PROSPECTUS
AUGUST 13, 1997
EMERGING GROWTH FUND
(LOGO)
TABLE OF CONTENTS
Expense Summary 2
Investment Objective and Policies 4
Other Investment Information 5
Purchase of Shares 8
Redemption of Shares 14
Exchange of Shares 17
Shareowners Services (Retail Shareowners Only) 18
Dividends and Distributions 19
Management of the Fund 20
Expenses 22
Investment Limitations 22
Taxes 23
Description of Shares 24
Net Asset Value and Days of Operation 25
Performance Calculations 26
This Prospectus describes the Emerging Growth Fund, one of the seventeen mutual
funds in the Portico family of funds. The Emerging Growth Fund seeks capital
appreciation through investments in securities of small-sized companies
(companies with stock market capitalizations between $250 million and $2 billion
are considered by the Fund's investment advisor to be small sized). Portico
Funds offer a variety of portfolios with different investment objectives to meet
the needs of individual and institutional investors, including money market,
bond, balanced, domestic and international equity funds, which are described in
separate prospectuses.
Firstar Investment Research & Management Company, LLC ("FIRMCO" or the
"Adviser") serves as investment adviser to the Fund, and the Fund is sponsored
by B.C. Ziegler and Company (the "Distributor"). Shareowner organizations may
perform shareowner 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 Emerging Growth
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 SEC maintains a website
(http://www.sec.gov.) that contains the Statement of Additional Information,
material incorporated by reference and other information regarding registrants
that file electronically with the SEC. The Statement of Additional Information
bears the same date as this Prospectus and is incorporated by reference in its
entirety into the Prospectus.
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 LLC,
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.
AUGUST 13, 1997
EXPENSE SUMMARY
Below is a summary of the shareowner transaction expenses and the annual
operating expenses expected to be incurred by Retail and Institutional
Shares of the Emerging Growth Fund during its first twelve months of
operations. An example based on the summary is also shown.
RETAIL INSTITUTIONAL
SHAREOWNER TRANSACTION EXPENSES SHARES SHARES
- -------------------------------------------------------------------------------
Maximum Sales Charge
Imposed on Purchases 4.00% None
Maximum Sales Charge
Imposed on Reinvested Dividends None None
Deferred Sales Charge None None
Redemption Fees<F1> None None
Exchange Fees None None
ANNUAL FUND
OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
- -------------------------------------------------------------------------------
Advisory Fees After Fee Waivers<F2> 0.63% 0.63%
12b-1 Fees 0%<F3> 0%
All Other Expenses After Fee Waivers
Shareowner Servicing Fees 0.25% 0%
Other Expenses After Fee Waivers<F4> 0.27% 0.52% 0.27% 0.27%
----- ----- ----- -----
Total Fund Operating Expenses After
Fee Waivers<F5> 1.15% 0.90%
===== =====
- -------------------------------------------------------------------------------
<F1> A fee of $12.00 is charged for each wire redemption on Retail Shares. See
"Redemption of Shares."
<F2> To the extent that the Fund's total ordinary operating expenses exceed
1.15% and 0.90%, respectively, for the Retail and Institutional Shares, the
Adviser will waive voluntarily a portion of its fee for the Fund's first
twelve months of operation. Absent such waivers, the advisory fee would be
0.75%, which is higher than the advisory fee payable by most other
investment companies. See "Management of the Fund" in this Prospectus for
a more complete discussion.
<F3> The total of all 12b-1 fees and Shareowner 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 shareowners may pay more than the economic equivalent of
the maximum front end sales charge permitted by the NASD Regulations, Inc.
<F4> The Administrator anticipates voluntarily waiving 0.07% of its fees to the
Fund during the first twelve months of operations. Without the fee waiver,
"Other Expenses" would be 0.34% for both Retail and Institutional Shares.
<F5> Absent fee waivers, total operating expenses would be 1.34% and 1.09% for
Retail and Institutional Shares, respectively.
Example: You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return; and (2) redemption of your investment at the
end of the following periods:
1 YEAR 3 YEARS
------ -------
Retail Shares $51 $75
Institutional Shares $ 9 $29
The foregoing tables are intended to assist investors in understanding the
expenses that shareowners bear either directly or indirectly and reflect
anticipated fees. In addition, Shareowner Organizations or Institutions (as
defined below) may charge fees for providing services in connection with
their clients' investments in the Fund's shares.
The example shown above should not be considered a representation of future
investment return or operating expenses. Actual investment return and
operating expenses may be more or less than those shown. The Emerging
Growth Fund is new and the above figures are based on estimates of expenses
expected during its first twelve months of operations.
Information regarding the Fund's actual performance will appear in its
annual report to shareowners. The annual report for its first fiscal year,
which may be obtained without charge by calling Portico Investor Services
at 1-800-982-8909, will be available within 60 days after the end of the
fiscal year. Each shareowner of record at the close of the fiscal year will
be sent the annual report.
UNDERSTANDING EXPENSES
Operating a mutual fund involves a variety of expenses for portfolio
management, shareowner statements and reports, and other services. These
costs are paid from the Fund's assets and their effect, except for fees
charged directly by a Shareowner Organization or Institution to its
customers, are factored into any quoted share price or return.
INVESTMENT
OBJECTIVES
AND POLICIES
INVESTMENT OBJECTIVE. The investment objective of the Emerging Growth Fund
is capital appreciation. The Fund seeks to achieve its objective primarily
through investments in securities of small-sized companies. 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.
The Fund's policy is to invest at least 50% of the value of its total
assets in equity securities under normal market conditions. Most equity
securities held by the Fund will be publicly traded 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. From
time to time, 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-sized 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 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-sized 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. Companies with
stock market capitalizations between $250 million and $2 billion are
considered by the Adviser to be small-sized. The Fund generally anticipates
its median stock market capitalization will be between $500 million and
$1.5 billion and its weighted average will be between $750 million and
$1.25 billion. The Fund may also invest from time to time a portion of its
assets, not to exceed 20% at the time of purchase, in companies with larger
or smaller market capitalizations.
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 10% of the value of its total assets in the securities
of unseasoned companies.
Non-convertible debt obligations acquired by the Fund will be "investment
grade' at the time of purchase. That is, these obligations will be rated
within the four highest rating categories by Standard and Poor's Rating
Group ("S&P") (AAA, AA, A and BBB), Moody's Investors Service, Inc.
("Moody's") (Aaa, Aa, A and Baa) or other nationally recognized rating
agencies. Unrated obligations will be determined by the Adviser to be
comparable in quality to instruments that are so rated. Obligations rated
in the lowest of the top four rating categories are considered to have
speculative characteristics and are subject to greater credit and market
risk than higher rated securities. As a result, the market value of these
securities may be expected to fluctuate more than those of securities with
higher ratings.
Subsequent to its purchase by the Fund, a rated security may cease to be
rated or its rating may be reduced below the minimum rating required 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 not rated investment
grade by at least one nationally recognized rating agency and that exceed
5% of the Fund's net assets.
In view of the specialized nature of its investment activities, investment
in the Fund's shares may be suitable only for those investors who are
prepared to invest without concern for current income and are financially
able to assume an above-average level of market risk in search of long-term
capital gain.
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 S&P or Prime-1 by 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 they must satisfy
the criteria set forth above for high quality money market instruments. 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 which invest in high quality, short-
term debt instruments. Securities of other investment companies will be
acquired by the Fund within the limits prescribed by the Investment Company
Act of 1940 (the "1940 Act"). 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 shareowner 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 shareowners.
RESTRICTED SECURITIES. The Fund will not knowingly invest more than 10%,
and in all cases will not 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, and securities that are not registered under the
Securities Act of 1933 (the "Act") but may be purchased by institutional
buyers under Rule 144A, are subject to this 15% limit (unless such
securities are variable amount master demand notes with maturities of nine
months or less or unless the Board of Directors or the Adviser, pursuant to
guidelines adopted by the Board of Directors, determines that a liquid
trading market exists).
BORROWINGS. The Fund may borrow money to the extent described below under
"Investment Limitations." 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
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 25% 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.
FOREIGN SECURITIES. The Fund may invest in foreign securities. The Fund's
investments in the securities of foreign issuers may include both
securities of foreign corporations and banks, as well as securities 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.
In addition, foreign banks and foreign branches of U.S. banks are subject
to less stringent reserve requirements and to different accounting,
auditing, reporting and recordkeeping standards than those applicable to
domestic branches of U.S. banks. 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. Additionally, foreign securities
and dividends and interest payable on those securities may be subject to
foreign taxes, including foreign withholding taxes, and other foreign taxes
may apply with respect to securities transactions. See "Taxes."
Transactions in foreign securities may involve greater time from the trade
date until the settlement date than for domestic securities transactions,
and may involve the risk of possible losses through the holding of
securities in custodians and securities depositories in foreign countries.
Additional costs associated with an investment in foreign securities may
include higher transaction costs and the cost of foreign currency
conversions. Changes in foreign exchange rates will also affect the value
of securities denominated or quoted in currencies other than the U.S.
dollar. In this regard, the Fund does not intend to hedge against foreign
currency risk, and changes in currency exchange rates will impact the
Fund's net asset value (positively or negatively) irrespective of the
performance of the portfolio securities held by the Fund. The Fund and its
shareowners may encounter substantial difficulties in obtaining and
enforcing judgments against non-U.S. resident individuals and companies.
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.
CONVERTIBLE SECURITIES AND WARRANTS. 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 that (1) are
not rated at the time of purchase investment grade by S&P, Moody's or other
nationally recognized rating agencies; or (2) are unrated and have not been
determined by the Adviser to be of comparable quality to a security rated
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 by the Fund, 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 a 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.
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.
SECURITIES LENDING. Although the Fund does not intend to during the current
fiscal year, the Fund may lend portfolio securities.
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.
CONCENTRATION. 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. As a matter of
fundamental policy, 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 the Fund's
investments will be diversified among individual issuers.
SMALL COMPANIES. Small companies in which the Fund will invest may have
limited product lines, markets, or financial resources, or may be dependent
upon a small management group, and their securities may be subject to more
abrupt or erratic market movements than larger, established companies, both
because their securities are typically traded in lower volume and because
the issuers are typically subject to greater degree of changes in their
earnings and prospects.
PORTFOLIO TURNOVER. 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 shareowners. High portfolio turnover may result
in the realization of substantial net capital gains; to the extent net
short-term capital gains are realized, distributions resulting from such
gains will be ordinary income for federal income tax purposes. (See
"Taxes-Federal.") The Fund's portfolio turnover rate is not expected to
exceed 150% although the Fund's annual portfolio turnover rate will not be
a limiting factor in making investment decisions.
PURCHASE OF
SHARES
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.
Retail and Institutional Shares of the Fund will be offered at net asset
value per share, plus in the case of Retail Shares the applicable sales
charge described below (unless a waiver applies).
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 $1,000;
WITH THE EXCEPTION OF IRAS, WHICH HAVE A MINIMUM INITIAL INVESTMENT OF
$100. The minimum subsequent investment for Retail Shares in the Fund is
$50. The minimum initial investment will be waived if you participate in
the Periodic Investment Plan. The Fund reserves the right to close your
account if the value is less than $1,000 and you are not currently
participating in the Periodic Investment Plan. For additional information
on involuntary redemptions, see "Other Redemption Information" below. The
$1,000 minimum account balance applies only to accounts opened with Portico
on or after February 28, 1997. Accounts opened with Portico on or before
February 27, 1997 must maintain a minimum account balance of $50.
There is no minimum initial or subsequent investment for Institutional
Shares.
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, "Shareowner
Organizations'). For a discussion of transactions through Shareowner
Organizations, see "Shareowner 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).
Retail Shares are purchased at the offering price which is the net asset
value plus a sales charge which varies in accordance with the amount of the
purchase as indicated below:
Shareowner
Organization
Amount of Sales Charge as a Sales Charge as Reallowance as a
Transaction Percentage of Percentage of Percentage of
at Offering Price Offering Price Net Asset Value Offering Price
----------------- -------------- --------------- ----------------
Less than $50,000 4.00% 4.16% 3.50%
$50,000 to $99,999 3.00% 3.09% 2.50%
$100,000 to $249,999 2.00% 2.04% 1.50%
$250,000 or more none none none
The Distributor may reallow the entire sales charge to certain Shareowner
Organizations. To the extent that 90% or more of the sales charge is
reallowed, Shareowner 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 shareowner as of January 1, 1995 and have continuously maintained a
shareowner account with the Company; (b) you make any purchase within 60
days of a redemption of Portico Institutional Shares; (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 termination of a personal trust account with an
affiliate of Firstar Corporation; (f) you make any purchase for your
medical savings account for which Firstar Corporation or an affiliate
serves in a custodial capacity; (g) you make any purchase for your
individual retirement account; (h) you make any purchase within 60 days of
a redemption of a mutual fund on which you paid an initial sales charge or
a contingent deferred sales charge; (i) 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; (j) you
are a spouse, parent or child of an individual who falls within the
preceding categories (a) or (d) above; or (k) you are a spouse, parent,
sibling or child of an individual who falls within the preceding category
(c) above. In addition, you may reinvest all or any portion of your
proceeds from redemption of shares of the Fund in Retail Shares of other
Portico funds, within 365 days of redemption without paying a sales charge.
Shares so reinvested will be purchased at a price equal to the net asset
value next determined after the transfer agent receives payment in proper
form.
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 Shareowner 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 Shareowner 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 Shareowner 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 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 the
Fund.
PURCHASE ORDERS PLACED THROUGH REGISTERED REPRESENTATIVES
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
------------------ --------------------
IN PERSON
- Complete an application at a - Bring your check to a Firstar
Firstar Investment Office. Call Investment Office. Call 1-800-
1-800-982-8909 for the office 982-8909 for the office nearest
nearest you. you.
BY PHONE
- Call your registered representative - Call your registered
or call 1-800-982-8909 for the representative at the number on
office nearest you. your statement or call
1-800-982-8909 for the office
nearest you.
AUTOMATICALLY
- Call your registered representative - Complete a Periodic Investment
to obtain a purchase application Plan Application to automatically
which includes information about purchase more shares.
a Periodic Investment Plan.
PURCHASE ORDERS PLACED THROUGH THE TRANSFER AGENT
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
------------------ --------------------
BY MAIL
- Complete an application and mail - Make your check payable to
it along with a check payable to Portico Funds. Please include
Portico Funds, P.O. Box 3011, your account number on your check
Milwaukee, WI 53201-3011. and mail it to the address on
your statement.
OVERNIGHT
DELIVERY
- Complete an application and deliver - Make your check payable to
it along with a check payable to Portico Funds. Please include
Portico Funds, 615 E. Michigan St., your account number on your check
Milwaukee, WI 53202. and deliver it to the address at
the left.
IN PERSON
- Bring your application and check - Bring your check to a Firstar
to a Firstar Investment Office. Call Investment Office. Call 1-800-
1-800-982-8909 for the office 982-8909 for the office nearest
nearest you. you.
AUTOMATICALLY
- Call 1-800-982-8909 to obtain a - Complete a Periodic Investment
purchase application which includes Plan Application to automatically
information for a Periodic purchase more shares.
Investment Plan.
- 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 a - Call 1-800-228-1024 to arrange a
wire transaction. Ask your bank to wire transaction. Ask your bank
transmit immediately available funds to transmit immediately available
by wire in the amount of your funds by wire as described at the
purchase to Firstar Bank Milwaukee, left. Please also include your
N.A., ABA # 0750-00022, Account # account number.
112-952-137 for further credit to
Portico Emerging Growth Fund
[name/title on the account].
BY PHONE
- Call 1-800-228-1024 to exchange - Call 1-800-228-1024 to exchange
from another Portico Fund account from another Portico Fund account
with the same registration including with the same registration
name, address and taxpayer including name, address and
ID number. taxpayer ID number.
Investors making initial investments by wire must promptly complete a
Purchase Application and forward it to the Fund. REDEMPTIONS WILL NOT BE
PAID UNTIL THE COMPLETED APPLICATION HAS BEEN RECEIVED BY THE TRANSFER
AGENT.
If an order and payment are received by the transfer agent 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.
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 at a rate of 31% on all liquidations and dividend and capital
gain distributions.
Certificates for shares will be issued only upon shareowner 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 owners
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
shareowner 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 regular trading hours.
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 Institutional 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 Emerging Growth Fund
[the investor's account number and the name/title of the account].
Payment may also be made by check payable to: Portico Funds, P.O. Box
3011, Milwaukee, WI 53201-3011, or delivered (via overnight delivery or in
person) to 615 E. Michigan St., Milwaukee, WI 53202.
It is the responsibility of Institutions to transmit orders and payment for
the purchase of shares by their customers to the transfer agent on a timely
basis, in accordance with the procedures stated above.
Certificates for shares will be issued only upon the request of an
Institution. The Fund reserves the right to reject any purchase order.
Payment for shares of the Fund in the amount of $1,000,000 or more may, at
the discretion of the Fund, be made in the form of securities that are
permissible investments for the Fund as described in this Prospectus. For
further information see the Statement of Additional Information or contact
Portico Investor Services at 1-800-982-8909 or 414-287-3710 (Milwaukee
area).
REDEMPTION OF
SHARES
HOW TO REDEEM
RETAIL SHARES
Redemption orders are effected at the net asset value per share next
determined after receipt of the order by the transfer agent or Elan. If a
redemption order is received in proper form (as described below) before the
close of regular trading hours on the Exchange, currently 3:00 p.m. Central
Time, on a business day, Fund shares will be redeemed as of the
determination of net asset value on that day. Redemption orders which are
received after the close of regular trading hours on the Exchange, or on
non-business days, will be executed on the next business day. Depending
upon the current net asset value of the redeemed shares at the time of
redemption, the value of the shares redeemed may be more or less than the
investor's cost.
REDEMPTION ORDERS
THROUGH THE TRANSFER AGENT THROUGH A REGISTERED REPRESENTATIVE
-------------------------- -----------------------------------
BY PHONE
- Call 1-800-228-1024 with your - Call your registered
account name, account number and representative at the number
amount of redemption (minimum on your statement, or 1-800-
$500). Redemption proceeds will 982-8909.
only be sent to a shareowner'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 - Mail your instructions to the
Portico Funds, P.O. Box 3011, , Portico Funds, P.O. Box 3011,
Milwaukee WI 53201-3011, or deliver Milwaukee, WI 53201-3011, or
them(via overnight delivery or in deliver them to 615 E.
person) to 615 E. Michigan Michigan Street, Milwaukee, WI
Street, Milwaukee, 53202, or bring your instructions
WI 53202. Include the number of to your registered
shares or the amount to be redeemed, representative's office.
your shareowner 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 Systematic - Call your registered
Withdrawal Plan application representative to establish a
($15,000 account minimum and Systematic Withdrawal Plan.
$100 minimum 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 could be disadvantageous because of the sales
charge involved in the additional purchases.
The transfer agent charges a $12.00 fee for each payment made by wire of
redemption proceeds, which will be deducted from the shareowner'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 shareowner'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 shareowner 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
shareowners. During periods of substantial economic or market change,
telephone redemptions may be difficult to implement. If a shareowner 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 shareowner. 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 shareowner 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 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 less than
$1,000. 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
$15.00 fee for each IRA distribution, which will be deducted from the
shareowner'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 shareowner. 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 shareowner is liable for any loss for
unauthorized transactions.
EXCHANGE
OF SHARES
If shares may legally be sold in the state of the investor's residence,
Retail shareowners are generally permitted to exchange their Retail Shares
in the Fund (with a minimum current value of $1,000) 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 unless a
shareowner qualifies for a sales charge exemption as described in the
section "Purchase of Shares". Institutional shareowners also are
generally permitted to exchange their Institutional Shares in the Fund 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 shareowner of record and the
representative of record unless and until the transfer agent receives
written instructions from the shareowner(s) of record canceling
the privilege.
Portico reserves the right to terminate indefinitely the exchange privilege
of any shareowner, 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 shareowner, broker, investment adviser, agent,
or account representative based on a consideration of both the number of
exchanges the particular shareowner, 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 shareowner 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 shareowner 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 shareowner and the exchange privilege may be modified or
terminated at any time. At least sixty days' notice will be given to
shareowners 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."
SHAREOWNER
SERVICES
(RETAIL SHAREOWNERS
ONLY)
The services and privileges described below are available to Retail
Shareowners of the Fund. These may be modified or terminated at any time
upon notice to shareowners.
SHAREOWNER REPORTS. Shareowners 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 with an annual report containing
audited financial statements. To eliminate unnecessary duplication, only
one copy of shareowner reports will be sent to shareowners with the same
mailing address. Shareowners who desire a duplicate copy of shareowner
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 shareowners after each
purchase, reinvestment of dividends and redemption.
AUTOMATED TELERESPONSE SERVICE. Shareowners 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, shareowners
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
shareowners. After calling the 800-number, pressing "2" on their touch-
tone phone, shareowners can:
1. Determine closing prices for the Fund.
2. Learn how the price of a Fund has changed from the previous day.
3. Hear daily yields for Portico money market funds.
Money market fund yields reflect fee waivers in effect, represent past
performance and will vary. If fees were not waived, yields would be
reduced. Past performance is no guarantee of future results. Current yield
refers to income earned by a fund's investments over a 7-day period. It is
then annualized and stated as a percentage of the investment. Effective
yield is the same as current yield except that it assumes the income earned
by an investment in a fund will be reinvested. An investment in any one of
the Portico money market funds is neither insured nor guaranteed by the
U.S. Government nor is there any assurance the funds will be able to
maintain a stable net asset value of $1.00 per share.
To speak with a Portico Investor Services representative anytime during an
automated teleresponse session (during regular business hours), shareowners
may press "0."
For total return information, shareowners 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), 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 shareowner 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 shareowner'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 shareowner's
shares of the Fund. Reinvested dividends and distributions receive the same
tax treatment as those paid in cash.
MANAGEMENT
OF THE FUND
The business and affairs of the Fund are managed under the direction of the
Board of Directors of the Portico Funds, Inc. ("Portico" or the
"Company"). The Statement of Additional Information contains the name and
background information regarding each Director.
ADVISORY SERVICES
FIRMCO, a Wisconsin limited liability company 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 $19.3 billion in assets under active management, of which
$11.9 billion is invested in fixed-income and money market securities and
$7.4 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 Shareowner Organizations, including, in the case of agency
transactions, Shareowner Organizations which are affiliated with the
Adviser, 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 0.75% of the Fund's average
daily net assets. The Adviser may voluntarily waive all or a portion of the
advisory fee otherwise payable by the Fund from time to time. These waivers
may be terminated at any time at the Adviser's discretion.
The Adviser's portfolio management services for the Fund are conducted by
Todd Krieg and Matthew D'Attilio. Mr. Krieg, a Vice President and Senior
Portfolio Manager of FIRMCO, has been with Firstar since 1992 and has five
years of investment management experience. Mr. D'Attilio is an Assistant
Vice President and Portfolio Manager of FIRMCO and has been with Firstar
since 1993. He has four years of investment management experience. Both Mr.
Krieg and Mr. D'Attilio have managed the Fund since inception. Mr. Krieg is
a Chartered Financial Analyst.
ADMINISTRATIVE SERVICES
Firstar Trust Company, 615 East Michigan Street, Milwaukee, WI 53202
("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 shareowners and filings with state securities commissions;
coordinate federal and state tax returns; monitor the arrangements
pertaining to the Funds' agreements with Shareowner 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.
SHAREOWNER
ORGANIZATIONS
Portico may enter into agreements from time to time with certain Shareowner
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, shareowner 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, Shareowner Organizations under a
Distribution and Service Agreement may provide the foregoing shareowner
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, Shareowner Organizations
may be entitled to receive fees from the Fund at annual rates of up to
0.25% of the average daily net asset value of the Retail Shares covered by
their agreements.
Under the terms of their agreements with Portico, Shareowner 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 Shareowner
Organization's agreement with Portico. In addition, investors should
contact their Shareowner Organization with respect to the availability of
shareowner services and the particular Shareowner Organization's procedures
for purchasing and redeeming shares. It is the responsibility of Shareowner
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 Shareowner Organization, the
transfer agent's charge of $12.00 for each payment made by wire of
redemption proceeds may be billed directly to the Shareowner 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 Shareowner 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
Shareowner 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 its
Distributor under the Plan. However, payments to Shareowner Organizations,
including affiliates of the Adviser, under the Plan are not tied directly
to their own out-of-pocket expenses and therefore may be used as they elect
(for example, to defray their overhead expenses), and may exceed their
direct and indirect costs.
CUSTODIAN, TRANSFER
AND DIVIDEND DISBURSING
AGENT, AND ACCOUNTING
SERVICES AGENT
Firstar Trust, an affiliate of the Adviser, provides custodial, transfer
agency, dividend disbursing agency services, and accounting services for
the Fund. Total custodial, transfer agency, dividend disbursing agency, and
accounting services fees paid to Firstar Trust for the first twelve months
of the Fund's operations are expected to be approximately 0.19% of the
Fund's average net assets. Additional information regarding the fees
payable by the Fund to Firstar Trust for these services is provided in the
Statement of Additional Information. Inquiries to the transfer agent may be
sent to the following address: Firstar Trust Company, P.O. Box 3011,
Milwaukee, WI 53201-3011.
EXPENSES
Operating expenses borne by the Fund include taxes, interest, fees and
expenses of Directors and officers, Securities and Exchange Commission
fees, state securities and qualification fees, advisory fees,
administration fees, Shareowner Organization fees (Retail Shares only),
charges of the custodian and transfer agent, dividend disbursing agent and
accounting services agent, certain insurance premiums, outside auditing and
legal expenses, costs of preparing and printing prospectuses for regulatory
purposes and for distribution to shareowners, costs of shareowner reports
and meetings and any extraordinary expenses. The Fund also pays any
brokerage fees, commissions and other transaction 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 owners of a majority of the Fund's outstanding shares. If there is a
change in the Fund's investment objective, shareowners 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 except for
temporary purposes in amounts up to 10% 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.
Whenever borrowings (including reverse repurchase agreements) exceed 5% of
the Fund's total assets, the Fund will not make any investments. 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 amount
of borrowings or reverse repurchase agreements exceed the 10% limit stated
above, the Fund will promptly reduce such amount.
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 or her 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
shareowner of the Fund as long-term capital gain, regardless of how long
the shareowner 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 shareowners, 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
shareowner (i) who has provided either an incorrect taxpayer identification
number or no number at all, (ii) who is subject to withholding by the
Internal Revenue Service for failure to properly include on his return
payments of interest or dividends, or (iii) who has failed, when required
to do so, to certify that he is not subject to backup withholding. The Fund
generally also will withhold and remit to the U.S. Treasury 10% of all
distributions from individual retirement accounts (including simplified
employee plans) to any investor unless the transfer agent receives a
written request not to withhold federal income tax from the investor prior
to the distribution date; withholding on distributions from other types of
Retirement Plans may be mandatory and may be at a higher rate.
A taxable gain or loss may be realized by a shareowner 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 shareowner 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 shareowner 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 shareowner's
exchanged shares, but may be included (subject to the limitation) in the
tax basis of the new shares. If a shareowner held shares for six months or
less, any loss realized by the shareowner will be treated as long-term loss
to the extent of any long-term capital gain distribution received.
The foregoing is only a brief summary of some of the important federal
income tax considerations generally affecting the Fund and its shareowners,
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.
Shareowners 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 18 classes representing
interests in 18 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,
100 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 0.25% of the average
daily net assets of the Retail Shares under the Fund's Distribution and
Service Plan and Shareowner 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) trust, agency or custodial accounts opened through
trust companies or trust departments affiliated with Firstar Corporation;
(ii) all employer-sponsored qualified retirement plans; and (iii) clients
of the Adviser. Retail Shares are available to any investor who does not
fall within the three preceding categories. Portico Funds offer various
services and privileges in connection with Retail Shares that are not
offered in connection with the Institutional Shares, including a Periodic
Investment Plan, ConvertiFund(R), and Systematic Withdrawal Plan. A
salesperson and any other person or Shareowner 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 Shareowner Organization.
Portico does not presently intend to hold annual meetings of shareowners
except as required by the 1940 Act or other applicable law. Portico will
call a meeting of shareowners for the purpose of voting upon the question
of removal of a member of the Board of Directors upon written request of
shareowners 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
shareowner communication in such matters.
Shareowners of each class of Portico 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 shareowners 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 shareowners 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 owners of more than 50% of Portico's outstanding shares
(irrespective of Fund) may elect all of the Directors.
As of April 30, 1997, the Adviser and its affiliates held, on behalf of
their underlying accounts, approximately 72% 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 allocated 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. Portfolio securities which are primarily traded on
foreign securities exchanges are generally valued at the preceding closing
values of such securities on their respective exchanges, except when an
occurrence subsequent to the time a value was so established is likely to
have changed such value. In such an event, the fair value of those
securities will be determined through the consideration of other factors by
or under the direction of the Board of Directors. 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.
Quotations of foreign securities in foreign currency are converted to U.S.
dollar equivalents using the foreign exchange quotation in effect at the
time net asset value is computed. Foreign securities held by the Fund may
trade in their local markets on days the Fund is closed, and the Fund's net
asset value may, therefore, change on days when investors may not purchase
or redeem shares.
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
shareowners. 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 S&P MidCap 400 Index; the S&P SmallCap 600 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
Shareowner 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
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
1-800-228-1024
1-414-287-3808
PORTICO FUNDS, INC.
Statement of Additional Information
for the
Emerging Growth Fund
August 13, 1997
TABLE OF CONTENTS
-----------------
Page
----
Portico Funds ................................................ 3
Investment Objective and Policies ............................ 3
Net Asset Value .............................................. 13
Additional Purchase and Redemption Information ............... 13
Description of Shares ........................................ 17
Additional Information Concerning Taxes ...................... 18
Management of the Company .................................... 19
Custodian, Transfer Agent and Accounting Services Agent ...... 25
Independent Accountants ...................................... 25
Counsel ...................................................... 25
Additional Information on Performance ....................... 26
Miscellaneous ................................................ 27
Appendix A ................................................... A-1
This Statement of Additional Information is meant to be read in
conjunction with the Portico Fund Prospectus dated August 13, 1997, for the
Retail and Institutional Shares of the Emerging Growth 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 53202-3011, 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, LLC, 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 Emerging Growth Fund. The Company also
offers other investment portfolios which are described in separate Prospectuses
and Statements of Additional Information. For information concerning these
other portfolios contact Portico Investor Services at 1-800-982-8909 or write to
777 East Wisconsin Avenue, Suite 900, Milwaukee, Wisconsin 53202.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Emerging Growth Fund is to seek
capital appreciation. The Fund seeks to achieve its objective primarily through
investments in securities of small-sized companies. There is no assurance,
however, that the Fund's investment objective will in fact be attained. The
following policies supplement the Fund's investment objective and policies as
set forth in the Prospectus.
Portfolio Transactions
- ----------------------
Subject to the general supervision of the Board of Directors, the
Adviser is responsible for, makes decisions with respect to, and places orders
for all purchases and sales of portfolio securities for the Fund.
The portfolio turnover rate for the Fund is calculated by dividing the
lesser of purchases or sales of portfolio securities for the reporting period by
the monthly average value of the portfolio securities owned during the reporting
period. The calculation excludes all securities, including options, whose
maturities or expiration dates at the time of acquisition are one year or less.
Portfolio turnover may vary greatly from year to year as well as within a
particular year, and may be affected by cash requirements for redemption of
shares and by requirements which enable the Fund to receive favorable tax
treatment. Portfolio turnover will not be a limiting factor in making portfolio
decisions, and the Fund may engage in short-term trading to achieve its
investment objective.
Transactions on U.S. stock exchanges involve the payment of negotiated
brokerage commissions. On exchanges on which commissions are negotiated, the
cost of transactions may vary among different brokers. Unlike transactions on
U.S. stock exchanges which involve the payment of negotiated brokerage
commissions, transactions in foreign securities generally involve the payment of
fixed brokerage commissions which are generally higher than those in the United
States.
Transactions in the over-the-counter market are generally principal
transactions with dealers and the costs of such transactions involve dealer
spreads rather than brokerage commissions. With respect to over-the-counter
transactions, the Adviser will normally deal directly with dealers who make a
market in the securities involved except in those circumstances where better
prices and execution are available elsewhere or as described below.
The Fund may participate, if and when practicable, in bidding for the
purchase of portfolio securities directly from an issuer in order to take
advantage of the lower purchase price available to members of a bidding group.
The Fund will engage in this practice, however, only when the Adviser in its
sole discretion, believes such practice to be in the Fund's interests.
The Advisory Agreement between the Company and the Adviser provides
that, in executing portfolio transactions and selecting brokers or dealers, the
Adviser will seek to obtain the best overall terms available. In assessing the
best overall terms available for any transaction, the Adviser shall consider
factors it deems relevant, including the breadth of the market in the security,
the price of the security, the financial condition and execution capability of
the broker or dealer, and the reasonableness of the commissions, if any, both
for the specific transaction and on a continuing basis. In addition, the
Agreement authorizes the Adviser to cause the Fund to pay a broker-dealer which
furnishes brokerage and research services a higher commission than that which
might be charged by another broker-dealer for effecting the same transaction,
provided that the Adviser determines in good faith that such commission is
reasonable in relation to the value of the brokerage and research services
provided by such broker-dealer, viewed in terms of either the particular
transaction or the overall responsibilities of the Adviser to the Fund. 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 October 31, 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 IMMDEXa, and Balanced
Funds held securities of Lehman Brothers totaling $7,053, $7,375, $13,615, and
$1,647, respectively; the Intermediate Bond Market, Bond IMMDEXa, and Balanced
Funds held securities of Goldman Sachs totaling $9,649, $4,825, and $1,447,
respectively; the Institutional Money Market and Equity Index Funds held
securities of Morgan Stanley totaling $38,808 and $357, respectively; and the
Short-Term Bond Market, Intermediate Bond Market, Balanced, Growth and Income,
and Equity Index Funds held securities of Merrill Lynch totaling $1,088, $131,
$1,034, $6,827 and $555, respectively.
Additional Information On Portfolio Instruments
- -----------------------------------------------
RATINGS. The ratings of Standard & Poor's, Moody's and other
nationally recognized rating agencies represent their opinions as to the quality
of debt securities. It should be emphasized, however, that ratings are general
and are not absolute standards of quality, and debt securities with the same
maturity, interest rate and rating may have different yields while debt
securities of the same maturity and interest rate with different ratings may
have the same yield.
The payment of principal and interest on most debt securities
purchased by the Fund will depend upon the ability of the issuers to meet their
obligations. An issuer's obligations under its debt securities are subject to
the provisions of bankruptcy, insolvency, and other laws affecting the rights
and remedies of creditors, such as the Federal Bankruptcy Code, and laws, if
any, which may be enacted by federal or state legislatures extending the time
for payment of principal or interest, or both, or imposing other constraints
upon enforcement of such obligations. The power or ability of an issuer to meet
its obligations for the payment of interest on, and principal of, its debt
securities may be materially adversely affected by litigation or other
conditions.
Subsequent to its purchase by the Fund, a rated security may cease to
be rated or its rating may be reduced below the minimum rating required for
purchase by the Fund. The Adviser will consider such an event in determining
whether the Fund should continue to hold the security. For a more detailed
description of ratings, see Appendix A to the Statement of Additional
Information.
SECURITIES LENDING. Although the Fund does not intend to during the
current fiscal year, it may lend its portfolio securities 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.
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 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.
REVERSE REPURCHASE AGREEMENTS. Reverse repurchase agreements are
considered to be borrowings under 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.
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 shareowner of another investment
company, the Fund would bear, along with other shareowners, 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 shareowners.
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 "Foreign Securities and 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 Emerging Growth 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. As stated in the Prospectus, however, under normal
market conditions the Fund may hold money market instruments or cash, pending
investment, to meet anticipated redemptions or if in the opinion of the Adviser
other suitable securities are unavailable The Fund does not attempt to "time"
the securities market.
Certain securities owned by the Emerging Growth Fund may 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. As a result, there may be a greater fluctuation in the
value of redemptions or for other reasons, to sell these securities at a
discount from market prices, to sell during period when such disposition is not
desirable, or to make many small sales over a lengthy period of time.
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 or yield obtained in a transaction (and therefore the value of a
security) may be less favorable then the price or yield (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
- ---------------------------
FOREIGN SECURITIES AND AMERICAN DEPOSITORY RECEIPTS ("ADRS"). In
addition to investing directly in foreign securities the Fund may also 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 foreign securities and ADRs 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.
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 except that (a) this investment limitation shall not
apply to the Fund's transactions in futures contracts and related options, and
(b) the 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 10% 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 10% of the value of the Fund's total assets at
the time of such borrowing. The Fund will not purchase securities while its
borrowings (including reverse repurchase agreements) in excess of 5% of its
total assets are outstanding. 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 amount of
borrowings and reverse repurchase agreements exceed the limit stated above, the
Fund will promptly reduce such amount.
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 Shareowner Servicing
Plan applicable only to Retail Shares. Subject to the provisions of the Articles
of Incorporation, determinations by the Board of Directors as to the direct and
allocable liabilities, and the allocable portion of any general assets, with
respect to the Fund are conclusive.
The value of the Fund's portfolio securities that are traded on stock
exchanges outside the United States are based upon the price on the exchange as
of the close of business of the exchange immediately preceding the time of
valuation, except when an occurrence subsequent to the time a value was so
established is likely to have changed such value. Securities trading in over-
the-counter markets in European and Pacific Basin countries is normally
completed well before 3:00 P.M. Central Time. In addition, European and Pacific
Basin securities trading may not take place on all business days. Furthermore,
trading takes place in Japanese markets on certain Saturdays and in various
foreign markets on days which are not business days in New York and on which net
asset value of the Fund is not calculated. The calculation of the net asset
value of the Fund may not take place contemporaneously with the determination of
the prices of portfolio securities used in such calculation. Events affecting
the values of portfolio securities that occur between the time their prices are
determined and 3:00 P.M. Central Time, and at other times, may not be reflected
in the calculation of net asset value of the Fund.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
COMPUTATION OF OFFERING PRICE OF THE FUNDS. An illustration of the
computation of the initial offering price per share of the Retail Shares of the
Emerging Growth Fund, follows:
Net Assets $ 9.60
Numbers of Shares 1
Outstanding
Net Asset Value $ 9.60
Per Share
Sales Charge, 4.00% of Offering Price $ .40
(4.16% of net asset value per share) ------
Public Offering Price $10.00
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 shareowner as of January 1, 1995 and have continuously
maintained a shareowner account with the Company; (b) you make any purchase
within 60 days of a redemption of Portico Institutional Shares, (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 termination of a personal trust account with an affiliate of Firstar
Corporation; (f) you make any purchase for your medical savings account for
which an affiliate of Firstar Corporation serves in a custodial capacity; (g)
you make any purchase for your individual retirement account; (h) you make any
purchase within 60 days of a redemption of a mutual fund on which you paid an
initial sales charge or a contingent deferred sales charge; (i) 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; (j) you are a spouse, parent or child of an individual who falls
within the preceding categories (a) or (d) above; or (k) you are a spouse,
parent, sibling or child of an individual who falls within the preceding
category (c) 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.
Shareowner Organizations or Institutions may be paid by the Fund for
advertising, distribution or shareowner services. Depending on the terms of the
particular account, Shareowner 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. Shareowner 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
on a day 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 shareowner 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 less than $1,000.
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 shareowner to make
full payment for shares purchased by the shareowner or to collect any charge
relating to a transaction effected for the benefit of a shareowner which is
applicable to Fund shares as provided in the Prospectus from time to time.
EXCHANGE PRIVILEGE. By use of the exchange privilege, shareowners
authorize the transfer agent to act on telephonic or written exchange
instructions from any person representing himself to be the shareowner or in
some cases, the shareowner's registered 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 shareowners.
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 shareowner 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 shareowner 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 shareowner 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 Shareowner Services for Retail Shares
- ----------------------------------------------------------------------
The Retail Shares of the Fund offer a Periodic Investment Plan whereby
a shareowner may automatically make purchases of shares of the Fund on a
regular, monthly basis ($50 minimum per transaction). Under the Periodic
Investment Plan, a shareowner's designated bank or other financial institution
debits a preauthorized amount on the shareowner'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 shareowner's account
or the shareowner'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 permit shareowners to effect
ConvertiFundR transactions, an automated method by which a Retail shareowner 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 offer shareowners a Systematic
Withdrawal Plan, which allows a shareowner who owns shares of a Fund worth at
least $15,000 at current net asset value at the time the shareowner initiates
the Systematic Withdrawal Plan to designate that a fixed sum ($50 minimum per
transaction) be distributed to the shareowner 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.
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
- ------------ ------------------- ---------------------
18-Institutional Emerging Growth Fund 100 Million
18-A/Retail 100 Million
The Board of Directors has also authorized the issuance of Classes 1
through 17 common stock representing interests in seventeen other separate
investment portfolios which are described in separate Statements of Additional
Information. The remaining authorized shares are classified into twelve
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, shareowners 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, shareowners 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 shareowner.
Shareowners 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 shareowners 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 shareowners 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
shareowners of the Company voting together in the aggregate without regard to
particular portfolios. Similarly, on any matter submitted to the vote of
shareowners 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 shareowners 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 shareowner 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 shareowners 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 shareowners 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 shareowners, 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
shareowners 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 shareowners). In such event,
dividend distributions would be taxable as ordinary income to shareowners 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
shareowners.
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 shareowners 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: 53 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: 59 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.
Principal
Position with Occupations During Past 5
Name, Address & Age the Company Years and Other Affiliations
- ------------------- ------------ ----------------------------
Jerry G. Remmel Director Vice President, Treasurer and
16650A Lake Circle Chief Financial Officer of
Brookfield, WI 53005 Wisconsin Energy Corporation
Age: 65 1994-1996; Treasurer of
Wisconsin Electric Power
Company 1973-1996; Director
Wisconsin Electric Power
Company 1989-1996; Senior Vice
President, Wisconsin Electric
Power Company 1988-1994; Chief
Financial Officer, Wisconsin
Electric Power Company 1983-
1996; Vice President and
Treasurer, Wisconsin Electric
Power Company 1983-1989.
Richard K. Riederer Director President, Chief Executive 400
Three Springs Drive Officer, and Chief Operating
Weirton, WV 26062-4989 Officer of Weirton Steel since
Age: 52 1995; Executive Vice
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,
14245 Heatherwood Court Chief Financial Officer and
Elm Grove, WI 53122 Secretary, Rexnord Corporation
Age: 66 (an equipment manufacturing
company), 1988 - 1992; Vice
President - Finance and
Administration, Rexnord Inc.,
1982 - 1988; Officer and
Director of several Rexnord
subsidiaries until 1992.
Mary Ellen Stanek Vice President President and Chief Operating
777 East Wisconsin Avenue Officer, FIRMCO since
Suite 800 1994, Director since 1992 and
Milwaukee, WI 53202 Director of Fixed Income
Age: 41 Securities of FIRMCO since
1990.
W. Bruce McConnel, III Secretary Partner of the law firm of
Philadelphia National Drinker Biddle & Reath LLP.
Bank Building
1345 Chestnut Street
Philadelphia, PA 19107
Age: 53
* 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 year ended October 31, 1996 of the Company's Directors.
PENSION OR TOTAL
RETIREMENT COMPENSATION
BENEFITS ESTIMATED FROM
AGGREGATE ACCRUED AS ANNUAL COMPANY
COMPENSATION PART OF BENEFITS AND FUND
NAME OF FROM THE FUND UPON COMPLEX* PAID
PERSON/POSITION COMPANY EXPENSES RETIREMENT 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 fiscal year ended October 31, 1996, the
Directors and Officers received aggregate fees and reimbursed expenses 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 LLP, 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 Advisor 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.
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, (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, shareowner 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 agreement would be subject to
shareowner 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") 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 the Company's arrangements
with respect to services provided by Shareowner 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 or counsel to the Company,
as requested by Firstar; review and comment upon sales literature and
advertising relating to the Company, as requested by Firstar; 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: 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 the Company of
all federal and state tax returns and required tax filings other than those
required to be made by the Company's custodian and transfer agent; prepare
compliance filings and Blue Sky registrations pursuant to state securities laws
with the advice of the Company's counsel; assist to the extent requested by
the Company with the Company's preparation of Annual and Semi-Annual Reports to
Fund shareowners 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 shareowners 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. The Distributor is not entitled to receive fees from the Fund for
its distribution services.
Shareowner Organizations
- ------------------------
As stated in the Fund's Prospectus, for Retail Shares the Fund intends
to enter into agreements from time to time with Shareowner Organizations
providing for support and/or distribution services to customers of the
Shareowner Organizations who are the beneficial owners of Retail Shares of the
Fund. Under the agreements, the Fund may pay Shareowner 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
Shareowner 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 shareowner 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, Shareowner
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 Shareowner 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 Shareowner Organizations and the purposes for which the
expenditures were made. In addition, the Fund's arrangements with Shareowner
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 Shareowner Organizations will benefit the holders of Retail
Shares as a way of allowing Shareowner Organizations to participate with the
Fund in the provision of support and distribution services to customers of the
Shareowner Organization who own Retail Shares. Any material amendment to the
arrangements with Shareowner Organizations under the agreements must be approved
by a majority of the Board of Directors (including a majority of the
Disinterested Directors), and any amendment to increase materially the costs
under the Distribution and Service Plan with respect to the Fund must be
approved by the holders of a majority of the outstanding Retail Shares of the
Fund. So long as the Plans are in effect, the selection and nomination of the
members of the Board of Directors who are not "interested persons" (as defined
in the 1940 Act) of the Fund will be committed to the discretion of such
disinterested Directors.
CUSTODIAN, TRANSFER AGENT, DISBURSING AGENT AND ACCOUNTING SERVICES AGENT
Firstar Trust serves as custodian of all the Fund's assets. Under
the Custody Agreement, Firstar Trust has agreed to (i) maintain a separate
account in the name of the Fund, (ii) make receipts and disbursements of money
on behalf of the Fund, (iii) collect and receive all income and other payments
and distributions on account of the Fund's portfolio investments, (iv) respond
to correspondence from shareowners, security brokers and others relating to its
duties and (v) make periodic reports to the Company concerning the Fund's
operations. Firstar Trust Company 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 monthly, based on the annual rate of $0.20 per $1,000 of the
market value of the Fund's first $2 billion of assets, $0.15 per $1,000 of the
market value of the Fund's next $2 billion of assets, and $0.10 per $1,000 on
the balance of such assets. In addition, Firstar Trust, as custodian, is
entitled to certain charges for securities transactions and reimbursement for
expenses.
Firstar Trust also serves as transfer agent and dividend disbursing
agent for the Fund under a Shareowner 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 shareowners of
the Fund, (iii) respond to correspondence by Fund shareowners and others
relating to its duties, (iv) maintain shareowner 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 rate of $15.00
per shareowner account with an annual minimum of $24,000 per portfolio, plus
certain other transaction charges and reimbursement for expenses.
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.
COUNSEL
Drinker Biddle & Reath LLP (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, shareowner
reports or other communications to shareowners. Performance information is
generally available by calling the Portico Investors 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 of 4% 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 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 shareowners may summarize the substance of
information contained in shareowner 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
shareowner 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 April 30, 1997 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 (6%), Institutional Money Market Fund (87%); Tax-
Exempt Money Market Fund (48%); 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 (75%); Bond IMMDEX/TM Fund (79%);
Equity Index Fund (76%); Balanced Fund (80%); Intermediate Bond Market Fund
(78%); MidCore Growth Fund (85%); Tax-Exempt Intermediate Bond Fund (67%);
International Equity Fund (89%); 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.
