January 31, 1996
VIA EDGAR TRANSMISSION
Securities and Exchange Commission Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Portico Funds, Inc.
(1933 Act Registration No. 33-18255)
(1940 Act Registration No. 811-5380)
Ladies and Gentlemen:
On behalf of Portico Funds, Inc. (the "Fund"), I have transmitted
herewith for filing Post-Effective Amendment No. 27 to the Fund's Registration
Statement on Form N-1A under the Securities Act of 1933 and the Investment
Company Act of 1940.
Pursuant to Rule 485(b) under the Securities Act of 1993, it is
proposed that this Amendment become effective fifteen days after filing on
February 15, 1996. The purpose of this Amendment is to fulfill, on behalf of
the MicroCap Fund, its undertaking to file a post-effective amendment with
unaudited financial statements within four to six months of the effective date
of its registration statement. Accordingly, the prospectuses and the
statements of additional information for the Balanced Fund, Balanced Income
Fund, Growth and Income Fund, Equity Index Fund, MidCore Growth Fund, Special
Growth Fund, International Equity Fund, Tax-Exempt Intermediate Bond Fund,
Short-Term Bond Market Fund, Intermediate Bond Market Fund, Bond IMMDEX/tm
Fund, Money Market Fund, Institutional Money Market Fund, U.S. Treasury Money
Market Fund, U.S. Government Money Market Fund, and Tax-Exempt Money Market
Fund, are not included in this filing.
Post-Effective Amendment No. 27 does not contain disclosures that
would render it ineligible to become effective under Rule 485(b) of the
Securities Act of 1933.
As requested in the staff's generic comment letter dated February 25,
1994, we note for your information that shares of the Company are marketed in
part through banks.
Please acknowledge receipt of this filing by datestamping the
enclosed copy of this letter and returning it to the messenger.
Very truly yours,
/s/ Kenneth L. Greenberg, Esq.
KLG:CS
Enclosures
cc: The Board of Directors of Portico Funds, Inc. (w/enc.)
As filed with the Securities and Exchange Commission on January 31, 1996
1933 Act Registration No. 33-18255
1940 Act Registration No. 811-5380
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. 27 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 28 X
(Check appropriate box or boxes)
PORTICO FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
Portico Funds Center
615 East Michigan Street
Milwaukee, Wisconsin 53201-3011
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (414) 287-3909
W. Bruce McConnel, III, Esquire
Drinker Biddle & Reath
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box).
immediately upon filing pursuant to paragraph (b)
X On February 15, 1996 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(i)
on (date) pursuant to paragraph (a)(i)
75 days after filing on , 199 pursuant to paragraph
--------- -
(a)(ii)
on , 19 pursuant to paragraph (a)(ii) 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.
Registrant has registered an indefinite number of shares of its
securities under the Securities Act of 1933, as amended, pursuant to Rule 24f-2
under the Investment Company Act of 1940, as amended. The Registrant filed on
behalf of the Money Market Fund, Institutional Money Market Fund, U.S. Treasury
Money Market Fund, U.S. Government Money Market Fund, Tax-Exempt Money Market
Fund, Short-Term Bond Market Fund, Intermediate Bond Market Fund, Tax-Exempt
Intermediate Bond Fund, Bond IMMDEX/TM Fund, Balanced Fund, Growth & Income
Fund, Special Growth Fund, Equity Index Fund, MidCore Growth Fund, and
International Equity Fund its Rule 24f-2 Notice for its fiscal year ended
October 31, 1995 on December 20, 1995.
THE PURPOSE OF THIS AMENDMENT IS TO FILE PURSUANT TO AN UNDERTAKING ON
BEHALF OF THE MICROCAP FUND, UNAUDITED FINANCIAL STATEMENTS WITHIN FOUR TO SIX
MONTHS OF THE EFFECTIVE DATE OF ITS REGISTRATION STATEMENT. ACCORDINGLY, THE
PROSPECTUSES AND STATEMENTS OF ADDITIONAL INFORMATION FOR THE BALANCED FUND,
GROWTH AND INCOME FUND, EQUITY INDEX FUND, MIDCORE GROWTH FUND, SPECIAL GROWTH
FUND, INTERNATIONAL EQUITY FUND, TAX-EXEMPT INTERMEDIATE BOND FUND, SHORT-TERM
BOND MARKET FUND, INTERMEDIATE BOND MARKET FUND, BOND IMMDEX FUND, MONEY
MARKET FUND, INSTITUTIONAL MONEY MARKET FUND, U.S. TREASURY MONEY MARKET FUND,
U.S. GOVERNMENT MONEY MARKET FUND AND TAX-EXEMPT MONEY MARKET FUND ARE NOT
INCLUDED IN THIS FILING.
PORTICO FUNDS, INC.
(Retail and Institutional Series)
MicroCap Fund
Form N-1A
Cross Reference Sheet
Part A
Item Prospectus
No. Heading
- --- -------
1. Cover Page. . . . . . . . . . . . . . . . . Cover Page
2. Synopsis. . . . . . . . . . . . . . . . . . Expense Summary
3. Condensed Financial Information . . . . . . Financial
Highlights; Performance
Calculations
4. General Description of Registrant . . . . . Cover Page;
Investment Objectives and
Policies; Other
Investment Information;
Description of Shares;
Investment Limitations
5. Management of the Fund. . . . . . . . . . . Management of the
Funds
5A. Management's Discussion of Fund Performance Inapplicable
6. Capital Stock and Other Securities. . . . . Dividends and
Distributions; Management
of the Funds; Taxes;
Description of Shares
7. Purchase of Securities Being Offered. . . . Purchase of
Shares;
Shareholder Services;Net
Asset Value and Days of
Operation
8. Redemption or Repurchase. . . . . . . . . . Redemption of
Shares; Shareholder
Services;Net Asset Value
and Days of Operation
9. Pending Legal Proceedings . . . . . . . . . Not Applicable
PORTICO FUNDS(R)
MICROCAP FUND
This Prospectus describes the MicroCap Fund, one of the sixteen mutual funds in
the Portico family of funds. The MicroCap Fund seeks capital appreciation
through investment in securities of small companies (companies with market
capitalizations of $250 million or less at the time of purchase). Portico
Funds offer a variety of portfolios with different investment objectives
designed to meet the needs of individual and institutional investors, including
money market, bond, balanced, and domestic and international equity funds,
which are described in separate prospectuses.
Firstar Investment Research & Management Company ("FIRMCO" or the ""Adviser")
serves as investment adviser to the Fund, and the Fund is sponsored by B. C.
Ziegler and Company (the "Distributor"). Shareholder Organizations may
perform shareholder servicing and assistance in connection with the
distribution of the Fund's Retail Shares and receive fees from the Fund for
their services. (See "Management of the Fund").
This Prospectus sets forth concisely the information about the MicroCap Fund
that a prospective investor should consider before investing. You should read
this Prospectus and retain it for future reference. Additional information
about the Fund, contained in a Statement of Additional Information, has been
filed with the Securities and Exchange Commission ("SEC") and is available
upon request without charge by writing Portico Investor Services at 777 East
Wisconsin Avenue, Suite 900, Milwaukee, Wisconsin 53202, or by calling 1-800-
982-8909 or 414-287-3710 (Milwaukee area). The Statement of Additional
Information bears the same date as this Prospectus and is incorporated by
reference in its entirety into the Prospectus.
THE FUND IS CLOSED TO NEW INVESTORS AND TO ADDITIONAL SHARE PURCHASES EXCEPT
FOR REINVESTMENT OF DIVIDENDS FROM THE FUND.
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.
SHARES OF THE FUND ARE NOT BANK DEPOSITS, AND ARE NEITHER ENDORSED BY, INSURED
BY, GUARANTEED BY, OBLIGATIONS OF, NOR OTHERWISE SUPPORTED BY THE FDIC, THE
FEDERAL RESERVE BOARD, FIRSTAR INVESTMENT RESEARCH & MANAGEMENT COMPANY,
FIRSTAR TRUST COMPANY, FIRSTAR CORPORATION, ITS AFFILIATES OR ANY OTHER BANK,
OR OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN THE PORTICO FUNDS INVOLVES
INVESTMENT RISKS INCLUDING POSSIBLE LOSS OF PRINCIPAL.
FEBRUARY 15, 1996
TABLE OF CONTENTS
Page
----
Expense Summary........................................... 3
Financial Highlights...................................... 5
Investment Objective and Policies......................... 6
Other Investment Information.............................. 8
Purchase of Shares........................................ 12
.......................................................
.......................................................
Redemption of Shares...................................... 19
.......................................................
.......................................................
Exchange of Shares........................................ 23
Shareholder Services (Retail Shareholders Only)........... 24
.......................................................
.......................................................
.......................................................
.......................................................
Dividends and Distributions............................... 26
Management of the Fund.................................... 26
Expenses.................................................. 28
Investment Limitations.................................... 29
Taxes..................................................... 29
Description of Shares..................................... 31
Net Asset Value and Days of Operation..................... 32
Performance Calculations.................................. 33
EXPENSE SUMMARY
Below is a summary of the shareholder transaction expenses and the annual
operating expenses expected to be incurred by Retail and Institutional Shares
of the MicroCap Fund during its first twelve months of operations. An example
based on the summary is also shown.
Retail Institutional
Shares Shares
------ ------
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases.... 4.00% None
Maximum Sales Load Imposed on Reinvested
Dividends................. None None
Deferred Sales Load....... None None
Redemption Fees........... None<F1> None<F1>
Exchange Fees............. None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Advisory Fees After Fee Waivers<F2>.... 1.30% 1.30%
12b-1 Fees.......................... 0%<F3> 0%
All Other Expenses After Fee Waivers
Shareholder Servicing Fees........ 0.25%<F3> 0%
Other Expenses After Fee Waivers<F4>. 0.45% 0.70% 0.45%
-------- ----- -----
Total Fund Operating Expenses After Fee
Waivers<F5>................ 2.00% 1.75%
===== -----
<F1> A fee of $7.50 is charged for each wire redemption. See "Redemption of
Shares."
<F2> The Adviser has voluntarily agreed to waive a portion of its fees during
the first twelve months of operations. Absent such waivers, advisory fees
would be 1.50%, which is higher than the advisory fee payable by most other
investment companies. See ""Management of the Fund" in this Prospectus for
a more complete discussion.
<F3> The total of all 12b-1 fees and Shareholder Servicing Fees paid by Retail
Shares of the Fund may not exceed, in the aggregate, the annual rate of
0.25% of the Fund's average daily net assets. The Fund does not expect to
pay any 12b-1 fees for the current year. If 12b-1 fees are paid in the
future, long-term shareholders may pay more than the economic equivalent of
the maximum front end sales charge permitted by the National Association of
Securities Dealers.
<F4> The Co-Administrators anticipate voluntarily waiving .07% of their fees to
the Fund during the first twelve months of operations. Without the fee
waiver, "Other Expenses After Fee Waivers" would be 0.52% for both Retail
and Institutional Shares.
<F5> Absent fee waivers, total operating expenses would be 2.27% and 2.02% for
Retail and Institutional Shares, respectively.
Example: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return; and (2) redemption of your investment at the end of the
following periods:
1 Year 3 Years
------ -------
Retail $59 $100
Shares
Institutional Shares $18 $55
The foregoing tables are intended to assist investors in understanding the
expenses that shareholders bear either directly or indirectly. In addition,
Shareholder Organizations or Institutions (as defined below) may charge fees
for providing services in connection with their clients' investments in the
Fund's shares.
The example shown above should not be considered a representation of future
investment return or operating expenses. Actual investment return and
operating expenses may be more or less than those shown. The MicroCap Fund is
new and the above figures are based on estimates of expenses expected during
its first twelve months of operations.
Information regarding the Fund's actual performance will appear in its annual
report to shareholders. The annual report for its first fiscal year ending
June 30, 1996, which may be obtained without charge by calling Portico Investor
Services at 1-800-982-8909, will be available within 60 days after the end of
the fiscal year. Each shareholder of record at the close of the fiscal year
will be sent the annual report.
UNDERSTANDING EXPENSES
OPERATING A MUTUAL FUND INVOLVES A VARIETY OF EXPENSES FOR PORTFOLIO
MANAGEMENT, SHAREHOLDER STATEMENTS AND REPORTS, AND OTHER SERVICES.
THESE COSTS ARE PAID FROM THE FUND'S ASSETS AND THEIR EFFECT, EXCEPT FOR
FEES CHARGED DIRECTLY BY A SHAREHOLDER ORGANIZATION OR INSTITUTION TO ITS
CUSTOMERS, ARE FACTORED INTO ANY QUOTED SHARE PRICE OR RETURN.
FINANCIAL HIGHLIGHTS
The unaudited financial highlights for the period ended December 31, 1995 have
been derived from financial records of the Fund without examination by the
Fund's independent accountants, who do not express an opinion thereon. The
table below should be read in conjunction with the financial statements and
related notes also incorporated by reference in the Statement of Additional
Information. You may obtain the Statement of Additional Information and the
semi-annual report to shareholders, which contain additional performance
information, free of charge by calling Portico Investor Services or writing to
Portico Investor Services at the address listed on the back cover of this
Prospectus.
Income from Investment Operations
---------------------------------
Net Realized
and
Net Asset Unrealized
Value, Net Gains or Total From
Beginning Investment (Losses) on Investment
of Period Income Securities Operations
--------- ------ ---------- ----------
Aug. 1, 1995<F6> through
Dec. 31, 1995 - Inst. $10.00 $0.48 $1.46 $1.94
Aug, 1, 1995<F6> through
Dec. 31, 1995 - Retail 10.00 0.48 1.45 1.93
Less Distributions
------------------
Net
Dividends Asset
from Net Distributions Value,
Investment from Capital Total End of
Income Gains Distributions Period
------ ----- ------------- ------
Aug. 1, 1995<F6> through
Dec. 31, 1995 - Inst. $0.56 $0.11 $0.67 $11.27
Aug. 1, 1995<F6> through
Dec. 31, 1995 - Retail 0.55 0.11 0.66 11.27
Supplemental Data and Ratios
----------------------------
Ratio of Ratio of
Net Net
Net Expenses Investment
Assets, to Income to
Total End of Average Average Portfolio
Return Period Net Net Turnover
<F7><F8> (000s) Assets<F9> Assets<F9> Rate<F12>
-------- ------ ---------- ---------- ---------
Aug. 1, 1995<F6> through
Dec. 31, 1995 - Inst. 19.58% $46,471 1.75%<F10> 14.83%<F10> 175.90%
Aug. 1, 1995<F6> through
Dec. 31, 1995 - Retail 19.51% 6,922 2.00%<F11> 14.58%<F11> 175.90%
<F6> Commencement of operations.
<F7> Not annualized for the period ended December 31, 1995.
<F8> The total return calculation for the Retail Series of the Fund does not
reflect the maximum sales charge of 4.00%.
<F9> Annualized for the period ended December 31, 1995.
<F10>Without fees waived, the ratio of net expenses to average net assets for
the period ended December 31, 1995 would have been 2.35%; and the ratio of net
investment income to average net assets for the period ended December 31, 1995
would have been 14.23%.
<F11>Without fees waived, the ratio of net expenses to average net assets for
the period ended December 31, 1995 would have been 2.60%; and the ratio of net
investment income to average net assets for the period ended December 31, 1995
would have been 13.98%.
<F12>Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
INVESTMENT OBJECTIVE AND POLICIES
Investment Objective. The investment objective of the MicroCap Fund is capital
appreciation. The Fund seeks to achieve its objective primarily through
investments in securities of small companies. At least 65% of the Fund's total
assets will be invested in securities of small capitalization companies
(companies with capitalizations of $250 million or less at the time of
purchase). Current income is not a significant consideration in the selection
of securities for this Fund. Securities are selected for the Fund by the
Adviser on the basis of their potential for price appreciation.
Most common equity securities held by the Fund will be common stocks of
companies incorporated in the United States, although up to 25% of its total
assets may be invested, either directly or through investments in American
Depository Receipts, in the securities of foreign issuers. In addition to
investing in common equity securities, the Fund may also acquire preferred
stocks and obligations, such as bonds, debentures and notes that, in the
opinion of the Adviser, present opportunities for capital appreciation. In
addition, the Fund may invest in securities convertible into common stock, such
as certain bonds and preferred stocks, and may invest up to 5% of its net
assets in other types of securities having common stock characteristics, such
as rights and warrants to purchase equity securities.
The Fund generally invests in small companies that the Adviser considers to be
well managed and to have attractive fundamental financial characteristics,
which include, among other factors, low debt, return on equity substantially
above the market average and consistent revenue and earnings per share growth
over the prior three to five years. The Adviser believes greater potential for
price appreciation exists among small companies since they tend to be less
widely followed by other securities analysts and thus may be more likely to be
undervalued by the market. The Fund generally anticipates the median stock
market capitalization of the securities it purchases will be between $50
million and $250 million and the weighted average of such securities will be
between $100 million and $250 million at the time of purchase. The Fund may
invest from time to time a portion of its assets, not to exceed 35% at the time
of purchase, in companies with market capitalizations in excess of $250 million
at the time of purchase. If the market capitalization of a company in which
the Fund has invested increases above $250 million, the Fund, consistent with
its investment objective, may continue to hold the security.
Securities of unseasoned companies, that is, companies with less than three
years' continuous operation, which present risks considerably greater than do
common stocks of more established companies, may be acquired from time to time
by the Fund when the Adviser believes such investments offer possibilities of
attractive capital appreciation. However, the Fund will not invest more than
5% of the value of its total assets in the securities of unseasoned companies.
Companies in which the Fund primarily invests will include those that have
limited product lines, markets, or financial resources, or are dependent upon a
small management group. In addition, because these stocks are not well known
to the investing public, do not have significant institutional ownership, and
are followed by relatively few securities analysts, there will normally be less
publicly available information concerning these securities compared to what is
available for the securities of larger companies. Adverse publicity and
investor perceptions, whether or not based on fundamental analysis, can
decrease the value and liquidity of securities held by the Fund. Historically,
small capitalization stocks have been more volatile in price than larger
capitalization stocks. Among the reasons for the greater price volatility of
these small company stocks are the less certain growth prospects of smaller
firms, the lower degree of liquidity in the markets for such stocks, the
greater sensitivity of small companies to changing economic conditions and the
fewer market makers and the wider spreads between quoted bid and asked prices
which exist in the over-the-counter market for such stocks. Besides exhibiting
greater volatility, small company stocks may, to a degree, fluctuate
independently of larger company stocks. Small company stocks may decline in
price as large company stocks rise, or rise in price as large company stocks
decline. Investors should therefore expect that the Fund will be more volatile
than, and may fluctuate independently of, broad stock market indices such as
the Standard & Poor's 500 Index.
The securities in which the Fund invests will often be traded only in the over-
the-counter market or on a regional securities exchange, may be listed only in
the quotation service commonly known as the "pink sheets," and may not be
traded every day or in the volume typical of trading on a national securities
exchange. They may be subject to wide fluctuations in market value. The
trading market for any given security may be sufficiently thin as to make it
difficult for the Fund to dispose of a substantial block of such securities.
The disposition by the Fund of portfolio securities to meet redemptions or
otherwise may require the Fund to sell these securities at a discount from
market prices or during periods when, in the Adviser's judgment, such
disposition is not desirable or to make many small sales over a lengthy period
of time.
The Adviser anticipates that from time to time certain industry sectors will
not be represented in the Fund's portfolio while other sectors will represent a
significant portion. However, the Adviser will not purchase any securities
which would cause 25% or more of the Fund's total assets at the time of
purchase to be invested in the securities of issuers conducting their principal
business activities in the same industry, and will not purchase securities of
any issuer which would cause 10% or more of the Fund's total assets at the time
of purchase to be invested in that issuer.
The Fund may sell a portfolio investment soon after its acquisition if the
Adviser believes that such a disposition is consistent with attaining the
investment objective of the Fund. Portfolio investments may be sold for a
variety of reasons, such as a more favorable investment opportunity or other
circumstances bearing on the desirability of continuing to hold such
investments. A high rate of portfolio turnover (over 100%) may involve
correspondingly greater brokerage commission expenses and other transaction
costs, which must be borne directly by the Fund and ultimately by its
shareholders. High portfolio turnover may result in the realization of
substantial net capital gains. To the extent short-term net capital gains are
realized, distributions resulting from such gains will be ordinary income for
federal income tax purposes. (See "Taxes - Federal.") The Adviser believes
that portfolio turnover of the Fund will not exceed 200% per year.
The Fund may engage in short sales as further discussed below. In view of the
specialized nature of its investment activities, investment in the Fund will be
suitable only for those investors who are prepared to invest without concern
for current income and are financially able to assume considerably more risk
than the risks presented by a mutual fund that invests in companies traded on a
national securities exchange or NASDAQ. The Fund's expenses in a year may
exceed income. There can be no assurance that the investment objective of the
Fund will be realized or that the value of the Fund's investments will not
decline in value. For these reasons, the Fund should be considered as a long-
term investment and not as a vehicle for seeking short-term profits and income.
OTHER INVESTMENT INFORMATION
Money Market Instruments. The Fund 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), repurchase agreements, bank obligations and cash,
pending investment, to meet anticipated redemption requests, if, in the opinion
of the Adviser, other suitable securities are unavailable. The foregoing
investments may include among other things commercial paper and variable amount
master demand notes and corporate bonds with remaining maturities of thirteen
months or less, and may be in such proportions as, in the opinion of the
Adviser, existing circumstances may warrant. Variable amount master demand
notes 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
Fund may demand payment of the principal of the instrument 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 Fund 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 Fund invests in variable amount master demand notes only when the Adviser
deems the investment to involve minimal credit risk. The Fund may invest in
obligations of foreign banks and foreign branches of U.S. banks. The Fund may
also invest in securities issued by other investment companies. The Fund will
not invest in any other Portico Fund. In addition to the advisory fees and
other expenses the Fund bears directly in connection with its own operations,
as a shareholder of another investment company, the Fund would bear its pro
rata portion of the other investment company's advisory fees and other
expenses, and such fees and other expenses will be borne indirectly by the
Fund's shareholders.
Restricted Securities. The Fund will not knowingly invest more than 15% of the
value of its net assets in securities that are illiquid at the time of
purchase. Repurchase agreements and time deposits that do not provide for
payment to the Fund within seven days, over-the-counter options, and securities
that are not registered under the Securities Act of 1933 (the "Act") but may
be purchased by institutional buyers under Rule 144A, are subject to this 15%
limit (unless such securities are variable amount master demand notes with
maturities of nine months or less or unless the Board of Directors or the
Adviser, pursuant to guidelines adopted by the Board of Directors, determines
that a liquid trading market exists). The Fund may invest up to 15% of the
value of its net assets in securities which are not registered under the Act
but which can be sold to "qualified institutional buyers" in accordance with
Rule 144A under the Act. Any such security will not be considered illiquid so
long as it is determined by the Adviser, acting under guidelines approved and
monitored by the Board, that an adequate trading market exists for that
security. This investment practice could have the effect of increasing the
level of illiquidity in the Fund during any period that qualified institutional
buyers become uninterested in purchasing these restricted securities.
Borrowings. The Fund may borrow money in amounts up to 25% of the value of the
total assets at the time of entering into the borrowing. The Fund would
borrow money 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 the Fund should decline in value while borrowings are outstanding, the
net asset value of the Fund's outstanding shares will decline in value by
proportionately more than the decline in value suffered by the Fund's
securities. As a result, the Fund's share price may be subject to greater
fluctuation until the borrowing is paid off.
Reverse repurchase agreements are considered to be borrowings under the
Investment Company Act of 1940 (the "1940 Act"). At the time the 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 will
subsequently monitor the account to insure that such value is maintained.
Reverse repurchase agreements involve the risk that the market value of the
securities sold by the Fund may decline below the price of the securities it is
obligated to repurchase.
When-Issued Purchases and Forward Commitments. The Fund may purchase
securities on a "when-issued" or delayed delivery basis and may purchase or
sell securities on a "forward commitment" basis. These transactions, which
involve a commitment by the Fund to purchase or sell particular securities with
payment and delivery taking place at a future date (perhaps one or two months
later), permit the Fund to lock in a price or yield on a security it owns or
intends to purchase, regardless of future changes in interest rates. The Fund
does not accrue income until the securities delivery occurs. When-issued and
forward commitment transactions involve the risk, however, that the price or
yield obtained in a transaction (and therefore the value of the security) may
be less favorable than the price or yield (and therefore the value of the
security) available in the market when the securities delivery takes place.
The Fund's forward commitments and when-issued purchases are not expected to
exceed 20% of the value of its total assets absent unusual market conditions.
The Fund does not intend to engage in when-issued purchases and forward
commitments for speculative purposes but only in furtherance of its investment
objective.
Short Sales. The Fund may enter into short sales with respect to its equity
security holdings. In a short sale transaction, the Fund borrows a security
from a broker and sells it with the expectation that it will replace the
security borrowed from the broker by repurchasing the same security at a lower
price. These transactions may result in gains if a security's price declines,
but may result in losses if a security's price does not decline in price.
When the Fund engages in short sales, unless the short sale is otherwise
"covered" in accordance with the policies of the SEC, the Fund will be
required to maintain in a segregated account an amount of cash or U.S.
Government securities equal to the difference between: (a) the market value of
the security sold short at the time they were sold short and (b) any cash or
United States Government securities required to be deposited as collateral with
the broker in connection with the short sale (not including the proceeds from
the short sale). In addition, until the Fund replaces the borrowed security,
the Fund will maintain the segregated account on a daily basis at such a level
that (a) the amount deposited in the account plus the amount deposited with the
broker as collateral will equal the current market value of the security sold
short and (b) the amount deposited in the segregated account plus the amount
deposited with the broker as collateral will not be less than the market value
of the security at the time it was sold short. Short sale transactions will be
conducted so that not more than 20% of the value of the Fund's net assets at
the time of entering into the short sale (exclusive of proceeds from short
sales) will be, when added together, (a) in deposits collateralizing the
obligation to replace securities borrowed to effect short sales, and (b)
allocated to the segregated account in connection with short sales.
Foreign Securities. The Fund may invest in foreign securities. The Fund's
investments in the obligations of foreign issuers may include both obligations
of foreign corporations and banks, as well as obligations of foreign
governments and their political subdivisions. Investments in foreign
securities, whether made directly or through American Depository Receipts,
involve certain inherent risks and considerations not typically associated with
investing in U.S. companies, such as political or economic instability of the
issuer or the country of issue, the difficulty of predicting international
trade patterns, changes in exchange rates of foreign currencies and the
possibility of adverse changes in investment or exchange control regulations.
There may be less publicly available information about a foreign company than
about a U.S. company. Foreign companies are not subject to uniform accounting,
auditing and financial reporting standards comparable to those applicable to
domestic companies. Further, foreign stock markets are generally not as
developed or efficient as those in the U.S., and in most foreign markets volume
and liquidity are less than in the U.S. Fixed commissions on foreign stock
exchanges are generally higher than the negotiated commissions on U.S.
exchanges, and there is generally less government supervision and regulation of
foreign stock exchanges, brokers and companies than in the U.S. With respect
to certain foreign countries, there is a possibility of expropriation or
confiscatory taxation, limitations on the removal of assets or diplomatic
developments that could affect investment within those countries. Because of
these and other factors, securities of foreign companies acquired by the Fund
may be subject to greater fluctuation in price than securities of domestic
companies.
Securities Lending. Although the Fund does not intend to during the current
fiscal year, the Fund may lend portfolio securities.
Options. The Fund may purchase put and call options in an amount not to exceed
5% of its net assets. Such options may relate to particular securities or
various stock indices and may or may not be listed on a national securities
exchange and issued by the Options Clearing Corporation. Purchasing options is
a specialized investment technique which entails a substantial risk of a
complete loss of the amount paid as premiums to the writer of the option.
The Fund may purchase put options on portfolio securities at or about the same
time that it purchases the underlying security or at a later time. By buying a
put, the Fund limits its risk of loss from a decline in the market value of the
security until the put expires. Any appreciation in the value of and yield
otherwise available from the underlying security, however, will be partially
offset by the amount of the premium paid for the put option and any related
transaction costs. Call options may be purchased by the Fund in order to
acquire the underlying security at a later date at a price that avoids any
additional cost that would result from an increase in the market value of the
security. A call option may also be purchased to increase the Fund's return to
investors at a time when the call is expected to increase in value due to
anticipated appreciation of the underlying security. Prior to its expiration,
a purchased put or call option may be sold in a "closing sale transaction" (a
sale by the Fund, prior to the exercise of the option that it has purchased, of
an option of the same series), and profit or loss from the sale will depend on
whether the amount received is more or less than the premium paid for the
option plus the related transaction costs.
In addition, the Fund may write call options on securities and on various stock
indices. The Fund may write a call option only if the option is "covered" by
the Fund's holding a position in the underlying securities or otherwise, which
would allow for immediate satisfaction of its obligation. Such options will be
listed on a national securities exchange and the aggregate value of the Fund's
assets subject to options written by the Fund will not exceed 5% of the value
of its net assets during the current year. In order to close out an option
position, the Fund will be required to enter into a "closing purchase
transaction" (the purchase of a call option on a security or an index with the
same exercise price and expiration date as the call option which it previously
wrote on the same security or index).
By writing a covered call option on a security, the Fund foregoes the
opportunity to profit from an increase in the market price of the underlying
security above the exercise price except insofar as the premium represents such
a profit, and it is not able to sell the underlying security until the option
expires or is exercised or the Fund effects a closing purchase transaction by
purchasing an option of the same series. Except to the extent that a written
call option on an index is covered by an option on the same index purchased by
the Fund, movements in the index may result in a loss to the Fund; however,
such losses may be mitigated by changes in the value of securities held by the
Fund during the period the option was outstanding. The use of covered call
options will not be a primary investment technique of the Fund. For additional
information relating to option trading practices and related risks, see the
Statement of Additional Information.
Futures Contracts and Related Options. The Adviser may determine that it would
be in the interest of the Fund to purchase or sell futures contracts, or
options thereon, as a hedge against changes resulting from market conditions in
the value of the securities held by the Funds, or of securities which it
intends to purchase, to maintain liquidity, to have fuller exposure to price
movements in the respective security index or to reduce transaction costs. For
example, the Fund may enter into transactions involving a stock index futures
contract, which is a bilateral agreement pursuant to which the parties agree to
take or make delivery of an amount of cash equal to a specified dollar amount
times the difference between the index value (which assigns relative values to
the common stocks included in the index) at the close of the last trading day
of the contract and the price at which the futures contract is originally
struck. No physical delivery of the underlying bonds or stocks in the index is
made. The Adviser may also determine it would be in the interest of the Fund
to purchase or sell interest rate futures contracts, or options thereon, which
provide for the future delivery of specified fixed-income securities. The Fund
will not use futures contracts for speculative purposes.
Risks associated with the use of futures contracts include (a) imperfect
correlation between the change in market values of the securities held by the
Fund and the prices of stock index futures contracts, and (b) the possible lack
of a liquid secondary market for futures contracts and the resulting inability
of the Fund to close open futures positions. During the current fiscal year,
the Fund intends to limit its transactions in futures contracts and related
options so that not more than 5% of its net assets are at risk. For a more
detailed description of futures contracts and futures options, including a
discussion of the limitations imposed by federal tax law, see Appendix A to
the Statement of Additional Information.
Convertible Securities. The Fund may invest in convertible securities,
including bonds, notes and preferred stock, that may be converted into common
stock either at a stated price or within a specified period of time. In
investing in convertibles, the Fund is looking for the opportunity, through the
conversion feature, to participate in the capital appreciation of the common
stock into which the securities are convertible, while earning higher current
income than is available from the common stock.
During normal market conditions, no more than 5% of the Fund's net assets will
be purchased or held in convertible or other securities rated below investment
grade. Securities rated below investment grade are predominantly speculative
and are commonly referred to as junk bonds. To the extent the Fund purchases
convertibles rated below investment grade or convertibles that are not rated, a
greater risk exists as to the timely repayment of the principal of, and the
timely payment of interest or dividends on, such securities. Subsequent to its
purchase, a rated security may cease to be rated or its rating may be reduced
below a minimum rating for purchase by the Fund. The Adviser will consider
such an event in determining whether the Fund should continue to hold the
security. The Adviser will sell promptly any securities that are non-
investment grade as a result of these events and that exceed 5% of the Fund's
net assets.
Warrants. The Fund may purchase warrants and similar rights, which are
privileges issued by corporations enabling the owners to subscribe to and
purchase a specified number of shares of the corporation at a specified price
during a specified period of time. The purchase of warrants involves the risk
that the Fund could lose the purchase value of a warrant if the right to
subscribe to additional shares is not exercised prior to the warrant's
expiration. Also, the purchase of warrants involves the risk that the
effective price paid for the warrant added to the subscription price of the
related security may exceed the value of the subscribed security's market price
such as when there is no movement in the level of the underlying security.
During normal market conditions, no more than 5% of the Fund's net assets will
be invested in warrants.
PURCHASE OF SHARES
THE FUND IS CLOSED TO NEW INVESTORS AND TO ADDITIONAL SHARE PURCHASES EXCEPT
FOR REINVESTMENT OF DIVIDENDS FROM THE FUND.
Shares of the Fund are offered and sold by the distributor for the Fund, B.C.
Ziegler and Company (the "Distributor"), which is independent of the Adviser.
The Distributor is a registered broker/dealer with offices at 215 North Main
Street, West Bend, Wisconsin 53095.
Institutional Shares of the Fund are exclusively sold to and held by (a) trust,
agency or custodial accounts opened through a Firstar Corporation trust
department, trust company or trust affiliate; (b) employer-sponsored qualified
retirement plans; and (c) all clients of FIRMCO. All other persons must
purchase Retail Shares of the Fund.
THE MINIMUM INITIAL INVESTMENT FOR RETAIL SHARES IN THE FUND IS $10,000. THE
MINIMUM SUBSEQUENT INVESTMENT FOR RETAIL SHARES IN THE FUND IS $100. THERE IS
NO MINIMUM INITIAL OR SUBSEQUENT INVESTMENT FOR INSTITUTIONAL SHARES. THE
MAXIMUM INVESTMENT IN THE FUND FOR AN INVESTOR IS $5,000,000.
HOW TO PURCHASE RETAIL SHARES
Purchase orders for Retail Shares may be placed through the transfer agent of
the Fund, registered representatives of Elan Investment Services, Inc.
("Elan"), or organizations that have entered into distribution or servicing
agreements with the Fund (including Elan, "Shareholder Organizations"). For a
discussion of transactions through Shareholder Organizations, see "Shareholder
Organizations" below.
Once each business day, two share prices of the Retail Shares are calculated
for the Fund: the offering price and the net asset value (NAV). The offering
price includes the sales charge, if any, which you pay when you buy shares,
unless you qualify for a waiver as described below. When you buy Retail Shares
at the offering price, the sales charge is deducted and the balance is invested
at NAV next computed after an order with payment is received by the transfer
agent. You may calculate your sales charge as follows:
Shareholder
Organization
Amount of Sales Charge as a Sales Charge as Reallowance as a
Transaction Percentage of Percentage of Percentage of
at Offering Price Offering Price Net Asset Value Offering Price
----------------- -------------- --------------- --------------
Less than $50,000 4.00% 4.16% 3.50%
$50,000 to $99,999 3.00% 3.09% 2.50%
$100,000 to $249,999 2.00% 2.04% 1.50%
$250,000 or more none none none
The Distributor may reallow the entire sales charge to certain Shareholder
Organizations. To the extent that 90% or more of the sales charge is
reallowed, Shareholder Organizations may be deemed to be underwriters under the
Act.
You may purchase Retail Shares without a sales charge if: (a) you were a
Portico shareholder as of January 1, 1995 and have continuously maintained a
shareholder account with the Company; (b) you make any purchase within 60 days
of a redemption of Portico Institutional Shares or from accounts for which
Firstar Corporation or its affiliates serves in a trust, agency or custodial
capacity; (c) you are an employee, director or retiree of Firstar Corporation
or its affiliates or of Portico; (d) you maintain a personal trust account with
an affiliate of Firstar Corporation at the time of purchase; (e) you make any
purchase within 60 days of a redemption of a mutual fund on which you paid an
initial sales charge or contingent deferred sales charge; (f) you are a
registered investment adviser that has entered into an agreement with the
Distributor to purchase shares for your own account or for discretionary client
accounts; or (g) you are a spouse, parent or child of an individual who falls
within the preceding categories (a), (c) or (d) above.
Quantity Discounts. You may be entitled to reduced sales charges through the
Right of Accumulation or under a Letter of Intent, even if you do not make an
investment of a size that would normally qualify for a quantity discount.
To qualify for a reduction of or exception to the sales charge, you must notify
your Shareholder Organization or the Distributor at the time of purchase or
exchange. The reduction in sales charge is subject to confirmation of your
holdings through a check of records. The Fund may modify or terminate quantity
discounts at any time. For more information about quantity discounts, contact
your Shareholder Organization or Portico Investors Services at 1-800-982-8909.
Rights of Accumulation. A reduced sales charge applies to any purchase of
Retail Shares of any Portico Fund that is sold with a sales charge (an
"Eligible Fund") where an investor's then current aggregate investment is
$50,000 or more. "Aggregate investment" means the total of: (a) the dollar
amount of the then current purchase of shares of an Eligible Fund, and (b) the
value (based on current net asset value) of previously purchased and
beneficially owned shares of any Eligible Fund on which a sales charge has been
paid. If, for example, an investor beneficially owns shares of one or more
Eligible Funds, with an aggregate current value of $49,000 on which a sales
charge has been paid and subsequently purchases shares of an Eligible Fund
having a current value of $1,000, the sales charge applicable to the subsequent
purchase would be reduced to 3.00% of the offering price. Similarly, each
subsequent investment in Eligible Fund shares may be added to an investor's
aggregate investment at the time of purchase to determine the applicable sales
charge.
Letter of Intent. By signing a Letter of Intent (available from the
Distributor and Shareholder Organizations), an investor becomes eligible for
the reduced sales charge applicable to the total number of Eligible Fund shares
purchased in a 13-month period pursuant to the terms and under the conditions
set forth in the Letter of Intent. To compute the applicable sales charge, the
offering price of shares of an Eligible Fund on which a sales charge has been
paid, beneficially owned by an investor on the date of submission of the Letter
of Intent, may be used as a credit toward completion of the Letter of Intent.
However, the reduced sales charge will be applied only to new purchases.
During the term of the Letter of Intent, the Transfer Agent will hold in escrow
shares equal to 5% of the amount indicated in the Letter of Intent for payment
of a higher sales charge if an investor does not purchase the full amount
indicated in the Letter of Intent. The escrow will be released when an
investor fulfills the terms of the Letter of Intent by purchasing the specified
amount. Any redemptions made during the 13-month period will be subtracted
from the amount of purchases in determining whether the Letter of Intent has
been completed. If total purchases qualify for a further sales charge
reduction, the sales charge will be adjusted to reflect an investor's total
purchases. If total purchases are less than the amount specified in the Letter
of Intent an investor will be requested to remit an amount equal to the
difference between the sales charge actually paid and the sales charge
applicable to the total purchases. If such remittance is not received within
20 days, the transfer agent, as attorney-in-fact pursuant to the terms of the
Letter of Intent and at the Distributor's direction, will redeem an appropriate
number of shares held in escrow to realize the difference. Signing a Letter of
Intent does not bind an investor to purchase the full amount indicated at the
sales charge in effect at the time of signing, but an investor must complete
the intended purchase in accordance with the terms of the Letter of Intent to
obtain the reduced sales charge. To apply, an investor must indicate his or
her intention to do so under a Letter of Intent at the time of purchase of
Shares.
Qualification for Discounts. For purposes of applying the Rights of
Accumulation and Letter of Intent privileges described above, the scale of
sales charges applies to the combined purchases made by any individual and/or
spouse purchasing securities for his, her or their own account, or the
aggregate investments of a trustee or other fiduciary or IRA for the benefit of
the persons listed above.
Purchase Orders. Investors may purchase Retail Shares of the Fund through
registered representatives of Elan located at Firstar Banks ("Firstar
Investment Offices", or through Elan representatives located at other
financial institutions, or directly with the Fund's transfer agent. All checks
must be drawn on a bank located within the United States and must be payable in
U.S. dollars. Subsequent investments in an existing account in the Fund may be
made at any time by sending to the address below a check or money order payable
to the Fund, along with a letter stating the amount of the investment, the name
of the Fund and the account number in which the investment is to be made. A
$15 fee will be imposed by the Fund's transfer agent if any check used for
investment in an account does not clear, and the investor involved will be
responsible for any loss incurred by a Fund.
PURCHASE ORDERS PLACED THROUGH REGISTERED REPRESENTATIVES
---------------------------------------------------------
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
------------------ --------------------
In Person Complete an application at a Bring your check to a
Firstar Investment Office. Firstar Investment Office.
Call 1-800-982-8909 for the Call 1-800-982-8909 for the
office nearest you. office nearest you.
By Phone Call your registered Call your registered
representative at the number representative at the number
on your statement or call 1- on your statement or call 1-
800-982-8909 for the office 800-982-8909 for the office
nearest you. nearest you.
Automatically Call your registered Complete a Periodic
representative at the number Investment Plan Application
on your statement to obtain to automatically purchase
a Periodic Investment Plan more shares.
Application.
PURCHASE ORDERS PLACED THROUGH THE TRANSFER AGENT
-------------------------------------------------
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
------------------ --------------------
By Mail Complete an application and Make your check payable to
mail it along with a check Portico Funds. Please
payable to Portico Funds, include your account number
P.O. Box 3011 on your check and mail it to
Milwaukee, WI 53201-3011. the address on your
statement.
Overnight Complete an application and Make your check payable to
Delivery deliver it along with a check Portico Funds. Please
payable to Portico Funds, 615 include your account number
E. Michigan St., Milwaukee, on your check and deliver it
WI 53202. to the address at the left.
In Person Bring your application and Bring your check to a
check to a Firstar Investment Firstar Investment Office.
Office. Call 1-800-982-8909 Call 1-800-982-8909 for the
for the office nearest you. office nearest you.
Automatically Call 1-800-982-8909 to obtain Complete a Periodic
a Periodic Investment Plan Investment Plan Application
Application. to automatically purchase
more shares.
Open a ConvertiFundR account
to automatically invest
proceeds from one account to
another account of the
Portico family of funds.
By Wire Call 1-800-228-1024 to Ask your bank to transmit
arrange a wire transaction. immediately available funds
Ask your bank to transmit by wire as described at the
immediately available funds left. Please also include
by wire in the amount of your your account number.
purchase to Firstar Bank
Milwaukee, N.A., ABA # 0750-
00022, Account # 112-952-137
for further credit to
MicroCap Fund [name/title on
the account].
By Phone Call 1-800-228-1024 to Call 1-800-228-1024 to
exchange from another Portico exchange from another
Fund account with the same Portico Fund account with
registration including name, the same registration
address and taxpayer ID including name, address and
number. taxpayer ID number.
Investors making initial investments by wire must promptly complete a Purchase
Application and forward it to the Fund. REDEMPTIONS WILL NOT BE PAID UNTIL THE
COMPLETED APPLICATION HAS BEEN RECEIVED BY THE TRANSFER AGENT.
If an order and payment are received by the transfer agent or Elan in proper
form (as described above) before the close of regular trading hours on the New
York Stock Exchange (the "Exchange"), currently 3:00 p.m. Central Time, on a
business day, Fund shares will be purchased as of the determination of net
asset value on that day. Purchase orders which are received after the close of
regular trading hours on the Exchange, or on non-business days, and orders for
which payment is not received by the close of regular trading hours on the
Exchange on a business day, will be executed on the next business day after
receipt of both the order and payment in proper form by the transfer agent or
Elan.
The Fund will not accept payment in cash or third party checks for the purchase
of shares. Federal regulations require that each investor provide a Social
Security number or other certified taxpayer identification number upon opening
or reopening an account. The Fund reserves the right to reject applications
without such a number or an indication that a number has been applied for. If
a number has been applied for, the number must be provided and certified within
sixty days of the date of the application. Any accounts opened without a
proper number will be subject to backup withholding and may be liquidated and
distributed to the owner(s) of record on or after the first business day
following the sixtieth day of investment, net of the backup withholding tax.
Certificates for shares will be issued only upon shareholder request. The Fund
reserves the right to reject any purchase order. Payment for shares of the
Fund in the amount of $1,000,000 or more may, at the discretion of the Adviser,
be made in the form of securities that are permissible investments for the
Fund. For further information see the Statement of Additional Information or
contact Portico Investor Services at 1-800-982-8909 or 414-287-3710 (Milwaukee
area).
HOW TO PURCHASE INSTITUTIONAL SHARES
All Institutional Share purchases are effected pursuant to a customer's account
at Firstar Trust Company ("Firstar Trust") or at another chosen institution
pursuant to procedures established in connection with the requirements of the
account. Confirmations of share purchases and redemptions will be sent to
Firstar Trust or the other institution involved. Firstar Trust and the other
institutions (or their nominees) (collectively referred to as "Institutions")
will normally be the holders of record of Fund shares, and will reflect their
customers' beneficial ownership of shares in the account statements provided by
them to their customers. The exercise of voting rights and the delivery to
customers of shareholder communications from the Fund will be governed by the
customers' account agreements with Firstar Trust and the other Institutions.
Investors wishing to purchase shares of the Fund should contact their account
representatives.
Institutional Shares are sold without a charge imposed by the Fund, although
Institutions may charge fees for providing administrative or other services in
connection with investments in Fund shares.
Purchase orders must be transmitted to the Fund's transfer agent by telephone
(1-800-228-1024; in Milwaukee area: 414-287-3808 or by fax 414-287-3781 only if
preceded by a telephone call) and will be effected by the transfer agent at its
Milwaukee office. Purchase orders that are received by the transfer agent
before the close of regular trading hours on the New York Stock Exchange (the
"Exchange"), currently 3:00 p.m. Central Time, will be executed as of the
close of regular trading hours on the Exchange, provided that payment is
received by the close of business. Purchase orders that are received after the
close of regular trading hours on the Exchange or on non-business days, and
orders for which payment is not received by the close of regular trading hours
on the Exchange on a business day, will be executed on the next business day
after receipt of both the order and payment in proper form by the transfer
agent.
Payment for Fund shares should be transmitted by wire in immediately available
funds to:
Firstar Bank Milwaukee, N.A.
ABA #0750-00022,
Account #112-952-137
For further credit to
MicroCap Fund
[the investor's account number and the name/title of the account].
Payment may also be made by check payable to: Portico Funds, P.O. Box 3011,
Milwaukee, WI 53201-3011, or delivered (via overnight delivery or in person) to
615 E. Michigan St., Milwaukee, WI 53202.
It is the responsibility of Institutions to transmit orders and payment for the
purchase of shares by their customers to the transfer agent on a timely basis,
in accordance with the procedures stated above.
Certificates for shares will be issued only upon the request of an Institution.
The Fund reserves the right to reject any purchase order.
Payment for shares of the Fund in the amount of $1,000,000 or more may, at the
discretion of the Fund, be made in the form of securities that are permissible
investments for the Fund as described in this Prospectus. For further
information see the Statement of Additional Information or contact Portico
Investor services at 1-800-982-8909 or 414-287-3710 (Milwaukee area).
REDEMPTION OF SHARES
HOW TO REDEEM RETAIL SHARES
Redemption orders are effected at the net asset value per share next determined
after receipt of the order by the transfer agent or Elan. If a redemption
order is received in proper form (as described below) before the close of
regular trading hours on the Exchange, currently 3:00 p.m. Central Time, on a
business day, Fund shares will be redeemed as of the determination of net asset
value on that day. Redemption orders which are received after the close of
regular trading hours on the Exchange, or on non-business days, will be
executed on the next business day. Depending upon the current net asset value
of the redeemed shares at the time of redemption, the value of the shares
redeemed may be more or less than the investor's cost.
Redemption Orders
THROUGH THE TRANSFER AGENT THROUGH A REGISTERED
-------------------------- REPRESENTATIVE
--------------
By Phone Call 1-800-228-1024 with your Call your registered
account name, account number representative at the
and amount of redemption number on your statement,
(minimum $500). Redemption or 1-800-982-8909.
proceeds will only be sent to
a shareholder's address or
bank account of a commercial
bank located within the United
States as shown on the
transfer agent's
records.[Available only if
established on the account
application and if there has
been no change of address by
telephone within the preceding
15 days.]
By Mail, Mail your instructions to the Bring your instructions to
Overnight Portico Funds, P.O. Box 3011, your registered
Delivery or Milwaukee, Wisconsin 53201- representative's office or
In Person 3011, or deliver them (via mail or deliver them to
overnight delivery or in Portico Investor Services
person) to 615 E. Michigan at 777 East Wisconsin
St., Milwaukee, WI 53202.. Avenue, Suite 900,
Include the number of shares Milwaukee, WI 53202.
or the amount to be redeemed,
your shareholder account
number and Social Security
number or other taxpayer
identification number. Your
instructions must be signed by
all persons required to sign
for transactions exactly as
their names appear on the
account. If the redemption
amount exceeds $50,000, or if
the proceeds are to be sent
elsewhere than the address of
record, or the address of
record has been changed by
telephone within the preceding
15 days, each signature must
be guaranteed in writing by
either a commercial bank that
is a member of the FDIC, a
trust company, a credit union,
a savings association, a
member firm of a national
securities exchange or other
eligible guarantor
institution.
Automatically Call 1-800-982-8909 for a Call your registered
Systematic Withdrawal Plan representative at the
application ($15,000 account number on your statement to
minimum and $100 minimum per establish a Systematic
transaction). Withdrawal Plan.
Guarantees must be signed by an eligible guarantor institution and "Signature
Guaranteed" must appear with the signature. If certificates have been issued,
the certificates, properly endorsed or accompanied by a properly executed stock
power and accompanied by signature guarantees, must be received by the transfer
agent or Elan. The Fund may require additional supporting documents for
redemptions made by corporations, executors, administrators, trustees and
guardians. A redemption request will not be deemed to be properly received
until the transfer agent or Elan receives all required documents in proper
form. Purchases of additional shares concurrently with withdrawals would be
disadvantageous because of the sales charge involved in the additional
purchases.
The transfer agent charges a $7.50 fee for each payment made by wire of
redemption proceeds, which will be deducted from the shareholder's account.
The transfer agent also charges a $15.00 fee for each IRA distribution (unless
it is part of a Systematic Withdrawal Plan), which will be deducted from the
shareholder's account.
In order to arrange for telephone redemptions after an account has been opened
or to change the bank or account designated to receive redemption proceeds, a
written request must be sent to Portico Investor Services at the address listed
above or contact your registered representative. The request must be signed by
each shareholder of the account. Further documentation may be requested from
corporations, executors, administrators, trustees and guardians.
The Fund reserves the right to refuse a telephone redemption if it believes it
is advisable to do so. Procedures for redeeming shares by telephone may be
modified or terminated by the Fund at any time upon notice to shareholders.
During periods of substantial economic or market change, telephone redemptions
may be difficult to implement. If a shareholder is unable to contact the
transfer agent by telephone, shares may also be redeemed by delivering the
redemption request to the transfer agent.
In an effort to prevent unauthorized or fraudulent redemption requests by
telephone, Portico and the transfer agent employ reasonable procedures
specified by the Fund to confirm that such instructions are genuine. Among the
procedures used to determine authenticity, investors electing to redeem or
exchange by telephone will be required to provide their account number. All
such telephone transactions will be tape recorded and confirmed in writing to
the shareholder. Portico may implement other procedures from time to time. If
reasonable procedures are not implemented, Portico and/or the transfer agent
may be liable for any loss due to unauthorized or fraudulent transactions. In
all other cases, the shareholder is liable for any loss for unauthorized
transactions.
Other Redemption Information
The Fund will make payment for redeemed shares typically within one or two
business days, but no later than the seventh day after receipt by the transfer
agent of a request in proper form, except as provided by the rules of the SEC.
HOWEVER, IF ANY PORTION OF THE SHARES TO BE REDEEMED REPRESENTS AN INVESTMENT
MADE BY CHECK, THE FUND MAY DELAY THE PAYMENT OF THE REDEMPTION PROCEEDS UNTIL
THE TRANSFER AGENT IS REASONABLY SATISFIED THAT THE CHECK HAS BEEN COLLECTED,
WHICH MAY TAKE TWELVE DAYS FROM THE PURCHASE DATE. This procedure does not
apply to shares purchased by wire payment. An investor purchasing shares by
wire must have filed a Purchase Application before any redemption requests can
be paid.
The Fund imposes no charge when shares are redeemed and reserves the right to
redeem an account involuntarily, upon sixty days' written notice, if
redemptions cause the account's net asset value to remain at $50 or less. The
Fund may also redeem shares involuntarily if it is appropriate to do so to
carry out the Fund's responsibilities under the 1940 Act and, in certain cases,
may make payment for redemption in securities. Investors would bear any
brokerage or other transaction costs incurred in converting the securities so
received to cash. See the Statement of Additional Information for examples of
when such redemptions might be appropriate.
Questions concerning the proper form for redemption requests should be directed
to Portico Investor Services at 1-800-228-1024 or 414-287-3808 (Milwaukee
area).
HOW TO REDEEM INSTITUTIONAL SHARES
Customers who purchase Institutional Shares of the Fund through accounts at an
Institution may redeem all or part of their shares in accordance with the
instructions and limitations pertaining to such accounts. The procedures will
vary according to the type of account and Institution involved, and customers
should consult their account representatives in this regard.
Redemption orders must be transmitted by an Institution to the transfer agent
in writing or by telephone in the manner described under "How to Purchase
Institutional Shares." Shares are redeemed at the net asset value per share
next determined after the transfer agent's receipt of the redemption order.
Payment for redeemed shares will normally be wired in federal funds on the next
business day if the redemption order is received by the transfer agent before
3:00 p.m. Central Time. The Fund reserves the right, however, to delay the
wiring of redemption proceeds for up to seven days after receipt of a
redemption order if, in the judgment of the Adviser, an earlier payment could
adversely affect the Fund. However, if any portion of the shares to be
redeemed represents an investment made by check, the Fund may delay the payment
of the redemption proceeds until the transfer agent is reasonably satisfied
that the check has been collected, which may take twelve days from the purchase
date. The transfer agent currently charges $7.50 fee for each wire payment of
redemption proceeds and a $15.00 fee for each IRA distribution, which will be
deducted from the shareholder's account or, at the request of an Institution,
billed directly to the Institution requesting the redemption.
Portico imposes no charge when shares are redeemed. However, Institutions may
charge a fee for providing administrative or other services in connection with
investments in Fund shares. If a customer has agreed with a particular
Institution to maintain a minimum account balance and the balance falls below
that minimum, the customer may be obliged by the Institution to redeem all or
part of the customer's shares in the Fund to the extent necessary to maintain
the required minimum balance. Portico may also redeem shares of the Fund
involuntarily or make payment for redemption in securities if it appears
appropriate to do so in light of Portico's responsibilities under the 1940 Act.
Investors would bear any brokerage or other transaction costs incurred in
converting the securities received to cash. See the Statement of Additional
Information for examples of when such redemptions might be appropriate.
It is the responsibility of Institutions to transmit redemption orders and
credit their customers' accounts with the redemption proceeds on a timely basis
in accordance with their agreements with the customers and to provide their
customers with account statements with respect to share transactions made for
the accounts.
In an effort to prevent unauthorized or fraudulent redemption requests by
telephone, Portico and the transfer agent employ reasonable procedures
specified by the Fund to confirm that such instructions are genuine. Among the
procedures used to determine authenticity, investors electing to redeem or
exchange by telephone will be required to provide their account number. All
such telephone transactions will be tape recorded and confirmed in writing to
the shareholder. Portico may implement other procedures from time to time. If
reasonable procedures are not implemented, Portico and/or the transfer agent
may be liable for any loss due to unauthorized or fraudulent transactions. In
all other cases, the shareholder is liable for any loss for unauthorized
transactions.
EXCHANGE OF SHARES
Except as provided in the next sentence and provided that such other shares may
legally be sold in the state of the investor's residence, Retail shareholders
are generally permitted to exchange their Retail Shares in a Fund (with a
minimum current value of $500) for Retail Shares of other funds in the Portico
family of funds without charge or commission by the Fund. A sales charge will
be imposed on the exchange if the shares of the Fund being acquired have a
sales charge and the shares being redeemed were purchased or otherwise acquired
without a sales charge. Institutional shareholders also are generally
permitted to exchange their Institutional Shares in a Fund (with a minimum
current value of $500) for Institutional Shares of other funds in the Portico
family of funds, provided such other shares may legally be sold in the state of
the investor's residence and the investor is eligible for Institutional Shares
at the time of the exchange. This exchange privilege does not apply to shares
of the Institutional Money Market Fund. Telephone exchange privileges
automatically apply to each shareholder of record and the representative of
record unless and until the transfer agent receives written instructions from
the shareholder(s) of record canceling the privilege.
Portico reserves the right to terminate indefinitely the exchange privilege of
any shareholder, broker, investment adviser, agent, or account representative
who requests more than four exchanges within a calendar year, whether for
oneself or one's customers. Portico may determine to do so with prior notice
to the shareholder, broker, investment adviser, agent, or account
representative based on a consideration of both the number of exchanges the
particular shareholder, broker, investment adviser, agent, or account
representative has requested and the time period over which those exchange
requests have been made, together with the level of expense to the funds or
other adverse effects which may result from the additional exchange requests.
If any portion of the shares to be exchanged represents an investment made by
check, a fund may delay the acquisition of new shares in an exchange until the
transfer agent is reasonably satisfied that the check has been collected, which
may take twelve days from the purchase date.
Investors may find the exchange privilege useful if their investment objectives
or market outlook should change after they invest in the Portico family of
funds. For federal income tax purposes, an exchange of shares is a taxable
event and, accordingly, a capital gain or loss may be realized by an investor.
Before making an exchange request, an investor should consult a tax or other
financial adviser to determine the tax consequences of a particular exchange.
No exchange fee is currently imposed by Portico on exchanges. Portico
reserves, however, the right to impose a charge in the future. In addition,
Institutions may charge a fee for providing administrative or other services in
connection with exchanges.
In order to request an exchange by telephone, a shareholder must give the
account name, account number and the amount or number of shares to be
exchanged. During periods of significant economic or market change, telephone
exchanges may be difficult to implement. If a shareholder is unable to contact
the transfer agent by telephone, shares may also be exchanged by delivering the
exchange request to the transfer agent in person or by mail at the address
listed above under "Redemption of Shares."
The Fund reserves the right to reject any exchange request with prior notice to
a shareholder and the exchange privilege may be modified or terminated at any
time. At least sixty days' notice will be given to shareholders of any
material modification or termination except where notice is not required under
SEC regulations, The responsibility of the Fund and its transfer agent for the
authenticity of telephone exchange instructions is limited as described above
under "Redemption of Shares."
SHAREHOLDER SERVICES (Retail Shareholders Only)
The services and privileges described below are available to Retail
Shareholders of the Fund. These may be modified or terminated at any time upon
notice to shareholders.
Shareholder Reports
Shareholders will be provided with a report showing portfolio investments and
other information at least semiannually; and after the close of the Fund's
fiscal year which ends June 30, with an annual report containing audited
financial statements. To eliminate unnecessary duplication, only one copy of
shareholder reports will be sent to shareholders with the same mailing address.
Shareholders who desire a duplicate copy of shareholder reports to be mailed to
their residence should call Portico Investor Services at 1-800-982-8909, or
write Portico Investor Services at the address listed above.
In addition, account statements will be mailed to shareholders after each
purchase, reinvestment of dividends and redemption.
Automated Teleresponse Service
Shareholders using a touch-tone telephone can access information on the Fund
twenty-four hours a day, seven days a week. When calling Portico Investor
Services at 1-800-228-1024, shareholders may choose to use the automated
information feature or, during regular business hours (8:00 a.m. to 7:00 p.m.
Central Time, Monday through Friday), speak with a Portico Investor Services
representative.
The automated service provides the information most frequently requested by
shareholders. After calling the 800-number, pressing "2" on their touch-tone
phone, shareholders can:
1. Determine closing prices for the Fund.
2. Learn how the price of a Fund has changed from the previous day.
3. Hear daily yields for Portico money market funds.
Money market fund yields reflect fee waivers in effect, represent past
performance and will vary. If fees were not waived, yields would be reduced.
Past performance is no guarantee of future results. 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. An investment in any one of the
Portico money market funds is neither insured nor guaranteed by the U.S.
government nor is there any assurance the funds will be able to maintain a
stable net asset value of $1.00 per share.
To speak with a Portico Investor Services representative anytime during an
automated teleresponse session (during regular business hours), shareholders
may press "0."
For total return information, shareholders must call Portico Investor Services
at 1-800-982-8909 or 414-287-3710 (Milwaukee area).
Retirement Plans
The Fund offers individual retirement accounts and prototype defined
contribution plans, including simplified employee, 401(k), 403(b), profit-
sharing and money purchase pension plans ("Retirement Plans"). For details
concerning Retirement Plans (including service fees), please call Portico
Investors Services at 1-800-982-8909 or 414-287-3710 (Milwaukee area).
DIVIDENDS AND DISTRIBUTIONS
Dividends from the Fund's net investment income are declared and paid annually.
The Fund's net realized capital gains are distributed at least annually to
avoid tax to the Fund.
Dividends and distributions will reduce the net asset value of the Retail and
Institutional Shares by the amount of the dividend or distribution. Dividends
and distributions are automatically reinvested in additional Retail or
Institutional Shares of the Fund (as applicable) on which the dividend or
distribution is paid at their net asset value per share (as determined on the
payable date), unless the shareholder notifies the Fund's transfer agent or
registered representative, as appropriate, that dividends or capital gains
distributions, or both, should be paid in cash. Cash dividends and
distributions will be paid by check unless the Fund's transfer agent receives a
voided check or deposit ticket to enable the dividends or distributions to be
directly deposited into the shareholder's bank account. Cash dividends and
distributions will be paid within five business days after the end of the month
in which dividends are declared or within five business days after a redemption
of all of a shareholder's shares of a Fund. Reinvested dividends and
distributions receive the same tax treatment as those paid in cash.
MANAGEMENT OF THE FUND
The business and affairs of the Fund are managed under the direction of the
Board of Directors of the Portico Funds, Inc. ("Portico" or the "Company").
The Statement of Additional Information contains the name and background
information regarding each Director.
Advisory Services
FIRMCO, a Wisconsin corporation and subsidiary of Firstar Corporation, a bank
holding company, serves as investment adviser to the Fund. FIRMCO, with
principal offices at Firstar Center, 777 East Wisconsin Avenue, 8th Floor,
Milwaukee, Wisconsin 53202, has been engaged in the business of providing
investment advisory services since 1986. FIRMCO currently has $15 billion in
assets under active management, of which $9 billion is invested in fixed-income
and money market securities and $6 billion in equity securities.
Subject to the general supervision of the Board of Directors and in accordance
with the investment objective and policies of the Fund, the Adviser manages the
Fund's portfolio, makes decisions with respect to and places orders for all
purchases and sales of the Fund's portfolio securities, and maintains records
relating to such purchases and sales. The Adviser is authorized to allocate
purchase and sale orders for portfolio securities to Shareholder Organizations,
including, in the case of agency transactions, Shareholder Organizations which
are affiliated with the Adviser, to take into account the sale of Fund shares
if the Adviser believes that the quality of the transaction and the amount of
the commission are comparable to what they would be with other qualified
brokerage firms.
The Adviser is entitled to receive from the Fund a fee, calculated daily and
payable monthly, at the annual rate of 1.50% of the Fund's average daily net
assets. The Adviser may voluntarily waive all or a portion of the advisory fee
otherwise payable by the Fund from time to time. These waivers may be
terminated at any time at the Adviser's discretion.
The Adviser's portfolio management services for the Fund are conducted by
Joseph Docter and Mark Westman. Mr. Docter has been with Firstar since 1984
and has eleven years of investment management experience. He is a Senior Vice
President and Senior Portfolio Manager of FIRMCO. Mr. Westman has been with
Firstar since 1992 and has four years of investment management experience. He
is a Vice President and Portfolio Manager of FIRMCO. Both Mr. Docter and Mr.
Westman are Chartered Financial Analysts.
Administrative Services
Firstar Trust Company ("Firstar Trust") and B. C. Ziegler and Company
("Ziegler") serve as the Co-Administrators (the "Co-Administrators"). The
Co-Administrators have agreed to provide the following administrative services
for the Portico Funds: assist in maintaining office facilities for the Funds;
furnish clerical and certain other services required by the Funds; compile data
for and prepare notices to the SEC; prepare semiannual reports to the SEC and
current shareholders and filings with state securities commissions; coordinate
federal and state tax returns; monitor the arrangements pertaining to the
Funds' agreements with Shareholder Organizations and Institutions; monitor the
Funds' expense accruals; monitor compliance with the Funds' investment policies
and limitations; and generally assist the Funds' operations. As further
described in the Statement of Additional Information, certain services under
the Co-Administration Agreement are provided jointly by Firstar Trust and
Ziegler and other services are provided separately by either Firstar Trust or
Ziegler. The Co-Administrators are entitled to receive a fee for their
administrative services, computed daily and payable monthly, at the annual rate
of .125% of Portico's first $2 billion of average aggregate daily net assets,
plus .10% of Portico's average aggregate daily net assets in excess of $2
billion. The Co-Administrators may voluntarily waive all or a portion of their
administrative fee from time to time. These waivers may be terminated at any
time at the Co-Administrators' discretion.
Shareholder Organizations
Portico may enter into agreements from time to time with certain Shareholder
Organizations, including affiliates of the Adviser (such as Elan), providing
for certain support and/or distribution services to their customers who are the
beneficial owners of Retail Shares of the Fund. Under the Service Agreements,
shareholder support services, which are described more fully in the Statement
of Additional Information, may include assisting investors in processing
purchase, exchange and redemption requests; processing dividend and
distribution payments from the Funds; providing information periodically to
customers showing their positions in Retail Shares of the Funds; and providing
sub-accounting with respect to Retail Shares beneficially owned by customers or
the information necessary for sub-accounting. In addition, Shareholder
Organizations under a Distribution and Service Agreement may provide the
foregoing shareholder support services and may also provide assistance, such as
the forwarding of sales literature and advertising to their customers, in
connection with the distribution of Retail Shares. For their services,
Shareholder Organizations may be entitled to receive fees from the Fund at
annual rates of up to 0.25% of the average daily net asset value of the Retail
Shares covered by their agreements.
Under the terms of their agreements with Portico, Shareholder Organizations are
required to provide a schedule of any fees that they may charge to their
customers relating to the investment of their assets in Retail Shares covered
by the agreements. Investors should read this Prospectus in light of such fee
schedules and under the terms of their Shareholder Organization's agreement
with Portico. In addition, investors should contact their Shareholder
Organization with respect to the availability of shareholder services and the
particular Shareholder Organization's procedures for purchasing and redeeming
shares. It is the responsibility of Shareholder Organizations to transmit
purchase and redemption orders and record those orders in customers' accounts
on a timely basis in accordance with their agreements with customers. At the
request of a Shareholder Organization, the transfer agent's charge of $7.50 for
each payment made by wire of redemption proceeds may be billed directly to the
Shareholder Organization.
The Glass-Steagall Act and other applicable laws, among other things, prohibit
banks from engaging in the business of underwriting securities. Accordingly,
banks will be engaged under agreements with Portico only to perform the
administrative and investor servicing functions described above, and will
represent to Portico that in no event will the services provided by them under
the agreements be primarily intended to result in the sale of Retail Shares.
Conflict-of-interest restrictions may apply to the receipt of compensation paid
by Portico to a Shareholder Organization in connection with the investment of
fiduciary funds in Retail Shares. Institutions, including banks regulated by
the Comptroller of the Currency and investment advisers and other money
managers subject to the jurisdiction of the SEC, the Department of Labor or
state securities commissions, are urged to consult legal counsel before
entering into agreements with Portico.
Agreements that contemplate the provision of distribution services by
Shareholder Organizations are governed by a Distribution and Service Plan (the
"Plan") that has been adopted by Portico pursuant to Rule 12b-1 under the 1940
Act. In the case of the Fund, no payments are made to their Distributor under
the Plan. However, payments to Shareholder Organizations, including affiliates
of the Adviser, under the Plan are not tied directly to their own out-of-pocket
expenses and therefore may be used as they elect (for example, to defray their
overhead expenses), and may exceed their direct and indirect costs.
Custodian, Transfer and Dividend Disbursing Agent, and Accounting Services
Agent
Firstar Trust, an affiliate of the Adviser, provides custodial, transfer
agency, dividend disbursing agency services, and accounting services for the
Fund. Total custodial, transfer agency, dividend disbursing agency, and
accounting services fees paid to Firstar Trust for the first twelve months of
the Fund's operations are expected to be approximately .22% of the Fund's
average net assets. Additional information regarding the fees payable by the
Fund to Firstar Trust for these services is provided in the Statement of
Additional Information. Inquiries to the transfer agent may be sent to the
following address: Firstar Trust Company, P.O. Box 3011, Milwaukee, WI 53201-
3011.
EXPENSES
Operating expenses of the Fund include taxes, interest, fees and expenses of
Directors and officers, SEC fees, state securities and qualification fees,
advisory fees, administrative fees, Shareholder Organization fees (Retail
Shares only), charges of the custodian and transfer agent, dividend disbursing
agent and accounting services agent, certain insurance premiums, auditing and
legal expenses, costs of preparing and printing prospectuses for regulatory
purposes and for distribution to shareholders, costs of shareholder reports and
meetings and any extraordinary expenses. The Fund also pays any brokerage
fees, commissions and other transactions charges (if any) incurred in
connection with the purchase or sale of portfolio securities.
INVESTMENT LIMITATIONS
Except for the limitations detailed below, the investment objective and
policies of the Fund described in this Prospectus are not fundamental and may
be changed by the Board of Directors without the affirmative vote of the
holders of a majority of the Fund's outstanding shares. If there is a change
in the Fund's investment objective, shareholders should consider whether the
Fund remains an appropriate investment in light of their then current financial
position and needs. The following descriptions summarize several of the Fund's
fundamental investment limitations which are set forth in full in the Statement
of Additional Information.
The Fund May Not:
1. Purchase securities of any one issuer (other than U.S. Government
securities) if more than 5% of the value of its total assets will be
invested in the securities of such issuer, except that up to 25% of the
value of a Fund's total assets may be invested without regard to this 5%
limitation.
2. Subject to the foregoing 25% exception, purchase more than 10% of the
outstanding voting securities of any issuer.
3. Invest 25% or more of its total assets in one or more issuers conducting
their principal business activities in the same industry.
4. Borrow money or enter into reverse repurchase agreements in amounts over
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
such borrowings.
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
the Fund's portfolio securities will not constitute a violation of such
limitation.
TAXES
Federal
Portico's management intends that the Fund will qualify as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended (the
"Code"). Such qualification generally will relieve the Fund of liability for
federal income taxes to the extent its earnings are distributed in accordance
with the Code.
The Fund contemplates declaring as dividends each year at least 90% of its
investment company income. An investor who receives a dividend derived from
investment company taxable income (which includes any excess of net short-term
capital gain over net long-term capital loss) treats it as a receipt of
ordinary income in the computation of his gross income, whether such dividend
is paid in the form of cash or additional shares of the Fund.
Any dividend or distribution of the excess of the Fund's net long-term capital
gain over its net short-term capital loss will be taxable to a shareholder of
the Fund as long-term capital gain, regardless of how long the shareholder has
held shares of the Fund.
Before purchasing Fund shares, the impact of dividend or capital gain
distributions which are expected to be declared or have been declared but not
paid, should be carefully considered. Any dividend or distribution paid by the
Fund shortly after the purchase of shares of the Fund will have the effect of
reducing the per share net asset value by the per share amount of the dividend
or distribution. Such dividends or distributions, although in effect a return
of capital to shareholders, are subject to income taxes.
The Fund will be required in certain cases to withhold and remit to the U.S.
Treasury 31% of the dividends or gross sale proceeds paid to any shareholder
(i)who has provided either an incorrect taxpayer identification number or no
number at all, (ii) who is subject to withholding by the Internal Revenue
Service for failure to properly include on his return payments of interest or
dividends, or (iii) who has failed, when required to do so, to certify that he
is not subject to backup withholding. The Fund generally also will withhold
and remit to the U.S. Treasury 10% of all distributions from individual
retirement accounts (including simplified employee plans) to any investor
unless the transfer agent receives a written request not to withhold federal
income tax from the investor prior to the distribution date; withholding on
distributions from other types of Retirement Plans may be mandatory and may be
at a higher rate.
A taxable gain or loss may be realized by a shareholder upon a redemption,
transfer or exchange of Fund shares, depending on the tax basis of the shares
and their price at the time of such disposition.
Generally, a shareholder may include sales charges incurred upon the purchase
of Retail Shares in his or her tax basis for such shares for the purpose of
determining gain or loss on a redemption, transfer or exchange of shares.
However, if the shareholder effects an exchange of such shares for Retail
Shares of another fund of the Company within 90 days of the purchase and is
able to reduce the sales charge applicable to the new shares (by virtue of the
Company's exchange privilege), the amount equal to such reduction may not be
included in the tax basis of the shareholder's exchanged shares, but may be
included (subject to the limitation) in the tax basis of the new shares. If a
shareholder held shares for six months or less, any loss realized by the
shareholder will be treated as long-term loss to the extent of any long-term
capital distribution received.
The foregoing is only a brief summary of some of the important federal income
tax considerations generally affecting the Fund and its shareholders, and is
not intended as a substitute for careful tax planning and is based on tax laws
and regulations which are in effect on the date of this Prospectus. Such laws
and regulations may be changed by legislative or administrative action.
Accordingly, investors in the Fund should consult their tax advisers with
specific reference to their own tax situation. Shareholders will be advised at
least annually as to the federal income tax consequences of dividends and
distributions made each year.
State and Local
Investors are advised to consult their tax advisers concerning the application
of state and local tax laws, which may have different consequences from those
of the federal income tax law described above.
DESCRIPTION OF SHARES
The Company was incorporated under the laws of the State of Wisconsin on
February 15, 1988 and is registered with the SEC as an open-end management
company. The Articles of Incorporation authorize the Board of Directors to
issue up to 150 billion full and fractional shares of common stock, $.0001 par
value per share. The Company currently has 16 classes representing interests
in 16 existing investment portfolios. Each class of the Funds is currently
divided into two separate series, a Retail and Institutional Series
representing interests in the same Fund. Of these authorized shares, 50
million shares have been classified for each of the Retail and Institutional
Series discussed in this Prospectus.
Shares of each series bear their pro rata portion of all operating expenses
paid by the Fund, except certain payments of up to .25% of the average daily
net assets of the Retail Shares under the Fund's Distribution and Service Plan
and Shareholder Servicing Plan applicable only to Retail Series Shares. In
addition, Retail Shares, subject to certain exceptions described under Purchase
of Shares above, are sold with a maximum sales charge of 4.00% with respect to
the Company's equity funds and 2.00% with respect to the Company's fixed income
funds. Institutional Shares are sold without a sales charge. The differences
in expenses and sales charges will affect the performance of Institutional and
Retail Shares. Institutional Shares are only available to (i) a trust, agency
or custodial accounts opened through trust companies or trust departments
affiliated with Firstar Corporation; (ii) all employer sponsored qualified
retirement plans; and (iii) clients of the Adviser. Retail Shares are
available to any investor who does not fall within the three preceding
categories. Portico Funds offer various services and privileges in connection
with Retail Shares that are not offered in connection the Institutional Shares,
including a Periodic Investment Plan, ConvertiFund, and Systematic Withdrawal
Plan. A salesperson and any other person or Shareholder Organization entitled
to receive compensation for selling or servicing shares may receive different
compensation with respect to different series of shares.
For information regarding the other funds and series, contact Portico Investor
Services at 1-800-982-8909 or 414-287-3710 (Milwaukee area) or your Shareholder
Organization.
Portico does not presently intend to hold annual meetings of shareholders
except as required by the 1940 Act or other applicable law. Portico will call
a meeting of shareholders for the purpose of voting upon the question of
removal of a member of the Board of Directors upon written request of
shareholders owning at least 10% of the outstanding shares of Portico that are
entitled to vote. To the extent required by law, Portico will assist in
shareholder communication in such matters.
Shareholders of each class of the Funds are entitled to one vote for each full
share held and proportionate fractional votes for fractional shares held, and
will vote in the aggregate and not by Fund except where otherwise required by
law. It is contemplated that shareholders of the Fund will vote separately on
matters relating to its investment advisory agreement and any changes in its
fundamental investment limitations. On any matter submitted to the vote of
shareholders which only pertains to agreements, liabilities or expenses
applicable to the Retail Shares but not the Institutional Shares of the Fund,
only the Retail Shares will be entitled to vote. Shares of Portico have
noncumulative voting rights and, accordingly, the holders of more than 50% of
Portico's outstanding shares (irrespective of Fund) may elect all of the
Directors. As of January 1, 1996, the Adviser and its affiliates held, on
behalf of their underlying accounts, approximately 71% of Portico's shares that
were outstanding on that date.
Each Retail and Institutional Share of the Fund represents an equal
proportionate interest with other shares of the same series in the Fund, and is
entitled to such dividends and distributions earned on its assets as are
declared at the discretion of the Board of Directors. Shares of the Fund do
not have preemptive rights. The Fund is classified as a diversified company
under the 1940 Act.
NET ASSET VALUE AND DAYS OF OPERATION
The net asset value of each series of the Fund for purposes of pricing purchase
and redemption orders is determined as of the close of regular trading hours on
the Exchange, currently, 3:00 p.m. Central Time, on each day the Exchange is
open for trading. As a result, shares of the Fund will not be priced on the
days which the Exchange observes: New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. Net asset value per Retail and Institutional Share is
calculated by dividing the value of all securities and other assets owned by
the Fund that are allocable to Retail or Institutional Shares, respectively,
less the liabilities charged to the particular series by the number of the
Fund's outstanding Shares of that series.
Securities which are traded on a recognized domestic 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 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 markets are
valued on the basis of closing over-the-counter bid prices. Restricted
securities, securities for which market quotations are not readily available
and other assets are valued at fair value by the Adviser under the supervision
of the Board of Directors. Short-term investments having a maturity of 60 days
or less are valued at amortized cost, unless the amortized cost does not
approximate market value.
The Fund's securities may be valued based on valuations provided by an
independent pricing service. These valuations are reviewed by the Adviser. If
the Adviser believes that a valuation received from the service does not
represent a fair value, it values the security by a method that the Board of
Directors believes will determine a fair value. Any pricing service used may
employ electronic data processing techniques, including a "matrix" system, to
determine valuations.
PERFORMANCE CALCULATIONS
From time to time, total return data for Retail or Institutional Shares of the
Fund may be quoted in advertisements or in communications to shareholders. The
total return of the Fund's Retail or Institutional Shares will be calculated on
an average annual (compound) total return basis, and may also be calculated on
an aggregate total return basis, for various periods. Average annual total
return reflects the average annual percentage change in value of an investment
in Retail or Institutional shares of the Fund over the measuring period.
Aggregate total return reflects the total percentage change in value over the
measuring period. Both methods of calculating total return assume that
dividends and capital gain distributions made by the Retail and Institutional
Shares of the Fund during the period are reinvested in Retail and Institutional
Shares of the Fund, respectively, and that, for Retail Shares, the maximum
sales charge during the period has been deducted from the investment at the
time of purchase.
The Fund may advertise total return data for Retail Shares of the Fund without
reflecting the sales charge if it is accompanied, in accordance with the SEC
rules, by average annual total return data reflecting the maximum sales charge.
Quotations which do not reflect the sales charge will, of course, be higher
than quotations which do.
The total return of the Fund's Retail and Institutional Shares may be compared
to those of other mutual funds with similar investment objectives and to stock,
bond and other relevant indices or to rankings prepared by independent services
or other financial or industry publications that monitor the performance of
mutual funds. For example, the total return of the Fund's Retail and
Institutional Shares may be compared to data prepared by Lipper Analytical
Services, Inc. In addition, the total return of the Fund's Retail and
Institutional Shares may be compared to the S&P 500 Index; the NASDAQ Composite
Index, an index of unmanaged groups of common stocks of domestic companies that
are quoted on the National Association of Securities Quotation System; the Dow
Jones Industrial Average, a recognized unmanaged index of common stocks of 30
industrial companies listed on the New York Stock Exchange; the Russell 2000
Index; the Value Line Composite Index, an unmanaged index of nearly 1,700
stocks reviewed in Ratings & Reports; and the Consumer Price Index. Total
return data as reported in national financial publications, such as Money
Magazine, Forbes, Barron's, Morningstar Mutual Funds, The Wall Street Journal
and The New York Times, or in publications of a local or regional nature, may
also be used in comparing the performance of the Fund.
Performance quotations represent past performance, and should not be considered
as representative of future results. The investment return and principal value
of an investment in the Fund's Retail and Institutional Shares will fluctuate
so that an investor's shares, when redeemed, may be worth more or less than
their original cost. Since performance will fluctuate, performance data for
the Fund cannot necessarily be used to compare an investment in the Fund's
Retail and Institutional Shares with bank deposits, savings accounts and
similar investment alternatives which often provide an agreed or guaranteed
fixed yield for a stated period of time. Investors should remember that
performance is generally a function of the kind and quality of the investments
held in a portfolio, portfolio maturity, operating expenses and market
conditions. Any fees charged by Shareholder Organizations directly to their
customer accounts in connection with investments in the Fund will not be
included in the Fund's calculations of total return and will reduce the total
return received by the accounts. The methods used to compute total return are
described in more detail in the Statement of Additional Information.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S STATEMENT OF
ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND
OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE
FUND OR BY ITS DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
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 INVESTOR SERVICES
- -------------------------
615 EAST MICHIGAN STREET
P.O. BOX 3011
MILWAUKEE, WI 53201-3011
PORTICO FUNDS, INC.
(Retail and Institutional Series)
MicroCap Fund
Form N-1A
Cross Reference Sheet
Part B
Item No. Heading
- -------- -------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Inapplicable
13. Investment Objectives and Policies InvestmentObjective
and Policies
14. Management of the Fund Management of the
Company
15. Control Persons and Principal
Holders of Securities Management of the
Company; Miscellaneous
16. Investment Advisory and
Other Services Management of the
Company; Custodian,
Transfer Agent and
Accounting Services
Agent
17. Brokerage Allocation and
Other Practices Management of the
Company
18. Capital Stock and Other Securities. Description of
Shares
19. Purchase, Redemption and Pricing
of Securities Being Offered Net Asset Value;
Additional Purchase
and Redemption
Information
20. Tax Status Additional
Information Concerning
Taxes
21. Underwriters Management of the
Company
22. Calculation of Performance Data Additional
Information on
Performance
Part C
Information to be included in Part C is set forth under the appropriate Item,
so numbered in Part C to this Registration Statement.
PORTICO FUNDS, INC.
Statement of Additional Information
for the
MicroCap Fund
February 15, 1996
TABLE OF CONTENTS
-----------------
Page
----
Portico Funds ...................................... 2
Investment Objective and Policies .................. 2
Net Asset Value .................................... 14
Additional Purchase and Redemption Information ..... 14
Description of Shares .............................. 18
Additional Information Concerning Taxes ............ 20
Management of the Company .......................... 21
Custodian, Transfer Agent, Disbursing Agent and
Accounting Services Agent .......................... 27
Independent Accountants ............................ 28
Counsel ............................................ 28
Additional Information on Performance ............. 28
Miscellaneous ...................................... 30
Appendix A ......................................... A-1
This Statement of Additional Information is meant to be read in
conjunction with the Portico Fund Prospectus dated, February 15,1996, for
the Retail and Institutional Shares of the MicroCap Fund (the "Fund") 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 this Fund should be made solely upon the information
contained herein. Copies of the Prospectus for the Fund may be obtained by
writing Portico Investor Services at 777 East Wisconsin Avenue, Suite 900,
Milwaukee, Wisconsin 53202, or by calling 1-800-982-8909 or 414-287-3710
(Milwaukee area). Capitalized terms used but not defined herein have the
same meanings as in the Prospectus.
SHARES OF THE FUND ARE NOT BANK DEPOSITS, AND ARE NEITHER ENDORSED BY,
INSURED BY, GUARANTEED BY, OBLIGATIONS OF, NOR OTHERWISE SUPPORTED BY THE
FDIC, THE FEDERAL RESERVE BOARD, FIRSTAR INVESTMENT RESEARCH & MANAGEMENT
COMPANY, FIRSTAR TRUST COMPANY, FIRSTAR CORPORATION, ITS AFFILIATES OR ANY
OTHER BANK, OR OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN THE PORTICO
FUNDS INVOLVES RISKS INCLUDING POSSIBLE LOSS OF PRINCIPAL.
PORTICO FUNDS
Portico Funds, Inc. (the "Company") is a Wisconsin corporation which
was incorporated on February 15, 1988 as a management investment company. The
Company is authorized to issue separate classes of shares of Common Stock
representing interests in separate investment portfolios. Each class for the
Funds is currently divided into two series, a retail and institutional series.
This Statement of Additional Information pertains to Retail Series and
Institutional Series Shares of the MicroCap Fund. The Company also offers other
investment portfolios which are described in separate Prospectuses and
Statements of Additional Information. For information concerning these other
portfolios contact Portico Investor Services at 1-800-982-8909 or write to 777
East Wisconsin Avenue, Suite 900, Milwaukee, Wisconsin 53202.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the MicroCap Fund is to seek capital
appreciation through investment in securities of small sized companies,
generally defined as those companies with market capitalizations below $250
million at the time of purchase. There is no assurance, however, that the
Fund's investment objective will in fact be attained. The following policies
supplement the Fund's investment objectives and policies as set forth in the
Prospectus.
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 Fund.
The portfolio turnover rate for the Fund is calculated by dividing the
lesser of purchases or sales of portfolio securities for the reporting period by
the monthly average value of the portfolio securities owned during the reporting
period. The calculation excludes all securities, including options, whose
maturities or expiration dates at the time of acquisition are one year or less.
Portfolio turnover may vary greatly from year to year as well as within a
particular year, and may be affected by cash requirements for redemption of
shares and by requirements which enable the Fund to receive favorable tax
treatment. Portfolio turnover will not be a limiting factor in making portfolio
decisions, and the Fund may engage in short-term trading to achieve its
investment objective.
Transactions on U.S. stock exchanges involve the payment of negotiated
brokerage commissions. On exchanges on which commissions are negotiated, the
cost of transactions may vary among different brokers. Unlike transactions on
U.S. stock exchanges which involve the payment of negotiated brokerage
commissions, transactions in foreign securities generally involve the payment of
fixed brokerage commissions which are generally higher than those in the United
States.
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.
The Fund 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 Fund will engage in this practice, however, only when the Adviser in its
sole discretion, believes such practice to be in the Fund's interests.
The Advisory Agreement between the Company and the Adviser provides
that, 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, the financial condition and execution capability of
the broker or dealer, and the reasonableness of the commissions, if any, both
for the specific transaction and on a continuing basis. In addition, the
Agreement authorizes the Adviser to cause the Fund to pay a broker-dealer which
furnishes brokerage and research services a higher commission than that which
might be charged by another broker-dealer for effecting the same transaction,
provided that the Adviser 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 Fund. The Directors will
periodically review the commissions paid by the Fund to consider whether the
commissions paid over representative periods of time appear to be reasonable in
relation to the benefits inuring to the Fund. It is possible that certain of
the supplementary research or other services received will primarily benefit one
or more other investment companies or other accounts for which investment
discretion is exercised. Conversely, the Fund may be the primary beneficiary of
the research or services received as a result of portfolio transactions effected
for such other account or investment company.
Portfolio securities will not be purchased from or sold to (and
savings deposits will not be made in and repurchase and reverse repurchase
agreements will not be entered into with) the Adviser and the Distributor or an
affiliated person of any of them (as such term is defined in the 1940 Act)
acting as principal. In addition, the Fund will not purchase securities during
the existence of any underwriting or selling group relating thereto of which the
Distributor or its Adviser, or an affiliated person of any of them, is a member,
except to the extent permitted by the Securities and Exchange Commission
("SEC").
Investment decisions for the Fund are made independently from those
for other investment companies and accounts advised or managed by its Adviser.
Such other investment companies and accounts may also invest in the same
securities as the Fund. When a purchase or sale of the same security is made at
substantially the same time on behalf of a Fund and another investment company
or account, the transaction will be averaged as to price and available
investments allocated as to amount, in a manner which the Adviser believes to be
equitable to the Fund and such other investment company or account. In some
instances, this investment procedure may adversely affect the price paid or
received by a Fund or the size of the position obtained or sold by the Fund. To
the extent permitted by law, the Adviser may aggregate the securities to be sold
or purchased for a Fund with those to be sold or purchased for other investment
companies or accounts in executing transactions.
SECURITIES LENDING. Although the Fund does not intend to during the
current fiscal year, it may lend its portfolio securities with a value of up to
30% of its total assets 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 "Money Market
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 the 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, the Fund will
maintain such value by the daily marking-to-market of the collateral.
MONEY MARKET INSTRUMENTS. As described in the Prospectus, the Fund
may invest from time to time in "money market 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 Fund intends to stay fully invested and
therefore investments in money market instruments are expected to represent
normally less than 10% of the 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 Fund will invest in money market obligations
of foreign banks or foreign branches of U.S. banks only where the Adviser
determines the instrument to present minimal credit risks, such investments 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 the Fund in the
obligations of foreign banks and foreign branches of U.S. banks will not exceed
25% of the Fund's total assets at the time of purchase. The Fund may also make
interest-bearing savings deposits in commercial and savings banks in amounts not
in excess of 5% of its net assets.
Investments by the Fund 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 Fund may
acquire unrated commercial paper and corporate bonds that are determined by the
Adviser at the time of purchase to be of comparable quality rated instruments
that may be acquired by the Fund as previously described.
The Fund 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 Fund
may demand payment of the principal of the instrument 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 Fund 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 Fund will invest
in variable amount master demand notes only when the Adviser deems the
investment to involve minimal credit risk.
REPURCHASE AGREEMENTS. The Fund 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 Fund to possible loss
because of adverse market action or delay in connection with the disposition of
the underlying securities. The securities held subject to a repurchase
agreement may have stated maturities exceeding one year, provided the repurchase
agreement itself matures in less than one year.
The repurchase price under the repurchase agreements described in the
Prospectus generally equals the price paid by the Fund 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 Fund's 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.
INVESTMENT COMPANIES. The Fund currently intends to limit its
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 the 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 the Fund or by the Company as a
whole.
The Fund may invest from time to time in securities issued by other
investment companies which invest in high-quality, short-term debt securities.
Securities of other investment companies will be acquired by the Fund within the
limits prescribed by the 1940 Act. As a shareholder of another investment
company, the Fund would bear, along with other shareholders, 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 Fund's
shareholders. These expenses would be in addition to the advisory and other
expenses that the Fund bears directly in connection with its own operations.
U.S. GOVERNMENT OBLIGATIONS. Examples of the types of U.S. Government
obligations that may be acquired by the Fund 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.
BANK OBLIGATIONS. For purposes of the Fund's 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 Fund's
investments in the obligations of foreign branches of U.S. banks and of foreign
banks may subject the Fund 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.
OTHER INVESTMENT CONSIDERATIONS
The MicroCap Fund maintains 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 the 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 the 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 the 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 the Fund. The Fund does not attempt to "time" the securities
market.
WHEN-ISSUED PURCHASES, DELAYED DELIVERY AND FORWARD COMMITMENTS. When
the Fund agrees to purchase securities on a when-issued or delayed delivery
basis or enter into a forward commitment to purchase securities, its custodian
will set aside cash or liquid high grade debt securities equal to the amount of
the commitment in a segregated account. Normally, the custodian will set aside
portfolio securities to satisfy a purchase commitment, and in such a case the
Fund may be required subsequently to place additional assets in the segregated
account in order to ensure that the value of the account remains equal to the
amount of the Fund's commitments. It may be expected that the market value of
the Fund's net assets will fluctuate to a greater degree when it sets aside
portfolio securities to cover such purchase commitments than when it sets aside
cash. Because the Fund will set aside cash or liquid assets to satisfy its
purchase commitments in the manner described, the Fund's liquidity and ability
to manage its portfolio might be affected in the event its commitments ever
exceeded 25% of the value of its assets. In the case of a forward commitment to
sell portfolio securities, the Fund's custodian will hold the portfolio
securities themselves in a segregated account while the commitment is
outstanding. When-issued and forward commitment transactions involve the risk
that the price obtained in a transaction (and therefore the value of a security)
may be less favorable then the price (and therefore the value of a security)
available in the market when the securities delivery takes place.
The Fund will make commitments to purchase securities on a when-issued
basis or to purchase or sell securities on a forward commitment basis only with
the intention of completing the transaction and actually purchasing or selling
the securities. If deemed advisable as a matter of investment strategy, however,
the Fund may dispose of or renegotiate a commitment after it is entered into,
and may sell securities it has committed to purchase before those securities are
delivered to the Fund on the settlement date. In these cases the Fund may
realize a capital gain or loss.
When the Fund engages in when-issued, delayed delivery and forward
commitment transactions, it relies on the other party to consummate the trade.
Failure of such party to do so may result in the Fund incurring a loss or
missing an opportunity to obtain a price considered to be advantageous.
The market value of the securities underlying a when-issued purchase
or a forward commitment to purchase securities, and any subsequent fluctuations
in their market value, are taken into account when determining the net asset
value of the Fund starting on the day the Fund agrees to purchase the
securities. The Fund does not earn interest on the securities it has committed
to purchase until they are paid for and delivered on the settlement date. When
the Fund makes a forward commitment to sell securities it owns, the proceeds to
be received upon settlement are included in the Fund's assets. Fluctuations in
the market value of the underlying securities are not reflected in the Fund's
net asset value as long as the commitment remains in effect.
OTHER PORTFOLIO INFORMATION
OPTIONS TRADING. As stated in the Fund's Prospectus, the Fund may
purchase put and call options. Option purchases by the Fund will not exceed 5%
of its net assets. Such options may relate to particular securities or to
various indices. This is a highly specialized activity which entails greater
than ordinary investment risks. Regardless of how much the market price of the
underlying security or index increases or decreases, the option buyer's risk is
limited to the amount of the original investment for the purchase of the option.
However, options may be more volatile than the underlying securities or indices,
and therefore, on a percentage basis, an investment in options may be subject to
greater fluctuation than an investment in the underlying securities. In
contrast to an option on a particular security, an option on an index provides
the holder with the right to make or receive a cash settlement upon exercise of
the option. The amount of this settlement will be equal to the difference
between the closing price of the index at the time of exercise and the exercise
price of the option expressed in dollars, times a specified multiple.
A call option gives the purchaser of the option the right to buy, and
a writer the obligation to sell, the underlying security or index at the stated
exercise price at any time prior to the expiration of the option, regardless of
the market price of the security. The premium paid to the writer is in
consideration for undertaking the obligations under the option contract. A put
option gives the purchaser the right to sell the underlying security or index at
the stated exercise price at any time prior to the expiration date of the
option, regardless of the market price of the security or index. Put and call
options purchased by the Fund will be valued at the last sale price or, in the
absence of such a price, at the mean between bid and asked prices.
The Fund may also sell covered call options listed on a national
securities exchange. Such options may relate to particular securities or to
various indices. A call option on a security is covered if the Fund owns the
security underlying the call or has an absolute and immediate right to acquire
that security without additional cash consideration (or, if additional cash
consideration is required, cash or cash equivalents in such amount as required
are held in a segregated account by its custodian) upon conversion or exchange
of other securities held by it. A call option on an index is covered if the
Fund maintains with its custodian cash or cash equivalents equal to the contract
value. A call option is also covered if the Fund holds a call on the same
security or index as the call written where the exercise price of the call held
is (i) equal to or less than the exercise price of the call written, or (ii)
greater than the exercise price of the call written provided the difference is
maintained by the Fund in cash or cash equivalents in a segregated account with
its custodian.
The Fund's obligation under a covered call option written by it may be
terminated prior to the expiration date of the option by the Fund's executing a
closing purchase transaction, which is effected by purchasing on an exchange an
option of the same series (i.e., same underlying security or index, exercise
price and expiration date) as the option previously written. Such a purchase
does not result in the ownership of an option. A closing purchase transaction
will ordinarily be effected to realize a profit on an outstanding option, to
prevent an underlying security from being called, to permit the sale of the
underlying security or to permit the writing of a new option containing
different terms. The cost of such a liquidation purchase plus transactions
costs may be greater than the premium received upon the original option, in
which event the Fund will have incurred a loss in the transaction. An option
position may be closed out only on an exchange which provides a secondary market
for an option of the same series. There is no assurance that a liquid secondary
market on an exchange will exist for any particular option. A covered call
option writer, unable to effect a closing purchase transaction, will not be able
to sell an underlying security until the option expires or the underlying
security is delivered upon exercise with the result that the writer in such
circumstances will be subject to the risk of market decline during such period.
The Fund will write an option on a particular security only if the Adviser
believes that a liquid secondary market will exist on an exchange for options of
the same series which will permit the Fund to make a closing purchase
transaction in order to close out its position.
When the Fund writes a covered call option, an amount equal to the net
premium (the premium less the commission) received by the Fund is included in
the liability section of the Fund's statement of assets and liabilities. The
amount of the liability will be subsequently marked-to-market to reflect the
current value of the option written. The current value of the traded option is
the last sale price or, in the absence of a sale, the average of the closing bid
and asked prices. If an option expires on the stipulated expiration date or if
the Fund enters into a closing purchase transaction, it will realize a gain (or
loss if the cost of a closing purchase transaction exceeds the net premium
received when the option is sold) and the liability related to such option will
be eliminated. Any gain on a covered call option on a security may be offset by
a decline in the market price of the underlying security during the option
period. If a covered call option on a security is exercised, the Fund may
deliver the underlying security held by it or purchase the underlying security
in the open market. In either event, the proceeds of the sale will be increased
by the net premium originally received, and the Fund will realize a gain or
loss. Premiums from expired options written by the Fund and net gains from
closing purchase transactions are treated as short-term capital gains for
federal income tax purposes, and losses on closing purchase transactions are
short-term capital losses.
As noted previously, there are several risks associated with
transactions in options on securities and indices. For example, there are
significant differences between the securities and options markets that could
result in an imperfect correlation between these markets, causing a given
transaction not to achieve its objectives. A decision as to whether, when and
how to use options involves the exercise of skill and judgment, and a
transaction may be unsuccessful to some degree because of market behavior or
unexpected events.
FUTURES CONTRACTS AND RELATED OPTIONS. The Adviser may determine that
it would be in the interest of the Fund to purchase or sell futures contracts,
or options thereon, as a hedge against changes resulting from market conditions
in the value of the securities held by the Fund, or of securities which it
intends to purchase. For example, the Fund may enter into transactions involving
an index futures contract, which is a bilateral agreement pursuant to which the
parties agree to take or make delivery of an amount of cash equal to a specified
dollar amount times the difference between the index value (which assigns
relative values to the securities included in the index) at the close of the
last trading day of the contract and the price at which the futures contract is
originally struck. No physical delivery of the underlying securities in the
index is made.
The Fund intends to limit its transactions in futures contracts and
related options so that not more than 5% of its net assets are at risk . In
connection with a futures transaction, unless the transaction is covered in
accordance with SEC positions, the Fund will maintain a segregated account with
its custodian or sub-custodian consisting of cash or liquid high grade debt
securities equal to the entire amount at risk (less margin deposits) on a
continuous basis. For a more detailed description of futures contracts and
related options, including a discussion of the limitations imposed by federal
tax law, see Appendix A to the Statement of Additional Information.
AMERICAN DEPOSITORY RECEIPTS ("ADRs"). The Fund may invest in
sponsored 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. 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.
CONVERTIBLE SECURITIES. The Fund 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 securities 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.
As described in its Prospectus, the Fund may invest a portion of its
assets in convertible securities that are rated below investment grade.
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.
SHORT SALES. If the Fund engages in short sales, it need not
segregate Fund assets if it "covers" the position. A position is "covered"
if, at the time the Fund sells the security or thereafter, the Fund also owns
that security or holds a call option on that security with a strike price no
higher than the price at which the security was sold. For federal tax purposes,
a short sale is considered consummated upon delivery of securities to close the
short sale. The gains or losses realized by the Fund from short sale
transactions normally will be characterized as capital gains or losses although
short sales that are part of certain hedging transactions or straddles may
receive different tax treatment. Special rules generally operate to prevent the
use of short sales to convert short-term capital gain into long-term capital
gain and long-term capital loss into short-term capital loss. As a result,
these transactions may increase the amount of short-term capital gain realized
by the Fund which is taxed as ordinary income when distributed to its
shareholders and may reduce the Fund's short-term capital loss available to
reduce its ordinary income. The impact of the tax consequences of short sale
transactions engaged in by the Fund on distributions to shareholders will be
closely monitored.
INVESTMENT LIMITATIONS
The Fund is subject to the investment limitations enumerated in this
subsection which may be changed only by a vote of the holders of a majority of
the Fund's outstanding shares (as defined under "Miscellaneous" below).
The Fund may not:
1. Make loans, except that the Fund may purchase and hold debt
instruments and enter into repurchase agreements in accordance with its
investment objective and policies and may lend portfolio securities in an amount
not exceeding 30% of its total assets.
2. Purchase securities of companies for the purpose of exercising
control.
3. Purchase or sell real estate except that the Fund may purchase
securities of issuers which deal in real estate and may purchase securities
which are secured by interests in real estate.
4. 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.
5. Act as an underwriter of securities within the meaning of the
Securities Act of 1933 except insofar as the 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. Write or sell put options, call options, straddles, spreads, or any
combination thereof, except for transactions in options on securities, indices
of securities, futures contracts and options on futures contracts.
7. Purchase securities on margin, make short sales of securities or
maintain a short position in an amount exceeding one-third of the 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.
8. Purchase or sell commodity contracts, or invest in oil, gas or mineral
exploration or development programs, except that the 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.
In addition, as summarized in the Prospectus, the Fund may not:
9. Purchase securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if,
immediately after such purchase, more than 5% of the value of the Fund's total
assets would be invested in the securities of such issuer, or more than 10% of
the issuer's outstanding voting securities would be owned by the Fund or Portico
Funds, Inc. ("the Company"), except that up to 25% of the value of the Fund's
total assets may be invested without regard to these limitations. For purposes
of this limitation, a security is considered to be issued by the entity (or
entities) whose assets and revenues back the security. A guarantee of a
security shall not be deemed to be a security issued by the guarantor when the
value of all securities issued and guaranteed by the guarantor, and owned by the
Fund, does not exceed 10% of the value of the Fund's total assets.
10. Purchase any securities which would cause 25% or more of the value of
the Fund's total assets at the time of purchase to be invested in the securities
of one or more issuers conducting their principal business activities in the
same industry; provided that, (a) there is no limitation with respect to
instruments issued or guaranteed by the United States, its agencies or
instrumentalities and repurchase agreements secured by such instruments; (b)
wholly owned finance companies will be considered to be in the industries of
their parents if their activities are primarily related to financing the
activities of the parents; and (c) utilities will be divided according to their
services, for example, gas, gas transmission, electric and gas, electric and
telephone will each be considered a separate industry.
11. Borrow money or issue senior securities, except that the Fund may
borrow from banks and enter into reverse repurchase agreements for temporary
purposes 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 the Fund's total assets
at the time of such borrowing. In addition, as a matter of fundamental policy,
the Fund may not enter into reverse repurchase agreements exceeding in the
aggregate one-third of its total assets. Securities held in escrow or separate
accounts in connection with the 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 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 the Fund's portfolio securities will not constitute a violation of such
limitation. If due to market fluctuations or other reasons, the total assets of
the Fund fall below 300% of its borrowings, the Fund will reduce its borrowings
in compliance with the 1940 Act. As a matter of fundamental policy, the Fund
will not purchase securities while its borrowings (including reverse repurchase
agreements) in excess of 5% of its total assets are outstanding.
In order to permit the sale of the Fund's shares in certain states,
the Fund may make commitments more restrictive than the investment policies and
limitations described above. Should the Fund determine that any such commitment
is no longer in the best interests of the Fund, it will revoke the commitment by
terminating sales of its shares in the state involved. The Fund will operate in
compliance with the following further investment limitations (which are imposed
pursuant to the regulations of a state) to the extent applicable to the Fund:
(1) the Fund will not purchase or sell real estate limited partnership
interests, except that the Fund may purchase securities of issuers which deal in
real estate and may purchase securities which are secured by interests in real
estate; (2) the Fund will not invest in oil, gas or mineral exploration or
development leases, except that the 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; (3) the Fund will limit investments in warrants to no more than
5% of its net assets (and no more than 2% of net assets will be invested in
warrants whose underlying securities are not traded on principal domestic
exchanges) and (4) the Fund will not invest more than 5% of the portfolio's
total assets in the securities of issuers which, together with any predecessors,
have a record of less than three years continuous operation. The foregoing
limitations may be changed with respect to the Fund without the approval of the
shareholders of the Fund; provided, however, in such event the Fund will
terminate sales of its shares in that state, if any.
NET ASSET VALUE
The net asset value per share of the Fund is calculated separately for
the Institutional Series and Retail Series by adding the value of all portfolio
securities and other assets belonging to the Fund that are allocable to a
particular series, subtracting the liabilities charged to that series, and
dividing the result by the number of outstanding shares of that series. Assets
belonging to the Fund consist of the consideration received upon the issuance of
shares of the 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 the Fund are borne by each share of the Fund, except for certain
payments under the Fund's Distribution and Service Plan and Shareholder
Servicing Plan applicable only to Retail Shares. 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 the Fund are conclusive.
The value of the Fund's portfolio securities that are traded on stock
exchanges outside the United States are based upon the price on the exchange as
of the close of business of the exchange immediately preceding the time of
valuation, except when an occurrence subsequent to the time a value was so
established is likely to have changed such value. Securities trading in over-
the-counter markets in European and Pacific Basin countries is normally
completed well before 3:00 P.M. Central Time. In addition, European and Pacific
Basin securities trading may not take place on all business days. Furthermore,
trading takes place in Japanese markets on certain Saturdays and in various
foreign markets on days which are not business days in New York and on which net
asset value of the Fund is not calculated. The calculation of the net asset
value of the Fund may not take place contemporaneously with the determination of
the prices of portfolio securities used in such calculation. Events affecting
the values of portfolio securities that occur between the time their prices are
determined and 3:00 P.M. Central Time, and at other times, may not be reflected
in the calculation of net asset value of the Fund.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
COMPUTATION OF OFFERING PRICE OF THE FUND. An illustration of the
computation of the initial offering price per share of the Retail Shares of the
MicroCap Fund based on the value of its net assets and number of outstanding
securities at December 31, 1995, follows:
Net Assets $53,393,273
Numbers of Shares Outstanding 4,736,646
Net Asset Value Per Share $11.27
Sales Charge, 4.00% of Offering Price $0.47
(4.09% of net asset value per share) -----
Public Offering Price $11.74
Retail Shares are sold with a front-end sales charge. A front-end
sales charge will not be imposed on reinvested dividends or distributions.
Likewise, there is no front-end sales charge (provided the status of the
investment is explained at the time of investment) on purchases of Retail Shares
if (a) you were a Portico shareholder as of January 1, 1995 and have
continuously maintained a shareholder account with the Company; (b) you make any
purchase within 60 days of a redemption of Portico Institutional Shares or from
accounts for which Firstar Corporation or its affiliates serves in a trust,
agency or custodial capacity; (c) you are an employee, director or retiree of
Firstar Corporation or its affiliates or of Portico; (d) you maintain a personal
trust account with an affiliate of Firstar Corporation at the time of purchase;
(e) you make any purchase within 60 days of a redemption of a mutual fund on
which you paid an initial sales charge or contingent deferred sales charge; (f)
you are a registered investment adviser that has entered into an agreement with
the Distributor to purchase shares for your own account or for discretionary
client accounts; or (g) you are a spouse, parent or child of an individual who
falls within the preceding categories (a), (c), or (d) above. These exemptions
to the imposition of a front-end sales charge are due to the nature of the
investors and/or the reduced sales efforts that will be needed in obtaining such
investments.
Shareholder Organizations or Institutions may be paid by the Fund for
advertising, distribution or shareholder services. Depending on the terms of the
particular account, Shareholder Organizations or Institutions also may charge
their customers fees for automatic investment, redemption and other services
provided. Such fees may include, for example, account maintenance fees,
compensating balance requirements or fees based upon account transactions,
assets or income. Shareholder Organizations or Institutions are responsible for
providing information concerning these services and any charges to any customer
who must authorize the purchase of Fund shares prior to such purchase.
Shares of the Fund for which a redemption order is received in proper
form by the transfer agent or Elan before the close of the Exchange (currently
3:00 p.m. Central Time) on a business day will be redeemed as of the
determination of net asset value on that day. Orders for a redemption received
after the close of the Exchange on a business day 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 a shareholder 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 Fund 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 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. (The 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 Fund to redeem an
account involuntarily, upon sixty days' notice, if redemptions cause the
account's net asset value to remain at $1,000 or less. The Fund intends to
exercise this right only when the net asset value of an account remains at $50
or less because of redemptions or when an investor discontinues participation in
the Periodic Investment Plan and the net asset value of the account is $50 or
less.
In addition to the situations described in the Fund's Prospectus under
"Redemption of Shares," the Fund may redeem shares involuntarily to reimburse
the Fund for any loss sustained by reason of the failure of a shareholder to
make full payment for shares purchased by the shareholder or to collect any
charge relating to a transaction effected for the benefit of a shareholder which
is applicable to Fund shares as provided in the Prospectus from time to time.
EXCHANGE PRIVILEGE. By use of the exchange privilege, shareholders
authorize the transfer agent to act on telephonic or written exchange
instructions from any person representing himself to be the shareholder or in
some cases, the shareholder's registered representative or account
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 shareholders.
Exchange transactions described in paragraphs A, B, and C below will be made on
the basis of the relative net asset values per share of the Funds involved in
the transaction.
A. Retail Shares of any Fund purchased with a sales charge may be exchanged
without a sales charge for Retail Shares of any other Fund offered by the
Company with a sales charge.
B. Shares of any Fund offered by the Company acquired by a previous
exchange transaction involving Retail Shares on which a sales charge has
directly or indirectly been paid (e.g. shares purchased with a sales charge or
issued in connection with an exchange involving shares that had been purchased
with a sales charge) as well as additional Shares acquired through reinvestment
of dividends or distributions on such Shares may be exchanged without a sales
charge for Retail Shares of any other Fund offered by the Company with a sales
charge. To accomplish an exchange under the provisions of this paragraph,
investors must notify the transfer agent of their prior ownership of Retail
Shares and their account number.
C. Shares of any Fund offered by the Company may be exchanged without a
sales charge for Shares of any other Fund of the Company that is offered without
a sales charge.
Except as stated above, a sales charge will be imposed when Shares of a
Fund that were purchased or otherwise acquired without a sales charge are
redeemed and the proceeds are used to purchase Retail Shares of another Fund of
the Company with a sales charge.
Shares in a Fund from which the shareholder 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 shareholder is investing will be
purchased at the net asset value per share next determined (plus any applicable
sales charge) after acceptance of the request by the Company in accordance with
the policies for accepting investments. 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 shareholder 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. Investors exercising the exchange
privilege should request and review the Prospectus for the shares to be acquired
in the exchange prior to making an exchange.
ADDITIONAL INFORMATION REGARDING SHAREHOLDER SERVICES FOR RETAIL SHARES
The Retail Shares of the Fund offer a Periodic Investment Plan whereby
a shareholder may automatically make purchases of shares of the Fund on a
regular, monthly basis ($100 minimum per transaction). Under the Periodic
Investment Plan, a shareholder's designated bank or other financial institution
debits a preauthorized amount on the shareholder's account each month and
applies the amount to the purchase of Retail Shares. The Periodic Investment
Plan must be implemented with a financial institution that is a member of the
Automated Clearing House. No service fee is currently charged by the Fund for
participation in the Periodic Investment Plan. A $15 fee will be imposed by the
transfer agent if sufficient funds are not available in the shareholder's
account or the shareholder's account has been closed at the time of the
automatic transaction.
The Periodic Investment Plan permits an investor to use "Dollar Cost
Averaging" in making investments. Instead of trying to time market
performance, a fixed dollar amount is invested in Retail Shares at predetermined
intervals. This may help investors to reduce their average cost per share
because the agreed upon fixed investment amount allows more Retail Shares to be
purchased during periods of lower Retail Share prices and fewer Retail Shares to
be purchased during periods of higher Retail Share prices. In order to be
effective, Dollar Cost Averaging should usually be followed on a sustained,
consistent basis. Investors should be aware, however, that Retail Shares bought
using Dollar Cost Averaging are purchased without regard to their price on the
day of investment or to market trends. Dollar Cost Averaging does not assure a
profit and does not protect against losses in a declining market. In addition,
while investors may find Dollar Cost Averaging to be beneficial, it will not
prevent a loss if an investor ultimately redeems his Retail Shares at a price
which is lower than their purchase price. An investor may want to consider his
financial ability to continue purchases through periods of low price levels.
The Retail Shares of the Fund permits shareholders to effect
ConvertiFundR transactions, an automated method by which a Retail shareholder
may invest proceeds from one account to another account of the Retail Shares of
the Portico family of funds. Such proceeds include dividend distributions,
capital gain distributions and systematic withdrawals. ConvertiFundR
transactions may be used to invest funds from a regular account to another
regular account, from a qualified plan account to another qualified plan
account, or from a qualified plan account to a regular account.
The Retail Shares of the Fund offers shareholders a Systematic
Withdrawal Plan, which allows a shareholder who owns shares of a Fund worth at
least $15,000 at current net asset value at the time the shareholder initiates
the Systematic Withdrawal Plan to designate that a fixed sum ($100 minimum per
transaction) be distributed to the shareholder or as otherwise directed at
regular intervals. Purchase of additional shares concurrently with withdrawals
will be disadvantageous because of the sales charge involved in the additional
purchases.
SPECIAL PROCEDURES FOR IN-KIND PAYMENTS
Payment for shares of the 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 its Prospectus. For further information about this form of
payment, contact Investor Services at 414-287-3710. In connection with an
in-kind securities payment, the Fund will require, among other things, 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. The
Fund will consider accepting securities as consideration for shares only if such
securities meet the investment objective and policies of 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.
DESCRIPTION OF SHARES
The Company's Articles of Incorporation authorize the Board of
Directors to issue up to 150,000,000,000 full and fractional shares of common
stock, $.0001 par value per share, divided into thirty classes (each, a
"Class" or ""Fund"). Each Class is divided into two series designated as
Institutional Series and Series A/Retail Series (each, a "eries") and, in the
case of the Fund, consists of the number of shares set forth in the table below:
Class-Series of Fund in which Stock Number of Authorized
Common Stock Represents Interest Shares in Each Series
- ------------ ------------------- ---------------------
16-Institutional MicroCap 50 Million
16-A/Retail 50 Million
The Board of Directors has also authorized the issuance of Classes 1
through 15 and Class 17 common stock representing interests in sixteen other
separate investment portfolios which are described in separate Statements of
Additional Information. The remaining authorized shares are classified into
fourteen additional classes representing interests in other potential future
investment portfolios of the Company. The Directors may similarly classify or
reclassify any particular class of shares into one or more additional series.
In the event of a liquidation or dissolution of the Company or the
Fund, shareholders of the Fund would be entitled to receive the assets available
for distribution belonging to the 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 Fund's Prospectus, shareholders of the Fund are entitled to participate
equally in the net distributable assets of the Fund on liquidation, based on the
number of shares of the Fund that are held by each shareholder.
Shareholders of the Fund, as well as those of any other investment
portfolio offered by the Company, will vote together in the aggregate and not
separately on a portfolio-by-portfolio basis, except as otherwise required by
law or when the Board of Directors determines that the matter to be voted upon
affects only the interests of the shareholders of a particular class or a
particular series within a class. Rule 18f-2 under the 1940 Act provides that
any matter required to be submitted to the holders of the outstanding voting
securities of an investment company such as the Company shall not be deemed to
have been effectively acted upon unless approved by the shareholders of each
portfolio affected by the matter. A portfolio is affected by a matter unless it
is clear that the interests of each portfolio in the matter are substantially
identical or that the matter does not affect any interest of the portfolio.
Under the Rule, the approval of an investment advisory agreement or any change
in a fundamental investment policy would be effectively acted upon with respect
to a portfolio only if approved by a majority of the outstanding shares of such
portfolio. However, the Rule also provides that the ratification of the
appointment of independent accountants, the approval of principal underwriting
contracts and the election of Directors may be effectively acted upon by
shareholders of the Company voting together in the aggregate without regard to
particular portfolios. Similarly, on any matter submitted to the vote of
shareholders which only pertains to agreements, liabilities or expenses
applicable to one series of the Fund (such as the Distribution and Service Plan
applicable to Retail Shares) but not the other series of the Fund, only the
affected series will be entitled to vote.
When issued for payment as described in the Fund's Prospectus and this
Statement of Additional Information, shares of the Fund will be fully paid and
non-assessable by the Company, except as provided in Section 180.0622(2)(b) of
the Wisconsin Business Corporation Law, as amended, which in general provides
for personal liability on the part of a corporation's shareholders for unpaid
wages of employees. The Company does not intend to have any employees and, to
that extent, the foregoing statute will be inapplicable to holders of Fund
shares and will not have a material effect on the Company.
The Articles of Incorporation authorize the Board of Directors,
without shareholder approval (unless otherwise required by applicable law), to:
(a) sell and convey the assets belonging to a series of shares to another
management investment company for consideration which may include securities
issued by the purchaser and, in connection therewith, to cause all outstanding
shares of such series to be redeemed at a price which is equal to their net
asset value and which may be paid in cash or by distribution of the securities
or other consideration received from the sale and conveyance; (b) sell and
convert the assets belonging to a series of shares into money and, in connection
therewith, to cause all outstanding shares of such series to be redeemed at
their net asset value; or (c) combine the assets belonging to a series of shares
with the assets belonging to one or more other series of shares if the Board of
Directors reasonably determines that such combination will not have a material
adverse effect on the shareholders of any series participating in such
combination and, in connection therewith, to cause all outstanding shares of any
such series to be redeemed or converted into shares of another series of shares
at their net asset value.
ADDITIONAL INFORMATION CONCERNING TAXES
The following is only a summary of certain additional tax
considerations generally affecting the Fund and its shareholders that are not
described in the Fund's Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of the Fund or its shareholders, 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). The 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.
The Fund is treated as a separate tax entity under the Code. Although
the Fund expects 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 Fund 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 Fund and its
shareholders under such laws may differ from their treatment under federal
income tax laws.
If for any taxable year the 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 shareholders). In such event,
dividend distributions would be taxable as ordinary income to shareholders to
the extent of the Fund's current and accumulated earnings and profits and would
be eligible for the dividends received deduction in the case of corporate
shareholders.
The 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 shareholders within 60 days after the close of the
Fund's taxable year.
Income received by the Fund from sources within foreign countries may
be subject to withholding and other taxes imposed by such countries. Tax
conventions between certain countries and the U.S. may reduce or eliminate such
taxes.
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.
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:
Principal
Position with Occupations During Past 5
Name, Address & Age the Company Years and Other Affiliations
- ------------------- ------------ ----------------------------
James M. Wade<F13> Chairman, Vice President and Chief
2802 Wind Bluff Circle President and Financial Officer, Johnson
Wilmington, NC 28409 Treasurer Controls, Inc. (a controls
Age: 52 manufacturing company)
January 1987 - May 1991.
Glen R. Bomberger Director Executive Vice President, Chief
One Park Plaza Financial Officer
11270 West Park Place and Director, A.O. Smith
Milwaukee, WI 53224-3690 Corporation (a diversified
Age: 58 manufacturing company) since
January 1987. Director of
companies affiliated with A.O.
Smith Corporation; Chief
Financial Officer, Director and
Vice President, Smith Investment
Company; Officer and Director of
companies affiliated with Smith
Investment Company
Jerry G. Remmel Director Vice President, Treasurer and
231 W. Michigan Street Chief Financial Officer of
Milwaukee, WI 53203 Wisconsin Energy Corporation
Age 64 since 1994; Treasurer of
Wisconsin Electric Power
Company since 1973;
Director Wisconsin
Electric Power Company since
1989; Senior Vice President,
Wisconsin Electric Power Company
1988 - 1994; Chief Financial
Officer, Wisconsin Electric
Power Company since 1983; Vice
President and Treasurer,
Wisconsin Electric Power
Company, 1983 - 1989.
Richard K. Riederer Director President and Chief Operating
400 Three Springs Drive Officer of Weirton Steel
Weirton, WV 26062-4989 since 1995; Executive Vice
Age: 51 President and Chief Financial
Officer, Weirton Steel, January
1994-1995; Vice President of
Finance and Chief Financial
Officer, Weirton Steel January
1989-1994; Member - Board of
Directors of American Iron and
Steel Institute since 1995;
Member - Board of Directors,
National Association of
Manufacturers since 1995.
Charles R. Roy<F13> Director Vice President - Finance, Chief
14245 Heatherwood Court Financial Officer and
Elm Grove, WI 53122 Secretary, Rexnord Corporation
Age: 65 (an equipment manufacturing
company), 1988 - 1992; Vice
President - Finance and
Administration, Rexnord Inc.,
1982 - 1988; Officer and
Director of several Rexnord
subsidiaries until 1992.
Mary Ellen Stanek Vice President President and Chief Operating
777 East Wisconsin Avenue Officer, FIRMCO since 1994,
Suite 800 Director since 1992 and Director
of Milwaukee, WI 53202 Fixed Income Securities since
Age: 39 1990.
W. Bruce McConnel, III Secretary Partner of the law firm of
Philadelphia National Drinker Biddle & Reath.
Bank Building
1345 Chestnut Street
Philadelphia, PA 19107
Age: 52
<F13>Messrs. Wade and Roy are considered by the Company to be "interested
directors" of the Company as defined in the 1940 Act.
The following chart provides certain information about the Director fees
for the Company year ended October 31, 1995 of the Company's Directors.
NAME OF AGGREGATE PENSION OR ESTIMATED TOTAL
PERSON/POSITION COMPENSATION RETIREMENT ANNUAL COMPENSATION
- --------------- FROM THE BENEFITS BENEFITS UPON FROM
COMPANY ACCRUED AS PART RETIREMENT COMPANY
------- OF FUND ---------- AND FUND
EXPENSES COMPLEX<F14> PAID
-------- TO DIRECTORS
-------------
James M. Wade $15,250 $0 $0 $15,250
President,
Treasurer and
Chairman of the
Board
Glen R. Bomberger $12,500<F15> $0 $0 $12,500
Director
Jerry G. Remmel $12,500 $0 $0 $12,500
Director
Richard K. Riederer $12,500 $0 $0 $12,500
Director
Charles R. Roy $12,500 $0 $0 $12,500
Director
<F14>The "Fund Complex" includes only the Company.
<F15>Includes $12,500 which Mr. Bomberger elected to defer under the Company's
deferred compensation plan.
Each Director receives an annual fee of $7,000, a $1,000 per meeting
attendance fee and reimbursement of expenses incurred as a Director. The
Chairman of the Board is entitled to receive an additional $3,000 per annum for
services in such capacity. For the Company's fiscal year ended October 31,
1995, the Directors and Officers received aggregate fees of $65,250. Ms. Stanek
receives no fees from the Company for her services as Vice President, although
FIRMCO, of which she is President, receives fees from the Company for advisory
services. Drinker Biddle & Reath, of which Mr. McConnel is a partner, receives
legal fees as counsel to the Company. 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 Fund.
ADVISORY SERVICES
FIRMCO is the Investment Adviser to the Fund. In its Investment
Advisory Agreement, the Adviser has agreed to pay all expenses incurred by it in
connection with its advisory activities, other than the cost of securities and
other investments, including brokerage commissions and other transaction
charges, if any, purchased or sold for the Funds.
The Adviser is entitled to 4/10ths of the gross income earned by the
Fund on each loan of its securities, excluding capital gains or losses, if any.
Pursuant to current policy of the Securities and Exchange Commission, the
Adviser does not intend to receive separate compensation for securities lending
activity. The Adviser has also agreed that if, in any fiscal year, the expenses
borne by the Fund exceed the applicable expense limitations imposed by the
securities regulations of any state in which shares of the Fund are registered
or qualified for sale to the public, it will reimburse the Fund for any excess
to the extent required by such regulations. To the knowledge of the Fund, of
the applicable expense limitations in effect as of the date of this Statement of
Additional Information, none is more restrictive than 2-1/2% of the first $30
million of a Fund's average annual net assets, 2% of the next $70 million of
average annual net assets, and 1-1/2% of the remaining average annual net
assets. In addition, the Adviser may also voluntarily waive additional advisory
fees otherwise payable by the Fund. Certain expenses including interest, taxes,
brokerage, and distribution expenses are not subject to this expense cap.
Under its Investment Advisory Agreement, the Adviser is not liable for
any error of judgment or mistake of law or for any loss suffered by the Fund in
connection with the performance of such Agreement, except a loss resulting from
a breach of fiduciary duty with respect to the receipt of compensation for
services or a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the Adviser in the performance of its duties or from
its reckless disregard of its duties and obligations under the Agreement.
BANKING LAWS AND REGULATIONS. Banking laws and regulations, including the
Glass-Steagall Act as presently interpreted by the Board of Governors of the
Federal Reserve System, presently (a) prohibit a bank holding company registered
under the Federal Bank Holding Company Act of 1956 or any bank or non-bank
affiliate thereof from sponsoring, organizing, controlling or distributing the
shares of a registered, open-end investment company continuously engaged in the
issuance of its shares, and prohibit banks generally from underwriting
securities, but (b) do not prohibit such a bank holding company or affiliate or
banks generally from acting as investment adviser, transfer agent or custodian
to such an investment company or from purchasing shares of such a company as
agent and upon order of a customer. In 1971, the United States Supreme Court
held in INVESTMENT COMPANY INSTITUTE VS. CAMP that the Glass-Steagall Act
prohibits a national bank from operating a fund for the collective investment of
managing agency accounts. Subsequently, the Board of Governors of the Federal
Reserve System (the "Board") issued a regulation and interpretation to the
effect that the Glass-Steagall Act and such decision forbid a bank holding
company registered under the Federal Bank Holding Company Act of 1956 (the
"Holding Company Act"), or any non-bank affiliate thereof from sponsoring,
organizing or controlling a registered, open-end investment company continuously
engaged in the issuance of its shares, but did not prohibit such a holding
company or affiliate from acting as investment adviser, transfer agent and
custodian to such an investment company. In 1981, the United States Supreme
Court held in BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM V. INVESTMENT
COMPANY INSTITUTE that the Board did not exceed its authority under the Holding
Company Act when it adopted its regulation and interpretation authorizing bank
holding companies and their non-bank affiliates to act as investment advisers to
registered closed-end investment companies. FIRMCO and Firstar Trust Company
are subject to such banking laws and regulations.
FIRMCO and Firstar Trust Company believe that they may perform the
services for the Fund contemplated by their respective agreements with the
Company without violation of the Glass-Steagall Act or other applicable banking
laws or regulations. These companies further believe that, if the question were
properly presented, a court should hold that these companies may each perform
such activities without violation of the Glass-Steagall Act or other applicable
banking laws and or regulations. It should be noted, however, there have been
no cases deciding whether banks and their affiliates may perform services
comparable to those performed by these companies, and future changes in either
federal or state statutes and regulations relating to permissible activities of
banks or trust companies and their subsidiaries or affiliates, as well as
further judicial or administrative decisions or interpretations of present and
future statutes and regulations, could prevent such companies from continuing to
perform such services for the Fund. If the companies were prohibited from
continuing to perform advisory, accounting, shareholder servicing and custody
services for the Fund, it is expected that the Board of Directors would
recommend that the Fund enter into new agreements or would consider the possible
termination of the Fund. Any new advisory or sub-advisory agreement would be
subject to shareholder approval.
Shares of the Fund are not bank deposits, are neither endorsed by,
insured by, or guaranteed by, obligations of, nor otherwise supported by the
FDIC, the Federal Reserve Board, Firstar Trust Company or FIRMCO, their
affiliates or any other bank, or any other governmental agency. An investment
in the Fund involves risks including possible loss of principal.
ADMINISTRATION AND DISTRIBUTION SERVICES
Firstar Trust Company ("Firstar Trust") and B. C. Ziegler and
Company ("Ziegler") serve as the Co-Administrators. Under the Co-
Administration Agreement, the following administrative services will be provided
jointly by the Co-Administrators: assist in maintaining office facilities;
furnish clerical services and stationery and office supplies; monitor Portico
Funds' arrangements with respect to services provided by Shareholder
Organizations and Institutions; and generally assist in the Funds' operations.
The following administrative services will be provided by Ziegler: review and
comment upon the registration statement and amendments thereto prepared by
Firstar Trust or counsel to Portico Funds, as requested by Firstar Trust; review
and comment upon sales literature and advertising relating to the Portico Funds,
as requested by Firstar Trust; assist in the administration of the marketing
budget; periodically review Blue Sky registration and sales reports for the
Funds; attend meetings of the Board of Directors, as requested by the Board of
Directors of the Funds; and such other services as may be requested in writing
and expressly agreed to by Ziegler. The following administrative services will
be provided by Firstar Trust: compile data for and prepare with respect to the
Fund timely Notices to the Securities and Exchange Commission required pursuant
to Rule 24f-2 under the 1940 Act and Semi-Annual Reports on Form N-SAR;
coordinate execution and filing by Portico Funds' of all federal and state tax
returns and required tax filings other than those required to be made by Portico
Funds' custodian and transfer agent; prepare compliance filings and Blue Sky
registrations pursuant to state securities laws with the advice of Portico
Funds' counsel; assist to the extent requested by Portico Funds with Portico
Funds' preparation of Annual and Semi-Annual Reports to Fund shareholders and
Registration Statements for the Funds; monitor the Fund's expense accruals and
cause all appropriate expenses to be paid on proper authorization from the Fund;
monitor the Fund's status as a regulated investment company under Subchapter M
of the Code; maintain the Fund's fidelity bond as required by the 1940 Act; and
monitor compliance with the policies and limitations of the Fund as set forth in
the Prospectus, Statement of Additional Information, By-laws and Articles of
Incorporation.
Each of the Co-Administrators have agreed to pay all expenses incurred by it in
connection with its administrative activities. Under the Co-Administration
Agreement, the Co-Administrators are not liable for any error of judgment or
mistake of law or for any loss suffered by the Fund in connection with the
performance of the Co-Administration Agreement, except a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of the Co-
Administrators in the performance of their respective duties or from their
reckless disregard of their duties and obligations under the Agreement.
The Distributor provides distribution services for the Fund as
described in the Fund's Prospectus pursuant to a Distribution Agreement with the
Fund under which the Distributor, as agent, sells shares of the Fund on a
continuous basis. The Distributor has agreed to use its best efforts to solicit
orders for the sale of shares, although it is not obliged to sell any particular
amount of shares. The Distributor causes expenses to be paid for the cost of
printing and distributing prospectuses to persons who are not shareholders of
the Fund (excluding preparation and printing expenses necessary for the
continued registration of the Fund's shares) and of printing and distributing
all sales literature.
SHAREHOLDER ORGANIZATIONS
As stated in the Fund's Prospectus, for Retail Shares the Fund intends
to enter into agreements from time to time with Shareholder Organizations
providing for support and/or distribution services to customers of the
Shareholder Organizations who are the beneficial owners of Retail Shares of the
Fund. Under the agreements, the Fund may pay Shareholder Organizations up to
0.25% (on an annualized basis) of the average daily net asset value of Retail
Shares beneficially owned by their customers. Support services provided by
Shareholder Organizations under their Service Agreements or Distribution and
Service Agreements may include: (i) processing dividend and distribution
payments from the Fund; (ii) providing information periodically to customers
showing their share positions; (iii) arranging for bank wires; (iv) responding
to customer inquiries; (v) providing sub-accounting with respect to shares
beneficially owned by customers or the information necessary for sub-accounting;
(vi) forwarding shareholder communications; (vii) assisting in processing share
purchase, exchange and redemption requests from customers; (viii) assisting
customers in changing dividend options, account designations and addresses; and
(ix) other similar services requested by the Fund. In addition, Shareholder
Organizations, under the Distribution and Service Plan, may provide assistance
(such as the forwarding of sales literature and advertising to their customers)
in connection with the distribution of Retail Shares. All fees paid under these
agreements are borne exclusively by the Fund's Retail Shares.
The Fund's arrangements with Shareholder Organizations under the
agreements are governed by two Plans (a Service Plan and a Distribution and
Service Plan), which have been adopted by the Board of Directors. Because the
Distribution and Service Plan contemplates the provision of services related to
the distribution of Retail Shares (in addition to support services), that Plan
has been adopted in accordance with Rule 12b-1 under the 1940 Act. In
accordance with the Plans, the Board of Directors reviews, at least quarterly, a
written report of the amounts expended in connection with the Fund's
arrangements with Shareholder Organizations and the purposes for which the
expenditures were made. In addition, the Fund's arrangements with Shareholder
Organizations must be approved annually by a majority of the Directors,
including a majority of the Directors who are not "interested persons" of the
Funds as defined in the 1940 Act and have no direct or indirect financial
interest in such arrangements (the "Disinterested Directors").
The Fund believes that there is a reasonable likelihood that its
arrangements with Shareholder Organizations will benefit the holders of Retail
Shares as a way of allowing Shareholder Organizations to participate with the
Fund in the provision of support and distribution services to customers of the
Shareholder Organization who own Retail Shares. Any material amendment to the
arrangements with Shareholder Organizations under the agreements must be
approved by a majority of the Board of Directors (including a majority of the
Disinterested Directors), and any amendment to increase materially the costs
under the Distribution and Service Plan with respect to the Fund must be
approved by the holders of a majority of the outstanding Retail Shares of the
Fund. So long as the Plans are in effect, the selection and nomination of the
members of the Board of Directors who are not "interested persons" (as defined
in the 1940 Act) of the Fund will be committed to the discretion of such
disinterested Directors.
CUSTODIAN, TRANSFER AGENT, DISBURSING AGENT AND ACCOUNTING SERVICES AGENT
Firstar Trust serves as custodian of all the Fund's assets. Under the
Custody Agreement, Firstar Trust has agreed to (i) maintain a separate account
in the name of the Fund, (ii) make receipts and disbursements of money on behalf
of the Fund, (iii) collect and receive all income and other payments and
distributions on account of the Fund's portfolio investments, (iv) respond to
correspondence from shareholders, security brokers and others relating to its
duties and (v) make periodic reports to the Company concerning the Fund's
operations. Firstar Trust may, at its own expense, open and maintain a custody
account or accounts on behalf of the Fund with other banks or trust companies,
provided that Firstar Trust Company shall remain liable for the performance of
all of its duties under the Custody Agreement notwithstanding any delegation.
For its services as custodian, Firstar Trust is entitled to receive a fee,
payable quarterly, based on the annual rate of $0.20 per $1,000 of the market
value of the Fund's assets. In addition, Firstar Trust, as custodian, is
entitled to certain charges for securities transactions and reimbursement for
expenses.
Firstar Trust also serves as transfer agent and dividend disbursing
agent for the Fund under a Shareholder Servicing Agent Agreement. As transfer
and dividend disbursing agent, Firstar Trust has agreed to (i) issue and redeem
shares of the Fund, (ii) make dividend and other distributions to shareholders
of the Fund, (iii) respond to correspondence by Fund shareholders and others
relating to its duties, (iv) maintain shareholder accounts, and (v) make
periodic reports to the Fund. For its transfer agency and dividend disbursing
services for the Fund, Firstar Trust is entitled to receive fees at the minimum
rate of $12,000 per portfolio plus $13 per account. Also, Firstar Trust is
entitled to certain other transaction charges and reimbursement for expenses.
In addition, Firstar Trust is entitled to receive, with respect to the Automatic
Investment Plan, $125.00 per monthly or bi-monthly cycle for the Fund and all
other investment portfolios of the Company.
In addition, the Fund has entered into a Fund Accounting Servicing
Agreement with Firstar Trust Company pursuant to which Firstar Trust has agreed
to maintain the financial accounts and records of the Fund in compliance with
the 1940 Act and to provide other accounting services to the Fund. For its
accounting services, Firstar Trust is entitled to receive fees, payable monthly,
at the following annual rates of the market value of the Fund's assets: --
$27,500 on the first $40 million, 1.25/100th of 1% on the next $200 million, and
6.25/1000ths of 1% on the balance, plus out-of-pocket expenses, including
pricing expenses.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, independent accountants, 100 East Wisconsin
Avenue, Suite 1500, Milwaukee, Wisconsin, 53202, serve as auditors for the
Company. The unaudited financial statements and notes thereto contained in
the Fund's Semi-Annual Report for the period ended December 31, 1995 are
incorporated herein by reference. No other part of the Semi-Annual Report
is incorporated herein by reference.
COUNSEL
Drinker Biddle & Reath (of which Mr. McConnel, Secretary of the
Company, is a partner), Philadelphia National Bank Building, 1345 Chestnut
Street, Philadelphia, Pennsylvania 19107, serve as counsel to the Company and
will pass upon the legality of the shares offered by the Fund's Prospectus.
ADDITIONAL INFORMATION ON PERFORMANCE
From time to time, the total return of the Retail Shares and
Institutional Shares of the Fund may be quoted in advertisements, shareholder
reports or other communications to shareholders. Performance information is
generally available by calling the Portico Investor Services at 1-800-982-8909.
TOTAL RETURN CALCULATIONS
The Fund computes "average annual total return" separately for its
Retail and Institutional Shares by determining the average annual compounded
rates of return during specified periods that equate the initial amount invested
in a particular series to the ending redeemable value of such investment in the
series. 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 portion thereof) covered by
the computation and subtracting one from the result. This calculation can be
expressed as follows:
ERV 1/n
T = [(-----) - 1]
P
Where: T = average annual total return.
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.
P = hypothetical initial payment of $1,000.
n = period covered by the computation, expressed in
terms of years.
The Fund computes its aggregate total returns separately for Retail
and Institutional Shares, by determining the aggregate rates of return during
specified periods that likewise equate the initial amount invested in a
particular series to the ending redeemable value of such investment in the
series. The formula for calculating aggregate total return is as follows:
ERV
T = [(-----) - 1]
P
The calculations of average annual total return 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" in each formula) is determined by assuming complete redemption
of the hypothetical investment and the deduction of all nonrecurring charges at
the end of the period covered by the computations. In addition, the Fund's
average annual total return and aggregate total return reflect the deduction of
the maximum front-end sales charge in connection with the purchase of Retail
Shares. The Fund may also advertise total return data without reflecting sales
charges in accordance with the rules of the Securities and Exchange Commission.
Quotations that do not reflect the sales charge will, of course, be higher than
quotations that do reflect the sales charge.
The aggregate total return for the period from commencement of
operations to December 31, 1995 was 19.58% with respect to the Institutional
Series, and 19.51% with respect to the Retail Series.
Assuming that the Fund's maximum sales charge for Retail Shares of the
Fund had been in effect, the aggregate total return for the period of
commencement of operations to December 31, 1995 was 14.70%.
The Fund may also from time to time include discussions or
illustrations of the effects of compounding in advertisements. "Compounding"
refers to the fact that, if dividends or other distributions on the 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 the Fund investment would
increase more quickly than if dividends or other distribution had been paid in
cash. The Fund 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 shareholders may summarize the substance of
information contained in shareholder reports (including the investment
composition of the Fund), 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 Fund. The Fund 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 Fund. In addition, advertisement or
shareholder communications may include a discussion of certain attributes or
benefits to be derived by an investment in the Fund. Such advertisements or
communications may include symbols, headlines or other materials which highlight
or summarize the information discussed in more detail therein.
MISCELLANEOUS
As used in this Statement of Additional Information and in the Fund's
Prospectus, a majority of the outstanding shares of the Fund or portfolio means,
with respect to the approval of an investment advisory agreement or a charge in
a fundamental investment policy, the lesser of (1) 67% of the shares of the Fund
or portfolio represented at a meeting at which the holders of more than 50% of
the outstanding shares of the Fund or portfolio are present in person or by
proxy, or (2) more than 50% of the outstanding shares of the Fund or portfolio.
As of January 1, 1996 the Adviser and its affiliates held of record
substantially all of the outstanding shares of each of the Company's investment
portfolios as agent, custodian, trustee or investment adviser on behalf of their
customers.
At such date, Firstar Trust Company, P.O. Box 2054, Milwaukee,
Wisconsin 53201, and its affiliated banks held as beneficial owner five percent
or more of the outstanding shares of the following investment portfolios of the
Company because they possessed sole voting or investment power with respect to
such shares: Money Market Fund (2%), Institutional Money Market Fund (83%); Tax-
Exempt Money Market Fund (54%); U.S. Treasury Money Market Fund (51%); U.S.
Government Money Market Fund (66%); Growth and Income Fund (69%); Short-Term
Bond Market Fund (63%); Special Growth Fund (67%); Bond IMMDEX/TM Fund (84%);
Equity Index Fund (79%); Balanced Fund (79%); Intermediate Bond Market Fund
(79%); MidCore Growth Fund (86%); Tax-Exempt Intermediate Bond Fund (68%);
International Equity Fund (95%); and MicroCap Fund (85%). At such date, no
other person was known by the Company to hold of record or beneficially 5% or
more of the outstanding shares of any investment portfolio of the Company.
APPENDIX A
----------
ADDITIONAL INFORMATION CONCERNING
FUTURES AND RELATED OPTIONS
As stated in the Prospectus, the Fund may enter into futures contracts and
options for hedging purposes, to maintain liquidity, to have fuller exposure to
price movements in a security index or to reduce transaction costs. Such
transactions are described in this Appendix. During the current fiscal year,
the Fund intends to limit its transactions in futures contracts and options so
that not more than 5% of its total assets are at risk. Furthermore, in no
event would the Fund purchase or sell futures contracts, or related options
thereon if, immediately thereafter, the aggregate initial margin that is
required to be posted by the Fund under the rules of the exchange on which the
futures contract (or futures option) is traded, plus any premiums paid by the
Fund on its open futures options positions, exceeds 5% of the Fund's total
assets, after taking into account any unrealized profits and unrealized losses
on the Fund's open contracts and excluding the amount that a futures option is
"in-the-money" at the time of purchase (an option to buy a futures contract
is "in-the-money" if the value of the contract that is subject to the option
exceeds the exercise price; and option to sell a futures contract is "in-the-
money"if the exercise price exceeds the value of the contract that is subject
of the option.)
I. Index Futures Contracts.
-----------------------
A stock index assigns relative values to the stocks included in the index
and the index fluctuates with changes in the market values of the stocks
included. Some stock index futures contracts are based on broad market
indexes, such as the Standard & Poor's 500 or the New York Stock Exchange
Composite Index. In contrast, certain exchanges offer futures contracts on
narrower market indexes, such as the Standard & Poor's 100 or indexes based on
an industry or market segment, such as oil and gas stocks. Futures contracts
are traded on organized exchanges regulated by the Commodity Futures Trading
Commission. Transactions on such exchanges are cleared through a clearing
corporation, which guarantees the performance of the parties to each contract.
The MicroCap Fund will sell index futures contracts in order to offset a
decrease in market value of its portfolio securities that might otherwise
result from a market decline. The Fund may do so either to hedge the value of
its portfolio as a whole, or to protect against declines, occurring prior to
sales of securities, in the value of the securities to be sold. Conversely,
the Fund may purchase index futures contracts in anticipation of purchases of
securities and to keep substantially all of its assets exposed to market. In a
substantial majority of these transactions, the Fund will purchase such
securities upon termination of the long futures position, but a long futures
position may be terminated without a corresponding purchase of securities.
In addition, the Fund may utilize index futures contracts in anticipation
of changes in the composition of its portfolio holdings. For example, in the
event that the Fund expects to narrow the range of industry groups represented
in its holdings it may, prior to making purchases of the actual securities,
establish a long futures position based on a more restricted index, such as an
index comprised of securities of a particular industry group. The Fund may
also sell futures contracts in connection with this strategy, in order to
protect against the possibility that the value of the securities to be sold as
part of the restructuring of the portfolio will decline prior to the time of
sale.
The following are examples of transactions in stock index futures (net of
commissions and premiums, if any).
ANTICIPATORY PURCHASE HEDGE: Buy the Future Hedge
Objective: Protect Against Increasing Price
Portfolio Futures
--------- -------
-Day Hedge is Placed-
Anticipate Buying $62,500 Buying 1 Index Futures at 125
Equity Portfolio Value of Futures=$62,500/Contract
-Day Hedge is Lifted-
Buy Equity Portfolio with Sell 1 Index Futures at 130
Actual Cost = $65,000 Value of Futures = $65,000/Contract
Increase in Purchase Price = $2,500 Gain on Futures = $2,500
HEDGING A STOCK PORTFOLIO: Sell the Future
Hedge Objective: Protect Against Declining
Value of the Portfolio
Factors:
Value of Stock Portfolio = $1,000,000
Value of Futures Contract = 125 x $500 = $62,500
Portfolio Beta Relative to the Index = 1.0
Portfolio Futures
--------- -------
-Day Hedge is Placed-
Anticipate Selling $1,000,000 Sell 16 Index Futures at 125
Equity Portfolio Value of Futures = $1,000,000
-Day Hedge is Lifted-
Equity Portfolio - Own Buy 16 Index Futures at 120
Stock with Value = $960,000 Value of Futures = $960,000
Loss in Portfolio Value = $40,000 Gain on Futures = $40,000
If however, the market moved in the opposite direction, that is, market value
decreased and the Fund had entered into an anticipatory purchase hedge, or
market value increased and the fund had hedged its stock portfolio, the results
of the Fund's transactions in stock index futures would be as set forth below.
Portfolio Futures
--------- -------
-Day Hedge is Placed-
Anticipate Buying $62,500 Buying 1 Index Futures at 125
Equity Portfolio Value of Futures=$62,500/Contract
Portfolio Futures
--------- -------
-Day Hedge is Lifted-
Buy Equity Portfolio with Sell 1 Index Futures at 120
Actual Cost - $60,000 Value of Futures = $60,000/Contract
Decrease in Purchase Price = $2,500 Loss on Futures = $2,500
HEDGING A STOCK PORTFOLIO: Sell the Future
Hedge Objective: Protect Against Declining
Value of the Portfolio
Factors:
Value of Stock Portfolio = $1,000,000
Value of Futures Contract = 125 x $500 = $62,500
Portfolio Beta Relative to the Index = 1.0
Portfolio Futures
--------- -------
-Day Hedge is Placed-
Anticipate Selling $1,000,000 Sell 16 Index Futures at 125
Equity Portfolio Value of Futures = $1,000,000
-Day Hedge is Lifted-
Equity Portfolio - Own Buy 16 Index Futures at 130
Stock with Value = $1,040,000 Value of Futures = $1,040,000
Loss in Portfolio Value = $40,000 Gain on Futures = $40,000
II. Margin Payments.
---------------
Unlike when the Fund purchases or sells a security, no price is paid or
received by the Fund upon the purchase or sale of a futures contract.
Initially, in accordance with the terms of the exchange on which such futures
contract is traded, the Fund may be required to deposit with the broker or in a
segregated account with the Fund's custodian an amount of cash or cash
equivalents, the value of which may vary but is generally equal to 10% or less
of the value of the contract. This amount is known as initial margin. The
nature of initial margin in futures transactions is different from that of
margin in security transactions in that futures contract margin does not
involve the borrowing of funds by the customer to finance the transactions.
Rather, the initial margin is in the nature of a performance bond or good faith
deposit on the contract which is returned to the Fund upon termination of the
futures contract assuming all contractual obligations have been satisfied.
Subsequent payments, called variation margin, to and from the broker, will be
made on a daily basis as the price of the underlying security or index
fluctuates making the long and short positions in the futures contract more or
less valuable, a process known as marking to the market. For example, when the
Fund has purchased a futures contract and the price of the contract has risen
in response to a rise in the underlying instruments, that position will have
increased in value and the Fund will be entitled to receive from the broker a
variation margin payment equal to that increase in value. Conversely, where
the Fund has purchased a futures contract and the price of the future contract
has declined in response to a decrease in the underlying instruments, the
position would be less valuable and the Fund would be required to make a
variation margin payment to the broker. At any time prior to expiration of the
futures contract, the Adviser may elect to close the position by taking an
opposite position, subject to the availability of a secondary market, which
will operate to terminate the Fund's position in the futures contract. A final
determination of variation margin is then made, additional cash is required to
be paid by or released to the Fund, and the Fund realizes a loss or gain.
III. Risks of Transactions in Futures Contracts.
------------------------------------------
There are several risks in connection with the use of futures by a Fund as
a hedging devise. One risk arises because of the imperfect correlation between
movements in the price of the future and movements in the price of the
securities which are the subject of the hedge. The price of the future may
move more than or less than the price of the securities being hedged. If the
price of the future moves less than the price of the securities which are the
subject of the hedge, the hedge will not be fully effective but, if the price
of the securities being hedged has moved in an unfavorable direction, the Fund
would be in a better position than if it had not hedged at all. If the price
of the securities being hedged has moved in an unfavorable direction, the Fund
would be in a better position than if it had not hedged at all. If the price
of the securities being hedged has moved in a favorable direction, this
advantage will be partially offset by the loss on the future. If the price of
the future moves more than the price of the hedged securities, the Fund
involved will experience either a loss or gain on the future which will not be
completely offset by movements in the price of the securities which are the
subject of the hedge. To compensate for the imperfect correlation of movements
in the price of securities being hedged and movements in the price of futures
contracts, the Fund may buy or sell futures contracts in a greater dollar
amount than the dollar amount of securities being hedged if the volatility over
a particular time period of the prices of such securities has been greater than
the volatility over such time period of the future, or if otherwise deemed to
be appropriate by the Adviser. Conversely, the Fund may buy or sell fewer
futures contracts if the volatility over a particular time period of the prices
of the securities being hedged is less than the volatility over such time
period of the futures contract being used, or if otherwise deemed to be
appropriate by the Adviser. It is also possible that, where the Fund has sold
futures to hedge its portfolio against a decline in the market, the market may
advance and the value of securities held by the Fund may decline. If this
occurred, the Fund would lose money on the future and also experience a decline
in value in its portfolio securities.
Where futures are purchased to hedge against a possible increase in the
price of securities before the Fund is able to invest its cash (or cash
equivalents) in securities (or options) in an orderly fashion, it is possible
that the market may decline instead; if the Fund then concludes not to invest
in securities or options at that time because of concern as to possible further
market decline or for other reasons, the Fund will realize a loss on the
futures contract that is not offset by a reduction in the price of securities
purchased.
In instances involving the purchase of futures contracts by the Fund, an
amount of cash and cash equivalents, equal to the market value of the futures
contracts, will be deposited in a segregated account with the Fund's custodian
and/or in a margin account with a broker to collateralize the position and
thereby insure that the use of such futures is unleveraged.
In addition to the possibility that there may be an imperfect correlation,
or no correlation at all, between movements in the futures and the securities
being hedged, the price of futures may not correlate perfectly with movement in
the cash market due to certain market distortions. Rather than meeting
additional margin deposit requirements, investors may close futures contracts
through off-setting transactions which could distort the normal relationship
between the cash and futures markets. Second, with respect to financial
futures contracts, the liquidity of the futures market depends on participants
entering into off-setting transactions rather than making or taking delivery.
To the extent participants decide to make or take delivery, liquidity in the
futures market could be reduced thus producing distortions. Third, from the
point of view of speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities market. Therefore,
increased participation by speculators in the futures market may also cause
temporary price distortions. Due to the possibility of price distortion in the
futures market, and because of the imperfect correlation between the movements
in the cash market and movements in the price of futures, a correct forecast of
general market trends or interest rate movements by the Adviser may still not
result in a successful hedging transaction over a short time frame.
Positions in futures may be closed out only on an exchange or board of
trade which provides a secondary market for such futures. Although the Fund
intends to purchase or sell futures only on exchanges or boards of trade where
there appear to be active secondary markets, there is no assurance that a
liquid secondary market on any exchange or board of trade will exist for any
particular contract or at any particular time. In such event, it may not be
possible to close a futures investment position, and in the event of adverse
price movements, the Fund would continue to be required to make daily cash
payments of variation margin. However, in the event futures contracts have
been used to hedge portfolio securities, such securities will not be sold until
the futures contract can be terminated. In such circumstances, an increase in
the price of the securities, if any, may partially or completely offset losses
on the futures contract and thus provide an offset on a futures contract.
Further, it should be noted that the liquidity of a secondary market in a
futures contract may be adversely affected by "daily price fluctuation
limits"established by commodity exchanges which limit the amount of
fluctuation in a futures contract price during a single trading day. Once the
daily limit has been reached in the contract, no trades may be entered into at
a price beyond the limit, thus preventing the liquidation of open futures
positions.
Successful use of futures by the Fund is also subject to the Adviser's
ability to predict correctly movements in the direction of the market. For
example, if the Fund has hedged against the possibility of a decline in the
market adversely affecting securities held in its portfolio and securities
prices increase instead, the Fund will lose part or all of the benefit to the
increased value of its securities which it has hedged because it will have
offsetting losses in its futures positions. In addition, in such situations,
if the Fund has insufficient cash, it may have to sell securities to meet daily
variation margin requirements. Such sales of securities may be, but will not
necessarily be, at increased prices which reflect the rising market. The Fund
may have to sell securities at a time when it may be disadvantageous to do so.
IV. Options on Futures Contracts.
----------------------------
The Fund may purchase options on the futures contracts described above. A
futures option gives the holder, in return for the premium paid, the right to
buy (call) from or sell (put) to the writer of the option a futures contract at
a specified price at any time during the period of the option. Upon exercise,
the writer of the option is obligated to pay the difference between the cash
value of the futures contract and the exercise price. Like the buyer or seller
of a futures contract, the holder, or writer, of an option has the right to
terminate its position prior to the scheduled expiration of the option by
selling, or purchasing, an option of the same series, at which time the person
entering into the closing transaction will realize a gain or loss.
Investments in futures options involve some of the same considerations
that are involved in connection with investments in futures contracts (for
example, the existence of a liquid secondary market). In addition, the
purchase of an option also entails the risk that changes in the value of the
underlying futures contract will not be fully reflected in the value of the
option purchased. Depending on the pricing of the option compared to either
the futures contract upon which it is based, or upon the price of the
securities being hedged, an option may or may not be less risky than ownership
of the futures contract or such securities. In general, the market prices of
options can be expected to be more volatile than the market prices on the
underlying futures contract. Compared to the purchase or sale of futures
contracts, however, the purchase of call or put options on futures contracts
may frequently involve less potential risk to the Fund because the maximum
amount at risk is the premium paid for the options (plus transaction costs).
Although permitted by its fundamental investment policies, the Fund does not
currently intend to write futures options, and will not do so in the future
absent any necessary regulatory approvals.
V. Accounting and Tax Treatment.
----------------------------
Accounting for futures contracts and options will be in accordance with
generally accepted accounting principles.
Generally, futures contracts held by the Fund at the close of the Fund's
taxable year will be treated for federal income tax purposes as sold for their
fair market value on the last business day of such year, a process known as
"marking-to-market." Forty percent of any gain or loss resulting from such
constructive sale will be treated as short-term capital gain or loss and 60% of
such gain or loss will be treated as long-term capital gain or loss without
regard to the length of time the Fund holds the futures contract ("the 40%-60%
rule'). The amount of any capital gain or loss actually realized by the Fund
in a subsequent sale or other disposition of those futures contracts will be
adjusted to reflect any capital gain or loss taken into account by the Fund in
a prior year as a result of the constructive sale of the contracts. With
respect to futures contracts to sell, which will be regarded as parts of a
"mixed straddle" because their values fluctuate inversely to the values of
specific securities held by the Fund, losses as to such contracts to sell will
be subject to certain loss deferral rules which limit the amount of loss
currently deductible on either part of the straddle to the amount thereof which
exceeds the unrecognized gain (if any) with respect to the other part of the
straddle, and to certain wash sales regulations. Under short sales rules,
which will also be applicable, the holding period of the securities forming
part of the straddle will (if they have not been held for the long-term holding
period) be deemed not to begin prior to termination of the straddle. With
respect to certain futures contracts, deductions for interest and carrying
charges will not be allowed. Notwithstanding the rules described above, with
respect to futures contracts to sell which are properly identified as such, the
Fund may make an election which will exempt (in whole or in part) those
identified futures contracts from being treated for federal income tax purposes
as sold on the last business day of the Fund's taxable year, but gains and
losses will be subject to such short sales, wash sales, loss deferral rules and
the requirement to capitalize interest and carrying charges. Under temporary
regulations, the Fund would be allowed (in lieu of the foregoing) to elect to
either (1) to offset gains or losses from portions which are part of a mixed
straddle by separately identifying each mixed straddle to which such treatment
applies, or (2) to establish a mixed straddle account for which gains and
losses would be recognized and offset on a periodic basis during the taxable
year. Under either election, the 40%-60% rule will apply to the net gain or
loss attributable to the futures contracts, but in the case of a mixed straddle
account election, not more than 50% of any net gain may be treated as long-term
and no more than 40% of any net loss may be treated as short-term. Options on
futures contracts generally receive federal tax treatment similar to that
described above.
Special rules govern the federal income tax treatment of certain
transactions denominated in terms of a currency other than the U.S. dollar or
determined by reference to the value of one or more currencies other than the
U.S. dollar. The types of transactions covered by the special rules include
the following: (i) the acquisition of, or becoming the obligor under, a bond or
other debt instrument (including, to the extent provided in Treasury
regulations, preferred stock); (ii) the accruing of certain trade receivables
and payables; and (iii) the entering into or acquisition of any forward
contract, futures contract, option or similar financial instrument. The
disposition of a currency other than the U.S. dollar by a U.S. taxpayer is also
treated as a transaction subject to the special currency rules. However,
foreign currency-related regulated futures contracts and nonequity options are
generally not subject to the special currency rules if they are or would be
treated as sold for their fair market value at year-end under the marking-to-
market rules unless an election is made to have such currency rules apply.
With respect to transactions covered by the special rules, foreign currency
gain or loss is calculated separately from any gain or loss on the underlying
transaction and is normally taxable as ordinary gain or loss. The Fund may
elect to treat as capital gain or loss foreign currency gain or loss arising
from certain identified forward contracts, futures contracts and options that
are capital assets in the hands of the Fund and which are not part of a
straddle. In accordance with Treasury regulations, certain transactions
subject to the special currency rules that are part of a "Section 988 hedging
transactions"(as defined in the Code and the Treasury regulations) will be
integrated and treated as a single transaction or otherwise treated
consistently for purposes of the Code. "Section 988 hedging transactions"
are not subject to the marking-to-market or loss deferral rules under the Code.
It is possible that some of the non-U.S. dollar denominated investments that
the Fund may make will be subject to the special currency rules described
above. Gain or loss attributable to the foreign currency component of
transactions engaged in by the Fund which are not subject to the special
currency rules (such as foreign equity investment other than certain preferred
stocks) will be treated as capital gain or loss and will not be segregated from
the gain or loss on the underlying transaction.
Qualification as a regulated investment company under the code requires
that the Fund satisfy certain requirements with respect to the source of its
income during a taxable year. At least 90% of the gross income of the Fund
must be derived from dividends, interest, certain payments with respect to
securities loans, gains from the sale or other disposition of stock, securities
or foreign currencies, and other income (including but not limited to gains
from options, futures or forward contracts) derived with respect to the Fund's
business of investing in such stock, securities or currencies. The Treasury
Department may by regulation exclude from qualifying income foreign currency
gains which are not directly related to the Fund's principal business of
investment in stock or securities, or options and futures with respect to stock
or securities. Any income derived by the Fund from a partnership or trust is
treated for this purpose as derived with respect to the Fund's business of
investment in stock, securities or currencies only to the extent that such
income is attributable to items of income which would have been qualifying
income if realized by the Fund in the same manner as by the partnership or
trust.
An additional requirement for qualification as a regulated investment
company under the Code is that less than 30% of the Fund's gross income must be
derived from gains realized on the sale or other disposition of the following
investments held for less than three months: (1) stock and securities (as
defined in section 2(a)(36) of the 1940 Act); (2) options, futures and forward
contracts other than those on foreign currencies; and (3) foreign currencies
(and options, futures and forward contracts on foreign currencies) that are not
directly related to the Fund's principal business of investment in stock and
securities (and options and futures with respect to stock and securities).
With respect to futures contracts and other financial instruments subject to
the marking-to-market rules, the Internal Revenue Service has ruled in private
letter rulings that a gain realized from such a futures contract or financial
instrument will be treated as being derived from a security held for three
months or more (regardless of the actual period for which the contract or
instrument is held) if the gain arises as a result of a constructive sale under
the marking-to-market rules, and will be treated as being derived from a
security held for less than three months only if the contract or instrument is
terminated (or transferred) during the taxable year (other than by reason of
marking-to-market) and less than three months have elapsed between the date the
contract or instrument is acquired and the termination date. In determining
whether the 30% test is met for a taxable year, increases and decreases in the
value of the Fund's futures contracts and other investments that qualify as
part of a "designated hedge," as defined in the Code, may be netted.
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
(1) Included in the Prospectus for the Money Market Fund, U.S.
Treasury Money Market Fund (formerly, U.S. Federal Money Market
Fund), U.S. Government Money Market Fund, and Tax-Exempt Money
Market Fund.
Financial Highlights for the Money Market Fund, U.S. Government
Money Market Fund and Tax-Exempt Money Market Fund for the years
ended October 31, 1994, October 31, 1993, October 31, 1992,
October 31, 1991, October 31, 1990 and October 31, 1989 and the
period from commencement of operations (March 16, 1988, August 1,
1988 and June 27, 1988 with respect to the Money Market Fund,
U.S. Government Money Market Fund and Tax-Exempt Money Market
Fund, respectively) to October 31, 1988.
Financial Highlights for the U.S. Federal Money Market Fund for
the years ended October 31, 1994, October 31, 1993, October 31,
1992 and the period from commencement of operations (April 29,
1991 with respect to U.S. Federal Money Market Fund) to October
31, 1991.
Included in the Prospectus for the Institutional Money Market
Fund:
Financial Highlights for the Institutional Money Market Fund for
the years ended October 31, 1994, October 31, 1993, October 31,
1992 and the period from commencement of operations (April 26,
1991 with respect to the Institutional Money Market Fund) to
October 31, 1991.
Incorporated by reference in the Statement of Additional
Information for the Money Market Fund, Institutional Money Market
Fund, U.S. Treasury Money Market Fund (formerly, U.S. Federal
Money Market Fund), U.S. Government Money Market Fund, and Tax-
Exempt Money Market Fund:
Report of Independent Accountants -- November 29, 1994 -- Money
Market Fund, U.S. Federal Money Market Fund, U.S. Government
Money Market Fund, Tax-Exempt Money Market Fund and Institutional
Money Market Fund.
Statement of Assets and Liabilities -- October 31, 1994 -- Money
Market Fund, U.S. Government Money Market Fund, U.S. Federal
Money Market Fund, TaxExempt Money Market Fund and Institutional
Money Market Fund.
Schedule of Investments -- October 31, 1994 -Money Market Fund,
U.S. Federal Money Market Fund, U.S. Government Money Market
Fund, Tax-Exempt Money Market Fund and Institutional Money Market
Fund.
Statement of Operations for the year ended October 31, 1994 --
Money Market Fund, U.S. Federal Money Market Fund, U.S Government
Money Market Fund, Tax-Exempt Money Market Fund and Institutional
Money Market Fund.
Statement of Changes in Net Assets for the years ended October
31, 1994 and October 31, 1993 -Money Market Fund, U.S. Government
Money Market Fund, Tax-Exempt Money Market Fund, U.S. Federal
Money Market Fund and Institutional Money Market Fund.
Financial Highlights for the Money Market Fund, U.S. Government
Money Market Fund and Tax-Exempt Money Market Fund for the years
ended October 31, 1994, October 31, 1993, October 31, 1992,
October 31, 1991, October 31, 1990 and October 31, 1989 and the
period from commencement of operations (March 16, 1988, August 1,
1988 and June 27, 1988 with respect to the Money Market Fund,
U.S. Government Money Market Fund and Tax-Exempt Money Market
Fund, respectively) to October 31, 1988.
Financial Highlights for the Institutional Money Market Fund and
U.S. Federal Money Market Fund for the years ended October 31,
1994, October 31, 1993, October 31, 1992, and the period from
commencement of operations (April 26, 1991 and April 29, 1991
with respect to the Institutional Money Market Fund and U.S.
Federal Money Market Fund, respectively) to October 31, 1991.
Notes to Financial Statements -- October 31, 1994 -- Money Market
Fund, U.S. Federal Money Market Fund, U.S. Government Money
Market Fund, TaxExempt Money Market Fund and Institutional Money
Market Fund.
(2) Included in the Retail and Institutional Prospectuses for the
Balanced Fund, Growth and Income Fund (formerly, Income and
Growth Fund), Special Growth Fund, Equity Index Fund and MidCore
Growth Fund:
Financial Highlights for the Growth and Income Fund (formerly,
Income and Growth Fund), Special Growth Fund and Equity Index
Fund for the years ended October 31, 1994, October 31, 1993,
1992, 1991 and for the period from the commencement of operations
(December 28, 1989 with respect to the Special Growth Fund and
December 29, 1989 with respect to the Growth and Income
(formerly, Income and Growth Fund), and Equity Index Fund) to
October 31, 1990.
Financial Highlights for the Balanced Fund for the years ended
October 31, 1994, October 31, 1993 and for the period from
commencement of operations (March 30, 1992 with respect to the
Balanced Fund) to October 31, 1992.
Financial Highlights for the MidCore Growth Fund for the year
ended October 31, 1994 and for the period from commencement of
operations (December 29, 1992 with respect to the MidCore Growth
Fund) to October 31, 1993.
(3) Included in the Retail and Institutional Prospectuses for the
Short-Term Bond Market Fund (formerly, Short-Intermediate Fixed
Income Fund), Bond IMMDEX/TM Fund, Intermediate Bond Market Fund
and Tax-Exempt Intermediate Bond Fund:
Financial Highlights for the Short-Term Bond Market Fund
(formerly, Short-Intermediate Fixed Income Fund) and Bond
IMMDEX/TM Fund for the years ended October 31, 1994, 1993, 1992,
1991 and for the period from the commencement of operations
(December 29, 1989 with respect to the Short-Term Bond Market
Fund (formerly, Short-Intermediate Fixed Income Fund) and Bond
IMMDEX/TM Fund) to October 31, 1990.
Financial Highlights for the Intermediate Bond Market Fund and
Tax-Exempt Intermediate Bond Fund for the year ended October 31,
1994 and for the period from commencement of operations (January
5, 1993 with respect to the Intermediate Bond Market Fund and
February 8, 1993 with respect to the TaxExempt Intermediate Bond
Fund) to October 31, 1993.
(4) Included in the Retail and Institutional Prospectuses for the
International Equity Fund:
Financial Highlights for the International Equity Fund for the
period from commencement of operations (April 28, 1994 with
respect to the International Equity Fund) to October 31, 1994.
(5) Incorporated by reference in the Statement of Additional
Information for the Short-Term Bond Market Fund (formerly, Short-
Intermediate Fixed Income Fund), Intermediate Bond Market Fund,
TaxExempt Intermediate Bond Fund, Bond IMMDEX/TM Fund, Balanced
Fund, Growth and Income Fund (formerly, Income and Growth Fund),
Equity Index Fund, MidCore Growth Fund, Special Growth Fund and
International Equity Fund:
Report of Independent Accountants -- November 29, 1994 -- Short-
Term Bond Market Fund (formerly, Short-Intermediate Fixed Income
Fund), Intermediate Bond Market Fund, Tax-Exempt Intermediate
Bond Fund, and Bond IMMDEX/TM Fund.
Statement of Assets and Liabilities -- October 31, 1994 -- Short-
Term Bond Market Fund (formerly, Short-Intermediate Fixed Income
Fund), Intermediate Bond Market Fund, Tax-Exempt Intermediate
Bond Fund, and Bond IMMDEX/TM Fund.
Schedule of Investments -- October 31, 1994 -Short-Term Bond
Market Fund (formerly, ShortIntermediate Fixed Income Fund),
Intermediate Bond Market Fund, Tax-Exempt Intermediate Bond Fund,
and Bond IMMDEX/TM Fund.
Statement of Operations for the year ended October 31, 1994 --
Short-Term Bond Market Fund (formerly, Short-Intermediate Fixed
Income Fund), Intermediate Bond Market Fund, Tax-Exempt
Intermediate Bond Fund, and Bond IMMDEX/TM Fund.
Statement of Changes in Net Assets for the years ended October
31, 1994 and October 31, 1993 -Short-Term Bond Market Fund
(formerly, ShortIntermediate Fixed Income Fund) and Bond
IMMDEX/TM Fund; for the year ended October 31, 1994 and for the
period from the commencement of operations (January 5, 1993 with
respect to the Intermediate Bond Market Fund and February 8, 1993
with respect to the Tax-Exempt Intermediate Bond Fund) to October
31, 1993.
Financial Highlights for the Short-Term Bond Market Fund
(formerly, Short-Intermediate Fixed Income Fund) and Bond
IMMDEX/TM Fund for the years ended October 31, 1994, 1993, 1992,
1991 and for the period from the commencement of operations
(December 29, 1989 with respect to the Short-Term Bond Market
Fund (formerly, Short-Intermediate Fixed Income Fund) and Bond
IMMDEX/TM Fund) to October 31, 1990.
Financial Highlights for the Intermediate Bond Market Fund and
Tax-Exempt Intermediate Bond Fund for the year ended October 31,
1994 and for the period from commencement of operations (January
5, 1993 with respect to the Intermediate Bond Market Fund and
February 8, 1993 with respect to the TaxExempt Intermediate Bond
Fund) to October 31, 1993.
Notes to Financial Statements -- October 31, 1994 -- Short-Term
Bond Market Fund (formerly, ShortIntermediate Fixed Income Fund),
Intermediate Bond Market Fund, Tax-Exempt Intermediate Bond Fund,
and Bond IMMDEX/TM Fund.
Report of Independent Accountants -- November 29, 1994 --
Balanced Fund, Growth and Income Fund (formerly, Income and
Growth Fund), Equity Index Fund, MidCore Growth Fund, Special
Growth Fund and International Equity Fund.
Statement of Assets and Liabilities -- October 31, 1994 --
Balanced Fund, Growth and Income Fund (formerly, Income and
Growth Fund), Equity Index Fund, MidCore Growth Fund, Special
Growth Fund and International Equity Fund.
Schedule of Investments -- October 31, 1994 -Balanced Fund,
Growth and Income Fund (formerly, Income and Growth Fund), Equity
Index Fund, MidCore Growth Fund, Special Growth Fund and
International Equity Fund.
Statement of Operations -- October 31, 1994 -Balanced Fund,
Growth and Income Fund (formerly, Income and Growth Fund), Equity
Index Fund, MidCore Growth Fund, Special Growth Fund and
International Equity Fund.
Statement of Changes in Net Assets for the years ended October
31, 1994 and October 31, 1993 -Growth and Income Fund (formerly,
Income and Growth Fund), Equity Index Fund and Special Growth
Fund, Balanced Fund and MidCore Growth Fund.
Statement of Changes in Net Assets for the period from the
commencement of operations (April 28, 1994 with respect to the
International Equity Fund) to October 31, 1994. -- International
Equity Fund.
Financial Highlights for the Growth and Income Fund (formerly,
Income and Growth Fund), Special Growth Fund, and Equity Index
Fund for the years ended October 31, 1994, 1993, 1992, 1991 and
for the period from the commencement of operations (December 28,
1989 with respect to the Special Growth Fund and December 29,
1989 with respect to the Growth and Income (formerly, Income and
Growth Fund) and Equity Index Fund to October 31, 1990.
Financial Highlights for the Balanced Fund for the years ended
October 31, 1994, 1993 and for the period from commencement of
operations (March 30, 1992 with respect to the Balanced Fund) to
October 31, 1992.
Financial Highlights for the MidCore Growth Fund for the year
ended October 31, 1994 and for the period from commencement of
operations (December 29, 1992 with respect to the MidCore Growth
Fund) to October 31, 1993.
Notes to Financial Statements -- October 31, 1994 -- Balanced
Fund, Growth and Income Fund (formerly, Income and Growth Fund),
Equity Index Fund, MidCore Growth Fund, and Special Growth Fund
and International Equity Fund.
Financial Highlights for the International Equity Fund for the
period from the commencement of operations (April 28, 1994 with
respect to the International Equity Fund) to October 31, 1994.
(6) Included in the Prospectus for the MicroCap Fund Financial
Highlights for the period from the commencement of operations
(August 1, 1995) to December 31, 1995.
(7) Incorporated by reference in the Statement of Additional
Information for the Microcap Fund -.Statement of Assets and
Liabilities -- December 31, 1995 -- MicroCap Fund.
Schedule of Investments -- December 31, 1995 -- MicroCap Fund.
Statement of Operations -- December 31, 1995 -- MicroCap Fund.
Statement of Changes in Net Assets for the period from the
commencement of operations (August 1, 1995 to December 31, 1995)
-- MicroCap Fund.
Notes to Financial Statements -- December 31, 1995 --MicroCap
Fund.
(8) Included in the Prospectus for the Balanced Income Fund - None.
(9) Incorporated by reference in the Statement of Additional Information
for the Balanced Income Fund - None.
(10) All required financial statements are included in Parts A and B
hereof, or incorporated by reference. All other financial statements
and schedules are inapplicable.
(b) Exhibits
(1) (a) Articles of Incorporation filed February 19, 1988 are
incorporated by reference to Exhibit (1) to Post-Effective
Amendment No. 1 to the Registration Statement, filed February 23,
1988 ("Post-Effective Amendment No. 1").
(b) Amendment No. 1 to the Articles of Incorporation filed June 30,
1989 is incorporated by reference to Exhibit (1)(b) to Post-
Effective Amendment No. 6 to the Registration Statement, filed
February 28, 1990 ("Post-Effective Amendment No. 6").
(c) Amendment No. 2 to the Articles of Incorporation filed June 30,
1989 is incorporated by reference to Exhibit (1)(c) to Post-
Effective Amendment No. 6.
(d) Amendment No. 3 to the Articles of Incorporation filed November
12, 1991 is incorporated by reference to Exhibit (1)(d) to Post-
Effective Amendment No. 10 to the Registration Statement, filed
December 20, 1991 ("Post-Effective Amendment No. 10").
(e) Amendment No. 4 to the Articles of Incorporation filed August 18,
1992 is incorporated by reference to Exhibit 1(e) to Post-
Effective Amendment No. 13 to the Registration Statement, filed
September 17, 1992 ("Post Effective Amendment No. 13").
(f) Amendment No. 5 to the Articles of Incorporation filed October
23, 1992 is incorporated by reference to Exhibit 1(f) to Post-
Effective Amendment No. 16 to the Registration Statement, filed
December 31, 1992 ("Post-Effective Amendment No. 16").
(g) Amendment No. 6 to the Articles of Incorporation filed January
26, 1993 is incorporated by reference to Exhibit (1)(g) to Post-
Effective Amendment No. 21 to the Registration Statement, filed
November 1, 1994 ("Post-Effective Amendment No. 21").
(h) Amendment No. 7 to the Articles of Incorporation filed February
10, 1994 is incorporated by reference to Exhibit (1)(h) to Post-
Effective Amendment No. 21.
(i) Amendment No. 8 to the Articles Incorporation filed December 29,
1994 is incorporated by reference to Exhibit (1)(i) to Post-
Effective Amendment No. 24 to the Registration Statement, filed
March 30, 1994 ("Post-Effective Amendment No. 24").
(j) Amendment No. 9 to the Articles of Incorporation filed July 20,
1995 is incorporated by reference to Exhibit (1)(j) to Post-
Effective Amendment No. 26 to the Registration Statement filed
September 20, 1995 ("Post-Effective Amendment No. 26").
(2) (a) Registrant's By-laws dated September 9, 1988 are incorporated by
reference to Exhibit (2) to Post-Effective Amendment No. 5 to the
Registration Statement, filed November 30, 1988 ("Post-Effective
Amendment No. 5").
(b) Amendment to By-Laws as approved by the Registrant's Board of
Directors on February 23, 1990 is incorporated by reference to
Exhibit (2)(b) to Post-Effective Amendment No. 6.
(c) Amendment to By-Laws as approved by the Registrant's Board of
Directors on February 15, 1991 is incorporated by reference to
Exhibit (2)(c) to Post-Effective Amendment No. 9 to the
Registration Statement filed October 28, 1991 ("Post-Effective
Amendment No. 9").
(d) Amendment to By-Laws as approved by the Registrant's Board of
Directors on June 21, 1991 is incorporated by reference to
Exhibit (2)(d) to Post-Effective Amendment No. 9.
(3) None.
(4) (a) Specimen copies of share certificates for Series A Common Stock
are incorporated by reference to Exhibit (4)(a) to Post-Effective
Amendment No. 7 to the Registration Statement filed June 19, 1990
("Post-Effective Amendment No. 7").
(b) Specimen copies of share certificates for Series B Common Stock
are incorporated by reference to Exhibit (4)(b) to Post-Effective
Amendment No. 7.
(c) Specimen copies of share certificates for Series C Common Stock
are incorporated by reference to Exhibit (4)(c) to Post-Effective
Amendment No. 7.
(d) Specimen copy of share certificate for Series D Common Stock is
incorporated by reference to Exhibit (4)(d) to Post-Effective
Amendment No. 7.
(e) Specimen copy of share certificate for Series E Common Stock is
incorporated by reference to Exhibit (4)(e) to Post-Effective
Amendment No. 7.
(f) Specimen copy of share certificate for Series F Common Stock is
incorporated by reference to Exhibit (4)(f) to Post-Effective
Amendment No. 7.
(g) Specimen copy of share certificate for Series G Common Stock is
incorporated by reference to Exhibit (4)(g) to Post-Effective
Amendment No. 7.
(h) Specimen copy of share certificate for Series H Common Stock is
incorporated by reference to Exhibit (4)(h) to Post-Effective
Amendment No. 7.
(i) Specimen copy of share certificate for Series I Common Stock is
incorporated by reference to Exhibit (4)(i) to Post-Effective
Amendment No. 8 to the Registration Statement filed December 31,
1990 ("Post-Effective Amendment No. 8").
(j) Specimen copy of share certificate for Series J Common Stock is
incorporated by reference to Exhibit (4)(j) to Post-Effective
Amendment No. 8.
(k) Specimen copy of share certificate for Series K Common Stock is
incorporated by reference to Exhibit (4)(k) to Post-Effective
Amendment No. 11 to the Registration Statement filed January 13,
1992 ("Post-Effective Amendment No. 11").
(l) Specimen copy of share certificate for Series L Common Stock is
incorporated by reference to Exhibit (4)(l) to Post-Effective
Amendment No. 12 to the Registration Statement filed August 4,
1992 ("Post-Effective Amendment No. 12").
(m) Specimen copy of share certificate for Series M Common Stock is
incorporated by reference to Exhibit (4)(m) to Post-Effective
Amendment No. 12.
(n) Specimen copy of share certificate for Series N Common Stock is
incorporated by reference to Exhibit 4(n) to Post-Effective
Amendment No. 16.
(o) Specimen copy of share certificate for Series O Common Stock is
incorporated by reference to Exhibit 4(o) to Post-Effective
Amendment No. 20 to the Registration Statement filed February 3,
1994 ("Post-Effective Amendment No. 20").
(p) Specimen copies of the share certificates for Class 16 -
Institutional Series and Class 16 - A Series Common Stock are
incorporated by reference to Exhibit (4)(p) to Post-Effective
Amendment No. 26.
(q) Form of specimen copies of the share certificates for Class 17 -
Institutional Series and Class 17 - A Series Common Stock are
incorporated by reference to Exhibit (4)(q) to Post-Effective
Amendment No. 26.
(5) (a) Investment Advisory Agreement between Registrant and First
Wisconsin Trust Company dated August 29, 1991 with respect to the
Money Market Fund, U.S. Government Money Market Fund, Tax-Exempt
Money Market Fund, Income and Growth Fund, Short-Intermediate
Fixed Income Fund, Special Growth Fund, Bond IMMDEX/TM Fund,
Equity Index Fund, Institutional Money Market Fund and U.S.
Federal Money Market Fund is incorporated by reference to Exhibit
(5)(a) to Post-Effective Amendment No. 12.
(b) Assumption and Guarantee Agreement between First Wisconsin Trust
Company and First Wisconsin Asset Management dated February 3,
1992 is incorporated by reference to Exhibit (5)(b) to Post-
Effective Amendment No. 12.
(c) Investment Advisory Agreement between Registrant and First
Wisconsin Asset Management dated March 27, 1992 with respect to
the Balanced Fund is incorporated by reference to Exhibit (6)(a)
to Post-Effective Amendment No. 12.
(d) Addendum No. 1 dated December 27, 1992 to Investment Advisory
Agreement between Registrant and Firstar Investment Research and
Management Company dated March 27, 1992 with respect to the
MidCore Growth Fund and Intermediate Bond Market Fund is
incorporated by reference to Exhibit (5)(d) to PostEffective
Amendment No. 17 to the Registration Statement filed June 16,
1993 ("Post-Effective Amendment No. 17").
(e) Addendum No. 2 dated February 5, 1993, to Investment Advisory
Agreement between the Registrant and Firstar Investment Research
and Management Company dated March 27, 1992 with respect to the
Tax-Exempt Intermediate Bond Fund is incorporated by reference to
Exhibit (5)(e) to Post-Effective Amendment No. 17.
(f) Assumption and Guarantee Agreement between Firstar Trust Company
and Firstar Investment Research and Management Company dated June
17, 1993 with respect to the Income and Growth Fund is
incorporated by reference to Exhibit (5)(f) to Post-Effective
Amendment No. 18 to the Registration Statement filed December 3,
1993 ("Post-Effective Amendment No. 18").
(g) Addendum No. 3 dated April 26, 1994, to Investment Advisory
Agreement between the Registrant and Firstar Investment Research
and Management Company dated March 27, 1992 with respect to the
International Equity Fund is incorporated by reference to Exhibit
(5)(g) to Post-Effective Amendment No. 21.
(h) Sub-Advisory Agreement among Firstar Investment Research and
Management Company, the Registrant and State Street Bank and
Trust Company dated April 26, 1994, with respect to the
International Equity Fund is incorporated by reference to Exhibit
(5)(h) to Post-Effective Amendment No. 21.
(i) Addendum No. 4 to the Investment Advisory Agreement between
Registrant and Firstar Investment Research & Management Company
dated March 27, 1992 with respect to the MicroCap Fund is
incorporated by reference to Exhibit (5)(i) to Post-Effective
Amendment No. 26.
(j) Form of Addendum No. 5 to the Investment Advisory Agreement
between Registrant and Firstar Investment Research & Management
Company dated March 27, 1992 with respect to the Balanced Income
Fund is incorporated by reference to Exhibit (5)(j) to Post-
Effective Amendment No. 26.
(6) (a) Distribution Agreement between Registrant and B.C. Ziegler &
Company dated as of January 1, 1995, with respect to Money Market
Fund, U.S. Government Money Market Fund, Tax-Exempt Money Market
Fund, Growth and Income Fund, Short-Term Bond Market Fund,
Special Growth Fund, Bond IMMDEX/TM Fund, Equity Index Fund,
Institutional Money Market Fund, U.S. Treasury Money Market Fund,
Balanced Fund, Intermediate Bond Market Fund, MidCore Growth
Fund, Tax-Exempt Intermediate Bond Fund and International Equity
Fund is incorporated by reference to Exhibit (6)(d) to Post-
Effective Amendment No. 25.
(b) Addendum No. 1 to the Distribution Agreement between Registrant
and B.C. Ziegler and Company dated as of January 1, 1995 with
respect to the MicroCap Fund is incorporated by reference to
Exhibit (6)(b) to PostEffective Amendment No. 26.
(c) Form of Addendum No. 2 to the Distribution Agreement between
Registrant and B.C. Ziegler and Company dated as of January 1,
1995 with respect to the Balanced Income Fund is incorporated by
reference to Exhibit (6)(c) to Post-Effective Amendment No. 26.
(7) Deferred Compensation Plan dated September 16, 1994 and Deferred
Compensation Agreement between Registrant and its Directors is
incorporated by reference to Exhibit (7) to Post-Effective Amendment
No. 21.
(8) (a) Custodian Agreement between Registrant and First Wisconsin Trust
Company dated July 29, 1988, is incorporated by reference to
Exhibit (8)(a) to Post-Effective Amendment No. 5.
(b) Letter dated December 28, 1989 with respect to the Custodian
Agreement with respect to the Equity Index Fund is incorporated
by reference to Exhibit No. (8)(b) to PostEffective Amendment No.
6.
(c) Revised Mutual Fund Custodial Agent Service Annual Fee Schedule
dated February 23, 1990 to the Custodian Agreement is
incorporated by reference to Exhibit No. (8)(c) to PostEffective
Amendment No. 6.
(d) Amendment dated May 1, 1990 to the Custodian Agreement between
Registrant and First Wisconsin Trust Company is incorporated by
reference to Exhibit (8)(d) to Post-Effective Amendment No. 7.
(e) Letter dated April 19, 1991 with respect to the Custodian
Agreement with respect to the Institutional Money Market Fund and
U.S. Federal Money Market Fund is incorporated by reference to
Exhibit (8)(e) to Post-Effective Amendment No. 9.
(f) Letter dated March 27, 1992 with respect to the Custodian
Agreement with respect to the Balanced Fund is incorporated by
reference to Exhibit (8)(f) to Post-Effective Amendment No. 12.
(g) Letter dated December 27, 1992 with respect to the Custodian
Agreement with respect to the Intermediate Bond Market Fund and
MidCore Growth Fund is incorporated by reference to Exhibit
(8)(g) to Post-Effective Amendment No. 17.
(h) Letter dated February 5, 1993 with respect to the Custodian
Agreement with respect to the Tax-Exempt Intermediate Bond Fund
is incorporated by reference to Exhibit (8)(h) to Post-Effective
Amendment No. 17.
(i) Custodian Arrangement between Registrant and State Street Bank
and Trust Company dated April 26, 1994, with respect to the
International Equity Fund is incorporated by reference to Exhibit
(8)(i) to Post-Effective Amendment No. 21.
(j) Letter Agreement with respect to the Custodian Agreement with
respect to the MicroCap Fund is incorporated by reference to
Exhibit (8)(j) to Post-Effective Amendment No. 26.
(k) Form of Letter Agreement with respect to the Custodian Agreement
with respect to the Balanced Income Fund is incorporated by
reference to Exhibit (8)(k) to Post-Effective Amendment No. 26.
(9) (a) Co-Administration Agreement Among the Registrant, B.C. Ziegler &
Company and Firstar Trust Company dated as of January 1, 1995 is
incorporated by reference to Exhibit (9)(e) to Post-Effective
Amendment No. 25.
(b) Addendum No. 1 to the Co-Administration Agreement among the
Registrant, B.C. Ziegler and Company and Firstar Trust Company
dated as of January 1, 1995 with respect to the MicroCap Fund is
incorporated by reference to Exhibit (9)(b) to Post-Effective
Amendment No. 26.
(c) Form of Addendum No. 2 to the Co-Administration Agreement among
the Registrant, B.C. Ziegler and Company and Firstar Trust
Company dated as of January 1, 1995 with respect to the Balanced
Income Fund is incorporated by reference to Exhibit (9)(c) to
Post-Effective Amendment No. 26.
(d) Fund Accounting Servicing Agreement between Registrant and First
Wisconsin Trust Company is incorporated by reference to Exhibit
(9)(c) to Post-Effective Amendment No. 3 to the Registration
Statement, filed April 15, 1988 ("Post-Effective Amendment No.
3").
(e) Letter dated July 29, 1988 with respect to the Fund Accounting
Servicing Agreement is incorporated by reference to Exhibit
(9)(d) to Post-Effective Amendment No. 5.
(f) Letter dated December 28, 1989 with respect to the Fund
Accounting Servicing Agreement with respect to the Equity Index
Fund is incorporated by reference to Exhibit (9)(d) to Post-
Effective Amendment No. 6.
(g) Letter dated April 19, 1991 with respect to the Fund Accounting
Servicing Agreement with respect to the Institutional Money
Market Fund and U.S. Federal Money Market Fund is incorporated by
reference to Exhibit (9)(e) to Post-Effective Amendment No. 9.
(h) Letter dated March 27, 1992 with respect to the Fund Accounting
Servicing Agreement with respect to the Balanced Fund is
incorporated by reference to Exhibit (9)(g) to PostEffective
Amendment No. 12.
(i) Letter dated December 27, 1992 with respect to the Fund
Accounting Servicing Agreement with respect to the Intermediate
Bond Market Fund and MidCore Growth Fund is incorporated by
reference to Exhibit (9)(i) to PostEffective Amendment No. 17.
(j) Letter dated February 5, 1993 with respect to the Fund Accounting
Servicing Agreement with respect to the Tax-Exempt Intermediate
Bond Fund is incorporated by reference to Exhibit (9)(j) to Post-
Effective Amendment No. 17.
(k) Revised Fund Valuation and Accounting Fee Schedule dated February
23, 1990 to the Fund Accounting Servicing Agreement with respect
to the Money Market Fund, Tax-Exempt Money Market Fund and U.S.
Government Money Market Fund is incorporated by reference to
Exhibit (9)(e) to Post-Effective Amendment No. 6.
(l) Revised Fund Valuation and Accounting Fee Schedule dated February
23, 1990 to the Fund Accounting Servicing Agreement with respect
to the Equity Index Fund is incorporated by reference to Exhibit
(9)(f) to Post-Effective Amendment No. 6.
(m) Revised Fund Valuation and Accounting Fee Schedule dated November
1, 1990 to the Fund Accounting and Servicing Agreement with
respect to the Equity Index Fund, Income and Growth Fund, Special
Growth Fund, ShortIntermediate Fixed Income Fund, and Bond
IMMDEX/TM Fund is incorporated by reference to Exhibit (9)(i) to
Post-Effective Amendment No. 8.
(n) Letter Agreement with respect to the Fund Accounting Servicing
Agreement with respect to the MicroCap Fund is incorporated by
reference to Exhibit (9)(n) to Post-Effective Amendment No. 26.
(o) Form of Letter Agreement with respect to the Fund Accounting
Servicing Agreement with respect to the Balanced Income Fund is
incorporated by reference to Exhibit (9)(o) to Post-Effective
Amendment No. 26.
(p) Shareholder Servicing Agent Agreement between Registrant and
First Wisconsin Trust Company is incorporated by reference to
Exhibit (9)(d) to Post-Effective Amendment No. 3.
(q) Letter dated July 29, 1988 with respect to Shareholder Servicing
Agent Agreement is incorporated by reference to Exhibit (9)(g) to
Post-Effective Amendment No. 5.
(r) Letter dated December 28, 1989 with respect to the Shareholder
Servicing Agent Agreement with respect to the Equity Index Fund
is incorporated by reference to Exhibit (9)(i) to Post-Effective
Amendment No. 6.
(s) Letter dated April 23, 1991 with respect to the Shareholder
Servicing Agent Agreement with respect to the Institutional Money
Market Fund and U.S. Federal Money Market Fund is incorporated by
reference to Exhibit (9)(1) to Post-Effective Amendment No. 9.
(t) Letter dated March 27, 1992 with respect to the Shareholder
Servicing Agent Agreement with respect to the Balanced Fund is
incorporated by reference to Exhibit (9)(p) to Post-Effective
Amendment No. 12.
(u) Letter dated December 27, 1992 with respect to the Shareholder
Servicing Agent Agreement with respect to the Intermediate Bond
Market Fund and MidCore Growth Fund is incorporated by reference
to Exhibit (9)(s) to PostEffective Amendment No. 17.
(v) Letter dated February 5, 1993 with respect to the Shareholder
Servicing Agent Agreement with respect to the Tax-Exempt
Intermediate Bond Fund is incorporated by reference to Exhibit
(9)(t) to Post-Effective Amendment No. 17.
(w) Letter dated April 26, 1994 with respect to the Shareholder
Servicing Agent Agreement with respect to the International
Equity Fund is incorporated by reference to Exhibit (9)(v) to
Post-Effective Amendment No. 21.
(x) Amendment dated May 1, 1990 to the Shareholder Servicing Agent
Agreement between Registrant and First Wisconsin Trust Company is
incorporated by reference to Exhibit (9)(j) to Post-Effective
Amendment No. 7.
(y) Letter with respect to Shareholder Servicing Agent Agreement with
respect to the MicroCap Fund is incorporated by reference to
Exhibit (9)(y) to Post-Effective Amendment No. 26.
(z) Form of Letter with respect to Shareholder Servicing Agent
Agreement with respect to the Balanced Income Fund is
incorporated by reference to Exhibit (9)(z) to Post-Effective
Amendment No. 26.
(aa) Plan of Reorganization is incorporated by reference to Exhibit
(9)(e) to Post-Effective Amendment No. 1.
(ab) Purchase and Assumption Agreement is incorporated by reference to
Exhibit (9)(f) to Post-Effective Amendment No. 3.
(ac) Amended and Restated Service Plan and Servicing Agreement is
incorporated by reference to Exhibit 9(aa) to Post-Effective
Amendment No. 23.
(10)1 Opinion and Consent of Counsel.
(11) (a) Consent of Drinker Biddle & Reath.
(b) Consent of Price Waterhouse L.L.P.
(12) None.
(13) (a) Purchase Agreement between Registrant and ALPS Securities, Inc.
is incorporated by reference to Exhibit (13) to Post-Effective
Amendment No. 3.
(b) Purchase Agreement between ALPS Securities, Inc. and Sunstone
Financial Group, Inc. dated May 1, 1990 is incorporated by
reference to Exhibit (13)(b) to Post-Effective Amendment No. 7.
(14) Individual Retirement Account Documents are incorporated by reference
to Exhibit (14) to PostEffective Amendment No. 8.
(15) (a) Distribution and Service Plan and Distribution and Servicing
Agreement is incorporated by reference to Exhibit (15) to Post-
Effective Amendment No. 9.
(b) Amended and Restated Distribution and Service Plan and Form of
Distribution and Servicing Agreement is incorporated by reference
to Exhibit (15)(b) to Post-Effective Amendment No. 23.
(16) (a) Schedule for Computation of Performance Quotations -- Money
Market Fund is incorporated by reference to Exhibit (16)(a) to
Post-Effective Amendment No.23.
(b) Schedule for Computation of Performance Quotations -- Tax-Exempt
Money Market Fund is incorporated by reference to Exhibit (16)(b)
to Post-Effective Amendment No. 23.
(c) Schedule for Computation of Performance Quotations -- U.S.
Government Money Market Fund is incorporated by reference to
Exhibit (16)(c) to Post-Effective Amendment No. 23.
(d) Schedule of Computation of Performance Quotations -- Growth and
Income Fund is incorporated by reference to Exhibit (16)(d) to
Post-Effective Amendment No. 23.
(e) Schedule of Computation of Performance Quotations -- Short-Term
Bond Market Fund is incorporated by reference to Exhibit (16)(e)
to Post-Effective Amendment No. 23.
(f) Schedule of Computation of Performance Quotations -- Special
Growth Fund is incorporated by reference to Exhibit (16)(f) to
Post-Effective Amendment No. 23.
(g) Schedule of Computation of Performance Quotations -- Bond
IMMDEX/TM Fund is incorporated by reference to Exhibit (16)(g) to
Post-Effective Amendment No. 23.
(h) Schedule of Computation of Performance Quotations -- Equity Index
Fund is incorporated by reference to Exhibit (16)(h) to Post-
Effective Amendment No. 23.
(i) Schedule of Computation of Performance Quotations --
Institutional Money Market Fund is incorporated by reference to
Exhibit (16)(i) to Post-Effective Amendment No. 23.
(j) Schedule of Computation of Performance Quotations -- U.S.
Treasury Money Market Fund is incorporated by reference to
Exhibit (16)(j) to Post-Effective Amendment No. 23.
(k) Schedule of Computation of Performance Quotations -- Balanced
Fund is incorporated by reference to Exhibit (16)(k) to Post-
Effective Amendment No. 23.
(l) Schedule of Computation of Performance Quotations -- MidCore
Growth Fund is incorporated by reference to Exhibit (16)(l) to
Post-Effective Amendment No. 23.
(m) Schedule of Computation of Performance Quotations -- Intermediate
Bond Market Fund is incorporated by reference to Exhibit (16)(m)
to Post-Effective Amendment No. 23.
(n) Schedule of Computation of Performance Quotations -- Tax-Exempt
Intermediate Bond Fund is incorporated by reference to Exhibit
(16)(n) to Post-Effective Amendment No. 23.
(o) Schedule of Computation of Performance Quotations --
International Equity Fund is incorporated by reference to Exhibit
(16)(o) to Post-Effective Amendment No. 23.
(p) Schedule of Computation of Performance Quotations -- MicroCap
Fund.
(17) Financial Data Schedules - MicroCap Fund.
(18) Amended and Restated Plan Pursuant to Rule 18f-3 for Operation of a
Multi-Series System is incorporated by reference to Exhibit 18 to
PostEffective Amendment No. 26.
(24) The unaudited financial statements and notes thereto for the MicroCap
Fund for the period from Commencement of Operations (August 1, 1995)
to October 31, 1995.
1 Filed with the SEC on December 20, 1995 under Rule 24f-2 as part of
Registrant's Rule 24f-2 Notice.
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Registrant is controlled by its board of directors.
Item 26. NUMBER OF HOLDERS OF SECURITIES
As of December 31, 1995:
Number of
Title of Class - Series Record Holders
- ----------------------- --------------
Money Market Fund 1-A 3,089
Tax-Exempt Money Market
Fund 2-A 388
U.S. Government Money
Market Fund 3-A 256
Institutional Money Market
Fund 4-A 68
U.S. Treasury Money Market
Fund 5-A 103
Special Growth Fund 6-Institutional 447
6-A 6,279
Bond IMMDEX/TM Fund 7-Institutional 129
7-A 800
Equity Index Fund 8-Institutional 117
8-A 1,158
Growth and Income Fund 9-Institutional 150
9-A 2,964
Short-Term Bond Market
Fund 10-Institutional 54
10-A 1,881
Balanced Fund 11-Institutional 170
11-A 1,402
MidCore Growth Fund 12-Institutional 63
12-A 706
Intermediate Bond Market
Fund 13-Institutional 28
13-A 245
Tax-Exempt Intermediate
Bond Fund 14-Institutional 14
14-A 108
International Equity Fund 15-Institutional 26
15-A 262
MicroCap Fund 16-Institutional 14
16-A 190
Item 27. INDEMNIFICATION
Indemnification of Registrant's principal underwriter, custodians and
transfer agents against certain losses is provided for, respectively, in Section
1.9 of the Distribution Agreement, incorporated by reference as Exhibit (6)(a)
hereto, Section 11 of the Custodian Agreement, incorporated by reference as
Exhibit (8)(a) hereto, and Section 6(c) of the Shareholder Servicing Agent
Agreement incorporated by reference as Exhibit (9)(p) hereto. Registrant has
obtained from a major insurance carrier a directors' and officers' liability
policy covering certain types of errors and omissions.
Article IX of Registrant's Articles of Incorporation, incorporated by
reference as Exhibit (1)(a) hereto, provides for the indemnification of
Registrant's directors and officers to the full extent permitted by the
Wisconsin Business Corporation Law and the Investment Company Act of 1940.
Article VII of the By-laws of the Registrant, incorporated by reference
as Exhibit (2)(a) hereto, provides that officers and directors of the Registrant
shall be indemnified by the Registrant against judgments, penalties, fines,
excise taxes, settlements and reasonable expenses (including attorney's fees)
incurred in connection with a legal action, suit or proceeding to the full
extent permissible under the Wisconsin Business Corporation Law, the Securities
Act of 1933 and the Investment Company Act of 1940.
In no event will Registrant indemnify any of its directors or officers
against any liability to which such person would otherwise be subject by reason
of his willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his or her office. Registrant will comply
with Rule 484 under the Securities Act of 1933 and Release No. 11330 under the
Investment Company Act of 1940 in connection with any indemnification.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
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 Registrant of expenses incurred or
paid by a director, officer or controlling person of 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, 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
Firstar Investment Research and Management Company, investment adviser
to the Money Market Fund, Institutional Money Market Fund, U.S. Treasury Money
Market Fund, U.S. Government
Money Market Fund, Tax-Exempt Money Market Fund, Short-Term Bond Market Fund,
Growth and Income Fund, Special Growth Fund, Bond IMMDEX/TM Fund, Equity Index
Fund, Balanced Fund, Intermediate Bond Market Fund, MidCore Growth Fund, Tax-
Exempt Intermediate Bond Fund, International Equity Fund and MicroCap Fund, is a
registered investment adviser under the Investment Advisers Act of 1940.
To Registrant's knowledge, none of the directors or senior executive
officers of Firstar Investment Research and Management Company, except those set
forth below, is, or has been at any time during Registrant's past two fiscal
years, engaged in any other business, profession, vocation or employment of a
substantial nature, except that certain directors and officers of Firstar
Investment Research and Management Company also hold various positions with, and
engage in business for, their respective affiliates. Set forth below are the
names and principal businesses of the directors and certain of the senior
executive officers of Firstar Investment Research and Management Company who are
or have been engaged in any other business, profession, vocation or employment
of a substantial nature.
Position with
Firstar Investment
Research and Other Business Type of
Name Management Company Connections Business
- ---- ------------------ ----------- --------
John A. Becker Director President, Firstar Bank
Corporation, 777 E. Holding Co.
Wisconsin Avenue,
Milwaukee, WI 53201
Michael J. Bills Director Executive Vice Bank
President, Firstar Holding Co.
Corporation, 777
E. Wisconsin Avenue,
Milwaukee, WI 53201
J. Scott Harkness Director and None
Chairman
Steven R. Parish Director Senior Vice Bank
President,
First National Bank
of Madison, First
Plaza, 1 South
Pinchney Street,
P.O. Box 7900,
Madison, WI 53707
Blaine E. Rieke Director Chairman of the Trust
Board and Chief Company
Executor Officer,
Firstar Trust
Company, 777 E.
Wisconsin Avenue,
Milwaukee, WI 53202
Mary Ellen Stanek Director, Chief Vice President, Investment
Operating Officer Portico Funds, Inc. Company
and President Portico Funds
Center, 615 East
Michigan Street,
P.O. Box 3011,
Milwaukee, WI 53201-3011
Robert L. Webster Director President, Trust
Firstar Trust Company
Company, 777 E.
Wisconsin Avenue,
Milwaukee, WI 53202
Dennis Wallestad Vice President, None
Secretary and
Treasurer
State Street Global Advisors serves as sub-investment adviser to the
International Equity Fund. State Street Global Advisors is an area of State
Street Bank and Trust Company, a Massachusetts bank, and currently manages large
institutional accounts and collective investment funds.
To Registrant's knowledge, none of the directors or senior executive
officers of State Street Global Advisors except those set forth below, is, or
has been at any time during Registrant's past two fiscal years, engaged in any
other business, profession, vocation or employment of a substantial nature,
except that certain directors and officers of State Street Global Advisors also
hold various positions with, and engage in business for, their respective
affiliates. Set forth below are the names and principal businesses of the
directors and certain of the senior executive officers of State Street Global
Advisors who are or have been engaged in any other business, profession,
vocation or employment of a substantial nature.
STATE STREET GLOBAL ADVISORS
Position with Other Business
State Street Connections and
Name Global Advisors Address<F16>
- ---- --------------- -------
Tenley E. Albright, M.D. Director Chairman, Western
Resources, Inc.
Joseph A. Baute Director Chairman,
Nashua Corporation
L. MacAlister Booth Director Retired Chairman,
President and
CEO, Polaroid
Corporation
Marshall N. Carter Chairman Director,
and CEO Euroclear;
Director,
Orbis International
James I. Cash, Jr. Director The James E.
Robinson
Professor of
Business
Administration,
Harvard Business
School
Truman S. Casner Director Partner, Ropes & Gray
Nader F. Darehshori Director Chairman,
President and CEO,
Houghton Mifflin
Company
Arthur L. Goldstein Director Chairman and CEO,
Ionics, Incorporated
Charles F. Kaye Director President,
Transportation
Investments, Inc.
John M. Kucharski Director Chairman,
President and CEO,
EG&G, Inc.
Charles R. LaMantia Director President and CEO,
Arthur D. Little, Inc.
David B. Perini Director Chairman and
President,
Perini Corporation
Dennis J. Picard Director Chairman and CEO,
Raytheon Company,
Position with
State Street other
Business
Alfred Poe Director President,
Meal Enhancement
Group, Campbell
Soup Company
Bernard W. Reznicek Director Dean of the
College of
Business
Administration,
Creighton
University
David A. Spina Preisdent and Chairman,
Chief Operating Massachusetts
Officer Housing Investment
Corporation,
Director,
Metropolitan
Boston Housing
Partnership, Inc.,
Chairman, Dana
Hall School
Robert E. Weissman Director Chairman,
President and CEO,
The Dun &
Bradstreet Corp.
<F16>Address of all individuals: State Street Boston Corporation, 225 Franklin
Street, Boston, Massachusetts 02110.
Item 29. PRINCIPAL UNDERWRITER
(a) B.C. Ziegler & Company ("B.C. Ziegler"), theRegistrant's current
principal underwriter, serves as principal underwriter of the shares
of the Principal Preservation Funds, American Tax-Exempt Bond Trust,
Series 1 (and subsequent series); Ziegler U.S. Government Securities
Trust, Series 1 (and subsequent series); American Income Trust,
Series 1 (and subsequent series); Ziegler Money Market Trust; and
The Insured American Tax-Exempt Bond Trust, Series 1 (and subsequent
series).
(b) To the best of Registrant's knowledge, the directors and executive
officers of B.C. Ziegler & Company are as follows:
Positions and
Name and Principal Position and Offices Offices with
Business Address with B. C. Ziegler Registrant
- ---------------- ------------------ ----------
R. Douglas Ziegler Chairman of the
Board and Director None
Peter D. Ziegler President, Chief
Executive Officer
and Director None
S. Charles O'Meara Senior Vice
President and
General Counsel and
Director None
Eugene H. Rudnicki Senior Vice
President-
Acquisition None
Vernon C. Van Vooren Senior Vice
President-Corporate
Finance, Treasurer
and Director None
John C. Wagner Senior Vice
President - Retail
Sales None
James R. Wyatt Senior Vice
President None
Donald A. Carlson, Jr. Senior Vice
President None
Neil L. Fuerbringer Senior Vice
President -
Administration None
Michael P. Doyle Senior Vice
President - Retail
Operations None
Lynn R. Van Horn Senior Vice
President - Finance
and Director None
Ronald N. Spears Senior Vice
President None
Jeffrey C. Vredenbregt Vice President,
Assistant Treasurer
and Controller None
Charles G. Stevens Vice President -
Marketing Director None
Jack H. Downer Vice President -
MIS Director None
Robert J. Tuszynski Vice President -
Director of Mutual
Funds None
Gerry Aman Vice President -
Insurance None
Sheila K. Hittman Vice President -
Personnel None
Robert J. Johnson Vice President -
Compliance None
James M. Bushman Vice President -
Recruiting and
Training Coordinator None
Lay C. Rosenheimer Vice President -
Bond Sales Control None
Darrell P. Frank Vice President -
Director of
Strategic Change None
James L. Brendemuehl Vice President -
Mutual Funds and
UIT's None
President -
Administration None
Jerome Ferrara, Jr. Assistant Vice
President - Mutual
Funds None
Janine R. Schmidt Corporate Secretary None
Kathleen A. Lochen Assistant Secretary None
The address of each of the foregoing is 215 North Main Street, West Bend,
Wisconsin 53095, (414) 334-5521.
(e) None.
Item 30. LOCATION OF ACCOUNTS AND RECORDS
(1) Firstar Trust Company, 615 E. Michigan Street, Milwaukee, WI 53201
(records relating to its function as custodian, transfer agent, fund accounting
servicing agent, shareholder servicing agent and coadministrator).
(2) Firstar Investment Research and Management Company, First Wisconsin
Center, 777 E. Wisconsin Avenue, Suite 1800, Milwaukee, WI 53202 (records
relating to its function as investment adviser).
(3) State Street Global Advisors, Two International Plaza, Boston, MA
02110, (records relating to its function as sub-investment adviser for the
International Equity Fund).
(4) State Street Bank and Trust Company, Two International Plaza,
Boston, MA 02110, (records relating to its function as custodian and fund
accounting service agent for the International Equity Fund).
(5) B.C. Ziegler & Company, 215 North Main Street, West Bend, Wisconsin
53095-3348 (records relating to its functions as distributor and co-
administrator).
(6) Drinker Biddle & Reath, Philadelphia National Bank Building, 1345
Chestnut Street, Philadelphia, Pennsylvania 19107 (Registrant's Articles of
Incorporation, By-laws and Minute Books).
Item 31. MANAGEMENT SERVICES
None.
Item 32. Undertakings
(1) The Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual report to
shareholders upon request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment to its
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment No. 27 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Philadelphia, and Commonwealth of Pennsylvania, on
the 31st day of January, 1996.
PORTICO FUNDS, INC.
Registrant
By *James M. Wade
President
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No. 27 to the Registration Statement of the Registrant has
been signed by the following persons in the capacities and on the dates
indicated:
Signature Title Date
- --------- ----- ----
<F17>James M. Wade Chairman, President January 31, 1996
(James M. Wade) and Treasurer
<F17>Richard Riederer Director January 31, 1996
(Richard Riederer)
<F17>Jerry Remmel Director January 31, 1996
(Jerry Remmel)
<F17>Glen R. Bomberger Director January 31, 1996
(Glen R. Bomberger)
<F17>Charles R. Roy Director January 31, 1996
(Charles R. Roy)
<F17>By /s/ W. Bruce McConnel, III January 31, 1996
W. Bruce McConnel, III
Attorney-in-fact
POWER OF ATTORNEY
Charles R. Roy, whose signature appears below, does hereby constitute
and appoint James M. Wade and W. Bruce McConnel, III, and either of them, his
true and lawful attorneys and agents, with power of substitution or
resubstitution, to do any and all acts and things and to execute any and all
instruments which said attorneys and agents, or either of them, may deem
necessary or advisable or which may be required to enable Portico Funds, Inc.
(the "Company") to comply with the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended (the "Acts"), and any rules,
regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the filing and effectiveness of the
Company's Registration Statement under the said Acts, and any and all
amendments (including post-effective amendments) thereto, including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign in the name and on behalf of the undersigned as a
director and/or officer of the Company said Registration Statement and any and
all such amendments thereto that are filed with the Securities and Exchange
Commission under said Acts, and any other instruments or documents related
thereto, and the undersigned does hereby ratify and confirm all that said
attorneys and agents, or either of them, shall do or cause to be done by virtue
hereof.
Date: February 23, 1990 /s/ Charles R. Roy
Charles R. Roy
POWER OF ATTORNEY
Glen R. Bomberger, whose signature appears below, does hereby constitute
and appoint James M. Wade and W. Bruce McConnel, III, and either of them, his
true and lawful attorneys and agents, with power of substitution or
resubstitution, to do any and all acts and things and to execute any and all
instruments which said attorneys and agents, or either of them, may deem
necessary or advisable or which may be required to enable Portico Funds, Inc.
(the "Company") to comply with the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended (the "Acts"), and any rules,
regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the filing and effectiveness of the
Company's Registration Statement under the said Acts, and any and all
amendments (including post-effective amendments) thereto, including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign in the name and on behalf of the undersigned as a
director and/or officer of the Company said Registration Statement and any and
all such amendments thereto that are filed with the Securities and Exchange
Commission under said Acts, and any other instruments or documents related
thereto, and the undersigned does hereby ratify and confirm all that said
attorneys and agents, or either of them, shall do or cause to be done by virtue
hereof.
Date: February 23, 1990 /s/ Glen R. Bomberger
Glen R. Bomberger
POWER OF ATTORNEY
James M. Wade, whose signature appears below, does hereby constitute and
appoint W. Bruce McConnel, III his true and lawful attorney and agent, with
power of substitution or resubstitution, to do any and all acts and things and
to execute any and all instruments which said attorney and agent may deem
necessary or advisable or which may be required to enable Portico Funds, Inc.
(the "Company") to comply with the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended (the "Acts"), and any rules,
regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the filing and effectiveness of the
Company's Registration Statement under the said Acts, and any and all
amendments (including post-effective amendments) thereto, including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign in the name and on behalf of the undersigned as a
director and/or officer of the Company said Registration Statement and any and
all such amendments thereto that are filed with the Securities and Exchange
Commission under said Acts, and any other instruments or documents related
thereto, and the undersigned does hereby ratify and confirm all that said
attorney and agent shall do or cause to be done by virtue hereof.
Date: February 23, 1990 /s/ James M. Wade
James M. Wade
POWER OF ATTORNEY
Richard K. Riederer, whose signature appears below, does hereby
constitute and appoint James M. Wade and W. Bruce McConnel, III, and either of
them, his true and lawful attorneys and agents, with power of substitution or
resubstitution, to do any and all acts and things and to execute any and all
instruments which said attorneys and agents, or either of them, may deem
necessary or advisable or which may be required to enable Portico Funds, Inc.
(the "Company") to comply with the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended (the "Acts"), and any rules,
regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the filing and effectiveness of the
Company's Registration Statement under the said Acts, and any and all
amendments (including post-effective amendments) thereto, including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign in the name and on behalf of the undersigned as a
director and/or officer of the Company said Registration Statement and any and
all such amendments thereto that are filed with the Securities and Exchange
Commission under said Acts, and any other instruments or documents related
thereto, and the undersigned does hereby ratify and confirm all that said
attorneys and agents, or either of them, shall do or cause to be done by virtue
hereof.
Date: February 23, 1990 /s/ Richard K. Riederer
Richard K. Riederer
POWER OF ATTORNEY
Jerry Remmel, whose signature appears below, does hereby constitute and
appoint James M. Wade and W. Bruce McConnel, III, and either of them, his true
and lawful attorneys and agents, with power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments which
said attorneys and agents, or either of them, may deem necessary or advisable
or which may be required to enable Portico Funds, Inc. (the "Company") to
comply with the Investment Company Act of 1940, as amended, and the Securities
Act of 1933, as amended (the "Acts"), and any rules, regulations or
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of the Company's Registration
Statement under the said Acts, and any and all amendments (including post-
effective amendments) thereto, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign in the name and on
behalf of the undersigned as a director and/or officer of the Company said
Registration Statement and any and all such amendments thereto that are filed
with the Securities and Exchange Commission under said Acts, and any other
instruments or documents related thereto, and the undersigned does hereby
ratify and confirm all that said attorneys and agents, or either of them, shall
do or cause to be done by virtue hereof.
Date: February 23, 1990 /s/ Jerry Remmel
Jerry Remmel
PORTICO FUNDS, INC.
CERTIFICATE OF SECRETARY
The following resolution was duly adopted by the Board of
Directors of Portico Funds, Inc. on September 15, 1995 and remains in effect on
the date hereof:
FURTHER RESOLVED, that the directors and officers of the Company who
may be required to execute any amendments to the Registration Statement of
the Company be, and each of them hereby is, authorized to execute a Power
of Attorney appointing James M. Wade and W. Bruce McConnel, III, and either
of them, their true and lawful attorney or attorneys, to execute in their
name, place and stead, in their capacity as director or officer, or both,
of the Company any and all amendments to said Registration Statement, and
all instruments necessary or incidental in connection therewith, and to
file the same with the Securities and Exchange Commission; and either of
said attorneys shall have the power to act thereunder with or without the
other said attorney and shall have full power of substitution and
resubstitution; and either of said attorneys shall have full power and
authority to do in the name and on behalf of said directors and officers,
or any or all of them, in any and all capacities, every act whatsoever
requisite or necessary to be done in the premises, as fully and to all
intents and purposes as each of said directors or officers, or any or all
of them, in any and all capacities, every act whatsoever requisite or
necessary to be done in the premises, as fully and to all intents and
purposes as each of said directors or officers, or any or all of them,
might or could do in person, said acts of said attorneys, or either of
them, being hereby ratified and approved.
PORTICO FUNDS, INC.
By: /s/ W. Bruce McConnel, III
--------------------------
W. Bruce McConnel, III,
Secretary
Dated: January 31, 1996
EXHIBIT INDEX
-------------
Exhibit Number Description Page
-------------- ----------- ----
(11)(a) Consent of Drinker Biddle and Reath.
(11)(b) Consent of Price Waterhouse L.L.P.
(16)(p) Schedule of Computation of Performance Quotations -- MicroCap
Fund.
(17) Financial Data Schedules --MicroCap Fund.
(24) The unaudited financial statements and notes thereto for the
MicroCap Fund for the period from Commencement of Operations
(August 1, 1995) to December 31, 1995.
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the references to our firm
under the caption "Counsel" in the Statement of Additional Information that is
included in PostEffective Amendment No. 27 to the Registration Statement (No.
3318255) on Form N-1A under the Securities Act of 1933, as amended, of Portico
Funds, Inc. This consent does not constitute a consent under section 7 of the
Securities Act of 1933, and in consenting to the use of our name and the
references to our Firm under such caption we have not certified any part of the
Registration Statement and do not otherwise come within the categories of
persons whose consent is required under said section 7 or the rules and
regulations of the Securities and Exchange Commission thereunder.
/s/ DRINKER BIDDLE & REATH
DRINKER BIDDLE & REATH
Philadelphia, Pennsylvania
January 31, 1996
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the reference to us under the heading "Independent
Accountants" in the Statement of Additional Information constituting part of
this Post-Effective Amendment No. 27 to the Portico Funds, Inc. registration
statement on Form N-1A.
/s/ Price Waterhouse
Milwaukee, Wisconsin
January 30, 1996
PORTICO MICROCAP FUND
SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS
TOTAL RETURN
INSTITUTIONAL SERIES
FOR THE PERIOD FROM AUGUST 1, 1995
(COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1995
Total Return = (Ending Redeemable Value/Initial Value) - 1
Total Return = (1,195.80/1,000.00) - 1
Total Return = 19.58%
RETAIL SERIES - WITHOUT SALES LOAD
FOR THE PERIOD FROM AUGUST 1, 1995
(COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1995
Total Return = (Ending Redeemable Value/Initial Value) - 1
Total Return = (1,195.12/1,000.00) - 1
Total Return = 19.51%
RETAIL SERIES - WITH SALES LOAD
FOR THE PERIOD FROM AUGUST 1, 1995
(COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1995
Total Return = (Ending Redeemable Value/Initial Value) - 1
Total Return = (1,46.95/1,000.00) - 1
Total Return = 14.70%
SEMI-ANNUAL REPORT
DECEMBER 31, 1995
PORTICO FUNDS
INSTITUTIONAL CLASS
RETAIL CLASS
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, includ ing 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 invest ment adviser, custodian, transfer
agent, administrator, and accounting services agent and receive compensation
for such services as disclosed in the current prospectus.
DECEMBER 1995
Portico Funds, Inc.
Dear Shareowner:
INVESTMENT REVIEW
Introduced August 1, 1995, Portico MicroCap Fund is the newest addition to the
Fund Family. Although this time period through December 31 was characterized by
falling interest rates, stable-to-falling valuations on small cap stocks, a
weakening economy and an underperformance of small company stocks versus larger
company stocks, MicroCap has INCREASED in value by 19.6% (based on a year-end
net asset value of $11.27). This compares favorably with the Russell 2000, the
Fund's benchmark, which returned 6.1% and the S&P 500, which returned 10.8%
during this same period.
In our shareowners' best interest, we closed Portico MicroCap Fund on December
5, 1995. We feel 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 Portico Fund Family is participating in the secular shift from savings to
investments. With over $3 billion in Portico assets, an expanding family of
funds designed to meet diverse investor needs and competitive performance
records, we are optimistic about the coming year.
MARKET OUTLOOK
For 1996, our market outlook is predicated on the following economic and
investment trends:
1. LOW NOMINAL GDP AND RESILIENT "REAL ECONOMIC GROWTH." Well into the fifth
year of an economic expansion, we expect 1-3% "real" economic growth and
continued decelerating levels of inflation (the consumption deflator, a good
current market basket index, rose only 1.7% over the past year) combining for
4% nominal GDP versus the 10% average during the 1980s.
2. A FEDERAL BUDGET AGREEMENT built on a recalculated CPI, modestly enhanced
economic growth assumptions, and a modest reduction in the growth rate of the
key discretionary spending programs (Medicare/Medicaid).
3. Continued disinflationary productivity gains and expanding pockets of actual
price deflation (technology and industrial commodities) along with the
previously mentioned CPI recalculation will produce 1996 INFLATION OF 1.5-
2.5%.
4. INVESTOR FRIENDLY TAX INITIATIVES for 1996, including a reduction in the
capital gains tax rate (but no indexing), increased estate limits, and
EXPANDED IRAS.
5. Continued emergence of the UNITED STATES AS THE "MARKET OF CHOICE" for the
increasingly one market world of global investors. More and more, we are
seeing cash flows into the American securities markets from foreigners.
6. TREASURY BOND YIELDS, WHICH HAVE DECLINED OVER 2% THIS PAST YEAR, WILL AT
LEAST RETEST THE SEPTEMBER 1993 LOW YIELD OF 5.8%. Short-term market yields,
which have only declined about .5%, will fall more dramatically, perhaps by 2%
over the next year. The unusually high inflation-adjusted ("real") yields
currently available, along with multi-economic cycle lows in monetary growth,
suggest a potential downside surprise in economic activity.
7. CORPORATE PROFIT GROWTH WILL DECELERATE steadily with the potential for a
profit recession in 1996.
8. FOR STOCK PRICES, A MODESTLY ABOVE-AVERAGE RETURN (more than 11%).
All in all, we see an above-average stock and bond market for 1996 with more
volatility than the past four years. Looking at the fixed-income market, we do
think it could be modestly better than a coupon-only year.
As always, we believe in our consistency of management and will adhere to our
stuctured fixed-income and equity `growth at reasonble prices" approaches.
These strategies, we believe, will provide you with the best investment
opportunities. We appreciate your continued confidence in the Portico Family of
Funds and urge you to read the MicroCap portfolio review that follows.
J. Scott Harkness, CFA Mary Ellen Stanek, CFA
Chairman/Chief Investment Officer President
Firstar Investment Research & Management Company
MICROCAP FUND
MicroCap Fund was designed to use the same investment criteria used in Portico
Special Growth and MidCore Funds. We currently hold one-fifth of the Fund's
assets in money market instruments, waiting for opportunities to invest in
persistent growth companies with attractive outlooks. Gemstar International, a
designer of consumer electronic products, Owens Healthcare, a provider or
pharmacy management services, and Palm Harbor Homes, a producer of manufactured
housing, are examples of new purchases which have done extremely well for the
Fund, increasing 136%, 69% and 17%, respectively, over the last five months.
After much consideration, we have decided to broaden the market capitalization
range of the companies in which we invest. In the future, less than 35% of the
Fund's assets will be invested in securities with market capitalizations greater
than $250 million at the time of purchase. The original cut-off was $150
million; however, we feel the increased range will provide more investment
opportunities. In addition, securities with high market capitalizations
geverally have greater liquidity. Even with this change, we will continue to
focus our research on stocks below $150 million in market capitalization, as we
believe those stocks offer the best opportunity for growth.
Like Portico's larger company fund offerings, MicroCap holdings are concentrated
in the consumer, health and technology areas. Largest holdings in the Fund
include Anadigics, Inc., a semiconductor manufacturer; CP Clare Corporation,
manufacturer of electromagnetic and semiconductor switches; Atlas Air, Inc., an
air cargo carrier and Parlux Fragrances, Inc., a fragrance manufacturer and
distributor.
Though we feel the stock market may experience an earnings-related correction
over the next six months, our outlook for Portico MicroCap is very favorable. We
are confident in our ability to uncover an ample number of rapidly growing small
companies. MicroCap securities are generally not covered by Wall Street or
widely held by institutional managers, thus valuations, until discovered, tend
to be below larger cap stocks with similar growth rates. In addition, we do not
anticipate MicroCap's returns being well correlated with the larger company
market indices. While we view this environment favorably, we caution investors
of the inherent volatility of returns which may occur in the MicroCap segment.
Joseph J. Docter, CFA
Mark D. Westman, CFA
Portfolio Managers
Firstar Investment Reasearch & Management Company
PORTFOLIO MANAGER PROFILE
Joseph J. Docter, CFA, Senior Vice President and Senior Portfolio Manager of
Firstar Investment Research & Management Company (FIRMCO) and Mark D. Westman,
CFA, CPA, Vice President and Senior Portfolio Manager, have both managed the
Fund since its inception on August 1, 1995. Joe has been with Firstar since 1984
and has 11 years of investment management experience. Joe received his BBA and
his MBA from the University of Wisconsin in 1981 and 1984, respectively. Mark
has been with Firstar since 1992 and has 4 years of investment management
experience. Mark received his BA from Augustana College in 1985 and his MBA from
the University of Chicago in 1993. Joe and Mark are both Chartered Financial
Analysts.
8/1/95 12/95
------ -------
PORTICO MICROCAP FUND 0 $11,960
S&P 500 STOCK INDEX 0 $11,080
RUSSELL 2000 0 $10,601
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 reinvest ment 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 PERIODS ENDED DECEMBER 31, 1995
Since Inception
8/1/95
---------------
PORTICO MICROCAP FUND 19.6
S&P500 STOCK INDEX <F18> 10.8
RUSSELL 2000 <F19> 6.1
<F18> 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.
<F19> 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.
Performance reflects fee waivers in effect. In the absence of fee waivers, total
return would be reduced.
TOP 5 HOLDINGS 12/31/95
- ----------------------------------------
ANADIGICS, INC. 5.2%
C.P. CLARE CORPORATION 5.1%
ATLAS AIR, INC. 4.3%
PARLUX FRAGRANCES, INC. 4.0%
TREND-LINES, INC. CLASS A 3.7%
Portfolio holdings are subject to change
and are not a representation of the Fund's
entire portfolio holdings.
TOTAL FUND NET ASSETS 12/31/95
- ----------------------------------------
$55,393,273
MICROCAP FUND
STATEMENT OF ASSETS AND LIABILITIES
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
DECEMBER 31, 1995
(UNAUDITED)
ASSETS:
Investments, at value (cost $44,439) $45,297
Cash 4,788
Income receivable 1,712
Receivable for securities sold 1,837
Organization costs, net of
accumulated amortization 22
Other assets 4
------
Total Assets 53,660
------
LIABILITIES:
Capital shares redeemed 19
Payable for securities purchased 115
Payable to affiliates 93
Accrued expenses and other liabilities 40
-------
Total Liabilities 267
-------
NET ASSETS $53,393
=======
NET ASSETS CONSIST OF:
Capital stock $51,466
Undistributed accumulated net realized gains 1,069
Unrealized net appreciation on investments 858
-------
Total Net Assets $53,393
-------
SERIES A:
Net assets $ 6,922
Shares authorized ($.0001 par value) 50,000
Shares issued and outstanding 614
Net asset value and redemption price per share <F3> $11.27
======
Maximum offering price per share <F3> $11.74
======
SERIES INSTITUTIONAL:
Net assets $46,471
Shares authorized ($.0001 par value) 50,000
Shares issued and outstanding 4,122
Net asset value, redemption price
and offering price per share <F20> $11.27
======
<F20> Amounts may not recalculate due to rounding.
See notes to the financial statements.
MICROCAP FUND
STATEMENT OF OPERATIONS
(AMOUNTS IN THOUSANDS)
PERIOD ENDED DECEMBER 31, 1995
(UNAUDITED)
INVESTMENT INCOME:
Dividend income $2,174
Interest income 261
------
2,435
------
EXPENSES:
Investment advisory fees 219
Administration fees 17
Shareowner servicing and accounting costs 23
Service organization fees - Series A 4
Custody fees 7
Federal and state registration fees 17
Professional fees 15
Reports to shareowners 8
Amortization of organization costs 2
Directors' fees and expenses 3
------
Total expenses before waiver 315
Less: Waiver of expenses (54)
------
Net Expenses 261
------
NET INVESTMENT INCOME 2,174
------
REALIZED AND UNREALIZED GAIN:
Net realized gain on investments 1,985
Change in unrealized appreciation on investments 858
------
Net gain on investments 2,843
------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $5,017
======
STATEMENT OF CHANGES IN NET ASSETS
(AMOUNTS IN THOUSANDS)
(UNAUDITED) Aug. 1, 1995 <F21>
through
Dec. 31, 1995
-------------
OPERATIONS:
Net investment income $2,174
Net realized gain on investments 1,985
Change in unrealized appreciation
on investments 858
-------
Net increase in net assets resulting
from operations 5,017
-------
CAPITAL SHARE TRANSACTIONS:
Shares sold 51,037
Shares issued to owners in
reinvestment of dividends 1,616
-------
52,653
Shares redeemed (1,187)
-------
Net increase 51,466
-------
DISTRIBUTIONS TO
SERIES A SHAREOWNERS:
From net investment income (321)
From net realized gains (66)
(387)
DISTRIBUTIONS TO
SERIES INSTITUTIONAL SHAREOWNERS:
From net investment income (2,245)
From net realized gains (458)
-------
(2,703)
-------
TOTAL INCREASE IN NET ASSETS 53,393
NET ASSETS:
Beginning of period -
End of period $53,393
=======
<F21> Commencement of operations.
See notes to the financial statements.
MICROCAP FUND
FINANCIAL HIGHLIGHTS
(UNAUDITED) August 1, 1995 <F22>
through
December 31, 1995
Series A Series Institutional
-------- --------------------
Per Share Data:
Net asset value,
beginning of period $10.00 $10.00
Income from investment operations:
Net investment income 0.48 0.48
Net realized and unrealized
gains on securities 1.45 1.46
------ ------
Total from investment operations 1.93 1.94
------ ------
Less distributions:
Dividends from net investment income (0.55) (0.56)
Distributions from capital gains (0.11) (0.11)
------ ------
Total distributions (0.66) (0.67)
------ ------
Net asset value, end of period $11.27 $11.27
====== ======
Total return <F23> <F24> 19.51% 19.58%
Supplemental data and ratios:
Net assets, in thousands, end of period $6,922 $46,471
Ratio of net expenses to average
net assets <F25> 2.00% 1.75%
Ratio of net investment income
to average net assets <F25> 14.58% 14.83%
Portfolio turnover rate <F26> 175.90% 175.90%
<F22> Commencement of operations.
<F23> Not annualized.
<F24> The total return calculation does not reflect the 4% front end sales
charge for Series A.
<F25> Annualized.
<F26> Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
See notes to the financial statements.
MICROCAP FUND
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1995
(UNAUDITED)
Number Market
of Value
Shares (in thousands)
- -------- ---------------
COMMON STOCKS 79.0%
BUILDING MATERIALS 3.0%
64,700 NCI Building Systems, Inc. <F27> $1,601
------
BUSINESS SERVICES 3.4%
31,900 Ciber, Inc. <F27> 746
2,700 METAGROUP, INC. <F27> 83
73,700 Richey Electronics <F27> 958
------
1,787
------
COMMUNICATIONS &MEDIA 2.3%
116,500 Anicom, Inc. <F27> 1,238
------
COMPUTER SOFTWARE &SERVICES 6.7%
18,600 Amisys Managed Care Systems <F27> 353
7,600 Arbor Software Corporation <F27> 359
6,000 Aspen Technologies, Inc. <F27> 203
9,900 Citrix Systems, Inc. <F27> 322
11,400 Clarify, Inc. <F27> 342
57,300 Eagle Point Software Corporation <F27> 1,232
6,200 Pixar, Inc. <F27> 179
21,600 Visio Corporation <F27> 610
------
3,600
------
COSMETICS &SOAP 3.8%
225,500 Parlux Fragrances, Inc. <F27> 2,001
------
DRUGS 0.5%
25,200 Amrion, Inc. <F27> 261
------
ELECTRICAL EQUIPMENT 7.9%
124,000 C.P. Clare Corporation <F27> 2,542
38,400 Cable Design Technologies <F27> 1,690
------
4,232
------
ELECTRONICS 10.6%
123,500 ANADIGICS, Inc. <F27> 2,624
57,100 Micrel, Inc. <F27> 1,113
157,200 Micro Linear Corporation <F27> 1,611
21,200 Sandisk Corporation <F27> 318
------
5,666
------
FINANCE COMPANIES 1.6%
128,500 MSFinancial, Inc. <F27> 883
------
FINANCIAL SERVICES 1.6%
28,000 PMT Services, Inc. <F27> 847
------
HEALTH CARE 2.3%
44,600 Owen Healthcare, Inc. <F27> 1,232
------
HOSPITAL SUPPLIES &SERVICES 4.8%
51,600 National Surgery Centers, Inc. <F27> 1,187
61,000 Rural/Metro Corporation <F27> 1,380
------
2,567
------
HOUSING 2.7%
66,000 Palm Harbor Homes, Inc. <F27> 1,436
------
MACHINERY - INDUSTRIAL 3.9%
42,700 Ade Corporation <F27> 619
127,600 Speedfam International, Inc. <F27> 1,436
------
2,055
------
RESTAURANTS 5.1%
30,600 Apple South, Inc. 658
61,300 Quality Dining, Inc. <F27> 1,487
45,600 Rock Bottom Restaurants, Inc. <F27> 593
------
2,738
------
RETAIL - SPECIALTY 8.0%
62,400 Moovies, Inc. <F27> 842
186,750 Trend-Lines, Inc. <F27> 1,868
49,100 West Marine, Inc. <F27> 1,534
------
4,244
TECHNOLOGY - ELECTRONIC 0.5%
9,200 Gemstar International Group, Limited <F27> 261
------
TECHNOLOGY - MISCELLANEOUS 2.7%
50,700 Accom, Inc. <F27> 330
8,900 Pinnacle Systems, Inc. <F27> 220
49,000 Recoton Corporation<F27> 919
------
1,469
------
TRANSPORTATION 7.6%
128,600 Atlas Air, Inc. <F27> 2,154
11,400 Eagle USAAirfreight, Inc. <F27> 299
104,000 United Transnet, Inc. <F27> 1,599
------
4,052
------
Total Common Stock
(Cost $40,860) 42,170
------
MUTUAL FUNDS 4.2%
87,492 Janus Twenty Fund 2,246
------
Total Mutual Funds
(Cost $2,698) 2,246
------
Principal
Amount
(in thousands)
- --------------
SHORT-TERM INVESTMENTS 1.6%
VARIABLE RATE DEMAND NOTES
$ 254 American Family Demand Note 254
627 Sara Lee Demand Note 627
-------
Total Short-Term Investments
(Cost $881) 881
-------
Total Investments 84.8%
(Cost $44,439) 45,297
-------
Other Assets, less Liabilities 15.2% 8,096
-------
TOTAL NET ASSETS 100.0% $53,393
=======
<F27> Non-income producing
MICROCAP FUND
NOTES TO THE FINANCIAL STATEMENTS
(UNAUDITED)
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 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. Portfolio
securities which are primarily traded on foreign securities exchanges are
generally valued at the preceding closing values of such securities on their
respective exchanges, except when an occurrence subsequent to the time a value
was so established is likely to have changed such value. In such an event, the
fair value of those securities is determined through the consideration of
other factors by or under the direction of the Board of Directors. Quotations of
foreign securities in foreign currency are converted to United States ("U.S.")
dollar equivalents using the foreign exchange quotation in effect at the time
net asset value is computed.
b) Federal Income Taxes - No provision for federal income taxes has been made
since the Fund intends to comply with the provisions of the Internal Revenue
Code available to regulated investment companies in the current and 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) 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
to capital stock.
3. CAPITAL SHARE TRANSACTIONS
Transactions in capital shares for the Fund for the period August 1, 1995
(commencement of operations),through December 31, 1995, in thousands, were as
follows:
Series A Series Institutional
----------------- --------------------
Amount Shares Amount Shares
------ ------ -------- -------
Shares sold $6,680 605 $44,357 4,088
Shares issued
to owners in
reinvestment
of dividends 383 35 1,233 111
------ ------ ------- ------
7,063 640 45,590 4,199
Shares redeemed (283) (26) (904) (77)
------ ------ ------- ------
Net increase $6,780 614 $44,686 4,122
====== ====== ======= ======
4. INVESTMENT TRANSACTIONS
Purchases and sales of securities for the period ended December 31, 1995
(excluding short-term investments), in thousands, aggregated $93,379 and
$51,805, respectively.
At December 31, 1995, gross unrealized appreciation and depreciation of
investments for federal tax purposes, in thousands, were as follows:
Appreciation $4,623
(Depreciation) (3,803)
-------
Net unrealized appreciation on investments $820
=======
At December 31, 1995, the cost of investments, in thousands, for federal income
tax purposes was $44,482.
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 December 31, 1995, FIRMCO
voluntarily waived $44, 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
December 31, 1995, $10 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
FIRMCOaffiliates aggregated $4 for the period ended December 31, 1995.
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.
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 and 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
[ARTICLE] 6
[CIK] 0000824612
[NAME] PORTICO MICROCAP FUND - RETAIL
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 5-MOS
[FISCAL-YEAR-END] JUN-30-1996
[PERIOD-START] AUG-1-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 44,439
[INVESTMENTS-AT-VALUE] 45,297
[RECEIVABLES] 3,549
[ASSETS-OTHER] 4,814
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 53,660
[PAYABLE-FOR-SECURITIES] 115
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 152
[TOTAL-LIABILITIES] 267
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 51,466
[SHARES-COMMON-STOCK] 614
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 1,069
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 858
[NET-ASSETS] 53,393
[DIVIDEND-INCOME] 2,174
[INTEREST-INCOME] 261
[OTHER-INCOME] 0
[EXPENSES-NET] 261
[NET-INVESTMENT-INCOME] 2,174
[REALIZED-GAINS-CURRENT] 1,985
[APPREC-INCREASE-CURRENT] 858
[NET-CHANGE-FROM-OPS] 5,017
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 321
[DISTRIBUTIONS-OF-GAINS] 66
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 605
[NUMBER-OF-SHARES-REDEEMED] 26
[SHARES-REINVESTED] 35
[NET-CHANGE-IN-ASSETS] 53,393
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 219
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 315
[AVERAGE-NET-ASSETS] 33,342
[PER-SHARE-NAV-BEGIN] 10.00
[PER-SHARE-NII] 0.48
[PER-SHARE-GAIN-APPREC] 1.45
[PER-SHARE-DIVIDEND] 0.55
[PER-SHARE-DISTRIBUTIONS] 0.11
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 11.27
[EXPENSE-RATIO] 2.00
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[CIK] 0000824612
[NAME] PORTICO MICROCAP FUND - INSTITUTIONAL
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 5-MOS
[FISCAL-YEAR-END] JUN-30-1996
[PERIOD-START] AUG-01-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 44,439
[INVESTMENTS-AT-VALUE] 45,297
[RECEIVABLES] 3,549
[ASSETS-OTHER] 4,814
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 53,660
[PAYABLE-FOR-SECURITIES] 115
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 152
[TOTAL-LIABILITIES] 267
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 51,466
[SHARES-COMMON-STOCK] 4,122
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 1,069
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 858
[NET-ASSETS] 53,393
[DIVIDEND-INCOME] 2,174
[INTEREST-INCOME] 261
[OTHER-INCOME] 0
[EXPENSES-NET] 261
[NET-INVESTMENT-INCOME] 2,174
[REALIZED-GAINS-CURRENT] 1,985
[APPREC-INCREASE-CURRENT] 858
[NET-CHANGE-FROM-OPS] 5,017
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 2,245
[DISTRIBUTIONS-OF-GAINS] 459
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 4,088
[NUMBER-OF-SHARES-REDEEMED] 77
[SHARES-REINVESTED] 111
[NET-CHANGE-IN-ASSETS] 53,393
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 219
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 315
[AVERAGE-NET-ASSETS] 35,600
[PER-SHARE-NAV-BEGIN] 10.00
[PER-SHARE-NII] 0.48
[PER-SHARE-GAIN-APPREC] 1.46
[PER-SHARE-DIVIDEND] 0.56
[PER-SHARE-DISTRIBUTIONS] 0.11
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 11.27
[EXPENSE-RATIO] 1.75
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
