JUNE 30, 1996
ANNUAL
REPORT
RETAIL CLASS
PORTICO FUNDS
MICROCAP
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.
TABLE OF CONTENTS
Page(s)
SHAREOWNER LETTER.......................................................1
PORTICO MICROCAP FUND..................................................2-3
STATEMENT OF ASSETS AND LIABILITIES.....................................4
STATEMENT OF OPERATIONS.................................................5
STATEMENT OF CHANGES IN NET ASSETS......................................5
FINANCIAL HIGHLIGHTS....................................................6
SCHEDULE OF INVESTMENTS................................................7-8
NOTES TO THE FINANCIAL STATEMENTS.....................................9-10
REPORT OF INDEPENDENT ACCOUNTANTS......................................11
August 1996
DEAR SHAREOWNER:
INVESTMENT REVIEW
We are pleased to report Mark Westman has been named sole portfolio manager of
Portico MicroCap Fund effective June 18, 1996. Joe Docter, who was a co-manager,
left FIRMCO to establish a money management firm. The Fund has received national
attention for its outstanding performance and much of its success is due to
Mark's management skills. Since its inception on August 1, 1995, Portico
MicroCap Fund has returned an extraordinary 63.5% (no-load). This compares very
favorably against the returns of the Russell 2000 and the Standard & Poor's 500,
the Fund's benchmarks, which returned 17.1% and 22.5%, respectively, for the
same time period.
According to industry figures, equity mutual fund assets of $1.5 trillion now
approximate total U.S. bank deposits of $2 trillion. This "equitization" of
consumer savings speeds business creation, provides for new technology and
improves America's competitive position in the global market. We are pleased the
Portico Family of Funds, with assets over $3 billion, is participating in this
process.
MARKET OUTLOOK
We believe the bond market is and will continue to be volatile -- especially
given recent strong employment figures. Over the past quarter, higher interest
rates continued to plague the bond market with total returns for intermediate-
term taxable securities of +0.6% (for the second quarter) and -0.2% year-to-date
(as represented by the Lehman Brothers Intermediate Government/Corporate Bond
Index).
The panel of economists appointed by Congress to study the accuracy of the
Consumer Price Index (CPI) believes the upward bias of the index is 1.0% to
1.5%. The CPI panel's estimate of "actual" consumer inflation matches the
reading of the GDP price deflator which most recently registered a 2.0% annual
inflation rate. We estimate Congressional adoption of the GDP inflation index
would reduce the deficit by approximately $30 billion annually due to lower
transfer payments (smaller cost-of-living adjustments for Social Security, etc.)
and higher tax receipts (lower adjustments to federal income tax brackets).
Accordingly, inflation-adjusted interest rates should remain unusually
attractive at +4%.
Stocks extended their gains in the second quarter with the Standard & Poor's 500
Index posting a +4.5% return and a +10.1% increase for the first six months of
1996. A low "misery index" (the sum of the inflation and unemployment rates)
boosts stock market valuations. Specifically, stock market price-to-earnings
multiples can range from 15-20 times with a 6% combination of unemployment and
inflation. On the other hand, a misery index approaching 20%, as in 1979 and
1980, corresponds with a market price-to-earnings multiple of less than 10
times. Our forecast of lower consumer inflation and a continuation of moderate
corporate profit growth leads to an upside intermediate stock market forecast of
800 for the S&P 500, a gain of over 20% from today's levels. Our downside
forecast of 600 for the S&P 500 equates to 15 times $40 of 1996 profits, or a
drop of -10% from current levels.
IN SUMMARY
Better-than-expected job growth and an acceleration in wage gains have fueled
investors' inflation fears. However, we believe the secular outlook for
inflation remains positive, with wage and price increases held in check by
global competition, technology-based productivity gains and waning union power.
Accordingly, we look for a slowdown in the pace of economic activity, allowing
cyclical inflation pressures to ease. We will use market weakness in an attempt
to lock in extremely attractive inflation-adjusted bond yields and to improve
the average earnings growth rate of our portfolio companies at advantageous
price/earnings ratios.
Thank you for your confidence in Portico MicroCap Fund. We urge you to read the
MicroCap portfolio review that follows.
J. SCOTT HARKNESS, CFA MARY ELLEN STANEK, CFA
Chairman/Chief President
Investment Officer
Firstar Investment Research & Management Company
MICROCAP FUND
Portico MicroCap Fund has been enjoying attractive performance since its
inception on August 1, 1995. It recently has been listed in such publications as
The New York Times, The Wall Street Journal and USA Today for its outstanding
performance. Over this reporting period, rising interest rates, coupled with a
slowdown in large company growth rates, have improved the relative
attractiveness of microcap stocks. The Fund's valuation continues to be
relatively modest compared with other small-cap growth funds.
Although there have been large cashflows into the small-cap sector recently,
there has been no impact on Portico MicroCap Fund because it has remained closed
since December 5, 1995. As you will recall, we felt the Fund must be limited in
size to maintain its integrity and purpose -- concentrating on just those very
small company stocks we feel have the best opportunity to provide maximum
growth.
The best performing sectors for the Fund have been in the consumer cyclical,
technology and transportation areas. The MicroCap Fund also benefited by not
investing in the basic materials, finance and utilities sectors which have been
underperformers over the first half of 1996. We have recently expanded the
number of stocks held in the portfolio due to the in-depth research conducted by
our analytical staff. Two of these new additions are Pomeroy Computer Resources,
Inc. and Outdoor Systems, Inc. As always, we will continue to work very closely
with our team of experienced analysts who are adept at searching the small-cap
market for undiscovered growth opportunities.
Looking ahead, even after such a strong past performance, we believe the Fund is
well-positioned for further growth over the remainder of 1996. Again, while we
view this environment favorably, we caution shareowners of the inherent
volatility which can occur in the microcap segment over short time periods.
MARK D. WESTMAN, CFA
PORTFOLIO MANAGER PROFILE
- --------------------------
MARK D. WESTMAN, CFA, CPA, Vice President and Senior Portfolio Manager has
managed the Fund since its inception on August 1, 1995. Mark has been with
Firstar since 1992 and has four years of investment management experience. He
received his BA from Augustana College in 1985 and his MBA from the University
of Chicago in 1993. Mark is a Chartered Financial Analyst and Certified Public
Accountant.
8/1/95 12/95 6/96
------ ------ ------
PORTICO MICROCAP FUND - A - NO LOAD $10,000 $11,951 $16,352
PORTICO MICROCAP FUND - A - LOAD<F1> $ 9,600 $11,470 $15,693
S&P 500 STOCK INDEX $10,000 $11,080 $12,248
RUSSELL 2000 $10,000 $10,610 $11,709
This chart assumes an initial investment of $10,000 made on 8/1/95 (inception).
Performance reflects fee waivers in effect. In the absence of fee waivers, total
return would be reduced. Returns shown include the reinvestment of all dividends
and other distributions. Past performance is not predictive of future
performance. Investment return and principal value will fluctuate, so that your
shares, when redeemed, may be worth more or less than their original cost.
CUMULATIVE RATE OF RETURN (%)
FOR PERIOD ENDED JUNE 30, 1996
------------------------------
Since Inception
8/1/95
-------------
PORTICO MICROCAP FUND - A - NO LOAD 63.5
PORTICO MICROCAP FUND - A - LOAD<F1> 56.9
S&P 500 STOCK INDEX<F2> 22.5
RUSSELL 2000<F3> 17.1
<F1>Reflects maximum sales charge of 4.0%.
<F2>The S&P 500 Stock Index is an index of an unmanaged group of 500 selected
common stocks, most of which are listed on the New York Stock Exchange. The
Index is heavily weighted toward stocks with large market capitalizations and
represents approximately two-thirds of the total market value of all domestic
common stocks.
<F3>The Russell 2000, an unmanaged index, consists of the smallest 2,000
companies in a group of 3,000 U.S. companies in the Russell 3000 Index, as
ranked by total market capitalization.
An investment cannot be made directly in an index.
Series A shares, unlike the Series Institutional shares, have a 4% maximum sales
load and are subject to an annual 0.25% service organization fee. Performance
reflects fee waivers in effect. In the absence of fee waivers, total return
would be reduced.
TOP 5 HOLDINGS 6/30/96
- ----------------------
ATLAS AIR, INC. 5.2%
C.P. CLARE CORPORATION 4.3%
RICHEY ELECTRONICS, INC. 3.6%
PINNACLE SYSTEMS, INC. 3.4%
MICREL, INC. 3.3%
Portfolio holdings are subject to change and are not a representation of the
Fund's entire portfolio holdings.
TOTAL FUND NET ASSETS 6/30/96
$72,631,353
MICROCAP FUND
STATEMENT OF ASSETS AND LIABILITIES
(Amounts in thousands, except per share data)
June 30, 1996
ASSETS:
Investments, at value (Cost $59,875) $74,332
Income receivable 42
Organization costs, net of
accumulated amortization 20
Other assets 8
------
Total Assets 74,402
------
LIABILITIES:
Payable for securities purchased 1,621
Payable to affiliates 112
Accrued expenses and other liabilities 38
------
Total Liabilities 1,771
------
NET ASSETS $72,631
======
NET ASSETS CONSIST OF:
Capital stock $50,990
Undistributed net investment (loss) (262)
Undistributed accumulated net realized gains 7,446
Unrealized net appreciation on investments 14,457
------
Total Net Assets $72,631
======
SERIES A:
Net assets $ 9,036
Shares authorized ($.0001 par value) 50,000
Shares issued and outstanding 586
Net asset value and redemption price per share <F4> $15.42
======
Maximum offering price per share <F4> $16.06
======
SERIES INSTITUTIONAL:
Net assets $63,595
Shares authorized ($.0001 par value) 50,000
Shares issued and outstanding 4,117
Net asset value, redemption price
and offering price per share <F4> $15.45
======
<F4> Amounts may not recalculate due to rounding.
See notes to the financial statements.
MICROCAP FUND
STATEMENT OF OPERATIONS
(Amounts in thousands)
Period Ended June 30, 1996
INVESTMENT INCOME:
Dividend income $ 252
Interest income 469
------
721
------
EXPENSES:
Investment advisory fees 681
Administration fees 55
Shareowner servicing and accounting costs 50
Service organization fees - Series A 14
Custody fees 24
Federal and state registration fees 21
Professional fees 34
Reports to shareowners 18
Amortization of organization costs 4
Directors' fees and expenses 6
Other 2
------
Total expenses before waiver 909
Less: Waiver of expenses (103)
------
Net Expenses 806
------
NET INVESTMENT (LOSS) (85)
------
Realized AND UNREALIZED GAIN:
Net realized gain on investments 10,355
Change in unrealized appreciation on investments 14,457
------
Net gain on investments 24,812
------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $24,727
======
See notes to the financial statements.
MICROCAP FUND
STATEMENT OF CHANGES IN NET ASSETS
(Amounts in thousands)
Aug. 1, 1995<F5>
through
June 30, 1996
---------------
OPERATIONS:
Net investment (loss) $ (85)
Net realized gain on investments 10,355
Change in unrealized appreciation
on investments 14,457
Net increase in net assets resulting ------
from operations 24,727
------
CAPITAL SHARE TRANSACTIONS:
Shares sold 51,298
Shares issued to owners in
reinvestment of dividends 1,616
Shares redeemed (1,920)
------
Net increase 50,994
------
Distributions to
Series A Shareowners:
From net investment income (22)
From net realized gains (365)
------
(387)
------
Distributions to
Series Institutional Shareowners:
From net investment income (155)
From net realized gains (2,548)
------
(2,703)
------
TOTAL INCREASE IN NET ASSETS 72,631
NET ASSETS:
Beginning of period -
End of period $72,631
======
<F5>Commencement of operations.
See notes to the financial statements.
MICROCAP FUND
FINANCIAL HIGHLIGHTS
August 1, 1995<F6>
through
June 30, 1996
--------------------------------
Series A Series Institutional
-------- --------------------
Per Share Data:
Net asset value,
beginning of period $10.00 $10.00
Income from investment operations:
Net investment income (0.02) (0.02)
Net realized and unrealized
gains on securities 6.10 6.14
------ ------
Total from investment operations 6.08 6.12
------ ------
Less distributions:
Dividends from net investment income (0.04) (0.05)
Distributions from capital gains (0.62) (0.62)
------ ------
Total distributions (0.66) (0.67)
------ ------
Net asset value, end of period $15.42 $15.45
====== ======
Total return<F7><F8> 63.52% 63.93%
Supplemental data and ratios:
Net assets, in thousands, end of period $ 9,036 $63,595
Ratio of net expenses to average
net assets<F9> 1.99% 1.74%
Ratio of net investment income
to average net assets<F9> (0.36)% (0.16)%
Portfolio turnover rate<F10> 283.67% 283.67%
Average commission rate paid<F10> $0.0423 $0.0423
<F6> Commencement of operations.
<F7> Not annualized.
<F8> The total return calculation does not reflect the 4% front-end sales charge
for Series A.
<F9> Annualized.
<F10>Portfolio turnover and average commission rate paid are calculated on the
basis of the Fund as a whole without distinguishing between the classes of
shares issued.
MICROCAP FUND
SCHEDULE OF INVESTMENTS
June 30, 1996
Number Market
of Value
Shares (in thousands)
------- --------------
COMMON STOCKS 94.7%
Auto & Truck 1.0%
75,100 Ugly Duckling Corporation <F11> $ 695
------
Building & Housing 3.0%
56,400 American Homestar Corporation <F11> 1,466
34,200 Watsco, Inc. 718
------
2,184
------
Building Materials 1.6%
35,100 NCI Building Systems, Inc. <F11> 1,185
------
Business Services 14.7%
7,600 Barrett Business Services, Inc. <F11> 143
40,900 Data Processing Resources Corporation <F11> 1,130
3,600 ICT Group, Inc. <F11> 69
94,800 ITEX Corporation <F11> 438
63,200 META Group, Inc. <F11> 1,548
22,100 The Registry, Inc. <F11> 646
226,200 Richey Electronics <F11> 2,658
51,100 Right Management Consultants <F11> 1,865
34,200 SCB Computer Technology, Inc. <F11> 556
49,500 Superior Services, Inc. <F11> 841
43,950 Youth Services International, Inc. <F11> 780
------
10,674
------
Communications & Media 1.9%
37,300 Anicom, Inc. <F11> 587
22,400 Outdoor Systems, Inc. <F11> 790
------
1,377
------
Computer Software & Services 8.2%
91,200 ANSYS, Inc. <F11> 1,197
26,600 Aspect Development, Inc. <F11> 678
2,500 Farallon Communications <F11> 37
11,700 Planning Sciences International PLC ADR <F11> 263
23,500 Segue Software, Inc. <F11> 699
19,000 Sykes Enterprises, Inc. <F11> 936
14,900 Unify Corporation <F11> 186
46,000 Visio Corporation <F11> 1,656
11,400 Verilink Corporation <F11> 291
------
5,943
------
Cosmetics & Soap 2.9%
207,000 Parlux Fragrances, Inc. <F11> 2,096
------
Distribution 5.9%
75,600 Barnett, Inc. <F11> 2,174
30,100 CHS Electronics, Inc. <F11> 406
113,600 Pomeroy Computer Resources, Inc. <F11> 1,704
------
4,284
------
Drugs 2.0%
94,400 Amrion, Inc. <F11> 1,463
------
Electrical Equipment 4.4%
124,000 C.P. Clare Corporation <F11> 3,193
------
Number Market
of Value
Shares (in thousands)
-------- -------------
Electronics 10.5%
36,100 ANADIGICS, Inc. <F11> $1,051
148,400 Micrel, Inc. <F11> 2,486
92,500 PPT Vision, Inc. <F11> 1,145
18,600 Photran Corporation <F11> 186
95,200 Sipex Corporation <F11> 2,035
34,400 Trident International, Inc. <F11> 748
------
7,651
------
Entertainment & Leisure 1.2%
118,100 IndeNet, Inc. <F11> 561
11,400 Penske Motorsports, Inc. <F11> 302
------
863
------
Financial Services 0.9%
38,300 Southern Pacific Funding Corporation <F11> 670
------
Hospital Supplies & Services 9.3%
19,000 Cardiac Pathways Corporation <F11> 276
57,200 Housecall Medical Resources, Inc. <F11> 1,094
77,400 National Surgery Centers, Inc. <F11> 2,051
34,400 Renal Care Group, Inc. <F11> 1,109
125,200 Safeguard Health Enterprises, Inc. <F11> 2,238
------
6,768
------
Housing 2.8%
66,000 Palm Harbor Homes, Inc. <F11> 2,063
------
Jewelry 0.6%
18,900 Marks Bros. Jewelers, Inc. <F11> 430
------
Lodging 0.5%
14,900 Surburban Lodges of America, Inc. <F11> 345
------
Machinery - Industrial 0.4%
20,200 Speedfam International, Inc. <F11> 328
------
Restaurant 2.0%
97,900 Blimpie International, Inc. 1,432
------
Retail - Specialty 3.9%
92,100 Moovies, Inc. <F11> 725
46,400 Party City Corporation <F11> 824
17,600 West Marine, Inc. <F11> 1,258
------
2,807
------
Technology - Miscellaneous 3.5%
121,600 Pinnacle Systems, Inc <F11> 2,523
------
Telecommunications 4.2%
43,800 Boston Communications Group, Inc. <F11> 723
36,200 F.Y.I. Incorporated <F11> 670
81,800 Rural Cellular Corporation <F11> 1,043
112,800 Syntellect, Inc. <F11> 635
------
3,071
------
See notes to the financial statements.
MICROCAP FUND
SCHEDULE OF INVESTMENTS
June 30, 1996
Number Market
of Value
Shares (in thousands)
------ -------------
Transportation 9.3%
68,100 Atlas Air, Inc. <F11> $ 3,916
64,100 Coach USA, Inc. <F11> 1,426
57,500 United Transnet, Inc. <F11> 1,416
------
6,758
------
Total Long-Term Investments (Cost $54,346) 68,803
------
Number
of Shares
(in thousands)
-------------
SHORT-TERM INVESTMENTS 7.6%
Investment Companies 5.5%
569 Financial Square Prime Obligation Fund 569
3,461 Short-Term Investments Co. Liquid
Assets Portfolio 3,461
------
4,030
------
Principal
Amount
(in thousands)
-------------
Variable Rate Demand Notes 2.1%
1,499 Warner-Lambert Co. 1,499
------
Total Short-Term Investments (Cost $5,529) 5,529
------
Total Investments (Cost $59,875) 74,332
------
Liabilities, less Other Assets (2.3)% (1,701)
------
TOTAL NET ASSETS 100.0% $72,631
======
<F11> Non-income producing
See notes to the financial statements.
MICROCAP 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
MicroCap Fund (the "Fund") is a separate, diversified investment portfolio of
the Company. The Fund commenced operations on August 1, 1995. The objective of
the MicroCap Fund is capital appreciation through investments in securities of
small companies.
The costs, in thousands, incurred in connection with the organization,
initial registration and public offering of shares, aggregating $24, have been
paid by the Fund. These costs are being amortized over the period of benefit,
but not to exceed sixty months from the Fund's commencement of operations.
The Company has issued two classes of Fund shares: Series A and Series
Institutional. The Series A shares are subject to a 0.25% service organization
fee and an initial sales charge imposed at the time of purchase, in accordance
with the Fund's prospectus. The maximum sales charge is 4% of the offering price
or 4.16% of the net asset value. Each class of shares has identical rights and
privileges except with respect to service organization fees paid by Series A
shares, voting rights on matters affecting a single class of shares and the
exchange privileges of each class of shares.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
a) Investment Valuation - 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 the last sale price on a national
securities exchange. Exchange-traded securities for which there were no
transactions are valued at the current bid prices. Securities traded on only
over-the-counter markets are valued on the basis of closing over-the-counter bid
prices. Instruments with a remaining maturity of 60 days or less are valued on
an amortized cost basis. Securities for which market quotations are not readily
available, and other assets are valued at fair value as determined by the
investment adviser under the supervision of the Board of Directors.
b) Federal Income Taxes - No provision for federal income taxes has been made
since the Fund has complied to date with the provisions of the Internal Revenue
Code available to regulated investment companies and intends to continue to so
comply in future years.
c) Income and Expenses - The Fund is charged for those expenses that are
directly attributable to it, such as advisory, administration 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. Net investment income other than class specific expenses, and
realized and unrealized gains and losses are allocated daily to each class of
shares based upon the relative net asset value of outstanding shares of each
class of shares at the beginning of the day (after adjusting for the current
day's capital share activity of the respective class).
d) Distributions to Shareowners - Dividends from net investment income are
declared and paid annually. Distributions of net realized capital gains, if any,
will be declared at least annually.
e) When-Issued Securities - The Fund may purchase securities on a when-issued or
delayed delivery basis. Although the payment and interest terms of these
securities are established at the time the purchaser enters into the agreement,
these securities may be delivered and paid for at a future date, generally
within 45 days. The Fund records purchases of when-issued securities and
reflects the values of such securities in determining net asset value in the
same manner as other portfolio securities. The Fund segregates and maintains at
all times cash, cash equivalents, or other high-quality liquid debt securities
in an amount at least equal to the amount of outstanding commitments for when-
issued securities.
f) 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.
g) Other - Investment and shareowner transactions are recorded no later than the
first business day after the trade date. The Fund determines the gain or loss
realized from investment transactions by comparing the original cost of the
security lot sold with the net sale proceeds. Dividend income is recognized on
the ex-dividend date or as soon as information is available to the Fund and
interest income is recognized on an accrual basis. Generally accepted accounting
principles require that permanent reporting and tax differences be reclassified.
3. Capital Share Transactions
Transactions in capital shares for the Fund for the period August 1, 1995
(commencement of operations),through June 30, 1996, in thousands, were as
follows:
SERIES A SERIES INSTITUTIONAL
---------------- --------------------
AMOUNT SHARES AMOUNT SHARES
------ ------ ------ ------
Shares sold $6,729 609 $44,569 4,105
Shares issued
to owners in
reinvestment
of dividends 383 35 1,233 112
Shares redeemed (694) (58) (1,226) (100)
----- ---- ------ -----
Net increase $6,418 586 $44,576 4,117
===== ==== ====== =====
4. INVESTMENT Transactions
Purchases and sales of securities for the period ended June 30, 1996
(excluding short-term investments), in thousands, aggregated $161,707 and
$115,713, respectively.
At June 30, 1996, gross unrealized appreciation and depreciation of
investments for federal tax purposes, in thousands, were as follows:
Appreciation $16,473
(Depreciation) (2,237)
-------
Net unrealized appreciation on investments $14,236
=======
At June 30, 1996, the cost of investments, in thousands, for federal income tax
purposes was $60,096.
Included in net realized gain on investments for the period ended June 30, 1996,
is $7, in thousands, of gains relating to the investment in other investment
companies, consisting of distributions from those investment companies and gains
and losses upon disposition.
5. 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 1.50% as applied to
the Fund's daily net assets. For the period ended June 30, 1996, FIRMCO
voluntarily waived fees of $72, in thousands.
Firstar Trust Company, an affiliate of FIRMCO, serves as custodian, transfer
agent and accounting services agent for the Funds.
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 period ended June 30, 1996, $31 of administration fees, in
thousands, were voluntarily waived for the Fund.
The Company has entered into Servicing Agreements with certain Service
Organizations, including FIRMCO affiliates, for the Series A class of shares.
The Service Organizations are entitled to receive fees from the Fund up to an
annual rate of 0.25% of the average daily net asset value of the Series A Shares
for certain support and/or distribution services to customers of the Service
Organizations who are beneficial owners of Fund Series A Shares. These services
may include assisting customers in processing purchase, exchange and redemption
requests; processing dividend and distribution payments from the Fund; and
providing information periodically to customers showing their positions in Fund
Series A shares. Service Organization fees, in thousands, paid by the Fund to
FIRMCO affiliates aggregated $14 for the period ended June 30, 1996.
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 MicroCap Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statement of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Portico MicroCap Fund (one of
the portfolios of Portico Funds, Inc. (the "Funds")) at June 30, 1996, the
results of its operations, the changes in its net assets and the financial
highlights for the period August 1, 1995 (commencement of operations) through
June 30, 1996, 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 audit. We conducted our audit 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 audit, which included confirmation of securities at June 30,
1996, by correspondence with the custodian, provides a reasonable basis for the
opinion expressed above.
/S/Price Waterhouse LLP
Milwaukee, Wisconsin
August 5, 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
NASDREF #X96-0718-001(8/96)
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