PORTICO FUNDS, INC.
Statement of Additional Information
for the Money Market Fund
Institutional Money Market Fund
U.S. Treasury Money Market Fund
U.S. Government Money Market Fund
Tax-Exempt Money Market Fund
February 28, 1997 (as revised April 25, 1997)
TABLE OF CONTENTS
Page
Portico Funds 2
Investment Objectives and Policies 2
Additional Information on Portfolio
Instruments......................................................
............... 12
Net Asset Value 14
Additional Purchase and Redemption Information 15
Additional Information Regarding Shareowner Services for the
U.S. Government Money
Market, U.S. Treasury Money Market, Money Market and
Tax-Exempt Money Market
Funds 18
Description of Shares 18
Additional Information Concerning Taxes 20
Management of the Company 23
Custodian, Transfer Agent, Disbursing Agent and Accounting
Services Agent 31
Expenses 32
Independent Accountants 32
Counsel 32
Additional Information on Yield 33
Miscellaneous 34
Appendix A-1
This Statement of Additional Information is meant to be read in
conjunction with the Portico Funds' Prospectuses dated February
28, 1997 for the Money Market Fund, Institutional Money Market
Fund, U.S. Treasury Money Market Fund (formerly, U. S. Federal
Money Market Fund), U.S. Government Money Market Fund and
Tax-Exempt Money Market Fund (collectively referred to as the
"Funds"), and is incorporated by reference in its entirety into
those Prospectuses. Because this Statement of Additional
Information is not itself a prospectus, no investment in shares
of these Funds should be made solely upon the information
contained herein. Copies of the Prospectuses for the Funds may
be obtained by writing Portico Investor Services at 615 East
Michigan Street, P.O. Box 3011, Milwaukee, Wisconsin 53201-3011
or by calling 1-800-982-8909 or 414-287-3710 (Milwaukee area).
Capitalized terms used but not defined herein have the same
meanings as in the Prospectuses.
SHARES OF THE FUNDS ARE NOT BANK DEPOSITS, AND ARE NEITHER
ENDORSED BY, INSURED BY, GUARANTEED BY, OBLIGATIONS OF, NOR
OTHERWISE SUPPORTED BY THE FDIC, THE FEDERAL RESERVE BOARD,
FIRSTAR INVESTMENT RESEARCH & MANAGEMENT COMPANY, FIRSTAR TRUST
COMPANY, FIRSTAR CORPORATION, ITS AFFILIATES OR ANY OTHER BANK,
OR OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN THE PORTICO
FUNDS INVOLVES INVESTMENT RISKS INCLUDING POSSIBLE LOSS OF
PRINCIPAL.
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. This Statement of Additional
Information pertains to five diversified portfolios, the Money
Market Fund, Institutional Money Market Fund, U.S. Treasury
Money Market Fund, U.S. Government Money Market Fund and
Tax-Exempt Money Market Fund. The Money Market Fund,
Institutional Money Market Fund, U.S. Treasury Money Market
Fund, U.S. Government Money Market Fund and Tax-Exempt Money
Market Fund commenced operations on March 16, 1988, April 26,
1991, April 29, 1991, August 1, 1988 and June 27, 1988,
respectively. 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 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).
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of the Money Market Fund, the
Institutional Money Market Fund and the U.S. Government Money
Market Fund is to seek a high level of taxable current income
consistent with liquidity, the preservation of capital and a
stable net asset value; the investment objective of the U.S.
Treasury Money Market Fund is to seek to provide a high level of
current income exempt from state income taxes consistent with
liquidity, the preservation of capital and a stable net asset
value; and the investment objective of the Tax-Exempt Money
Market Fund is to seek a high level of current income exempt
from federal income taxes consistent with liquidity, the
preservation of capital and a stable net asset value. There is
no assurance, however, that the Funds' investment objectives
will be attained. The following policies supplement the Funds'
respective investment objectives and policies as set forth in
their Prospectuses.
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 each Fund.
Securities purchased and sold by each Fund are generally traded
in the over-the-counter market on a net basis (i.e., without
commission) through dealers, or otherwise involve transactions
directly with the issuer of an instrument. The cost of
securities purchased from underwriters includes an underwriting
commission or concession, and the prices at which securities are
purchased from and sold to dealers include a dealer's mark-up or
mark-down. With respect to over-the-counter transactions, the
Adviser will normally deal directly with dealers who make a
market in the instruments involved except in those circumstances
where more favorable prices and execution are available
elsewhere.
The Funds 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 Funds will engage in this
practice, however, only when the Adviser, in its sole
discretion, believes such practice to be in the Funds' interests.
The Funds do not intend to seek profits from short-term trading.
Because the Funds will invest only in short-term debt
instruments, their annual portfolio turnover rates will be
relatively high, but brokerage commissions are normally not paid
on money market instruments, and portfolio turnover is not
expected to have a material effect on the Funds' net investment
income. For regulatory purposes, the Fund's annual portfolio
turnover rates are expected to be zero.
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 commission, if any, both for the
specific transaction and on a continuing basis. In addition,
the Agreement authorizes the Adviser to cause the Funds to pay a
broker-dealer which furnishes brokerage and research services a
higher commission than that which might be charged by another
broker-dealer for effecting the same transaction, provided that
the Adviser determines in good faith that such commission is
reasonable in relation to the value of the brokerage and
research services provided by such broker-dealer, viewed in
terms of either the particular transaction or the overall
responsibilities of the Adviser to the Funds. Such brokerage
and research services might consist of reports and statistics
relating to specific companies or industries, general summaries
of groups of stocks or bonds and their comparative earnings and
yields, or broad overviews of the stock, bond and government
securities markets and the economy.
Supplementary research information so received is in addition
to, and not in lieu of, services required to be performed by the
Adviser and does not reduce the advisory fees payable to it by
the Funds. The Directors will periodically review the
commissions paid by the Funds to consider whether the
commissions paid over representative periods of time appear to
be reasonable in relation to the benefits inuring to the Funds.
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, a 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, the Distributor or an affiliated person of either of
them (as such term is defined in the 1940 Act) acting as
principal. In addition, the Funds will not purchase securities
during the existence of any underwriting or selling group
relating thereto of which the Distributor or the Adviser, or an
affiliated person of either of them, is a member, except to the
extent permitted by the Securities and Exchange Commission.
Investment decisions for the Funds are made independently from
those for other investment companies and accounts advised or
managed by the Adviser. Such other investment companies and
accounts may also invest in the same securities as the Funds.
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.
Additional Information on Portico Instruments
Ratings. Subsequent to its purchase by a Fund, a rated security
may cease to be rated or its rating may be reduced below the
minimum rating required for purchase by a Fund. The Board of
Directors or the Adviser, pursuant to guidelines adopted by the
Board, will in accordance with Rule 2a-7 under the 1940 Act
consider such an event in determining whether the Fund involved
should continue to hold the security. In addition, it is
possible that unregistered securities purchased by a Fund in
reliance upon Rule 144A under the Securities Act of 1933 could
have the effect of increasing the level of the Fund's
illiquidity to the extent that qualified institutional buyers
become, for a period, uninterested in purchasing these
securities.
Variable and Floating Rate Instruments. With respect to the
variable and floating rate instruments that may be acquired by
the Money Market, Tax-Exempt Money Market and Institutional
Money Market Funds as described in their Prospectuses, the
Adviser will consider the earning power, cash flows and other
liquidity ratios of the issuers and guarantors of such
instruments and, if the instrument is subject to a demand
feature, will monitor their financial status to meet payment on
demand. In determining average weighted portfolio maturity, an
instrument will usually be deemed to have a maturity equal to
the longer of the period remaining to the next interest rate
adjustment or the time the Fund involved can recover payment of
principal as specified in the instrument. Variable U.S.
Government obligations held by a Fund, however, will be deemed
to have maturities equal to the period remaining until the next
interest rate adjustment.
The variable and floating rate demand instruments that the
Tax-Exempt Money Market Fund may purchase include participations
in Municipal Obligations purchased from and owned by financial
institutions, primarily banks. Participation interests provide
the Fund with a specified undivided interest (up to 100%) in the
underlying obligation and the right to demand payment of the
unpaid principal balance plus accrued interest on the
participation interest from the institution upon a specified
number of days' notice, not to exceed thirty days. Each
participation interest is backed by an irrevocable letter of
credit or guarantee of a bank that the Adviser has determined
meets the prescribed quality standards for the Fund. The bank
typically retains fees out of the interest paid on the
obligation for servicing the obligation, providing the letter of
credit and issuing the repurchase commitment.
Short-Term Funding Agreements. The Money Market Fund and the
Institutional Money Market Fund may invest in short-term funding
agreements. A funding agreement is a contract between an issuer
and a purchaser that obligates the issuer to pay a guaranteed
rate of interest on a principal sum deposited by the purchaser.
Funding agreements will also guarantee the return of principal
and may guarantee a stream of payments over time. A funding
agreement has a fixed maturity and may have either a fixed or
variable interest rate that is based on an index and guaranteed
for a set time period. Because there is no secondary market for
these investments, any such funding agreement purchased by the
Money Market Fund and the Institutional Money Market Fund will
be regarded as illiquid.
U.S. Government Obligations. Examples of the types of U.S.
Government obligations that may be acquired by the Funds 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.
Stripped U.S. Government Obligations and Government-Backed
Trusts. The Money Market Fund, U.S. Government Money Market
Fund and Institutional Money Market Fund may acquire U.S.
Government obligations and their unmatured interest coupons
which have been separated ("stripped") by their holder,
typically a custodian bank or investment brokerage firm. Having
separated the interest coupons from the underlying principal of
the U.S. Government obligations, the holder will resell the
stripped securities in custodial receipt programs with a number
of different names, including "Treasury Income Growth Receipts"
("TIGRs") and Certificate of Accrual on Treasury Securities
("CATs"). The stripped coupons are sold separately from the
underlying principal, which is sold at a deep discount because
the buyer receives only the right to receive a future fixed
payment on the security and does not receive any rights to
periodic interest (cash) payments. Purchasers of stripped
securities acquire, in effect, discount obligations that are
economically identical to the zero coupon securities that the
Treasury Department sells itself. The underlying U.S. Treasury
bonds and notes themselves are held in book-entry form at the
Federal Reserve Bank or, in the case of bearer securities (i.e.,
unregistered securities which are owned ostensibly by the bearer
or holder), in trust on behalf of the owners. Counsel to the
underwriters of these certificates or other evidences of
ownership of the U.S. Treasury securities have stated that, in
their opinion, purchasers of the stripped securities, such as
the Funds, most likely will be deemed the beneficial holders of
the underlying U.S. Government obligations for federal tax and
security purposes. The SEC staff believes that participations
in CATs and TIGRs and other similar trusts are not U.S.
Government securities.
The Treasury Department has also facilitated transfers of
ownership of zero coupon securities by accounting separately for
the beneficial ownership of particular interest coupon and
principal payments on Treasury securities through the Federal
Reserve book-entry record-keeping system. The Federal Reserve
program as established by the Treasury Department is known as
"STRIPS" or "Separate Trading of Registered Interest and
Principal of Securities." Under the STRIPS program, a Fund will
be able to have its beneficial ownership of zero coupon
securities recorded directly in the book-entry record-keeping
system in lieu of having to hold certificates or other evidences
of ownership of the underlying U.S. Treasury securities.
The Money Market Fund, U.S. Government Money Market Fund and
Institutional Money Market Fund may also invest in certificates
issued by Government-backed trusts. Such certificates represent
an undivided fractional interest in the respective
Government-backed trust's assets. The assets of each
Government-backed trust consists of (i) a promissory note issued
by a foreign government (the "Note"), (ii) a guaranty by the
U.S. Government, acting through the Defense Security Assistance
Agency of the Department of Defense, of the due and punctual
payment of 90% of all principal and interest due on such Note
and (iii) a beneficial interest in a government securities trust
holding U.S. Treasury bills, notes and other direct obligations
of the U.S. Treasury sufficient to provide the Trust with funds
in an amount equal to at least 10% of all principal and interest
payments due on the Note. No more than 35% of the value of a
Fund's total assets will be invested in stripped securities not
purchased through the Federal Reserve's STRIPS program and
Government-backed trusts.
Investment Companies. Each 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.
Repurchase Agreements. Each Fund (except the Tax-Exempt Money
Market 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 thirteen months, provided the
repurchase agreement itself matures in less than one year.
The repurchase price under the repurchase agreements described
in the Prospectuses generally equals the price paid by a 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 Funds' custodian (or
sub-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
a Fund enters into a reverse repurchase agreement (an agreement
under which a 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
a Fund may decline below the price of the securities it is
obligated to repurchase.
Securities Lending. To increase return on portfolio securities,
the Funds may lend their portfolio securities to 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.
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 of the Fund or any combination thereof.
Such loans will not be made, if, as a result, the aggregate of
all outstanding loans of the Fund exceeds 30% of the value of
its total assets. 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 a 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, a Fund will maintain such value by the daily
marking-to-market of the collateral.
<PAGE>
Other Investment Considerations - Tax-Exempt Money Market Fund.
Municipal Obligations which may be acquired by the Tax-Exempt
Money Market Fund include debt obligations issued by
governmental entities to obtain funds for various public
purposes, including the construction of a wide range of public
facilities, the refunding of outstanding obligations, the
payment of general operating expenses and the extension of loans
to public institutions and facilities.
The two principal classifications of Municipal Obligations which
may be held by the Tax-Exempt Money Market Fund are General
Obligation securities and Revenue securities. The Fund may
also acquire Moral Obligation securities.
There are, of course, variations in the quality of Municipal
Obligations both within a particular classification and between
classifications, and the yields on Municipal Obligations depend
upon a variety of factors, including general money market
conditions, the financial condition of the issuer, general
conditions of the municipal bond market, the size of a
particular offering, the maturity of the obligation and the
rating of the issue. The ratings of NRSROs represent their
opinions as to the quality of Municipal Obligations. It should
be emphasized, however, that ratings are general and are not
absolute standards of quality, and Municipal Obligations with
the same maturity, interest rate and rating may have different
yields while Municipal Obligations of the same maturity and
interest rate with different ratings may have the same yield.
The payment of principal and interest on most securities
purchased by the Tax-Exempt Money Market Fund will depend upon
the ability of the issuers to meet their obligations. An
issuer's obligations under its Municipal Obligations 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 or upon the ability of
municipalities to levy taxes. The power or ability of an issuer
to meet its obligations for the payment of interest on, and
principal of, its Municipal Obligations may be materially
adversely affected by litigation or other conditions.
Certain of the Municipal Obligations held by the Tax-Exempt
Money Market Fund may be insured at the time of issuance as to
the timely payment of principal and interest. The insurance
policies will usually be obtained by the issuer of the Municipal
Obligation at the time of its original issuance. In the event
that the issuer defaults on interest or principal payment, the
insurer will be notified and will be required to make payment to
the bondholders. There is, however, no guarantee that the
insurer will meet its obligations. In addition, such insurance
will not protect against market fluctuations caused by changes
in interest rates and other factors. The Tax-Exempt Money
Market Fund may, from time to time, invest more than 25% of its
assets in Municipal Obligations covered by insurance policies.
Municipal Obligations acquired by the Tax-Exempt Money Market
Fund may include short-term General Obligation Notes, Tax
Anticipation Notes, Bond Anticipation Notes, Revenue
Anticipation Notes, Tax-Exempt Commercial Paper, Construction
Loan Notes and other forms of short-term tax-exempt loans. Such
instruments are issued with a short-term maturity in
anticipation of the receipt of tax funds, the proceeds of bond
placements or other revenues. In addition, the Fund may invest
in bonds and other types of tax-exempt instruments provided they
have remaining maturities of thirteen months or less at the time
of purchase.
Certain types of Municipal Obligations (private activity bonds)
have been or are issued to obtain funds to provide privately
operated housing facilities, pollution control facilities,
convention or trade show facilities, mass transit, airport, port
or parking facilities and certain local facilities for water
supply, gas, electricity or sewage or solid waste disposal.
Private activity bonds are also issued on behalf of privately
held or publicly owned corporations in the financing of
commercial or industrial facilities. State and local
governments are authorized in most states to issue private
activity bonds for such purposes in order to encourage
corporations to locate within their communities. The principal
and interest on these obligations may be payable from the
general revenues of the users of such facilities.
From time to time, proposals have been introduced before
Congress for the purpose of restricting or eliminating the
federal income tax exemption for interest on Municipal
Obligations. For example, under the Tax Reform Act of 1986,
interest on certain private activity bonds must be included in
an investor's alternative minimum taxable income, and corporate
investors must include all tax-exempt interest in their federal
alternative minimum taxable income. The Company cannot, of
course, predict what legislation, if any, may be proposed in the
future as regards the income tax status of interest on Municipal
Obligations, or which proposals, if any, might be enacted. Such
proposals, while pending or if enacted, might materially and
adversely affect the availability of Municipal Obligations for
investment by the Tax-Exempt Money Market Fund and the liquidity
and value of the Fund's portfolio. In such an event, the
Company would reevaluate the Fund's investment objective and
policies and consider possible changes in its structure or
possible dissolution.
When-Issued Purchases and Forward Commitments. When the
Tax-Exempt Money Market Fund agrees to purchase securities on a
when-issued or forward commitment basis, the 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 separate 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 forward commitments and commitments to purchase
when-issued securities ever exceeded 25% of the value of its
assets.
The Tax-Exempt Money Market Fund will purchase securities on a
when-issued or forward commitment basis only with the intention
of completing the transaction and actually purchasing 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 taxable capital gain or loss.
When the Tax-Exempt Money Market Fund engages in when-issued 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's 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 market value of the Tax-Exempt
Money Market 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.
Stand-By Commitments. The Tax-Exempt Money Market Fund may
acquire "stand-by commitments" with respect to Municipal
Obligations held in its portfolio. Under a stand-by commitment,
a dealer or bank agrees to purchase at the Fund's option
specified Municipal Obligations at a specified price. Stand-by
commitments may be exercisable by the Fund at any time before
the maturity of the underlying Municipal Obligations and may be
sold, transferred or assigned only with the instruments involved.
The amount payable to the Fund upon its exercise of a stand-by
commitment is normally (i) the Fund's acquisition cost of the
Municipal Obligations (excluding any accrued interest which the
Fund paid on their acquisition), less any amortized market
premium or plus any amortized market or original issue discount
during the period the Fund owned the securities, plus (ii) all
interest accrued on the securities since the last interest
payment date during that period. A "stand-by commitment" may be
sold, transferred or assigned by the Fund only with the
instrument involved.
The Fund expects that stand-by commitments will generally be
available without the payment of any direct or indirect
consideration. However, if necessary or advisable, the Fund may
pay for a stand-by commitment either separately in cash or by
paying a higher price for portfolio securities which are
acquired subject to the commitment (thus reducing the yield to
maturity otherwise available for the same securities). Where
the Fund has paid any consideration directly or indirectly for a
stand-by commitment, its cost would be reflected as unrealized
loss for the period during which the commitment was held by the
Fund and will be reflected in realized gain or loss when the
commitment is exercised or expires. The total amount paid in
either manner for outstanding stand-by commitments held by the
Fund will not exceed 1/2 of 1% of the value of its total assets
calculated immediately after each stand-by commitment is
acquired.
The Fund intends to enter into stand-by commitments only with
dealers, banks and broker-dealers which, in the Adviser's
opinion, present minimal credit risks. The Fund's reliances
upon the credit of those dealers, banks and broker/dealers is
secured by the value of the underlying Municipal Obligations
that are subject to a commitment.
The Fund would acquire stand-by commitments solely to facilitate
portfolio liquidity and does not intend to exercise its rights
thereunder for trading purposes. The acquisition of a stand-by
commitment will not affect the valuation or assumed maturity of
the underlying Municipal Obligations which will continue to be
valued in accordance with the ordinary method of valuation
employed by the Fund. Stand-by commitments acquired by the Fund
would be valued at zero in determining net asset value where the
Fund paid any consideration directly or indirectly for a
stand-by commitment, its cost would be reflected as unrealized
depreciation for the period in which the commitment was held by
the Fund.
During the current fiscal year, the Adviser expects that not
more than 5% of the net assets of the Tax-Exempt Money Market
Fund will be invested at any time in a particular class of
taxable obligations described in the Fund's prospectus.
ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS
Additional Investment Limitations
Each Fund is subject to the investment limitations enumerated in
this subsection which may be changed with respect to a
particular Fund only by a vote of the holders of a majority of
such Fund's outstanding shares (as defined under "Miscellaneous"
below).
No Fund may:
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 each 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 a 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 obligations 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. Borrow money or issue senior securities, except that each
Fund may borrow from banks and enter into reverse repurchase
agreements for temporary purposes in amounts up to 10% of the
value of its 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 a
Fund's total assets at the time of such borrowing. No Fund will
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 a Fund's investment practices described in this
Statement of Additional Information or in its Prospectus are not
deemed to be pledged for purposes of this limitation.
8. Purchase securities on margin, make short sales of securities
or maintain a short position, except that (a) this investment
limitation shall not apply to a Fund's transactions in futures
contracts and related options, and (b) a Fund may obtain
short-term credit as may be necessary for the clearance of
purchases and sales of portfolio securities.
9. Purchase or sell commodity contracts, or invest in oil, gas
or mineral exploration or development programs, except that each
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 Prospectuses, no Fund may:
10. Purchase securities of any one issuer (other than securities
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities ("U.S. Government securities")) 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. In accordance with current SEC
regulations, the Money Market Fund and Institutional Money
Market Fund intend (as a matter of nonfundamental policy) to
limit investments in the securities of any single issuer (other
than U.S. Government securities) to not more than 5% of the
Fund's total assets, provided that the Fund may invest up to 25%
of its total assets in the securities of any one issuer for a
period of up to three business days.
11. 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 (i)
instruments issued or guaranteed by the United States, any
state, territory or possession of the United States, the
District of Columbia or any of their authorities, agencies,
instrumentalities or political subdivisions; (ii) instruments
issued by domestic branches of U.S. banks; and (iii) repurchase
agreements secured by the instruments described in clauses (i)
and (ii); (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.
Although the foregoing investment limitations would permit the
Funds to invest in options, futures contracts and options on
future contracts, the Funds, during the current fiscal year, do
not intend to trade in such instruments. Prior to making any
such investments, the Funds would notify their shareowners and
add appropriate descriptions concerning the instruments to their
Prospectuses and this Statement of Additional Information.
NET ASSET VALUE
The net asset value per share of each Fund described in this
Statement of Additional Information is calculated separately by
adding the value of all portfolio securities and other assets
belonging to the particular Fund, subtracting the liabilities
charged to the Fund, and dividing the result by the number of
outstanding shares of that Fund. Assets belonging to a Fund
consist of the consideration received upon the issuance of
shares of the particular 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.
Assets belonging to a particular Fund are charged with the
direct liabilities of that Fund and with a share of the general
liabilities of the Company which are normally allocated in
proportion to the relative net asset values of all of the
Company's investment portfolios at the time of allocation.
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 a particular Fund are conclusive.
The Company uses the amortized cost method of valuation to value
each Fund's portfolio securities, pursuant to which an
instrument is valued at its cost initially and thereafter a
constant amortization to maturity of any discount or premium is
assumed, regardless of the impact of fluctuating interest rates
on the market value of the instrument. This method may result
in periods during which value, as determined by amortized cost,
is higher or lower than the price a Fund would receive if it
sold the instrument. The market value of portfolio securities
held by a Fund can be expected to vary inversely with changes in
prevailing interest rates.
Each Fund attempts to maintain a dollar-weighted average
portfolio maturity appropriate to its objective of maintaining a
stable net asset value per share. In this regard, except for
securities subject to repurchase agreements, each Fund will
neither purchase a security deemed to have a remaining maturity
of more than thirteen months within the meaning of the 1940 Act
nor maintain a dollar-weighted average maturity which exceeds 90
days. The Board of Directors has also established procedures
that are intended to stabilize the net asset value per share of
each Fund for purposes of sales and redemptions at $1.00. These
procedures include the determination, at such intervals as the
Directors deem appropriate, of the extent, if any, to which the
net asset value per share of each Fund calculated by using
available market quotations deviates from $1.00 per share. In
the event such deviation exceeds one-half of one percent, the
Board will promptly consider what action, if any, should be
initiated. If the Board believes that the extent of any
deviation from a $1.00 amortized cost price per share may result
in material dilution or other unfair results to new or existing
investors, it has agreed to take such steps as it considers
appropriate to eliminate or reduce to the extent reasonably
practicable any such dilution or unfair results. These steps may
include selling portfolio instruments prior to maturity;
shortening the average portfolio maturity; withholding or
reducing dividends; redeeming shares in kind; reducing the
number of outstanding shares without monetary consideration; or
utilizing a net asset value per share determined by using
available market quotations.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares of each Fund described in this Statement of Additional
Information are sold without a sales charge imposed by the
Company, although Shareowner Organizations or Institutions may
be paid by the Company 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.
Investors redeeming shares by check generally will be subject to
the same rules and regulations that the transfer agent applies
to checking accounts, although the election of this privilege
creates only a shareowner-transfer agent relationship with the
transfer agent. Because dividends on each Fund accrue daily,
checks may not be used to close an account, as a small balance
is likely to result.
Under the 1940 Act, the Funds 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 Securities and Exchange
Commission ("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 Funds may also suspend or postpone
the recording of the transfer of their shares upon the
occurrence of any of the foregoing conditions.)
The Company's Articles of Incorporation permit a Fund to redeem
an account involuntarily, upon sixty days' notice, if
redemptions cause the account's net asset value to remain at
less than $1000.
In addition to the situations described in the Funds'
Prospectuses under "Redemption of Shares" and in the Statement
of Additional Information under "Net Asset Value," the Company
may redeem shares involuntarily to reimburse the Funds 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 Prospectuses from time to time.
Exchange Privilege (Not Available for Shares of the
Institutional Money Market Fund). By use of the exchange
privilege, shareowners of the Money Market Fund, U.S. Treasury
Money Market Fund, U.S. Government Money Market Fund and
Tax-Exempt Money Market Fund 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 involving shares of the Money Market Fund,
U.S. Treasury Money Market Fund, U.S. Government Money Market
Fund or Tax-Exempt Money Market Fund and 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 transactions.
A. Retail Shares of any Equity or Bond Fund purchased with a
sales charge may be exchanged without a sales charge for Retail
Shares of any other Equity or Bond Fund offered by the Company
with a sales charge.
B. Shares of any Equity or Bond 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 (including shares
of each money market Fund offered by the Company except the
Institutional Money Market Fund) may be exchanged without a
sales charge for Shares of any other Fund of the Company that is
offered without a sales charge (including shares of each Money
Market Fund offered by the Company except the Institutional
Money Market Fund).
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 (including shares of each money market
Fund offered by the Company except the Institutional Money
Market Fund) 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 Company's customary 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.
Special Procedures for In-Kind Payments
Payment for shares of a 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 Portico
Investor Services at 414-287-3710. In connection with an
in-kind securities payment, a 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.
ADDITIONAL INFORMATION REGARDING SHAREOWNER SERVICES FOR THE
U.S. GOVERNMENT MONEY MARKET, U.S. TREASURY MONEY MARKET, MONEY
MARKET AND TAX-EXEMPT MONEY MARKET FUNDS
Periodic Investment Plan
The Funds offer a Periodic Investment Plan whereby a shareowner
may automatically make purchases of shares of a 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 Fund 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 a 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.
ConvertiFund Transactions
The Funds permit shareowners to effect ConvertiFund
transactions, an automated method by which a shareowner may
invest proceeds from one account to another account of the
Portico family of funds. Such proceeds include dividend
distributions, capital gain distributions and systematic
withdrawals. ConvertiFund 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. Investments
in the non-money market funds will be subject to the applicable
sales charges.
Systematic Withdrawal Plan
The Funds 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.
DESCRIPTION OF SHARES
The Company's 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 that shall be
divided into thirty classes (each a designated "class" or
"fund"). Each class is further divided into two series,
Institutional Series and Series A/Retail Series (each, a
"Series") and, with respect to the Funds, consists of shares set
forth next to its name in the table below:
Class-Series Fund in Which Stock Number of Authorized
of Common Stock Represents Interest Shares in Each Initial Series
1-Institutional Money Market 5 billion
1-A 5 billion
2-Institutional Tax-Exempt Money Market 5 billion
2-A 5 billion
3-Institutional U.S. Government Money Market 5 billion
3-A 5 billion
4-Institutional Institutional Money Market 5 billion
4-A 5 billion
5-Institutional U.S. Treasury Money Market 5 billion
5-A 5 billion
Currently, only Series A Shares of the Money Market Funds have
been offered by the Company. The Board of Directors has also
authorized the issuance of Classes 6 through 17 common stock
representing interests in twelve other separate investment
portfolios which are described in separate prospectuses and
Statement of Additional Information. The remaining authorized
shares have been classified by the Board into thirteen
additional classes representing interest 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
an individual Fund, shareowners of a particular Fund would be
entitled to receive the assets available for distribution
belonging to such 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 attributable to the operation of a particular
series, shareowners of a Fund are entitled to participate
equally in the net distributable assets of the particular Fund
involved on liquidation, based on the number of shares of the
Fund that are held by each shareowner.
Shareowners of the Funds, as well as those of any other
investment portfolio offered by the Company, will vote together
in the aggregate and not separately on a Fund-by-Fund 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 holders of a majority of the
outstanding shares 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.
When issued for payment as described in the Funds' Prospectuses
and this Statement of Additional Information, shares of the
Funds 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 Funds and their
shareowners that are not described in the Funds' Prospectuses.
No attempt is made to present a detailed explanation of the tax
treatment of the Funds or their shareowners, and the discussion
here and in the Prospectuses 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.
Tax-Exempt Money Market Fund
As described above and in its Prospectus, the Tax-Exempt Money
Market Fund is designed to provide investors with current
tax-exempt interest income. This Fund is not intended to
constitute a balanced investment program and is not designed for
investors seeking capital appreciation or maximum tax-exempt
income irrespective of fluctuations in principal. Shares of the
Fund may not be suitable for tax-exempt institutions, or for
retirement plans qualified under Section 401 of the Internal
Revenue Code of 1986 (the "Code"), H.R. 10 plans and individual
retirement accounts since such plans and accounts are generally
tax-exempt and, therefore, not only would not gain any
additional benefit from the Fund's dividends being tax-exempt,
but such dividends would be ultimately taxable to the
beneficiaries when distributed to them. In addition, the Fund
may not be an appropriate investment for entities which are
"substantial users" of facilities financed by private activity
bonds or "related persons" thereof. "Substantial user" is
defined under U.S. Treasury Regulations to include a non-exempt
person who regularly uses a part of such facilities in his trade
or business and whose gross revenues derived with respect to the
facilities financed by the issuance of bonds are more than 5% of
the total revenues derived by all users of such facilities, who
occupies more than 5% of the usable area of such facilities or
for whom such facilities or a part thereof were specifically
constructed, reconstructed or acquired. "Related persons"
include certain related natural persons, affiliated
corporations, a partnership and its partners and an S
Corporation and its shareowners.
The percentage of total dividends paid by the Tax-Exempt Money
Market Fund with respect to any taxable year which qualifies as
federal exempt-interest dividends will be the same for all
shareowners receiving dividends for such year. In order for
this Fund to pay exempt-interest dividends during any taxable
year, at the close of each taxable quarter at least 50% of the
aggregate value of the Fund's portfolio must consist of
tax-exempt obligations. In addition, the Fund must distribute
an amount that is at least equal to the sum of 90% of the net
tax-exempt interest income and 90% of the investment company
taxable income earned by the Fund for the taxable year. Within
60 days of the close of its taxable year, the Fund will notify
shareowners of the portion of the dividends paid by the Fund
which constitutes an exempt-interest dividend with respect to
such taxable year. However, the aggregate amount of dividends so
designated cannot exceed the excess of the amount of interest
exempt from tax under Section 103 of the Code received by the
Fund during the taxable year over any amounts disallowed as
deductions under Sections 265 and 171(a)(2) of the Code.
Interest on indebtedness incurred by a shareowner to purchase or
carry shares of the Tax-Exempt Money Market Fund generally is
not deductible for federal income tax purposes if the Fund
distributes exempt-interest dividends during the shareowner's
taxable year. If a shareowner holds shares of the Tax-Exempt
Money Market Fund for six months or less, any loss on the sale
or exchange of those shares will be disallowed to the extent of
the amount of exempt-interest dividends received with respect to
the shares. The Treasury Department, however, is authorized to
issue regulations reducing the six-month holding requirement to
a period of not less than the greater of 31 days or the period
between regular distributions for investment companies that
regularly distribute at least 90% of their net tax-exempt
interest. No such regulations had been issued as of the date of
this Statement of Additional Information.
All Funds
Investment company taxable income earned by the Money Market
Fund, the Institutional Money Market Fund, the U.S. Treasury
Money Market Fund, the U.S. Government Money Market Fund or the
Tax-Exempt Money Market Fund will be distributed by the Funds to
their shareowners, and will be taxable to shareowners as
ordinary income whether paid in cash or additional shares. In
general, investment company taxable income will be a Fund's
taxable income, subject to certain adjustments and excluding the
excess of any net long-term capital gain for the taxable year
over the net short-term capital loss, if any, for such year.
Similarly, while the Funds do not expect to realize long-term
capital gains, any net realized long-term capital gains will be
distributed at least annually. The Funds will generally have no
tax liability with respect to such gains and the distributions
(whether paid in cash or additional shares) will be taxable to
shareowners as long-term capital gains, regardless of how long a
shareowner has held Fund shares. Such distributions will be
designated as a capital gain dividend in a written notice mailed
by the Company to shareowners after the close of the Company's
taxable year.
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
Funds intend to make sufficient distributions or deemed
distributions of their ordinary taxable income and any capital
gain net income with respect to each calendar year to avoid
liability for this excise tax.
Each Fund is treated as a separate tax entity under the Code.
Although each 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 Funds 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
Funds and their shareowners under such laws may differ from
their treatment under federal income tax laws.
If for any taxable year a 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 (including amounts derived from interest on
Municipal Obligations) 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 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, age,
principal occupations during the past five years and other
affiliations are as follows:
Name, Address and Age Position with the Company
Principal Occupations During Past 5 Years and Other
Affiliations
James M. Wade* 2802 Wind Bluff Circle Wilmington, NC 28409 Age:
53 Chairman, President and Treasurer Vice President and
Chief Financial Officer, Johnson Controls, Inc. (a controls
manufacturing company), January 1987 - May 1991.
Glen R. Bomberger One Park Plaza 11270 West Park Place
Milwaukee, WI 53224-3690 Age: 59 Director Executive Vice
President, Chief Financial Officer and Director, A.O. Smith
Corporation (a diversified manufacturing company) since January
1987; Director of companies affiliated with A.O. Smith
Corporation; Chief Financial Officer, Director and Vice
President, Smith Investment Company; Officer and Director of
companies affiliated with Smith Investment Company.
Jerry G. Remmel 16650A Lake Circle Brookfield, WI 53005 Age:
65 Director Vice President, Treasurer and Chief Financial
Officer of Wisconsin Energy Corporation 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 400 Three Springs Drive Weirton, WV
26062-4989 Age: 52 Director President, Chief Executive
Officer, and Chief Operating Officer of Weirton Steel since
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* 14245 Heatherwood Court Elm Grove, WI 53122
Age: 66 Director Vice President - Finance, Chief
Financial Officer and Secretary, Rexnord Corporation (an
equipment manufacturing company), since 1988 - 1992; Vice
President - Finance and Administration, Rexnord, Inc., 1982 -
1992; Officer and Director of several Rexnord subsidiaries until
1992.
Mary Ellen Stanek 777 East Wisconsin Avenue Suite 800 Milwaukee,
WI 53202 Age: 40 Vice President, President and Chief
Operating Officer FIRMCO since 1994, Director since 1992 and
Director of Fixed Income series since 1990.
W. Bruce McConnel, III Philadelphia National Bank 1345 Chestnut
Street Philadelphia, PA 19107 Age: 53 Secretary Partner
of the law firm of Drinker Biddle & Reath.
* 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
NAME OF AGGREGATE BENEFITS ACCRUED ESTIMATED ANNUAL FROM COMPANY
PERSON/ COMPENSATION AS PART OF FUND BENEFITS UPON AND FUND COMPLEX
POSITION FROM THE COMPANY EXPENSES RETIREMENT PAID TO
DIRECTORS
James M. Wade President, Treasurer and Chairman of the Board
$15,000 $0 $0 $15,000
Glen R. Bomberger Director
12,000(2) 0 0 12,000
Jerry G. Remmel Director
12,000 0 0 12,000
Richard K. Riederer Director
12,000 0 0 12,000
Charles R. Roy Director
12,000 0 0 12,000
*The "Fund Complex" includes only the Company.(2)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 of $63,000. Ms. Stanek
receives no fees from the Company for her services as Vice
President, although FIRMCO, of which she is President, receives
fees from the Company for advisory services. Drinker Biddle &
Reath, of which Mr. McConnel is a partner, receives legal fees
as counsel to the Company. As of the date of this Statement of
Additional Information, the Directors and Officers of the
Company, as a group, owned less than 1% of the outstanding
shares of each Fund.
Advisory Services
FIRMCO became the investment adviser to the Funds as of February
3, 1992. Prior thereto, investment advisory services were
provided by Firstar Trust Company, an affiliate of the Adviser.
Firstar Trust Company has guaranteed all obligations incurred by
FIRMCO in connection with its Investment Advisory Agreement with
the Funds. In its Investment Advisory Agreement, the Adviser
has agreed to pay all expenses incurred by it in connection with
its advisory activities, other than the cost of securities and
other investments, including brokerage commissions and other
transaction charges, if any, purchased or sold for the Funds.
The Adviser may voluntarily waive additional advisory fees
otherwise payable by the Funds. The Adviser is entitled to
4/10ths of the gross income earned by each 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 Funds do not intend to receive separate
compensation for securities lending activity.
For the services provided and expenses assumed by the Adviser
under its investment advisory agreements for the fiscal years
ended October 31, 1996, 1995, and 1994, the Adviser earned and
waived advisory fees as follows:
Advisory Fees Earned (Advisory Fees Waived)
1996 1995 1994
Money Market Fund $702,547 (266,408) $422,104 (365,955) $319,171 (384,249)
U.S. Treasury
Money Market Fund 228,672 (84,582) 199,277 (97,487) 102,634 (130,917)
U.S. Government
Money Market Fund 886,823 (74,691) 730,168 (136,091) 524,889 (442,933)
Tax-Exempt
Money Market Fund 307,395 (88,415) 232,548 (118,037) 171,919 (214,967)
Institutional Money
Market Fund 2,207,362 (1,670,748) 1,670,220 (1,882,153) 722,865 (2,610,542)
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 Company 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, including the Glass-Steagall Act
as presently interpreted by the Board of Governors of the
Federal Reserve System, presently (a) prohibit a bank holding
company registered under the Federal Bank Holding Company Act of
1956 or any bank or non-bank affiliate thereof from sponsoring,
organizing, controlling or distributing the shares of a
registered, open-end investment company continuously engaged in
the issuance of its shares, and prohibit banks generally from
underwriting securities, but (b) do not prohibit such a bank
holding company or affiliate or banks generally from acting as
investment adviser, transfer agent or custodian to such an
investment company or from purchasing shares of such a company
as agent and upon order of a customer.
In 1971, the United States Supreme Court held in Investment
Company Institute vs. Camp that the Glass-Steagall Act prohibits
a national bank from operating a fund for the collective
investment of managing agency accounts. Subsequently, the Board
of Governors of the Federal Reserve System (the "Board") issued
a regulation and interpretation to the effect that the
Glass-Steagall Act and such decision forbid a bank holding
company registered under the Federal Bank Holding Company Act of
1956 (the "Holding Company Act"), or any non-bank affiliate
thereof from sponsoring, organizing or controlling a registered,
open-end investment company continuously engaged in the issuance
of its shares, but did not prohibit such a holding company or
affiliate from acting as investment adviser, transfer agent and
custodian to such an investment. company. In 1981, the United
States Supreme Court held in Board of Governors of the Federal
Reserve System vs. 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.
The Adviser and Firstar Trust Company believe that they may
perform the services for the Funds 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 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
Funds. If the companies were prohibited from continuing to
perform advisory, accounting, shareowner servicing and custody
services for the Funds, it is expected that the Board of
Directors would recommend that the Funds enter into new
agreements or would consider the possible termination of the
Funds.
Shares of the Funds are not bank deposits, are not insured by
the FDIC or any other governmental agency, are not endorsed,
insured or guaranteed by Firstar Trust Company or FIRMCO and are
not obligations of or otherwise supported by Firstar Trust
Company or FIRMCO.
Administration and Distribution Services
Firstar Trust Company ("Firstar") became a Co-Administrator to
the Funds on September 1, 1994, and B. C. Ziegler and Company
("Ziegler") became a Co-Administrator to the Funds on January 1,
1995. 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, stationery and office supplies;
monitor the Company's arrangements with respect to services
provided by Shareowner Organizations; 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
preparation 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 Funds 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 each Fund's
expense accruals and cause all appropriate expenses to be paid
on proper authorization from each Fund; monitor each Fund's
status as a regulated investment company under Subchapter M of
the Code; maintain each Fund's fidelity bond as required by the
1940 Act; and monitor compliance with the policies and
limitations of each Fund as set forth in the prospectuses,
statements 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 Funds 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 also provides distribution services for each
Fund as described in the Funds' Prospectuses pursuant to a
Distribution Agreement with the Funds under which the
Distributor, as agent, sells shares of each 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 Funds (excluding preparation and printing expenses
necessary for the continued registration of the Funds' shares)
and of printing and distributing all sales literature. For the
fiscal year ended October 31, 1994, Sunstone Financial Group,
Inc. ("Sunstone"), Portico Funds' former Distributor and
Co-Administrator, received no fees for its distribution
services. For the fiscal years ended October 31, 1996 and 1995,
Ziegler received no fees for its distribution services. For the
fiscal years ended October 31, 1996, 1995, and 1994, the
following administrative fees were earned and waived:
Administration Fees Earned (Administration Fees Waived)
1996 1995 1994
Money Market Fund $73,082 (148,206) $72,183 (119,354) $90,485 (81,639)
U.S. Treasury
Money Market Fund 29,446 (42,094) 27,263 (44,793) 29,836 (27,368)
U.S. Government
Money Market Fund 84,282 (135,306) 77,856 (130,337) 132,045 (105,050)
Tax-Exempt
Money Market Fund 37,207 (53,187) 31,469 (51,566) 56,785 (37,943)
Institutional Money
Market Fund 205,168 (680,504) 215,820 (647,783) 221,920 (593,834)
Shareowner Organizations (Money Market, U.S. Government Money
Market, U.S. Treasury Money Market and Tax-Exempt Money Market
Funds).
As stated in the Funds' Prospectus, the Funds intend 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
Fund shares. Under the agreements, the Funds may pay Shareowner
Organizations up to 0.25% (on an annualized basis) of the
average daily net asset value of the shares beneficially owned
by their customers. Services provided by Shareowner
Organizations under their agreements may include: (i)
processing dividend and distribution payments from a 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 Funds. In addition, under the Distribution and
Service Plan, Shareowner Organizations may provide assistance
(such as the forwarding of sales literature and advertising to
their customers) in connection with the distribution of Fund
shares.
The Funds' 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 Fund sha
res (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 Funds' arrangements with Shareowner
Organizations and the purposes for which the expenditures were
made. In addition, the Funds' 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 Funds believe that there is a reasonable likelihood that
their arrangements with Shareowner Organizations have benefited
each Fund and its shareowners as a way of allowing Shareowners
Organizations to participate with the Funds in the provision of
support and distribution services to customers of the Shareowner
Organizations who own Fund 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 a Fund must be
approved by the holders of a majority of the outstanding shares
of the Fund involved. So long as the Distribution and Service
Plan is 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 Funds will be committed to the
discretion of such disinterested Directors.
The Funds paid fees to Shareowner Organizations, none of which
were affiliated with the Adviser, pursuant to the Distribution
and Service Plan for the fiscal years ended October 31, 1996,
1995, and 1994 as follows:
Fees Earned by Non-Affiliated Shareowner Organizations
1996 1995 1994
Money Market Fund $45,429 $35,574 $19,423
U.S. Government
Money Market Fund 501 365 573
Tax-Exempt
Money Market Fund 140 260 222
Institutional
Money Market Fund 0 0 0
U.S. Treasury
Money Market Fund 0 46 0
The Funds paid fees to Shareowner Organizations, all of which
were affiliated with the <PAGE>
Adviser, pursuant to the Service Plan for the fiscal
years ended October 31, 1996, 1995, and1994 as follows:
Fees Earned by Affiliated Shareowner Organizations
1996 1995 1994
Money Market Fund $0 $9,663 $61,480
U.S. Government Money Market Fund 0 48,913 367,140
Tax-Exempt Money Market Fund 0 16,271 110,489
Institutional Money Market Fund 0 293,262 1,324,778
U. S. Treasury Money Market Fund 0 12,934 50,187
As of January 1, 1995, the Institutional Money Market Fund no
longer pays Shareowner Organization fees under the Service Plan.
CUSTODIAN, TRANSFER AGENT, DISBURSING AGENT AND ACCOUNTING
SERVICES AGENT
Firstar Trust Company serves as custodian of the Funds' assets
pursuant to a Custody Agreement. Under the Custody Agreement,
Firstar Trust Company has agreed to (i) maintain a separate
account in the name of each Fund, (ii) make receipts and
disbursements of money on behalf of each Fund, (iii) collect and
receive all income and other payments and distributions on
account of each 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 each Fund's operations. Firstar Trust
Company may, at its own expense, open and maintain a custody
account or accounts on behalf of each 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 Company is entitled to
receive a fee, payable monthly, based on the following annual
rate of $0.20 per $1,000 of the market value of Portico's first
$2 billion of the aggregate market value of assets, plus $0.15
per $1,000 of the market value of Portico's next $2 billion of
the aggregate market value of assets, and $0.10 per $1,000 of
the aggregate market value of Portico's assets in excess of $4
billion. In addition, Firstar Trust Company, as custodian, is
entitled to certain charges for securities transactions and
reimbursement for expenses.
Firstar Trust Company also serves as transfer agent and dividend
disbursing agent for each Fund under a Shareowner Servicing
Agent Agreement. As transfer and dividend disbursing agent,
Firstar Trust Company has agreed to (i) issue and redeem shares
of the Funds, (ii) make dividend and other distributions to
shareowners of the Funds, (iii) respond to correspondence by
Fund shareowners and others relating to its duties, (iv)
maintain shareowner accounts, and (v) make periodic reports to
the Funds. For its transfer agency and dividend disbursing
services, Firstar Trust Company is entitled to receive a fee at
the following rates: $20 per shareowner account with an annual
minimum of $12,000 per portfolio, plus certain other transaction
charges and reimbursement for expenses.
In addition, the Funds have entered into a Fund Accounting
Servicing Agreement with Firstar Trust Company pursuant to which
Firstar Trust Company has agreed to maintain the financial
accounts and records of the Funds in compliance with the 1940
Act and to provide other accounting services to the Funds. For
its accounting services, Firstar Trust Company is entitled to
receive fees, payable monthly, at the annual rate of $25,000 on
the first $40 million of each Fund's assets and 1/100th of 1% on
the next $200 million of such assets, plus 5/1,000th of 1% on
the assets in excess of $240 million plus out-of-pocket
expenses, including pricing expenses. The annual fee for the
Institutional Money Market Fund is capped at $55,000.
EXPENSES
Operating expenses of the Funds include taxes, interest, fees
and expenses of Directors and officers, Securities and Exchange
Commission fees, state securities qualification fees, advisory
fees, administrative fees, Shareowner Organization fees, charges
of the custodian and transfer agent, dividend disbursing agent
and accounting services agent, certain insurance premiums,
auditing and legal expenses, costs of preparing and printing
prospectuses for regulatory purposes and for distribution to
shareowners, membership fees in the Investment Company
Institute, costs of shareowner reports and meetings and any
extraordinary expenses. The Funds also pay any brokerage fees.
commissions and other transaction charges (if any) incurred in
connection with the purchase and sale of portfolio securities.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, independent accountants, 100 E. Wisconsin
Avenue, Suite 1500, Milwaukee, Wisconsin 53202, serve as
auditors for the Company. The financial statements and related
report of Price Waterhouse LLP contained in the respective
Fund's Annual Report for the fiscal year ended October 31, 1996
are incorporated herein by reference. No other part of a Fund's
Annual Report is incorporated herein by reference. Such
financial statements have been incorporated herein in reliance
on the report of Price Waterhouse LLP, independent accountants,
given as authority of said firm as experts in auditing and
accounting.
COUNSEL
Drinker Biddle & Reath (of which Mr. McConnel, Secretary of the
Company, is a partner), Philadelphia National Bank Building,
1345 Chestnut Street, Philadelphia, Pennsylvania 19107, serve as
counsel to the Company and will pass upon the legality of the
shares offered by each Fund's Prospectus.
ADDITIONAL INFORMATION ON YIELD
The "yield" and "effective yield" of each Fund described in
their Prospectuses are calculated according to formulas
prescribed by the Securities and Exchange Commission. The
standardized seven-day yield for each Fund is computed
separately by determining the net change, exclusive of capital
changes, in the value of a hypothetical pre-existing account in
the particular Fund involved having a balance of one share at
the beginning of the period, dividing the net change in account
value by the value of the account at the beginning of the base
period to obtain the base period return, and multiplying the
base period return by (365/7). The net change in the value of
an account in a Fund includes the value of additional shares
purchased with dividends from the original share, and dividends
declared on both the original share and any such additional
shares and all fees, other than nonrecurring account sales
charges, that are charged to all shareowner accounts in
proportion to the length of the base period and the Fund's
average account size. The capital changes to be excluded from
the calculation of the net change in account value are realized
gains and losses from the sale of securities and unrealized
appreciation and depreciation. The effective annualized yield
for each Fund is computed by compounding a particular Fund's
unannualized base period return (calculated as above) by adding
1 to the base period return, raising the sum to a power equal to
365 divided by 7, and subtracting one from the result. The fees
which may be imposed by financial intermediaries directly on
their customers for cash management services are not reflected
in the Company's calculations of yields for the Funds.
In addition, the Tax-Exempt Money Market Fund may advertise its
standardized "tax-equivalent yield," which is computed by: (a)
dividing the portion of the Fund's yield (as calculated above)
that is exempt from federal income tax by one minus a stated
federal income tax rate; and (b) adding the figure resulting
from (a) above to that portion, if any, of the Fund's yield that
is not exempt from federal income tax.
The current yield for each of the Funds may be obtained by
calling Portico Investor Services at 1-800-228-1024. For the
seven-day period ended October 31, 1996, the annualized yields
of the Money Market Fund, Institutional Money Market Fund, U.S.
Treasury Money Market Fund, U.S. Government Money Market Fund
and Tax-Exempt Money Market Fund were 4.94%, 5.16%, 4.62%, 4.80%
and 3.07%, respectively. Without fees waived by the Adviser and
Co-Administrators during such period, the annualized yields of
such Funds would have been 4.72%, 4.85%, 4.41%, 4.68% and 2.89%,
respectively. For the seven-day period ended October 31, 1996,
the effective yields of the Money Market Fund, Institutional
Money Market Fund, U.S. Treasury Money Market Fund, U.S.
Government Money Market Fund and Tax-Exempt Money Market Fund
were 5.06%, 5.29%, 4.73%, 4.92% and 3.12%, respectively.
Without fees waived by the Adviser and Co-Administrators during
such period, the effective yields of such Funds would have been
4.84%, 4.98%, 4.52%, 4.80% and 2.94%, respectively. For the
seven-day period ended October 31, 1996, the tax-equivalent
yield of the Tax-Exempt Money Market Fund was 4.45% (assuming a
federal income tax rate of 31%). Without fees waived by the
Adviser and Co-Administrators during such period, the
tax-equivalent yield of such Fund would have been 4.19%.
MISCELLANEOUS
As used in this Statement of Additional Information and in the
Funds' Prospectuses, a "majority of the outstanding shares" of a
Fund or portfolio means, with respect to the approval of an
investment advisory agreement or change in a fundamental
investment policy, the lesser of (1) 67% of the shares of the
particular Fund or portfolio represented at a meeting at which
the holders of more than 50% of the outstanding shares of such
Fund or portfolio are present in person or by proxy, or (2) more
than 50% of the outstanding shares of such Fund or portfolio.
As of January 31, 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
53202, 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 4%; Institutional Money Market Fund 86%; U.S.
Government Money Market Fund 67%; Tax-Exempt Money Market Fund
45%; U.S. Treasury Money Market Fund 50%; Growth and Income Fund
65%; Short-Term Bond Market Fund 69%; Special Growth Fund 72%;
Bond IMMDEXTM Fund 80%; Equity Index Fund 79%; Balanced Fund
79%; MidCore Growth Fund 86%; Intermediate Bond Market Fund 78%,
Tax-Exempt Intermediate Bond Fund 67%, International Equity Fund
87%; and MicroCap Fund 84%. 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.
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