Company (FIRMCO) as a
Senior Vice President and Senior Portfolio Manager of the Equity Growth Fund A
(which had a mid to large capitalization growth strategy). The Equity Growth
Fund A is an employee benefit collective investment fund which had assets of
$490 million as of May 31, 1996. The Equity Growth Fund A's investment
objective, policies and strategies are identical in all material respects to
those of the Growth Fund. Mr. Wear managed other accounts, in addition to the
Equity Growth Fund A, during his tenure at FIRMCO. In total, Mr. Wear managed
$2.7 billion in assets employing this mid to large cap equity strategy while
employed at FIRMCO. As Senior Portfolio Manager for Equity Growth Fund A, Mr.
Wear had full discretionary authority over the selection of investments for
that fund and was primarily responsible for the day-to-day management of its
portfolio. No other person played a significant role in managing that fund's
investment portfolio.
Joseph J. Docter manages the Small Cap Fund. Mr. Docter, a Chartered
Financial Analyst, has had more than 12 years of experience as a securities
analyst/portfolio manager. He was a Senior Vice President and Senior Portfolio
Manager of the Equity Growth Fund C (which had an emerging to small
capitalization growth strategy) from February 7, 1987 through June 18, 1996
during his employment at FIRMCO. Equity Growth Fund C is an employee benefit
collective investment fund which had assets of $285 million as of May 31, 1996.
The Equity Growth Fund C's investment objective, policies and strategies are
identical in all material respects to those of the Small Cap Fund. Mr. Docter
managed other accounts, in addition to the Equity Growth Fund C, during his
tenure at FIRMCO. In total, Mr. Docter managed $1.1 billion in assets
employing this small-cap equity strategy while
10
<PAGE> 14
employed at FIRMCO. As Senior Portfolio Manager for Equity Growth Fund C, Mr.
Docter had full discretionary authority over the selection of investments for
that fund and was primarily responsible for the day-to-day management of its
portfolio, although a co-portfolio manager with a subordinate role was
appointed for that Fund as of January 1, 1994. Until January 1, 1996, all
securities transactions proposed by the co- portfolio manager for the Equity
Growth Fund C were reviewed and approved by Mr. Docter. After such date, the
co-portfolio manager was allocated approximately 30% of the investment
portfolio of that fund and his investment decisions were reviewed at least
quarterly by Mr. Docter for purposes of compliance with that fund's investment
objective, policies and restrictions and related suitability concerns.
PAST PERFORMANCE OF PORTFOLIO MANAGERS
The following sets forth the average annual returns for each of the
employee benefit collective investment funds previously managed by Messrs. Wear
and Docter (as adjusted to reflect the reinvestment of dividends and capital
gains distributions and the BCM Funds' operating expenses after reimbursement)
compared with the performance of the S&P 500 Stock Index:
<TABLE>
<CAPTION>
EQUITY EQUITY
GROWTH GROWTH S&P 500
For periods ending: FUND A FUND C* INDEX**
December 31, 1995 ------ ------ -------
<S> <C> <C> <C>
Ten Years 15.5% * 14.9%
Five Years 19.1 22.8 16.6
Three Years 10.9 11.0 15.3
One Year 32.0 25.3 37.6
Since Inception through May 31, 1996 17.7 13.5
Since January 1, 1986 through May 31, 1996 15.2 * 15.3
</TABLE>
- -------------------------------
* Equity Growth Fund C's inception date was February 1, 1987.
** The S&P 500 Index is an unmanaged index of common stocks of 500
industrial, transportation, utility and financial companies, and
regarded as generally representative of the U.S. stock market. The
Index reflects the reinvestment of dividends and capital gain
distributions, if any, but does not reflect fees, brokerage
commissions or other expenses of investing.
The above performance information relates to the past performance of
separate employee benefit collective investment funds, and not to the BCM
Funds, and is not indicative of the anticipated future performance of the BCM
Funds. These employee benefit collective investment funds were not registered
under the 1940 Act and, accordingly, were not subject to certain investment
limitations, diversification requirements and other restrictions imposed by the
1940 Act and the Internal Revenue Code on registered
11
<PAGE> 15
investment companies, which, if applicable, may have adversely affected the
performance of such collective funds.
CODE OF ETHICS
The Adviser has adopted a Code of Ethics that restricts personal
investing practices by its employees. Among other provisions, the Code of
Ethics requires that employees with access to information about the purchase or
sale of securities in the Funds' portfolios obtain preclearance before
executing personal trades. With respect to portfolio managers and other
investment personnel, the Code of Ethics prohibits acquisition of securities in
an initial public offering, as well as profits derived from the purchase and
sale of the same security within 60 calendar days. These provisions are
designed to ensure that the interests of Fund investors come before the
interests of the people who manage those Funds.
INVESTING IN BCM FUNDS
Shares of each Fund are sold on a continuous basis without a sales
charge at the net asset value next determined after receipt of a purchase order
in proper form. Shares of the Fund are sold to institutional investors such as
pension and profit sharing plans (including participant accounts in such
plans), employee benefit trusts, foundations, endowments, corporations and
other institutions; or others pursuant to policies adopted by the Company.
_____________ serves as the Fund's transfer agent and dividend disbursing agent
(the "Transfer Agent").
If you have any questions, a Fund telephone representative will be
pleased to provide the information that you need. Please call the following
number: [ ].
The minimum initial purchase is $100,000 which can be allocated
between the Funds at the election of the investor, and the minimum for any
subsequent purchase in a Fund is $100. The required minimum purchases may be
waived at the discretion of the Funds and altered in certain circumstances
pursuant to guidelines established from time to time by the Company. The
Company reserves the right, in its discretion, to accept or reject applications
and purchase orders, in whole or in part, and to suspend or cease the offering
of Fund shares for sale at any time.
Investors purchasing Fund shares through a broker, plan administrator,
financial intermediary or agent may be charged a separate transaction and/or
service fee by that broker, administrator, agent or intermediary.
PURCHASES BY MAIL
Your purchase application, if properly filled out and accompanied by
payment in the form of a check made payable to BCM Funds, will be processed
upon receipt by the Transfer Agent. If the Transfer Agent receives you order
and payment by the close of regular trading (currently 3:00 p.m. Central Time)
on the New York Stock Exchange, your shares will be purchased at the net asset
value calculated at the close of regular trading on that
12
<PAGE> 16
day. If received after that time, your shares will be purchased at the net
asset value determined as of the close of regular trading on the next business
day.
HOW TO PURCHASE BCM FUND SHARES
<TABLE>
<S> <C> <C>
BY MAIL OR COURIER TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
------------------ --------------------
Complete and sign the Purchase Make your check payable to BCM
Application. Make your check Funds and mail it to the address
payable to BCM Funds. at the left. Put your account
name, address and BCM Funds
By Mail, send to: account number on your check.
BCM Funds Subsequent investment forms will
[ ] be included with each investor
statement. An investor wishing to
By Overnight Courier, send to: add to an account should complete
BCM Funds this form and include it with the
[ ] check. Alternatively, include
with your check a note indicating
If you are investing through a your BCM Funds account number,
qualified retirement plan, you your name and your address.
will need to use a special
application.
BY TELEPHONE Telephone transactions may not be Call [ ] to make your
used for initial purchases. If purchase from a bank checking or
you want to make subsequent money market account by electronic
telephone transactions, please funds transfer. Specify account
select this service on your name, address and BCM Funds
Purchase Application or call account number. This service must
[ ] to add telephone be established by you in advance
transactions to an existing by following the instructions at
account. the left.
</TABLE>
13
<PAGE> 17
<TABLE>
<S> <C> <C>
BY WIRE First, call BCM Funds at [ ] to Follow instructions at the left.
notify them that you intend to Please note that wires may be
purchase shares by wire and to rejected if they do not contain
verify wire instruction. complete account information.
Then, wire funds care of
[ ]. Include your
name, address and tax-payer
identification number.
Your bank may charge a fee for
wiring money on your behalf.
</TABLE>
All purchases must be made in U.S. dollars and checks must be drawn on
U.S. banks. No cash will be accepted. A $_____ fee will be charged against an
investor's account for any payment check returned to the Transfer Agent for
insufficient funds, stop payment, closed account or other reasons. The
investor will also be responsible for any losses suffered by the Funds or the
Transfer Agent as a result. For purchases made by corporations, executors,
administrators, trustees, guardians, general partners, managers, agents or
attorneys-in-fact, further documentation may be requested.
PURCHASES BY TELEPHONE
Telephone transactions may not be used for initial purchases. Your
account must already be established prior to initiating telephone purchases.
Only bank accounts held at domestic financial institutions that are Automated
Clearing House (ACH) members can be used for telephone transactions. Your
shares will be purchased at the net asset value determined as of the close of
regular trading on the date that the Transfer Agent receives payment for shares
purchased by electronic funds transfer through the ACH system. Most transfers
are completed within three business days after your call to place the order.
To preserve flexibility, the Funds may revise or remove the ability to purchase
shares by phone, or may charge a fee for such service, although currently the
Funds do not expect to charge a fee. Investors in the Funds may also request
by telephone a change of address, a change in investments made through an
Automatic Investment Plan, and a change in the manner in which dividends are
received.
The Funds will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. Such procedures may
include, among others, requiring some form of personal identification prior to
acting upon telephone instructions, providing written confirmations of all such
transactions, and/or tape recording all telephone instructions. The Funds
reserve the right to refuse a telephone redemption if they believe it advisable
to do so. Assuming procedures such as the above have been followed, the Funds
will not be liable for any loss, cost, or expense for acting upon an investor's
telephone instructions or for any fraudulent or unauthorized telephone
redemption. As a
14
<PAGE> 18
result of this policy, the investor will bear the risk of any loss unless the
Funds have failed to follow such procedure(s). The telephone purchase
privilege may be modified or terminated by the Funds at any time.
PURCHASES BY WIRE
If you purchase your initial shares by wire, you must prepare and file
a Purchase Application, marked "follow-up," with the Transfer Agent. The
Transfer Agent must receive the Purchase Application before any of the shares
purchased can be redeemed. You should contact your bank (which will need to be
a commercial bank that is a member of the Federal Reserve System) for
information on sending funds by wire, including any charges that your bank may
make for these services. Wiring instructions are listed on page __of this
prospectus.
AUTOMATIC INVESTMENT PLAN
The Funds offer an Automatic Investment Plan whereby an investor may
automatically make purchases of shares of a Fund on a convenient monthly basis
($100 minimum per transaction) out of his or her savings or checking account.
The $100,000 minimum initial investment must be met before an Automatic
Investment Plan may be established. Under the Automatic Investment Plan, an
investor's designated bank or other financial institutional debits a
preauthorized amount on the investor's account each month and applies the
amount to the purchase of Fund shares. The Automatic Investment Plan must be
implemented with a financial institution that is an Automated Clearing House
member. In addition, the Fund must have a currently effective registration in
those states in which it is required. No service fee is currently charged by
the Funds for participating in the Automatic Investment Plan. Applications to
establish the Automatic Investment Plan are available from the Funds by calling
[ ].
MISCELLANEOUS PURCHASE INFORMATION
For reasons of economy and convenience, the Funds will not issue
certificates for shares purchased.
Federal regulations require that you provide a certified taxpayer
identification number whenever you open or reopen an account. Congress has
mandated that if any investor fails to provide and certify to the accuracy of
the investor's Social Security number or other tax- payer identification
number, the Funds will be required to withhold 31% of all dividends,
distributions and payments, including redemption proceeds, from such investor
as a backup withholding procedure.
Payment for shares of a Fund may, in the discretion of the Fund, be
made in the form of liquid securities that are permissible investments for the
Fund, provided that, among other conditions, the investor making the
contribution of securities is a tax-exempt entity and the aggregate amount of
the purchase (including cash and contributed securities) be at least
$1,000,000. Investors considering a contribution of securities to the Funds
should consult
15
<PAGE> 19
with their own tax advisers regarding the tax consequences, if any, of such
contribution. For further information, contact the Funds at [ ].
EXCHANGE PRIVILEGE
You may exchange your shares of one BCM Fund for shares of another
Fund. You must have owned shares of a Fund for at least 15 days before such
shares may be exchanged.
The exchange privilege is not designed to afford investors a way to
play short-term swings in the market. BCM is not suitable for that purpose.
By Telephone
You may exchange your Fund shares into shares of another Fund by phone
if you have authorized BCM Funds to accept telephone instructions. There will
be no fee charge to the investor's account for a telephone exchange transacted
by the investor.
By Mail
You may also direct BCM Funds in writing to exchange your shares. If
you have authorized BCM Funds to accept written instructions from any one
registered owner, and if the shares are owned by two or more persons, only one
signature is required on your written exchange request. Otherwise, the request
should be signed by each person in whose name the shares are registered. All
signatures should be exactly as the name appears in the registration.
Additional Information About Exchanges
1. In an exchange from one account to another account, the shares
being sold and the new shares being purchased must have a
current value of at least $1,000 and you must meet any
investment minimum imposed by the Fund into which you wish to
exchange.
2. Exchanges from any one Fund account are limited to six times
in any one calendar year.
3. The shares being acquired must be qualified for sale in your
state of residence.
4. Once you have telephoned or mailed your exchange request, it
is irrevocable and may not be modified or canceled.
5. For the purposes of processing exchanges, the value of the
shares surrendered and the value of the shares acquired are
the net asset values of such shares next computed after
receipt of your exchange order.
16
<PAGE> 20
6. An exchange of shares is, for federal income tax purposes, a
sale of the shares being exchanged, on which you may realize a
taxable gain or loss.
7. If the request is made by a corporation, partnership, trust,
fiduciary, agent or unincorporated association, BCM Funds will
require evidence satisfactory to it of the authority of the
individual signing the request.
The exchange privilege may be modified or terminated at any time upon
60 days' prior written notice.
HOW TO SELL (REDEEM) BCM FUND SHARES
You may sell (redeem) any or all of your shares on any day the Funds
are open for business at the next determined net asset value. Ordinarily, the
Funds make payments by check for the shares redeemed within three business days
after it receives your properly completed request. However, the right of
redemption may be suspended or payment may be postponed under unusual
circumstances such as when trading on the New York Stock Exchange is restricted
or when it is not reasonably practical for a Fund to determine the fair market
value of its net assets. Payment of redemption proceeds with respect to shares
purchased by check will not be made until the check or payment received for
investment has cleared, which may take up to 15 calendar days from the purchase
date.
Payment of the redemption proceeds for shares of a Fund where an
investor requests wire payment will normally be made in federal funds on the
next business day. The Transfer Agent will wire redemption proceeds only to
the bank and account designated on the Purchase Application or in written
instructions subsequently received by the Transfer Agent, and only if the bank
is a commercial bank that is a member of the Federal Reserve System. The
Transfer Agent currently charges a $_____ fee for each payment made by wire of
redemption proceeds, which fee will be deducted from the investor's account.
PROCEDURE FOR REQUESTING REDEMPTION
You may request the sale of your shares either by mail or courier or
by telephone as described below.
By Mail:
Sale (redemption) requests should be mailed to:
BCM Funds
[ ]
By Overnight Courier:
The requests should be sent to:
BCM Funds
[ ]
17
<PAGE> 21
The selling price of each share being redeemed will be the Fund's per
share net asset value next calculated after receipt of all required documents
in good order. There is no load or charge imposed on redemptions. Good order
means that the request must include:
- Your BCM Fund account number
- The number of shares or dollar amount to be sold (redeemed)
- The signatures of all account owners exactly as they are
registered on the account
- Any required signature guarantees
- Any supporting legal documentation that is required in the case
of estates, trusts, corporations or partnerships
- In the case of shares being redeemed from a qualified
retirement plan, including an IRA or IRA/SEP Plan, a statement
of whether or not federal income tax should be withheld (in the
absence of any statement, federal tax will be withheld)
A signature guarantee of each owner is required to redeem shares in
the following situations: (i) if you change ownership on your account; (ii)
when you want the redemption proceeds sent to a different address from that
registered on the account; (iii) if the proceeds are to be made payable to
someone other than the account's owner(s); (iv) any redemption transmitted by
federal wire transfer to your bank; and (v) if a change of address request has
been received by the Funds or the Transfer Agent within the last 15 days. In
addition, signature guarantees are required for all redemptions of $25,000 or
more from any investor account.
Signature guarantees are designed to protect both you and the Funds
from fraud. Signature guarantees can be obtained from most banks, credit
unions or savings associations, or from broker/dealers, municipal securities
broker/dealers, government securities broker/dealers, national securities
exchanges, registered securities associations or clearing agencies deemed
eligible by the Securities and Exchange Commission. Notaries public cannot
provide signature guarantees.
By Telephone:
Shares of the Funds may also be sold by calling the Transfer Agent at
[ ]. In order to utilize this procedure for telephone redemption, an
investor must have previously elected this procedure in writing, which election
will be reflected in the records of the Transfer Agent, and the redemption
proceeds must be mailed directly to the investor or transmitted to the
investor's predesignated account at a domestic bank. To change the designated
account, send a written request with signature(s) guaranteed to the Transfer
Agent. To change the address, call the Transfer Agent at [ ] or send a
written request with signature(s) guaranteed to the Transfer Agent. Any
written redemption requests received within 15 days after an address change
made by telephone must be accompanied by a signature guarantee and no telephone
redemptions will be allowed within 15 days of such a change. The Funds reserve
the right to limit the number of telephone redemptions by an investor. Once
made, telephone redemption requests may not be modified or canceled. The
selling price of each share being redeemed will be the Fund's per share net
18
<PAGE> 22
asset value next calculated after receipt by the Transfer Agent of the
telephone redemption request. There is currently no charge for telephone
redemptions, although a charge may be imposed in the future.
The Funds will not be liable for following instructions communicated
by telephone that it reasonably believes to be genuine. See "Purchases by
Telephone" on page __ for discussion of liability for telephone errors.
During periods of substantial economic or market changes, telephone
redemptions may be difficult to implement. If an investor is unable to contact
the Transfer Agent by telephone, shares may also be redeemed by delivering the
redemption request to the Transfer Agent by mail or overnight courier as
previously described.
The Funds reserve the right to modify or terminate this telephone
redemption service at any time.
REDEMPTION AT THE OPTION OF THE FUND
The Funds reserve the right to redeem shares held in any account if
the net asset value remains below $1,000 in order to relieve the Funds of the
cost of maintaining very small accounts. Before such involuntary redemption,
the Fund will give the investor 30 days written notice to bring the account up
to $1,000 before any action is taken. This minimum balance requirement does
not apply to qualified retirement plan accounts. The right of redemption shall
not apply if the value of a investor's account drops below $1,000 as the result
of market action.
DISTRIBUTIONS
In general, distributions of each Fund's net investment income and net
realized securities gains, if any, are declared and paid annually on or before
December 31 of each year, but the Funds may make distributions on a more
frequent basis to comply with the distribution requirements of the Internal
Revenue Code in a manner consistent with the provisions of the 1940 Act.
THE OBJECTIVE OF THESE FUNDS IS LONG-TERM CAPITAL GROWTH AND NOT THE
PRODUCTION OF INCOME DISTRIBUTIONS.
Distributions will be reinvested in additional Fund shares unless you
elect to receive them in cash by notifying BCM Funds in writing. Distributions
of less than $10 and distributions on shares purchased within the last 15 days,
however, will not be paid in cash and will be reinvested. You may elect to
have distributions on shares held in qualified retirement plans paid in cash
only if you are 59 1/2 years old or permanently and totally disabled.
Distribution checks normally are mailed within seven days after the record
date.
The Board of Directors may elect not to distribute capital gains in
whole or in part to take advantage of loss carryovers.
19
<PAGE> 23
A distribution on shares of a Fund does not increase the value of your
shares or your total return. At any given time the value of your shares
includes the undistributed net gains, if any, realized by the Fund on the sale
of portfolio securities, and undistributed dividends and interest received,
less Fund expenses. Because such gains and dividends are included in the value
of your shares, when they are distributed the value of your shares is reduced
by the amount of the distribution. If you buy your shares just before the
distribution, you will pay the full price for your shares, and then receive a
portion of the purchase price back as a taxable distribution.
TAXES
Each Fund has elected to be taxed under Subchapter M of the Internal
Revenue Code, which means that to the extent its earnings and gains are
distributed to investors in a timely manner it pays no income tax.
Accordingly, the Funds intend to distribute to their shareholders substantially
all of their net investment income and net realized gains.
Distributions of net investment income and net short-term capital
gains are taxable to you as ordinary income. Distributions from net long-term
capital gains are taxable as long-term capital gains regardless of the length
of time you have held the shares on which such distributions are paid.
However, you should note that any loss realized upon the sale or redemption of
shares held for six months or less will be treated as a long-term capital loss
to the extent of any distribution of long-term capital gain to you with respect
to such shares.
Distributions are taxable to you regardless of whether they are taken
in cash or reinvested, even if the value of your shares is below your cost. If
you purchase shares shortly before a distribution, you must pay income taxes on
the distribution, even though the value of your investment (plus cash received,
if any) remains the same. In addition, the share price at the time you
purchase shares may include unrealized gains in the securities held in the
investment portfolio of the Fund. If these portfolio securities are
subsequently sold and the gains are realized, they will, to the extent not
offset by capital losses, be paid to you as a distribution of capital gains and
will be taxable to you as short-term or long-term capital gains.
After the end of each calendar year, BCM Funds will send you a Form
1099 notifying you of the federal income tax status of the distributions paid
to you during the year.
If you have not complied with certain provisions of the Internal
Revenue Code and Regulations, BCM Funds is required by federal law to withhold
and remit to the IRS 31% of reportable payments (which may include dividends,
capital gains distributions and redemptions). Those regulations require you to
certify that the social security number or tax identification number you
provide is correct and that you are not subject to 31% withholding for previous
under-reporting to the IRS. You will be asked to make the appropriate
certification on your application.
Redemptions and exchanges of shares of a Fund will be taxable
transactions for federal income tax purposes and investors will generally
recognize gain or loss in an amount equal to the difference between the basis
of the shares redeemed or exchanged and the
20
<PAGE> 24
amount received. Assuming that investors hold such shares as a capital asset,
the gain or loss will be a capital gain or loss and will generally be long term
if investors have held such shares for a period of more than one year. If a
loss is realized on the redemption of Fund shares, the reinvestment in
additional fund shares within 30 days before or after the redemption may be
subject to the "wash sale" rules of the Code, resulting in a postponement of
the recognition of such loss for federal income tax purposes.
The foregoing tax discussion is only general in nature, and each
investor is advised to consult his or her tax adviser for additional
information.
DETERMINATION OF NET ASSET VALUE
The price investors pay when buying shares of a Fund, and the price
investors receive when redeeming shares of a Fund, is the net asset value of
the shares. No sales charge or commission of any kind is added by the Funds
upon a purchase and no charge is deducted upon a redemption (except for
redemption proceeds sent by wire).
The per share net asset value of a Fund is determined by dividing the
total value of its net assets (meaning its assets less its liabilities
excluding capital and surplus) by the total number of its shares outstanding at
that time. The net asset value is determined as of the close of regular
trading (currently 3:00 p.m. central time) on the New York Stock Exchange on
each day the New York Stock Exchange is open for trading. This determination
is applicable to all transactions in shares of each Fund prior to that time and
after the previous time as of which net asset value was determined.
Accordingly, purchase orders accepted or shares tendered for redemption prior
to the close of regular trading on a day the New York Stock Exchange is open
for trading will be valued as of the close of trading, and purchase orders
accepted or shares tendered for redemption after that time will be valued as of
the close of the next trading day.
Securities which are traded on a recognized stock exchange are valued
at the last sale price on the securities exchange on which such securities are
primarily traded or at last sale price on the national securities market.
Exchange-traded securities for which there were no transactions are valued at
the current bid prices. Securities traded on only over-the-counter bid prices
are valued on the basis of closing over-the-counter bid prices. Debt
securities (other than short-term instruments) are valued at prices furnished
by a national pricing service, subject to review by the Adviser. Debt
instruments maturing within 60 days are valued by the amortized cost method.
Any securities for which market quotations are not readily available are valued
at their fair value as determined in good faith by the Board of Directors.
CAPITAL STRUCTURE
BCM Funds, Inc. is a diversified open-end management investment
company registered under the 1940 Act and organized as a Maryland corporation
in 1996. The Company is organized as a series fund which permits it to issue
its authorized capital stock in one or more Funds, each such Fund representing
a separate investment portfolio. The Company currently consists of the two
diversified equity Funds described in this Prospectus.
21
<PAGE> 25
The Company's authorized capital stock consists of one billion shares
of common stock, $.001 par value per share, of which there have been initially
allocated 100 million shares to each Fund. The Board of Directors may, at its
discretion, classify and allocate shares to additional funds within the Company
or classify and allocate additional shares to each Fund without further action
by the investors. Each share outstanding entitles the holder to one vote. On
matters affecting an individual Fund, a separate vote of the shares of that
Fund is required. Shares of a Fund are not entitled to vote on any matter not
affecting that Fund. All shares of each Fund vote together in the election of
Directors at each meeting of investors at which Directors are to be elected and
on other matters as provided by law or the Company's articles of incorporation
or bylaws. The Company's bylaws do not require that meetings of shareholders
be held annually. However, special meetings of shareholders may be called for
purposes such as electing or removing directors, changing fundamental policies
or approving investment advisory contracts.
Shares have no preemptive, cumulative voting, subscription or
conversion rights, and can be issued as full or fractional shares. A
fractional share has the same kind of rights and privileges as a full share on
a pro rata basis.
PERFORMANCE ADVERTISING
BCM Funds may provide from time to time in advertisements, reports to
investors and other communications with investors its cumulative total return
or average annual total return. Cumulative total return data is computed by
considering all elements of return, including reinvestment of dividends and
capital gains distributions, over a stated period of time. Average annual
total return is determined by computing the annual compound return over a
stated period of time that would have produced a Fund's cumulative total return
over the same period if the Fund's performance had remained constant
throughout.
In reports or other communications to investors and in advertising
material, the Funds may also compare their performance to other mutual funds
with similar investment objectives and to the industry as a whole, as quoted by
ranking services and publications that monitor or report on the performance of
mutual funds (such as Lipper Analytical Services, Inc.). Performance
information may be quoted numerically or may be presented in a table, graph or
other illustration. In addition, fund performance may be compared to
well-known indices of market performance including the Standard & Poor's (S&P)
500 Index, the S&P Mid-Cap Index, the NASDAQ Composite Index, the Dow Jones
Industrial Average, Russell 2000 Index, Russell 1000 Index, Wilshire Top 750
Index and Wilshire Next 1750 Index. Further information on performance
measurement may be found in the Statement of Additional Information.
All performance information advertised by the Funds is historical in
nature and is not intended to represent or guarantee future results. The value
of Fund shares when redeemed may be more or less than their original cost.
22
<PAGE> 26
BCM INSTITUTIONAL FUNDS, INC.
- - BCM GROWTH FUND
- - BCM SMALL CAP GROWTH FUND
INVESTMENT ADVISER
Baird Capital Management LLC
111 East Kilbourn Avenue, Suite 1000
Milwaukee, Wisconsin 53202
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
[ ]
LEGAL COUNSEL
Quarles & Brady
411 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
100 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
23
<PAGE> 27
BCM INSTITUTIONAL FUNDS, INC.
BCM GROWTH FUND
BCM SMALL CAP GROWTH FUND
STATEMENT OF ADDITIONAL INFORMATION
DECEMBER 31, 1996
TABLE OF CONTENTS
Page
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . 1
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . . . . . 1
INVESTMENT LIMITATIONS . . . . . . . . . . . . . . . . . . . . . . . . 5
MANAGEMENT OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . 8
NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION . . . . . . . . . . . . 11
DESCRIPTION OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . 12
PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . 13
ADDITIONAL INFORMATION CONCERNING TAXES . . . . . . . . . . . . . . . . 15
CUSTODIAN, TRANSFER AGENT AND ACCOUNTING SERVICES AGENT . . . . . . . . 16
INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . 17
COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ADDITIONAL INFORMATION ON PERFORMANCE . . . . . . . . . . . . . . . . . 17
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
COMMERCIAL PAPER RATINGS . . . . . . . . . . . . . . . . . . . . . . . 19
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 20
This Statement of Additional Information is meant to be read in
conjunction with the Prospectus dated December 31, 1996 for BCM Growth Fund and
BCM Small Cap Growth Fund (collectively, the "Funds") and is incorporated by
reference in its entirety into the Prospectus. Because this Statement of
Additional Information is not itself a prospectus, no investment in shares of
these Funds should be made solely upon the information contained herein.
Copies of the Prospectus for the Fund may be obtained by writing to the Funds
at 111 East Kilbourn Avenue, Suite 1000, Milwaukee, Wisconsin 53202, or by
calling [ ]. Capitalized terms used but not defined herein have the same
meanings as in the Prospectus.
<PAGE> 28
GENERAL INFORMATION
BCM Institutional Funds, Inc. (the "Company" or "BCM Funds") is a
registered open-end management investment company organized as a Maryland
corporation on October 31, 1996. The Company is authorized to issue separate
series of shares of Common Stock representing interests in separate investment
portfolios. This Statement of Additional Information pertains to BCM Growth
Fund and BCM Small Cap Growth Fund.
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of each of the Funds is long-term capital
growth. The BCM Growth Fund seeks to achieve its objective by investing
primarily in securities of mid to large-sized companies, defined as those
companies with market capitalizations between $750 million and $5 billion at
the time of purchase. The BCM Small Cap Growth Fund seeks to achieve its
objective by investing primarily in securities of small-sized companies,
defined as those companies with market capitalizations between $100 million and
$1 billion at the time of purchase. There is no assurance, however, that
either Fund's investment objective will in fact be attained. The following
policies supplement the Funds' investment objectives and policies as set forth
in the Prospectus.
Securities Lending. The Funds may lend their portfolio securities to
unaffiliated domestic broker/dealers and other institutional investors pursuant
to agreements requiring that the loans be secured by collateral equal in value
to at least the market value of the securities loaned, in order to increase
return on portfolio securities. Collateral for such loans may include cash,
securities of the U.S. Government, its agencies or instrumentalities, or an
irrevocable letter of credit issued by a bank which meets the investment
standards stated below under "Short-Term Instruments," or any combination
thereof. There may be risks of delay in receiving additional collateral or in
recovering the securities loaned or even a loss of rights in the collateral
should the borrower of the securities fail financially. However, loans will be
made only to borrowers deemed by the Adviser to be of good standing and when,
in the Adviser's judgment, the income to be earned from the loan justifies the
attendant risks. When a Fund lends its securities, it continues to receive
interest or dividends on the securities loaned and may simultaneously earn
interest on the investment of the cash collateral which will be invested in
readily marketable, high- quality, short-term obligations. Although voting
rights, or rights to consent, attendant to securities on loan pass to the
borrower, such loans may be called at any time and will be called so that the
securities may be voted by a Fund if a material event affecting the investment
is to occur.
Securities lending arrangements with broker/dealers require that the
loans be secured by collateral equal in value to at least the market value of
the securities loaned. During the term of such arrangements, a Fund will
maintain such value by the daily marking-to-market of the collateral.
<PAGE> 29
Short-Term Instruments. As described in the Prospectus, the Funds may
invest from time to time in "short-term instruments," a term that includes,
among other things, bank obligations, commercial paper, variable amount master
demand notes and corporate bonds with remaining maturities of thirteen months
or less. However, the Funds intend to stay fully invested and therefore
investments in short-term instruments are expected to represent normally less
than 10% of each Fund's net assets.
Bank obligations include bankers' acceptances, negotiable certificates
of deposit and nonnegotiable time deposits, including U.S. dollar-denominated
instruments issued or supported by the credit of U.S. or foreign banks or
savings institutions. Although the Funds will invest in money market
obligations of foreign banks or foreign branches of U.S. banks only when the
Adviser determines the instruments present minimal credit risks, such
investment may nevertheless entail risks that are different from those of
investments in domestic obligations of U.S. banks due to differences in
political, regulatory and economic systems and conditions. All investments in
bank obligations are limited to the obligations of financial institutions
having more than $1 billion in total assets at the time of purchase, and
investments by a Fund in the obligations of foreign banks and foreign branches
of U.S. banks may not exceed 25% of a Fund's total assets at the time of
purchase. The Funds may also make interest-bearing savings deposits in
commercial and savings banks in amounts not in excess of 5% of its total
assets.
For purposes of the Funds' investment policies with respect to bank
obligations, the assets of a bank or savings institution will be deemed to
include the assets of its domestic and foreign branches. The Funds'
investments in the obligations of foreign branches of U.S. banks and of foreign
banks may subject the Funds to investment risks (similar to those discussed
below under "American Depository Receipts") that are different in some respects
from those of investments in obligations of U.S. domestic issuers. Such risks
include future political and economic developments, the possible imposition of
withholding taxes on interest income, possible seizure or nationalization of
foreign deposits, the possible establishment of exchange controls or the
adoption of other foreign governmental restrictions which might adversely
affect the payment of principal and interest of such obligations. In addition,
foreign branches of U.S. banks and foreign banks may be subject to less
stringent reserve requirements and to different accounting, auditing, reporting
and record keeping standards than those applicable to domestic branches of U.S.
banks.
Investments by the Funds in commercial paper will consist of issues
rated at the time A-1 and/or P-1 by Standard & Poor's, Moody's or similar
rating by another nationally recognized rating agency. In addition, the Funds
may acquire unrated commercial paper and corporate bonds that are determined by
the Adviser at the time of purchase to be of comparable quality to rated
instruments that may be acquired by the Funds as previously described.
The Funds may also purchase variable amount master demand notes which
are unsecured instruments that permit the indebtedness thereunder to vary and
provide for periodic adjustments in the interest rate. Although the notes are
not normally traded and there may be no secondary market in the notes, the
Funds may demand payment of the
2
<PAGE> 30
principal of the instruments at any time. The notes are not typically rated by
credit rating agencies, but issuers of variable amount master demand notes must
satisfy the same criteria as set forth above for issuers of commercial paper.
If an issuer of a variable amount master demand note defaulted on its payment
obligation, the Funds might be unable to dispose of the note because of the
absence of a secondary market and might, for this or other reasons, suffer a
loss to the extent of the default. The Funds will invest in variable amount
master notes only when the Adviser deems the investment to involve minimal
credit risk.
Repurchase Agreements. The Funds may agree to purchase securities
from financial institutions subject to the seller's agreement to repurchase
them at an agreed upon time and price ("repurchase agreements"). During the
term of the agreement, the Adviser will continue to monitor the
creditworthiness of the seller and will require the seller to maintain the
value of the securities subject to the agreement at not less than 102% of the
repurchase price. Default or bankruptcy of the seller would, however, expose
the Funds to possible loss because of adverse market action or delay in
connection with the disposition of the underlying securities.
The repurchase price under the repurchase agreements generally equals
the price paid by the Funds plus interest negotiated on the basis of current
short-term rates (which may be more or less than the rate on the securities
underlying the repurchase agreement). Securities subject to repurchase
agreements will be held by the Funds' custodian or in the Federal
Reserve/Treasury book-entry system or other authorized securities depository.
Repurchase agreements are considered to be loans under the 1940 Act.
The Funds intend to limit investments in repurchase agreements to not
more than 5% of their respective total assets.
Investment Companies. As prescribed by the 1940 Act, the Funds will
limit their investments in securities issued by other investment companies so
that, as determined immediately after a purchase of such securities is made:
(i) not more than 5% of the value of a Fund's total assets will be invested in
the securities of any one investment company; (ii) not more than 10% of the
value of its total assets will be invested in the aggregate in securities of
investment companies as a group; and (iii) not more than 3% of the outstanding
voting stock of any one investment company will be owned by a Fund or by the
Company as a whole.
The Funds may invest from time to time in securities issued by other
investment companies which invest in high-quality, short-term debt securities
(i.e., money market mutual funds). As an investor of another investment
company, a Fund would bear, along with other investors, its pro rata portion of
the other investment company's expenses, including advisory fees and such fees
and other expenses will be borne indirectly by the Funds' investors. These
expenses would be in addition to the advisory and other expenses that the Funds
bear directly in connection with their own operations.
3
<PAGE> 31
U.S. Government Obligations. Examples of the types of U.S. Government
obligations that may be acquired by the Funds include U.S. Treasury bonds,
notes and bills and the obligations of Federal Home Loan Banks, Federal Farm
Credit Banks, Federal Land Banks, the Federal Housing Administration, Farmers
Home Administration, Export-Import Bank of the United States Small Business
Administration, Government National Mortgage Association, Federal National
Mortgage Association, General Services Administration, Student Loan Marketing
Association, Central Bank for Cooperatives, Federal Home Loan Mortgage
Corporation, Federal Intermediate Credit Banks, Maritime Administration, and
Resolution Trust Corp.
Other Investment Considerations
The Funds maintain a long-term investment horizon with respect to
investments in equity securities. However, when a company's growth in earnings
and valuation results in price appreciation that reaches a level which meets a
Fund's established return objective, the stock is normally sold. Holdings are
also sold if there has been significant deterioration in the underlying
fundamentals of the securities involved since their acquisition. Sale proceeds
are either re-invested in money market instruments or in other securities which
meet a Fund's investment criteria.
The increase or decrease of cash equivalents in a Fund is primarily
the residual effect of the research process. The portion of a Fund invested in
cash equivalents tends to rise when the pool of acceptable securities is
limited and tends to fall when a Fund's valuation screening process identifies
a large number of attractive securities. Short-term forecasts for the economy
and financial markets are not an important determinant of the level of cash
equivalents in a Fund. The Funds do not attempt to "time" the securities
market.
American Depository Receipts ("ADRs"). The Funds may invest in
securities issued by foreign issuers, including ADRs, which are receipts issued
by an American bank or trust company evidencing ownership of underlying
securities issued by a foreign issuer. ADRs may be listed on a national
securities exchange or may trade in the over-the-counter market. ADR prices
are denominated in U.S. dollars; the underlying security may be denominated in
a foreign currency. Certain institutions issuing ADRs may not be sponsored by
the issuer. A non-sponsored depository may not provide material unitholders
information that a sponsored depository is required to provide under its
contractual arrangements with the issuers. The underlying security may be
subject to foreign government taxes which would reduce the yield on such
securities. Investments in such securities also involve certain inherent
risks, such as political or economic instability of the country of issue, the
difficulty of predicting international trade patterns and the possibility of
imposition of exchange controls. Such securities may also be subject to
greater fluctuations in price than securities of domestic corporations. In
addition, there may be less publicly available information about a foreign
company than about a domestic company. Foreign companies generally are not
subject to uniform accounting, auditing and financial reporting standards
comparable to those applicable to domestic companies. With respect to certain
foreign countries, there is a possibility of expropriation or confiscatory
taxation, or diplomatic developments which could affect investment in those
countries.
4
<PAGE> 32
Convertible Securities. The Funds may hold convertible securities.
Convertible securities entitle the holder to receive interest paid or accrued
on debt or the dividend paid on preferred stock until the securities mature or
are redeemed, converted or exchanged. Prior to conversion, convertible
securities have characteristics similar to ordinary debt in that they normally
provide a stable stream of income with generally higher yields than those of
common stock of the same or similar issuers. Convertible securities rank
senior to common stock in a corporation's capital structure and therefore
generally entail less risk than the corporation's common stock, although the
extent to which such risk is reduced depends in large measure upon the degree
to which the convertible security sells above its value as a fixed income
security.
The Funds may invest a portion of their respective assets (under 5% of
total assets) in convertible debt securities that are rated below investment
grade.
Warrants. The Funds may invest in warrants. Warrants basically are
options to purchase equity securities at a specific price valid for a specific
period of time. They do not represent ownership of the securities, but only
the right to buy them. They have no voting rights, pay no dividends and have
no rights with respect to the assets of the company issuing them. Warrants
differ from call options in that warrants are issued by the issuer of the
security which may be purchased on their exercise, whereas call options may be
written or issued by anyone. The prices of warrants do not necessarily move
parallel to the prices of the underlying securities.
Unseasoned Companies. Securities of unseasoned companies, that is,
companies with less than three years of continuous operation, which present
risks considerably greater than do common stocks of more established companies,
may be acquired from time to time by the Funds when the Adviser believes such
investments offer possibilities of attractive capital appreciation. However,
neither Fund may invest more than 5% of the value of its total assets in the
securities of such unseasoned companies.
INVESTMENT LIMITATIONS
Each Fund is subject to the investment limitations enumerated below
which may be changed only by a vote of the holders of a majority of a Fund's
outstanding shares (as defined under "Miscellaneous" below).
No Fund may:
1. With respect to 75% of the Fund's total assets, invest more
than 5% of the fair market value of its assets in securities
of any one issuer (other than securities issued or guaranteed
by the U.S. Government, its agencies or instrumentalities).
2. Invest more than 25% of its total assets, based on current
market value at the time of purchase, in securities of issuers
conducting their principal business
5
<PAGE> 33
activity in the same industry (other than securities issued or
guaranteed by the U.S. Government, its agencies or
instrumentalities).
3. Invest in a company to get control or manage it or, with
respect to 75% of the Fund's total assets, purchase more than
10% of the outstanding voting securities of an issuer.
4. Purchase or sell real estate except that a Fund may purchase
securities of issuers which deal in real estate (including
real estate investment trusts) and may purchase securities
which are secured by interests in real estate.
5. Act as an underwriter of securities within the meaning of the
Securities Act of 1933, although it may invest in companies
engaged in such businesses, and except insofar as a Fund might
be deemed to be an underwriter upon the disposition of
portfolio securities acquired within the limitation on
purchases of restricted securities and except to the extent
that the purchase of securities directly from the issuer
thereof in accordance with the Fund's investment objective,
policies and limitations may be deemed to be underwriting.
6. Purchase securities on margin, make short sales of securities
or maintain a short position in an amount exceeding one-third
of a Fund's net assets, except that (a) this investment
limitation shall not apply to a Fund's transactions in futures
contracts, related options, and short sales against the box,
and (b) a Fund may obtain short-term credit as may be
necessary for the clearance of purchases and sales of
portfolio securities.
7. Purchase or sell commodity contracts, or invest in oil, gas or
mineral exploration or development programs, except that a
Fund may, to the extent appropriate to its investment
objective, purchase publicly traded securities of companies
engaging in whole or in part in such activities and may enter
into futures contracts and related options.
8. Purchase a security if, as a result, more than 15% of the
value of the Fund's net assets would be invested in securities
that are not readily marketable or that would require
registration under the Securities Act of 1933, as amended,
upon disposition, and repurchase agreements which do not
provide for payment within seven days.
9. Make loans, except that it may (a) acquire publicly
distributed bonds, debentures, notes and other debt
securities; (b) lend portfolio securities provided no such
loan may be made if, as a result, the aggregate amount of such
loans would exceed one- third of the value of the Fund's total
assets; and (c) enter into repurchase agreements.
10. Borrow money or issue senior securities, except that a Fund
may borrow from banks and enter into reverse repurchase
agreements for temporary purposes
6
<PAGE> 34
in amounts up to one-third of the value of the total assets at
the time of such borrowing; or mortgage, pledge or hypothecate
any assets, except in connection with any such borrowing and
in amounts not in excess of the lesser of the dollar amounts
borrowed or one-third of the value of a Fund's total assets at
the time of such borrowing. In addition, as a matter of
fundamental policy, a Fund may not enter into reverse
repurchase agreements exceeding in the aggregate one-third of
its respective total assets. Securities held in escrow or
separate accounts in connection with a Fund's investment
practices described in this Statement of Additional
Information or in the Prospectus are not deemed to be pledged
for purposes of this limitation. If due to market
fluctuations or other reasons, the total assets of a Fund fall
below 300% of its borrowings, a Fund will reduce its
borrowings in accordance with the 1940 Act.
If a percentage limitation is satisfied at the time of investment, a
later increase or decrease in such percentage resulting from a change in the
value of a Fund's portfolio securities will not constitute a violation of such
limitation.
In accordance with the following non-fundamental policies, which may
be changed without investor approval, neither Fund may:
1. Invest more than 5% of its total assets in securities of
companies which, including any predecessors, have a record of
less than three years of continuous operations.
2. Invest more than 5% of its total assets in preferred stock,
convertible securities and warrants.
3. Engage in short sales or options or futures transactions.
4. Invest more than 25% of its total assets in securities of
foreign issuers (including ADRs).
5. Acquire any other investment company or investment company
security except in connection with a merger, consolidation,
reorganization or acquisition of assets or where otherwise
permitted by the 1940 Act.
6. Borrow money in amounts in excess of 10% of the value of its
total assets at the time of such borrowing.
7. Invest more than 10% of its total assets in short-term
instruments except for temporary defensive purposes.
8. Invest 5% or more of its total assets in debt securities rated
below "investment grade."
7
<PAGE> 35
Portfolio Turnover
The portfolio turnover rate for the Funds 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 whose maturity
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 other factors.
Portfolio turnover will not be a limiting factor in making portfolio decisions,
and the Funds may engage in short-term trading to achieve their investment
objective.
MANAGEMENT OF THE COMPANY
Directors and Officers
The Directors and officers of the Company, their addresses, principal
occupations during the past five years and other affiliations are as follows
(Directors who are "interested persons" of the Company, as defined in the 1940
Act, are denoted by an asterisk):
<TABLE>
<CAPTION>
PRINCIPAL
POSITION WITH OCCUPATIONS DURING PAST FIVE
NAME, ADDRESS & AGE THE COMPANY YEARS AND OTHER AFFILIATIONS
------------------- ----------- ----------------------------
<S> <C> <C>
Joseph J. Docter* Director and President Principal and Equity Portfolio Manager,
111 East Kilbourn Avenue Baird Capital Management LLC, since
Suite 1000 June 1996. Senior Vice President and
Milwaukee, Wisconsin 53202 Senior Portfolio Manager, Firstar
Age 37 Investment Research & Management
Company (investment adviser), June 1986
- June 1996.
R. Bart Wear* Director and Treasurer Principal, Manager and Equity Portfolio
111 East Kilbourn Avenue Manager, Baird Capital Management LLC,
Suite 1000 since June 1996. Senior Vice President
Milwaukee, Wisconsin 53202 and Senior Portfolio Manager, Firstar
Age 36 Investment Research & Management
Company, June 1986 - June 1996.
Michael J. Bills Vice President Principal, Manager and Director of
111 East Kilbourn Avenue Marketing, Baird Capital Management
Suite 1000 LLC, since April 1996. Executive Vice
Milwaukee, Wisconsin 53202 President Firstar Corporation (bank
Age 53 holding company), April 1994 - April
1996. President, Firstar Investment
Research & Management Company, January
1990 - March 1994. Director of several
Firstar subsidiaries, November 1992 -
April 1996.
</TABLE>
8
<PAGE> 36
<TABLE>
<CAPTION>
PRINCIPAL
POSITION WITH OCCUPATIONS DURING PAST FIVE
NAME, ADDRESS & AGE THE COMPANY YEARS AND OTHER AFFILIATIONS
------------------- ----------- ----------------------------
<S> <C> <C>
Robert A. Lintereur Director President, Stocks, Inc. (technical
507 Lake Bluff Road equity analysis services), since
Thiensville, Wisconsin 53092 December 1995. Author and Publisher,
Age 51 The Inner Game - Another View of the
----------------------------------------
Market (advisory publication), since --
------
December 1987.
Dana J. Russart Secretary Principal, Manager and Director of
111 East Kilbourn Avenue Operations, Baird Capital Management
Suite 1000 LLC, since April 1996. President and
Milwaukee, Wisconsin 53202 Director, Elan Investment Services,
Age 37 Inc. (broker-dealer), January 1995 -
April 1996. Vice President, Firstar
Corporation, April 1994 - April 1995.
Vice President Firstar Investment
Research & Management Company, July
1993 - April 1994. Executive Vice
President, Sunstone Financial Group,
Inc. (mutual fund services company)
April 1990 - July 1993.
</TABLE>
Officers and Directors who are "interested persons" of the Company
receive no compensation from the Funds for serving in such capacities. Each
non-interested Director receives an annual fee of $5,000, a $500 per meeting
attendance fee and reimbursement of expenses incurred as a Director. Because
the Company is newly organized, non-interested Directors received no
compensation from the Funds for the fiscal year ended December 31, 1996. As of
the date of this Statement of Additional information, the Directors and
officers of the Company, as a group, owned less than 1% of the outstanding
shares of the Funds.
As of the date of this Statement of Additional Information, the
Adviser owned of record all outstanding shares of the Funds.
Advisory Services
Baird Capital Management, LLC is the Investment Adviser to each of the
Funds and has served in such capacity since the commencement of the Funds'
operations. The Board of Directors of the Company and the initial stockholder
of the Funds approved the Investment Advisory Agreement (the "Agreement") on
October 31, 1996. The Adviser was organized as a Wisconsin limited liability
company in July 1996 and is a registered investment adviser. The equity
interests of the Adviser are owned 60% by Baird and 40% by Summit Partners LLC.
The officers of the Company own Summit Partners LLC. The Adviser manages
numerous other accounts in addition to the Funds, and as of the date of this
Statement of Additional Information had $___________ of assets under
discretionary management.
9
<PAGE> 37
The Adviser provides each Fund with overall investment advisory and
administrative services pursuant to the Agreement. Subject to such policies as
the Board of Directors may determine the Adviser makes investment decisions on
behalf of each Fund, makes available research and statistical data in
connection therewith, and supervises the acquisition and disposition of
investments by each Fund, including the selection of broker-dealers to carry
out portfolio transactions.
The Agreement will remain in effect until October 31, 1998, with
respect to each Fund and continue thereafter from year to year, as long as it
is approved at least annually by the Board of Directors or by a vote of the
outstanding voting securities of the appropriate Fund and in either case by a
majority of the Directors who are not parties to the Investment Advisory
Agreement or interested persons of any such party. The Agreement terminates
automatically if it is assigned and may be terminated without penalty by either
party on not more than 60 nor less than 30 days' notice. The Agreement
provides that neither the Adviser nor its personnel shall be liable for any
error of judgment or mistake of law or for any loss arising out of any
investment or for any act or omission in the execution and management of either
Fund, except for willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of reckless disregard of its obligations
and duties under the Agreement.
NET ASSET VALUE
The net asset value per share of a Fund is calculated by adding the
value of all portfolio securities and other assets belonging to the Fund,
subtracting the liabilities charged to that Fund, and dividing the result by
the number of outstanding shares of that Fund. Assets belonging to a Fund
consist of the consideration received upon the issuance of shares of a Fund
together with all net investment income, realized gains/losses and proceeds
derived from the investment thereof, including any proceeds from the sale of
such investments, any funds or payments derived from any reinvestment of such
proceeds, and a portion of any general assets of the Company not belonging to a
particular investment portfolio. The liabilities that are charged to a Fund
are borne by each share of that Fund. Subject to the provisions of the
Articles of Incorporation, determinations by the Board of Directors as to the
direct and allocable liabilities, and the allocable portion of any general
assets, with respect to a Fund are conclusive.
Net asset value calculations are made as of the close of trading on
the New York Stock Exchange at least once every weekday, Monday through Friday,
except on (i) customary national business holidays which result in the closing
of the New York Stock Exchange (New Year's Day, Washington's Birthday, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas);
or (ii) days when no security is tendered for redemption from and non customer
purchase order is received.
10
<PAGE> 38
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares of a Fund for which a redemption order is received in proper
form by the Transfer Agent before close of the Exchange (currently 3:00 p.m.
Central Time) on a business day will be as of the determination of net asset
value on that day. Orders for a redemption received on a day after the close
of the Exchange or on a non-business day will be priced as of the determination
of net asset value on the next day on which shares of the particular Fund are
priced. If an investor requests that redemption proceeds be paid by federal
funds wire, the proceeds will be wired to a correspondent member bank if the
investor's designated bank is not a member of the Federal Reserve System.
Under the 1940 Act, the Funds may suspend the right of redemption or
postpone the date of payment for shares during any period when (a) trading on
the Exchange is restricted by applicable rules and regulations of the
Securities and Exchange Commission ("SEC"); (b) the Exchange is closed for
other than customary weekend and holiday closings; (c) the SEC has by order
permitted such suspension; or (d) an emergency exists as determined by the SEC.
(A Fund may also suspend or postpone the recording of the transfer of its
shares upon the occurrence of any of the foregoing conditions.)
The Company's Articles of Incorporation permit the Funds to redeem an
account involuntarily, upon 30 days' notice, if redemptions cause the account's
net asset value to remain at $1,000 or less. A Fund may redeem shares
involuntarily to reimburse the Fund for any loss sustained by reason of the
failure of an investor to make full payment for shares purchased by the
Investor or to collect any charge relating to a transaction effected for the
benefit of an investor which is applicable to Fund shares as provided in the
Prospectus from time to time.
Exchange Privilege. By use of the exchange privilege, investors of
the Funds authorize the Transfer Agent to act on telephonic or written exchange
instructions from any person representing himself to be the investor or in some
case, the investor's registered representative of record, and believed by the
Transfer Agent to be genuine. The Transfer Agent's records of such
instructions are binding. The exchange privilege may be modified or terminated
at any time upon notice to investors.
Shares in a Fund from which the investor is withdrawing an investment
will be redeemed at the net asset value per share next determined on the date
of receipt. Shares of the new Fund into which the investor is investing will
be purchased at the net asset value per share next determined after acceptance
of the request by the Company in accordance with the policies for accepting
investment. Exchanges of Shares will be available only in states where they
may legally be made.
For federal income tax purposes, share exchanges are treated as sales
on which the investor may realize a gain or loss, depending upon whether the
value of the shares to be given up in exchange is more or less than the basis
in such shares at the time of the exchange.
11
<PAGE> 39
Special Procedures for In-Kind Payments. Payment for shares of a Fund
may, in the discretion of the Fund, be made in the form of securities that are
permissible investments for the Fund as described in the Prospectus. In
connection with an in-kind securities payment, a Fund will require, among other
things, that the investor making the contribution of securities be a tax-exempt
entity; that the securities be valued on the day of purchase in accordance with
the pricing methods used by the Fund; that the Fund receive satisfactory
assurances that it will have good and marketable title to the securities
received by it; that the securities be in proper form for transfer to the Fund;
that adequate information be provided to the Fund concerning the basis and
other tax matters relating to the securities; and that the amount of the
purchase be at least $1,000,000. A Fund will consider accepting securities as
consideration for shares only if such securities meet the investment objectives
and policies of the Fund and otherwise are deemed by the Adviser to be suitable
and appropriate for the Fund, are acquired for investment and not for resale
(although the Fund may sell such securities in response to market or Fund
activity), are liquid and have a value which is readily ascertainable.
Investors should consult their own tax advisers before contributing
securities to the Fund because of possible adverse tax consequences resulting
from such contributions. See "Additional Information Concerning Taxes."
DESCRIPTION OF SHARES
In the interest of economy and convenience, certificates representing
Fund shares purchased are not ordinarily issued. However, such purchases are
confirmed to the investor and credited to their accounts in the books
maintained by the Transfer Agent. The investor will have the same rights of
ownership with respect to such shares as if certificates had been issued.
Investors may receive a certificate representing whole shares by specifically
requesting one by letter to the Transfer Agent. If a stock certificate is
requested, it will not be sent for at least 14 days. The Directors require
payment of any lost instrument bond premiums or federal and state taxes due in
connection with the replacement of certificates and may require a fee for each
new stock certificate that is issued by the Fund not connected with the
purchase of new shares.
The Company's Articles of Incorporation authorize the Board of
Directors to issue up to 1 billion full and fractional shares of common stock,
$.001 par value per share, which are presently divided into the following two
mutual fund series:
NUMBER OF AUTHORIZED
NAME OF FUND SHARES IN FUND
- ------------ --------------
BCM Growth Fund 100 Million
BCM Small Cap Growth Fund 100 Million
12
<PAGE> 40
The Board of Directors has also authorized the remaining shares to be
classified into additional series representing interests in other potential
future investment portfolios of the Company. The Directors may similarly
classify or reclassify any particular series of shares into one or more
additional series.
In the event of a liquidation or dissolution of the Company or an
individual Fund, investors of a particular Fund would be entitled to receive
the assets available for distribution belonging to such Fund, and a
proportionate distribution, based upon the relative assets of the Company's
respective investment portfolios, of any general assets not belonging to any
particular portfolio which are available for distribution. Subject to the
allocation of certain costs, expenses, charges and reserves attributed to the
operation of a particular series as described in the Funds' Prospectuses,
investors of a Fund are entitled to participate equally in the net
distributable assets of the particular Fund involved on liquidation, based on
the number of shares of the Fund that are held by each investor.
Investors have the right to vote on the election of directors at each
meeting of stockholders at which Directors are to be elected and on other
matters as provided by law or the Articles of Incorporation or Bylaws of the
Company. The Company's Bylaws do not require that meetings of stockholders be
held annually. However, special meetings of stockholders may be called for
purposes such as electing or removing Directors, changing fundamental policies,
or approving investment advisory contracts. Stockholders of the Funds vote
together on matters affecting all Funds (such as election of directors), with
each share entitled to a single vote. On matters affecting only one Fund (such
as a change in that Fund's fundamental investment restrictions), only the
stockholders of that Fund are entitled to vote. On matters relating to all the
Funds but affecting the Funds differently (such as a new Investment Advisory
Agreement), separate votes by the Funds are required.
When issued for payment as described in the Funds' Prospectus and this
Statement of Additional Information, shares of the Funds will be fully paid and
non-assessable by the Company.
PORTFOLIO TRANSACTIONS
Subject to the general supervision of the Board of Directors, the
Adviser is responsible for, makes decisions with respect to, and places orders
for all purchases and sales of portfolio securities for the Funds.
Transactions on national or regional 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.
Transactions in the over-the-counter market are generally principal
transactions with dealers and the costs of such transactions involve dealer
spreads rather than brokerage commissions. With respect to over-the-counter
transactions, the Adviser will normally deal directly with dealers who make a
market in the securities involved except in those circumstances where better
prices and execution are available elsewhere or as described below.
13
<PAGE> 41
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 in its
sole discretion, believes such practice to be in the Funds' interests.
In executing portfolio transactions and selecting brokers or dealers,
the Adviser will seek to obtain the best overall terms available. In assessing
the best overall terms available for any transaction, the Adviser shall
consider factors it deems relevant, including the breadth of the market in the
security, the price of the security, size of order, the financial condition and
execution capability of the broker or dealer, and the reasonableness of the
commissions and dealer spreads, if any, both for the specific transaction and
on a continuing basis. While the Adviser seeks reasonably competitive rates,
it does not necessarily pay the lowest commission or spreads available.
Transactions in small companies in which the Funds invest may involve
specialized services on the part of the broker and thereby entail higher
commissions or spreads than would be pain in transactions involving more widely
traded securities. Allocation of transactions, including their frequency, to
various broker-dealers is determined by the Adviser in its best judgment and in
a manner deemed fair and reasonable to shareholders. The primary consideration
is prompt and efficient execution of orders in an effective manner at the most
favorable price. Subject to this primary consideration, the Adviser may also
consider the provision of supplemental research services in the selection of
broker-dealers to execute portfolio transactions. The Adviser is authorized to
cause the Funds to pay a broker-dealer which furnishes brokerage and research
services a higher commission that which might be charged by another
broker-dealer for effecting the same transaction, provided that the Adviser
determines in good faith that such commission is reasonable in relation to the
value of the brokerage and research services provided by such broker- dealer,
viewed in terms of either the particular transaction or the overall
responsibilities of the Adviser to the 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 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
other accounts for which investment discretion is exercised. Conversely, the
Funds may be the primary beneficiary of the research or services received as a
result of portfolio transactions effected for such other accounts.
Portfolio securities will not be purchased from or sold to (and
repurchase and reverse repurchase agreements will not be entered into with) the
Adviser or an affiliated person (as such term is defined in the 1940 Act)
acting as principal. In addition, the Funds will not buy or sell portfolio
securities through the Adviser or an affiliate acting as a broker on an
14
<PAGE> 42
agency basis. However, the Funds will purchase securities during the existence
of any underwriting or selling group relating thereto of which the Adviser or
an affiliated person is a member, to the extent permitted by the Securities and
Exchange Commission. Pursuant to plans adopted by the Board of Directors for
each Fund under, and subject to, the provisions of Rule 10f-3 under the 1940
Act, the Funds may purchase securities in an offering from an underwriter which
is a member of an underwriting syndicate of which an affiliate of the Adviser
is also a member. The plans and Rule 10f-3 limit the securities that may be
purchased, the time and manner of purchase, the underwriting discount and
amount of purchase, and require a review by the Board of Directors of any such
transactions at least quarterly.
ADDITIONAL INFORMATION CONCERNING TAXES
The following is only a summary of certain additional tax
considerations generally affecting the Funds and its investors that are not
described in the Funds' Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of the Funds or its investors, and the
discussion here and in the Prospectus is not intended as a substitute for
careful tax planning. Investors are advised to consult their tax advisers with
specific reference to their own tax situations.
A 4% non-deductible excise tax is imposed on regulated investment
companies that fail to currently distribute specified percentages of their
ordinary taxable income and capital gain net income (excess of capital gains
over capital losses). Each Fund intends to make sufficient distributions or
deemed distributions of its ordinary taxable income and any capital gain net
income with respect to each calendar year to avoid liability for this excise
tax.
Each Fund is treated as a separate tax entity under the Code.
Although the Funds expect to qualify as a "regulated investment company" and to
be relieved of all or substantially all federal income taxes, depending upon
the extent of the Company's activities in states and localities in which its
offices are maintained, in which its agents or independent contractors are
located or in which it is otherwise deemed to be conducting business, the Funds
may be subject to the tax laws of such states or localities. In addition, in
those states and localities which have income tax laws, the treatment of the
Funds and its investors under such laws may differ from their treatment under
federal income tax laws.
If for any taxable year a Fund does not qualify for the special
federal income tax treatment afforded regulated investment companies, all of
its taxable income will be subject to federal income tax at regular corporate
rates (without any deduction for distributions to its investors). In such
event, dividend distributions would be taxable as ordinary income to investors
to the extent of a Fund's current and accumulated earnings and profits, and
would be eligible for the dividends received deduction in the case of corporate
investors.
Each Fund will designate any distribution of the excess of net
long-term capital gain over net short-term capital loss as a capital gain
dividend in a written notice mailed to investors after the close of a Fund's
taxable year.
15
<PAGE> 43
Investors who contribute securities to a Fund as payment for an
investment in the Fund should be aware that generally the contribution will
result in gain or loss pursuant to Section 351(e)(1) of the Code, in an amount
equal to the difference between the fair market value of the securities at time
of contribution and the investor's tax basis in the securities.
The foregoing discussion is based on federal tax laws and regulations
which are in effect on the date of this Statement of Additional Information;
such laws and regulations may be changed by legislative or administrative
action.
CUSTODIAN, TRANSFER AGENT AND ACCOUNTING SERVICES AGENT
[ ] serves as custodian of all the Funds' assets. Under the
Custody Agreement, [ ] has agreed to (i) maintain a separate account in the
name of each Fund, (ii) make receipts and disbursements of money on behalf of
each Fund, (iii) collect and receive all income and other payments and
distributions on account of each Fund's portfolio investments, (iv) respond to
correspondence from investors, security brokers and others relating to its
duties and (v) make periodic reports to the Company concerning the Funds'
operations. [ ] may, at its own expense, open and maintain a custody
account or accounts on behalf of a Fund with other banks or trust companies,
provided [ ] shall remain liable for the performance of all of its duties
under the Custody Agreement notwithstanding any delegation. For its services
as custodian, [ ] is entitled to receive a fee, payable quarterly, based on
the annual rate of $___ per $1,000 of the market value of each Fund's assets.
In addition, [ ], as custodian, is entitled to certain charges for
securities transactions and reimbursement for expenses.
[ ] also serves as transfer agent and dividend disbursing agent
for each Fund under a Transfer Agency Agreement. As transfer and dividend
disbursing agent, [ ] has agreed to (i) issue and redeem shares of each
Fund, (ii) make dividend and other distributions to investors of each Fund,
(iii) respond to correspondence by Fund investors and others relating to its
duties, (iv) maintain investor accounts, and (v) make periodic reports to the
Funds. For its transfer agency and dividend disbursing services, [ ] is
entitled to receive fees at the minimum rate of $_____ per investment
portfolio. Also, [ ] is entitled to certain other transaction charges and
reimbursement for expenses.
In addition, the Funds have entered into a Fund Accounting Servicing
Agreement with [ ] pursuant to which [ ] has agreed to maintain the
financial accounts and records of each Fund in compliance with the 1940 Act and
to provide other accounting and pricing services to each Fund. For its
accounting services, [ ] is entitled to receive fees, payable monthly, at
the following annual rates of the market value of each Funds assets: [ ],
plus out-of-pocket expenses, including pricing expenses.
16
<PAGE> 44
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, Milwaukee, Wisconsin, the Company's independent
accountants, serve as auditors for the Funds.
COUNSEL
Quarles & Brady, Milwaukee, Wisconsin, serve as counsel to the Company
and will pass upon the legality of the shares offered by the Funds' Prospectus.
ADDITIONAL INFORMATION ON PERFORMANCE
From time to time, the total return of the Funds may be quoted in
advertisements, reports to investors or other communications to investors.
Performance information is generally available by calling the Funds at [ ].
Total Return Calculations.
The Funds compute "average annual total return" by determining the
average annual compounded rates of return during specified periods that equate
the initial amount invested in a particular Fund to the ending redeemable value
of such investment in the Fund. This is done by dividing the ending redeemable
value of a hypothetical $1,000 initial payment by $1,000 and raising the
quotient to a power equal to one divided by the number of years (or fractional
portfolio hereof) covered by the computation and subtracting one from the
result. This calculation can be expressed as follows:
n
P(1+T) =ERV
Where:
P = hypothetical initial payment of $1,000
T= average annual total return.
n = period covered by the computation, expressed
in terms of years.
ERV = ending redeemable value at the end of the
period covered by the computation of a
hypothetical $1,000 payment made at the
beginning of the period.
The calculations of average annual total returns and aggregate total
return assume the reinvestment of all dividends and capital gain distributions
on the reinvestment dates during the period. The ending redeemable value
(variable "ERV") is determined by assuming
17
<PAGE> 45
complete redemption of the hypothetical investment and the deduction of all
nonrecurring charges at the end of the period covered by the computations.
The Funds may also from time to time include discussions or
illustrations of the effect of compounding in advertisements. "Compounding"
refers to the fact that, if dividends or other distributions on a Fund's
investment are reinvested by being paid in additional Fund shares, any future
income or capital appreciation of the Fund would increase the value, not only
of the original Fund investment, but also of the additional Fund shares
received through reinvestment. As a result, the value of a Fund investment
would increase more quickly than if dividends or other distribution had been
paid in cash. The Funds may also include discussions or illustrations of the
potential investment goals of a prospective investor, investment management
techniques, policies or investment suitability of the Fund, economic
conditions, the effects of inflation and historical performance of various
asset classes, including but not limited to, stocks, bonds and Treasury bills.
From time to time advertisements or communications to investors may summarize
the substance of information contained in investor reports (including the
investment composition of the Funds), as well as the views of the Adviser as to
market, economic, trade and interest rate trends, legislative, regulatory and
monetary developments, investment strategies and related matters believed to be
of relevance to the Funds. The Funds may also include in advertisements,
charts, graphs or drawings which illustrate the potential risks and rewards of
investment in various investment vehicles, including but not limited to stocks,
bonds, treasury bills and shares of the Funds. In addition, advertisement or
investor communications may include a discussion of certain attributes or
benefits to be derived by an investment in the Funds. Such advertisements or
communications may include symbols, headlines or other materials which
highlight or summarize the information discussed in more detail therein.
The total returns of the Funds may be compared to the following
indices:
. S&P 500 Index, an Index of 500 selected common stocks most of
which are listed on the New York Stock Exchange.
. NASDAQ Composite Index, an Index of unmanaged groups of common
stock of domestic companies that are quoted on the National
Association of Securities Quotation System.
. Dow Jones Industrial Average, a recognized unmanaged Index of
common stocks of 30 industrial companies listed on the New
York Stock Exchange.
. Wilshire Top 750 Index, an Index of all domestic equity issues
which are traded over the national exchanges.
. Any other recognized index of equity securities comparable to
the composition of the Funds' investment portfolios, including
the S&P Mid-Cap Index, Russell 2000 Index, Russell 1000 Index
and Wilshire Next 1750 Index.
18
<PAGE> 46
MISCELLANEOUS
As used in this Statement of Additional Information and in the Funds'
Prospectus, a majority of the outstanding shares of the Funds, with respect to
the approval of an investment advisory agreement or a change in a fundamental
investment policy, the lesser of (1) 67% of the shares of the Funds or Fund
represented at a meeting at which the holders of more than 50% of the
outstanding shares of the Funds or Fund are present in person or by proxy, or
(2) more than 50% of the outstanding shares of the Funds or Fund.
The Prospectus and this Statement of Additional Information do not
contain all the information included in the Registration Statement filed with
the securities and Exchange Commission under the Securities Act of 1933 with
respect to the securities offered by the Prospectus. Certain portions of the
Registration Statement have been omitted from the Prospectus and this Statement
of Additional Information pursuant to the rules and regulations of the
Securities and Exchange Commission. The Registration Statement, including the
exhibits filed therewith, may be examined at the office of the Securities and
Exchange Commission in Washington, D.C. or via the Commission's worldwide web
site (http://www.sec.gov).
Statements contained in the Prospectus or in this Statement of
Additional Information as to the contents of any contract or other document
referred to are not necessarily complete, and, in each instance, reference is
made tot he copy of such contract or other document filed as an exhibit to the
Registration Statement of which the Prospectus and this Statement of Additional
Information for a part, each such statement being qualified in all respects by
such reference.
COMMERCIAL PAPER RATINGS
RATINGS BY MOODY'S
Moody's commercial paper ratings are opinions of the ability to repay
punctually promissory obligations. Moody's employs the following three
category designations, all judged to be investment grade, to indicate the
relative repayment capacity of rated issuers: Prime 1 - highest quality; Prime
2 - higher quality; Prime 3 - high quality.
RATINGS BY STANDARD & POOR'S
A Standard & Poor's commercial paper rating is a current assessment of
the likelihood of timely payment. Ratings are graded into four categories,
ranging from "A" for the highest quality obligations to "D" for the lowest.
Issues assigned the highest rating category, A, are regarded as having
the greatest capacity for timely payment. Issues in this category are
delineated with the numbers "1", "2" and "3" to indicate the relative degree of
safety. The designation A-1 indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. A"+"
19
<PAGE> 47
designation is applied to those issues rated "A-1" which possess extremely
strong safety characteristics. Capacity for timely payment on issues with the
designation "A-2" is strong. However, the relative degree of safety is not as
high as for issues designated A-1. Issues carrying the designation A-3 have a
satisfactory capacity for timely payment. They are, however, somewhat more
vulnerable to the adverse effect of changes in circumstances than obligations
carrying the higher designations.
FINANCIAL STATEMENTS
The Statement of Assets and Liabilities, related notes and report of
Price Waterhouse LLP, independent accountants, showing the initial capital
contributed to the Company, are set forth below.
20
<PAGE> 48
[PRICE WATERHOUSE LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board
of Directors of BCM Institutional Funds, Inc.
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of BCM Small Cap
Growth Fund and BCM Growth Fund (constituting BCM Institutional Funds, Inc.,
hereafter referred to as the "Funds") at October 31, 1996, in conformity with
generally accepted accounting principles. This financial statement is the
responsibility of the Funds' management; our responsibility is to express an
opinion on this financial statement based on our audit. We conducted our audit
of this financial statement in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatements. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Milwaukee, Wisconsin
October 31, 1996
<PAGE> 49
BCM INSTITUTIONAL FUNDS, INC.
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1996
<TABLE>
<CAPTION>
BCM Small-Cap BCM Growth
Growth Fund Fund
--------------- --------------
<S> <C> <C>
ASSETS
Cash $ 50,000 $ 50,000
Unamortized organizational costs 15,000 15,000
--------------- --------------
Total Assets 65,000 65,000
--------------- --------------
LIABILITIES
Payable to Adviser 15,000 15,000
--------------- --------------
Total Liabilities 15,000 15,000
--------------- --------------
NET ASSETS $ 50,000 $ 50,000
=============== ==============
Capital Stock, $0.001 par value; 100,000,000 shares
authorized; 5,000 shares outstanding
Net asset value, offering and redemption price per share
(net assets/shares outstanding) $ 10.00 $ 10.00
=============== ==============
</TABLE>
The accompanying notes to the financial statement
are an integral part of this statement.
<PAGE> 50
BCM INSTITUTIONAL FUNDS, INC.
NOTES TO FINANCIAL STATEMENT
OCTOBER 31, 1996
1. ORGANIZATION
BCM Institutional Funds, Inc. (the "Company") was organized as a Maryland
corporation on October 31, 1996 and is in the process of registering under
the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end, diversified management investment company. The BCM Small Cap
Growth Fund and BCM Growth Fund (the "Funds") are each a diversified
mutual fund series of the Company. The Company has had no operations
other than those relating to organizational matters and the sale of 10,000
shares of its common stock to its original shareholder, Baird Capital
Management LLC (the "Adviser") for cash in the amount of $100,000.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) Organization costs
Costs incurred by the Funds in connection with their organization,
registration and the initial public offering of shares, are being
deferred and amortized over the period of benefit, but not to exceed
sixty months from the Funds' commencement of operations. These costs
were advanced by the Adviser and will be reimbursed by the Funds.
The proceeds of any redemption of the initial shares by the original
stockholders will be reduced by a pro-rata portion of any then
unamortized organizational expenses in the same proportion as the
number of initial shares being redeemed bears to the number of
initial shares outstanding at the time of such redemption.
(b) Federal Income Taxes
The Funds intend to comply with the requirements of the Internal
Revenue Code necessary to qualify as regulated investment companies
and to make the requisite distributions of income and capital gains
to their shareholders sufficient to relieve it from all or
substantially all Federal income taxes.
3. INVESTMENT ADVISER
BCM Institutional Funds, Inc. has an agreement with the Adviser, with whom
certain officers and directors of BCM Institutional Funds, Inc. are
affiliated, to furnish investment advisory services to the Funds. Under
the terms of this agreement, the Adviser will receive a monthly fee of
1/12 of .90% (.90% per annum) on the average daily net assets of each
Fund. The Adviser has committed to reimburse expenses of the Funds to the
extent necessary to ensure that the total operating expenses of each Fund
during the year ending December 31, 1997 do not exceed 1.00% of such
Fund's average net assets.
<PAGE> 51
Part C. Other Information.
Item 24. Financial Statements and Exhibits
(a) Financial Statements and related notes for the Funds
included or incorporated by reference in Part B are:
(1) Report of Independent Accountants; and
(2) Statement of Assets and Liabilities as of
October 31, 1996.
(b) Exhibits:
See Exhibit Index following the signature page of
this registration statement, which index is
incorporated herein by this reference.
Item 25. Persons Controlled by or under Common Control with Registrant
Not Applicable.
Item 26. Number of Holders of Securities
On October 31, 1996, the number of record holders of each
class of securities of the Registrant was:
NUMBER OF HOLDERS OF
FUND RECORD OF COMMON STOCK
- ----------------------------- ----------------------
BCM Institutional Growth Fund 1
BCM Institutional Small Cap Growth Fund 1
Item 27. Indemnification
Reference is made to Article Thirteenth of the Registrant's
Articles of Incorporation filed as Exhibit No. 1 to
Registrant's Registration Statement with respect to the
indemnification of Registrant's officers and directors, which
is set forth below:
C-1
<PAGE> 52
THIRTEENTH: Each officer and director of the Corporation
shall be indemnified by the Corporation to the full extent
permitted by the General Corporation Law of the State of
Maryland and the Bylaws of the Corporation, subject only to
the limitations as may be required by the 1940 Act.
Reference is made to Article IX of the Registrant's Bylaws
filed as Exhibit No. 2 to Registrant's Registration Statement
with respect to the indemnification of Registrant's directors
and officers, which is set forth below:
Section 9.1. Indemnification of Officers, Directors,
Employees and Agents. The Corporation shall indemnify each
person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative ("Proceeding"), by reason of the fact that he is
or was a Director, officer, employee or agent of the
Corporation, or is or was serving at the request of the
Corporation as a Director, officer, employee or agent of
another corporation, partnership, joint venture, trust or
other enterprise, against all expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with
such Proceeding to the fullest extent permitted by law;
provided that:
(a) whether or not there is an adjudication of
liability in such Proceeding, the Corporation shall
not indemnify any person for any liability arising
by reason of such person's willful misfeasance,
bad faith, gross negligence, or reckless disregard
of the duties involved in the conduct of his
office or under any contract or agreement with the
Corporation ("disabling conduct"); and
(b) the Corporation shall not indemnify any person
unless:
(1) the court or other body before which the
Proceeding was brought (i) dismisses the Proceeding
for insufficiency of evidence of any disabling
conduct, or (ii) reaches a final decision on the
merits that such person was not liable by reason of
disabling conduct; or
(2) absent such a decision, a reasonable
determination is made, based upon a review of the
facts, by (i) the vote of a majority of a quorum of
the Directors of the Corporation who are neither
interested persons of the Corporation as defined in
the Investment Company Act of 1940 nor parties to the
Proceeding, or (ii) if such quorum is not obtainable,
or even if obtainable, if a majority of a quorum of
Directors described in
C-2
<PAGE> 53
paragraph (b)(2)(i) above so directs, by independent
legal counsel in a written opinion, that such person
was not liable by reason of disabling conduct.
Expenses (including attorneys' fees) incurred in
defending a Proceeding will be paid by the
Corporation in advance of the final disposition
thereof upon an undertaking by such person to repay
such expenses (unless it is ultimately determined
that he is entitled to indemnification),
(1) such person shall provide adequate security
for his undertaking;
(2) the Corporation shall be insured against
losses arising by reason of such advance; or
(3) a majority of a quorum of the Directors of
the Corporation who are neither interested
persons of the Corporation as defined in the
Investment Company Act of 1940 nor parties to
the Proceeding, or independent legal counsel in
a written opinion, shall determine, based on a
review of readily available facts, that there is
reason to believe that such person will be found
to be entitled to indemnification.
Section 9.2. Insurance of Officers, Directors, Employees and
Agents. The Corporation may purchase and maintain insurance on
behalf of any person who is or was a Director, officer, employee or
agent of the Corporation, or is or was serving at the request of
the Corporation as a Director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred
by him in or arising out of his position. However, in no event
will the Corporation purchase insurance to indemnify any such
person for any act for which the Corporation itself is not
permitted to indemnify him.
Section 17(h) of the 1940 Act provides that neither the
charter nor bylaws of any registered investment company, nor any
other instrument pursuant to which such a company is organized or
administered, shall contain any provision which protects or
purports to protect any director or officer of such company against
any liability to the company or its security holders to which he
would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
Registrant undertakes that insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling
C-3
<PAGE> 54
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant
of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
Item 28. Business and Other Connections of Investment Adviser
Baird Capital Management LLC serves as the investment adviser
to each of the Funds. It is engaged in the investment
advisory business and provides advisory services to numerous
other clients. Baird Capital Management LLC is a
member-managed limited liability company whose outstanding
interests are 60% owned by Baird and 40% owned by Summit
Partners LLC. Baird is a registered broker-dealer. Summit
Partners LLC'S sole purpose is to own interests in Baird
Capital Management LLC. The principals of Summit Partners LLC
are R. Bart Wear, Joseph D. Docter, Dana J. Russart and
Michael J. Bills, who are officers of the Adviser.
Set forth below is a list of the executive officers and
managers of Baird Capital Management LLC as of December 31,
1996, together with information as to any other business,
profession, vocation or employment of a substantial nature of
those officers and directors during the past two years:
C-4
<PAGE> 55
<TABLE>
<CAPTION>
POSITION WITH
NAME BAIRD CAPITAL MANAGEMENT LLC OTHER
- ---- ---------------------------- -----
<S> <C> <C>
Joseph J. Docter Principal and Equity President, Director and
Portfolio Manager Portfolio Manager, BCM
Institutional Funds,
Inc.; formerly, Senior
Vice President and
Senior Portfolio
Manager, Firstar
Investment Research &
Management Company
("FIRMCO") (investment
adviser) (6/86 - 6/96)
R. Bart Wear Principal and Equity Vice President, Director
Portfolio Manager and Portfolio Manager,
BCM Institutional Funds,
Inc.; formerly, Senior
Vice President and
Senior Portfolio
Manager, FIRMCO (6/86 -
6/96)
Michael J. Bills Principal and Director of Vice President, BCM
Marketing Institutional Funds,
Inc.; formerly,
Executive Vice
President, Firstar
Corporation (bank
holding company) (4/94 -
4/96)
Dana J. Russart Principal and Director of Secretary, BCM
Operations Institutional Funds,
Inc.; formerly, Vice
President, Firstar
Corporation (4/94 -
4/96)
James D. Bell Manager Director, BCM
Institutional Funds,
Inc.; Director, The
Baird Funds, Inc.;
Executive Vice
President, Baird
Ronald J. Kruszewski Manager Managing Director, Baird
</TABLE>
Item 29. Principal Underwriters
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
Item 30. Location of Accounts and Records
(a) Baird Capital Management LLC
111 East Kilbourn Avenue, Suite 1000
Milwaukee, Wisconsin 53202
C-5
<PAGE> 56
Articles of incorporation, bylaws, minute books,
corporate records and contracts of the Registrant;
general ledger and certain separate ledger accounts;
transaction journals and confirmations for portfolio
trades.
(b) [Transfer Agent]
Ledger accounts and other records relating to
shareholders of the Fund.
(c) [Custodian]
Accounts, records and other documentation required to be
maintained by the custodian for the Funds.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) The Registrant undertakes to file an amendment to the
Registration Statement with certified financial statements
showing the initial capital received before accepting
subscriptions from any persons in excess of 25.
(b) The Registrant undertakes to file a post-effective
amendment, using financial statements which need not be
certified, for the Funds, within four to six months from the
effective date of this Registration Statement.
(c) The Registrant undertakes to furnish each person to whom a
Prospectus is delivered a copy of the Registrant's latest
annual report to shareholders, upon request and without
charge.
C-6
<PAGE> 57
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of Milwaukee, and State of Wisconsin,
on the 31st day of October, 1996.
BCM INSTITUTIONAL FUNDS, INC.
By: /s/ Joseph J. Docter
---------------------------------
JOSEPH J. DOCTER, PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on this 31st day of October, 1996,
by or on behalf of the following persons in the capacities indicated.
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Joseph J. Docter and R. Bart Wear
or either of them, with full power of substitution, his or her true and
lawful attorneys-in-fact and agents, for him and in his name, place and
stead, in any and all capacities, to sign in his or her name and on his or
her behalf, in any and all capacities any and all pre- and post-effective
amendments to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission and any state securities divisions,
agencies, departments or commissions, granting unto said attorneys-in-fact
and agents full power and authority to do and to perform each and every
act and things requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact
and agents may lawfully do or cause to be done by virtue hereof.
SIGNATURE TITLE
/s/ Joseph J. Docter
- --------------------------------------- Director and President (Chief
JOSEPH J. DOCTER Executive Officer)
/s/ R. Bart Wear
- --------------------------------------- Director and Treasurer (Chief
R. BART WEAR Financial and Accounting Officer)
/s/ Robert A. Lintereur
- --------------------------------------- Director
ROBERT A. LINTEREUR
C-7
<PAGE> 58
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- -------- ----------------------------
1 Articles of Incorporation
2 By-Laws
5 Investment Advisory Agreement for BCM Institutional Growth
Fund and BCM Institutional Small Cap Growth Fund
8(a) Custodian Agreement*
8(b) Transfer Agent/Dividend Disbursing Agent Agreement*
9(a) Code of Ethics*
9(b) Rule 10f-3 Plan*
10 Opinion of Quarles & Brady*
11(a) Consent of Price Waterhouse LLP
11(b) Consent of Quarles & Brady (contained in Exhibit 10)*
13 Subscription Agreement
17 Financial Data Schedules (See Exhibit 27)
27 Financial Data Schedules - Not Applicable
___________________________
* To be filed by amendment.
C-8
<PAGE> 1
ARTICLES OF INCORPORATION
OF
BCM INSTITUTIONAL FUNDS, INC.
FIRST: The undersigned, Conrad G. Goodkind, whose post office
address is 411 East Wisconsin Avenue, Milwaukee, Wisconsin 53202,
being at least 18 years of age, under and by virtue of the General
Laws of the State of Maryland authorizing the formation of
corporations, is acting as sole incorporator with the intention of
forming a corporation.
SECOND: The name of the corporation is BCM Institutional
Funds, Inc. (the "Corporation").
THIRD: The duration of the Corporation shall be perpetual.
FOURTH: The purposes for which the Corporation is formed are:
(a) To conduct and carry on the business of an
investment company of the open-end management type.
(b) To hold, invest and reinvest its funds, and in connection
therewith to hold part or all of its funds in cash, and to
purchase, subscribe for or otherwise acquire, hold for
investment or otherwise, to trade and deal in, write, sell,
assign, negotiate, transfer, exchange, lend, pledge or
otherwise dispose of or turn to account or realize upon,
securities (which term "securities" shall, for the purposes of
these Articles of Incorporation, without limiting the
generality thereof, be deemed to include any bonds,
debentures, stocks, shares, bills, notes, mortgages, financial
futures contracts or other obligations or evidences of
indebtedness, and any options, certificates, receipts,
warrants or other instruments representing rights to receive,
purchase or subscribe for the same or indices thereof, or
evidencing or representing any other rights or interests
therein, or in any property or assets; and any negotiable or
non-negotiable instruments and money market instruments,
including bank certificates of deposit, finance paper,
commercial paper, bankers' acceptance and all kinds of
repurchase or reverse repurchase agreements) created or issued
by any United States or foreign issuer (which term "issuer"
shall, for the purpose of these Articles of Incorporation,
without limiting the generality thereof, be deemed to include
any persons, firms, associations, partnerships, corporations,
limited liability companies, syndicates, combinations,
organizations, governments or subdivisions, agencies or
instrumentalities of any government); and to exercise, as owner
or holder of any securities, all rights, powers and privileges
in respect thereof; and to do any and all acts and things for the
preservation, protection, improvement and enhancement in value
of any and all such securities.
<PAGE> 2
(c) To apply for, obtain, purchase or otherwise acquire, any
copyrights, licenses, trademarks, trade names, patents and the
like, which may be capable of being used for any of the
purposes of the Corporation; and to use, exercise, develop,
grant licenses in respect of, sell and otherwise turn to
account, the same.
(d) To issue and sell shares of its own capital stock in such
amounts and on such terms and conditions, for such purposes
and for such amount or kind of consideration (including,
without limitation thereto, securities) now or hereafter
permitted by the laws of the State of Maryland, by the
Investment Company Act of 1940, as amended (the "1940 Act"),
and these Articles of Incorporation, as its Board of Directors
may authorize and approve.
(e) To redeem, purchase and otherwise acquire, hold, dispose
of, resell, transfer, reissue, retire or cancel (all without
the vote or consent of the stockholders of the Corporation)
shares of its capital stock in any manner and to the extent
now or hereafter permitted by the laws of the State of
Maryland, by the 1940 Act and by these Articles of
Incorporation.
(f) To conduct its business in all its branches at one or more
offices in Maryland and elsewhere in any part of the world,
without restriction or limit as to extent.
(g) To exercise and enjoy, in Maryland and in any other
states, territories, districts and United States dependencies
and in foreign countries, all of the powers, rights and
privileges granted to, or conferred upon, corporations by the
General Laws of the State of Maryland now or hereafter in
force.
(h) In general to carry on any other business in connection
with or incidental to its corporate purposes, to do everything
necessary, suitable or proper for the accomplishment of such
purposes or for the attainment of any object or the
furtherance of any power hereinbefore set forth, either alone
or in association with others, to do every other act or thing
incidental or appurtenant to or growing out of or connected
with its business or purposes, objects or powers, and, subject
to the foregoing, to have and exercise all the powers, rights
and privileges conferred upon corporations by the laws of the
State of Maryland as in force from time to time.
The foregoing objects and purposes shall, except as otherwise
expressly provided, be in no way limited or restricted by reference
to, or inference from, the terms of any other clause of this or any
other Article of these Articles of Incorporation, and
shall each be regarded as independent and construed as a power as
well as an object and a purpose, and the enumeration of specific
purposes, objects and powers shall not be construed to limit or
restrict in any manner the meaning of general terms or the general
powers of the Corporation now or hereafter conferred by the laws of
Maryland, nor shall the expression of one thing be deemed to
exclude another though it be of like nature, not expressed;
provided, however, that the Corporation shall not have power to
carry on any business
2
<PAGE> 3
whatsoever the carrying on of which would preclude it from being
classified as an ordinary business corporation under the laws of
the State of Maryland.
FIFTH: The post office address of the principal office of the
Corporation in the State of Maryland is 32 South Street, Baltimore,
Maryland 21202. The name of the resident agent of the Corporation
in the State of Maryland is The Corporation Trust Incorporated, and
the post office address of the resident agent is 32 South Street,
Baltimore, Maryland 21202.
SIXTH: The total number of shares of capital stock of all
classes which the Corporation shall have authority to issue is one
billion (1,000,000,000) shares, of the par value of one-tenth of
one cent ($.001) (the "Shares"), each to be classified as "Common
Stock," and of the aggregate par value of one million dollars
($1,000,000). Two hundred million of such Shares may be issued in
the following classes (hereinafter referred to as "series"), such
series comprising the number of shares and having the designation
indicated; subject, however, to authority herein granted to the
Board of Directors to increase or decrease any such number of
Shares:
BCM Institutional Growth Fund 100,000,000 Shares
BCM Institutional Small Cap Growth Fund 100,000,000 Shares
The balance of eight hundred million Shares may be issued by the
Board of Directors in such initial series, or in any new series,
each comprising of such number of Shares and having such
preferences, rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption
as shall be fixed and determined from time to time by resolution or
resolutions providing for the issuance of such Shares adopted by
the Board of Directors, to whom authority so to fix and determine
the same is hereby expressly granted. The variations in the
relative preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms
and condition of redemption as between the different series shall
be fixed and determined by the Board of Directors; provided that
the Board of Directors shall not classify or reclassify any Shares
into any series which is prior to any series of Shares then
outstanding with respect to rights upon the liquidation,
dissolution or winding up of the affairs of, or upon any
distribution of the general assets of, the Corporation, except that
there may be variations so fixed and determined between different
series as to investment objective, purchase price, right of
redemption, special rights as to dividends and on liquidation with
respect to assets belonging to a particular series, voting powers
and conversion rights. The Board of Directors is hereby expressly
granted authority to increase or decrease the number of Shares of
any series, but the number of Shares of any series shall not be
decreased by the Board of Directors below the number of Shares
thereof then outstanding.
Subject to the limitations above, the Board of Directors may
classify or reclassify any unissued Shares into one or more series
that may be established and designated from time to time. The
Corporation may hold as treasury Shares, reissue for such
consideration and
3
<PAGE> 4
on such terms as the Board of Directors may determine, or
cancel, at its discretion from time to time, any Shares of any
series reacquired by the Corporation.
SEVENTH: Section 7.1. Procedure for Designation. The
establishment and designation of any series of Shares in addition
to the series established and designated in Article Sixth shall be
effective upon (i) the authorization of such series by vote of a
majority of the Board of Directors, including the establishment and
designation of the preferences, rights, voting powers,
restrictions, limitations as to dividends, qualifications, and
terms and conditions of redemption of such series, and (ii) the
filing for record of the articles supplementary required by Section
2-208 of the Maryland General Corporation Law with the State
Department of Assessments and Taxation of Maryland. At any time
when there are no Shares outstanding or subscribed for a particular
series previously established and designated by the Board of
Directors, the series may be liquidated by similar means.
Section 7.2. Establishment and Designation of Series.
Without limiting the authority of the Board of Directors set forth
herein to establish and designate any further series, there is
hereby established and designated two series of stock to be known
as: BCM Institutional Growth Fund and BCM Institutional Small Cap
Growth Fund. The Shares of said series and any Shares of any
further series that may from time to time be established and
designated by the Board of Directors (unless provided otherwise by
the Board of Directors with respect to such further series at the
time of establishing and designating such further series) shall
have the following relative preferences, rights, voting powers,
restrictions, limitations as to dividends, qualifications, and
terms and conditions of redemption.
(a) Assets Belonging to Series. All consideration received by
the Corporation for the issue or sale of Shares to a
particular series, together with all assets in which such
consideration is invested or reinvested, all income, earnings,
profits, and proceeds thereof, including any such assets, and
any funds or payments derived from any reinvestment of such
proceeds in whatever form the same may be, shall irrevocably
belong to that series for all purposes, subject only to the
rights of creditors, and shall be so recorded upon the books
and accounts of the Corporation. Such consideration, assets,
income, earnings, profits, and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation of
such assets, and any funds or payments derived from any
reinvestment of such proceeds, in whatever form the same may
be, together with any General Items allocated to that series
as provided in the following sentence, are herein referred
to as "assets belonging to" that series. In the event that
there are any assets, income, earnings, profits, and proceeds
thereof, funds, or payments which are not readily identifiable
as belonging to any particular series (collectively "General
Items"), such General Items shall be allocated by or under the
supervision of the Board of Directors to and among any one or
more of the series established and designated from time to
time in such manner and on such basis as the Board of
Directors, in its sole discretion, deems fair and equitable,
and any General Items so allocated to a particular series
shall belong to that series. Each
4
<PAGE> 5
such allocation by the Board of Directors shall be conclusive
and binding for all purposes.
(b) Liabilities Belonging to Series. The assets belonging to
each particular series shall be charged with the liabilities
of the Corporation in respect of that series and all expenses,
costs, charges and reserves attributable to that series, and
any general liabilities, expenses, costs, charges or reserves
of the Corporation which are not readily identifiable as
belonging to any particular series shall be allocated and
charged by or under the supervision of the Board of Directors
to and among any one or more of the series established and
designated from time to time in such manner and on such basis
as the Board of Directors, in its sole discretion, deems fair
and equitable. The liabilities, expenses, costs, charges and
reserves allocated and so charged to a series are herein
referred to as "liabilities belonging to" that series. Each
allocation of liabilities, expenses, costs, charges and
reserves by the Board of Directors shall be conclusive and
binding for all purposes.
(c) Income Belonging to Series. The Board of Directors shall
have full discretion, to the extent not inconsistent with the
Maryland General Corporation Law and the 1940 Act, to
determine which items shall be treated as income and which
items as capital; and each such determination and allocation
shall be conclusive and binding. "Income belonging to" a
series includes all income, earnings and profits derived from
assets belonging to that series, less any expenses, costs,
charges or reserves belonging to that series, for the relevant
time period.
(d) Dividends. Dividends and distributions on Shares of a
particular series may be declared and paid with such
frequency, in such form and in such amount as the Board of
Directors may from time to time determine. Dividends may be
declared daily or otherwise pursuant to a standing resolution
or resolutions adopted only once or with such frequency as the
Board of Directors may determine, after providing for actual
and accrued liabilities belonging to that series.
All dividends on Shares of a particular series shall be
paid only out of the income belonging to that series and
capital gains distributions on Shares of a particular series
shall be paid only out of the capital gains belonging to that
series or class. All dividends and distributions on Shares of
a particular series shall be distributed pro rata to the
holders of that series in proportion to the number of Shares
of that series held by such holders at the date and time of
record established for the payment of such dividends
or distributions, except that in connection with any dividend
or distribution program or procedure the Board of Directors
may determine that no dividend or distribution shall be
payable on Shares as to which the Shareholder's purchase order
and/or payment have not been received by the time or times
established by the Board of Directors under such program or
procedure.
5
<PAGE> 6
The Board of Directors shall have the power, in its sole
discretion, to distribute in any fiscal year as dividends,
including dividends designated in whole or in part as capital
gains distributions, amounts sufficient, in the opinion of the
Board of Directors, to enable the Corporation to qualify as a
regulated investment company under the Internal Revenue Code
of 1986, or any amended version thereof or any successor or
comparable statute thereto, and regulations promulgated
thereunder, and to avoid liability of the Corporation for
Federal income tax in respect of that year. However, nothing
in the foregoing shall limit the authority of the Board of
Directors to make distributions greater than or less than the
amount necessary to qualify as a regulated investment company
and to avoid liability of the Corporation for such tax.
Dividends and distributions may be paid in cash, property
or Shares, or a combination thereof, as determined by the
Board of Directors or pursuant to any program that the Board
of Directors may have in effect at the time. Any such
dividend or distribution paid in Shares will be paid at the
current net asset value thereof as defined in Subsection (h)
of this Section 7.2.
(e) Liquidation. In the event of the liquidation of the
Corporation or of a particular series, the Shareholders of
each series that has been established and designated and is
being liquidated shall be entitled to receive, as a series,
when and as declared by the Board of Directors, the excess of
the assets belonging to that series over the liabilities
belonging to that series. The holders of Shares of any series
shall not be entitled thereby to any distribution upon
liquidation of any other series. The assets so distributable
to the Shareholders of any particular series shall be
distributed among such Shareholders in proportion to the
number of Shares of that series held by them and recorded on
the books of the Corporation. The liquidation of any
particular series in which there are Shares then outstanding
may be authorized by vote of a majority of the Board of
Directors then in office, subject to the approval of a
majority of the outstanding securities of that series, as
defined in the 1940 Act.
(f) Voting. On each matter submitted to a vote of the
Shareholders, each holder of a Share shall be entitled to one
vote for each Share standing in his name on the books of the
Corporation, irrespective of the series thereof, and all
Shares of all series shall vote as a single series ("Single
Class Voting"); provided, however, that (i) as to any matter
with respect to which a separate vote of any series is
required by the 1940 Act or by the Maryland General
Corporation Law, such requirement as to a separate vote by
that series shall apply in lieu of Single Class Voting as
described above; (ii) in the event that the separate vote
requirements referred to in (i) above apply with respect to
one or more series, then, subject to (iii) below, the Shares
of all other series shall vote as a single series; and (iii)
as to any matter which does not affect the interest of a
particular series, only the holders of Shares of the one or
more affected series shall be entitled to vote.
6
<PAGE> 7
(g) Redemption by Shareholder. Each holder of Shares of a
particular series shall have the right at such times as may be
permitted by the Corporation to require the Corporation to
redeem all or any part of his Shares of that series at a
redemption price per share equal to the net asset value per
Share of that series next determined (in accordance with
Subsection (h) of this Section 7.2) after the Shares are
properly tendered for redemption less such contingent deferred
sales charge or other charge, if any, as is determined by the
Board of Directors and described in the Corporation's then
effective registration statement under the Securities Act of
1933. Payment of the redemption price shall be in cash unless
the Board of Directors determines, which determination shall
be conclusive, that conditions exist which make payment wholly
in cash unwise or undesirable. In the event of such a
determination, the Corporation may make payment wholly or
partly in securities or other assets belonging to the series
of which the Shares being redeemed are part at the value of
such securities or assets used in such determination of net
asset value. Notwithstanding the foregoing, the Corporation
may postpone payment of the redemption price and may suspend
the right of the holders of Shares of any series to require
the Corporation to redeem Shares of that series during any
period or at any time when and to the extent permissible under
the 1940 Act.
(h) Net Asset Value per Share. The net asset value per Share
of any series shall be the quotient obtained by dividing the
value of the net assets of that series (being the value of the
assets belonging to that series less the liabilities belonging
to that series) by the total number of Shares of that series
outstanding.
The Board of Directors may determine to maintain the net
asset value per Share of any series at a designated constant
dollar amount and in connection therewith may adopt procedures
not inconsistent with the 1940 Act for the continuing
declarations of income attributable to that series as
dividends payable in additional Shares of that series at the
designated constant dollar amount and for the handling of any
losses attributable to that series.
(i) Equality. All Shares of each particular series shall
represent an equal proportionate interest in the assets
belonging to that series (subject to the liabilities belonging
to that series), and each Share of any particular series shall
be equal to each other Share of that series. The Board of
Directors may from time to time divide or combine the Shares
of any particular series into a greater or lesser number of
Shares of that series without thereby changing the proportionate
beneficial interest of such shareholders in the assets belonging
to that series or in any way affecting the rights of Shares of
any other series.
(j) Conversion or Exchange Rights. Subject to compliance with
the requirements of the 1940 Act, the Board of Directors shall
have the authority to provide that holders of Shares of any
series shall have the right to convert or exchange said Shares
into Shares of one or more other series of Shares of this
Corporation, or into shares
7
<PAGE> 8
of one or more series of shares of capital stock of any other
registered investment company selected in the discretion of
the Board of Directors and identified in this Corporation's
then effective registration statement under the Securities Act
of 1933 as qualifying for such exchange transactions all in
accordance with such requirements and procedures as may be
established by the Board of Directors.
(k) Redemption by the Corporation. The Board of Directors may
cause the Corporation to redeem at current net asset value the
Shares of any series from a Shareholder where such Shares have
an aggregate current net asset value of less than One Thousand
Dollars ($1,000), or such lesser minimal amount as determined
from time to time by the Board of Directors. No such
redemption shall be effected unless the Corporation has given
the Shareholder at least thirty (30) days' notice of its
intention to redeem the Shares and an opportunity to purchase
a sufficient number of additional Shares to bring the
aggregate current net asset value of his Shares to One
Thousand Dollars ($1,000), or such lesser minimal amount as
determined, from time to time, by the Board of Directors.
Upon redemption of Shares pursuant to this Subsection (k), the
Corporation shall promptly cause payment of the full
redemption price to be made to the holder of Shares so
redeemed.
EIGHTH: Section 8.1. Issuance of New Stock. The Board of
Directors is authorized to issue and sell or cause to be issued and
sold from time to time (without the necessity of offering the same
or any part thereof to existing shareholders) all or any portion or
portions of the entire authorized but unissued Shares of the
Corporation, and all or any portion or portions of the Shares of
the Corporation from time to time in its treasury, for cash or for
any other lawful consideration or considerations and on or for any
terms, conditions, or prices consistent with the provisions of law
and of the Articles of Incorporation at the time in force;
provided, however, that in no event shall Shares of the Corporation
having a par value be issued or sold for a consideration or
considerations less in amount or value than the par value of the
Shares so issued or sold, and provided further that in no event
shall any Shares of the Corporation be issued or sold for a
consideration less in amount or value than the net asset value of
the Shares so issued or sold determined next after an order to
purchase such Shares is accepted.
Section 8.2. Fractional Shares. The Corporation may issue
and sell fractions of Shares having pro rata all the rights of full
Shares, including, without limitation, the right to vote and to
receive dividends, and wherever the words "Share" or "Shares" are
used in these Articles or in the Bylaws they shall be deemed
to include fractions of Shares, where the context does not clearly
indicate that only full Shares are intended.
NINTH: The number of directors constituting the Board of
Directors shall be three, which number may be changed in accordance
with the Bylaws of the Corporation, but shall never be less than
three. The names of the persons who shall act as initial directors
until the first annual meeting of the Corporation or until their
successors have been duly chosen and qualified are: Joseph J.
Docter, R. Bart Wear and Robert A. Lintereur.
8
<PAGE> 9
TENTH: Section 10.1. Except as otherwise provided by law, the
presence in person or by proxy of the holders of one-third of the
shares of capital stock of the Corporation entitled to vote thereat
shall constitute a quorum at any meeting of the Shareholders.
Notwithstanding any provision of the laws of the State of Maryland
requiring any action to be taken or authorized by the affirmative
vote of the holders of more than a majority of the total number of
shares of the Corporation entitled to vote thereon, that action
shall, except to the extent otherwise required by the Investment
Company Act of 1940, be effective and valid if taken or authorized
by the affirmative vote of the holders of a majority of the total
number of shares entitled to vote thereon.
Section 10.2. Notwithstanding any provision of law
requiring a greater proportion than a majority of the votes of all
series (or of any series entitled to vote thereon as a separate series)
to take or authorize any action, in accordance with the authority
granted by Section 2-104(b)(5) of the Maryland General Corporation Law,
the Corporation is hereby authorized to take such action upon the
concurrence of a majority of the aggregate number of Shares entitled to
vote thereon (or of a majority of the aggregate number of Shares of a
series entitled to vote thereon as a separate series). The right to
cumulate votes in the election of directors is expressly prohibited.
ELEVENTH: Except as may otherwise be provided in the Bylaws,
the Board of Directors of the Corporation is expressly authorized
to make, alter, amend and repeal Bylaws or to adopt new Bylaws of
the Corporation, without any action on the part of the
Shareholders; but the Bylaws made by the Board of Directors and the
power so conferred may be altered or repealed by the Shareholders.
TWELFTH: The Corporation reserves the right from time to time
to make any amendment of these Articles of Incorporation, now or
hereafter authorized by law, including any amendment which alters
contract rights, as expressly set forth in these Articles of
Incorporation, of any outstanding Shares by classification,
reclassification or otherwise. Any amendment to these Articles of
Incorporation may be adopted at either an annual or special meeting
of the Shareholders upon receiving an affirmative majority vote of
all outstanding Shares and an affirmative majority of the
outstanding Shares of each series entitled to vote thereon
separately as a series in accordance with Subsection (f) of Section
7.2 hereof. The Board of Directors of the Corporation may also
adopt amendments to these Articles of Incorporation, without action
by the Shareholders, to the extent permitted or not prohibited by
the General Corporation Law of the State of Maryland or the 1940
Act.
THIRTEENTH: Each officer and director of the Corporation
shall be indemnified by the Corporation to the full extent
permitted by the General Corporation Law of the State of Maryland
and the Bylaws of the corporation, subject only to the limitations
as may be required by the 1940 Act.
9
<PAGE> 10
IN WITNESS WHEREOF, the undersigned incorporator of BCM
Institutional Funds, Inc., who executed the foregoing Articles of
Incorporation, hereby acknowledges the same to be his act and
further acknowledges that, to the best of his knowledge, the
matters and facts set forth therein are true in all material
respects under the penalties of perjury.
Dated this 30th day of October, 1996.
/s/ Conrad G. Goodkind
-------------------------------------------
Conrad G. Goodkind, Sole Incorporator
10
<PAGE> 1
BY-LAWS
OF
BCM INSTITUTIONAL FUNDS, INC.
(A MARYLAND CORPORATION)
ARTICLE I
NAME OF CORPORATION, LOCATION OF
OFFICES AND SEAL
Section 1.1. Name. The name of the Corporation is BCM
Institutional Funds, Inc.
Section 1.2. Principal Offices. The principal office of the
Corporation in the State of Maryland shall be located in Baltimore,
Maryland. The Corporation may, in addition, establish and maintain
such other offices and places of business as the Board of Directors
may, from time to time, determine.
Section 1.3. Seal. The corporate seal of the Corporation shall be
circular in form and shall bear the name of the Corporation, the
year of its incorporation, and the word "Maryland." The form of
the seal shall be subject to alteration by the Board of Directors
and the seal may be used by causing it or a facsimile to be
impressed or affixed or printed or otherwise reproduced. Any
officer or Director of the Corporation shall have authority to
affix the corporate seal of the Corporation to any document
requiring the same.
ARTICLE II
STOCKHOLDERS
Section 2.1. Place of Meetings. All meetings of the Stockholders
shall be held at such place within or outside the State of Maryland
as the Board of Directors may determine.
Section 2.2. Annual Meeting. The annual meeting of the
Stockholders of the Corporation shall be held in April or May of
each year on a day selected by the Board of Directors at 10:00
a.m., or at such other date and time as may be authorized by the
Board of Directors and set forth in the notice of meeting. Any
business of the Corporation may be transacted at the annual meeting
without being specifically designated in the notice
except as otherwise provided by statute or in the Articles of
Incorporation or these By-Laws. Notwithstanding the above, for so
long as the Corporation is registered under the federal Investment
Company Act of 1940, as amended, the Corporation shall not be
required to hold an annual meeting of shareholders in any year in
which the election of directors is not
<PAGE> 2
required to be acted on by shareholders under the Investment
Company Act of 1940, as amended.
Section 2.3. Special Meetings. Special Meetings of the
Stockholders for any purpose or purposes, unless otherwise
prescribed by statute or by the Articles of Incorporation, may be
called at any time by resolution of the Board of Directors or by
the President. Special Meetings of the Stockholders shall be
called by the Secretary: (1) for the purpose of considering the
removal of a Director from office upon the written request of
Stockholders entitled to vote not less than 10% of all the votes
entitled to be cast at such meeting, and the Corporation shall
cooperate with and assist the Stockholders of record who notify the
Corporation that they wish to communicate with the other
Stockholders for the purpose of obtaining signatures to request
such a meeting, all pursuant to and in accordance with Section
16(c) of the Investment Company Act of 1940, as amended; and (2)
for any other purpose upon the written request of Stockholders
entitled to vote not less than 25% of all of the votes entitled to
be cast at such meeting. In either case, such request shall state
the purpose(s) of such meeting and the matter(s) proposed to be
acted upon, and the Corporation may condition the calling of the
meeting on payment by the Stockholders of the reasonably estimated
cost of preparing and mailing the notice of the meeting, in which
case the Secretary shall determine and specify the estimated cost
to such Stockholders. No special meeting shall be called upon the
request of the Stockholders pursuant to clause (2) above if the
purpose is to consider any matter which is substantially the same
as a matter voted upon at any special meeting of the Stockholders
held during the preceding 12 months, unless requested by the
holders of a majority of all shares entitled to be voted at such
meeting.
Section 2.4. Notice of Meetings. The Secretary shall cause notice
of the place, date and hour, and, in the case of a special meeting,
the purpose or purposes for which the meeting is called, to be
served, either personally or by mail, not less than 10 nor more
than 90 days before the date of the meeting, to each Stockholder
entitled to vote at such meeting. If mailed (1) such notice shall
be directed to a Stockholder at his address as it shall appear on
the books of the Corporation (unless he shall have filed with the
Transfer Agent of the Corporation a written request that notices
intended for him be mailed to some other address, in which case it
shall be mailed to the address designated in such request) and (2)
such notice shall be deemed to have been given as of the date when
it is deposited in the United States mail with first class postage
thereon prepaid. Irregularities in the notice or in the giving
thereof, as well as the accidental omission to give notice of any
meeting to, or the non-receipt of any such notice by, any of the
Stockholders shall not invalidate any action otherwise properly taken
by or at any such meeting.
Notice of any Stockholders' meeting need not be given to any
Stockholder who shall sign a written waiver of such notice whether
before or after the time of such meeting, which waiver shall be
filed with the record of such meeting, or to any Stockholder who is
present at such meeting in person or by proxy. Notice of
adjournment of a Stockholders' meeting to another time or place
need not be given if such time and place are announced at the
meeting.
- 2 -
<PAGE> 3
Section 2.5. Quorum. The presence at any Stockholders' meeting,
in person or by proxy, of Stockholders entitled to cast one third
of the votes shall be necessary and sufficient to constitute a
quorum for the transaction of business, except as otherwise
provided by statute, by the Articles of Incorporation or by these
By-Laws. In the absence of a quorum, the holders of a majority of
shares entitled to vote at the meeting and present in person or by
proxy, or, if no Stockholder entitled to vote is present in person
or by proxy, any officer present entitled to preside or act as
Secretary of such meeting may adjourn the meeting sine die or from
time to time without further notice to a date not more than 120
days after the original record date. Any business that might have
been transacted at the meeting originally called may be transacted
at any such adjourned meeting at which a quorum is present.
Section 2.6. Voting. At each Stockholders' meeting, each
Stockholder entitled to vote shall be entitled to one vote for each
share of stock of the Corporation validly issued and outstanding
and standing in his name on the books of the Corporation on the
record date fixed in accordance with Section 6.3 of Article VI
hereof. Except as otherwise specifically provided in the Articles
of Incorporation or these By-Laws or as required by provisions of
the Investment Company Act of 1940, as amended from time to time,
all matters shall be decided by a vote of the majority of the votes
validly cast. The vote upon any question shall be by ballot
whenever requested by any person entitled to vote, but, unless such
a request is made, voting may be conducted in any way approved by
the meeting.
Section 2.7. Stockholders Entitled to Vote. If the Board of
Directors sets a record date for the determination of Stockholders
entitled to notice of or to vote at any Stockholders' meeting in
accordance with Section 6.3 of Article VI hereof, each Stockholder
of the Corporation shall be entitled to vote, in person or by
proxy, each share of stock standing in his name on the books of the
Corporation on such record date. If no record date has been fixed,
the record date for the determination of Stockholders entitled to
notice of or to vote at a meeting of Stockholders shall be the
later of the close of business on the day on which notice of the
meeting is mailed or the thirtieth day before the meeting, or, if
notice is waived by all Stockholders, at the close of business on
the tenth day next preceding the day on which the meeting is held.
Section 2.8. Proxies. The right to vote by proxy shall exist only
if the instrument authorizing such proxy to act shall have been
signed by the Stockholder or by his duly authorized attorney.
Unless a proxy provides otherwise, it is not valid more than eleven
months after its date. Proxies shall be delivered prior to the
meeting to the Secretary of the Corporation or to the person acting
as Secretary of the meeting before being voted. A proxy with respect
to stock held in the name of two or more persons shall be valid if
executed by one of them unless at or prior to exercise of such proxy
the Corporation receives a specific written notice to the contrary
from any one of them. A proxy purporting to be executed by or on
behalf of Stockholder shall be deemed valid unless challenged at or
prior to its exercise.
- 3 -
<PAGE> 4
ARTICLE III
BOARD OF DIRECTORS
Section 3.1. Powers. Except as otherwise provided by law, by the
Articles of Incorporation or by these By-Laws, the business and
affairs of the Corporation shall be managed under the direction of
and all the powers of the Corporation shall be exercised by or
under authority of its Board of Directors.
Section 3.2. Number and Term. The Board of Directors shall
consist of not fewer than three nor more than twelve Directors, as
specified by a resolution of a majority of the entire Board of
Directors, provided that at least one of the Directors shall be a
person who is not an interested person of the Corporation as
defined in the Investment Company Act of 1940, as amended. Each
Director (whenever selected) shall hold office until his successor
is elected and qualified or until his earlier death, resignation or
removal.
Section 3.3. Election. At any annual meeting of Stockholders
called and held for the purpose of electing Directors pursuant to
the requirements of the Investment Company Act of 1940, as amended,
the Corporation's Articles of Incorporation or these By-Laws,
Directors shall be elected by vote of the holders of a majority of
the shares present in person or by proxy and entitled to vote
thereon.
Section 3.4. Vacancies and Newly Created Directorships. If any
vacancies shall occur in the Board of Directors by reason of death,
resignation, removal or otherwise, or if the authorized number of
Directors shall be increased, the Directors then in office shall
continue to act, and such vacancies (if not previously filled by
the Stockholders) may be filled by a majority of the Directors then
in office, although less than a quorum, except that a newly created
Directorship may be filled only by a majority vote of the entire
Board of Directors; provided, however, that immediately after
filling such vacancy, at least two-thirds (2/3) of the Directors
then holding office shall have been elected to such office by the
Stockholders of the Corporation. In the event that at any time,
other than the time preceding the first annual Stockholders'
meeting, less than a majority of the Directors of the Corporation
holding office at that time were elected by the Stockholders, a
meeting of the Stockholders shall be held promptly and in any event
within 60 days for the purpose of electing Directors to fill any
existing vacancies in the Board of Directors, unless the Securities
and Exchange Commission or any court of competent jurisdiction
shall by order extend such period.
Section 3.5. Removal. At any meeting of Stockholders duly called
and at which a quorum is present, the Stockholders may, by
the affirmative votes of the holders of a majority of the votes
entitled to be cast thereon, remove any Director or Directors from
office, with or without cause, and may elect a successor or
successors to fill any resulting vacancies for the unexpired terms
of the removed Directors.
Section 3.6. Annual and Regular Meetings. The Board of
Directors from time to time may provide by resolution for the
holding of regular and annual meetings of the Board of
- 4 -
<PAGE> 5
Directors and fix their time and place within or outside the State of
Maryland. At the annual meeting of the Board of Directors, the Board
shall choose officers and transact other proper business for an annual
meeting. Notice of such annual and regular meetings of the Board of
Directors need not be in writing, provided that written notice of any
change in the time or place of such meetings shall be sent promptly to
each Director not present at the meeting at which such change was made
in the manner provided in Section 3.7 of this Article III for notice of
special meetings of the Board of Directors. Except as provided by the
Investment Company Act of 1940, as amended, members of the Board of
Directors or any committee designated thereby may participate in a
meeting of such Board or committee by means of a conference telephone
or similar communications equipment by means of which all persons
participating in the meeting can hear each other at the same time and
participation by such means shall constitute presence in person at the
meeting.
Section 3.7. Special Meetings. Special meetings of the Board of
Directors may be held at any time or place and for any purpose when
called by the Chairman of the Board or by a majority of the
Directors. Notice of special meetings, stating the time and place,
shall be (1) mailed to each Director at his residence or regular
place of business at least five days before the day on which a
special meeting is to be held or (2) delivered to him personally or
transmitted to him by telegraph, cable or wireless at least one day
before the meeting.
Section 3.8. Waiver of Notice. No notice of any meeting need be
given to any Director who is present at the meeting or who waives
notice of such meeting in writing (which waiver shall be filed with
the records of such meeting), whether before or after the time of
the meeting.
Section 3.9. Quorum and Voting. At all meetings of the Board of
Directors, the presence of one-third of the total number of
Directors then in office (but not less than two Directors) shall
constitute a quorum and shall be sufficient for the transaction of
business. In the absence of a quorum, a majority of the Directors
present may adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be
present. The action of a majority of the Directors present at a
meeting at which a quorum is present shall be the action of the
Board of Directors, unless the concurrence of a greater proportion
is required for such action by law, by the Articles of
Incorporation or by these By-Laws.
Section 3.10. Action Without a Meeting. Any action required or
permitted to be taken at any meeting of the Board of Directors or
of any committee thereof may be taken without a meeting if a
written consent to such action is signed by all members of the
Board or of such committee, as the case may be, and such written
consent is filed with the minutes of proceedings of the Board or
committee.
Section 3.11. Compensation of Directors. The Board of Directors
may, by resolution, determine what compensation and reimbursement
of expenses of attendance at meetings, if any, shall be paid to
Directors in connection with their service on the Board. Nothing
herein contained shall be construed to preclude any Director from
serving the Corporation in any other capacity or from receiving
compensation therefor.
- 5 -
<PAGE> 6
ARTICLE IV
COMMITTEES
Section 4.1. Organization. By resolution adopted by the Board of Directors,
the Board may designate one or more committees, including an Executive
Committee. The Chairmen of such committees shall be elected by the Board of
Directors. Each member of a committee shall be a Director and shall hold
office at the pleasure of the Board. The Board of Directors shall have the
power at any time to change the members of such committees and to fill
vacancies in the committees. The Board may delegate to these committees any of
its powers, except the power to declare a dividend, authorize the issuance of
stock, recommend to Stockholders any action requiring Stockholders' approval,
amend these By-Laws, or approve any merger or share exchange which does not
require Stockholder approval.
Section 4.2. Executive Committee. There may be an Executive Committee of two
or more Directors appointed by the Board who may meet at stated times or on
notice to all by any of their own number. The Executive Committee shall
consult with and advise the officers of the Corporation in the management of
its business and exercise such powers of the Board of Directors as may be
lawfully delegated by the Board of Directors. The Executive Committee shall
keep regular minutes of its proceedings and report the same to the Board when
required.
Section 4.3. Other Committees. The Board of Directors may appoint other
committees which shall have such powers and perform such duties as may be
delegated from time to time by the Board.
Section 4.4. Proceedings and Quorum. In the absence of an appropriate
resolution of the Board of Directors, each committee may adopt such rules and
regulations not inconsistent with law, the Articles of Incorporation or these
By-Laws to govern its proceedings, quorum and manner of acting as it shall deem
proper and desirable. In the event any member of any committee is absent from
any meeting, the members thereof present at the meeting, whether or not they
constitute a quorum, may appoint a member of the Board of Directors to act in
the place of such absent member.
ARTICLE V
OFFICERS
Section 5.1. General. The officers of the Corporation shall be a President, a
Secretary and a Treasurer, and may include one or more Vice Presidents,
Assistant Secretaries or Assistant Treasurers, and such other officers as may
be appointed in accordance with the provisions of Section 9 of this Article V.
The Board of Directors may, but shall not be required to, elect a Chairman of
the Board.
-6-
<PAGE> 7
Section 5.2. Election, Tenure and Qualifications. The officers of the
Corporation, except those appointed as provided in Section 9 of this Article V,
shall be elected by the Board of Directors at its first annual meeting or such
meetings as shall be held prior to its first annual meeting, and thereafter
annually at its annual meeting. If any officers are not chosen at any annual
meeting, such officers may be chosen at any subsequent regular or special
meeting of the Board. Except as otherwise provided in this Article V, each
officer chosen by the Board of Directors shall hold office until the next
annual meeting of the Board of Directors and until his successor shall have
been elected and qualified. Any person may hold one or more offices of the
Corporation except the offices of President and Vice President; however, a
person who holds more than one office may not act in more than one capacity to
execute, acknowledge or verify an instrument required by law to be executed,
acknowledged or verified by more than one officer. The Chairman of the Board
shall be elected from among the Directors of the Corporation and may hold such
office only as long as he continues to be a Director. No other officer need be
a Director.
Section 5.3. Removal and Resignation. Whenever in the Board's judgment the
best interest of the Corporation will be served thereby, any officer may be
removed from office by the vote of a majority of the members of the Board of
Directors given at a regular meeting or any special meeting called for such
purpose. Any officer may resign his office at any time by delivering a written
resignation to the Board of Directors, the President, the Secretary, or any
Assistant Secretary. Unless otherwise specified therein, such resignation
shall take effect upon delivery.
Section 5.4. Chairman of the Board. The Chairman of the Board, if there be
such an officer, shall preside at all Stockholders' meetings and at all
meetings of the Board of Directors and shall be ex officio a member of all
committees of the Board of Directors. He shall have such powers and perform
such other duties as may be assigned to him from time to time by the Board of
Directors.
Section 5.5. President. The President shall be the chief executive officer of
the Corporation and, in the absence of the Chairman of the Board or if no
Chairman of the Board has been chosen, he shall preside at all Stockholders'
meetings and at all meetings of the Board of Directors and shall in general
exercise the powers and perform the duties of the Chairman of the Board.
Subject to the supervision of the Board of Directors, he shall have general
charge of the business, affairs, and property of the Corporation and general
supervision over its officers, employees and agents. Except as the Board of
Directors may otherwise order, he may sign in the name and on behalf of the
Corporation all deeds, bonds, contracts, or agreements. He shall exercise such
other powers and perform such other duties as from time to time may be assigned
to him by the Board of Directors.
Section 5.6. Vice President. The Board of Directors may from time to time
elect one or more Vice Presidents who shall have such powers and perform such
duties as from time to time may be assigned to them by the Board of Directors
or the President. At the request or in the absence or disability of the
President, the Vice President (or, if there are two or more Vice Presidents,
then the senior of the Vice Presidents present and able to act) may perform
-7-
<PAGE> 8
all the duties of the President and, when so acting, shall have all the powers
of and be subject to all the restrictions upon the President.
Section 5.7. Treasurer and Assistant Treasurers. The Treasurer shall be the
principal financial and accounting officer of the Corporation and shall have
general charge of the finances and books of account of the Corporation. Except
as otherwise provided by the Board of Directors, he shall have general
supervision of the funds and property of the Corporation and of the performance
by the Custodian of its duties with respect thereto. He shall render to the
Board of Directors, whenever directed by the Board, an account of the financial
condition of the Corporation and of all his transactions as Treasurer; and as
soon as possible after the close of each financial year he shall make and
submit to the Board of Directors a like report for such financial year. He
shall perform all acts incidental to the office of Treasurer, subject to the
control of the Board of Directors.
Any Assistant Treasurer may perform such duties of the Treasurer as the
Treasurer or the Board of Directors may assign, and, in the absence of the
Treasurer, he may perform all the duties of the Treasurer.
Section 5.8. Secretary and Assistant Secretaries. The Secretary shall attend
to the giving and serving of all notices of the Corporation and shall record
all proceedings of the meetings of the Stockholders and Directors in books to
be kept for that purpose. He shall keep in safe custody the seal of the
Corporation, and shall have charge of the records of the Corporation, including
the stock books and such other books and papers as the Board of Directors may
direct and such books, reports, certificates and other documents required by
law to be kept, all of which shall at all reasonable times be open to
inspection by any Director. He shall perform such other duties as appertain to
his office or as may be required by the Board of Directors.
Any Assistant Secretary may perform such duties of the Secretary as the
Secretary or the Board of Directors may assign, and, in the absence of the
Secretary, he may perform all the duties of the Secretary.
Section 5.9. Subordinate Officers. The Board of Directors from time to time
may appoint such other officers or agents as it may deem advisable, each of
whom shall have such title, hold office for such period, have such authority
and perform such duties as the Board of Directors may determine. The Board of
Directors from time to time may delegate to one or more officers or agents the
power to appoint any such subordinate officers or agents and to prescribe their
respective rights, terms of office, authorities and duties.
Section 5.10. Remuneration. The salaries or other compensation of the
officers of the Corporation shall be fixed from time to time by resolution of
the Board of Directors, except that the Board of Directors may by resolution
delegate to any person or group of persons the power to fix the salaries or
other compensation of any subordinate officers or agents appointed in
accordance with the provisions of Section 9 of this Article V.
-8-
<PAGE> 9
Section 5.11. Surety Bonds. The Board of Directors may require any officer or
agent of the Corporation to execute a bond (including, without limitation, any
bond required by the Investment Company Act of 1940, as amended, and the rules
and regulations of the Securities and Exchange Commission) to the Corporation
in such sum and with such surety or sureties as the Board of Directors may
determine, conditioned upon the faithful performance of his duties to the
Corporation, including responsibility for negligence and for the accounting of
any of the Corporation's property, funds or securities that may come into his
hands.
ARTICLE VI
CAPITAL STOCK
Section 6.1. Stock Ledgers. The stock ledgers of the Corporation, containing
the names and addresses of the Stockholders and the number of shares held by
them respectively, shall be kept at the principal offices of the Corporation or
at the offices of the transfer agent of the Corporation.
Section 6.2. Transfer Agents and Registrars. The Board of Directors may from
time to time appoint or remove transfer agents and/or registrars of transfers
of shares of stock of the Corporation, and it may appoint the same person as
both transfer agent and registrar.
Section 6.3. Fixing of Record Date. The Board of Directors may fix in advance
a date as a record date for the determination of the Stockholders entitled to
notice of or to vote at Stockholders' meeting or any adjournment thereof, or to
express consent to corporate action in writing without a meeting, or to receive
payment of any dividend or other distribution or allotment of any rights, or to
exercise any rights in respect of any change, conversion or exchange of stock,
or for the purpose of any other lawful action, provided that (1) such record
date shall be within 60 days prior to the date on which the particular action
requiring such determination will be taken, (2) the transfer books shall not be
closed for a period longer than 20 days, and (3) in the case of a meeting of
Stockholders, the record date or any closing of the transfer books shall be at
least 10 days before the date of the meeting.
Section 6.4. Lost, Stolen or Destroyed Certificates. Before issuing a new
certificate for stock of the Corporation alleged to have been lost, stolen or
destroyed, the Board of Directors or any officer authorized by the Board may,
in its discretion, require the owner of the lost, stolen or destroyed
certificate (or his legal representative) to give the Corporation a bond or
other indemnity, in such form and in such amount as the Board or any such
officer may direct and with such surety or sureties as may be satisfactory to
the Board or any such officer, sufficient to indemnify the Corporation against
any claim that may be made against it on account of the alleged loss, theft or
destruction of any such certificate or the issuance of such new certificate.
-9-
<PAGE> 10
ARTICLE VII
FISCAL YEAR AND ACCOUNTANT
Section 7.1. Fiscal Year. The fiscal year of the Corporation shall be
determined by resolution of the Board of Directors.
Section 7.2. Accountant. The Corporation shall employ an independent public
accountant or a firm of independent public accountants as its Accountant to
examine the accounts of the Corporation and to sign and certify financial
statements filed by the Corporation. The Accountant's certificates and reports
shall be addressed both to the Board of Directors and to the Stockholders of
the Corporation. The employment of the Accountant shall be conditioned upon
the right of the Corporation to terminate the employment forthwith without any
penalty by vote of a majority of the outstanding voting securities at any
meeting of the Stockholders' called for that purpose.
A majority of the members of the Board of Directors who are not interested
persons (as such term is defined in the Investment Company Act of 1940, as
amended, and the Rules of the Securities and Exchange Commission promulgated
thereunder) of the Corporation shall select the Accountant: (a) at any meeting
held within 30 days before or 90 days after the beginning of the fiscal year of
the Corporation for fiscal years during which no annual meeting of Stockholders
is held; and (b) within 30 days before or after the beginning of the fiscal
year of the Corporation or before the annual meeting of Stockholders for any
fiscal year in which an annual meeting of Stockholders is held. With respect
to fiscal years during which an annual meeting of Stockholders is held, the
Board's selection of the Accountant shall be submitted for ratification or
rejection at such annual meeting of Stockholders. If the Stockholders shall
reject the Board's selection of the Accountant at such meeting, the Accountant
shall be selected by majority vote of the Corporation's outstanding voting
securities, either at the meeting at which the rejection occurred or at a
subsequent meeting of Stockholders called for that purpose.
Any vacancy occurring due to the resignation of the Accountant may be filled
by the vote of a majority of the members of the Board of Directors who are not
interested persons of the Corporation (as that term is defined in the
Investment Company Act of 1940, as amended, and the Rules of the Securities and
Exchange Commission promulgated thereunder).
ARTICLE VIII
CUSTODY OF SECURITIES
Section 8.1. Employment of Custodian. All assets of the Corporation shall be
held by one or more custodian banks or trust companies meeting the requirements
of the Investment Company Act of 1940, as amended, and having capital, surplus
and undivided profits of at
-10-
<PAGE> 11
least $2,000,000 and may be registered in the name of the Corporation, or any
such custodian, or a nominee of either of them. The terms of any custodian
agreement shall be determined by the Board of Directors, which terms shall be
in accordance with the provisions of the Investment Company Act of 1940, as
amended.
Subject to such rules, regulations and orders as the Securities and Exchange
Commission may adopt, the Corporation may direct a custodian to deposit all or
any part of the securities owned by the Corporation in a system for the central
handling of securities established by a national securities exchange or a
national securities association registered with the Securities and Exchange
Commission, or otherwise in accordance with the Investment Company Act of 1940,
as amended, pursuant to which system all securities of any issuer deposited
within the system are treated as fungible and may be transferred or pledged by
bookkeeping entry without physical delivery of such securities, provided that
all such deposits shall be subject to withdrawal only upon the order of the
Corporation, a custodian, or pursuant to an agreement between a custodian and a
futures commission merchant to meet the margin requirements of a registered
securities exchange or contract market and in accordance with the Investment
Company Act of 1940, as amended.
ARTICLE IX
INDEMNIFICATION AND INSURANCE
Section 9.1. Indemnification of Officers, Directors, Employees and Agents.
The Corporation shall indemnify each person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
("Proceeding"), by reason of the fact that he is or was a Director, officer,
employee or agent of the Corporation, or is or was serving at the request of
the Corporation as a Director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against all
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
Proceeding to the fullest extent permitted by law; provided that:
(a) whether or not there is an adjudication of liability in such
Proceeding, the Corporation shall not indemnify any person for any
liability arising by reason of such person's willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties involved
in the conduct of his office or under any contract or agreement with
the Corporation ("disabling conduct"); and
(b) the Corporation shall not indemnify any person unless:
(1) the court or other body before which the Proceeding was
brought (i) dismisses the Proceeding for insufficiency of evidence of
any disabling conduct, or (ii) reaches a final
-11-
<PAGE> 12
decision on the merits that such person was not liable by
reason of disabling conduct; or
(2) absent such a decision, a reasonable determination is made, based
upon a review of the facts, by (i) the vote of a majority of a quorum
of the Directors of the Corporation who are neither interested
persons of the Corporation as defined in the Investment Company Act of
1940 nor parties to the Proceeding, or (ii) if such quorum is not
obtainable, or even if obtainable, if a majority of a quorum of
Directors described in paragraph (b)(2)(i) above so directs, by
independent legal counsel in a written opinion, that such person was
not liable by reason of disabling conduct.
Expenses (including attorneys' fees) incurred in defending a Proceeding will
be paid by the Corporation in advance of the final disposition thereof upon an
undertaking by such person to repay such expenses (unless it is ultimately
determined that he is entitled to indemnification), if:
(1) such person shall provide adequate security for his undertaking;
(2) the Corporation shall be insured against losses arising by reason
of such advance; or
(3) a majority of a quorum of the Directors of the Corporation who are
neither interested persons of the Corporation as defined in the
Investment Company Act of 1940 nor parties to the Proceeding, or
independent legal counsel in a written opinion, shall determine, based
on a review of readily available facts, that there is reason to
believe that such person will be found to be entitled to
indemnification.
Section 9.2. Insurance of Officers, Directors, Employees and Agents. The
Corporation may purchase and maintain insurance on behalf of any person who is
or was a Director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a Director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him in or
arising out of his position. However, in no event will the Corporation
purchase insurance to indemnify any such person for any act for which the
Corporation itself is not permitted to indemnify him.
-12-
<PAGE> 13
ARTICLE X
AMENDMENTS
Section 10.1. By Stockholders. These By-Laws may be adopted, amended or
repealed by vote of the holders of a majority of the Corporation's stock, as
defined in the Investment Company Act of 1940, as amended, at any annual or
special meeting of the Stockholders at which a quorum is present or
represented, provided that notice of the proposed amendment shall have been
contained in the notice of the meeting.
Section 10.2. By Directors. The Directors may adopt, amend or repeal any
By-Law by majority vote of all of the Directors in office at any regular
meeting, or at any special meeting if notice of the proposed By-Law, amendment
or repeal shall have been included in the notice of such meeting.
Section 10.3. Implied Amendments. Any action taken or authorized by the
Stockholders or by the Board of Directors which would be inconsistent with the
By-Laws then in effect, but which is taken or authorized by affirmative vote of
not less than the number of shares or the number of Directors required to amend
the By-Laws so that the By-Laws would be consistent with such action and which
is not in violation of applicable federal or state law, shall be given the same
effect as though the By-Laws had been temporarily amended or suspended so far,
but only so far, as is necessary to permit the specific action so taken or
authorized.
-13-
<PAGE> 1
EXHIBIT 5
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of October 31, 1996 by and between BCM INSTITUTIONAL FUNDS,
INC., a Maryland corporation (herein called the "Company"), and BAIRD CAPITAL
MANAGEMENT LLC, a Wisconsin limited liability company (herein called the
"Adviser").
R E C I T A L S:
WHEREAS, the Company is registered as an open-end, diversified, series
management investment company under the Investment Company Act of 1940 (the
"1940 Act"); and
WHEREAS, the Company desires to retain the Adviser to render investment
advisory and administrative services with respect to each series of its common
stock listed on Exhibit A attached hereto, and the Adviser is willing to render
such services on the terms hereinafter set forth.
A G R E E M E N T:
NOW, THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. The Company hereby appoints the Adviser to act as investment adviser to
each series of the Company's common stock set forth on the attached Exhibit A
(each such series is referred to herein as a "Fund" and collectively as the
"Funds"), for the period and on the terms set forth in this Agreement. The
Adviser accepts such appointment and agrees to render the services herein set
forth for the compensation herein provided.
2. (a) The Adviser shall, at its expense, (i) employ or associate with
itself such persons as it believes appropriate to assist it in performing its
obligations under this Agreement and (ii) provide all services, equipment and
facilities necessary to perform its obligations under this Agreement.
(b) The Company shall be responsible for all of its expenses and
liabilities, including compensation of its independent Directors; taxes and
governmental fees; interest charges; fees and expenses of the Company's
independent auditors and legal counsel; trade association membership dues; fees
and expenses of any custodian (including safekeeping of funds and securities,
provision of fund accounting and pricing services, and maintenance of required
books and accounts), transfer agent, registrar and dividend disbursing agent of
the Company; brokerage commissions on portfolio securities transactions; costs
of distribution of shares of the Funds; expenses of preparing and mailing
reports to investors and to regulatory agencies; the cost of office supplies,
including stationery; travel expenses of all officers, Directors and employees;
insurance premiums; brokerage and other expenses of executing portfolio
transactions; expenses of investors' and
<PAGE> 2
Directors' meetings; cost of director and officer errors and omissions
insurance; cost of required indemnity bonds; organization expenses; and
extraordinary expenses.
3. (a) Subject to the general supervision of the Board of Directors of
the Company, the Adviser shall formulate and provide an appropriate
investment program on a continuous basis in connection with the management of
the Funds, including research, analysis, advice, statistical and economic data
and information and judgments of both a macroeconomic and microeconomic
character.
The Adviser will determine the securities to be purchased, sold
or lent by the Funds and will place orders pursuant to its determinations
either directly with the issuer or with any broker or dealer who deals in such
securities. In placing orders with brokers and dealers, the Adviser will use
its reasonable best efforts to obtain the best net price and the most favorable
execution of its orders, after taking into account all 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 commission, if any, both for the specific
transaction and on a continuing basis. Consistent with this obligation, the
Adviser may, to the extent permitted by law, purchase and sell portfolio
securities to and from brokers and dealers who provide brokerage and research
services (within the meaning of Section 28(e) of the Securities Exchange Act of
1934) to or for the benefit of the Funds and/or other accounts over which the
Adviser or any of its affiliates exercise investment discretion. Subject to
the review of the Company's Board of Directors from time to time with respect
to the extent and continuation of the policy, the Adviser is authorized to pay
to a broker or dealer who provides such brokerage and research services a
commission for effecting a securities transaction for the Funds which is in
excess of the amount of commission another broker or dealer would have charged
for effecting that transaction if the Adviser determines in good faith that
such commission was reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer, viewed in terms of either
that particular transaction or the overall responsibilities of the Adviser with
respect to the accounts as to which it exercises investment discretion.
In placing orders with brokers and/or dealers, the Adviser
intends to seek best price and execution for purchases and sales and
may effect transactions through itself and its affiliates on a securities
exchange provided that the commissions paid by the Funds are "reasonable and
fair" compared to commissions received by other broker-dealers having
comparable execution capability in connection with comparable transactions
involving similar securities and provided that the transactions in connection
with which such commissions are paid are effected pursuant to procedures
established by the Board of the Directors of the Company. All transactions are
effected pursuant to written authorizations from the Company conforming to the
requirements of Section 11(a) of the Securities Exchange Act of 1934 and Rule
11a2-2(T) thereunder, if then applicable.
-2-
<PAGE> 3
The Adviser shall determine from time to time the manner in which
voting rights, rights to consent to corporate action and any other
rights pertaining to the Funds' securities shall be exercised, provided,
however, that should the Board of Directors at any time make any definite
determination as to investment policy and notify the Adviser thereof in
writing, the Adviser shall be bound by such determination for the period, if
any, specified in such notice or until similarly notified that such
determination has been revoked. The Adviser will determine what portion of
each Fund's total assets should be invested in securities described by the
policies of the Fund and what portion, if any, should be held uninvested. The
Adviser will determine whether and to what extent to employ various investment
techniques available to the Funds. In effecting transactions with respect to
securities or other property for the account of the Funds, the Adviser may deal
with itself and its affiliates, with the Directors of the Company or with other
persons to the extent such actions are permitted by the 1940 Act.
(b) As manager of the assets of the Funds, the Adviser shall make
investments for the account of the Funds in accordance with the Adviser's best
judgment and within the Funds' investment objective and restrictions, the 1940
Act and the provisions of the Internal Revenue Code of 1986 relating to
regulated investment companies subject to policy decisions adopted by the Board
of Directors.
(c) The Adviser shall furnish to the Board of Directors periodic reports
on the investment performance of the Funds and on the performance of its
obligations under this Agreement and shall supply such additional reports and
information as the Company's officers or Board of Directors shall reasonably
request.
(d) On occasions when the Adviser deems the purchase or sale of a
security to be in the best interest of the Funds as well as other customers,
the Adviser, to the extent permitted by applicable law, may aggregate the
securities to be so sold or purchased in order to obtain the best execution or
lower brokerage commissions, if any. The Adviser may also on occasions
purchase or sell a particular security for one or more customers in different
amounts. On either occasion, and to the extent permitted by applicable law and
regulations, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by the Adviser in the manner
it considers to be the most equitable and consistent with its fiduciary
obligations to the Company and to such other customers.
(e) Subject to the general direction and control of the Board of
Directors of the Company, the Adviser also shall perform such administrative
and management services as may from time to time reasonably be requested by
management of the Company with respect to the Company or any Fund, which shall
include without limitation: (i) providing office space, equipment and clerical
personnel necessary for maintaining the organization of the Company and for
performing the administrative and management functions herein set forth; (ii)
arranging, if desired by the Company, for directors, officers and employees of
the Adviser to serve as directors, officers or agents of
-3-
<PAGE> 4
the Company if duly elected or appointed to such positions and subject to their
individual consent and to any limitations imposed by law; (iii) supervising the
overall administration of the Company, including negotiation of contracts and
fees and the monitoring of performance and billing of the Company's independent
contractors and agents; (iv) preparing and, if applicable, filing all documents
required for compliance by the Company with applicable laws and regulations,
including registration statements, registration fee filings, state registration
exemption notices and related fees, prospectuses and statements of additional
information, semi-annual and annual reports to shareholders, semi-annual and
annual reports on Form N-SAR, proxy statements and tax returns; (v) preparation
of agendas and supporting documents for and minutes of meetings of the Board of
Directors, committees thereof and shareholders; and (vi) supervise the
maintenance of books and records of the Company.
4. The Adviser shall give the Company the benefit of the Adviser's best
judgment and efforts in rendering services to the Funds under this Agreement.
In the performance of its duties under this Agreement, the Adviser will comply
with the provisions of the Company's Articles of Incorporation and By-Laws and
the stated investment objective, policies and restrictions of the respective
Funds, and will use its best efforts to safeguard and promote the welfare of
the Company and to comply with other policies which the Board of Directors may
from time to time establish. Notwithstanding the foregoing, the Adviser shall
not be deemed to have assumed any duties with respect to, and shall not be
responsible for, the distribution of shares of any Fund or the pricing of the
Funds' portfolio securities and the determination of the Funds' net asset
values, nor shall the Adviser be deemed to have assumed or have any
responsibility with respect to functions specifically assumed by any transfer
agent or registrar, dividend disbursing agent, custodian or shareholder
servicing agent of the Company, or for any service whatsoever to any series of
the Company other than the Funds specified on Exhibit A hereto.
As an inducement to the Adviser's undertaking to render these services,
the Company agrees that the Adviser shall not be liable under this Agreement
for any mistake in judgment or in any other event whatsoever provided that
nothing in this Agreement shall be deemed to protect or purport to protect the
Adviser against any liability to the Company or the Funds' investors to which
the Adviser would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence in the performance of the Adviser's duties under this
Agreement or by reason of the Adviser's reckless disregard of its obligations
and duties hereunder.
5. The Company agrees (a) not to hold the Adviser or any of its directors,
officers or employees liable for any costs and liabilities they may incur as a
result of any claim against them arising out of the good faith exercise of
their powers hereunder, provided, however, that nothing in this Agreement shall
be construed to protect any such person against any liability to which he may
be subject by reason of his willful misfeasance, bad faith, gross negligence or
willful disregard of his duties hereunder; and (b) to indemnify, to the fullest
extent permitted by the Company's Articles of Incorporation and By-laws, the
-4-
<PAGE> 5
Adviser and any of its directors, officers or employees against any costs and
liabilities they may incur as a result of any claim against them by the holder
of any interest in the Funds arising out of the good faith exercise of the
powers described herein.
6. In consideration of the services to be rendered by the Adviser under
this Agreement, the Company shall pay the Adviser a fee accrued daily and paid
monthly for each Fund at an annual rate equal to the percentage of the Funds'
average daily net assets set forth on Exhibit A, calculated on an annualized
basis for the Fund's then-current fiscal year. If the fees payable to the
Adviser pursuant to this paragraph 6 begin to accrue before the end of any
month or if this Agreement terminates before the end of any month, the fees for
the period from that date to the end of that month or from the beginning of
that month to the date of termination, as the case may be, shall be prorated
according to the proportion which the period bears to the full month in which
the effectiveness or termination occurs. For purposes of calculating the
monthly fees, the value of the net assets of each Fund shall be computed in the
manner specified in its current Prospectus for the computation of net asset
value. For purposes of this Agreement, a "business day" is any day the New
York Stock Exchange is open for trading. The Company acknowledges that the
Adviser may make payments from any source available to it, to other persons for
investor, administrative, recordkeeping and distribution services provided by
such person.
7. The Adviser shall pay the entire salaries and wages of all of the
Company's Directors, officers and agents who devote part of all of their time
to the affairs of the Adviser or its affiliates, and the wages and salaries of
such persons shall not be deemed to be expenses incurred by the Company for
purposes of this Section 7. Except as provided in the foregoing sentence, the
Adviser shall not pay other expenses relating to the Fund including, without
limitation, those listed in Section 2(b) of this Agreement.
8. The Adviser may subcontract for the performance of its obligations
hereunder with any one or more persons; provided, however, that the Adviser
shall not enter into any such subcontract unless the Board of Directors of the
Company shall have approved such subcontract and found the subcontracting party
to be qualified to perform the obligations thought to be subcontracted; and
provided further, that, unless the Company otherwise expressly agrees in
writing, the Adviser shall be as fully responsible to the Company for the acts
and omissions of any subcontractor as it would be for its own acts or
omissions. Notwithstanding the foregoing, the Adviser shall have no authority
and duty to appoint any sub- adviser or otherwise delegate any of its authority
and duty to make decisions regarding the securities to be purchased, sold or
lent by the Funds or to provide any advice with respect to such matters.
9. In compliance with the requirements of Rule 31a-3 under the 1940 Act,
the Adviser hereby agrees that all records which it maintains for the Funds are
property of the Company and further agrees to surrender promptly to the Company
any such records upon the Company's request. The Adviser further agrees to
preserve for the periods
-5-
<PAGE> 6
prescribed by Rule 31a-2 under the 1940 Act any such records required to be
maintained by Rule 31a-1 under the 1940 Act.
10. This Agreement shall be effective as to each Fund on the date
specified on Exhibit A, and thereafter, unless sooner terminated as provided
herein, shall continue in effect with respect to such Fund for successive
periods of 12 months each, provided such continuance is specifically approved
at least annually by the vote of a majority of those members of the Board of
Directors of the Company who are not parties to this Agreement or interested
persons of any such party, cast in person at a meeting called for the purpose
of voting on such approval; and either (a) by the vote of a majority of the
full Board of Directors or (b) by the vote of a majority of the outstanding
voting securities of such Fund; provided, however, that this Agreement may be
terminated at any time with respect to all or any of the Funds, without the
payment of any penalty, by the Board of Directors of the Company or by vote of
a majority of the outstanding voting securities of such Fund(s) on 60 days'
written notice to the Adviser, or by the Adviser as to any or all of the Funds
at any time, without payment of any penalty, on 90 days' written notice to the
Company. This Agreement will terminate immediately in the event of its
assignment. (As used in this Agreement, the terms "majority of the outstanding
voting securities", "interested person" and "assignment" shall have the same
meanings as such terms have in the 1940 Act and the rules and regulatory
constructions thereunder.)
11. Except to the extent necessary to perform the Adviser's obligations
under this Agreement, nothing herein shall be deemed to limit or restrict the
right of the Adviser, or any affiliate of the Adviser, or any employee of the
Adviser, to engage in any other business or to devote time and attention to the
management or other aspects of any other business, whether of a similar or
dissimilar nature, or to render services of any kind to any other trust,
corporation, firm, individual or association. The services to be provided by
the Adviser to the Funds under this Agreement are not to be deemed exclusive as
to the Adviser, and the Adviser shall be free to render similar services to
others.
12. Each party agrees to perform such further acts and execute such
further documents as are necessary to effectuate the purposes hereof.
13. No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought, and no material amendment of this Agreement shall be effective until
approved by vote of the holders of a majority of the outstanding voting
securities of the Funds.
14. This Agreement embodies the entire agreement and understanding between
the parties hereto and supersedes all prior agreements and understandings
relating to the subject matter hereof. The captions in this Agreement are
included for convenience of reference only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or effect.
Should any part of this Agreement be held or made
-6-
<PAGE> 7
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. This Agreement shall be binding and
shall inure to the benefit of the parties hereto and their respective
successors, to the extent permitted by law.
15. This Agreement shall be construed in accordance with the laws of the
State of Wisconsin provided that nothing herein shall be construed in a manner
inconsistent with the requirements of 1940 Act.
16. The Company and the Adviser shall be considered, for all purposes,
independent contractors, and neither shall have any authority to act, nor will
act, directly or indirectly, as an agent, servant or employee of the other, or
make any commitments or incur any liabilities on behalf of the other party
without such other party's prior written consent.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first above
written.
BCM INSTITUTIONAL FUNDS, INC.
By: /s/ Joseph J. Docter
---------------------------------------------
Joseph J. Docter, President
BAIRD CAPITAL MANAGEMENT LLC
By: /s/ Dana J. Russart
---------------------------------------------
Dana J. Russart, Director of Operations
-7-
<PAGE> 8
EXHIBIT A
<TABLE>
<CAPTION>
FUND EFFECTIVE DATE COMPENSATION
---- -------------- ------------
<S> <C> <C>
1. BCM SMALL CAP GROWTH FUND The original effective date of An annual rate equal to 0.9
the Company's initial Registration of 1% of the Fund's average
Statement on Form N-1A, as daily net assets, calculated
filed with the SEC on November and paid in accordance with
1, 1996, as subsequently amended. the provisions of Section 6
It is anticipated that the of this Agreement.
effective date will be December
31, 1996.
2. BCM GROWTH FUND The original effective date of An annual rate equal to 0.9
the Company's initial of 1% of the Fund's average
Registration Statement on Form daily net assets, calculated
N-1A, as filed with the SEC on and paid in accordance with
November 1, 1996, as subsequently the provisions of Section 6
amended. It is anticipated that of this Agreement.
the effective date will be
December 31, 1996.
</TABLE>
<PAGE> 1
EXHIBIT 11(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this registration statement on Form N-1A (the
"Registration Statement") of our report dated October 31, 1996, relating to the
statement of assets and liabilities of BCM Small Cap Growth Fund and BCM Growth
Fund, comprising BCM Institutional Funds, Inc., which appears in such Statement
of Additional Information, and to the incorporation by reference of our report
into the Prospectus which constitutes part of this Registration Statement. We
also consent to the reference to us under the headings "Independent
Accountants" and "Financial Statements" in such Statement of Additional
Information.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Milwaukee, Wisconsin
October 31, 1996
<PAGE> 1
EXHIBIT 13
SUBSCRIPTION AGREEMENT
October 31, 1996
BCM Institutional Funds, Inc.
111 East Kilbourn Avenue, Suite 1000
Milwaukee, WI 53202
Ladies and Gentlemen:
The undersigned, Baird Capital Management LLC, hereby subscribes for the
purchase of 10,000 shares of Common Stock, par value $.001 per share, of BCM
Institutional Funds, Inc. (the "Company"), representing 5,000 shares of the BCM
Growth Fund and 5,000 shares of the BCM Small Cap Growth Fund (collectively,
the "Funds")), and hereby promises to pay to the Company on the date hereof the
sum of $100,000 in cash for such shares. Upon payment therefor, the shares to
be issued shall be duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock of the Funds.
The undersigned represents and warrants that it is an accredited investor (as
defined in Rule 501(a) under the Securities Act of 1933 (the "1933 Act")), has
sufficient experience and knowledge in business and financial matters as to be
capable of evaluating the merits and risks of this investment, can bear all
such risks (including total loss), and has had the opportunity to make all
inquiries and investigations as it has deemed appropriate. The undersigned
further represents and warrants that it is purchasing the shares of the Funds
for investment purposes only and not with a view toward sale, redemption or
distribution.
The undersigned acknowledges and understands that shares of the Funds will be
issued to the undersigned in a private placement and are not currently
registered under the 1933 Act or applicable state securities laws, in reliance
by the Company on the representations and warranties made by the undersigned
herein. The undersigned agrees not to sell or redeem any shares of the Funds
unless there is a registration statement covering such shares then in effect or
pursuant to an available exemption from such registration supported by an
opinion of counsel to such effect. In addition, the undersigned understands
and acknowledges that, if any shares of the Funds issued pursuant hereto (the
"initial shares") are redeemed by the undersigned before the deferred
organizational expenses of the Funds are completely amortized, there shall be
deducted from the redemption price payable to the
<PAGE> 2
BCM Institutional Funds, Inc.
October 31, 1996
Page 2
undersigned the pro rata unamortized portion of such expenses attributable to
the redeemed shares (based on the ratio that the number of redeemed shares
bears to the number of initial shares then outstanding).
Very truly yours,
BAIRD CAPITAL MANAGEMENT LLC
By: /s/ Dana J. Russart
--------------------------
Dana J. Russart, Secretary
