OCTOBER 31, 1996
ANNUAL
REPORT
PORTICO FUNDS
INSTITUTIONAL
MONEY MARKET FUND
NOTICE TO INVESTORS
- - Shares of Portico Funds:
- ARE NOT INSURED BY THE FDIC, the US Government or any
other governmental agency;
- are not bank deposits or obligations
of or guaranteed by Firstar Bank, its parent company or its affiliates;
- are subject to investment risks, including possible loss of principal;
and
- are offered by B.C. Ziegler and Company, member NASD, SIPC, and
an independent third-party distributor.
- - Firstar Bank affiliates serve as investment adviser, custodian, transfer
agent, administrator, and accounting services agent and receive compensation
for such services as disclosed in the current prospectus.
- - There can be no assurance that the money market fund will be able to
maintain a stable net asset value of
$1.00 per share.
TABLE OF CONTENTS
Page(s)
SHAREOWNER LETTER....................................................1
PORTICO INSTITUTIONAL MONEY MARKET FUND YIELD COMPARISONS............2
LOOKING AHEAD - THE FORECAST.........................................2
STATEMENT OF ASSETS AND LIABILITIES..................................3
STATEMENT OF OPERATIONS..............................................4
STATEMENT OF CHANGES IN NET ASSETS...................................4
FINANCIAL HIGHLIGHTS.................................................5
SCHEDULE OF INVESTMENTS.............................................6-7
NOTES TO FINANCIAL STATEMENTS........................................8
REPORT OF INDEPENDENT ACCOUNTANTS....................................9
October, 1996
DEAR SHAREOWNER:
INVESTMENT REVIEW
Money market rates remained unusually steady over the past fiscal year. Short-
term interest rates moved approximately 50 basis points while the rest of the
bond market experienced much greater volatility with longer-term rates
fluctuating as much as 160 basis points. Concerns throughout the year for the
prospect of higher inflation kept short-term interest rates high on a real or
inflation-adjusted basis. However, restrained by global competition and
mitigated by technology-based productivity gains, inflation actually remained
subdued under 3%. "Real" yields on our money market funds remain attractive
when adjusted for the continued low levels of inflation.
Portico Institutional Money Market Fund is managed with quality and safety of
principal as our primary goals. All securities purchased by the Fund must meet
strict guidelines set by the SEC for presenting minimal credit risk, as well as
our own high internal standards. Our credit research team closely monitors all
investments to ensure quality standards are met.
7-DAY YIELD<F1>
------------
PERIOD ENDED OCTOBER 31, 1996
CURRENT EFFECTIVE
INSTITUTIONAL MONEY MARKET FUND 5.16% 5.29%
<F1> After fee waivers. Had fees not been waived, the current and effective
yields would have been 4.85% and 4.98%, respectively. Reflects past
performance; yields will vary. An investment in Portico Institutional Money
Market Fund is neither insured nor guaranteed by the U.S. Government nor is
there any assurance the Fund will be able to maintain a stable net asset value
of $1.00 per share.
Current yield refers to income earned by a fund's investments over a 7-day
period. It is then annualized and stated as a percentage of the investment.
Effective yield is the same as current yield except that it assumes the income
earned by an investment in a fund will be reinvested.
YIELD COMPARISONS<F2>
------------------
AVERAGE PORTICO INSTITUTIONAL DONOGHUE'S INSTITUTIONAL
MONTHLY RATES MONEY MARKET FUND AVERAGETM / ALL TAXABLE
1996
- ----
October 5.16% 5.00%
September 5.17% 5.01%
August 5.16% 5.00%
July 5.13% 5.00%
June 5.07% 4.97%
May 5.03% 4.94%
April 4.98% 4.95%
March 5.02% 4.97%
February 5.15% 5.01%
January 5.36% 5.24%
1995
- ----
December 5.46% 5.39%
November 5.48% 5.43%
We compare the Portico Institutional Money Market Fund to the IBC/Donoghue's
Institutional AverageTM/All Taxable, which is a composite of professionally
managed money market investment funds with similar objectives.
<F2> After fee waivers. Had fees not been waived, performance would have been
reduced. Reflects past performance; yields will vary. An investment in Portico
Institutional Money Market Fund is neither insured nor guaranteed by the U.S.
government nor is there any assurance the Fund will be able to maintain a stable
net asset value of $1.00 per share.
LOOKING AHEAD - THE FORECAST
Our forecast calls for continued moderate Gross Domestic Product (GDP) and
fairly low levels of inflation in the 2-4% range. We expect money market rates
to remain stable and possibly fall over the next several months and anticipate
at least maintaining an average maturity comparable to, or slightly longer than,
the industry benchmarks. The high credit quality of our money market funds
continues to be reinforced by strong corporate earnings.
We continue to pride ourselves on having met three important objectives for our
money market shareowners: preservation of principal, liquidity and competitive
investment income. We believe these principles, combined with a disciplined
approach to quality, continue to be appropriate for our money market investors.
We appreciate your continued confidence in Portico Institutional Money Market
Fund and look forward to working with you in the future.
Jane T. Keelan
Carl J. Smith
Margaret Radske
Portfolio Managers
Firstar Investment Research & Management Company
INSTITUTIONAL MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
OCTOBER 31, 1996
ASSETS:
Investments, at amortized cost $753,547
Interest receivable 252
Other 1
--------
Total Assets 753,800
--------
LIABILITIES:
Dividends payable 3,370
Payable to affiliates 307
Accrued expenses 72
--------
Total Liabilities 3,749
--------
NET ASSETS $750,051
========
CAPITAL STOCK, $.0001 par value
Authorized 5,000,000
Issued and outstanding 750,051
NET ASSET VALUE,
REDEMPTION PRICE AND
OFFERING PRICE PER SHARE $1.00
=====
See notes to the financial statements.
INSTITUTIONAL MONEY MARKET FUND
STATEMENT OF OPERATIONS
(AMOUNTS IN THOUSANDS)
YEAR ENDED OCTOBER 31, 1996
INVESTMENT INCOME:
Interest income $42,984
--------
EXPENSES:
Investment advisory fees 3,878
Administration fees 886
Custody fees 136
Federal and state registration fees 33
Shareowner servicing and accounting costs 71
Professional fees 24
Reports to shareowners 22
Amortization of organization costs 1
Directors' fees and expenses 6
Other 9
--------
Total expenses before waiver 5,066
Less: Waiver of expenses (2,351)
--------
Net Expenses 2,715
--------
NET INVESTMENT INCOME $40,269
========
See notes to the financial statements.
INSTITUTIONAL MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
(AMOUNTS IN THOUSANDS)
Year Year
ended ended
Oct. 31, 1996 Oct. 31,1995
------------- ------------
OPERATIONS:
Net investment income $ 40,269 $ 39,970
---------- ----------
Increase in net assets resulting
from operations 40,269 39,970
---------- ----------
CAPITAL SHARE
TRANSACTIONS:
Shares sold 2,484,810 2,916,794
Shares issued to owners in
reinvestment of dividends 6,595 4,010
Shares redeemed (2,457,920) (2,958,874)
---------- ----------
Net increase (decrease) 33,485 (38,070)
---------- ----------
DIVIDENDS PAID FROM:
Net investment income (40,269) (39,970)
---------- ----------
TOTAL INCREASE (DECREASE)
IN NET ASSETS 33,485 (38,070)
NET ASSETS:
Beginning of year 716,566 754,636
---------- ----------
End of year $ 750,051 $ 716,566
========== ==========
See notes to the financial statements.
INSTITUTIONAL MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
Year ended October 31,
--------------------------------------------------
1996 1995 1994 1993 1992<F3>
---- ---- ---- ---- -------
Per Share Data:
Net asset value,
beginning of
period $1.00 $1.00 $1.00 $1.00 $1.00
Income from
investment operations:
Net investment
income 0.05 0.06 0.04 0.03 0.04
----- ----- ----- ----- -----
Total from investment
operations 0.05 0.06 0.04 0.03 0.04
----- ----- ----- ----- -----
Less distributions:
Dividends from net
investment income (0.05) (0.06) (0.04) (0.03) (0.04)
----- ----- ----- ----- -----
Total distributions (0.05) (0.06) (0.04) (0.03) (0.04)
----- ----- ----- ----- -----
Net asset value, end
of period $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== =====
Total Return 5.32% 5.77% 3.65% 2.92% 3.88%
Supplemental data and ratios:
Net assets, in thousands,
end of period $750,051 $716,566 $754,636 $588,301 $696,132
Ratio of net expenses
to average
net assets 0.35% 0.35% 0.37% 0.38% 0.41%
Ratio of net investment
income to average
net assets 5.19% 5.63% 3.64% 2.87% 3.75%
<F3> Effective February 3, 1992, FIRMCO assumed the investment advisory
responsibilities of Firstar Trust Company.
See notes to the financial statements.
INSTITUTIONAL MONEY MARKET FUND
SCHEDULE OF INVESTMENTS
October 31, 1996
Principal Amortized
Amount Cost
(in thousands) (in thousands)
------------- -------------
COMMERCIAL PAPER - 95.3%
ASSET BACKED - 7.5%
Corporate Asset Funding Co., Inc.:
$15,000 5.42%, 12/12/96 $14,907
12,000 5.38%, 12/18/96 11,916
New Center Asset Trust:
15,000 5.53%, 11/27/96 14,940
15,000 5.40%, 1/16/97 14,829
-------
56,592
-------
AUTOS & TRUCKS - 5.1%
Ford Credit Europe PLC:
15,000 5.56%, 1/21/97 14,812
15,000 5.32%, 2/03/97 14,792
Ford Motor Credit Company,
9,000 5.33%, 1/17/97 8,897
-------
38,501
-------
BANKING - FOREIGN - 2.0%
Dresdner US Financial,
15,000 5.32%, 12/13/96 14,907
-------
BASIC INDUSTRY - 5.9%
Monsanto Company:
14,800 5.48% 12/11/96 14,710
10,000 5.32%, 1/15/97 9,889
13,000 5.32%, 1/17/97 12,852
U.S. Borax & Chemical Corporation,
6,500 5.45%, 12/10/96 6,462
-------
43,913
-------
BEVERAGES - 2.0%
Bass Finance (C.I.) Ltd.,
15,000 5.48%, 12/09/96 14,913
-------
BUILDING MATERIALS - 1.3%
Johnson Controls Inc.,
10,000 5.30%, 11/26/96 9,963
-------
CONGLOMERATES - 5.0%
Mitsubishi International Corporation:
15,000 5.34%, 11/05/96 14,991
15,250 5.48%, 12/03/96 15,176
7,575 5.45%, 12/10/96 7,530
-------
37,697
-------
CONSUMER STAPLES - 2.4%
Hitachi America, Ltd.:
10,000 5.43%, 12/20/96 9,926
8,000 5.34%, 1/10/97 7,917
-------
17,843
-------
Principal Amortized
Amount Cost
(in thousands) (in thousands)
------------- -------------
DRUGS - 4.0%
Sandoz Corporation:
$15,000 5.41%, 11/01/96 $ 15,000
15,000 5.40%, 11/06/96 14,989
-------
29,989
-------
FINANCE - 21.8%
A. I. Credit Corporation,
15,000 5.32%, 1/30/97 14,801
ABB Treasury Center,
10,000 5.35%, 12/27/96 9,917
American Express Company:
15,000 5.29%, 11/21/96 14,956
15,000 5.26%, 12/23/96 14,886
Beneficial Corporation,
13,000 5.40%, 12/19/96 12,906
CIT Group Holdings, Inc.,
10,000 5.41%, 11/12/96 9,983
General Electric Capital Corporation,
15,000 5.33%, 1/14/97 14,836
Household Finance Corporation:
15,000 5.32%, 1/09/97 14,847
15,000 5.32%, 1/29/97 14,803
Swedish Export Credit Corporation,
15,000 5.32%, 1/08/97 14,849
Transamerica Finance Corporation:
12,000 5.30%, 11/07/96 11,989
15,000 5.32%, 1/07/97 14,852
-------
163,625
-------
FINANCE - SERVICES - 9.8%
Merrill Lynch & Co., Inc.:
10,000 5.40%, 1/06/97 9,901
15,000 5.44%, 1/22/97 14,814
10,000 5.37%, 1/27/97 9,870
Morgan Stanley Group, Inc.:
15,000 5.30%, 11/14/96 14,971
15,000 5.29%, 11/25/96 14,947
9,000 5.32%, 1/23/97 8,890
-------
73,393
-------
FOOD - 1.2%
CPC International Inc.,
9,000 5.37%, 12/20/96 8,934
-------
See notes to the financial statements.
INSTITUTIONAL MONEY MARKET FUND
SCHEDULE OF INVESTMENTS
October 31, 1996
Principal Amortized
Amount Cost
(in thousands) (in thousands)
------------- -------------
INSURANCE - 10.7%
American Family Financial Services, Inc.,
$10,000 5.38%, 12/17/96 $ 9,931
American General Corporation:
15,000 5.32%, 1/28/97 14,805
15,000 5.31%, 2/18/97 14,759
ITT Hartford Group, Inc.:
14,133 5.28%, 11/18/96 14,098
12,000 5.33%, 1/24/97 11,851
Prudential Funding Corporation,
15,000 5.32%, 12/02/96 14,931
-------
80,375
-------
MISCELLANEOUS - 2.0%
International Lease Financial Corporation,
15,000 5.30%, 2/04/97 14,790
-------
PRINTING AND PUBLISHING - 2.0%
Reed Elsevier, Inc.,
15,000 5.42%, 11/13/96 14,973
-------
SOVEREIGN - 8.6%
Kingdom of Sweden:
15,000 5.45%, 11/20/96 14,957
15,000 5.49%, 12/16/96 14,897
Quebec Province of Canada:
10,000 5.30%, 11/19/96 9,974
15,000 5.59%, 1/13/97 14,830
Wool International,
10,000 5.30%, 11/22/96 9,969
-------
64,627
-------
TECHNOLOGY - 2.0%
Xerox Corporation,
15,000 5.32%, 12/05/96 14,925
-------
UTILITIES 2.0%
Ontario Hydro,
15,000 5.42%, 12/06/96 14,921
-------
Total Commercial Paper 714,881
-------
VARIABLE RATE DEMAND NOTES - 2.9%
21,500 WPL Holdings Demand Note 21,500
-------
Total Variable Rate Demand Notes 21,500
-------
Number Amortized
of Shares Cost
(in thousands) (in thousands)
------------- -------------
INVESTMENT COMPANIES - 2.3%
10 Financial Square Prime Obligation Fund $ 10
17,156 Short-Term Investments Co.
Liquid Assets Portfolio 17,156
-------
Total Investment Companies 17,166
-------
Total Investments 100.5% 753,547
-------
Liabilities, less Other Assets (0.5)% (3,496)
-------
NET ASSETS 100.0% $750,051
=======
See notes to the financial statements.
INSTITUTIONAL MONEY MARKET FUND
NOTES TO THE FINANCIAL STATEMENTS
1. ORGANIZATION
Portico Funds, Inc. (the "Company") was incorporated on February 15, 1988,
as a Wisconsin Corporation and is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended. The
Institutional Money Market Fund (the "Fund") which commenced operations on
April 26, 1991, is a separate, diversified investment portfolio of the Company.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in preparation of its financial statements. These policies
are in conformity with generally accepted accounting principles.
a) Investment Valuation - The securities are valued on the basis of amortized
cost for financial reporting purposes and federal income tax purposes, which
approximates market value. Variable rate demand notes are valued at cost which
approximates market value.
b) Federal Income Taxes - No provision for federal income taxes has been made
since the Fund has complied with the provisions of the Internal Revenue Code
available to regulated investment companies and intends to continue to so comply
in future years.
c) Expenses - The Fund is charged for those expenses that are directly
attributable to it, such as advisory, administration, service organization fees
and certain shareowner service fees. Expenses that are not directly attributable
to a portfolio are typically allocated among the Company's portfolios in
proportion to their respective net assets, number of shareowner accounts or net
sales, where applicable.
d) Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
e) Distributions to Shareowners - Dividends from net investment income are
declared daily and paid monthly. Distributions of net realized capital gains, if
any, will be declared at least annually.
f) Other - The Fund recognizes interest income on the accrual basis. Discounts
and premiums are amortized over the life of the respective security. Investment
and shareowner transactions are recorded no later than the first business day
after the trade date. Realized gains and losses from investment transactions are
reported on an identified cost basis which is the same basis the Fund uses for
federal income tax purposes. Transactions in capital shares at $1.00 per share
are shown in the Statement of Changes in Net Assets. Generally accepted
accounting principles require that permanent financial reporting and tax
differences be reclassified to capital stock.
3. INVESTMENT ADVISORY AND OTHER AGREEMENTS
The Fund has entered into an Investment Advisory Agreement with Firstar
Investment Research & Management Company ("FIRMCO"). FIRMCO is a subsidiary of
Firstar Corporation, a publicly held bank holding company. Pursuant to its
Advisory Agreement with the Fund, FIRMCO is entitled to receive a fee,
calculated daily and payable monthly, at the annual rate of 0.50% of the Fund's
first $2 billion of average daily net assets, and 0.40% of the Fund's average
daily net assets in excess of $2 billion. For the year ended October 31, 1996,
FIRMCO voluntarily waived $1,671 of its advisory fees, in thousands, for the
Fund.
Firstar Trust Company, an affiliate of FIRMCO, serves as custodian, transfer
agent and accounting services agent for the Fund.
The Company has entered into a Co-Administration Agreement with B.C. Ziegler
and Company and Firstar Trust Company (the "Co-Administrators") for certain
administrative services. Pursuant to the Co-Administration Agreement with the
Company, the Co-Administrators are entitled to receive a fee, computed daily and
payable monthly, at the annual rate of 0.125% of the Company's first $2 billion
of average aggregate daily net assets, plus 0.10% of the Company's average
aggregate daily net assets in excess of $2 billion. For the year ended October
31, 1996, $680 of administration fees, in thousands, were voluntarily waived for
the Fund.
Each Director of the Company who is not affiliated with FIRMCO receives an
annual fee from the Company for service as a Director and is eligible to
participate in a deferred compensation plan with respect to these fees.
Participants in the plan may designate their deferred Director's fees as if
invested in any one of the Portico Funds (with the exception of the MicroCap
Fund) or in 90-day U.S. Treasury bills. The value of each Director's deferred
compensation account will increase or decrease as if it were invested in shares
of the selected Portico Funds or 90-day U.S. Treasury bills. The Fund maintains
its proportionate share of the Company's liability for deferred fees.
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF THE
PORTICO INSTITUTIONAL MONEY MARKET FUND
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Portico Institutional Money
Market Fund (one of the portfolios of Portico Funds, Inc. (the "Fund")) at
October 31, 1996, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended and
the financial highlights for each of the five years in the period then ended,
all in conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. 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 audits, which included confirmation of securities at October
31, 1996 by correspondence with the custodian, provide a reasonable basis for
the opinion expressed above.
/s/Price Waterhouse LLP
Milwaukee, Wisconsin
December 6, 1996
- - PORTICO FUNDS ARE AVAILABLE THROUGH:
- the Portico Funds Center,
- Investment Specialists who are registered representatives of Elan
Investment Services, Inc., a registered broker/dealer, NASD and SIPC
member,
- and through selected shareholder organizations.
This report is authorized for distribution only when preceded or accompanied by
a current prospectus.
TO OPEN AN ACCOUNT OR
REQUEST INFORMATION
1-800-982-8909
1-414-287-3710
FOR ACCOUNT BALANCES AND
INVESTOR SERVICES
1-800-228-1024
1-414-287-3808
PORTICO FUNDS CENTER
615 East Michigan Street
P.O. Box 3011
Milwaukee, WI 53201-3011
NASD Ref #C96-1129-001
