DRINKER BIDDLE & REATH
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, PA 19107-3496
Telephone: (215) 988-2700
TELEX: 834684
FAX: (215) 988-2757
October 28, 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. 29 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 immediately on October 28, 1996.
The purpose of this Amendment is to bring the financial statements up to date
and make other non-material changes to the prospectus and statement of
additional information of the MicroCap Fund. Accordingly, the prospectuses and
the 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/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. 29 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.
Very truly yours,
/s/ Kenneth L. Greenberg, Esq.
Kenneth L. Greenberg, Esq.
KLG:CS
Enclosures
cc: The Board of Directors of Portico Funds, Inc. (w/enc.)
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. 29 (X)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 (X)
Amendment No. 30 (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).
(X) immediately upon filing pursuant to paragraph (b)
( ) On , 199 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 Registrant filed on behalf of the
MicroCap Fund its Rule 24f-2 Notice for its fiscal year ended June 30, 1996 on
August 27, 1996.
THE PURPOSE OF THIS AMENDMENT IS TO ANNUALLY UPDATE THE REGISTRATION
STATEMENT OF THE MICROCAP FUND WHOSE FISCAL YEAR ENDED JUNE 30, 1996.
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/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.
PORTICO FUNDS, INC.
(Retail and Institutional Series)
MicroCap Fund
Form N-1A
Cross Reference Sheet
Part A
Item No. Prospectus 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; Invest-
ment 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
Prospectus October 28, 1996
PORTICO FUNDS
MicroCap
Fund
PORTICO FUNDS
TABLE OF CONTENTS
Expense Summary 3
Financial Highlights 4
Investment Objective and Policies 6
Other Investment Information 8
Purchase of Shares 14
Redemption of Shares 21
Exchange of Shares 25
Shareholder Services
(Retail Shareholders Only) 27
Dividends and Distributions 28
Management of the Fund 28
Expenses 31
Investment Limitations 32
Taxes 32
Description of Shares 34
Net Asset Value and Days of Operation 35
Performance Calculations 36
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 615 East Michigan
Street, P.O. Box 3011, Milwaukee, Wisconsin 53201-3011, 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.
October 28, 1996
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 current fiscal year. An example based on the summary is
also shown.
RETAIL INSTITUTIONAL
SHAREHOLDER TRANSACTION EXPENSES SHARES SHARES
- ----------------------------------------------------------------------------
Maximum Sales Load Imposed
on Purchases 4.00% None
Maximum Sales Load 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<F2> 1.50% 1.50%
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> 0.25% 0.50% 0.25% 0.25%
----- ----- ----- -----
Total Fund Operating Expenses
After Fee Waivers<F5> 2.00% 1.75%
- ----------------------------------------------------------------------------
<F1> A fee of $10.00 is charged for each wire redemption. See "Redemption of
Shares."
<F2> To the extent that the Fund's total ordinary operating expenses exceed
2.00% and 1.75%, respectively, for the Retail and Institutional Shares, the
Adviser may waive a portion of its fee. An advisory fee of 1.50% 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. Without the fee waiver, "Other Expenses After Fee Waivers"
would be 0.32% for both Retail and Institutional Shares.
<F5> Absent fee waivers, total operating expenses are expected to be 2.07% and
1.82% for Retail and Institutional Shares, respectively.
EXPENSE SUMMARY 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 5 YEARS 10 YEARS
---------------------------------------------------------
Retail Shares $59 $100 $143 $263
Institutional Shares $18 $ 55 $ 95 $206
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.
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 a 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 financial highlights for the period ended June 30, 1996
have been derived from financial records of the Fund which
have been audited by Price Waterhouse LLP, independent
accountants, whose report, which appears in the annual report
to shareholders for the fiscal period ended June 30, 1996, is
incorporated by reference into the Statement of Additional
Information. 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 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.
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
Income from Investment Operations Less Distributions
---------------------------------------- ---------------------------------------
Net Asset Net Realized and Net Asset
Value, Net Unrealized Gains Total from Dividends from Distributions Value,
Beginning Investment or (Losses) on Investment Net Investment from Total End
of Period Income (Loss) Securities Operations Income Capital Gains Distributions of Period
--------- -------------- ------------ ----------- ------------ ------------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aug. 1, 1995<F6> through
June 30, 1996
Institutional $10.00 $(0.02) $6.14 $6.12 (0.05) (0.62) (0.67) $15.45
Aug. 1, 1995<F6> through
June 30, 1996
Retail 10.00 (0.02) 6.10 6.08 (0.04) (0.62) (0.66) 15.42
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS (cont'd.)
<CAPTION>
Supplemental Data and Ratios
----------------------------------------------------------------------------------------
Ratio of Net
Net Ratio of Net Investment
Assets, Expenses to (Loss) to Portfolio
Total End of Average Net Average Net Turnover
Return<F7><F8> Period (000s) Assets<F9> Assets<F9> Rate<F12>
---------- -------------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Aug. 1, 1995<F6> through
June 30, 1996
Institutional 63.93% $63,595 1.74%<F10> (0.16)%<F10> 283.67%
Aug. 1, 1995<F6> through
June 30, 1996
Retail 63.52% 9,036 1.99%<F11> (0.36)% <F11> 283.67%
<FN>
<F6> Commencement of operations.
<F7> Not annualized for the period ended June 30, 1996.
<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 June 30, 1996.
<F10> Without fees waived, the ratio of net expenses to average net assets for the period ended June 30, 1996 would have been
1.97%; and the ratio of net investment income (loss) to average net assets for the period ended June 30, 1996 would have been
(0.39)%.
<F11> Without fees waived, the ratio of net expenses to average net assets for the period ended June 30 ,1996 would have been
2.22%; and the ratio of net investment income (loss) to average net assets for the period ended June 30, 1996 would have been
(0.59)%.
<F12> Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares
issued.
</TABLE>
INVESTMENT
OBJECTIVES
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 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, or 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 rate 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
Sales Charge Sales Charge Reallowance
Amount of as a as as a
Transaction Percentage Percentage Percentage
at Offering of Offering of Net of Offering
Price Price Asset Value 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 $20 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 - Bring your check to a Firstar
a Firstar Investment Office. Investment Office. Call
Call 1-800-982-8909 for the 1-800-982-8909 for the office
office nearest you. nearest you.
BY PHONE
- Call your registered - Call your registered
representative at the number representative at the number
on your statement or call on your statement or call
1-800-982-8909 for the office 1-800-982-8909 for the office
nearest you. nearest you.
AUTOMATICALLY
- Call your registered - Complete a Periodic Investment
representative at the number Plan Application to automatically
on your statement to obtain purchase more shares.
a Periodic Investment Plan
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 include
payable to Portico Funds, your account number on your
P.O. Box 3011, check and mail it to the address
Milwaukee, WI 53201-3011. on your statement.
OVERNIGHT DELIVERY
- Complete an application and - Make your check payable to
deliver it along with a check Portico Funds. Please include
payable to Portico Funds, your account number on your
615 E. Michigan St., check and deliver it to the
Milwaukee, WI 53202. address at the left.
IN PERSON
- Bring your application and - Bring your check to a Firstar
check to a Firstar Investment Investment Office. Call
Office. Call 1-800-982-8909 1-800-982-8909 for the office
for the office nearest you. nearest you.
AUTOMATICALLY
- Call 1-800-982-8909 to - Complete a Periodic Investment
obtain a Periodic Investment Plan Application to auto-
Plan Application. matically purchase more shares.
- Open a ConvertiFund(R)
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 arrange - Ask your bank to transmit
a wire transaction. Ask your immediately available funds by
bank to transmit immediately wire as described at the left.
available funds by wire in the Please also include your
amount of your purchase to: account number.
Firstar Bank Milwaukee, N.A.
ABA # 0750-00022, Account #
112-952-137 for further credit
to Portico MicroCap Fund
[the name/title on the account].
BY PHONE
- Call 1-800-228-1024 to - Call 1-800-228-1024 to exchange
exchange from another from another Portico Fund
Portico Fund account with account with the same
the same registration registration including name,
including name, address address and taxpayer
and taxpayer ID number. 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 Portico 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 A REGISTERED
THROUGH THE TRANSFER AGENT REPRESENTATIVE
-------------------------- --------------------
BY PHONE
- Call 1-800-228-1024 with - Call your registered
your account name, account representative at the
number and amount of number on your statement,
redemption (minimum $500). or 1-800-982-8909.
Redemption 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,
OVERNIGHT
DELIVERY
OR IN PERSON
- Mail your instructions to the - Bring your instructions to
Portico Funds, P.O. Box 3011, your registered representative's
Milwaukee, Wisconsin office, or mail or deliver them
53201-3011, or deliver them to Portico Investor Services at
(via overnight delivery or 777 East Wisconsin Avenue,
in person) to Suite 900, Milwaukee, WI 53202
615 E. Michigan Street,
Milwaukee, WI 53202.
Include the number of shares
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
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 number
application ($15,000 account on your statement to establish
minimum and $100 minimum a Systematic Withdrawal Plan.
per transaction).
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 $10.00 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 $1,000 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 a $10.00 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 October 31, 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's 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 FUNDS The business and affairs of the Funds 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
$18 billion in assets under active management, of which $10
billion is invested in fixed-income and money market
securities and $8 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 earned fees, net of waivers, for the fiscal period
ended June 30, 1996, at the annual rate of 1.34% for the
MicroCap Fund.
The Adviser's portfolio management services for the Fund are
conducted by Mark Westman. Mr. Westman has been with Firstar
since 1992 and has four years of investment management
experience and has managed the MircoCap Fund since its
inception. He is a Vice President and Portfolio Manager of
FIRMCO and a Chartered Financial Analyst.
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. For the fiscal period
ended June 30, 1996, the MicroCap Fund accrued administrative
fees, after waivers, at the effective annual rate of 0.05%.
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. For the fiscal period
ended June 30, 1996, Shareholder Organizations received fees
pursuant to such agreements at the annual rate of 0.25% of its
average net assets.
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 $10.00 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 were
approximately 0.16% (annualized) of the Fund's average net
assets for the fiscal period ended June 30, 1996. 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 taxation.
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, or (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) all 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 with Institutional Shares, including a
Periodic Investment Plan, ConvertiFund(R), 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 September 30, 1996, the
Adviser and its affiliates held, on behalf of their underlying
accounts, approximately 73% 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
CALCULATION 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
89-9070
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............. Investment
Objective 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
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............... Net Asset Value;
of Securities Being Offered 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
October 28, 1996
TABLE OF CONTENTS
-----------------
Page
----
Portico Funds .................................................. 2
Investment Objective and Policies .............................. 2
Net Asset Value ................................................ 14
Additional Purchase and Redemption Information ................. 15
Description of Shares .......................................... 19
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 ......................... 29
Miscellaneous .................................................. 30
Appendix A ..................................................... A-1
This Statement of Additional Information is meant to be read in
conjunction with the Portico Fund Prospectus dated, October 28, 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 615 East Michigan Street, P.O. Box
3011, Milwaukee, Wisconsin 53201-3011, 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 615
East Michigan Street, P.O. Box 3011, Milwaukee, Wisconsin 53201-3011.
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.
For the fiscal period ended June 30, 1996, the MicroCap Fund paid
brokerage commissions of $62,266. None of the brokerage commissions were paid
to the affiliates of the Company, the Adviser or the Co-Administrator.
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.
As of June 30, 1996, the Company held securities of its regular
brokers or dealers (as defined under the 1940 Act) or their parents as follows:
the Short-Term Bond Market, Intermediate Bond Market, Bond IMMDEX/tm, and
Balanced Funds held securities of Lehman Brothers totaling $1,301,681,
$5,493,401, $12,775,140, and $887,195, respectively; the Intermediate Bond
Market, Bond IMMDEX/tm, and Balanced Funds held securities of Goldman Sachs
totaling $4,744,180, $9,488,359, and $1,423,254, respectively; the Short-Term
Bond Market and Equity Index Funds held securities of Morgan Stanley totaling
$555,111 and $397,913, respectively; and the Short-Term Bond Market, Balanced,
Growth and Income, and Equity Index Funds held securities of Merrill Lynch
totaling $1,283,359, $1,028,415, $5,832,000, and $560,075, respectively.
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, in
the past the Fund has made commitments more restrictive than the investment
policies and limitations described above. The Fund is reviewing the
applicability of this commitment in light of recent legislation that preempts
state registration of investment company securities. Although the Fund
operates, as of the date of this Statement of Additional Information, in
compliance with the following investment limitations (which are imposed pursuant
to the regulations of a state), it may determine hereafter that it is no longer
required to do so without further notice to investors: (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.
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 normally based upon the price on the
exchange as of the close of business of the exchange immediately preceding the
time of valuation. 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 June 30, 1996, follows:
Net Assets $9,035,677
Numbers of Shares 585,992
Outstanding
Net Asset Value $ 15.42
Per Share
Sales Charge, 4.00% of Offering Price $ 0.64
----------
(4.16% of net asset value per share)
Public Offering Price $ 16.06
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.
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 $20 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 "Series") 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* 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,
One Park Plaza Chief 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* 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
777 East Wisconsin Avenue Operating Officer, FIRMCO since
Suite 800 1994, Director since 1992 and
Milwaukee, WI 53202 Director of Fixed Income
Age: 39 Securities since 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
* 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 MicroCap Fund's fiscal period ended June 30, 1996 of the Company's
Directors.
TOTAL
NAME OF AGGREGATE PENSION OR ESTIMATED COMPENSATION
PERSON/POSITION COMPENSATION RETIREMENT ANNUAL FROM
FROM THE BENEFITS BENEFITS UPON COMPANY
COMPANY ACCRUED AS RETIREMENT AND FUND
PART OF FUND COMPLEX* PAID
EXPENSES TO DIRECTORS
James M. Wade $15,000 $0 $0 $15,000
President,
Treasurer and
Chairman of the
Board
Glen R. Bomberger $12,000+ $0 $0 $12,000
Director
Jerry G. Remmel $12,000 $0 $0 $12,000
Director
Richard K. Riederer $12,000 $0 $0 $12,000
Director
Charles R. Roy $12,000 $0 $0 $12,000
Director
*The "Fund Complex" includes only the Company.
+Includes $12,000 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 MicroCap Fund's fiscal period ended June 30,
1996, the Directors and Officers received aggregate fees of $63,000. 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 may voluntarily
waive advisory fees otherwise payable by the Fund.
In addition to the compensation stated in the Prospectus, 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.
For services provided and expenses assumed by the Adviser under its
investment advisory agreement in effect for the fiscal period ended June 30,
1996, the Adviser earned $681,346 and waived advisory fees of $72,149.
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.
For its administrative services for the fiscal period ended June 30,
1996, the Co-Administrators earned $54,508 and waived $30,742.
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.
The MicroCap Fund paid $13,678 to Shareholder Organizations, all of
which were affiliated with the Advisor, pursuant to the service plan for the
fiscal period ended June 30, 1996.
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 first $2 billion of assets and $0.15 per $1,000 of the
market value of the Fund's assets in excess of $2 billion. 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 $24,000 per portfolio plus $15 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 financial statements and notes thereto, and accompanying reports
of the independent accountants, contained in the Fund's Annual Report for the
period ended June 30, 1996 are incorporated herein by reference. No other part
of the Annual Report is incorporated herein by reference. Such financial
statements have been incorporated herein in reliance on the report of Price
Waterhouse, LLP, independent accountants, given as authority of said firm as
experts in auditing and accounting.
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 June 30, 1996 was 63.93% with respect to the Institutional Series,
and 63.52% 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 June 30, 1996 was 56.93%.
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 September 30, 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 (5%), Institutional Money Market Fund (88%); Tax-
Exempt Money Market Fund (54%); U.S. Treasury Money Market Fund (39%); U.S.
Government Money Market Fund (68%); Growth and Income Fund (66%); Short-Term
Bond Market Fund (69%); Special Growth Fund (73%); Bond IMMDEXTM Fund (81%);
Equity Index Fund (79%); Balanced Fund (80%); Intermediate Bond Market Fund
(80%); MidCore Growth Fund (90%); Tax-Exempt Intermediate Bond Fund (70%);
International Equity Fund (92%); 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
"mark-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 mark-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 mark-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 mark-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 mark-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
mark-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.
*****
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements:
(1) Included in the Retail 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, 1995, 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. Treasury Money Market Fund
(formerly, U.S. Federal Money Market Fund) for the years ended
October 31, 1995, October 31, 1994, October 31, 1993, October 31,
1992 and the period from commencement of operations (April 29,
1991 with respect to U.S. Treasury Money Market Fund (formerly,
U.S. Federal Money Market Fund)) to October 31, 1991.
Incorporated by reference into the Statement of Additional
Informationfor the Money Market Fund, Institutional Money Market
Fund, U.S.Treasury Money Market Fund (formerly, U.S. Federal
Money MarketFund), U.S. Government Money Market Fund, and
Tax-Exempt Money Market Fund:
Reports of Independent Accountants -- November 29, 1995 -- Money
Market Fund, U.S. Treasury Money Market Fund (formerly, 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, 1995 -- Money
Market Fund, U.S. Government Money Market Fund, U.S. Treasury
Money Market Fund (formerly, U.S. Federal Money Market Fund),
Tax-Exempt Money Market Fund and Institutional Money Market Fund.
Schedule of Investments -- October 31, 1995 -- Money Market Fund,
U.S. Treasury Money Market Fund (formerly, 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, 1995 --
Money Market Fund, U.S. Treasury Money Market Fund (formerly,
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
31,1995 and October 31, 1994--Money Market Fund, U.S. Government
Money Market Fund, Tax-Exempt Money Market Fund, U.S. Treasury
Money Market Fund (formerly, 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, 1995, 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. Treasury Money Market Fund (formerly, U.S. Federal Money
Market Fund) for the years ended October 31, 1995, 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.
Treasury Money Market Fund (formerly, U.S. Federal Money Market
Fund), respectively) to October 31, 1991.
Notes to Financial Statements -- October 31, 1995 -- Money Market
Fund, U.S. Treasury Money Market Fund (formerly, U.S. Federal
Money Market Fund), U.S. Government Money Market Fund, Tax-Exempt
Money Market Fund and Institutional Money Market Fund.
(2) Included in the Retail Prospectus for the Balanced Fund, Growth
and Income Fund (formerly, Income and Growth Fund), Special
Growth Fund, Equity Index Fund, MidCore Growth Fund and
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, 1995, 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, 1995, 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 years
ended October 31, 1995, 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.
Financial Highlights for the International Equity Fund for the
year ended October 31, 1995 and for the period from commencement
of operations (April 28, 1994 with respect to the International
Equity Fund) to October 31, 1994.
(3) Included in the Retail Prospectus 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, 1995, 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 years ended October 31,
1995 and 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 Tax-Exempt
Intermediate Bond Fund) to October 31, 1993.
(4) Included in the Institutional Prospectus for 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, Balanced Fund, Growth and Income Fund (formerly, Income and
Growth Fund), Special Growth Fund, Equity Index Fund, MidCore
Growth Fund, International Equity Fund, 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 Institutional Money Market Fund for
the years ended October 31, 1995, October 31, 1994, October 31,
1993, October 31, 1992 and the period from commencement of
operations (April 26, 1991) to October 31, 1991.
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, 1995, 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. Treasury Money Market Fund
(formerly, U.S. Federal Money Market Fund) for the years ended
October 31, 1995, October 31, 1994, October 31, 1993, October 31,
1992 and the period from commencement of operations (April 29,
1991 with respect to U.S. Treasury Money Market Fund (formerly,
U.S. Federal Money Market Fund)) to October 31, 1991.
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, 1995, 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, 1995, 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 years
ended October 31, 1995, 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.
Financial Highlights for the International Equity Fund for the
year ended October 31, 1995 and for the period from commencement
of operations (April 28, 1994 with respect to the International
Equity Fund) to October 31, 1994.
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, 1995, 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 years ended October 31,
1995 and 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 Tax-Exempt
Intermediate Bond Fund) to October 31, 1993.
(5) Incorporated by reference in the Statement of Additional
Information for the Short-Term Bond Market Fund, Intermediate
Bond Market Fund, Tax-Exempt Intermediate Bond Fund, Bond
IMMDEX/TM Fund, Balanced Fund, Growth and Income Fund, Equity
Index Fund, MidCore Growth Fund, Special Growth Fund and
International Equity Fund:
Report of Independent Accountants -- November 29, 1995 -- Short-
Term Bond Market Fund, Intermediate Bond Market Fund, Tax-Exempt
Intermediate Bond Fund, and Bond IMMDEX/TM Fund.
Statement of Assets and Liabilities -- October 31, 1995 -- Short-
Term Bond Market Fund, Intermediate Bond Market Fund, Tax-Exempt
Intermediate Bond Fund, and Bond IMMDEX/TM Fund.
Schedule of Investments -- October 31, 1995 -- Short-Term Bond
Market Fund, Intermediate Bond Market Fund, Tax-Exempt
Intermediate Bond Fund, and Bond IMMDEX/TM Fund.
Statement of Operations for the year ended October 31, 1995 --
Short-Term Bond Market 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, 1995 and 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.
Financial Highlights for the Short-Term Bond Market Fund and Bond
IMMDEX/TM Fund for the years ended October 31, 1995, 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 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 years ended October 31,
1995 and 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 Tax-Exempt
Intermediate Bond Fund) to October 31, 1993.
Notes to Financial Statements -- October 31, 1995 -- 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.
Report of Independent Accountants -- November 29, 1995--Balanced
Fund, Growth and Income Fund, Equity Index Fund, MidCore Growth
Fund, Special Growth Fund and International Equity Fund.
Statement of Assets and Liabilities -- October 31, 1995 --
Balanced Fund, Growth and Income Fund, Equity Index Fund, MidCore
Growth Fund, Special Growth Fund and International Equity Fund.
Schedule of Investments -- October 31, 1995 -- Balanced Fund,
Growth and Income Fund, Equity Index Fund, MidCore Growth Fund,
Special Growth Fund and International Equity Fund.
Statement of Operations -- October 31, 1995 -- Balanced Fund,
Growth and Income 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, 1995 and October 31, 1994, -- Growth and Income Fund, Equity
Index Fund and Special Growth Fund, Balanced Fund and MidCore
Growth Fund.
Statement of Changes in Net Assets for the year ended October 31,
1995 and 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, Special
Growth Fund, and Equity Index Fund for the years ended October
31, 1995, 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 and Equity Index Fund) to October 31, 1990.
Financial Highlights for the Balanced Fund for the years ended
October 31, 1995, 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 years
ended October 31, 1995 and 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.
Financial Highlights for the International Equity Fund for the
year ended October 31, 1995 and for the period from the
commencement of operations (April 28, 1994 with respect to the
International Equity Fund) to October 31, 1994.
Notes to Financial Statements -- October 31, 1995 -- Balanced
Fund, Growth and Income Fund (formerly, Income and Growth Fund),
Equity Index Fund, MidCore Growth Fund, Special Growth Fund and
International Equity Fund.
(6) Included in the Prospectus for the MicroCap Fund - Financial
Highlights for the period from the commencement of operations
(August 1, 1995) to June 30, 1996.
(7) Incorporated by reference in the Statement of Additional
Information for the MicroCap Fund --
Statement of Assets and Liabilities -- June 30, 1996 -- MicroCap
Fund.
Schedule of Investments -- June 30, 1996 -- MicroCap Fund.
Statement of Operations -- June 30, 1996 -- MicroCap Fund.
Statement of Changes in Net Assets for the period from January 1,
1996 to June 30, 1996 -- MicroCap Fund.
Notes to Financial Statements -- June 30, 1996 --MicroCap Fund.
(8) Included in the Prospectus of 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 is
incorporated by reference to Exhibit (1)(a) to Post-
Effective Amendment No. 28 to the Registration Statement,
filed February 15, 1996 ("Post-Effective Amendment No. 28").
(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. 28.
(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. 28.
(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. 28.
(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. 28.
(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. 28.
(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. 28.
(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. 28.
(i) Amendment No. 8 to the Articles of Incorporation filed
December 29, 1994 is incorporated by reference to Exhibit
(1)(i) to Post-Effective Amendment No. 28.
(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. 28.
(k) Amendment No. 10 to the Articles of Incorporation filed
November 10, 1995 is incorporated by reference to Exhibit
(1)(k) to Post-Effective Amendment No. 28.
(2)(a) Registrant's By-laws dated September 9, 1988 are incorporated
by reference to Exhibit (2)(a) to Post-Effective Amendment No.
28.
(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. 28.
(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. 28.
(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. 28.
(3) None.
(4) (a) See Articles V and VII of the Articles of Incorporation which
are incorporated by reference to Exhibits (1)(a) and (1)(i) to
Post-Effective Amendment No. 28 and Article II, Sections 1,
9 and 10 of Article III, Sections 1, 2 and 3 of Article V
and Section II of Article VII of the By-laws which are
incorporated by reference to Exhibits 2(a)-2(d) of Post-
Effective Amendment No. 28.
(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. 28.
(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. 28.
(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
(5)(c) to Post-Effective Amendment No. 28.
(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 Post-
Effective Amendment No. 28.
(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. 28.
(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. 28.
(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.
28.
(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. 28.
(i) Addendum No. 4 to the Investment Advisory Agreement between
Registrant and Firstar Investment Research and 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. 28.
(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. 28.
(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)(a) to Post-Effective Amendment No.
28.
(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 Post-Effective Amendment No.
28.
(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. 28.
(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. 28.
(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. 28.
(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 (8)(b) to Post-
Effective Amendment No. 28.
(c) Revised Mutual Fund Custodial Agent Service Annual Fee
Schedule dated February 23, 1990 to the Custodian Agreement is
incorporated by reference to Exhibit (8)(c) to Post-
Effective Amendment No. 28.
(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. 28.
(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.
28.
(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. 28.
(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. 28.
(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. 28.
(i) Custodian Arrangement between Registrant and State Street Bank
and Trust Company dated April 26, 1994.
(j) Letter Agreement dated August 1, 1995 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. 28.
(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. 28.
(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)(a) to Post-Effective Amendment No. 28.
(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. 28.
(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. 28.
(d) Fund Accounting Servicing Agreement dated March 23, 1988
between Registrant and First Wisconsin Trust Company is
incorporated by reference to Exhibit (9)(d) to Post-Effective
Amendment No. 28.
(e) Letter dated July 29, 1988 with respect to the Fund Accounting
Servicing Agreement is incorporated by reference to Exhibit
(9)(e) to Post-Effective Amendment No. 28.
(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)(f) to
Post-Effective Amendment No. 28.
(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)(g)
to Post-Effective Amendment No. 28.
(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)(h) to Post-
Effective Amendment No. 28.
(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 Post-
Effective Amendment No. 28.
(j) Letter dated February 5, 1993 with respect to the Fund
Accounting Servicing Agreement with respect to the Tax-Exempt
Intermediate Bond Fund.
(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)(k) to Post-Effective
Amendment No. 28.
(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)(l) to Post-Effective Amendment No.
28.
(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, Short- Intermediate Fixed
Income Fund, and Bond IMMDEX/TM Fund is incorporated by
reference to Exhibit (9)(m) to Post-Effective Amendment
No. 28.
(n) Letter Agreement dated August 1, 1995 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. 28.
(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. 28.
(p) Shareholder Servicing Agent Agreement dated March 23, 1988
between Registrant and First Wisconsin Trust Company is
incorporated by reference to Exhibit (9)(p) to Post-
Effective Amendment No. 28.
(q) Letter dated July 29, 1988 with respect to Shareholder
Servicing Agent Agreement is incorporated by reference to
Exhibit (9)(q) to Post-Effective Amendment No. 28
(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)(r) to Post-
Effective Amendment No. 28.
(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)(s) to Post-
Effective Amendment No. 28.
(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)(t) to Post-
Effective Amendment No. 28.
(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)(u) to Post-Effective Amendment No.
28.
(v) Letter dated February 5, 1993 with respect to the Shareholder
Servicing Agent Agreement with respect to the Tax-Exempt
Intermediate Bond Fund.
(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)(w)
to Post-Effective Amendment No. 28.
(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)(x) to
Post-Effective Amendment No. 28.
(y) Letter Agreement dated August 1, 1995 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. 28.
(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. 28.
(aa) Plan of Reorganization is incorporated by reference to Exhibit
(9)(aa) to Post-Effective Amendment No. 28.
(ab) Purchase and Assumption Agreement dated February 22, 1988 is
incorporated by reference to Exhibit (9)(ab) to Post-
Effective Amendment No. 28.
(ac) Amended and Restated Service Plan and Servicing Agreement is
incorporated by reference to Exhibit (9)(ac) to Post-
Effective Amendment No. 28.
(10)<F13> Opinion and Consent of Counsel.
(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.
(b) Purchase Agreement between ALPS Securities, Inc. and Sunstone
Financial Group, Inc.
- ------------------------
<F13>Filed with the SEC on December 20, 1995 and August 27, 1996 (with respect
to the MicroCap Fund) under Rule 24f-2 as part of Registrant's Rule 24f-2
Notice.
(14) (a) Individual Retirement Account Documents is incorporated by
reference to Exhibit (14) to Post-Effective Amendment No. 28.
(15) (a) Amended and Restated Distribution and Service Plan and Form of
Distribution and Servicing Agreement is incorporated by
reference to Exhibit (15)(a) to Post-Effective Amendment No.
28.
(16) (a) Schedule for Computation of Performance Quotations--Money
Market Fund is incorporated by reference to Exhibit (16)(a) to
Post-Effective Amendment No. 28.
(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. 28.
(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. 28.
(d) Schedule of Computation of Performance Quotations--Growth and
Income Fund is incorporated by reference to Exhibit (16)(d)
to Post-Effective Amendment No. 28.
(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. 28.
(f) Schedule of Computation of Performance Quotations--Special
Growth Fund is incorporated by reference to Exhibit (16)(f)
to Post-Effective Amendment No. 28.
(g) Schedule of Computation of Performance Quotations--Bond
IMMDEX/TM Fund is incorporated by reference to Exhibit
(16)(g) to Post-Effective Amendment No. 28.
(h) Schedule of Computation of Performance Quotations--Equity
Index Fund is incorporated by reference to Exhibit (16)(h)
to Post-Effective Amendment No. 28.
(i) Schedule of Computation of Performance Quotations--
Institutional Money Market Fund is incorporated by reference
to Exhibit (16)(i) to Post-Effective Amendment No. 28.
(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. 28.
(k) Schedule of Computation of Performance Quotations--Balanced
Fund is incorporated by reference to Exhibit (16)(k) to
Post-Effective Amendment No. 28.
(l) Schedule of Computation of Performance Quotations--MidCore
Growth Fund is incorporated by reference to Exhibit (16)(l)
to Post-Effective Amendment No. 28.
(m) Schedule of Computation of Performance Quotations--
Intermediate Bond Market Fund is incorporated by reference
to Exhibit (16)(m) to Post-Effective Amendment No. 28.
(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. 28.
(o) Schedule of Computation of Performance Quotations--
International Equity Fund is incorporated by reference to
Exhibit (16)(o) to Post-Effective Amendment No. 28.
(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 Post-Effective Amendment No. 28.
(24) (a) The Audited Financial Statements, related notes thereto and
Auditor's reports thereon included as part of the Annual
Report to Shareholders for the period ended June 30, 1996
with respect to the MicroCap Fund is incorporated herein by
refernece to such Annual Report as filed with the SEC on
August 28, 1996 pursuant to Rule 30b2-1 of the Investment
Company Act of 1940 (Nos. 33-18255/811-5380).
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 September 30, 1996:
Number of
Title of Class Series Record Holders
-------------- ------ --------------
Money Market Fund 1-A 5,216
Tax-Exempt Money Market Fund 2-A 406
U.S. Government Money Market Fund 3-A 328
Institutional Money Market Fund 4-A 69
U.S. Treasury Money Market Fund 5-A 111
Special Growth Fund 6-Institutional 446
6-A 6,515
Bond IMMDEX/TM Fund 7-Institutional 146
7-A 889
Equity Index Fund 8-Institutional 140
8-A 1,445
Growth and Income Fund 9-Institutional 159
9-A 3,007
Short-Term Bond Market Fund 10-Institutional 58
10-A 1,656
Balanced Fund 11-Institutional 173
11-A 1,390
MidCore Growth Fund 12-Institutional 81
12-A 795
Intermediate Bond Market Fund 13-Institutional 31
13-A 264
Tax-Exempt Intermediate Bond Fund 14-Institutional 13
14-A 167
International Equity Fund 15-Institutional 27
15-A 318
MicroCap Fund 16-Institutional 15
16-A 181
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.
FIRSTAR INVESTMENT RESEARCH AND MANAGEMENT COMPANY
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
J. Scott Harkness Director and None
Chairman
Steven R. Parish Director Executive Vice Bank
President, Firstar Holding Co.
Corporation, 777
E. Wisconsin Avenue,
Suite 800
Milwaukee, WI 53201
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
Matthew Uselman Director Senior Vice Bank
President,
Firstar Bank
Wisconsin
1 South Pinckney,
Suite 401
Madison, WI 53703
Robert L. Webster Director President, Trust Company
Firstar Trust
Company, 777 E.
Wisconsin Avenue,
Milwaukee, WI 53202
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<F14>
- ---- --------------- ---------------
Tenley E. Albright, M.D. Director Chairman, Western
Resources, Inc.
Joseph A. Baute Director Consultant to Markem Corporation
Former Chairman/CEO
L. MacAlister Booth Director Retired Chairman, President and
CEO, Polaroid Corporation
Marshall N. Carter Chairman Director, Euroclear;
and CEO Director, Orbis Inter-
national
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 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 Former President, Meal Enhancement
Group, Campbell Soup Company
Bernard W. Reznicek Director Dean of the College of Business
Administration, Creighton
University
Former Chairman and CEO, Boston
Edison
David A. Spina President and Chairman, Massachusetts Housing
Chief Oper- Investment Corporation, Director,
ating Officer Metropolitan Boston Housing
Partnership, Inc., Chairman,
Dana Hall School
Robert E. Weissman Director Chairman and CEO,
The Dun & Bradstreet Corp.
<F14> 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"), the Registrant'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:
Name and Principal Position and Offices Positions and Offices with
Business Address with B. C. Ziegler Registrant
- ------------------- --------------------- --------------------------
R. Douglas Ziegler Chairman of the Board and None
Director
Peter D. Ziegler President, Chief Executive None
Officer and Director
S. Charles O'Meara Senior Vice President and None
General Counsel and
Director
Eugene H. Rudnicki Senior Vice President - None
Acquisition
Name and Principal Position and Offices Positions and Offices with
Business Address with B. C. Ziegler Registrant
- ------------------- ---------------------- --------------------------
Donald A. Carlson, Jr. Senior Vice President None
Neil L. Fuerbringer Senior Vice President - None
Administration
Michael P. Doyle Senior Vice President - None
Retail Operations
Lynn R. Van Horn Senior Vice President - None
Finance and Director
Ronald N. Spears Senior Vice President None
Jeffrey C. Vredenbregt Vice President, Treasurer, None
Controller and Director
Charles G. Stevens Vice President - Marketing None
Director
Jack H. Downer Vice President - None
MIS Director
Robert J. Tuszynski Senior Vice President None
Gerry Aman Vice President - Insurance None
Sheila K. Hittman Vice President - Personnel None
Robert J. Johnson Vice President - None
Compliance
James M. Bushman Vice President - None
Recruiting and Training
Coordinator
Lay C. Rosenheimer Vice President - Bond None
Name and Principal Position and Offices Positions and Offices with
Business Address with B. C. Ziegler Registrant
- ------------------- -------------------- --------------------------
Darrell P. Frank Sales Control
Vice President - Director None
of Strategic Change
James L. Brendemuehl Vice President - Mutual None
Funds and UIT's
Ronald C. Strzok Vice President - None
Administration
Jerome Ferrara, Jr. Assistant Vice President - None
Mutual Funds
Janine R. Yovanovich 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 co-
administrator).
(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. 29 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 28th day of October, 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. 29 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
- --------- ----- ----
*James M. Wade Chairman, President October 28th, 1996
- ------------------------- and Treasurer
(James M. Wade)
*Richard Riederer Director October 28th, 1996
- -------------------------
(Richard Riederer)
*Jerry Remmel Director October 28th, 1996
- -------------------------
(Jerry Remmel)
*Glen R. Bomberger Director October 28th, 1996
- -------------------------
(Glen R. Bomberger)
*Charles R. Roy Director October 28th, 1996
- -------------------------
(Charles R. Roy)
*By --------------------- October 28th, 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 June 21, 1996 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: October 28, 1996
EXHIBIT INDEX
Exhibit No. Item
(8)(i) Custodian Agreement between Registrant and State Street Bank and
Trust Company dated April 26, 1994, with respect to the
International Equity Fund.
(9)(j) Letter dated February 5, 1993 with respect to the Fund Accounting
Servicing Agreement with respect to the Tax-Exempt Intermediate
Bond Fund.
(9)(v) Letter dated February 5, 1993 with respect to the Shareholder
Servicing Agent Agreement with respect to the Tax-Exempt
Intermediate Bond Fund.
(11)(a) Consent of Drinker Biddle & Reath.
(11)(b) Consent of Price Waterhouse L.L.P.
(13(a) Purchase Agreement between Registrant and ALPS Securities, Inc.
(13)(b) Purchase Agreement between ALPS Securities, Inc. and Sunstone
Financial Group, Inc.
(16)(p) Schedule of Computation of Performance Quotations-MicroCap Fund.
(17) Financial Data Schedule.
EXHIBIT (8) (i)
CUSTODIAN CONTRACT
Between
PORTICO FUNDS, INC.
and
STATE STREET BANK AND TRUST COMPANY
TABLE OF CONTENTS
Page
----
1. Employment of Custodian and Property to be Held by It................ 1
2. Duties of the Custodian with Respect to Property of
the Fund Held By the Custodian in the United States.................. 2
2.1 Holding Securities....................................... 2
2.2 Delivery of Securities................................... 2
2.3 Registration of Securities............................... 5
2.4 Bank Accounts............................................ 5
2.5 Availability of Federal Funds............................ 5
2.6 Collection of Income..................................... 6
2.7 Payment of Fund Monies................................... 6
2.8 Liability for Payment in Advance of Receipt
of Securities Purchased................................ 8
2.9 Appointment of Agents.................................... 8
2.10 Deposit of Fund Assets in Securities Systems............. 8
2.11 Fund Assets Held in the Custodian's Direct Paper System.. 9
2.12 Segregated Account....................................... 10
2.13 Ownership Certificate for Tax Purposes................... 11
2.14 Proxies.................................................. 11
2.15 Communications Relating to Portfolio Securities.......... 11
3. Duties of the Custodian with Respect to Property of
The Fund Held Outside of the United States........................... 12
3.1 Appointment of Foreign Sub-Custodians.................... 12
3.2 Assets to be Held........................................ 12
3.3 Foreign Securities Depositories.......................... 12
3.4 Agreements with Foreign Banking Institutions............. 12
3.5 Access of Independent Accountants of the Fund............ 13
3.6 Reports by Custodian..................................... 13
3.7 Transactions in Foreign Custody Account.................. 13
3.8 Liability of Foreign Sub-Custodians...................... 14
3.9 Liability of Custodian................................... 14
3.10 Reimbursement for Advances............................... 15
3.11 Monitoring Responsibilities.............................. 15
3.12 Branches of U.S. Banks................................... 15
3.13 Tax Law.................................................. 15
4. Payments for Sales or Repurchases or Redemptions
of Shares of the Fund................................................ 16
5. Proper Instructions.................................................. 16
6. Actions Permitted Without Express Authority.......................... 17
7. Evidence of Authority................................................ 17
8. Duties of Custodian With Respect to the Books of
Account and Calculation of Net Asset Value and Net Income............ 18
9. Records.............................................................. 18
10. Opinion of Fund's Independent Accountants............................ 18
11. Reports to Fund by Independent Public Accountants.................... 19
12. Compensation of Custodian............................................ 19
13. Responsibility of Custodian.......................................... 19
14. Effective Period, Termination and Amendment.......................... 20
15. Successor Custodian.................................................. 21
16. Interpretive and Additional Provisions............................... 22
17. Additional Funds..................................................... 22
18. Massachusetts Law to Apply........................................... 23
19. Prior Contracts...................................................... 23
20. Equipment Failures................................................... 23
21. Shareholder Communications........................................... 23
CUSTODIAN CONTRACT
This Contract between Portico Funds, Inc., a corporation organized and
existing under the laws of Wisconsin, having its principal place of business at
207 E. Buffalo Street, Suite 315, Milwaukee, Wisconsin, 53202 hereinafter called
the "Fund," and State Street Bank and Trust Company, a Massachusetts trust
company, having its principal place of business at 225 Franklin Street, Boston,
Massachusetts 02110, hereinafter called the "Custodian,"
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets; and
WHEREAS, the Fund intends to initially offer shares in one series, the
Portico International Equity Portfolio (such series together with all other
series subsequently established by the Fund and made subject to this Contract in
accordance with paragraph 17, being herein referred to as the "Portfolio(s)");
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
-----------------------------------------------------
The Fund hereby employs the Custodian as the custodian of the assets of
the Portfolio(s) of the Fund, including securities which the Fund, on behalf of
the applicable Portfolio desires to be held in places within the United States
("domestic securities") and securities it desires to be held outside the United
States ("foreign securities") pursuant to the provisions of the Articles of
Incorporation. The Fund on behalf of the Portfolio(s) agrees to deliver to the
Custodian all securities and cash of the Portfolio(s), and all payments of
income, payments of principal or capital distributions received by it with
respect to all securities owned by the Portfolio(s) from time to time, and the
cash consideration received by it for such new or treasury shares of capital
stock of the Fund representing interests in the Portfolio(s), ("Shares") as may
be issued or sold from time to time. The Custodian shall not be responsible for
any property of a Portfolio held or received by the Portfolio and not delivered
to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article 5),
the Custodian shall on behalf of the applicable Portfolio(s) from time to time
employ one or more sub-custodians, located in the United States but only in
accordance with an applicable vote by the Board of Directors of the Fund on
behalf of the applicable Portfolio(s), and provided that the Custodian shall
have no more or less responsibility or liability to the Fund on account of any
actions or omissions of any sub-custodian so employed than any such sub-
custodian has to the Custodian. The Custodian may employ as sub-custodian for
the Fund's foreign securities on behalf of the applicable Portfolio(s) the
foreign banking institutions and foreign securities depositories designated in
Schedule A hereto but only in accordance with the provisions of Article 3.
2. Duties of the Custodian with Respect to Property of the Fund Held By the
------------------------------------------------------------------------
Custodian in the United States
------------------------------
2.1 Holding Securities. The Custodian shall hold and physically segregate for
------------------
the account of each Portfolio all non-cash property, to be held by it in
the United States including all domestic securities owned by such
Portfolio, other than (a) securities which are maintained pursuant to
Section 2.10 in a clearing agency which acts as a securities depository or
in a book-entry system authorized by the U.S. Department of the Treasury,
collectively referred to herein as "Securities System" and (b) commercial
paper of an issuer for which State Street Bank and Trust Company acts as
issuing and paying agent ("Direct Paper") which is deposited and/or
maintained in the Direct Paper System of the Custodian pursuant to
Section 2.11.
2.2 Delivery of Securities. The Custodian shall release and deliver domestic
----------------------
securities owned by a Portfolio which are held by the Custodian or in a
Securities System account of the Custodian or in the Custodian's Direct
Paper book entry system account ("Direct Paper System Account") only upon
receipt of Proper Instructions from the Fund on behalf of the applicable
Portfolio, which may be continuing instructions when deemed appropriate by
the parties, and only in the following cases:
1) Upon sale of such securities for the account of the Portfolio and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase agreement
related to such securities entered into by the Portfolio;
3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other similar
offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are called,
redeemed, retired or otherwise become payable; provided that, in any
such case, the cash or other consideration is to be delivered to the
Custodian;
6) To the issuer thereof, or its agent, for transfer into the name of the
Portfolio or into the name of any nominee or nominees of the Custodian
or into the name or nominee name of any agent appointed pursuant to
Section 2.9 or into the name or nominee name of any sub-custodian
appointed pursuant to Article 1; or for exchange for a different
number of bonds, certificates or other evidence representing the same
aggregate face amount or number of units; PROVIDED that, in any such
case, the new securities are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of the Portfolio, to
the broker or its clearing agent, against a receipt, for examination in
accordance with "street delivery" custom; provided that in any such
case, the Custodian shall have no responsibility, or liability for any
loss arising from the delivery of such securities prior to receiving
payment for such securities except as may arise from the Custodian's
own negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of
the securities of the issuer of such securities, or pursuant to
provisions for conversion contained in such securities, or pursuant
to any deposit agreement; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the surrender
thereof in the exercise of such warrants, rights or similar securities
or the surrender of interim receipts or temporary securities for
definitive securities; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the Custodian;
10) For delivery in connection with any loans of securities made by the
Portfolio, BUT ONLY against receipt of adequate collateral as agreed
upon from time to time by the Custodian and the Fund on behalf of the
Portfolio, which may be in the form of cash or obligations issued by
the United States government, its agencies or instrumentalities,
except that in connection with any loans for which collateral is to be
credited to the Custodian's account in the book-entry system
authorized by the U.S. Department of the Treasury, the Custodian will
not be held liable or responsible for the delivery of securities owned
by the Portfolio prior to the receipt of such collateral;
11) For delivery as security in connection with any borrowings by the Fund
on behalf of the Portfolio requiring a pledge of assets by the Fund on
behalf of the Portfolio, BUT ONLY against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any agreement among
the Fund on behalf of the Portfolio, the Custodian and a broker-dealer
registered under the Securities Exchange Act of 1934 (the "Exchange
Act") and a member of The National Association of Securities Dealers,
Inc. ("NASD"), relating to compliance with the rules of The Options
Clearing Corporation and of any registered national securities
exchange, or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the
Portfolio of the Fund;
13) For delivery in accordance with the provisions of any agreement among
the Fund on behalf of the Portfolio, the Custodian, and a Futures
Commission Merchant registered under the Commodity Exchange Act,
relating to compliance with the rules of the Commodity Futures Trading
Commission and/or any Contract Market, or any similar organization or
organizations, regarding account deposits in connection with
transactions by the Portfolio of the Fund;
14) Upon receipt of instructions from the transfer agent ("Transfer Agent")
for the Fund, for delivery to such Transfer Agent or to the holders of
shares in connection with distributions in kind, as may be described
from time to time in the currently effective prospectus and statement
of additional information of the Fund, related to the Portfolio
("Prospectus"), in satisfaction of requests by holders of Shares for
repurchase or redemption; and
15) For any other proper corporate purpose, BUT ONLY upon receipt of, in
addition to Proper Instructions from the Fund on behalf of the
applicable Portfolio, a certified copy of a resolution of the Board of
Directors or of the Executive Committee signed by an officer of the
Fund and certified by the Secretary or an Assistant Secretary,
specifying the securities of the Portfolio to be delivered, setting
forth the purpose for which such delivery is to be made, declaring
such purpose to be a proper corporate purpose, and naming the person
or persons to whom delivery of such securities shall be made. In no
case may any director, officer, employee or agent of the Fund withdraw
any securities upon his or her sole instructions.
2.3 Registration of Securities. All securities accepted by the Custodian on
--------------------------
behalf of the Portfolio under the terms of this Contract shall be in
"street name" or other good delivery form. If, however, the Fund directs
the Custodian to maintain securities in "street name," the Custodian shall
utilize its best efforts only to timely collect income due the Fund on
such securities and to notify the Fund on a best efforts basis only of
relevant corporate actions including, without limitation, pendency of
calls, maturities, tender or exchange offers. Otherwise, domestic
securities held by the Custodian (other than bearer securities) shall be
registered in the name of the Portfolio or in the name of any nominee of
the Fund on behalf of the Portfolio or of any nominee of the Custodian
which nominee shall be assigned exclusively to the Portfolio, UNLESS the
Fund has authorized in writing the appointment of a nominee to be used in
common with other registered investment companies having the same
investment adviser as the Portfolio, or in the name or nominee name of any
agent appointed pursuant to Section 2.9 or in the name or nominee name of
any sub-custodian appointed pursuant to Article 1.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
-------------
account or accounts in the United States in the name of each Portfolio of
the Fund, subject only to draft or order by the Custodian acting pursuant
to the terms of this Contract, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by it from or for the
account of the Portfolio, other than cash maintained by the Portfolio in a
bank account established and used in accordance with Rule 17f-3 under the
Investment Company Act of 1940. Funds held by the Custodian for a
Portfolio may be deposited by it to its credit as Custodian in the Banking
Department of the Custodian or in such other banks or trust companies as it
may in its discretion deem necessary or desirable; PROVIDED, however, that
every such bank or trust company shall be qualified to act as a custodian
under the Investment Company Act of 1940 and that each such bank or trust
company and the funds to be deposited with each such bank or trust company
shall on behalf of each applicable Portfolio be approved by vote of a
majority of the Board of Directors of the Fund. Such funds shall be
deposited by the Custodian in its capacity as Custodian and shall be
withdrawable by the Custodian only in that capacity.
2.5 Availability of Federal Funds. Upon mutual agreement between the Fund on
-----------------------------
behalf of each applicable Portfolio and the Custodian, the Custodian shall,
upon the receipt of Proper Instructions from the Fund on behalf of a
Portfolio, make federal funds available to such Portfolio as of specified
times agreed upon from time to time by the Fund and the Custodian in the
amount of checks received in payment for Shares of such Portfolio which are
deposited into the Portfolio's account.
2.6 Collection of Income. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments
with respect to registered domestic securities held hereunder to which each
Portfolio shall be entitled either by law or pursuant to custom in the
securities business, and shall collect on a timely basis all income and
other payments with respect to bearer domestic securities if, on the date
of payment by the issuer, such securities are held by the Custodian or its
agent thereof and shall credit such income, as collected, to such
Portfolio's custodian account. Without limiting the generality of the
foregoing, the Custodian shall detach and present for payment all coupons
and other income items requiring presentation as and when they become due
and shall collect interest when due on securities held hereunder. Income
due each Portfolio on securities loaned pursuant to the provisions of
Section 2.2 (10) shall be the responsibility of the Fund, except with
respect to income due on securities loaned under the Custodian's securities
lending program, in which case the Custodian's responsibilities shall be
set forth in the Securities Lending Authorization Agreement duly executed
between the Fund and the Custodian. The Custodian will have no duty or
responsibility in connection therewith, other than to provide the Fund with
such information or data as may be necessary to assist the Fund in
arranging for the timely delivery to the Custodian of the income to which
the Portfolio is properly entitled.
2.7 Payment of Fund Monies. Upon receipt of Proper Instructions from the Fund
----------------------
on behalf of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, the Custodian shall
pay out monies of a Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options, futures contracts or
options on futures contracts for the account of the Portfolio but only
(a) against the delivery of such securities or evidence of title to
such options, futures contracts or options on futures contracts to the
Custodian (or any bank, banking firm or trust company doing business
in the United States or abroad which is qualified under the
Investment Company Act of 1940, as amended, to act as a custodian and
has been designated by the Custodian as its agent for this purpose)
registered in the name of the Portfolio or in the name of a nominee of
the Custodian referred to in Section 2.3 hereof or in proper form for
transfer; (b) in the case of a purchase effected through a Securities
System, in accordance with the conditions set forth in Section 2.10
hereof; (c) in the case of a purchase involving the Direct Paper
System, in accordance with the conditions set forth in Section 2.11;
(d) in the case of repurchase agreements entered into between the Fund
on behalf of the Portfolio and the Custodian, or another bank, or a
broker-dealer which is a member of NASD, (i) against delivery of the
securities either in certificate form or through an entry crediting
the Custodian's account at the Federal Reserve Bank with such
securities or (ii) against delivery of the receipt evidencing purchase
by the Portfolio of securities owned by the Custodian along with
written evidence of the agreement by the Custodian to repurchase such
securities from the Portfolio or (e) for transfer to a time deposit
account of the Fund in any bank, whether domestic or foreign; such
transfer may be effected prior to receipt of a confirmation from a
broker and/or the applicable bank pursuant to Proper Instructions from
the Fund as defined in Article 5;
2) In connection with conversion, exchange or surrender of securities
owned by the Portfolio as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by the Portfolio as
set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by the Portfolio,
including but not limited to the following payments for the account of
the Portfolio: interest, taxes, management, accounting, transfer
agent and legal fees, and operating expenses of the Fund whether or
not such expenses are to be in whole or part capitalized or treated as
deferred expenses;
5) For the payment of any dividends on Shares of the Portfolio declared
pursuant to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, BUT ONLY upon receipt of, in addition to
Proper Instructions from the Fund on behalf of the Portfolio, a
certified copy of a resolution of the Board of Directors or of the
Executive Committee of the Fund signed by an officer of the Fund and
certified by its Secretary or an Assistant Secretary, specifying the
amount of such payment, setting forth the purpose for which such
payment is to be made, declaring such purpose to be a proper purpose,
and naming the person or persons to whom such payment is to be made.
2.8 Liability for Payment in Advance of Receipt of Securities Purchased. Except
-------------------------------------------------------------------
as specifically stated otherwise in this Contract, in any and every case
where payment for purchase of domestic securities for the account of a
Portfolio is made by the Custodian in advance of receipt of the securities
purchased in the absence of specific written instructions from the Fund on
behalf of such Portfolio to so pay in advance, the Custodian shall be
absolutely liable to the Fund for such securities to the same extent as
if the securities had been received by the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or times in its
---------------------
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the Investment Company Act of 1940,
as amended, to act as a custodian, as its agent to carry out such of the
provisions of this Article 2 as the Custodian may from time to time direct;
PROVIDED, however, that the appointment of any agent shall not relieve the
Custodian of its responsibilities or liabilities hereunder.
2.10 Deposit of Fund Assets in Securities. The Custodian may deposit and/or
------------------------------------
maintain securities owned by a Portfolio in a clearing agency registered
with the Securities and Exchange Commission under Section 17A of the
Securities Exchange Act of 1934, which acts as a securities depository, or
in the book-entry system authorized by the U.S. Department of the Treasury
and certain federal agencies, collectively referred to herein as
"Securities System" in accordance with applicable Federal Reserve Board
and Securities and Exchange Commission rules and regulations, if any, and
subject to the following provisions:
1) The Custodian may keep securities of the Portfolio in a Securities
System provided that such securities are represented in an account
("Account") of the Custodian in the Securities System which shall not
include any assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a Securities System shall identify
by book-entry those securities belonging to the Portfolio;
3) The Custodian shall pay for securities purchased for the account of the
Portfolio upon (i) receipt of advice from the Securities System that
such securities have been transferred to the Account, and (ii) the
making of an entry on the records of the Custodian to reflect such
payment and transfer for the account of the Portfolio. The Custodian
shall transfer securities sold for the account of the Portfolio upon
(i) receipt of advice from the Securities System that payment for such
securities has been transferred to the Account, and (ii) the making of
an entry on the records of the Custodian to reflect such transfer and
payment for the account of the Portfolio. Copies of all advices from
the Securities System of transfers of securities for the account of
the Portfolio shall identify the Portfolio, be maintained for the
Portfolio by the Custodian and be provided to the Fund at its
request. Upon request, the Custodian shall furnish the Fund on
behalf of the Portfolio confirmation of each transfer to or from the
account of the Portfolio in the form of a written advice or notice and
shall furnish to the Fund on behalf of the Portfolio copies of daily
transaction sheets reflecting each day's transactions in the
Securities System for the account of the Portfolio.
4) The Custodian shall provide the Fund for the Portfolio with any report
obtained by the Custodian on the Securities System's accounting
system, internal accounting control and procedures for safeguarding
securities deposited in the Securities System;
5) The Custodian shall have received from the Fund on behalf of the
Portfolio the initial or annual certificate, as the case may be,
required by Article 14 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for the benefit of the Portfolio
for any loss or damage to the Portfolio resulting from use of the
Securities System by reason of any negligence, misfeasance or
misconduct of the Custodian or any of its agents or of any of its or
their employees or from failure of the Custodian or any such agent to
enforce effectively such rights as it may have against the Securities
System; at the election of the Fund, it shall be entitled to be
subrogated to the rights of the Custodian with respect to any claim
against the Securities System or any other person which the Custodian
may have as a consequence of any such loss or damage if and to the
extent that the Portfolio has not been made whole for any such loss
or damage.
2.11 Fund Assets Held in the Custodian's Direct Paper System. The Custodian may
-------------------------------------------------------
deposit and/or maintain securities owned by a Portfolio in the Direct
Paper System of the Custodian subject to the following provisions:
1) No transaction relating to securities in the Direct Paper System will
be effected in the absence of Proper Instructions from the Fund on
behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the Direct Paper
System only if such securities are represented in an account
("Account") of the Custodian in the Direct Paper System which shall
not include any assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;
3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the Portfolio;
4) The Custodian shall pay for securities purchased for the account of the
Portfolio upon the making of an entry on the records of the Custodian
to reflect such payment and transfer of securities to the account of
the Portfolio. The Custodian shall transfer securities sold for the
account of the Portfolio upon the making of an entry on the records of
the Custodian to reflect such transfer and receipt of payment for the
account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf of the Portfolio
confirmation of each transfer to or from the account of the Portfolio,
in the form of a written advice or notice, of Direct Paper on the
next business day following such transfer and shall furnish to the
Fund on behalf of the Portfolio copies of daily transaction sheets
reflecting each day's transaction in the Securities System for the
account of the Portfolio;
6) The Custodian shall provide the Fund on behalf of the Portfolio with
any report on its system of internal accounting control as the Fund may
reasonably request from time to time.
2.12 Segregated Account. The Custodian shall upon receipt of Proper Instructions
------------------
from the Fund on behalf of each applicable Portfolio establish and maintain
a segregated account or accounts for and on behalf of each such Portfolio,
into which account or accounts may be transferred cash and/or securities,
including securities maintained in an account by the Custodian pursuant to
Section 2.10 hereof, (i) in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the Custodian and a
broker-dealer registered under the Exchange Act and a member of the NASD
(or any futures commission merchant registered under the Commodity Exchange
Act), relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange (or the
Commodity Futures Trading Commission or any registered contract market), or
of any similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Portfolio, (ii) for
purposes of segregating cash or government securities in connection with
options purchased, sold or written by the Portfolio or commodity futures
contracts or options thereon purchased or sold by the Portfolio, (iii) for
the purposes of compliance by the Portfolio with the procedures required by
Investment Company Act Release No. 10666, or any subsequent release or
releases of the Securities and Exchange Commission relating to the
maintenance of segregated accounts by registered investment companies and
(iv) for other proper corporate purposes, BUT ONLY, in the case of clause
(iv), upon receipt of, in addition to Proper Instructions from the Fund on
behalf of the applicable Portfolio, a certified copy of a resolution of the
Board of Directors or of the Executive Committee signed by an officer of
the Fund and certified by the Secretary or an Assistant Secretary, setting
forth the purpose or purposes of such segregated account and declaring such
purposes to be proper corporate purposes.
2.13 Ownership Certificate for Tax. The Custodian shall execute ownership and
-----------------------------
other certificates and affidavits for all federal and state tax purposes in
connection with receipt of income or other payments with respect to
domestic securities of each Portfolio held by it and in connection with
transfers of securities.
2.14 Proxies. The Custodian shall, with respect to the domestic securities held
-------
hereunder, cause to be promptly executed by the registered holder of such
securities, if the securities are registered otherwise than in the name of
the Portfolio or a nominee of the Portfolio, all proxies, without
indication of the manner in which such proxies are to be voted, and shall
promptly deliver to the Portfolio such proxies, all proxy soliciting
materials and all notices relating to such securities.
2.15 Communications Relating to Portfolio Securities. Subject to the provisions
-----------------------------------------------
of Section 2.3, the Custodian shall transmit promptly to the Fund for each
Portfolio all written information (including, without limitation, pendency
of calls and maturities of domestic securities and expirations of rights in
connection therewith and notices of exercise of call and put options
written by the Fund on behalf of the Portfolio and the maturity of futures
contracts purchased or sold by the Portfolio) received by the Custodian
from issuers of the securities being held for the Portfolio. With respect
to tender or exchange offers, the Custodian shall transmit promptly to the
Portfolio all written information received by the Custodian from issuers of
the securities whose tender or exchange is sought and from the party (or
his agents) making the tender or exchange offer. If the Portfolio desires
to take action with respect to any tender offer, exchange offer or any
other similar transaction, the Portfolio shall notify the Custodian at
least three business days prior to the date on which the Custodian is to
take such action.
3. Duties of the Custodian with Respect to Property of the Fund Held Outside
-------------------------------------------------------------------------
of the United States
--------------------
3.1 Appointment of Foreign Sub-Custodians. The Fund hereby authorizes and
-------------------------------------
instructsthe Custodian to employ as sub-custodians for the Portfolio's
securities and other assets maintained outside the United States the
foreign banking institutions and foreign securities depositories designated
on Schedule A hereto ("foreign sub-custodians"). Upon receipt of "Proper
Instructions," as defined in Section 5 of this Contract, together with a
certified resolution of the Fund's Board of Directors, the Custodian and
the Fund may agree to amend Schedule A hereto from time to time to
designate additional foreign banking institutions and foreign securities
depositories to act as sub-custodian. Upon receipt of Proper Instructions,
the Fund may instruct the Custodian to cease the employment of any one or
more such sub-custodians for maintaining custody of the Portfolio's assets.
3.2 Assets to be Held. The Custodian shall limit the securities and other
-----------------
assets maintained in the custody of the foreign sub-custodians to:
(a) "foreign securities," as defined in paragraph (c)(1) of Rule 17f-5
under the Investment Company Act of 1940, and (b) cash and cash equivalents
in such amounts as the Custodian or the Fund may determine to be reasonably
necessary to effect the Portfolio's foreign securities transactions. The
Custodian shall identify on its books as belonging to the Fund, the foreign
securities of the Fund held by each foreign sub-custodian.
3.3 Foreign Securities Depositories. Except as may otherwise be agreed upon in
-------------------------------
writing by the Custodian and the Fund, assets of the Portfolio(s) shall be
maintained in foreign securities depositories only through arrangements
implemented by the foreign banking institutions serving as sub-custodians
pursuant to the terms hereof. Where possible, such arrangements shall
include entry into agreements containing the provisions set forth in
Section 3.4 hereof.
3.4 Agreements with Foreign Banking Institutions. Each agreement with a foreign
--------------------------------------------
banking institution shall be substantially in the form set forth in Exhibit
1 hereto and shall provide that: (a) the assets of each Portfolio will not
be subject to any right, charge, security interest, lien or claim of any
kind in favor of the foreign banking institution or its creditors or agent,
except a claim of payment for their safe custody or administration; (b)
beneficial ownership for the assets of each Portfolio will be freely
transferable without the payment of money or value other than for custody
or administration; (c) adequate records will be maintained identifying the
assets as belonging to each applicable Portfolio; (d) officers of or
auditors employed by, or other representatives of the Custodian, including
to the extent permitted under applicable law the independent public
accountants for the Fund, will be given access to the books and records of
the foreign banking institution relating to its actions under its agreement
with the Custodian; and (e) assets of the Portfolio(s) held by the foreign
sub-custodian will be subject only to the instructions of the Custodian or
its agents.
3.5 Access of Independent Accountants of the Fund. Upon request of the Fund,
---------------------------------------------
the Custodian will use its best efforts to arrange for the independent
accountants of the Fund to be afforded access to the books and records of
any foreign banking institution employed as a foreign sub-custodian insofar
as such books and records relate to the performance of such foreign banking
institution under its agreement with the Custodian.
3.6 Reports by Custodian. The Custodian will supply to the Fund from time to
--------------------
time, as mutually agreed upon, statements in respect of the securities and
other assets of the Portfolio(s) held by foreign sub-custodians, including
but not limited to an identification of entities having possession of the
Portfolio(s) securities and other assets and advices or notifications of
any transfers of securities to or from each custodial account maintained by
a foreign banking institution for the Custodian on behalf of each
applicable Portfolio indicating, as to securities acquired for a Portfolio,
the identity of the entity having physical possession of such securities.
3.7 Transactions in Foreign Custody Account. (a) Except as otherwise provided
---------------------------------------
in paragraph (b) of this Section 3.7, the provision of Sections 2.2 and 2.7
of this Contract shall apply, MUTATIS MUTANDIS to the foreign securities of
the Fund held outside the United States by foreign sub-custodians. (b)
Notwithstanding any provision of this Contract to the contrary, settlement
and payment for securities received for the account of each applicable
Portfolio and delivery of securities maintained for the account of each
applicable Portfolio may be effected in accordance with the customary
established securities trading or securities processing practices and
procedures in the jurisdiction or market in which the transaction occurs,
including, without limitation, delivering securities to the purchaser
thereof or to a dealer therefor (or an agent for such purchaser or dealer)
against a receipt with the expectation of receiving later payment for such
securities from such purchaser or dealer. (c) Securities maintained in
the custody of a foreign sub-custodian may be maintained in the name of
such entity's nominee to the same extent as set forth in Section 2.3 of
this Contract, and the Fund agrees to hold any such nominee harmless from
any liability as a holder of record of such securities.
3.8 Liability of Foreign Sub-Custodians. Each agreement pursuant to which the
-----------------------------------
Custodian employs a foreign banking institution as a foreign sub-custodian
shall require the institution to exercise reasonable care in the
performance of its duties and to indemnify, and hold harmless, the
Custodian and each Fund from and against any loss, damage, cost, expense,
liability or claim arising out of or in connection with the institution's
performance of such obligations. At the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with respect to
any claims against a foreign banking institution as a consequence of any
such loss, damage, cost, expense, liability or claim if and to the extent
that the Fund has not been made whole for any such loss, damage, cost,
expense, liability or claim.
3.9 Liability of Custodian. The Custodian shall be liable for the acts or
----------------------
omissions of a foreign banking institution to the same extent as set forth
with respect to sub-custodians generally in this Contract and, regardless
of whether assets are maintained in the custody of a foreign banking
institution, a foreign securities depository or a branch of a U.S. bank as
contemplated by paragraph 3.12 hereof, the Custodian shall not be liable
for any loss, damage, cost, expense, liability or claim resulting from
nationalization, expropriation, currency restrictions, or acts of war or
terrorism or any loss where the sub-custodian has otherwise exercised
reasonable care. Notwithstanding the foregoing provisions of this
paragraph 3.9, in delegating custody duties to State Street London Ltd.,
the Custodian shall not be relieved of any responsibility to the Fund for
any loss due to such delegation, except such loss as may result from (a)
political risk (including, but not limited to, exchange control
restrictions, confiscation, expropriation, nationalization, insurrection,
civil strife or armed hostilities) or (b) other losses (excluding a
bankruptcy or insolvency of State Street London Ltd. not caused by
political risk) due to Acts of God, nuclear incident or other losses under
circumstances where the Custodian and State Street London Ltd. have
exercised reasonable care.
3.10 Reimbursement for Advances. If the Fund requires the Custodian to advance
--------------------------
cash or securities for any purpose for the benefit of a Portfolio including
the purchase or sale of foreign exchange or of contracts for foreign
exchange, or in the event that the Custodian or its nominee shall incur or
be assessed any taxes, charges, expenses, assessments, claims or
liabilities in connection with the performance of this Contract, except
such as may arise from its or its nominee's own negligent action, negligent
failure to act or willful misconduct, any property at any time held for the
account of the applicable Portfolio shall be security therefor and should
the Fund fail to repay the Custodian promptly, the Custodian shall be
entitled to utilize available cash and to dispose of such Portfolio's
assets to the extent necessary to obtain reimbursement.
3.11 Monitoring Responsibilities. The Custodian shall furnish annually to the
---------------------------
Fund, during the month of June, information concerning the foreign sub-
custodians employed by the Custodian. Such information shall be similar
in kind and scope to that furnished to the Fund in connection with the
initial approval of this Contract. In addition, the Custodian will promptly
inform the Fund in the event that the Custodian learns of a material
adverse change in the financial condition of a foreign sub-custodian or any
material loss of the assets of the Fund or in the case of any foreign sub-
custodian not the subject of an exemptive order from the Securities and
Exchange Commission is notified by such foreign sub-custodian that there
appears to be a substantial likelihood that its shareholder's equity will
decline below $200 million (U.S. dollars or the equivalent thereof) or that
its shareholders' equity has declined below $200 million (in each case
computed in accordance with generally accepted U.S. accounting principles).
3.12 Branches of U.S. Banks. (a) Except as otherwise set forth in this Contract,
----------------------
the provisions hereof shall not apply where the custody of the Portfolio's
assets are maintained in a foreign branch of a banking institution which is
a "bank" as defined by Section 2(a)(5) of the Investment Company Act of
1940 meeting the qualification set forth in Section 26(a) of said Act. The
appointment of any such branch as a sub-custodian shall be governed by
paragraph 1 of this Contract. (b) Cash held for each Portfolio of the Fund
in the United Kingdom shall be maintained in an interest bearing account
established for the Fund with the Custodian's London branch, which account
shall be subject to the direction of the Custodian, State Street London
Ltd. or both.
3.13 Tax Law. The Custodian shall have no responsibility or liability for any
-------
obligations now or hereafter imposed on the Fund or the Custodian as
Custodian of the Fund by the tax law of the United States of America or any
state or political subdivision thereof. It shall be the responsibility of
the Fund to notify the Custodian of the obligations imposed on the Fund or
the Custodian as Custodian of the Fund by the tax law of jurisdictions
other than those mentioned in the above sentence, including responsibility
for withholding and other taxes, assessments or other governmental charges,
certifications and governmental reporting. The sole responsibility of the
Custodian with regard to such tax law shall be to use reasonable efforts to
assist the Fund with respect to any claim for exemption or refund under the
tax law of jurisdictions for which the Fund has provided such information.
4. Payments for Sales or Repurchases or Redemptions of Shares of the Fund
----------------------------------------------------------------------
The Custodian shall receive from the distributor for the Shares or from the
Transfer Agent of the Fund and deposit into the account of the appropriate
Portfolio such payments as are received for Shares of that Portfolio issued or
sold from time to time by the Fund. The Custodian will provide timely
notification to the Fund on behalf of each such Portfolio and the Transfer Agent
of any receipt by it of payments for Shares of such Portfolio.
From such funds as may be available for the purpose but subject to the
limitations of the Articles of Incorporation and any applicable votes of the
Board of Directors of the Fund pursuant thereto, the Custodian shall, upon
receipt of instructions from the Transfer Agent, make funds available for
payment to holders of Shares who have delivered to the Transfer Agent a request
for redemption or repurchase of their Shares. In connection with the redemption
or repurchase of Shares of a Portfolio, the Custodian is authorized upon receipt
of instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the
redemption or repurchase of Shares of the Fund, the Custodian shall honor checks
drawn on the Custodian by a holder of Shares, which checks have been furnished
by the Fund to the holder of Shares, when presented to the Custodian in
accordance with such procedures and controls as are mutually agreed upon from
time to time between the Fund and the Custodian.
5. Proper Instructions
-------------------
Proper Instructions as used throughout this Contract means a writing signed
or initialled in the name of the Fund by any two of the President, a Vice
President, the Secretary and the Treasurer of the Fund, or by any other person
duly authorized to sign by the Board of Directors from time to time. Each such
writing shall set forth the party or parties involved, and the specific
transaction or type of transaction involved, including a specific statement of
the purpose for which such action is requested. Oral instructions will be
considered Proper Instructions if the Custodian reasonably believes them to have
been given by a person authorized to give such instructions with respect to the
transaction involved. The Fund shall cause all oral instructions to be
confirmed in writing within two business days thereafter. Upon receipt of a
certificate of the Secretary or an Assistant Secretary as to the authorization
by the Board of Directors of the Fund accompanied by a detailed description of
procedures approved by the Board of Directors, Proper Instructions may include
communications effected directly between electromechanical or electronic devices
provided that the Board of Directors and the Custodian are satisfied that such
procedures afford adequate safeguards for the Portfolio's assets. For purposes
of this Section, Proper Instructions shall include instructions received by the
Custodian pursuant to any three-party agreement which requires a segregated
asset account in accordance with Section 2.12.
6. Actions Permitted without Express Authority
-------------------------------------------
The Custodian may in its discretion, without express authority from the
Fund on behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this
Contract, PROVIDED that all such payments shall be accounted for to
the Fund on behalf of the Portfolio;
2) surrender securities in temporary form for securities in definitive
form;
3) endorse for collection, in the name of the Portfolio, checks, drafts
and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection with
the sale, exchange, substitution, purchase, transfer and other dealings
with the securities and property of the Portfolio except as otherwise
directed by the Board of Directors of the Fund.
7. Evidence of Authority
---------------------
The Custodian shall be protected in acting upon any instructions, notice,
request, consent, certificate or other instrument or paper believed by it to be
genuine and to have been properly executed by or on behalf of the Fund. The
Custodian may receive and accept a certified copy of a vote of the Board of
Directors of the Fund as conclusive evidence (a) of the authority of any person
to act in accordance with such vote or (b) of any determination or of any action
by the Board of Directors pursuant to the Articles of Incorporation as described
in such vote, and such vote may be considered as in full force and effect until
receipt by the Custodian of written notice to the contrary.
8. Duties of Custodian with Respect to the Books of Account and Calculation of
---------------------------------------------------------------------------
Net Asset Value and Net Income
------------------------------
The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the Board of Directors of the Fund to keep the
books of account of each Portfolio and/or compute the net asset value per share
of the outstanding shares of each Portfolio or, if directed in writing to do so
by the Fund on behalf of the Portfolio, shall itself keep such books of account
and/or compute such net asset value per share. If so directed by the Fund on
behalf of the Portfolio, the Custodian shall also calculate daily the net income
of the Portfolio as described in the Fund's currently effective prospectus
related to such Portfolio and shall advise the Fund and the Transfer Agent daily
of the total amounts of such net income and, if instructed in writing by an
officer of the Fund to do so, shall advise the Transfer Agent periodically of
the division of such net income among its various components. The calculations
of the net asset value per share and the daily income of each Portfolio shall be
made at the time or times described from time to time in the Fund's currently
effective prospectus related to such Portfolio.
9. Records
-------
The Custodian shall with respect to each Portfolio create and maintain all
records relating to its activities and obligations under this Contract in such
manner as will meet the obligations of the Fund under the Investment Company Act
of 1940, with particular attention to Section 31 thereof and Rules 31a-1 and
31a-2 thereunder. All such records shall be the property of the Fund and shall
at all times during the regular business hours of the Custodian be open for
inspection by duly authorized officers, employees or agents of the Fund and
employees and agents of the Securities and Exchange Commission. The Custodian
shall, at the Fund's request, supply the Fund with a tabulation of securities
owned by each Portfolio and held by the Custodian and shall, when requested to
do so by the Fund and for such compensation as shall be agreed upon between the
Fund and the Custodian, include certificate numbers in such tabulations.
10. Opinion of Fund's Independent Accountant
----------------------------------------
The Custodian shall take all reasonable action, as the Fund on behalf of
each applicable Portfolio may from time to time request, to obtain from year to
year favorable opinions from the Fund's independent accountants with respect to
its activities hereunder in connection with the preparation of the Fund's Form
N-1A, and Form N-SAR or other annual reports to the Securities and Exchange
Commission and with respect to any other requirements of such Commission.
11. Reports to Fund by Independent Public Accountants
-------------------------------------------------
The Custodian shall provide the Fund, on behalf of each of the Portfolio(s)
at such times as the Fund may reasonably require, with reports by independent
public accountants on the accounting system, internal accounting control and
procedures for safeguarding securities, futures contracts and options on futures
contracts, including securities deposited and/or maintained in a Securities
System, relating to the services provided by the Custodian under this Contract;
such reports, shall be of sufficient scope and in sufficient detail, as may
reasonably be required by the Fund to provide reasonable assurance that any
material inadequacies would be disclosed by such examination, and, if there are
no such inadequacies, the reports shall so state.
12. Compensation of Custodian
-------------------------
The Custodian shall be entitled to reasonable compensation for its services
and expenses as Custodian, as agreed upon from time to time between the
Fund on behalf of each applicable Portfolio and the Custodian. Such
compensation schedule shall be set forth on Schedule B attached hereto and
may be amended from time to time.
13. Responsibility of Custodian
---------------------------
So long as and to the extent that it is in the exercise of reasonable care,
the Custodian shall not be responsible for the title, validity or genuineness of
any property or evidence of title thereto received by it or delivered by it
pursuant to this Contract and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably believed by it to
be genuine and to be signed by the proper party or parties, including any
futures commission merchant acting pursuant to the terms of a three-party
futures or options agreement. The Custodian shall be held to the exercise of
reasonable care in carrying out the provisions of this Contract, but shall be
kept indemnified by and shall be without liability to the Fund for any action
taken or omitted by it in good faith without negligence. The Custodian shall
only be indemnified hereunder from the assets of the Fund belonging to the
respective Portfolio involved. It shall be entitled to rely on and may act upon
advice of counsel (who may be counsel for the Fund) on all matters, and shall be
without liability for any action reasonably taken or omitted pursuant to such
advice.
The Custodian shall be liable for the acts or omissions of a foreign
banking institution appointed pursuant to the provisions of Article 3 to the
same extent as set forth in Article 1 hereof with respect to sub-custodians
located in the United States (except as specifically provided in Article 3.9)
and, regardless of whether assets are maintained in the custody of a foreign
banking institution, a foreign securities depository or a branch of a U.S. bank
as contemplated by paragraph 3.12 hereof, the Custodian shall not be liable for
any loss, damage, cost, expense, liability or claim resulting from, or caused
by, the direction of or authorization by the Fund to maintain custody of any
securities or cash of the Fund in a foreign country including, but not limited
to, losses resulting from nationalization, expropriation, currency restrictions,
or acts of war or terrorism.
If the Fund on behalf of a Portfolio requires the Custodian to take any
action with respect to securities, which action involves the payment of money or
which action may, in the opinion of the Custodian, result in the Custodian or
its nominee assigned to the Fund or the Portfolio being liable for the payment
of money or incurring liability of some other form, the Fund on behalf of the
Portfolio, as a prerequisite to requiring the Custodian to take such action,
shall provide indemnity to the Custodian in an amount and form satisfactory to
it. The Custodian shall only be indemnified hereunder from the assets of the
Fund belonging to the respective Portfolio involved.
If the Fund requires the Custodian, its affiliates, subsidiaries or agents,
to advance cash or securities for any purpose (including but not limited to
securities settlements, foreign exchange contracts and assumed settlement) for
the benefit of a Portfolio including the purchase or sale of foreign exchange or
of contracts for foreign exchange or in the event that the Custodian or its
nominee shall incur or be assessed any taxes, charges, expenses, assessments,
claims or liabilities in connection with the performance of this Contract,
except such as may arise from its or its nominee's own negligent action,
negligent failure to act or willful misconduct, any property at any time held
for the account of the applicable Portfolio shall be security therefor and
should the Fund fail to repay the Custodian promptly, the Custodian shall be
entitled to utilize available cash and to dispose of such Portfolio's assets to
the extent necessary to obtain reimbursement.
14. Effective Period, Termination and Amendment
-------------------------------------------
This Contract shall become effective as of its execution, shall continue in
full force and effect until terminated as hereinafter provided, may be amended
at any time by mutual agreement of the parties hereto and may be terminated by
either party by an instrument in writing delivered or mailed, postage prepaid to
the other party, such termination to take effect not sooner than thirty (30)
days after the date of such delivery or mailing; PROVIDED, however that the
Custodian shall not with respect to a Portfolio act under Section 2.10 hereof in
the absence of receipt of an initial certificate of the Secretary or an
Assistant Secretary that the Board of Directors of the Fund has approved the
initial use of a particular Securities System by such Portfolio and the receipt
of a certificate of the Secretary or an Assistant Secretary that the Board of
Directors has reviewed any subsequent changes regarding the use by such
Portfolio of such Securities System, as required in each case by Rule 17f-4
under the Investment Company Act of 1940, as amended and that the Custodian
shall not with respect to a Portfolio act under Section 2.11 hereof in the
absence of receipt of an initial certificate of the Secretary or an Assistant
Secretary that the Board of Directors has approved the initial use of the Direct
Paper System by such Portfolio and the receipt of an annual certificate of the
Secretary or an Assistant Secretary that the Board of Directors has reviewed the
use by such Portfolio of the Direct Paper System; PROVIDED FURTHER, however,
that the Fund shall not amend or terminate this Contract in contravention of any
applicable federal or state regulations, or any provision of the Articles of
Incorporation, and further provided, that the Fund on behalf of one or more of
the Portfolios may at any time by action of its Board of Directors (i)
substitute another bank or trust company for the Custodian by giving notice as
described above to the Custodian, or (ii) immediately terminate this Contract in
the event of the appointment of a conservator or receiver for the Custodian by
the Comptroller of the Currency or upon the happening of a like event at the
direction of an appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Contract, the Fund on behalf of each applicable
Portfolio shall pay to the Custodian such compensation as may be due as of the
date of such termination and shall likewise reimburse the Custodian for its
costs, expenses and disbursements. This Agreement may not be assigned by the
Custodian without the consent of the Fund, authorized or approved by a
resolution of its Board of Directors.
15. Successor Custodian
-------------------
If a successor custodian for the Fund, of one or more of the Portfolios
shall be appointed by the Board of Directors of the Fund, the Custodian shall,
upon termination, deliver to such successor custodian at the office of the
Custodian, duly endorsed and in the form for transfer, all securities of each
applicable Portfolio then held by it hereunder and shall transfer to an account
of the successor custodian all of the securities of each such Portfolio held in
a Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in
like manner, upon receipt of a certified copy of a vote of the Board of
Directors of the Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Directors shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company Act of 1940,
doing business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all securities, funds and other
properties held by the Custodian on behalf of each applicable Portfolio and all
instruments held by the Custodian relative thereto and all other property held
by it under this Contract on behalf of each applicable Portfolio and to transfer
to an account of such successor custodian all of the securities of each such
Portfolio held in any Securities System. Thereafter, such bank or trust company
shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Directors to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
16. Interpretive and Additional Provisions
--------------------------------------
In connection with the operation of this Contract, the Custodian and the
Fund on behalf of each of the Portfolios, may from time to time agree on such
provisions interpretive of or in addition to the provisions of this Contract as
may in their joint opinion be consistent with the general tenor of this
Contract. Any such interpretive or additional provisions shall be in a writing
signed by both parties and shall be annexed hereto, PROVIDED that no such
interpretive or additional provisions shall contravene any applicable federal or
state regulations or any provision of the Articles of Incorporation of the Fund.
No interpretive or additional provisions made as provided in the preceding
sentence shall be deemed to be an amendment of this Contract.
17. Additional Funds
----------------
In the event that the Fund establishes one or more series of Shares in
addition to the Portico International Equity Portfolio with respect to which it
desires to have the Custodian render services as custodian under the terms
hereof, it shall so notify the Custodian in writing, and if the Custodian agrees
in writing to provide such services, such series of Shares shall become a
Portfolio hereunder and shall be subject to the provisions of this Agreement to
the same extent as the Portico International Equity Portfolio, except to the
extent that said provisions are modified with respect to such fund in writing by
the Fund and the Custodian at the time.
18. Massachusetts Law to Apply
--------------------------
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
19. Prior Contracts
---------------
This Contract supersedes and terminates, as of the date hereof, all prior
contracts between the Fund on behalf of each of the Portfolios and the Custodian
relating to the custody of the Fund's assets.
20. Equipment Failures
------------------
In the event of equipment failures beyond the Custodian's control,
Custodian shall, at no additional expense to the Fund, take reasonable steps to
minimize service interruption but shall have no liability with respect thereto.
Custodian shall enter into and maintain in effect with appropriate parties one
or more agreements making reasonable provision for emergency use of electronic
data processing equipment to the extent appropriate equipment is available.
21. Shareholder Communications
--------------------------
Securities and Exchange Commission Rule 14b-2 requires banks which hold
securities for the account of customers to respond to requests by issuers of
securities for the names, addresses and holdings of beneficial owners of
securities of that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In order to comply with
the rule, the Custodian needs the Fund to indicate whether the Fund authorizes
the Custodian to provide the Fund's name, address, and share position to
requesting companies whose stock the Fund owns. If the Fund tells the Custodian
"no," the Custodian will not provide this information to requesting companies.
If the Fund tells the Custodian "yes" or does not check either "yes" or "no"
below, the Custodian is required by the rule to treat the Fund as consenting to
disclosure of this information for all securities owned by the Fund or any funds
or accounts established by the Fund. For the Fund's protection, the Rule
prohibits the requesting company from using the Fund's name and address for any
purpose other than corporate communications. Please indicate below whether the
Fund consents or objects by checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the Fund's name, address,
and share positions.
NO [x] The Custodian is not authorized to release the Fund's name,
address, and share positions.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as
of the 26th day of April, 1994.
ATTEST PORTICO FUNDS, INC.
/s/ Randy Pavlick By: /s/ Miriam Allison
---------------------- ------------------
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/[signature illegible] By: /s/[signature illegible]
- ------------------------ ------------------------
Executive Vice President
Schedule A
----------
The following foreign banking institutions and foreign securities
depositories have been approved by the Board of Directors of Portico Funds, Inc.
for use as sub-custodians for the Fund's securities and other assets:
Austria GiroCredit Bank Aktiengesellschaft der Sparkassen
(Bank)/Oesterreichische Kontrollbank AG (Depository)
Belgium Generale Bank (Bank)/Caisse Interprofessionnelle de Depots et de
Virements de Titres S.A. (Depository)
Denmark Den Danske Bank (Bank)/Vaerdipapircentralen (Depository)
Finland Merita Bank Limited (Bank)/The Central Share Register of Finland
(Depository)
France Banque Paribas (Bank)/Societe Interprofessionnelle pour la
Compensation des Valeurs Mobilieres (Depository)
Germany Dresdner Bank AG (Bank)/The Deutscher Kassenverein AG
(Depository)
Ireland Bank of Ireland Bank (Bank)
Italy Morgan Guaranty Trust Company (Bank)/Monte Titoli S.p.A.
(Depository)
Netherlands MeesPierson N.V. (Bank)/Nederlands Centraal Instituut vour
Giraal Effectenverkeev B.V. (Depository)
Norway Christiana Bank og Kreditkasse (Bank)/Verdipapirsentralen, The
Norweigian Registry of Securities (Depository)
Spain Banco Santander, S.A. (Bank)/Servicio de Compensacion y
Liquidacion de Valores, S.A. (Depository)
Sweden Skandinaviska Enskilda Banken (Bank)/Vardepapperscentralen
(Depository)
Switzerland Union Bank of Switzerland (Bank)/Schweizerische EffektenGiro AG
(Depository)
United Kingdom State Street Bank and Trust Company (Bank)
Australia Westpac Banking Corporation (Bank)/Austraclear Limited
(Depository)
Hong Kong Standard Chartered Bank (Bank)/The Central Clearing and
Settlement System (Depository)
Japan The Sumitomo Trust & Banking Co., Ltd. (Bank)/Japan Securities
Depository Center (Depository)
Malaysia Standard Chartered Bank Malaysia Berhad (Bank)/Malaysian Central
Depository Sdsn. Bhd. (Depository)
New Zealand ANZ Banking Group (New Zealand) Limited (Bank)
Singapore The Development Bank of Singapore Ltd. (Bank)/ The Central
Depository (Pte) Limited
Certified:
/s/ James M. Wade
- -------------------------
Fund's Authorized Officer
Dated as of June 21, 1996
Schedule A
----------
The following foreign banking institutions and foreign securities
depositories have been approved by the Board of Directors of Portico Funds, Inc.
for use as sub-custodians for the Fund's securities and other assets:
Austria GiroCredit Bank Aktiengesellschaft der Sparkassen
(Bank)/Oesterreichische Kontrollbank AG (Depository)
Belgium Generale Bank (Bank)/Caisse Interprofessionnelle de Depots et de
Virements de Titres S.A. (Depository)
Denmark Den Danske Bank (Bank)/Vaerdipapircentralen (Depository)
Finland Merita Bank Limited (Bank)/The Central Share Register of Finland
(Depository)
France Banque Paribas (Bank)/Societe Interprofessionnelle pour la
Compensation des Valeurs Mobilieres (Depository)
Germany Dresdner Bank AG (Bank)/The Deutscher Kassenverein AG
(Depository)
Ireland Bank of Ireland Bank (Bank)
Italy Morgan Guaranty Trust Company and Banque Paribas (Bank)/Monte
Titoli S.p.A. (Depository)
Netherlands MeesPierson N.V. (Bank)/Nederlands Centraal Instituut vour
Giraal Effectenverkeev B.V. (Depository)
Norway Christiana Bank og Kreditkasse (Bank)/Verdipapirsentralen, The
Norweigian Registry of Securities (Depository)
Spain Banco Santander, S.A. (Bank)/Servicio de Compensacion y
Liquidacion de Valores, S.A. (Depository)
Sweden Skandinaviska Enskilda Banken (Bank)/Vardepapperscentralen
(Depository)
Switzerland Union Bank of Switzerland (Bank)/Schweizerische EffektenGiro AG
(Depository)
United Kingdom State Street Bank and Trust Company (Bank)
Australia Westpac Banking Corporation (Bank)/Austraclear Limited
(Depository)
Hong Kong Standard Chartered Bank (Bank)/The Central Clearing and
Settlement System (Depository)
Japan The Sumitomo Trust & Banking Co., Ltd., The Fuji Bank,
Limited and The Daiwa Bank, Limited (Bank)/Japan Securities
Depository Center (Depository)
Malaysia Standard Chartered Bank Malaysia Berhad (Bank)/Malaysian
Central Depository Sdsn. Bhd. (Depository)
New Zealand ANZ Banking Group (New Zealand) Limited (Bank)
Singapore The Development Bank of Singapore Ltd. (Bank)/ The Central
Depository (Pte) Limited
Certified:
/s/ James M. Wade
- -------------------------
Fund's Authorized Officer
Dated as of September 20, 1996
EXHIBIT (9)(J)
FUND ACCOUNTING SERVICING AGREEMENT
(Addition of Tax-Exempt Intermediate Bond Fund)
Firstar Trust Company
P.O. Box 2054
Milwaukee, WI 53201
Gentlemen:
Pursuant to Paragraph 4 of the Fund Accounting Servicing Agreement
dated March 23, 1988 that you and we have entered into, we are writing to
request that you render accounting services under the terms of said agreement
with respect to the Tax-Exempt Intermediate Bond Fund, an additional portfolio
we are establishing. Your compensation for the services provided under said
agreement for said additional portfolio shall be determined in accordance with
the fee schedule attached hereto. Please sign two copies of this letter where
indicated to signify your agreement to provide said services and to the
compensation terms set forth on the attached fee schedule.
Sincerely,
Dated: February 5, 1993 PORTICO FUNDS, INC.
By: /s/ Miriam Allison
------------------
Title: Vice President
ACKNOWLEDGED AND AGREED:
FIRSTAR TRUST COMPANY
By: /s/ Joe D. Redwine Dated: February 5, 1993
------------------
Title: Vice President
--------------
/s/ Andrea Lydolph
------------------
Assistant Secretary
FIRSTAR TRUST COMPANY
FUND VALUATION AND ACCOUNTING
FOR
PORTICO FUNDS, INC.
Tax-Exempt Intermediate Bond Fund
---------------------------------
Portfolio Services
- ------------------
Annual fee schedule for Tax-Exempt Intermediate Bond Fund based on market value
of assets.
$20,000.00 for first $40,000,000.00
2/100 of 1% (2 basis points) on the next $100,000,000.00
1/100 of 1% (1 basis point) on the next $100,000,000.00
5/1000 of 1% (1/2 basis point) on the balance.
[$3.50 per month per asset in excess of 50 assets]
Out-of-Pocket Expenses: Charged on the Account.
Fees are billed monthly.
EXHIBIT (9)(V)
SHAREHOLDER SERVICING AGENT AGREEMENT
(Addition of Tax-Exempt
Intermediate Bond Fund)
Firstar Trust Company
P.O. Box 2054
Milwaukee, WI 53201
Gentlemen:
Pursuant to Paragraph 7 of the Shareholder Servicing Agent Agreement
dated as of March 23, 1988 and amended as of May 1, 1990, between you and
Portico Funds, Inc. (formerly, Elan Funds, Inc.) (the "Company"), the Company
requests that you render services as Shareholder Servicing Agent under the terms
of said agreement with respect to the Tax-Exempt Intermediate Bond Fund, an
additional portfolio the Company is establishing. Your compensation for the
services provided under said agreement for said additional portfolio shall be
determined in accordance with the fee schedule attached hereto.
Please sign two copies of this letter where indicated to signify your
agreement to so serve as Shareholder Servicing Agent for the Tax-Exempt
Intermediate Bond Fund and to the compensation terms set forth on the attached
fee schedules for the new Fund, which terms are to become effective as of the
date set forth below.
Sincerely,
Dated: PORTICO FUNDS, INC.
February 5, 1993
By: /s/ Miriam Allison
------------------
(Authorized Officer)
ACKNOWLEDGED AND AGREED:
FIRSTAR TRUST COMPANY
By: [signature illegible] Dated: February 5, 1993
---------------------
(Authorized Officer)
FIRST WISCONSIN TRUST COMPANY
MUTUAL FUND SHAREHOLDER SERVICES
FOR
PORTICO FUNDS, INC.
Tax-Exempt Intermediate Bond Fund
---------------------------------
Annual Fee Schedule
- -------------------
$12.00 per Shareholder Account on the first 20,000 Accounts
$11.50 per Shareholder Account on the next 80,000 Accounts
$11.00 per Shareholder Account on the balance
$ 5.00 per telephone exchange
$ 7.50 per wire transfer
Fees billed monthly.
Plus out-of-pocket expenses including, but not limited to:
- Telephone--Toll-free lines
- Postage
- Programming
- Stationery/Envelopes
- Mailing
- Proxies
- Retention of Records
- Microfilm/Microfiche of Records
- Special Reports
- All other out-of-pocket expenses
Plus, with respect to Two-Dimensional Transaction:
$1.00 per shareholder account to set-up
$1.00 per shareholder account to alter
AUTOMATIC INVESTMENT PLAN PROCESSING
------------------------------------
$125.00 per cycle
$ 0.50 per account set-up and/or change
$ 0.50 per item
$ 3.25 per correction, reversal or return item
EXHIBIT (11)(A)
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the reference to
our Firm under the caption "Counsel" in the Statement of Additional Information
that is included in Post-Effective Amendment No. 29 to the Registration
Statement (No. 33-18255) on Form N-1A under the Securities Act of 1933 and the
Investment Company Act of 1940, 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
October 25, 1996
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Prospectus
and Statement of Additional Information constituting parts of this
Post-Effective Amendment No. 29 to the registration statement on Form
N-1A (the "Registration Statement") of our report dated August 5, 1996,
relating to the financial statements and financial highlights appearing
in the June 30, 1996 Annual Report to Shareholders of the Portico
MicroCap Fund which are also incorporated by reference into the
Registration Statement. We also consent to the references to us under
the headings "Financial Highlights" in the Prospectus and under the
heading "Independent Accountants" in the Statement of Additional
Information.
/s/ Price Waterhouse, LLP
Milwaukee, Wisconsin
October 24, 1996
EXHIBIT (13)(A)
PURCHASE AGREEMENT
------------------
Elan Funds, Inc. ("Elan Funds"), a Wisconsin corporation, and ALPS
Securities, Inc. ("ALPS") hereby agree with each other as follows:
1. Elan Funds hereby offers ALPS and ALPS hereby purchases 99,000
Class A-2 shares of Common Stock and 1,000 Class B-2 shares of Common Stock
aggregating to 100,000 shares of Common Stock of Elan Funds (such shares of
Common Stock being hereinafter collectively known as "Shares") at a price of
$1.00 per Share. ALPS hereby acknowledges receipt from ALPS of funds in the
amount of $100,000 in full payment for the Shares.
2. ALPS represents and warrants to Elan Funds that the Shares are being
acquired for investment purposes and not with a view to the distribution
thereof.
3. Costs incurred by Elan Funds in connection with its organization,
registration and the initial public offering of Shares have been deferred and
will be amortized over a period of five years from the date upon which Elan
Funds commences its investment activities. In the event that any of the initial
Class A-2 Shares or Class B-2 Shares purchased by ALPS hereunder are redeemed
by any holder thereof during such period, Elan Funds is authorized to reduce the
redemption proceeds to cover any unamortized organizational expenses in the same
proportion as the number of initial Shares outstanding at the time of
redemption. If, for any reason, said reduction of redemption proceeds is not in
fact made by Elan Funds in the event of such a redemption, ALPS agrees to
reimburse Elan Funds immediately for any unamortized organzational expenses in
the proportion stated above.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the 22nd day of February, 1988.
(SEAL)
Attest: ELAN FUNDS, INC.
/s/ W. Bruce McConnel, III /s/ J.M. Wade
- -------------------------- -------------
Secretary
(SEAL)
Attest: ALPS SECURITIES, INC.
[signature illegible] [signature illegible]
- --------------------- ---------------------
EXHIBIT (13)(B)
PURCHASE AGREEMENT
------------------
ALPS Securities, Inc. a Colorado corporation at 600 Seventeenth
Street, Suite 1605 South, Denver, Colorado 80202 ("ALPS"), and Miriam Meyer
Allison at 207 E. Buffalo Street, Suite 315, Milwaukee, Wisconsin 53202
("Allison"), hereby agree with each other as follows:
1. ALPS hereby offers Allison and Allison hereby purchases 99,000 Class
A-2 shares of Common Stock and 1,000 Class B-2 shares of Common Stock
aggregating to 100,000 shares of Common Stock of Portico Funds, Inc., a
Wisconsin corporation ("Portico"), (such shares of Common Stock being
hereinafter collectively known as "Shares") at a price of $1.00 per Share. The
Shares were acquired by ALPS pursuant to a purchase agreement dated February 22,
1988 by and between ALPS and Portico (formerly Elan Funds, Inc.).
2. Allison hereby acknowledges purchaseof the Shares and ALPS hereby
acknowledges receipt from Allison of funds in the amount of $100,000.00 in full
payment for the Shares.
3. Allison represents and warrants to ALPS that the Shares are being
acquired for investment purposes and not with a view to the distribution
thereof.
4. Allison acknowledges that costs incurred by Portico in connection with
its organization, registration and the initial public offering of Shares of
Portico have been deferred and are being amortized over a period of five years
from March 16, 1988, the date upon which Portico commenced its investment
activities. Allison agrees that in the event that any of the initial Class A-2
Shares or Class B-2 Shares purchased by Allison hereunder are redeemed by any
holder thereof during such period, Portico is authorized to reduce the
redemption proceeds to cover any unamortized organizational expenses in the same
proportion as the number of Shares being redeemed bears to the number of Shares
outstanding at the time of redemption. If, for any reason, said reduction of
redemption proceeds is not in fact made by Portico in the event of such a
redemption, Allison agrees to reimburse Portico immediately for any unamortized
organzational expenses in the proportion stated above, and to otherwise
indemnify and hold ALPS harmless from and against any liability or less
resulting from such a redemption.
All signatures need not appear on the same copy of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the first day of May, 1990.
(SEAL)
Attest: ALPS SECURITIES, INC.
/s/ Arthur J. Lucey /s/ W. Robert Alexander
- ------------------- -----------------------
Vice President
(SEAL)
Witness: MIRIAM MEYER ALLISON
/s/ Dana J. Russart /s/ Miriam Meyer Allison
- ------------------- ------------------------
PORTICO MICROCAP FUND
SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS
TOTAL RETURN
INSTITUTIONAL SERIES
For the Period from August 1, 1995
(Commencement of Operations)
to June 30, 1996
Total Return = (Ending Redeemable Value/ Initial Value) -1
Total Return = (1,639.30/ 1,000.00) -1
Total Return = 63.93%
RETAIL SERIES - WITHOUT SALES LOAD
For the Period from August 1, 1995
(Commencement of Operations)
to June 30, 1996
Total Return = (Ending Redeemable Value/ Initial Value) -1
Total Return = (1,635.21/ 1,000.00) -1
Total Return = 63.52%
RETAIL SERIES - WITH SALES LOAD
For the Period from August 1, 1995
(Commencement of Operations)
to June 30, 1996
Total Return = (Ending Redeemable Value/ Initial Value) -1
Total Return = (1,569.30/ 1,000.00) -1
Total Return = 56.93%
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<ARTICLE> 6
<CIK> 0000824612
<NAME> PORTICO MICROCAP FUND
<SERIES>
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<NAME> PORTICO MICROCAP FUND - RETAIL SERIES
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<NAME> PORTICO MICROCAP FUND
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<NAME> PORTICO MICROCAP FUND - INSTITUTIONAL SERIES
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<S> <C>
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<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 365
<DISTRIBUTIONS-OF-GAINS> 2,548
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,105
<NUMBER-OF-SHARES-REDEEMED> 100
<SHARES-REINVESTED> 112
<NET-CHANGE-IN-ASSETS> 72,631
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<ACCUMULATED-GAINS-PRIOR> 0
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<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 681
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<GROSS-EXPENSE> 909
<AVERAGE-NET-ASSETS> 50,028
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (0.02)
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<PER-SHARE-NAV-END> 15.45
<EXPENSE-RATIO> 1.74
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
