APRIL 30, 1997
SEMI-
ANNUAL
REPORT
INSTITUTIONAL CLASS
(LOGO)
MICROCAP
FUND
NOTICE TO INVESTORS
- - Shares of Portico Funds:
- ARE NOT INSURED BY THE FDIC, the US Government or any other governmental
agency;
- are not bank deposits or obligations of or guaranteed by Firstar Bank, its
parent company or its affiliates;
- are subject to investment risks, including possible loss of principal; and
- are offered by B.C. Ziegler and Company, member NASD, SIPC, and an
independent third-party distributor.
- - Firstar Bank affiliates serve as investment adviser, custodian, transfer
agent, administrator, and accounting services agent and receive compensation
for such services as disclosed in the current prospectus.
TABLE OF CONTENTS
Page(s)
SHAREOWNER LETTER...................................................1-2
PORTICO MICROCAP FUND...............................................3-4
STATEMENT OF ASSETS AND LIABILITIES..................................5
STATEMENT OF OPERATIONS..............................................5
STATEMENT OF CHANGES IN NET ASSETS...................................6
FINANCIAL HIGHLIGHTS.................................................7
SCHEDULE OF INVESTMENTS.............................................8-9
NOTES TO THE FINANCIAL STATEMENTS..................................10-11
June 1997
DEAR SHAREOWNER:
INVESTMENT REVIEW
Over the past six months, the pace of economic activity has accelerated,
interest rates have risen modestly and the stock market, as measured by the Dow
Jones Industrial Average, jumped 1,000 points to a record high. We list the
surprisingly robust conditions affecting the financial markets in the
accompanying chart titled Economic Scorecard. Looking forward, a recently
published National Association of Purchasing Managers report (NAPM), a
historically accurate gauge of future business conditions, suggests valid
reasons for continued optimism:
1) Prices paid for materials have DECLINED by -0.2%.
2) The outlook for labor and benefit expenses for calendar year 1997 is a
modest +2%.
3) The REVENUE OUTLOOK FOR 1997 IMPROVED to +7% - versus + 4.9% for 1996.
4) CAPACITY GROWTH of +4.9% is expected in 1997.
Perhaps the most noteworthy events for the financial markets since our last
report are the narrowing of interest rate spreads for low quality credits and
the significant outperformance of big company stocks (S&P 500; +14.7%) relative
to small and midcap stocks (S&P MidCap 400; +6.9%). OUR PREDICTABLE PROFITS AT
REASONABLE PRICES GROWTH EQUITY STRATEGY WORKS WELL IN THIS SLOW GROWTH,
DISINFLATIONARY ECONOMIC ENVIRONMENT. Importantly, valuation levels between
large cap and midcap stocks are now at parity, providing a level playing field
going forward.
- -------------------------------------------------------------------------------
ECONOMIC SCORECARD
LATEST REPORT TWELVE MONTHS OUTLOOK
GDP Growth +5.8% (1Q97) +2.4% (1996) Upside Surprise
Job Creation +143,000 (April) +2.2% Improving Participation
Rate
Inflation +0.1% (April) +2.5% Downward Bias
Budget Deficit $53 billion $107 billion Falling
(7-mth annual rate) (yr-end 9/96)
30-yr Bond Yield 6.96% (May) 6.35% -7.19% Range Bound
S&P 500 Earnings +15% (1Q97) +13% Continued Above
Expectations
TOTAL RETURNS:
S&P 500 +14.7% (6-mth) +25.1% Flattening
S&P MidCap 400 + 6.9 % (6-mth) +10.1% Upward Bias
- -------------------------------------------------------------------------------
MARKET OUTLOOK
Our economic and market outlook is predicated on the following trends:
1. With fiscal year-to-date Federal tax receipts gaining +9% against a +4%
gain in Federal spending, we continue to forecast a CYCLICALLY BALANCED
FEDERAL BUDGET and expect this year's deficit to drop approximately $47
billion to $60 billion.
2. We anticipate the adoption of the Labor Department's experimental consumer
price index (CPI) which will DECREASE THE REPORTED CPI BY -.3% ANNUALLY.
3. Rapid job creation, along with an improving job "mix", results in
aggregate wage growth of +7% year-over-year, STIMULATING CONSUMER SPENDING.
4. The percentage of the U.S. working-age population employed (the labor force
participation rate) has RISEN from 59% in 1962, to a record 67% today
(source: Deutsche Morgan Grenfell).
5. The aging of the U.S. work force, combined with the labor force
participation rate upswing, is generating SIGNIFICANT PERSONAL SAVINGS
GROWTH - up 44% over the past three years to $275 billion.
6. PRODUCTIVITY IMPROVEMENTS CONTINUE TO OFFSET WAGE GAINS. For 16 consecutive
quarters, S&P 500 profit growth has exceeded total revenue growth. A
productivity-driven economic expansion is not inflationary.
7. The S&P 500's current 18X 1997 price/earnings IS IN THE MIDDLE OF THE
HISTORICAL 15X TO 20X RANGE for valuations when inflation is +2-3%.
8. Falling oil prices should lead to MODERATE MONTHLY INFLATION REPORTS of
+0.1% - 0.2%, or about +2.5% annually.
9. The .8% drop in inflation and .4% rise in interest rates brings "real"
yields up by +1.2% and IMPROVES THE OUTLOOK FOR FIXED-INCOME RETURNS.
10. The ability of S&P 500 companies to sustain double-digit earnings gain in a
5% nominal GDP growth environment explains the resilience of the bull
market and STRENGTHENS THE OUTLOOK FOR OUR PERSISTENT GROWTH COMPANY
STRATEGY.
IN SUMMARY
WE MAINTAIN OUR FAVORABLE OUTLOOK FOR FINANCIAL ASSETS AND FORECAST IMPROVED
RELATIVE RESULTS FOR SMALLER TO MIDCAP STOCKS FOR THE REMAINDER OF 1997. We
expect "over-the-speed-limit" growth in consumer spending will be partially
offset by continued moderate government and healthcare spending trends. This, we
believe, will result in full year Gross Domestic Product (GDP) growth of +3-4%.
For inflation, increased foreign competition, improved productivity, and lower
raw material prices will lead to a 2-3% increase in the CPI.
As always, we appreciate your confidence in Portico MicroCap Fund and encourage
you to read the portfolio review that follows.
(pictures)
J. SCOTT HARKNESS, CFA MARY ELLEN STANEK, CFA
Chairman/Chief President
Investment Officer
Firstar Investment Research & Management Company
MICROCAP FUND
After a spectacular +54.7% return for fiscal year 1996, Portico MicroCap Fund
returned -10.8% over the first six months of fiscal year 1997 - clearly
demonstrating both the potential rewards and risks of microcap investing.
Looking at the Fund since its inception, the average annual total return remains
attractive at +27.7%.
Along with the correction in small capitalization growth stocks over the past
several months, we have also witnessed a decline in trading volume. This decline
in liquidity has frustrated our efforts to reposition the portfolio to take
advantage of the market's volatility.
As expected, several of the best performing stocks in 1996 have lost some ground
due to the recent correction. Pomery Computer Resources and Ugly Duckling, two
of the Fund's largest holdings, have declined over 25% since the beginning of
1997, but are approximately unchanged since October 31, 1996. During the
decline, however, we have followed our investment discipline by increasing our
holdings as valuations improved.
On a positive note, our research team continues to uncover undervalued growth
companies. Equity analyst Tom Bolgert has provided invaluable research on
assisted-living companies. Assisted Living Concepts, Inc., for example, has been
the Fund's best performing stock in 1997 and was the Fund's largest holding as
of April 30, 1997. Analysts Alex Paul and Joe Frohna have also provided
substantial expertise in technology-related companies. Small technology stocks
have been particularly hard hit in 1997, providing us with several opportunities
to invest in excellent companies at reasonable prices.
Overall, industry weightings for the MicroCap Fund have not changed appreciably
in the past six months. We have reduced technology exposure in favor of finance
stocks and as usual, we have virtually no investments in basic materials,
energy, or utilities. We believe the Fund is well-positioned to deliver
excellent returns over the long term due to the superior growth potential of
small companies.
As always, we caution shareowners to be prepared for the volatility inherent in
the microcap segment. We believe investors with a long-term commitment to
investing in this segment will be rewarded with potentially superior results.
(picture)
MARK D. WESTMAN, CFA
PORTFOLIO MANAGER PROFILE
- -------------------------------------------------------------------------------
MARK D. WESTMAN, CFA, CPA, Vice President and Senior Portfolio Manager has
managed the Fund since its inception on August 1, 1995. Mark has been with
Firstar since 1992 and has five years of investment management experience. He
received his BA from Augustana College in 1985 and his MBA from the University
of Chicago in 1993. Mark is a Chartered Financial Analyst and Certified Public
Accountant.
8/1/95 12/95 6/96 10/96 4/97
PORTICO MICROCAP FUND $10,000 $11,958 $16,393 $17,188 $15,340
This chart assumes an initial investment of $10,000 made on 8/1/95 (inception).
Performance reflects fee waivers in effect. In the absence of fee waivers, total
return would be reduced. Returns shown include the reinvestment of all dividends
and other distributions. Past performance is not predictive of future
performance. Investment return and principal value will fluctuate, so that your
shares, when redeemed, may be worth more or less than their original cost.
AVERAGE ANNUAL RATE OF RETURN (%)
FOR PERIODS ENDED APRIL 30, 1997
Fiscal Since Inception
Year-To-Date 1 Year 8/1/95
PORTICO MICROCAP FUND (10.8) (2.8) 27.7
S&P 500 STOCK INDEX* 14.7 25.1 25.6
RUSSELL 2000** 1.6 0.1 9.7
* The S&P 500 Stock Index is an index of an unmanaged group of 500 selected
common stocks, most of which are listed on the New York Stock Exchange. The
Index is heavily weighted toward stocks with large market capitalizations
and represents approximately two-thirds of the total market value of all
domestic common stocks.
** The Russell 2000, an unmanaged index, consists of the smallest 2,000
companies in a group of 3,000 U.S. companies in the Russell 3000 Index, as
ranked by total market capitalization.
An investment cannot be made directly in an index.
Series A shares, unlike the Series Institutional shares, have a 4% maximum sales
load and are subject to an annual 0.25% service organization fee. Performance
reflects fee waivers in effect. In the absence of fee waivers, total return
would be reduced.
TOP 5 HOLDINGS 4/30/97
ASSISTED LIVING CONCEPTS, INC. 6.6%
COINMACH LAUNDRY CORPORATION 5.6%
POMEROY COMPUTER RESOURCES, INC. 5.6%
SYNOPSYS, INC. 4.6%
UGLY DUCKLING CORPORATION 4.6%
Portfolio holdings are subject to change and are not
a representation of the Fund's entire portfolio holdings.
TOTAL FUND NET ASSETS 4/30/97
$64,211,021
MICROCAP FUND
STATEMENT OF ASSETS AND LIABILITIES
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
APRIL 30, 1997
(UNAUDITED)
ASSETS:
Investments, at value (Cost $64,067) $64,282
Income receivable 4
Organization costs, net of
accumulated amortization 16
Receivable for securities sold 456
Other assets 24
----------
Total Assets 64,782
----------
LIABILITIES:
Payable for securities purchased 459
Payable to affiliates 97
Accrued expenses and other liabilities 15
----------
Total Liabilities 571
----------
NET ASSETS $64,211
==========
NET ASSETS CONSIST OF:
Capital stock $59,363
Undistributed net investment (loss) (582)
Undistributed accumulated net realized gains 5,214
Unrealized net appreciation on investments 216
----------
Total Net Assets $64,211
==========
SERIES A:
Net assets $ 7,480
Shares authorized ($.0001 par value) 50,000
Shares issued and outstanding 623
Net asset value and redemption price per share<F1> $12.00
==========
Maximum offering price per share<F1> $12.50
==========
SERIES INSTITUTIONAL:
Net assets $56,731
Shares authorized ($.0001 par value) 50,000
Shares issued and outstanding 4,708
Net asset value, redemption price
and offering price per share<F1> $12.05
==========
<F1> Amounts may not recalculate due to rounding.
See notes to the financial statements.
STATEMENT OF OPERATIONS
(AMOUNTS IN THOUSANDS)
PERIOD ENDED APRIL 30, 1997
(UNAUDITED)
INVESTMENT INCOME:
Interest income $ 80
----------
EXPENSES:
Investment advisory fees 569
Administration fees 44
Shareowner servicing and accounting costs 31
Service organization fees - Series A 11
Custody fees 15
Federal and state registration fees 5
Professional fees 12
Reports to shareowners 3
Amortization of organization costs 2
Directors' fees and expenses -
Other 1
----------
Total expenses before waiver 693
Less: Waiver of expenses (32)
----------
Net Expenses 661
----------
NET INVESTMENT (LOSS) (581)
----------
REALIZED AND UNREALIZED GAIN:
Net realized gain on investments 5,239
Change in unrealized appreciation on investments (12,347)
----------
Net (loss) on investments (7,108)
----------
NET (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ (7,689)
==========
See notes to the financial statements.
MICROCAP FUND
STATEMENT OF CHANGES IN NET ASSETS
(AMOUNTS IN THOUSANDS)
November 1, 1996 July 1, 1996
through through
April 30, 1997 October 31, 1996
--------------- ----------------
(Unaudited)
OPERATIONS:
Net investment (loss) $ (581) $ (352)
Net realized gain on investments 5,239 5,738
Change in unrealized appreciation
on investments (12,347) (1,894)
--------- ---------
Net increase (decrease)
in net assets resulting
from operations (7,689) 3,492
--------- ---------
CAPITAL SHARE TRANSACTIONS:
Shares sold 411 74
Shares issued to owners in
reinvestment of dividends 11,413 -
Shares redeemed (2,795) (556)
--------- ---------
Net increase (decrease) 9,029 (482)
--------- ---------
DISTRIBUTIONS TO
SERIES A SHAREOWNERS:
From net investment income - -
From net realized gains (1,541) -
--------- ---------
(1,541) -
--------- ---------
DISTRIBUTIONS TO
SERIES INSTITUTIONAL SHAREOWNERS:
From net investment income - -
From net realized gains (11,229) -
--------- ---------
(11,229) -
--------- ---------
TOTAL INCREASE (DECREASE)
IN NET ASSETS (11,430) 3,010
NET ASSETS:
Beginning of period 75,641 72,631
--------- ---------
End of period (including
undistributed net investment
loss of $(582) and $(1),
respectively) $64,211 $75,641
========= =========
<F2> Commencement of operations.
See notes to the financial statements.
<TABLE>
MICROCAP FUND
FINANCIAL HIGHLIGHTS
<CAPTION>
November 1, 1996 July 1, 1996 August 1, 1995<F1>
through through through
April 30, 1997 October 31, 1996 June 30, 1996
------------------------------ ------------------------------ ------------------------------
Series A Series Institutional Series A Series Institutional Series A Series Institutional
-------- -------------------- -------- -------------------- -------- --------------------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Per Share Data:
Net asset value,
beginning of period $16.16 $16.20 $15.42 $15.45 $10.00 $10.00
Income from investment
operations:
Net investment income (0.12)<F2> (0.10)<F2> (0.08)<F3> (0.07)<F3> (0.02) (0.02)
Net realized and
unrealized
gains on securities (1.29) (1.30) 0.82 0.82 6.10 6.14
-------- -------- -------- -------- -------- --------
Total from investment
operations (1.41) (1.40) 0.74 0.75 6.08 6.12
-------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net
investment income - - - - (0.04) (0.05)
Distributions from
capital gains (2.75) (2.75) - - (0.62) (0.62)
-------- -------- -------- -------- -------- --------
Total distributions (2.75) (2.75) - - (0.66) (0.67)
-------- -------- -------- -------- -------- --------
Net asset value, end
of period $12.00 $12.05 $16.16 $16.20 $15.42 $15.45
======== ======== ======== ======== ======== ========
Total return<F4><F5> (10.86)% (10.76)% 4.80% 4.85% 63.52% 63.93%
Supplemental data and ratios:
Net assets, in thousands,
end of period $7,480 $56,731 $9,273 $66,368 $9,036 $63,595
Ratio of net expenses to
average net assets<F6> 1.97% 1.72% 1.97% 1.72% 1.99% 1.74%
Ratio of net investment
(loss) to average net
assets<F6> (1.75)% (1.50)% (1.69)% (1.44)% (0.36)% (0.16)%
Portfolio turnover
rate<F4><F7> 78.10% 78.10% 64.44% 64.44% 283.67% 283.67%
Average commission
rate paid<F6><F7> $0.0500 $0.0500 $0.0460 $0.0460 $0.0423 $0.0423
<FN>
<F1> Commencement of operations.
<F2> Net investment income per share represents net investment income divided by the average shares outstanding throughout the
period.
<F3> Net investment income per share is calculated using ending balances prior to consideration of adjustments for permanent book
and tax differences.
<F4> Not annualized.
<F5> The total return calculation does not reflect the 4% front-end sales charge for Series A.
<F6> Annualized.
<F7> Portfolio turnover and average commission rate paid are calculated on the basis of the Fund as a whole without distinguishing
between the classes of shares issued.
See notes to the financial statements.
</TABLE>
MICROCAP FUND
SCHEDULE OF INVESTMENTS
APRIL 30, 1997
(UNAUDITED)
Number Market
of Value
Shares (in thousands)
------ --------------
COMMON STOCKS 98.9%
AUTOS & TRUCKS 4.9%
220,100 Ugly Duckling Corporation<F1> $ 3,109
---------
BANKS & BANK HOLDING 0.6%
20,900 Hamilton Bancorp., Inc.<F1> 402
---------
BUILDING & HOUSING 2.5%
30,100 American Homestar Corporation<F1> 489
35,400 NCI Building Systems, Inc.<F1> 1,097
---------
1,586
---------
BUSINESS SERVICES 3.1%
152,400 Barrett Business Services, Inc.<F1> 1,981
---------
COMPUTER SOFTWARE & SERVICES 15.5%
45,500 Complete Business Solutions, Inc.<F1> 466
230,900 Elcom International, Inc.<F1> 1,155
52,800 Phoenix International Ltd., Inc.<F1> 1,082
120,800 Smallworldwide PLC - ADR<F1> 1,691
84,200 Summit Design, Inc.<F1> 589
105,014 Synopsys, Inc.<F1> 3,347
29,200 Technology Modeling Associates, Inc.<F1> 292
146,300 Western Micro Technology, Inc.<F1> 1,317
---------
9,939
---------
CONSUMER SERVICES 9.1%
110,200 American Residential Services, Inc.<F1> 2,080
208,300 Coinmach Laundry Corporation<F1> 3,593
18,200 Rent-Way, Inc.<F1> 189
---------
5,862
---------
COSMETICS & SOAP 3.3%
292,400 French Fragrances, Inc.<F1> 2,120
---------
DATA PROCESSING 1.3%
70,800 CCC Information Services Group<F1> 832
---------
DISTRIBUTION 20.6%
123,600 CHS Electronics, Inc.<F1> 2,348
118,200 Insight Enterprises, Inc.<F1> 2,807
130,400 MicroAge, Inc.<F1> 1,646
149,700 Pomeroy Computer Resources, Inc.<F1> 3,630
280,900 Richey Electronics<F1> 2,844
---------
13,275
---------
DRUGS 0.2%
17,700 Faulding, Inc.<F1> 157
---------
Number Market
of Value
Shares (in thousands)
------ --------------
ELECTRONICS 6.4%
4,100 Advanced Technical Materials, Inc.<F1> $ 74
24,000 Exar Corporation<F1> 408
30,800 Micrel, Inc.<F1> 1,348
125,300 SDL, Inc.<F1> 1,629
62,100 Thermedics Detection, Inc.<F1> 613
---------
4,072
---------
ENTERTAINMENT & LEISURE 0.6%
42,200 Vistana, Inc.<F1> 404
---------
FINANCIAL SERVICES 6.4%
135,700 Delta Financial Corporation<F1> 1,832
52,300 Granite Financial, Inc.<F1> 484
170,800 Southern Pacific Funding Corporation<F1> 1,815
---------
4,131
---------
HOSPITAL SUPPLIES & SERVICES 5.0%
60,000 Kensey Nash Corporation<F1> 795
193,500 Safeguard Health Enterprises, Inc.<F1> 2,419
---------
3,214
---------
HUMAN RESOURCES 2.4%
99,600 RemedyTemp, Inc. - Class A<F1> 1,519
---------
RETIREMENT CARE 9.2%
192,400 Assisted Living Concepts, Inc.<F1> 4,233
79,400 Harborside Healthcare Corporation<F1> 913
63,100 Sterling House Corporation<F1> 773
---------
5,919
---------
TELECOMMUNICATIONS 4.1%
99,100 ACT Networks, Inc.<F1> 1,338
22,000 RMH Teleservices, Inc.<F1> 127
376,200 Syntellect, Inc.<F1> 1,176
---------
2,641
---------
TRANSPORTATION 3.7%
92,400 Coach USA, Inc.<F1> 2,356
---------
Total Common Stocks (Cost $63,304) 63,519
---------
MICROCAP FUND
SCHEDULE OF INVESTMENTS
APRIL 30, 1997
(UNAUDITED)
Number Market
of Shares Value
(in thousands) (in thousands)
- -------------- --------------
SHORT-TERM INVESTMENTS 1.2%
INVESTMENT COMPANIES 1.2%
763 Short-Term Investments Co. Liquid Assets
Portfolio $ 763
---------
Total Short-Term Investments (Cost $763) 763
---------
Total Investments 100.1% (Cost $64,067) 64,282
---------
Liabilities, less Other Assets (0.1)% (71)
---------
TOTAL NET ASSETS 100.0% $64,211
========
<F1> Non-income producing
See notes to the financial statements.
MICROCAP FUND
NOTES TO THE FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION
Portico Funds, Inc. (the "Company") was incorporated on February 15, 1988,
as a Wisconsin Corporation and is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended. The
MicroCap Fund (the "Fund") is a separate, diversified investment portfolio of
the Company. The Fund commenced operations on August 1, 1995. The objective of
the MicroCap Fund is capital appreciation through investments in securities of
small companies. The Fund's fiscal year end was changed from June 30 to October
31.
The costs, in thousands, incurred in connection with the organization,
initial registration and public offering of shares, aggregating $24, have been
paid by the Fund. These costs are being amortized over the period of benefit,
but not to exceed sixty months from the Fund's commencement of operations.
The Company has issued two classes of Fund shares: Series A and Series
Institutional. The Series A shares are subject to a 0.25% service organization
fee and an initial sales charge imposed at the time of purchase, in accordance
with the Fund's prospectus. The maximum sales charge is 4% of the offering price
or 4.16% of the net asset value. Each class of shares has identical rights and
privileges except with respect to service organization fees paid by Series A
shares, voting rights on matters affecting a single class of shares and the
exchange privileges of each class of shares.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
a) Investment Valuation - Securities which are traded on a recognized stock
exchange are valued at the last sale price on the securities exchange on which
such securities are primarily traded or at the last sale price on a national
securities exchange. Exchange-traded securities for which there were no
transactions are valued at the current bid prices. Securities traded on only
over-the-counter markets are valued on the basis of closing over-the-counter bid
prices. Instruments with a remaining maturity of 60 days or less are valued on
an amortized cost basis. Securities for which market quotations are not readily
available, and other assets are valued at fair value as determined by the
investment adviser under the supervision of the Board of Directors.
b) Federal Income Taxes - No provision for federal income taxes has been made
since the Fund has complied to date with the provisions of the Internal Revenue
Code available to regulated investment companies and intends to continue to so
comply in future years.
c) Income and Expenses - The Fund is charged for those expenses that are
directly attributable to it, such as advisory, administration and certain
shareowner service fees. Expenses that are not directly attributable to a
portfolio are typically allocated among the Company's portfolios in proportion
to their respective net assets, number of shareowner accounts or net sales,
where applicable. Net investment income other than class specific expenses, and
realized and unrealized gains and losses are allocated daily to each class of
shares based upon the relative net asset value of outstanding shares of each
class of shares at the beginning of the day (after adjusting for the current
day's capital share activity of the respective class).
d) Distributions to Shareowners - Dividends from net investment income are
declared and paid annually. Distributions of net realized capital gains, if any,
will be declared at least annually.
e) When-Issued Securities - The Fund may purchase securities on a when-issued
or delayed delivery basis. Although the payment and interest terms of these
securities are established at the time the purchaser enters into the agreement,
these securities may be delivered and paid for at a future date, generally
within 45 days. The Fund records purchases of when-issued securities and
reflects the values of such securities in determining net asset value in the
same manner as other portfolio securities. The Fund segregates and maintains at
all times cash, cash equivalents, or other high-quality liquid debt securities
in an amount at least equal to the amount of outstanding commitments for when-
issued securities.
f) Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
g) Other - Investment and shareowner transactions are recorded no later than
the first business day after the trade date. The Fund determines the gain or
loss realized from investment transactions by comparing the original cost of the
security lot sold with the net sale proceeds. Dividend income is recognized on
the ex-dividend date or as soon as information is available to the Fund and
interest income is recognized on an accrual basis. Generally accepted accounting
principles require that permanent reporting and tax differences be reclassified.
3. CAPITAL SHARE TRANSACTIONS
Transactions in capital shares for the Fund, in thousands, were as follows:
Period from November 1, 1996 to April 30, 1997:
Series A Series Institutional
---------------- --------------------
Amount Shares Amount Shares
------ ------ ------ ------
Shares sold $ 13 1 $ 398 28
Shares issued
to owners in
reinvestment
of dividends 1,535 112 9,878 717
Shares redeemed (904) (63) (1,891) (133)
------ ------ ------- ------
Net increase $ 644 50 $ 8,385 612
====== ====== ======= ======
Period from July 1, 1996 to Oct. 31, 1996:
Series A Series Institutional
---------------- --------------------
Amount Shares Amount Shares
------ ------ ------ ------
Shares sold $27 2 $47 3
Shares redeemed (210) (14) (346) (24)
------ ------ ------- ------
Net decrease $ (183) (12) $ (299) (21)
====== ====== ======= ======
4. INVESTMENT TRANSACTIONS
Purchases and sales of securities for the period ended April 30, 1997
(excluding short-term investments), in thousands, aggregated $57,335 and
$62,147, respectively.
At April 30, 1997, gross unrealized appreciation and depreciation of
investments for federal tax purposes, in thousands, were as follows:
Appreciation $ 8,300
(Depreciation) (8,122)
-------
Net unrealized appreciation on investments $ 178
=======
At April 30, 1997, the cost of investments, in thousands, for federal income tax
purposes was $64,104.
5. INVESTMENT ADVISORY AND OTHER AGREEMENTS
The Fund has entered into an Investment Advisory Agreement with Firstar
Investment Research & Management Company ("FIRMCO"). FIRMCO is a subsidiary of
Firstar Corporation, a publicly held bank holding company. Pursuant to its
Advisory Agreement with the Fund, FIRMCO is entitled to receive a fee,
calculated daily and payable monthly, at the annual rate of 1.50% as applied to
the Fund's daily net assets.
Firstar Trust Company, an affiliate of FIRMCO, serves as custodian, transfer
agent and accounting services agent for the Funds.
The Company has entered into a Co-Administration Agreement with B.C. Ziegler
and Company and Firstar Trust Company (the "Co-Administrators") for certain
administrative services. Pursuant to the Co-Administration Agreement with the
Company, the Co-Administrators are entitled to receive a fee, computed daily and
payable monthly, at the annual rate of 0.125% of the Company's first $2 billion
of average aggregate daily net assets, plus 0.10% of the Company's average
aggregate daily net assets in excess of $2 billion. For the period ended April
30, 1997, $32 of administration fees, in thousands, were voluntarily waived for
the Fund.
The Company has entered into Servicing Agreements with certain Service
Organizations, including FIRMCO affiliates, for the Series A class of shares.
The Service Organizations are entitled to receive fees from the Fund up to an
annual rate of 0.25% of the average daily net asset value of the Series A Shares
for certain support and/or distribution services to customers of the Service
Organizations who are beneficial owners of Fund Series A Shares. These services
may include assisting customers in processing purchase, exchange and redemption
requests; processing dividend and distribution payments from the Fund; and
providing information periodically to customers showing their positions in Fund
Series A shares. Service Organization fees, in thousands, incurred by the Fund
aggregated $11 for the period ended April 30, 1997.
Each director of the Company who is not affiliated with FIRMCO receives an
annual fee from the Company for service as a Director and is eligible to
participate in a deferred compensation plan with respect to these fees.
Participants in the plan may designate their deferred Director's fees as if
invested in any one of the Portico Funds (with the exception of the MicroCap
Fund) or in 90-day U.S. Treasury bills. The value of each Director's deferred
compensation account will increase or decrease as if it were invested in shares
of the selected Portico Funds or 90-day U.S. Treasury bills. The Fund maintains
its proportionate share of the Company's liability for deferred fees.
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- - PORTICO FUNDS ARE AVAILABLE THROUGH:
- the Portico Funds Center,
- Investment Specialists who are registered representatives of Elan
Investment Services, Inc., a registered broker/dealer, NASD and SIPC
member,
- and through selected shareholder organizations.
This report is authorized for distribution only when pre ceded or accompanied by
a current prospectus.
TO OPEN AN ACCOUNT OR
REQUEST INFORMATION
1-800-982-8909
1-414-287-3710
FOR ACCOUNT BALANCES AND
INVESTOR SERVICES
1-800-228-1024
1-414-287-3808
PORTICO FUNDS CENTER
615 EAST MICHIGAN STREET
P.O. BOX 3011
MILWAUKEE, WI 53201-3011
NASD REF #C96-1129-001
