Law Offices
DRINKER BIDDLE & REATH
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, PA 19107
Telephone: (215) 988-2700
TELEX: 834684
FAX: (215) 988-2757
February 28, 1997
VIA EDGAR TRANSMISSION
- ----------------------
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: PORTICO FUNDS, INC.
(1933 ACT REGISTRATION NO. 33-18255)
(1940 ACT REGISTRATION NO. 811-5380)
------------------------------------
Ladies and Gentlemen:
On behalf of Portico Funds, Inc. (the "Fund"), I have transmitted
herewith for filing Post-Effective Amendment No. 30 to the Fund's Registration
Statement on Form N-1A under the Securities Act of 1933 and the Investment
Company Act of 1940.
Pursuant to Rule 485(b) under the Securities Act of 1993, it is
proposed that this Amendment become effective immediately on February 28, 1997.
The purpose of this Amendment is to bring the financial statements up to date
and make other non-material changes to the prospectuses and the statements of
additional information of the Balanced Fund, Growth and Income Fund, Equity
Index Fund, MidCore Growth Fund, Special Growth Fund, International Equity Fund,
Tax-Exempt Intermediate Bond Fund, Short-Term Bond Market Fund, Intermediate
Bond Market Fund, Bond IMMDEX/TM Fund, Money Market Fund, Institutional Money
Market Fund, U.S. Treasury Money Market Fund, U.S. Government Money Market Fund,
Tax-Exempt Money Market Fund and MicroCap Fund.
Post-Effective Amendment No. 30 does not contain disclosures that
would render it ineligible to become effective under Rule 485(b) of the
Securities Act of 1933.
As requested in the staff's generic comment letter dated February 25,
1994, we note for your information that shares of the Company are marketed in
part through banks.
Very truly yours,
/s/ Kenneth L. Greenberg, Esq.
Kenneth L. Greenberg, Esq.
KLG:CS
Enclosures
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 x
Pre-Effective Amendment No.__
Post-Effective Amendment No. 30 x
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 x
Amendment No. 31 x
(Check appropriate box or boxes)
PORTICO FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
PORTICO FUNDS CENTER
615 EAST MICHIGAN STREET
MILWAUKEE, WISCONSIN 53201-3011
(Address of Principal Executive Offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (414) 287-3909
W. BRUCE MCCONNEL, III, ESQUIRE
Drinker Biddle & Reath
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107
(Name and Address of Agent for Service)
It is proposed that this filing will become effective(check appropriate box).
immediately upon filing pursuant to paragraph (b)
x On _______ __, 199_ pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(i)
on (date) pursuant to paragraph (a)(i)
75 days after filing on _________, 199_ pursuant to paragraph (a)(ii)
on ___________ __, 19__ pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
this Post-Effective Amendment designates a new effective date for a
previously filed Post-Effective Amendment.
Registrant has registered an indefinite number of shares of its securities
under the Securities Act of 1933, as amended, pursuant to Rule 24f-2 under the
Investment Company Act of 1940, as amended. The Registrant filed on behalf of
the Money Market Fund, Institutional Money Market Fund, U.S. Treasury Money
Market Fund, U.S. Government Money Market Fund, Tax-Exempt Money Market Fund,
Short-Term Bond Market Fund, Intermediate Bond Market Fund, Tax-Exempt
Intermediate Bond Fund, Bond IMMDEX/TM Fund, Balanced Fund, Growth & Income
Fund, Special Growth Fund, Equity Index Fund, MidCore Growth Fund, International
Equity Fund and MicroCap Fund its Rule 24f-2 Notice for its fiscal year ended
October 31, 1996 on December 27, 1996.
- -------------------------------------------------------------------------------
PORTICO FUNDS, INC.
(Retail Series)
Short-Term Bond Market Fund,
Intermediate Bond Market Fund,
Tax-Exempt Intermediate Bond Fund
Bond IMMDEX/TM Fund
Form N-1A
Cross Reference Sheet
________________________________
Part A
Item No. Prospectus Heading
- -------- -------------------
1. Cover Page.................................. Cover Page
2. Synopsis.................................... Expense Summary
3. Condensed Financial Information............. Financial
Highlights;
Performance
Calculations
4. General Description of Registrant............ Cover Page;
Investment
Objectives and
Policies; Other
Investment
Information;
Description of
Shares; Invest-
ment Limitations
5. Management of the Fund....................... Management of the
Funds
5A. Management's Discussion of Fund Performance.. Inapplicable
6. Capital Stock and Other Securities........... Dividends and
Distributions;
Management of the
Funds; Taxes;
Description of
Shares
7. Purchase of Securities Being Offered......... Purchase of Shares;
Shareholder
Services; Net Asset
Value and Days of
Operation
8. Redemption or Repurchase..................... Redemption of
Shares; Shareholder
Services; Net Asset
Value and Days of
Operation
9. Pending Legal Proceedings.................... Not Applicable
- ----------------------------------------------------------------------------
PROSPECTUS
FEBRUARY 28, 1997
SHORT-TERM
BOND MARKET FUND
INTERMEDIATE
BOND MARKET FUND
TAX-EXEMPT
INTERMEDIATE BOND FUND
BOND IMMDEX/TM FUND
PORTICO FUNDS
TABLE OF CONTENTS
Expense Summary 2
Financial Highlights 3
Performance History 6
Investment Objectives and Policies 7
Other Investment Information 13
Purchase of Shares 19
Redemption of Shares 23
Shareowner Services 26
Dividends and Distributions 28
Management of the Funds 28
Investment Limitations 31
Taxes 32
Description of Shares 33
Net Asset Value and Days of Operation 34
Performance Calculations 35
PORTICO FUNDS, INC. is a family of sixteen mutual funds that offer a variety of
investment objectives designed to meet the needs of individual and institutional
investors. This Prospectus describes the Retail Shares of the Bond Funds.
Portico Funds also offers retail and institutional shares of equity funds and
shares of money market funds, which are described in separate prospectuses.
THE SHORT-TERM BOND MARKET FUND seeks to provide an annual rate of total return,
before Fund expenses, comparable to the annual rate of total return of the
Lehman Brothers 1-3 year Government/Corporate Bond Index.
THE INTERMEDIATE BOND MARKET FUND seeks to provide an annual rate of total
return, before Fund expenses, comparable to the annual rate of total return of
the Lehman Brothers Intermediate Government/Corporate Bond Index.
THE TAX-EXEMPT INTERMEDIATE BOND FUND seeks to provide current income that is
substantially exempt from federal income tax and emphasize total return with
relatively low volatility of principal.
THE BOND IMMDEX/TM FUND seeks to provide an annual rate of total return, before
Fund expenses, comparable to the annual rate of total return of the Lehman
Brothers Government/Corporate Bond Index.
Firstar Investment Research & Management Company ("FIRMCO" or the "Adviser")
serves as investment adviser to each Fund and the Funds are sponsored by B.C.
Ziegler and Company (the "Distributor"). Shareowner Organizations may perform
shareowner servicing and provide assistance in connection with the distribution
of the Funds' shares and receive fees from the Funds for their services. (See
"Management of the Funds").
This Prospectus sets forth concisely the information about the Funds that a
prospective investor should consider before investing. You should read this
Prospectus and retain it for future reference. Additional information about the
Funds, contained in a Statement of Additional Information, has been filed with
the Securities and Exchange Commission ("SEC") and is available upon request
without charge by writing Portico Investor Services at 615 East Michigan Street,
P.O. Box 3011, Milwaukee, Wisconsin 53201-3011, or by calling 1-800-982-8909 or
414-287-3710 (Milwaukee area). The SEC maintains a website (http://www.sec.gov.)
that contains the Statement of Additional Information, materials incorporated by
reference and other information regarding registrants that file electronically
with the SEC. The Statement of Additional Information bears the same date as
this Prospectus and is incorporated by reference in its entirety into the
Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
SHARES OF THE 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.
February 28, 1997
EXPENSE SUMMARY
Below is a summary of the shareowner transaction expenses and
the annual operating expenses incurred by Retail Shares of the Short-Term Bond
Market, Intermediate Bond Market, Tax-Exempt Intermediate Bond and Bond
IMMDEX/TM Funds during the fiscal year ended October 31, 1996. An example based
on the summary is also shown.
SHORT-TERM INTERMEDIATE TAX-EXEMPT BOND
SHAREOWNER BOND MARKET BOND MARKET INTERMEDIATE IMMDEX/TM
TRANSACTION EXPENSES FUND FUND BOND FUND FUND
- --------------------------------------------------------------------------------
Maximum Sales Charge Imposed
on Purchases 2.00% 2.00% 2.00% 2.00%
Maximum Sales Charge Imposed
on Reinvested Dividends None None None None
Deferred Sales Charge None None None None
Redemption Fees1 None None None None
Exchange Fees None None None None
ANNUAL FUND
OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET COST)
- ------------------------------------------------------------------------------
Advisory Fees After Fees Waivers 2 0.30% 0.33% 0.10% 0.30%
12b-1 Fees 3 0.00% 0.00% 0.00% 0.00%
Shareowner Servicing Fees 3 0.25% 0.25% 0.25% 0.25%
Other Expenses After Fee Waivers 4 0.20% 0.17% 0.40% 0.13%
Total Fund Operating Expenses
After Fee Waivers 5 0.75% 0.75% 0.75% 0.68%
- ------------------------------------------------------------------------------
1 A fee of $12.00 is charged for each wire redemption. See "Redemption of
Shares."
2 Absent voluntary advisory fee waivers, advisory fees would be 0.60%, 0.50%,
and 0.50% for the Short-Term Bond Market, Intermediate Bond Market and Tax-
Exempt Intermediate Bond Funds, respectively. See "Management of the Funds"
in this Prospectus for a more complete description and the financial
statements for the Short-Term Bond Market Fund, Intermediate Bond Market
Fund, Tax-Exempt Intermediate Bond Fund, and Bond IMMDEX/TM Fund, for the
fiscal year ended October 31, 1996 incorporated into the Statement of
Additional Information.
3 The total of all 12b-1 fees and Shareowner Servicing Fees paid by a Fund may
not exceed, in the aggregate, the annual rate of 0.25% of the Fund's average
daily net assets. The Funds do not expect to pay any 12b-1 fees for the
current year. If 12b-1 fees are paid in the future, long-term shareowners may
pay more than the economic equivalent of the maximum front end sales charge
permitted by the National Association of Securities Dealers.
4 Absent voluntary administrative fee waivers, other expenses were 0.27%,
0.24%, 0.47% and 0.20% for the Short-Term Bond Market, Intermediate Bond
Market, Tax-Exempt Intermediate Bond and Bond IMMDEX/TM Funds, respectively.
5 Absent fee waivers, total operating expenses would have been 1.12%, 0.99%,
1.22% and 0.75% for the Short-Term Bond Market, Intermediate Bond Market,
Tax-Exempt Intermediate Bond and Bond IMMDEX/TM Funds, respectively.
Example: You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual returns; and (2) redemption of your investment at the end
of the following periods:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------------------------------------
Short-Term Bond Market Fund $28 $43 $61 $111
Intermediate Bond Market Fund 28 43 61 111
Tax-Exempt Intermediate Bond Fund 28 43 61 111
Bond IMMDEX/TM Fund 27 41 57 103
The foregoing tables are intended to assist investors in understanding the
expenses that shareowners bear either directly or indirectly and have been
restated to reflect current fees. In addition, Shareowner Organizations may
charge fees for providing services in connection with their clients' investments
in a Fund's shares.
The example shown above should not be considered a representation of future
investment return or operating expenses. Actual investment return and operating
expenses may be more or less than those shown.
UNDERSTANDING EXPENSES
Operating a mutual fund involves a variety of expenses for portfolio management,
shareowner statements and reports, and other services. These costs are paid from
a Fund's assets and their effect, except for fees charged directly by a
Shareowner Organization to its customers, are factored into any quoted share
price or return.
FINANCIAL HIGHLIGHTS
The financial highlights for each of the periods presented have been derived
from financial statements which have been audited by Price Waterhouse LLP,
independent accountants, whose report, which appears in the annual report to
shareowners for the fiscal year ended October 31, 1996, is incorporated by
reference into the Statement of Additional Information. Prior to January 9,
1995, the Funds offered only one class of shares to both institutional and
retail investors. On that date, the Funds began offering Institutional Shares to
institutional investors as described in a separate prospectus and Retail Shares
to retail investors as described in this Prospectus. The tables on the following
pages should be read in conjunction with the financial statements and related
notes also incorporated by reference into the Statement of Additional
Information. You may obtain the Statement of Additional Information and the
annual report to shareowners, which contain additional performance information,
free of charge by calling Portico Investor Services or writing to Portico
Investor Services at the address listed on the back cover of this Prospectus.
FINANCIAL
HIGHLIGHTS
INCOME FROM INVESTMENT OPERATIONS
--------------------------------------------
NET ASSET NET REALIZED AND
VALUE, NET UNREALIZED GAINS TOTAL FROM
DIVIDENDS BEGINNING INVESTMENT OR (LOSSES) ON
OF PERIOD INCOME3 SECURITIES OPERATIONS
- -------------------------------------------------------------------------------
SHORT-TERM BOND MARKET
Dec. 29, 19891 through
Oct. 31, 1990 $10.00 $0.66 $(0.21) $0.45
Year Ended 1991 9.79 0.73 0.54 1.27
Year Ended 19922 10.33 0.64 0.29 0.93
Year Ended 1993 10.60 0.58 0.10 0.68
Year Ended 1994 10.56 0.56 (0.41) 0.15
Year Ended 1995 10.03 0.61 0.24 0.85
Year Ended 1996 10.28 0.58 (0.03) 0.55
INTERMEDIATE BOND MARKET
Jan. 5, 19931 through
Oct. 31, 1993 10.00 0.40 0.45 0.85
Year Ended 1994 10.45 0.51 (0.69) (0.18)
Year Ended 1995 9.67 0.60 0.53 1.13
Year Ended 1996 10.21 0.56 (0.02) 0.54
TAX-EXEMPT INTERMEDIATE BOND
Feb. 8, 19931 through
Oct. 31, 1993 10.00 0.27 0.26 0.53
Year Ended 1994 10.26 0.41 (0.48) (0.07)
Year Ended 1995 9.78 0.42 0.45 0.87
Year Ended 1996 10.23 0.40 (0.01) 0.39
BOND IMMDEX/TM
Dec. 29, 19891 through
Oct. 31, 1990 25.00 1.67 (0.66) 1.01
Year Ended 1991 24.52 1.85 1.98 3.83
Year Ended 19922 26.50 1.75 0.96 2.71
Year Ended 1993 27.31 1.68 1.83 3.51
Year Ended 1994 28.91 1.65 (2.74) (1.09)
Year Ended 1995 25.67 1.68 2.30 3.98
Year Ended 1996 27.82 1.61 (0.26) 1.35
1 Commencement of operations.
2 Effective February 3, 1992, FIRMCO assumed the investment advisory
responsibilities of Firstar Trust Company, an affiliate of FIRMCO.
3 For the Tax-Exempt Intermediate Bond Fund, substantially all investment
income is exempt from federal income tax.
4 Not annualized for the period ended October 31, 1990 for the Short-Term Bond
Market and Bond IMMDEX/TM Funds and for the period ended October 31, 1993 for
the Intermediate Bond Market and Tax-Exempt Intermediate Bond Funds.
5 The total return calculation for the Funds does not reflect the maximum
sales charge of 2.00%.
6 Annualized for the period ended October 31, 1990 for the Short-Term Bond
Market and Bond IMMDEX/TM Funds and for the period ended October 31, 1993 for
the Intermediate Bond Market and Tax-Exempt Intermediate Bond Funds.
7 Without fees waived, ratios of net expenses to average net assets for the
fiscal years ended October 3l, 1996, 1995, 1994, 1993, 1992, 1991 and the
period ended October 31, 1990 would have been 1.12%, 1.10%, 0.90%, 0.90%,
0.93%, 0.97% and 1.17%, respectively; and ratios of net investment income to
average net assets for the fiscal years ended October 31, 1996, 1995, 1994,
1993, 1992, 1991 and the period ended October 31, 1990 would have been
5.30%, 5.63%, 5.03%, 5.15%, 5.67%, 6.76% and 7.36%, respectively.
8 Without fees waived, ratios of net expenses to average net assets for the
fiscal years ended October 3l, 1996, 1995, 1994 and the period ended October
31, 1993 would have been 0.99%, 0.98%, 0.78% and 0.89%, respectively; and
ratios of net investment income to average net assets for the fiscal years
ended October 31, 1996, 1995 and 1994 and the period ended October 31, 1993
would have been 5.35%, 5.78%, 4.91% and 4.26%, respectively.
9 Without fees waived, ratios of net expenses to average net assets for the
fiscal years ended October 3l, 1996, 1995, 1994 and the period ended October
31, 1993 would have been 1.22%, 1.20%, 0.98% and 1.28%, respectively; and
ratios of net investment income to average net assets for the fiscal years
ended October 31, 1996, 1995 and 1994 and the period ended October 31, 1993
would have been 3.52%, 3.76%, 3.67% and 3.07%, respectively.
10 Without fees waived, ratios of net expenses to average net assets for the
fiscal years ended October 3l, 1996, 1995, 1994, 1993, 1992, 1991 and the
period ended October 31, 1990 would have been 0.75%, 0.71%, 0.51%, 0.52%,
0.56%, 0.60% and 0.65%, respectively; and ratios of net investment income to
average net assets for the fiscal years ended October 31, 1996, 1995, 1994,
1993, 1992, 1991 and the period ended October 31, 1990 would have been
5.91%, 6.24%, 6.10%, 6.08%, 6.86%, 7.75% and 7.94%, respectively.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (CONT'D)
LESS DISTRIBUTIONS SUPPLEMENTAL DATA AND RATIOS
-------------------- ----------------------------
RATIO OF NET
NET ASSET NET RATIO OF NET INVESTMENT
DIVIDENDS FROM DISTRIBUTIONS VALUE, ASSETS, EXPENSES TO INCOME TO PORTFOLIO
NET INVESTMENT FROM TOTAL END TOTAL END OF AVERAGE NET AVERAGE NET TURNOVER
INCOME CAPITAL GAINS DISTRIBUTIONS OF PERIOD RETURN4,5 PERIOD (000S) ASSETS6 ASSETS6 RATE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHORT-TERM BOND MARKET
Dec. 29, 19891 through
Oct. 31, 1990 $(0.66) $ _ $(0.66) $ 9.79 4.64% $ 22,731 0.60%71 7.93%71 57.40%
Year Ended 1991 (0.73) _ (0.73) 10.33 13.39% 63,183 0.60%71 7.13%71 66.80%
Year Ended 19922 (0.64) (0.02) (0.66) 10.60 9.28% 129,409 0.60%71 6.00%71 82.20%
Year Ended 1993 (0.58) (0.14) (0.72) 10.56 6.70% 142,518 0.52%71 5.53%71 87.62%
Year Ended 1994 (0.56) (0.12) (0.68) 10.03 1.46% 122,368 0.50%71 5.43%71 76.13%
Year Ended 1995 (0.60) _ (0.60) 10.28 8.74% 47,730 0.69%71 6.04%71 100.58%
Year Ended 1996 (0.58) _ (0.58) 10.25 5.54% 58,843 0.75%71 5.67%71 59.62%
INTERMEDIATE BOND MARKET
Jan. 5, 19931 through
Oct. 31, 1993 (0.40) _ (0.40) 10.45 8.58% 56,794 0.50%81 4.65%81 82.37%
Year Ended 1994 (0.51) (0.09) (0.60) 9.67 (1.73%) 88,306 0.50%81 5.19%81 56.25%
Year Ended 1995 (0.59) _ (0.59) 10.21 12.04% 11,576 0.69%81 6.07%81 66.69%
Year Ended 1996 (0.56) _ (0.56) 10.19 5.51% 17,392 0.75%81 5.59%81 59.29%
TAX-EXEMPT INTERMEDIATE BOND
Feb. 8, 19931 through
Oct. 31, 1993 (0.27) _ (0.27) 10.26 5.36% 23,866 0.59%91 3.75%91 3.23%
Year Ended 1994 (0.41) _ (0.41) 9.78 (0.73%) 26,167 0.60%91 4.04%91 58.54%
Year Ended 1995 (0.42) _ (0.42) 10.23 9.07% 7,711 0.71%91 4.25%91 44.13%
Year Ended 1996 (0.41) _ (0.41) 10.21 3.87% 10,690 0.75%91 3.99%91 30.46%
BOND IMMDEX/TM
Dec. 29, 19891 through
Oct. 31, 1990 (1.49) _ (1.49) 24.52 4.21% 44,241 0.50%10 8.10%10 111.28%
Year Ended 1991 (1.85) _ (1.85) 26.50 16.16% 90,034 0.50%10 7.85%10 131.69%
Year Ended 19922 (1.76) (0.14) (1.90) 27.31 10.49% 181,421 0.50%10 6.92%10 37.72%
Year Ended 1993 (1.70) (0.21) (1.91) 28.91 13.30% 260,468 0.50%10 6.10%10 81.18%
Year Ended 1994 (1.65) (0.50) (2.15) 25.67 (3.89%) 256,778 0.48%10 6.14%10 49.70%
Year Ended 1995 (1.79) (0.04) (1.83) 27.82 16.05% 21,875 0.64%10 6.31%10 41.67%
Year Ended 1996 (1.63) _ (1.63) 27.54 5.06% 42,671 0.68%10 5.98%10 33.38%
<FN>
1Commencement of operations.
2Effective February 3, 1992, FIRMCO assumed the investment advisory responsibilities of Firstar Trust Company, an affiliate of
FIRMCO.
3For the Tax-Exempt Intermediate Bond Fund, substantially all investment income is exempt from federal income tax.
4Not annualized for the period ended October 31, 1990 for the Short-Term Bond Market and Bond IMMDEX/TM Funds and for the period
ended October 31, 1993 for the Intermediate Bond Market and Tax-Exempt Intermediate Bond Funds.
5The total return calculation for the Funds does not reflect the maximum sales charge of 2.00%.
6Annualized for the period ended October 31, 1990 for the Short-Term Bond Market and Bond IMMDEX/TM Funds and for the period ended
October 31, 1993 for the Intermediate Bond Market and Tax-Exempt Intermediate Bond Funds.
7Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 3l, 1996, 1995, 1994, 1993,
1992, 1991 and the period ended October 31, 1990 would have been 1.12%, 1.10%, 0.90%, 0.90%, 0.93%, 0.97% and 1.17%, respectively;
and ratios of net investment income to average net assets for the fiscal years ended October 31, 1996, 1995, 1994, 1993, 1992,
1991 and the period ended October 31, 1990 would have been 5.30%, 5.63%, 5.03%, 5.15%, 5.67%, 6.76% and 7.36%, respectively.
8Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 3l, 1996, 1995, 1994 and the
period ended October 31, 1993 would have been 0.99%, 0.98%, 0.78% and 0.89%, respectively; and ratios of net investment income to
average net assets for the fiscal years ended October 31, 1996, 1995 and 1994 and the period ended October 31, 1993 would have
been 5.35%, 5.78%, 4.91% and 4.26%, respectively.
9Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 3l, 1996, 1995, 1994 and the
period ended October 31, 1993 would have been 1.22%, 1.20%, 0.98% and 1.28%, respectively; and ratios of net investment income to
average net assets for the fiscal years ended October 31, 1996, 1995 and 1994 and the period ended October 31, 1993 would have
been 3.52%, 3.76%, 3.67% and 3.07%, respectively.
10 Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 3l, 1996, 1995, 1994, 1993,
1992, 1991 and the period ended October 31, 1990 would have been 0.75%, 0.71%, 0.51%, 0.52%, 0.56%, 0.60% and 0.65%, respectively;
and ratios of net investment income to average net assets for the fiscal years ended October 31, 1996, 1995, 1994, 1993, 1992,
1991 and the period ended October 31, 1990 would have been 5.91%, 6.24%, 6.10%, 6.08%, 6.86%, 7.75% and 7.94%, respectively.
</TABLE>
PERFORMANCE
HISTORY
SINCE INCEPTION
AVERAGE ANNUAL TOTAL RETURN* 1 YEAR 5 YEARS 10 YEARS (INCEPTION DATE)
- ------------------------------------------------------------------------------
SHORT-TERM BOND MARKET 3.42% 5.89% 6.69% N/A
INTERMEDIATE BOND MARKET 3.38% _ _ 5.71% (Jan. 5, 1993)
TAX-EXEMPT INTERMEDIATE BOND 1.78% _ _ 4.10% (Feb. 8, 1993)
BOND IMMDEX/TM 2.95% 7.53% 8.09% N/A
- ------------------------------------------------------------------------------
* Average annual total return calculations are for periods ended October 31,
1996 and reflect the 2.00% front end sales load.
The performance of the Portico Short-Term Bond Market and Bond IMMDEX/TM
Funds for the period prior to December 29, 1989 is represented by the
performance of collective investment funds which operated prior to the
effectiveness of the registration statement of the Portico Short-Term Bond
Market and Bond IMMDEX/TM Funds. At the time of the Portico Short-Term Bond
Market and Bond IMMDEX/TM Funds' inception, each collective investment fund
was operated using substantially the same investment objectives, policies
and restrictions as its corresponding Portico Fund. In connection with the
Portico Short-Term Bond Market and Bond IMMDEX/TM Funds' commencement of
operations, on December 28, 1989, each collective investment fund transferred
its assets to its Portico Fund equivalent. The collective investment funds
were not registered under the Investment Company Act of 1940 (the "1940 Act")
and were not subject to certain restrictions that are imposed by the 1940
Act. If the collective investment funds had been registered under
the 1940 act, performance may have been adversely affected. Performance of
the collective investment funds has been restated to reflect the Portico
Short-Term Bond Market and Bond IMMDEX/TM Funds' respective actual expenses
during such Fund's first fiscal year.
Prior to January 10, 1995, each fund offered to retail and institutional
investors one series of shares with neither a sales charge
nor a 0.25% service organization fee. Retail Share performance reflects the
deduction of the current maximum sales charge of 2.00%, but for periods
prior to January 10, 1995, Retail Share performance does not reflect service
organization fees. If service organization fees had been reflected,
performance would be reduced.
Performance assumes the reinvestment of all net investment income and capital
gains and reflects fee waivers. In the absence of fee waivers, performance
would be reduced. Performance quotations represent past performance, and
should not be considered as representative of future results.
INVESTMENT OBJECTIVES AND POLICIES
The descriptions that follow are designed to help you choose the Fund that
best fits your investment objectives. You may want to pursue more than one
objective by investing in more than one of the Portico Funds. You are
reminded that there are risks in an investment in the Funds and there can be
no assurance that each Fund's investment objective will be attained.
COMPARISON OF PORTICO BOND FUNDS
----------------------------------
SHORT-TERM FULL-TERM
BOND FUND INTERMEDIATE-TERM BOND FUNDS BOND FUND
- ------------------ ------------------------------------- ------------
PORTICO SHORT-TERM PORTICO INTERMEDIATE PORTICO TAX-EXEMPT PORTICO BOND
BOND MARKET FUND BOND MARKET FUND INTERMEDIATE BOND FUND IMMDEX/TM FUND
- --------------------------------------------------------------------------------
The Benchmark: The Benchmark: The Benchmark: The Benchmark:
Lehman Bros. 1-3 Yr. Lehman Bros. Lehman Bros. 5-Year Lehman Bros
Gov't./Corp. Bond Intermediate General Obligation Gov't./Corp. Bond
Index Gov't./Corp. Bond Index Bond Index Index
Average Quality* Average Quality* Average Quality* Average Quality*
of Holdings _ AA of Holdings _ AA of Holdings _ AAA of Holdings _ AA
Average Maturity Average Maturity Average Maturity Average Maturity
2.8 Years 4.6 Years 4.9 Years 9.8 Years
1.7 Years Duration 3.3 Years Duration 4.0 Years Duration 5.1 Years Duration
Lehman Brothers is neither a sponsor of nor in any way affiliated with Portico
Funds.
Average quality, maturity, and duration reflect the portfolio as of October 31,
1996, and will change from time to time in connection with the management of
the portfolios pursuant to the policies described in this prospectus.
*Dollar weighted average quality of portfolio securities held by the Funds.
TAXABLE BOND FUNDS
SHORT-TERM BOND
MARKET FUND
INTERMEDIATE BOND
MARKET FUND
BOND IMMDEX/TM FUND
INVESTMENT OBJECTIVES.
The SHORT-TERM BOND MARKET FUND seeks to provide an annual rate of total return,
before Fund expenses, comparable to the annual rate of total return of the
Lehman Brothers 1-3 Year Government/Corporate Bond Index (the "Lehman 1-3
Gov't./Corp."). The INTERMEDIATE BOND MARKET FUND seeks to provide an annual
rate of total return, before Fund expenses, comparable to the annual rate of
total return of the Lehman Brothers Intermediate Government/Corporate Bond
Index (the "Lehman Intermediate Gov't./Corp."). The BOND IMMDEX/TM FUND seeks
to provide an annual rate of total return, before Fund expenses, comparable
to the annual rate of total return of the Lehman Brothers Government/Corporate
Bond Index (the "Lehman Gov't./Corp.").
Each Fund will attempt to achieve its objective by maintaining a comparable
duration to that of the benchmark index, and may invest a substantial portion
of its assets in securities that are not included in its benchmark index. The
Funds, therefore, are not "index" funds, which typically hold only securities
that are included in the indices they attempt to replicate.
DESCRIPTION OF BOND INDICES. The bond indices are market value weighted
total return indices measuring both the principal price changes of and income
provided by the underlying universe of securities that comprise the respective
index. The bond indices are intended to measure performance of their respective
fixed-rate debt market over given time intervals and differ with respect to the
maturity range of securities included. Each index is comprised of U.S. Treasury
securities, U.S. Government agency securities, dollar-denominated debt of
certain foreign, sovereign or supranational entities and investment grade
corporate debt obligations satisfying the following criteria as defined by
Lehman Brothers:
_ Fixed-rate debt (as opposed to variable-rate debt);
_ At least one year until maturity;
_ Minimum outstanding par value of $100 million;
_ Minimum quality rating of Baa by Moody's Investors Service, Inc.
("Moody's"), BBB by Standard and Poor's Rating Group
("S&P"), or BBB by Fitch Investors Service, Inc. ("Fitch"); and
LEHMAN 1-3 GOV'T./CORP.
------------------------
_ From one to three years remaining until maturity.
LEHMAN INTERMEDIATE GOV'T./CORP.
--------------------------------
_ From one to ten years remaining until maturity.
LEHMAN GOV'T./CORP.
--------------------
_ From one to thirty years or more remaining until maturity.
As of October 31, 1996, 896 issues were included in the Lehman 1-3
Gov't./Corp. representing $1.0 trillion in market value; 3,425 issues were
included in the Lehman Intermediate Gov't./Corp. representing $2.3 trillion
in market value; and 4,856 issues were included in the Lehman Gov't./Corp.
representing $3.2 trillion in market value.
INVESTMENT TECHNIQUES. In constructing and maintaining each Fund's portfolio,
the Adviser attempts to maintain an overall interest rate sensitivity equivalent
to its respective bond index and is intended to produce an annual rate of total
return, before Fund expenses, comparable to that of the respective bond index.
These techniques are used in conjunction with traditional methods of
investment management that rely on economic, financial and market analysis to
select portfolio investments.
The approach employed by the Adviser in managing each Fund's portfolio is to
define and measure the various duration characteristics of each bond index.
"Duration" is a term used to express the average time to receipt of expected
cash flows (discounted to their present value) on a particular fixed-income
instrument or a portfolio of instruments. For example, the duration of a
five-year zero coupon bond which pays no interest or principal until the
maturity of the bond is five years. This is because a zero coupon bond
produces no cash flow until the maturity date. On the other hand, a coupon
bond that pays interest semiannually and matures in five years will have a
duration of less than five years reflecting the semiannual cash flows
resulting from coupon payments.
Duration generally defines the effect of interest rate changes on bond prices.
However, for large interest rate changes (generally changes of 1% or more)
this measure will not completely explain the interest rate sensitivity of a
bond.
APPLICATION OF INVESTMENT TECHNIQUES. The Adviser will select securities for
each Fund's portfolio based upon their expected contribution to the portfolio's
overall duration and total return as compared to each bond index. The Adviser
expects that typically each Fund will hold less than 200 securities that in
the aggregate have similar price sensitivities or durations as the respective
bond index. Although the Adviser expects that as a general matter a significant
percentage of the securities acquired by each Fund will also be securities
that are included in the respective bond index, each Fund may invest more
than 50% of its total assets in securities that are not so included.
In order to reduce a negative deviation in return between each Fund and the
respective bond index, each Fund will normally attempt to be fully invested.
The Adviser may engage in practices that are intended to achieve an enhanced
return, before Fund expenses, over the respective bond index. As indicated
above, each Fund will hold only a percentage of the large number of issues
included in its respective bond index. In addition, a Fund may hold securities
which are not included in its respective bond index, including stripped
government, asset-backed and mortgage-backed obligations, collateralized
mortgage obligations, medium-term notes and Eurobonds, among others. This
permits the Adviser to engage in sampling and other strategies that are
designed to achieve an enhanced incremental gross return above the return on
the respective bond index. For example, the Adviser may, in light of current
changes in market conditions, "swap" portfolio securities whereby a bond or
a group of bonds is sold and another bond or group of bonds is bought that
has similar duration characteristics but, in the Adviser's opinion, a higher
expected return. Furthermore, the percentage mix of government and corporate
issues held by a Fund will differ from the percentage included in its
respective bond index whenever, in the Adviser's judgment, such a mix is
desirable. Moreover, the average quality of bonds held by each Fund (which
is expected to be at least the second highest rating category - AA by S&P
or Aa by Moody's) may vary from the average quality of bonds included in
its respective bond index, and in selecting among the various securities
available for investment by a Fund the Adviser will make its own
creditworthiness determinations. These and other practices, although
intended to result in a positive incremental return in favor of a Fund,
may instead result in a negative deviation.
In an effort to make a Fund's duration and return comparable to those of its
respective bond index, the Adviser will continue to monitor a Fund's portfolio
and market changes in accordance with procedures established by the Adviser
under the supervision of the Board of Directors. It should be recognized,
however, that while the sensitivity of a Fund's portfolio to interest rate
changes is expected to be similar to that of its respective bond index, because
of the smaller number of issues held by a Fund, material events affecting a
Fund's portfolio (for example, an issuer's decline in credit quality) may
influence the performance of a Fund to a greater degree than such events
will influence its respective bond index and may prevent a Fund from attaining
its investment objective for particular periods. In the event the performance
of a Fund is not comparable to the performance of its respective bond
index, the Board of Directors will examine the reasons for the deviation
and the availability of corrective measures.
Each Fund's policy is to invest at least 65% of the total value of its assets
in a broad range of corporate, government, government agencies, stripped
government, asset-backed, mortgage-backed and collateralized mortgage
obligations during normal market conditions, as described in greater
detail below. The duration of a Fund will be similar to its respective
bond index during normal market conditions. In addition, the dollar-weighted
average portfolio maturity of each Fund's portfolio will be more than one year
but less than three years for the Short-Term Bond Market Fund; more than three
years but less than ten for the Intermediate Bond Market Fund; and greater
than five years for the Bond IMMDEX/TM Fund during normal market conditions.
The calculation of a Fund's duration and average portfolio maturity will,
however, be based on certain estimates relating to the duration and
maturity of the securities held by a Fund. There can be no assurance
that these estimates will be accurate or that the duration or average portfolio
maturity of a Fund will always remain within the maximum limits described above.
Debt obligations acquired by each Fund will be rated "investment grade" at the
time of purchase by S&P, Moody's or other nationally recognized rating
agencies. That is, obligations will be rated within the four highest rating
categories by S&P (AAA, AA, A and BBB), Moody's (Aaa, Aa, A and Baa) or other
nationally recognized rating agencies or obligations that are unrated but
determined by the Adviser to be comparable in quality to instruments that are
so rated. Obligations rated in the lowest of the top four rating categories
are considered to have speculative characteristics and are subject to greater
credit and market risk than higher rated securities. As a result, the market
value of these securities may be expected to fluctuate more than those of
securities with higher ratings. Subsequent to its purchase by a Fund, a rated
security may cease to be rated or its rating may be reduced below the minimum
rating required for purchase by that Fund. The Adviser will consider such an
event in determining whether the Fund should continue to hold the security.
The Adviser will sell promptly any securities that are non-investment grade
as a result of these events that exceed 5% of the Fund's net assets.
See Appendix A to the Statement of Additional Information for a description
of applicable debt ratings.
Each Fund may make limited investments in guaranteed investment contracts
("GICs") issued by highly rated U.S. insurance companies. Pursuant to such
contracts, the Fund makes cash contributions to a separate account of the
insurance company which has been segregated from the general assets of the
issuer. The insurance company then pays to the Fund at the end of the
contract an amount equal to the cash contributions adjusted for the total
return of an index. A GIC is a separate account obligation of the issuing
insurance company. The Fund will only purchase GICs from issuers which,
at the time of purchase, are rated A or higher by Moody's or S&P, have assets
of $1 billion or more and meet quality and credit standards established by the
Adviser. Generally, GICs are not assignable or transferable without the
permission of the issuing insurance companies, and an active secondary
market in GICs does not currently exist. Therefore, GICs are considered
by the Fund to be subject to the 10% limitation on illiquid investments
described under "Other Investment Information." Generally, a GIC allows
a purchaser to buy an annuity with the money accumulated under the contract;
however, the Fund will not purchase any such annuities.
The Funds may invest in certain other securities not contained in the indices
such as options, futures, repurchase agreements and other cash market
instruments. See "Other Investment Information."
The value of each Fund's portfolio, as is generally the case with each bond
index, can be expected to vary inversely from changes in prevailing interest
rates.
TAX-EXEMPT INTERMEDIATE BOND FUND
The investment objective of the Tax-Exempt Intermediate Bond Fund is to seek to
provide current income that is substantially exempt from federal income tax and
emphasize total return with relatively low volatility of principal. The Fund
will invest primarily in investment grade intermediate-term municipal
obligations issued by state and local governments exempt from federal
income tax. In pursuing its investment objective, the Fund invests in a
diversified portfolio of debt obligations issued by or on behalf of states,
territories and possessions of the United States, the District of Columbia
and their authorities, agencies, instrumentalities and political subdivisions
("Municipal Obligations"). As a fundamental policy, the Fund will invest at
least 80% of its net assets in securities, the interest on which is exempt
from regular federal income and alternative minimum taxes, except during
defensive periods. (See "Investment Limitations.") The Fund intends to maintain
an average weighted maturity between three and ten years. There is no limit
on the maturity of any individual security in the Fund.
The two principal classifications of Municipal Obligations which may be held by
the Fund are "General Obligation" securities and "Revenue" securities. General
Obligation securities are secured by the issuer's pledge of its full faith,
credit and taxing power for the payment of principal and interest. Revenue
securities are payable only from the revenues derived from a particular facility
or class of facilities or, in some cases, from the proceeds of a special excise
tax or other specific revenue source such as the issuer of the facility being
financed. Private activity bonds (i.e., bonds issued by industrial development
authorities) that are issued by or on behalf of public authorities to finance
various privately operated facilities are included within the term
"Municipal Obligations" if the interest paid thereon is exempt from regular
federal income tax. Private activity bonds are in most cases Revenue securities
and are not payable from the unrestricted revenues of the issuer. The credit
quality of such bonds is usually directly related to the credit standing of
the corporate user of the facility involved.
The Fund may also acquire "Moral Obligation" securities, which are normally
issued by special purpose public authorities. If the issuer of Moral Obligation
securities is unable to meet its debt service obligations from current revenues,
it may draw on a reserve fund, the restoration of which is a moral commitment
but not a legal obligation of the state or municipality which created the
issuer.
Although the Fund does not presently intend to do so on a regular basis, it may
invest more than 25% of its assets in Municipal Obligations, the issuers of
which are located in the same state or the interest on which is paid solely
from revenues of similar projects. To the extent that the Fund's assets are
concentrated in Municipal Obligations payable from revenues on similar projects
or issued by issuers in the same state, the Fund may be subject to the peculiar
economic, political and business risks presented by the laws and economic
conditions relating to such states and projects to a greater extent than it
would be if the Fund's assets were not so concentrated. Furthermore, payment
of Municipal Obligations of certain projects may be secured by mortgages or
deeds of trust. In the event of a default, enforcement of the mortgages or
deeds of trust will be subject to statutory enforcement procedures and
limitations, including rights of redemption and limitations on obtaining
deficiency judgments. In the event of a foreclosure, collection of the
proceeds of the foreclosure may be delayed and the amount of proceeds from
the foreclosure may not be sufficient to pay the principal of and accrued
interest on the defaulted Municipal Obligations.
Opinions relating to the validity of Municipal Obligations and to the exemption
of interest thereon from federal income tax are rendered by bond counsel to the
respective issuers at the time of issuance. Neither the Fund nor the Adviser
will review the proceedings relating to the issuance of Municipal Obligations
or the bases for such opinions.
Municipal Obligations purchased by the Fund will be investment grade at the
time of purchase. See "Short-Term Bond Market, Intermediate Bond Market and
Bond IMMDEX/TM Funds" above for a description of "investment grade securities."
The Fund may also purchase Municipal Obligations which are unrated at the time
of purchase but are determined to be of comparable quality by the Adviser or
have comparable ratings from other nationally recognized rating agencies. The
Fund may also acquire municipal notes and other short-term obligations rated
SP-1 by S&P, or MIG-1 by Moody's; tax-exempt commercial paper rated A-1 or
higher by S&P, or VMIG-1 by Moody's. Subsequent to its purchase by the Fund,
a rated security may cease to be rated or its rating may be reduced below
the minimum rating required for purchase by the Fund. The Adviser will consider
such event in determining whether the Fund should continue to hold the
security. The Adviser will sell promptly any securities that are not rated
investment grade by at least one nationally recognized rating agency and that
exceed 5% of the Fund's net assets. As indicated, the Fund's cash balances
may be invested in short-term municipal notes and tax-exempt commercial paper,
as well as municipal bonds with remaining maturities of thirteen months or
less and securities issued by other investment companies which invest in
high quality, short-term municipal debt securities. Except during temporary
defensive periods, at least 65% of the Fund's total assets will be invested
in bonds and debentures. The value of the Fund's portfolio can be expected
to vary inversely to changes in prevailing interest rates.
Municipal Obligations purchased by the Fund may be backed by letters of credit
issued by foreign and domestic banks and other financial institutions. Such
letters of credit are not necessarily subject to federal deposit insurance and
adverse developments in the banking industry could have a negative effect on
the credit quality of the Fund's portfolio securities and its ability to
maintain a stable net asset value and share price. Letters of credit issued
by foreign banks, like other obligations of foreign banks, may involve certain
risks in addition to those of domestic obligations. Such risks include future
political and economic developments, the possible imposition of foreign
withholding taxes on interest income payable on such instruments, the possible
seizure or nationalization of foreign deposits or the adoption of other foreign
government restrictions which might adversely affect the payment of principal
and interest on such instruments. In addition, foreign banks and foreign
branches of U.S. banks are subject to less stringent reserve requirements
and to different accounting, auditing, reporting and recordkeeping standards
than those applicable to domestic branches of U.S. banks.
Municipal Obligations purchased by the Fund may include variable and floating
rate instruments issued by industrial development authorities and other
governmental entities. If such instruments are unrated, they will be determined
by the Fund's Adviser (under the supervision of the Board of Directors) to be of
comparable quality at the time of purchase to investment grade. While there may
be no active secondary market with respect to a particular variable or floating
rate demand instrument purchased by the Fund, the Fund may (at any time or
during specified periods not exceeding thirteen months, depending upon the
instrument involved) demand payment in full of the principal of the instrument
and has the right to resell the instrument to a third party. The absence of such
an active secondary market, however, could make it difficult for the Fund to
dispose of a variable or floating rate demand instrument if the issuer
defaulted on its payment obligation or during periods that the Fund is
not entitled to exercise its demand rights, and the Fund could, for these
or other reasons, suffer a loss with respect to such instruments.
In addition, from time to time, on a temporary defensive basis due to market
conditions, the Fund may hold without any limitations uninvested cash reserves
and invest without any limitations in high quality short-term taxable money
market obligations in such proportions as in the opinion of the Adviser,
prevailing market or economic conditions warrant. Uninvested cash reserves will
not earn income. See "Other Investment Information - Money Market Instruments"
below. Taxable obligations acquired by the Fund will not exceed under normal
market conditions 20% of the Fund's net assets at the time of purchase.
The Fund may purchase put options on Municipal Obligations. A put gives the
Fund the right to sell a Municipal Obligation at a specified price at any
time before a specified date. A put will be sold, transferred or assigned
only with the related Municipal Obligation. The Fund will acquire puts only
to enhance liquidity, shorten the maturity of the related municipal security
or permit the Fund to invest its assets at more favorable rates. The aggregate
price of a security subject to a put may be higher than the price which
otherwise would be paid for the security without such an option, thereby
increasing the security's cost and reducing its yield.
The Fund may also acquire "stand-by commitments" with respect to Municipal
Obligations held in its portfolio. Under a stand-by commitment, a dealer
would agree to purchase at the Fund's option specified Municipal Obligations
at a specified price. The Fund will acquire stand-by commitments solely to
facilitate portfolio liquidity and does not intend to exercise its rights
thereunder for trading purposes.
In addition, the Fund may acquire municipal lease obligations which are issued
by a state or local government or authority to acquire land and a wide variety
of equipment and facilities. These obligations typically are not fully backed
by the municipality's credit, and their interest may become taxable if the
lease is assigned. If the funds are not appropriated for the following year's
lease payments, the lease may terminate, with the possibility of default on
the lease obligation and significant loss to the Fund. Certificates of
participation in municipal lease obligations or installment sale contracts
entitle the owner to a proportionate interest in the lease-purchase payments
made. The Adviser determines and monitors the liquidity of municipal lease
obligations(including certificates of participation) under guidelines approved
by the Board of Directors requiring the Adviser to evaluate the credit
quality of such obligations and report on the nature of and the Fund's
trading experience in the municipal lease market. Under the guidelines,
municipal lease obligations that are not readily marketable and transferable
are treated as illiquid. The Fund will not knowingly invest more than 10% of
the value of its net assets in securities, including municipal leases, that
are illiquid.
OTHER INVESTMENT INFORMATION
MONEY MARKET INSTRUMENTS. The Funds may hold short-term U.S. Government
obligations, high quality money market instruments (i.e., rated A-1 or better
by S&P or Prime-1 by Moody's or unrated instruments deemed by the Adviser to
be of comparable quality), repurchase agreements, bank obligations and cash,
pending investment, to meet anticipated redemption requests if, in the opinion
of the Adviser, other suitable securities are unavailable. The foregoing
investments may include among other things commercial paper, variable amount
master demand notes and corporate bonds with remaining maturities of thirteen
months or less and may be in such proportions as, in the opinion of the
Adviser, existing circumstances may warrant. Variable amount master demand
notes are unsecured instruments that permit the indebtedness thereunder to vary
and provide for periodic adjustments in the interest rate. Although the notes
are not normally traded and there may be no secondary market in the notes, the
Funds may demand payment of the principal of the instrument at any time. The
notes are not typically rated by credit rating agencies, but they must satisfy
the criteria set forth above for high quality money market instruments. If
an issuer of a variable amount master demand note defaulted on its payment
obligation, the Funds might be unable to dispose of the note because of the
absence of a secondary market and might, for this or other reasons, suffer
a loss to the extent of the default. The Funds invest in variable amount
master demand notes only when the Adviser deems the investment to involve
minimal credit risk. The Funds may also invest in obligations of foreign
banks and foreign branches of U.S. banks and may invest their cash balances
in securities issued by other investment companies which invest in high
quality, short-term debt securities. The Funds will not invest in any Portico
Money Market Fund. In addition to the advisory fees and other expenses the
Fund bears directly in connection with its own operations, as a shareowner
of another investment company, the Fund would bear its pro rata portion
of the other investment company's advisory fees and other expenses, and
such fees and other expenses will be borne indirectly by the Fund's shareowners.
GOVERNMENT OBLIGATIONS. To the extent consistent with their investment
objectives, the Short-Term Bond Market, Intermediate Bond Market and
Bond IMMDEX/TM Funds may invest in a variety of U.S. Treasury obligations
consisting of bills, notes and bonds, which principally differ only in
their interest rates, maturities and time of issuance. These Funds may
also invest in other securities issued or guaranteed by the U.S. Government,
its agencies and instrumentalities. Obligations of certain agencies and
instrumentalities, such as the Government National Mortgage Association
("GNMA"), are supported by the full faith and credit of the U.S. Treasury;
others, such as those of the Export-Import Bank of the United States, are
supported by the right of the issuer to borrow from the Treasury; others,
such as those of the Federal National Mortgage Association ("FNMA"), are
supported by the discretionary authority of the U.S. Government to purchase
the agency's obligations; still others, such as those of the Student Loan
Marketing Association, are supported only by the credit of the
instrumentalities. No assurance can be given that the U.S. Government
would provide financial support to its agencies or instrumentalities if it
is not obligated to do so by law. There is no assurance that these
commitments will be undertaken or complied with in the future.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. The Short-Term Bond Market,
Intermediate Bond Market and Bond IMMDEX/TM Funds may purchase residential
and commercial mortgage-backed, as well as other asset-backed securities
(i.e., securities backed by credit card receivables, automobile loans or
other assets). The average life of these securities varies with the maturities
of the underlying instruments which, in the case of mortgages, have maximum
maturities of thirty years. The average life of a mortgage-backed instrument
may be substantially less than the original maturity of the mortgages
underlying the securities as the result of scheduled principal payments
and mortgage prepayments. The rate of such mortgage prepayments, and hence
the life of the certificates, will be a function of current market rates
and current conditions in the relevant housing and commercial markets. In
periods of falling interest rates, the rate of mortgage prepayments tends
to increase. During such periods, the reinvestment of prepayment proceeds
by a Fund will generally be at lower rates than the rates that were carried
by the obligations that have been prepaid. As a result, the relationship
between mortgage prepayments and interest rates may give some high-yielding
mortgage-related securities less potential for growth in value than non-callable
bonds with comparable maturities. In calculating the average weighted maturity
of each Fund, the maturity of asset-backed securities will be based on estimates
of average life. There can be no assurance that these estimates will be
accurate.
Presently there are several types of mortgage-backed securities which provide
the owner with a pro rata interest in the underlying mortgages, and
collateralized mortgage obligations ("CMOs") which provide the owner with a
specified interest in the cash flow of a pool of underlying mortgages or
other mortgage-backed securities. CMOs are issued in multiple classes, each
with a specified fixed or floating interest rate and a final distribution
date. The relative payment rights of the various CMO classes may be subject
to greater volatility and interest rate risk than other types of mortgage-
backed obligations. The Short-Term Bond Market, Intermediate Bond Market and
Bond IMMDEX/TM Funds will invest less than 25% of their respective total
assets in CMOs.
Asset-backed securities may involve certain risks that are not presented by
mortgage-backed securities arising primarily from the nature of the underlying
assets (i.e., credit card and automobile loan receivables as opposed to real
estate mortgages). For example, credit card receivables are generally unsecured
and may require the repossession of personal property upon the default of
the debtor which may be difficult or impracticable in some cases. Non-mortgage
asset-backed securities do not have the benefit of the same security in the
collateral as mortgage-backed securities. Credit card receivables are generally
unsecured and the debtors are entitled to the protection of a number of state
and federal consumer credit laws, many of which have given debtors the right to
reduce the balance due on the credit cards. Most issuers of automobile
receivables permit the servicers to retain possession of the underlying
obligations. If the servicer were to sell these obligations to another party,
there is the risk that the purchaser would acquire an interest superior to that
of the owners of related automobile receivables. In addition, because of the
large number of vehicles involved in a typical issuance and technical
requirements under state laws, the trustee for the owners of the automobile
receivables may not have an effective security interest in all of the
obligations backing such receivables. Therefore, there is a possibility
that payments on the receivables together with recoveries on repossessed
collateral may not, in some cases, be able to support payments on these
securities.
Asset-backed securities may be subject to greater risk of default during
periods of economic downturn than other instruments. Also, while the secondary
market for asset-backed securities is ordinarily quite liquid, in times of
financial stress the secondary market may not be as liquid as the market
for other types of securities, which could result in a Fund experiencing
difficulty in valuing or liquidating such securities.
ZERO COUPON OBLIGATIONS. The Short-Term Bond Market, Intermediate Bond Market,
Tax-Exempt Intermediate Bond and Bond IMMDEX/TM Funds may acquire zero coupon
obligations. Zero coupon obligations have greater price volatility than similar
maturity coupon obligations and will not result in the payment of interest
until maturity. The Funds will purchase such zero coupon obligations only if the
likely relative greater price volatility of such zero coupon obligations is
not inconsistent with such Fund's investment objective. The Funds will accrue
income on such investments for tax and accounting purposes, as required, which
is distributable to shareowners and which, because no cash is received at the
time of accrual, may require the liquidation of other portfolio securities to
satisfy each Fund's distribution obligations.
RESTRICTED SECURITIES. Each Fund will not knowingly invest more than 10% of
the value of its respective net assets in securities that are illiquid.
Repurchase agreements and time deposits that do not provide for payment to
a Fund within seven days, over-the- counter options, and securities that are
not registered under the Securities Act of 1933 (the "Act") but may be
purchased by institutional buyers under Rule 144A, are subject to this 10%
limit (unless such securities are variable amount master demand notes
with maturities of nine months or less or unless the Board of Directors
or the Adviser, pursuant to guidelines adopted by the Board of Directors,
determines that a liquid trading market exists).
BORROWINGS. Each Fund may borrow money to the extent described below under
"Investment Limitations." A Fund would borrow money to meet redemption requests
prior to the settlement of securities already sold or in the process of being
sold by the Fund. If the securities held by a Fund should decline in value
while borrowings are outstanding, the net asset value of a Fund's outstanding
shares will decline in value by proportionately more than the decline in
value suffered by a Fund's securities. As a result, a Fund's share price
may be subject to greater fluctuation until the borrowing is paid off.
Reverse repurchase agreements are considered to be borrowings under the
Investment Company Act of 1940 (the "1940 Act"). At the time a Fund enters
into a reverse repurchase agreement (an agreement under which the Fund sells
portfolio securities and agrees to repurchase them at an agreed upon date
and price), it will place in a segregated custodial account U.S. Government
securities or other liquid high grade debt securities having a value equal
to or greater than the repurchase price (including accrued interest),
and will subsequently monitor the account to insure that such value is
maintained. Reverse repurchase agreements involve the risk that the market
value of the securities sold by the Fund may decline below the price of the
securities it is obligated to repurchase.
WHEN-ISSUED PURCHASES AND FORWARD COMMITMENTS. Each Fund may purchase securities
on a "when-issued" or delayed delivery basis and may purchase or sell securities
on a "forward commitment" basis. These transactions, which involve a commitment
by the Fund to purchase or sell particular securities with payment and
delivery taking place at a future date (perhaps one or two months later), permit
the Fund to lock in a price or yield on a security it owns or intends to
purchase, regardless of future changes in interest rates. The Fund does not
accrue income until the securities delivery occurs. When-issued and forward
commitment transactions involve the risk, however, that the price or yield
obtained in a transaction (and therefore the value of the security) may be
less favorable than the price or yield (and therefore the value of the
security) available in the market when the securities delivery takes place.
Each Fund's forward commitments and when-issued purchases are not expected
to exceed 25% of the value of its total assets absent unusual market
conditions. The Funds do not intend to engage in when-issued purchases
and forward commitments for speculative purposes but only in furtherance
of their respective investment objectives.
FOREIGN SECURITIES. Each Fund may invest in foreign securities. The Funds'
investments in the securities of foreign issuers may include both securities
of foreign corporations and banks, as well as securities of foreign governments
and their political subdivisions. Investments in foreign securities, whether
made directly or through American Depository Receipts, involve certain
inherent risks and considerations not typically associated with investing
in U.S. companies, such as political or economic instability of the issuer
or the country of issue, the difficulty of predicting international trade
patterns, changes in exchange rates of foreign currencies and the possibility
of adverse changes in investment or exchange control regulations. There may be
less publicly available information about a foreign company than about a U.S.
company. Foreign companies are not subject to uniform accounting, auditing
and financial reporting standards comparable to those applicable to domestic
companies. Further, foreign stock markets are generally not as developed or
efficient as those in the U.S., and in most foreign markets volume and
liquidity are less than in the U.S. Fixed commissions on foreign stock exchanges
are generally higher than the negotiated commissions on U.S. exchanges, and
there is generally less government supervision and regulation of foreign stock
exchanges, brokers and companies than in the U.S. With respect to certain
foreign countries, there is a possibility of expropriation or confiscatory
taxation, limitations on the removal of assets or diplomatic developments
that could affect investment within those countries. Because of these and
other factors, securities of foreign companies acquired by the Funds may be
subject to greater fluctuation in price than securities of domestic companies.
STRIPPED SECURITIES. To the extent consistent with their investment objectives,
the Short-Term Bond Market, Intermediate Bond Market and Bond IMMDEX/TM Funds
may purchase participations in trusts that hold U.S. Treasury and agency
securities (such as TIGRs and CATs) and also may purchase Treasury receipts
and other "stripped" securities that evidence ownership in either the future
interest payments or the future principal payments of U.S. Government
obligations. These participations are issued at a discount to their "face
value," and may (particularly in the case of stripped mortgage-backed
securities) exhibit greater price volatility than ordinary debt securities
because of the manner in which their principal and interest are returned to
investors. The SEC staff believes that participations in CATs and TIGRs and
other similar trusts are not U.S. Government securities.
OPTIONS. The Short-Term Bond Market, Intermediate Bond Market and Bond
IMMDEX/TM Funds may purchase put and call options in an amount not to exceed
5% of their respective net assets. Such options may relate to particular
securities or various bond indices and may or may not be listed on a
national securities exchange and issued by the Options Clearing Corporation.
Purchasing options is a specialized investment technique which entails a
substantial risk of a complete loss of the amount paid as premiums to the
writer of the option.
The Short-Term Bond Market, Intermediate Bond Market and Bond IMMDEX/TM
Funds will engage in unlisted over-the-counter options only with
broker-dealers deemed creditworthy by the Adviser. Closing transactions
in certain options are usually effected directly with the same broker-
dealer that effected the original option transaction. A Fund bears the
risk that the broker-dealer will fail to meet its obligations. There is
no assurance that a liquid secondary trading market exists for closing
out an unlisted option position. Furthermore, unlisted options are not
subject to the protections afforded purchasers of listed options by the
Options Clearing Corporation, which performs the obligations of its
members who fail to perform in connection with the purchase or sale of
options.
Each Fund may purchase put options on portfolio securities at or about the same
time that it purchases the underlying security or at a later time. By buying a
put, a Fund limits its risk of loss from a decline in the market value of the
security until the put expires. Any appreciation in the value of and yield
otherwise available from the underlying security, however, will be partially
offset by the amount of the premium paid for the put option and any related
transaction costs. Call options may be purchased by a Fund in order to acquire
the underlying security at a later date at a price that avoids any additional
cost that would result from an increase in the market value of the security.
A call option may also be purchased to increase a Fund's return to investors
at a time when the call is expected to increase in value due to anticipated
appreciation of the underlying security. Prior to its expiration, a
purchased put or call option may be sold in a "closing sale transaction"
(a sale by a Fund, prior to the exercise of the option that it has purchased,
of an option of the same series), and profit or loss from the sale will depend
on whether the amount received is more or less than the premium paid for the
option plus the related transaction costs.
In addition, the Short-Term Bond Market, Intermediate Bond Market and Bond
IMMDEX/TM Funds may write call options on securities and on various bond
indices. Each Fund may write a call option only if the option is "covered"
by the Fund's holding of a position in the underlying securities or otherwise,
which would allow for immediate satisfaction of its obligation. Such options
will be listed on a national securities exchange and the aggregate value of
the Fund's assets subject to options written by the Fund will not exceed 5%
of the value of its net assets during the current year. In order to close out
an option position, a Fund will be required to enter into a "closing purchase
transaction" (the purchase of a call option on a security or an index with the
same exercise price and expiration date as the call option which it previously
wrote on the same security or index).
By writing a covered call option on a security, a Fund foregoes the opportunity
to profit from an increase in the market price of the underlying security
above the exercise price except insofar as the premium represents such a
profit, and it is not able to sell the underlying security until the option
expires or is exercised or the Fund effects a closing purchase transaction by
purchasing an option of the same series. Except to the extent that a written
call option on an index is covered by an option on the same index purchased
by the Fund, movements in the index may result in a loss to the Fund; however,
such losses may be mitigated by changes in the value of securities held by the
Fund during the period the option was outstanding. The use of covered call
options will not be a primary investment technique of the Funds.
For additional information relating to option trading practices and
related risks, see the Statement of Additional Information.
FUTURES CONTRACTS AND RELATED OPTIONS. The Adviser may determine that it would
be in the interest of the Short-Term Bond Market, Intermediate Bond Market and
Bond IMMDEX/TM Funds to purchase or sell futures contracts, or options thereon,
as a hedge against changes resulting from market conditions in the value of the
securities held by the Funds, or of securities which it intends to purchase,
to maintain liquidity, to have fuller exposure to price movements in the
respective bond index or to reduce transaction costs. For example, a Fund may
enter into transactions involving a bond index futures contract, which is a
bilateral agreement pursuant to which the parties agree to take or make
delivery of an amount of cash equal to a specified dollar amount times the
difference between the index value (which assigns relative values to the
bonds included in the index) at the close of the last trading day of the
contract and the price at which the futures contract is originally struck.
No physical delivery of the underlying bonds in the index is made. The
Adviser may also determine it would be in the interest of a Fund to purchase
or sell interest rate futures contracts, or options thereon, which provide for
the future delivery of specified fixed-income securities. Risks associated
with the use of futures contracts include (a) imperfect correlation between
the change in market values of the bonds held by a Fund and the prices of bond
index futures contracts, and (b) the possible lack of a liquid secondary market
for futures contracts and the resulting inability of a Fund to close open
futures positions. During the current fiscal year, the Short-Term Bond Market,
Intermediate Bond Market and Bond IMMDEX/TM Funds intend to limit transactions
in futures contracts and related options so that not more than 5% of a Fund's
respective net assets are at risk. For a more detailed description of futures
contracts and futures options, including a discussion of the limitations
imposed by federal tax law, see Appendix B to the Statement of Additional
Information.
PORTFOLIO TURNOVER. Each Fund may sell a portfolio investment soon after its
acquisition if the Adviser believes that such a disposition is consistent
with attaining the investment objective of the Fund. Portfolio investments
may be sold for a variety of reasons, such as a more favorable investment
opportunity or other circumstances bearing on the desirability of continuing
to hold such investments. A high rate of portfolio turnover (over 100%) may
involve correspondingly greater brokerage commission expenses and other
transaction costs, which must be borne directly by the Fund and ultimately
by its shareowners. High portfolio turnover may result in the realization of
substantial net capital gains; to the extent net short-term capital gains
are realized, distributions resulting from such gains will be ordinary income
for federal income tax purposes. (See "Taxes-Federal.") See "Financial
Highlights" for each Fund's portfolio turnover rates.
BOND INDICES. The Lehman Brothers 1-3 Government/Corporate, the Lehman Brothers
Intermediate Government/Corporate and the Lehman Brothers Government/Corporate
are trademarks of Lehman Brothers. The Funds, their Adviser and
Co-Administrators are not affiliated in any way with Lehman Brothers. See
"Management of the Funds." Inclusion of a security in the bond indices in
no way implies an opinion by Lehman Brothers' as to its attractiveness or
appropriateness as an investment. Lehman Brothers' publication of the bond
indices is not made in connection with any sale or offer for sale of securities
or any solicitations of orders for the purchase of securities.
PURCHASE OF SHARES
Retail Shares of the Funds are offered and sold on a continuous basis by the
distributor for the Funds, B.C. Ziegler and Company (the "Distributor"),
which is independent of the Adviser. The Distributor is a registered broker-
dealer with offices at 215 North Main Street, West Bend, Wisconsin 53095.
Purchase orders for shares may be placed through the transfer agent of the
Funds, registered representatives of Elan Investment Services, Inc. ("Elan"),
or organizations that have entered into distribution or servicing agreements
with the Funds (including Elan, "Shareowner Organizations"). For a discussion
of transactions through Shareowner Organizations, see "Shareowner Organizations"
below.
THE MINIMUM INITIAL INVESTMENT FOR SHARES IN A FUND IS $1,000; WITH THE
EXCEPTION OF IRAS, WHICH HAVE A MINIMUM INITIAL INVESTMENT OF $100. The
minimum investment for all accounts for subsequent purchases is $50. The
minimum initial investment will be waived if you participate in the Periodic
Investment Plan. The Funds reserve the right to close your account if the
value is less than $1,000 and you are not currently participating in the
Periodic Investment Plan. For additional information on involuntary
redemptions, see "Other Redemption Information" below. The $1,000 minimum
account balance applies only to accounts opened with Portico on or after
February 28, 1997. Accounts opened with Portico on or before February 27,
1997 must maintain a minimum account balance of $50.
Once each business day, two share prices are calculated for each Fund: the
offering price and the net asset value (NAV). Retail Shares are purchased
at the offering price which is the net asset value plus a sales charge
which varies in accordance with the amount of the purchase as indicated below:
SHAREOWNER
SALES CHARGE SALES CHARGE ORGANIZATION
AMOUNT OF AS A AS A REALLOWANCE AS
TRANSACTION AT PERCENTAGE OF PERCENTAGE OF A PERCENTAGE OF
OFFERING PRICE OFFERING PRICE NET ASSET VALUE OFFERING PRICE
- --------------------------------------------------------------------------------
Less than $50,000 2.00% 2.04% 1.50%
$50,000 to $99,999 1.00% 1.01% 0.50%
$100,000 to $249,999 0.50% 0.50% 0.25%
$250,000 or more none none none
The Distributor may reallow the entire sales charge to certain Shareowner
Organizations. To the extent that 90% or more of the sales charge is
reallowed, Shareowner Organizations may be deemed to be underwriters under the
Act.
You may purchase shares without a sales charge if: (a) you were a Portico
shareowner as of January 1, 1995 and have continuously maintained a shareowner
account with the Company; (b) you make any purchase within 60 days of a
redemption of Portico Institutional Shares, (c) you are an employee, director
or retiree of Firstar Corporation or its affiliates or of Portico; (d) you
maintain a personal trust account with an affiliate of Firstar Corporation at
the time of purchase; (e) you make any purchase within 60 days of a termination
of a personal trust account with an affiliate of Firstar Corporation; (f) you
make any purchase for your medical savings account for which Firstar
Corporation or an affiliate serves in a custodial capacity; (g) you make
any purchase for your individual retirement accont; (h) you make any purchase
within 60 days of a redemption of a mutual fund on which you paid an initial
sales charge or a contingent deferred sales charge; (i) you are a registered
investment adviser that has entered into an agreement with the Distributor
to purchase shares for your own account or for discretionary client accounts;
(j) you are a spouse, parent or child of an individual who falls within the
preceding categories (a) or (d) above; or (k) you are a spouse, parent,
sibling or child of an individual who falls within the preceding category
(c) above. In addition, you may reinvest all or any portion of your
proceeds from redemption of shares of the Funds in Retail Shares of the
Funds or Retail Shares of other Portico funds, within 365 days of a
redemption without paying a sales charge. Shares so reinvested will be
purchased at a price equal to the net asset value next determined after the
transfer agent receives payment in proper form.
QUANTITY DISCOUNTS. You may be entitled to reduced sales charges through the
Right of Accumulation or under a Letter of Intent, even if you do not make
an investment of a size that would normally qualify for a quantity discount.
To qualify for a reduction of or exception to the sales charge, you must
notify your Shareowner Organization or the Distributor at the time of
purchase or exchange. The reduction in sales charge is subject to
confirmation of your holdings through a check of records. The Fund may
modify or terminate quantity discounts at any time. For more information
about quantity discounts, contact your Shareowner Organization or Portico
Investor Services at 1-800-982-8909.
RIGHTS OF ACCUMULATION. A reduced sales charge applies to any purchase of
shares of any Portico Fund that is purchased with a sales charge (an
"Eligible Fund") where an investor's then current aggregate investment is
$50,000 or more. "Aggregate investment" means the total of: (a) the dollar
amount of the then current purchase of shares of an Eligible Fund, and (b)
the value (based on current net asset value) of previously purchased and
beneficially owned shares of any Eligible Fund on which a sales charge
has been paid. If, for example, an investor beneficially owns shares of
one or more Eligible Funds with an aggregate current value of $49,000 on
which a sales charge has been paid and subsequently purchases shares of
an Eligible Fund having a current value of $1,000, the sales charge
applicable to the subsequent purchase would be reduced to 1.00% of the
offering price. Similarly, each subsequent investment in Eligible Fund
shares may be added to an investor's aggregate investment at the time of
purchase to determine the applicable sales charge.
LETTER OF INTENT. By signing a Letter of Intent (available from the
Distributor and Shareowner Organizations), an investor becomes eligible
for the reduced sales charge applicable to the total number of Eligible
Fund shares purchased in a 13-month period pursuant to the terms and under
the conditions set forth in the Letter of Intent. To compute the applicable
sales charge, the offering price of shares of an Eligible Fund on which a
sales charge has been paid, beneficially owned by an investor on the date
of submission of the Letter of Intent, may be used as a credit toward
completion of the Letter of Intent. However, the reduced sales charge will be
applied only to new purchases.
During the term of the Letter of Intent, the transfer agent will hold in escrow
shares equal to 5% of the amount indicated in the Letter of Intent for payment
of a higher sales charge if an investor does not purchase the full amount
indicated in the Letter of Intent. The escrow will be released when an investor
fulfills the terms of the Letter of Intent by purchasing the specified amount.
Any redemptions made during the 13-month period will be subtracted from the
amount of purchases in determining whether the Letter of Intent has been
completed. If total purchases qualify for a further sales charge reduction,
the sales charge will be adjusted to reflect an investor's total purchases.
If total purchases are less than the amount specified in the Letter of Intent,
an investor will be requested to remit an amount equal to the difference
between the sales charge actually paid and the sales charge applicable
to the total purchases. If such remittance is not received within 20 days,
the transfer agent, as attorney-in-fact pursuant to the terms of the Letter
of Intent and at the Distributor's direction, will redeem an appropriate
number of shares held in escrow to realize the difference. Signing a Letter
of Intent does not bind an investor to purchase the full amount indicated
at the sales charge in effect at the time of signing, but an investor must
complete the intended purchase in accordance with the terms of the Letter
of Intent to obtain the reduced sales charge. To apply, an investor must
indicate his or her intention to do so under a Letter of Intent at the time
of purchase of shares.
QUALIFICATION FOR DISCOUNTS. For purposes of applying the Rights of
Accumulation and Letter of Intent privileges described above, the scale
of sales charges applies to the combined purchases made by any individual
and/or spouse purchasing securities for his, her or their own account, or
the aggregate investments of a trustee or other fiduciary or IRA for the
benefit of the persons listed above.
PURCHASE ORDERS. Investors may purchase shares of the Funds through registered
representatives of Elan located at Firstar Banks ("Firstar Investment Offices")
or directly with the Funds' transfer agent. All checks must be drawn on a bank
located within the United States and must be payable in U.S. dollars. Subsequent
investments in an existing account in a Fund may be made at any time by sending
to the address below a check or money order payable to the Fund in which the
investment is being made as shown above, along with a letter stating the amount
of the investment, the name of the Fund and the account number in which the
investment is to be made. A $20 fee will be imposed by the Funds' transfer
agent if any check used for investment in an account does not clear, and
the investor involved will be responsible for any loss incurred by a Fund.
<TABLE>
PURCHASE ORDERS PLACED THROUGH REGISTERED REPRESENTATIVES
<CAPTION>
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
<S> <C> <C>
IN PERSON _ Complete an application at a Firstar _ Bring your check to a Firstar
Investment Office. Call 1-800-982-8909 Investment Office. Call 1-800-982-8909
for the office nearest you. for the office nearest you.
BY PHONE _ Call your registered representative _ Call your registered representative
or call 1-800-982-8909 for the office or call 1-800-982-8909 for the office
nearest you. nearest you.
AUTOMATICALLY _ Call your registered representative to _ Complete a Periodic Investment Plan
obtain a purchase application which Application to automatically purchase
includes information for a Periodic more shares.
Investment Plan.
PURCHASE ORDERS PLACED THROUGH THE TRANSFER AGENT
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
BY MAIL _ Complete an application and _ Make your check payable to
mail it along with a check Portico Funds. Please include
payable to Portico Funds, your account number on your
P.O. Box 3011, check and mail it to the address
Milwaukee, WI 53201-3011. on your statement.
OVERNIGHT _ Complete an application and _ Make your check payable to
DELIVERY deliver it along with a check Portico Funds. Please include
payable to Portico Funds, your account number on your
615 East Michigan St., check and deliver it to the
Milwaukee, WI 53202. address at the left.
IN PERSON _ Bring your application and _ Bring your check to a Firstar
check to a Firstar Investment Investment Office. Call
Office. Call 1-800-982-8909 1-800-982-8909 for the office
for the office nearest you. nearest you.
AUTOMATICALLY _ Call 1-800-982-8909 to obtain a _ Complete a Periodic Investment Plan
purchase application which includes Application to automatically purchase
information for a Periodic more shares.
Investment Plan. _ Open a ConvertiFundR (account to automatically
invest proceeds from one account to another
account of the Portico family of funds.)
BY WIRE _ Call 1-800-228-1024 to arrange a wire _ Call 1-800-228-1024 to arrange a
transaction. Ask your bank to transmit wire transaction. Ask your bank to
immediately available funds by wire transmit immediately available funds
in the amount of your purchase to: by wire as described at the left.
Firstar Bank Milwaukee, N.A. Please also include your account
ABA # 0750-00022, Account # number.
112-952-137 for further credit to
[name of Fund] [the name/title
on the account ].
BY PHONE _ Call 1-800-228-1024 to exchange from _ Call 1-800-228-1024 to exchange
another Portico Fund account with from another Portico Fund account
the same registration including name, with the same registration including
address and taxpayer ID number. name, address and taxpayer
ID number.
</TABLE>
Investors making initial investments by wire must promptly complete a Purchase
Application and forward it to the respective Fund. REDEMPTIONS WILL NOT BE PAID
UNTIL THE COMPLETED APPLICATION HAS BEEN RECEIVED BY THE TRANSFER AGENT.
If an order and payment are received by the transfer agent in proper form (as
described above) before the close of regular trading hours on the New York Stock
Exchange (the "Exchange"), currently 3:00 p.m. Central Time, on a business day,
Fund shares will be purchased as of the determination of net asset value on that
day. Purchase orders which are received after the close of regular trading hours
on the Exchange, or on non-business days, and orders for which payment is not
received by the close of regular trading hours on the Exchange on a business
day, will be executed on the next business day after receipt of both the order
and payment in proper form by the transfer agent.
The Funds will not accept payment in cash or third party checks for the purchase
of shares. Federal regulations require that each investor provide a Social
Security number or other certified taxpayer identification number upon opening
or reopening an account. The Funds reserve the right to reject applications
without such a number or an indication that a number has been applied for. If a
number has been applied for, the number must be provided and certified within
sixty days of the date of the application. Any accounts opened without a proper
number will be subject to backup withholding at a rate of 31% on all
liquidations and dividend and capital gain distributions.
Certificates for shares will be issued only upon shareowner request. The Funds
reserve the right to reject any purchase order. Payment for shares of a Fund in
the amount of $1,000,000 or more may, at the discretion of the Adviser, be made
in the form of securities that are permissible investments for the respective
Fund. For further information, see the Statement of Additional Information or
contact the Portico Investor Services at 1-800-982-8909 or 414-287-3710
(Milwaukee area).
REDEMPTION OF SHARES Redemption orders are effected at the net asset value
per share next determined after receipt of the order by the transfer agent. If a
redemption order is received in proper form (as described below) before the
close of regular trading hours on the Exchange, currently 3:00 p.m. Central
Time, on a business day, Fund shares will be redeemed as of the determination of
net asset value on that day. Redemption orders which are received after the
close of regular trading hours on the Exchange, or on non-business days, will be
executed on the next business day. Depending upon the current net asset value of
the redeemed shares at the time of redemption, the value of the shares redeemed
may be more or less than the investor's cost.
<TABLE>
<CAPTION>
REDEMPTION ORDERS
THROUGH A REGISTERED
THROUGH THE TRANSFER AGENT REPRESENTATIVE
-------------------------- --------------------
<S> <C> <C>
BY PHONE _ Call 1-800-228-1024 with your account _ Call your registered representative
name, account number and amount of at the number on your statement,
redemption (minimum $500). or 1-800-982-8909.
Redemption proceeds will only be
sent to a shareowner's address or
bank account of a commercial bank
located within the United States as
shown on the transfer agent's records.
(Available only if established on the
account application and if there has
been no change of address by
telephone within the preceding
15 days.)
BY MAIL, _ Mail your instructions to the Portico _ Mail your instructions to the Portico
OVERNIGHT Funds, P.O. Box 3011, Milwaukee, Funds, P.O. Box 3011, Milwaukee,
DELIVERY WI 53201-3011, or deliver them (via WI, 53201-3011, or deliver them to
OR IN PERSON overnight delivery or in person) to 615 E. Michigan Street, Milwaukee,
615 E. Michigan Street, Milwaukee, WI, 53202, or bring your instructions
WI 53202. Include the number of to your registered representative's
shares or the amount to be redeemed, office.
your shareowner account number
and Social Security number or other
taxpayer identification number. Your
instructions must be signed by all
persons required to sign for
transactions exactly as their names
appear on the account. If the
redemption amount exceeds $50,000,
or if the proceeds are to be sent
elsewhere than the address of record,
or the address of record has been
changed by telephone within the
preceding 15 days, each signature
must be guaranteed in writing by
either a commercial bank that is a
member of the FDIC, a trust company,
a credit union, a savings association,
a member firm of a national securities
exchange or other eligible guarantor
institution.
AUTOMATICALLY _ Call 1-800-982-8909 for a Systematic _ Call your registered representative to
Withdrawal Plan application ($15,000 establish a Systematic Withdrawal Plan.
account minimum and $100 minimum
per transaction).
</TABLE>
Guarantees must be signed by an eligible guarantor institution and "Signature
Guaranteed" must appear with the signature. If certificates have been issued,
the certificates, properly endorsed or accompanied by a properly executed stock
power and accompanied by signature guarantees, must be received by the transfer
agent or Elan. The Funds may require additional supporting documents for
redemptions made by corporations, executors, administrators, trustees and
guardians. A redemption request will not be deemed to be properly received until
the transfer agent or Elan receives all required documents in proper form.
Purchases of additional shares concurrently with withdrawals could be
disadvantageous because of the sales charge involved in the additional purchase.
The transfer agent charges a $12.00 fee for each payment made by wire of
redemption proceeds, which will be deducted from the shareowner's account. The
transfer agent also charges a $15.00 fee for each IRA distribution (unless it is
part of a Systematic Withdrawal Plan), which will be deducted from the
shareowner's account.
In order to arrange for telephone redemptions after an account has been opened
or to change the bank or account designated to receive redemption proceeds, a
written request must be sent to Portico Investor Services at the address listed
above or contact your registered representative. The request must be signed by
each shareowner of the account. Further documentation may be requested from
corporations, executors, administrators, trustees and guardians.
The Funds reserve the right to refuse a telephone redemption if they believe it
is advisable to do so. Procedures for redeeming shares by telephone may be
modified or terminated by the Funds at any time upon notice to shareowners.
During periods of substantial economic or market change, telephone redemptions
may be difficult to implement. If a shareowner is unable to contact the transfer
agent by telephone, shares may also be redeemed by delivering the redemption
request to the transfer agent.
In an effort to prevent unauthorized or fraudulent redemption requests by
telephone, Portico and the transfer agent employ reasonable procedures specified
by a Fund to confirm that such instructions are genuine. Among the procedures
used to determine authenticity, investors electing to redeem or exchange by
telephone will be required to provide their account number. All such telephone
transactions will be tape recorded and confirmed in writing to the shareowner.
Portico may implement other procedures from time to time. If reasonable
procedures are not implemented, Portico and/or the transfer agent may be liable
for any loss due to unauthorized or fraudulent transactions. In all other cases,
the shareowner is liable for any loss for unauthorized transactions.
OTHER REDEMPTION INFORMATION
The Funds will make payment for redeemed shares typically within one or two
business days, but no later than the seventh day after receipt by the transfer
agent of a request in proper form, except as provided by SEC rules. HOWEVER,
IF ANY PORTION OF THE SHARES TO BE REDEEMED REPRESENTS AN INVESTMENT MADE BY
CHECK, THE FUNDS MAY DELAY THE PAYMENT OF THE REDEMPTION PROCEEDS UNTIL THE
TRANSFER AGENT IS REASONABLY SATISFIED THAT THE CHECK HAS BEEN COLLECTED,
WHICH MAY TAKE TWELVE DAYS FROM THE PURCHASE DATE. This procedure does not
apply to shares purchased by wire payment. An investor must have filed a
Purchase Application before any redemption requests can be paid.
The Funds impose no charge when shares are redeemed and reserve the right to
redeem an account involuntarily, upon sixty days' written notice, if redemptions
cause the account's net asset value to remain at less than $1,000. A Fund may
also redeem shares involuntarily if it is appropriate to do so to carry out the
Fund's responsibilities under the 1940 Act and, in certain cases, may make
payment for redemption in securities. Investors would bear any brokerage or
other transaction costs incurred in converting the securities so received to
cash. See the Statement of Additional Information for examples of when such
redemptions might be applicable.
Questions concerning the proper form for redemption requests should be directed
to Portico Investor Services at 1-800-228-1024 or 414-287-3808 (Milwaukee area).
SHAREOWNER SERVICES
The services and privileges described below are available to retail shareowners
of the Funds. These may be modified or terminated at any time upon notice to
shareowners.
SHAREOWNER REPORTS
Shareowners will be provided with a report showing portfolio investments and
other information at least semiannually; and after the close of the Funds'
fiscal year which ends October 31, with an annual report containing audited
financial statements. To eliminate unnecessary duplication, only one copy of
shareowner reports will be sent to shareowners with the same mailing address.
Shareowners who desire a duplicate copy of shareowner reports to be mailed to
their residence should call Portico Investor Services at 1-800-982-8909, or
write to Portico Investor Services at the address listed above.
In addition, account statements will be mailed to shareowners after each
purchase, reinvestment of dividends and redemption.
AUTOMATED TELERESPONSE SERVICE
Shareowners using a touch-tone telephone can access information on the Funds
twenty-four hours a day, seven days a week. When calling Portico Investor
Services at 1-800-228-1024, shareowners may choose to use the automated
information feature or, during regular business hours (8:00 a.m. to 7:00 p.m.
Central Time, Monday through Friday), speak with a Portico Investor Services
representative.
The automated service provides the information most frequently requested by
shareowners. After calling the 800-number, pressing "2" on their touch-tone
phone, shareowners can:
1. Determine closing prices for each Fund.
2. Learn how the price of a Fund has changed from the previous day.
3. Hear daily yields for Portico money market funds.
Money market fund yields reflect fee waivers in effect, represent past
performance and will vary. If fees were not waived, yields would be reduced.
Past performance is no guarantee of future results. Current yield refers to
income earned by a fund's investments over a 7-day period. It is then annualized
and stated as a percentage of the investment. Effective yield is the same as
current yield except that it assumes the income earned by an investment in a
fund will be reinvested. An investment in any one of the Portico money market
funds is neither insured nor guaranteed by the U.S. government nor is there any
assurance the funds will be able to maintain a stable net asset value of $1.00
per share.
To speak with a Portico Investor Services representative anytime during an
automated teleresponse session (during regular business hours), shareowners may
press "0."
For total return information, shareowners must call Portico Investor Services at
1-800-982-8909 or 414-287-3710 (Milwaukee area).
TELEPHONE EXCHANGE PRIVILEGE
If shares may legally be sold in the state of the investor's residence,
shareowners are generally permitted to exchange their Retail Shares in a Fund
(with a minimum current value of $1,000) for Retail Shares of other funds in the
Portico family of funds without charge or commission by the Fund. A sales charge
will be imposed on the exchange if the shares of the Fund being acquired have a
sales charge and the shares being redeemed were purchased or otherwise acquired
without a sales charge unless a shareowner qualifies for a sales charge
exemption as described in the section "Purchase of Shares". Telephone exchange
privileges automatically apply to each shareowner of record and the
representative of record unless and until the transfer agent receives written
instructions from the shareowner(s) of record canceling the privilege.
Portico reserves the right to terminate indefinitely the exchange privilege of
any shareowner, broker, investment adviser or agent who requests more than four
exchanges within a calendar year, whether for oneself or one's customers.
Portico may determine to do so with prior notice to the shareowner, broker,
investment adviser or agent based on a consideration of both the number of
exchanges the particular shareowner, broker, investment adviser or agent has
requested and the time period over which those exchange requests have been made,
together with the level of expense to the Funds or other adverse effects which
may result from the additional exchange requests. If any portion of the shares
to be exchanged represents an investment made by check, a Fund may delay the
acquisition of new shares in an exchange until the transfer agent is reasonably
satisfied that the check has been collected, which may take twelve days from the
purchase date.
Investors may find the exchange privilege useful if their investment objectives
or market outlook should change after they invest in the Portico family of
funds. For federal income tax purposes, an exchange of shares is a taxable event
and, accordingly, a capital gain or loss may be realized by an investor. Before
making an exchange request, an investor should consult a tax or other financial
adviser to determine the tax consequences of a particular exchange. No exchange
fee is currently imposed by Portico on exchanges. Portico, however, reserves the
right to impose a charge in the future.
In order to request an exchange by telephone, a shareowner must give the account
name, account number and the amount or number of shares to be exchanged. During
periods of significant economic or market change, telephone exchanges may be
difficult to implement. If a shareowner is unable to contact the transfer agent
by telephone, shares may also be exchanged by delivering the exchange request to
the transfer agent in person or by mail at the addresses listed above under
"Redemption of Shares."
The Funds reserve the right to reject any exchange request with prior notice to
a shareowner and the exchange privilege may be modified or terminated at any
time. At least sixty days' notice will be given to shareowners of any material
modification or termination except where notice is not required under SEC
regulations. The responsibility of the Funds and their transfer agent for the
authenticity of telephone exchange instructions is limited as described above
under "Redemption of Shares."
RETIREMENT PLANS The Funds offer individual retirement accounts and prototype
defined contribution plans, including simplified employee; 401(k), profit-
sharing and money purchase pension plans ("Retirement Plans"). For details
concerning Retirement Plans (including service fees), please call Portico
Investor Services at 1-800-982-8909 or 414-287-3710 (Milwaukee area).
DIVIDENDS AND DISTRIBUTIONS
Dividends from a Fund's net investment income are declared and paid monthly by
the Short-Term Bond Market Fund, Intermediate Bond Market Fund, Tax-Exempt
Intermediate Bond Fund and Bond IMMDEX/TM Funds. Each Fund's net realized
capital gains are distributed at least annually to avoid tax to the Fund.
Dividends and distributions will reduce the net asset value of the Funds' Retail
Shares by the amount of the dividend or distribution. Dividends and
distributions are automatically reinvested in additional Retail Shares of the
Fund on which the dividend or distribution is paid at their net asset value per
share (as determined on the payable date), unless the shareowner notifies the
Fund's transfer agent or a registered representative that dividends or capital
gains distributions, or both, should be paid in cash. Cash dividends and
distributions will be paid by check unless the Fund's transfer agent receives a
voided check or deposit ticket to enable the dividends or distributions to be
directly deposited into the shareowner's bank account. Cash dividends and
distributions will be paid within five business days after the end of the month
in which dividends are declared or within five business days after a redemption
of all of a shareowner's shares of a Fund. Reinvested dividends and
distributions receive the same tax treatment as those paid in cash.
MANAGEMENT OF THE FUNDS
The business and affairs of the Funds are managed under the direction of the
Board of Directors of the Portico Funds, Inc. ("Portico" or the "Company"). The
Statement of Additional Information contains the name and background information
regarding each Director.
ADVISORY SERVICES
FIRMCO, a Wisconsin corporation and subsidiary of Firstar Corporation, a bank
holding company, serves as investment adviser to each Fund. FIRMCO, with
principal offices at Firstar Center, 777 East Wisconsin Avenue, 8th Floor,
Milwaukee, Wisconsin 53202, has been engaged in the business of providing
investment advisory services since 1986. FIRMCO currently has $19.5 billion in
assets under active management, of which $11.6 billion is invested in fixed-
income and money market securities and $7.9 billion in equity securities.
Subject to the general supervision of the Board of Directors and in accordance
with the respective investment objective and policies of each Fund, the Adviser
manages each Fund's portfolio, makes decisions with respect to and places orders
for all purchases and sales of each Fund's portfolio securities, and maintains
records relating to such purchases and sales. The Adviser is authorized to
allocate purchase and sale orders for portfolio securities to Shareowner
Organizations, including, in the case of agency transactions, Shareowner
Organizations which are affiliated with the Adviser, to take into account the
sale of Fund Shares if the Adviser believes that the quality of the transaction
and the amount of the commission are comparable to what they would be with other
qualified brokerage firms. The Adviser is entitled to receive from each Fund a
fee, calculated daily and payable monthly, at the following annual rates (as a
percentage of the Fund's average daily net assets): 0.60% for the Short-Term
Bond Market Fund, 0.50% for each of the Intermediate Bond Market and Tax-Exempt
Intermediate Bond Funds and 0.30% for the Bond IMMDEX/TM Fund. The Adviser
earned fees, net of waivers, for the fiscal year ended October 31, 1996, at the
annual rate of 0.30% for the Short-Term Bond Market Fund, 0.33% for the
Intermediate Bond Market Fund, 0.10% for the Tax-Exempt Intermediate Bond
Fund and 0.30% for the Bond IMMDEX/TM Fund.
The Adviser may voluntarily waive all or a portion of the advisory fee otherwise
payable by a Fund from time to time. These waivers may be terminated at any time
at the Adviser's discretion.
The following are biographies of the portfolio managers of each Fund.
Mary Ellen Stanek and Daniel Tranchita co-manage the Short-Term Bond Market
Fund. Ms. Stanek is the President of FIRMCO and Director of Fixed Income
Services; she has served in this role since 1994. In addition, Ms. Stanek has
served as an officer of the Funds since September 1994. She has eighteen years
of investment management experience and was named a Director of FIRMCO in 1992.
Prior to joining FIRMCO, Ms. Stanek headed the Fixed Income and Quantitative
Investment Management Department at Firstar Trust Company. She has been the
Fund's portfolio manager since its inception on December 29, 1989. Mr. Tranchita
is a Vice President and has been with Firstar since 1989. He has eight years of
investment management experience and has been the portfolio manager of the Fund
since January 1, 1993. Both Ms. Stanek and Mr. Tranchita are Chartered Financial
Analysts.
Mary Ellen Stanek and Teresa Westman co-manage the Intermediate Bond Market
Fund. A Senior Vice President and Senior Portfolio Manager of FIRMCO, Ms.
Westman joined Firstar in 1987 and has ten years of investment management
experience. Ms. Westman is a Chartered Financial Analyst. Both Ms. Stanek and
Ms. Westman have managed the Fund since its inception on January 5, 1993.
Warren Pierson manages the Tax-Exempt Intermediate Bond Fund. Mr. Pierson joined
Firstar in 1985 and has eleven years of fixed income experience at Firstar. He
is a Vice President of FIRMCO and has been a portfolio manager of the Fund since
June 22, 1993. Mr. Pierson is a Chartered Financial Analyst.
Mary Ellen Stanek and Teresa Westman co-manage the Bond IMMDEX/TM Fund.
Ms. Stanek has managed the Fund since its inception on December 29, 1989.
Ms. Westman has been a portfolio manager of the Fund since January 1, 1992.
ADMINISTRATIVE SERVICES
Firstar Trust Company ("Firstar Trust") and B.C. Ziegler and Company ("Ziegler")
serve as the Co-Administrators (the "Co-Administrators"). The Co-Administrators
have agreed to provide the following administrative services for the Portico
Funds: assist in maintaining office facilities for the Funds; furnish clerical
and certain other services required by the Funds; compile data for and prepare
notices to the SEC; prepare semiannual reports to the SEC and current
shareowners and filings with state securities commissions; coordinate federal
and state tax returns; monitor the arrangements pertaining to the Funds'
agreements with Shareowner Organizations; monitor the Funds' expense accruals;
monitor compliance with the Funds' investment policies and limitations; and
generally assist the Funds' operations. As further described in the Statement of
Additional Information, certain services under the Co-Administration Agreement
are provided jointly by Firstar Trust and Ziegler and other services are
provided separately by either Firstar Trust or Ziegler. The Co-Administrators
are entitled to receive a fee for their administrative services, computed daily
and payable monthly, at the annual rate of 0.125% of Portico's first $2 billion
of average aggregate daily net assets, plus 0.10% of Portico's average aggregate
daily net assets in excess of $2 billion. The Co-Administrators may voluntarily
waive all or a portion of their administrative fee from time to time. These
waivers may be terminated at any time at the Co-Administrators' discretion.
For the fiscal year ended October 31, 1996, the Funds accrued administrative
fees, after waivers, at the effective annual rates of 0.05% of each Fund's
respective average net assets.
SHAREOWNER ORGANIZATIONS
Portico may enter into agreements from time to time with certain Shareowner
Organizations, including affiliates of the Adviser (such as Elan), providing for
certain support and/or distribution services to their customers who are the
beneficial owners of Retail Shares of the Funds. Under the Service Agreements,
shareowner support services, which are described more fully in the Statement of
Additional Information, may include assisting investors in processing purchase,
exchange and redemption requests; processing dividend and distribution payments
from the Funds; providing information periodically to customers showing their
positions in Retail Shares of the Funds; and providing sub-accounting with
respect to Retail Shares beneficially owned by customers or the information
necessary for sub-accounting. In addition, Shareowner Organizations under a
Distribution and Service Agreement may provide the foregoing shareowner support
services and may also provide assistance, such as the forwarding of sales
literature and advertising to their customers, in connection with the
distribution of Retail Shares. For their services, Shareowner Organizations may
be entitled to receive fees from a Fund at annual rates of up to 0.25% of the
average daily net asset value of the Retail Shares covered by their agreements.
For the 1996 calendar year, Shareowner Organizations received fees pursuant to
such agreements at the annual rates of 0.25% of their average net assets.
Under the terms of their agreements with Portico, Shareowner Organizations are
required to provide a schedule of any fees that they may charge to their
customers relating to the investment of their assets in Retail Shares covered by
the agreements. Investors should read this Prospectus in light of such fee
schedules and under the terms of their Shareowner Organization's agreement with
Portico. In addition, investors should contact their Shareowner Organization
with respect to the availability of shareowner services and the particular
Shareowner Organization's procedures for purchasing and redeeming shares. It is
the responsibility of Shareowner Organizations to transmit purchase and
redemption orders and record those orders in customers' accounts on a timely
basis in accordance with their agreements with customers. At the request of a
Shareowner Organization, the transfer agent's charge of $12.00 for each payment
made by wire of redemption proceeds may be billed directly to the Shareowner
Organization.
The Glass-Steagall Act and other applicable laws, among other things, prohibit
banks from engaging in the business of underwriting securities. Accordingly,
banks will be engaged under agreements with Portico only to perform the
administrative and investor servicing functions described above, and will
represent to Portico that in no event will the services provided by them under
the agreements be primarily intended to result in the sale of Retail Shares.
Conflict-of-interest restrictions may apply to the receipt of compensation paid
by Portico to a Shareowner Organization in connection with the investment of
fiduciary funds in Retail Shares. Institutions, including banks regulated by the
Comptroller of the Currency and investment advisers and other money managers
subject to the jurisdiction of the SEC, the Department of Labor or state
securities commissions, are urged to consult legal counsel before entering into
agreements with Portico.
Agreements that contemplate the provision of distribution services by Shareowner
Organizations are governed by a Distribution and Service Plan (the "Plan") that
has been adopted by Portico pursuant to Rule 12b-1 under the 1940 Act. In the
case of the Funds, no payments are made to their Distributor under the Plan.
However, payments to Shareowner Organizations, including affiliates of the
Adviser, under the Plan are not tied directly to their own out-of-pocket
expenses and therefore may be used as they elect (for example, to defray their
overhead expenses), and may exceed their direct and indirect costs.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, AND ACCOUNTING SERVICES AGENT
Firstar Trust, an affiliate of the Adviser, provides custodial, transfer agency,
dividend disbursing agency, and accounting services for the Funds. For the
fiscal year ended October 31, 1996, total custodial, transfer agency, dividend
disbursing agency, and accounting services fees earned by Firstar Trust were
approximately 0.10%, 0.08%, 0.22% and 0.06% of the Short-Term Bond Market,
Intermediate Bond Market, Tax-Exempt Intermediate Bond and Bond IMMDEX/TM Funds'
average net assets, respectively. Additional information regarding the fees
payable by the Funds to Firstar Trust for these services is provided in the
Statement of Additional Information. Inquiries to the transfer agent may be sent
to the following address: Firstar Trust Company, P.O. Box 3011, Milwaukee,
Wisconsin 53201-3011.
INVESTMENT LIMITATIONS
Except for the limitations detailed below, the investment objective and
policies of each Fund described in this Prospectus are not fundamental
and may be changed by the Board of Directors without the affirmative
vote of the owners of a majority of a Fund's outstanding shares. If there
is a change in a Fund's investment objective, shareowners should consider
whether the Fund remains an appropriate investment in light of their then
current financial position and needs. The following descriptions summarize
several of each Fund's fundamental investment limitations which are set forth in
full in the Statement of Additional Information.
NO FUND MAY:
1. Purchase securities of any one issuer (other than U.S. Government
securities) if more than 5% of the value of its total assets will be
invested in the securities of such issuer, except that up to 25% of the
value of a Fund's total assets may be invested without regard to this 5%
limitation.
2. Subject to the foregoing 25% exception, purchase more than 10% of the
outstanding voting securities of any issuer.
3. Invest 25% or more of its total assets in one or more issuers conducting
their principal business activities in the same industry.
4. Borrow money or enter into reverse repurchase agreements except for
temporary purposes in amounts up to 10% of the value of the total assets at
the time of such borrowing, or mortgage, pledge or hypothecate any assets
except in connection with such borrowings. Whenever borrowings (including
reverse repurchase agreements) exceed 5% of the Fund's total assets, the
Fund will not make any investments.
In addition, the Tax-Exempt Intermediate Bond Fund may not:
5. Invest less than 80% of its net assets in securities the interest on which
is exempt from federal income tax, except during defensive periods or
during periods of unusual market conditions. For purposes of this
fundamental policy, Municipal Obligations that are subject to federal
alternative minimum tax are considered taxable.
If a percentage limitation is satisfied at the time of investment, a later
increase or decrease in such percentage resulting from a change in the value of
the Fund's portfolio securities will not constitute a violation of such
limitation. If due to market fluctuations or other reasons the amount of
borrowings exceed the 10% limit stated above, a Fund will promptly reduce such
amount.
TAXES
FEDERAL
Portico's management intends that each Fund will qualify as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended (the
"Code"). Such qualification generally will relieve each Fund of liability for
federal income taxes to the extent its earnings are distributed in accordance
with the Code.
Each Fund contemplates declaring as dividends each year at least 90% of its
investment company income. An investor who receives a dividend derived from
investment company taxable income (which includes any excess of net short-term
capital gain over net long-term capital loss) treats it as a receipt of ordinary
income in the computation of his gross income, whether such dividend is paid in
the form of cash or additional shares of the Fund.
In addition, the Tax-Exempt Intermediate Bond Fund contemplates paying to its
shareowners at least 90% of its exempt interest income net of certain
deductions. Dividends paid by this Fund that are derived from exempt-interest
income generally may be treated by shareowners as items of interest excludable
from their gross income under Section 103(a) of the Code, unless under the
circumstances applicable to the particular shareowner, exclusion would be
disallowed. (See Statement of Additional Information under "Additional
Information Concerning Taxes"). If the Fund should hold certain private activity
bonds issued after August 7, 1986, shareowners must include, as an item of tax
preference, the portion of dividends paid by the Fund that is attributable to
interest on such bonds in their federal alternative minimum taxable income for
purposes of determining liability (if any) for the 26%-28% alternative minimum
tax applicable to individuals and the 20% alternative minimum tax and the
environmental tax applicable to corporations. Corporate shareowners must also
take all exempt-interest dividends into account in determining certain
adjustments for federal alternative minimum and environmental tax purposes. The
environmental tax applicable to corporations is imposed at the rate of 0.12% on
the excess of the corporation's modified federal alternative minimum taxable
income over $2,000,000. Shareowners receiving Social Security benefits should
note that all exempt-interest dividends will be taken into account in
determining the taxability of such benefits.
Any dividend or distribution of a Fund's excess of net long-term capital gain
over its net short-term capital loss will be taxable to a shareowner of the Fund
as long-term capital gain, regardless of how long the shareowner has held shares
of the Fund.
Before purchasing Fund shares, the impact of dividend or capital gain
distributions which are expected to be declared or have been declared but not
paid, should be carefully considered. Any dividend or distribution paid by the
Fund shortly after the purchase of shares of the Fund will have the effect of
reducing the per share net asset value by the per share amount of the dividend
or distribution. Such dividends or distributions, although in effect a return of
capital to shareowners, are subject to income taxes.
Each Fund will be required in certain cases to withhold and remit to the U.S.
Treasury 31% of the dividends or gross sale proceeds paid to any shareowner (i)
who has provided either an incorrect taxpayer identification number or no number
at all, (ii) who is subject to withholding by the Internal Revenue Service for
failure to properly include on his return payments of interest or dividends, or
(iii) who has failed, when required to do so, to certify that he is not subject
to backup withholding. Each Fund generally also will withhold and remit to the
U.S. Treasury 10% of all distributions from individual retirement accounts
(including simplified employee plans) to any investor unless the transfer agent
receives a written request not to withhold federal income tax from the investor
prior to the distribution date; withholding on distributions from other types of
Retirement Plans may be mandatory and may be at a higher rate.
A taxable gain or loss may be realized by a shareowner upon a redemption,
transfer or exchange of Fund shares, depending on the tax basis of the shares
and their price at the time of such disposition. If a shareowner held shares for
six months or less, any loss realized by the shareowner will be disallowed to
the extent of the amount of exempt-interest dividends received with respect to
the shares and will be treated as long-term loss to the extent of any long-term
capital distribution received.
Generally, a shareowner may include sales charges incurred upon the purchase of
Retail Shares in his or her tax basis for such shares for the purpose of
determining gain or loss on a redemption, transfer or exchange of shares.
However, if the shareowner effects an exchange of such shares for Retail Shares
of another fund of the Company within 90 days of the purchase and is able to
reduce the sales charge applicable to the new shares (by virtue of the Company's
exchange privilege), the amount equal to such reduction may not be included in
the tax basis of the shareowner's exchanged shares, but may be included (subject
to the limitation) in the tax basis of the new shares.
The foregoing is only a brief summary of some of the important federal income
tax considerations generally affecting the Funds and their shareowners, and is
not intended as a substitute for careful tax planning and is based on tax laws
and regulations which are in effect on the date of this Prospectus. Such laws
and regulations may be changed by legislative or administrative action.
Accordingly, investors in the Funds should consult their tax advisers with
specific reference to their own tax situation. Shareowners will be advised at
least annually as to the federal income tax consequences of dividends and
distributions made each year.
STATE AND LOCAL
Investors are advised to consult their tax advisers concerning the application
of state and local tax laws, which may have different consequences from those of
the federal income tax law described above. Dividends paid by the Tax-Exempt
Intermediate Bond Fund may be taxable to investors under state or local law as
dividend income even though all or a portion of such dividends may be derived
from interest on obligations which, if realized directly, would be exempt from
such income taxes.
DESCRIPTION OF SHARES
The Company was incorporated under the laws of the State of Wisconsin on
February 15, 1988 and is registered with the SEC as an open-end management
company. The Articles of Incorporation authorize the Board of Directors to issue
up to 150 billion full and fractional shares of common stock, $.0001 par value
per share. The Company currently has 16 classes representing interests in 16
investment portfolios. Each class of the Funds is currently divided into two
separate series, a Retail and Institutional Series, representing interests in
the same Fund. Of these authorized shares, 500 million shares have been
classified for each Retail Series of each Fund discussed in this Prospectus.
Shares of each series bear their pro rata portion of all operating expenses paid
by the Funds, except certain payments under the Funds' Distribution and Service
Plan and Shareowner Servicing Plan applicable only to Retail Series Shares.
Institutional Shares are offered in a separate prospectus and are sold without a
sales charge. The differences in expenses and sales charges will affect the
performance of Institutional and Retail Shares. Institutional Shares are only
sold to and held by (i) trust, agency or custodial accounts opened through trust
companies or trust departments affiliated with Firstar Corporation; (ii)
employer sponsored qualified retirement plans; and (iii) clients of the Adviser.
Retail Shares are available to any investor who does not fall within the three
preceding categories. Portico Funds does not offer the Periodic Investment Plan,
ConvertiFund_ and Systematic Withdrawal Plan to Shareowners of the Institutional
Series. A salesperson and any other person or Shareowner Organization entitled
to receive compensation for selling or servicing shares of a Fund may receive
different compensation with respect to different series of shares.
For information regarding the other funds and series, contact Portico Investor
Services at 1-800-982-8909 or 414-287-3710 (Milwaukee area) or your Shareowner
Organization.
Portico does not presently intend to hold annual meetings of shareowners except
as required by the 1940 Act or other applicable law. Portico will call a meeting
of shareowners for the purpose of voting upon the question of removal of a
member of the Board of Directors upon written request of shareowners owning at
least 10% of the outstanding shares of Portico that are entitled to vote. To the
extent required by law, Portico will assist in shareowner communication in such
matters.
Shareowners of each class of the Funds are entitled to one vote for each full
share held and proportionate fractional votes for fractional shares held, and
will vote in the aggregate and not by Fund except where otherwise required by
law. It is contemplated that the shareowners of a Fund will vote separately on
matters relating to its investment advisory agreement and any changes in its
fundamental investment limitations. On any matter submitted to the vote of
shareowners which only pertains to agreements, liabilities or expenses
applicable to the Retail Shares but not the Institutional Shares of the same
Fund, only the Retail Shares will be entitled to vote. Shares of Portico have
noncumulative voting rights and, accordingly, the owners of more than 50% of
Portico's outstanding shares (irrespective of Fund) may elect all of the
Directors. As of January 31, 1997, the Adviser and its affiliates held, on
behalf of their underlying accounts, approximately 72% of Portico's shares that
were outstanding on that date.
Each Retail Share of a Fund represents an equal proportionate interest with
other Retail Shares in the Fund, and is entitled to such dividends and
distributions earned on its assets as are declared at the discretion of the
Board of Directors. Shares of the Funds do not have preemptive rights. Each Fund
is classified as a diversified company under the 1940 Act.
NET ASSET VALUE AND DAYS OF OPERATION
The net asset value of each Fund for purposes of pricing purchase and redemption
orders is determined as of the close of regular trading hours on the Exchange,
currently, 3:00 p.m. Central Time, on each day the Exchange is open for
trading. As a result, shares of the Funds will not be priced on the days which
the Exchange observes: New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Columbus Day,
Veterans Day, Thanksgiving Day and Christmas Day. Net asset value per Retail
Share is calculated by dividing the value of all securities and other assets
owned by each Fund that are allocated to Retail Shares, less the liabilities
charged to Retail Shares, by the number of the Fund's outstanding Retail Shares.
Shares which are traded on a recognized exchange are valued at the last sale
price on the securities exchange on which such securities are primarily traded
or at the last sale price on the national securities market. Exchange-traded
securities for which there were no transactions are valued at the current bid
prices. Securities traded on only over-the-counter markets are valued on the
basis of closing over-the-counter bid prices. Restricted securities, securities
for which market quotations are not readily available and other assets are
valued at fair value by the Adviser under the supervision of the Board of
Directors.
Each Fund's securities may be valued based on valuations provided by an
independent pricing service. These valuations are reviewed by the Adviser. If
the Adviser believes that a valuation received from the services does not
represent a fair value, it values the security by a method that the Board of
Directors believes will determine a fair value. Any pricing service used may
employ electronic data processing techniques, including a "matrix" system, to
determine valuations.
PERFORMANCE CALCULATIONS
From time to time, total return and yield data for Retail Shares of a Fund may
be quoted in advertisements or in communications to shareowners. The total
return of a Fund's Retail Shares will be calculated on an average annual
(compound) total return basis, and may also be calculated on an aggregate total
return basis for various periods. Average annual total return reflects the
average annual percentage change in value of an investment in Retail Shares of a
Fund over the measuring period. Aggregate total return reflects the total
percentage change in value over the measuring period. Both methods of
calculating total return assume that dividends and capital gain distributions
made by the Retail Shares of the Fund during the period are reinvested in Retail
Shares of the Fund and that the maximum sales charge during the period has been
deducted from the investment at the time of the purchase.
All the Funds may advertise total return data without reflecting the sales
charge if they are accompanied, in accordance with SEC rules, by average annual
total return data reflecting the maximum sales charge. Quotations which do not
reflect the sales charge will, of course, be higher than quotations which do.
Yield is computed based on the net income of a Fund's Retail Shares during a 30-
day (or one-month) period, which will be identified in connection with the
particular yield quotation. More specifically, the yield of the Retail Shares of
the Fund is computed by dividing the net income per share of the Retail Shares
of the Fund during a 30-day (or one-month) period by the net asset value per
share of the Retail Shares of the Fund on the last day of the period and
annualizing the result on a semiannual basis. The Tax-Exempt Intermediate Bond
Fund may also quote a tax-equivalent yield which shows the level of taxable
yield needed to produce an after-tax equivalent to the tax-free yield of the
Retail Shares of the Fund. This is done by increasing the yield of the Retail
Shares of the Fund (calculated as above) by the amount necessary to reflect the
payment of federal income tax at a stated tax rate. The "tax equivalent yield"
will always be higher than the "yield" of the Retail Shares of the Fund.
The total return and yield of a Fund's Retail Shares may be compared to those of
other mutual funds with similar investment objectives and to bond and other
relevant indices or to rankings prepared by independent services or other
financial or industry publications that monitor the performance of mutual funds.
For example, the total return and yield of a Fund's Retail Shares may be
compared to data prepared by Lipper Analytical Services, Inc. In addition, the
total return of a Fund's Retail Shares may be compared to the Lehman Brothers 1-
3 Year Government/Corporate Bond Index; the Merrill Lynch 1-2.99 U.S. Treasury
Bond Index; the Lehman Brothers Intermediate Government/Corporate Bond Index;
the Lehman Brothers 5-Year General Obligation Bond Index; the Lehman Brothers
Government/Corporate Bond Index; and the Consumer Price Index. Total return and
yield data as reported in national financial publications, such as Money
Magazine, Forbes, Barron's, Morningstar Mutual Funds, The Wall Street Journal
and The New York Times, or in publications of a local or regional nature, may
also be used in comparing the performance of the Funds.
Performance quotations represent past performance and should not be considered
as representative of future results. The investment return and principal value
of an investment in a Fund's Retail Shares will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost. Since
performance will fluctuate, performance data for a Fund cannot necessarily be
used to compare an investment in a Fund's Retail Shares with bank deposits,
savings accounts and similar investment alternatives which often provide an
agreed or guaranteed fixed yield for a stated period of time. Investors should
remember that performance is generally a function of the kind and quality of the
investments held in a portfolio, portfolio maturity, operating expenses and
market conditions. Any fees charged by Shareowner Organizations directly to
their customer accounts in connection with investments in a Fund will not be
included in the Fund's calculations of yield and total return and will reduce
the yield and total return received by the accounts. The methods used to compute
yield and total return are described in more detail in the Statement of
Additional Information.
_______________________
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUNDS' STATEMENT OF
ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS
OR THEIR DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE
FUNDS OR BY THEIR DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
TO OPEN AN ACCOUNT OR REQUEST INFORMATION
1-800-982-8909
1-414-287-3710
FOR ACCOUNT BALANCES AND INVESTOR SERVICES
1-800-228-1024
1-414-287-3808
PORTICO INVESTOR SERVICES
615 East Michigan Street
P.O. Box 3011
Milwaukee, Wisconsin 53201-3011
- ------------------------------------------------------------------------------
PORTICO FUNDS, INC.
(Retail Series)
Balanced Fund, Growth and Income Fund,
Special Growth Fund,
Equity Index Fund, MidCore Growth Fund,
International Equity Fund
Form N-1A
Cross Reference Sheet
________________________________________
Part A
Item No Prospectus Heading
- -------- ------------------
1. Cover Page................................... Cover Page
2. Synopsis..................................... Expense Summary
3. Condensed Financial Information.............. Financial
Highlights;
Performance
Calculations
4. General Description of Registrant............ Cover Page;
Investment
Objectives and
Policies; Other
Investment
Information;
Description of
Shares; Invest-
ment Limitations
5. Management of the Fund....................... Management of the
Funds
5A. Management's Discussion of Fund Performance.. Inapplicable
6. Capital Stock and Other Securities........... Dividends and
Distributions;
Management of the
Funds; Taxes;
Description of
Shares
7. Purchase of Securities Being Offered......... Purchase of Shares;
Shareholder
Services; Net Asset
Value and Days of
Operation
8. Redemption or Repurchase..................... Redemption of
Shares; Shareholder
Services; Net Asset
Value and Days of
Operation
9. Pending Legal Proceedings.................... Not Applicable
- ------------------------------------------------------------------------------
PROSPECTUS
FEBRUARY 28, 1997
BALANCED FUND
GROWTH AND INCOME FUND
EQUITY INDEX FUND
MIDCORE GROWTH FUND
SPECIAL GROWTH FUND
INTERNATIONAL EQUITY FUND
PORTICO FUNDS
TABLE OF CONTENTS
Expense Summary 2
Financial Highlights 5
Performance History 10
Investment Objectives and Policies 11
Other Investment Information 20
Purchase of Shares 27
Redemption of Shares 31
Shareowner Services 33
Dividends and Distributions 35
Management of the Funds 35
Investment Limitations 39
Taxes 40
Description of Shares 42
Net Asset Value and Days of Operation 43
Performance Calculations 43
PORTICO FUNDS, INC. is a family of sixteen mutual funds that offer a variety of
investment objectives designed to meet the needs of individual and institutional
investors. This Prospectus describes the Retail Shares of six of the Equity
Funds. Portico Funds also offers retail and institutional shares of its bond
funds and shares of its money market funds, which are described in separate
prospectuses.
THE BALANCED FUND seeks capital appreciation and current income with relatively
low volatility of capital.
THE GROWTH AND INCOME FUND seeks both reasonable income and long-term capital
appreciation.
THE EQUITY INDEX FUND seeks returns, before Fund expenses, comparable to the
price and yield performance of publicly traded common stocks in the aggregate as
represented by the S&P 500 Stock Index.
THE MIDCORE GROWTH FUND seeks capital appreciation through investment in
securities of medium- to large-sized companies.
THE SPECIAL GROWTH FUND seeks capital appreciation through investment in
securities of small- to medium-sized companies.
THE INTERNATIONAL EQUITY FUND seeks capital appreciation through investment in
foreign equity securities of small- to medium-sized companies.
Firstar Investment Research & Management Company ("FIRMCO" or the "Adviser")
serves as investment adviser to each Fund, and the Funds are sponsored by B. C.
Ziegler and Company (the "Distributor"). State Street Global Advisors, a
division of State Street Bank and Trust Company (the "Sub-Adviser"), serves as
the sub-adviser to the International Equity Fund. Shareowner Organizations may
perform shareowner servicing and provide assistance in connection with the
distribution of the Funds' shares and receive fees from the Funds for their
services. (See "Management of the Funds").
This Prospectus sets forth concisely the information about the Funds that a
prospective investor should consider before investing. You should read this
Prospectus and retain it for future reference. Additional information about the
Funds, contained in a Statement of Additional Information, has been filed with
the Securities and Exchange Commission ("SEC") and is available upon request
without charge by writing Portico Investor Services at 615 East Michigan Street,
P.O. Box 3011, Milwaukee, Wisconsin 53201-3011, or by calling 1-800-982-8909 or
414-287-3710 (Milwaukee area). The SEC maintains a website (http://www.sec.gov.)
that contains the Statement of Additional Information, material incorporated by
reference and other information regarding registrants that file electronically
with the SEC. The Statement of Additional Information bears the same date as
this Prospectus and is incorporated by reference in its entirety into the
Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
SHARES OF THE 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.
February 28, 1997
EXPENSE SUMMARY
Below is a summary of the shareowner transaction expenses and
the annual operating expenses incurred by Retail Shares of the
Balanced, Growth and Income, Equity Index, MidCore Growth,
Special Growth, and International Equity Funds during the
fiscal year ended October 31, 1996. An example based on the
summary is also shown.
<TABLE>
<CAPTION>
SHAREOWNER BALANCED GROWTH AND EQUITY INDEX MIDCORE GROWTH SPECIAL GROWTH INTERNATIONAL
TRANSACTION EXPENSES FUND INCOME FUND FUND FUND FUND EQUITY FUND
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases 4.00% 4.00% 4.00% 4.00% 4.00% 4.00%
Maximum Sales Charge Imposed on
Reinvested Dividends None None None None None None
Deferred Sales Charge None None None None None None
Redemption Fees None None None None None None
Exchange Fees None None None None None None
- ----------------------------------------------------------------------------------------------------------------------------------
ANNUAL FUND
OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE
NET ASSETS)
- ----------------------------------------------------------------------------------------------------------------------------------
Advisory Fees After Fees
Waivers 2 0.54% 0.74% 0.25% 0.74% 0.75% 0.71%
12b-1 Fees 3 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Shareowner Servicing Fees 3 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Other Expenses After Fee
Waivers 4 0.21% 0.16% 0.16% 0.16% 0.13% 0.79%
Total Fund Operating Expenses
After Fee Waivers 5 1.00% 1.15% 0.66% 1.15% 1.13% 1.75%
<FN>
1 A fee of $12.00 is charged for each wire redemption. See "Redemption of Shares."
2 Absent voluntary advisory fee waivers, advisory fees for the Balanced Fund, Growth and Income Fund, MidCore Growth Fund and
International Equity Fund would have been 0.75%, 0.75%, 0.75% and 1.50%, respectively. These advisory fees (except for the
fee for the Equity Index Fund) are higher than the advisory fee payable by most other investment companies. See "Management
of the Funds" in this Prospectus for a more complete description and the financial statements for the Funds for the fiscal
year ended October 31, 1996 incorporated into the Statement of Additional Information.
3 The total of all 12b-1 fees and Shareowner Servicing Fees paid by a Fund may not exceed, in the aggregate, the annual rate of
0.25% of a Fund's average daily net assets. The Funds do not expect to pay any 12b-1 fees for the current year. If 12b-1 fees
are paid in the future, long-term shareowners may pay more than the economic equivalent of the maximum front end sales charge
permitted by the National Association of Securities Dealers.
4 Absent voluntary administrative fee waivers, other expenses would have been 0.28%, 0.23%, 0.23%, 0.23%, 0.20% and 0.86% for
the Balanced, Growth and Income, Equity Index, MidCore Growth, Special Growth and International Equity Funds, respectively.
5 Absent fee waivers, total operating expenses would have been 1.28%, 1.23%, 0.73%, 1.23%, 1.20% and 2.61% for the Balanced ,
Growth and Income, Equity Index, MidCore Growth, Special Growth and International Equity Funds, respectively.
</TABLE>
EXPENSE SUMMARY Example: You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual returns, and (2) redemption
of your investment at the end of the following periods:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------
Balanced Fund $50 $71 $ 93 $158
Growth and Income Fund 51 75 101 174
Equity Index Fund 46 60 75 119
MidCore Growth Fund 51 75 101 174
Special Growth Fund 51 75 100 173
International Equity Fund 57 93 131 238
--------------------------------------------------------------
The foregoing tables are intended to assist investors in
understanding the expenses that shareowners bear either
directly or indirectly and have been restated to reflect
current fees. In addition, Shareowner Organizations may charge
fees for providing services in connection with their clients'
investments in a Fund's shares.
The example shown above should not be considered a
representation of future investment return or operating
expenses. Actual investment return and operating expenses may
be more or less than those shown.
UNDERSTANDING EXPENSES
Operating a mutual fund involves a variety of expenses for
portfolio management, shareowner statements and reports, and
other services. These costs are paid from a Fund's assets
and their effect, except for fees charged directly by a
Shareowner Organization to its customers, are factored into
any quoted share price or return.
FINANCIAL The financial highlights for each of the periods presented
HIGHLIGHTS have been derived from financial statements which have been
audited by Price Waterhouse LLP, independent accountants,
whose report, which appears in the annual report to
shareowners for the fiscal year ended October 31, 1996, is
incorporated by reference into the Statement of Additional
Information. Prior to January 9, 1995, the Funds offered only
one class of shares to both institutional and retail
investors. On that date, the Funds began offering
Institutional Shares to institutional investors as described
in a separate prospectus and Retail Shares to retail investors
as described in this Prospectus. The tables on the following
pages should be read in conjunction with the financial
statements and related notes also incorporated by reference
into the Statement of Additional Information. You may obtain
the Statement of Additional Information and the annual report
to shareowners, which contain additional performance
information, free of charge by calling Portico Investor
Services or writing to Portico Investor Services at the
address listed on the back cover of this Prospectus.
<TABLE>
<CAPTION>
FINANCIAL INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
HIGHLIGHTS --------------------------------------- --------------------------------------
NET ASSET NET REALIZED AND NET ASSET
VALUE, NET UNREALIZED GAINS TOTAL FROM DIVIDENDS FROM DISTRIBUTIONS VALUE,
BEGINNING INVESTMENT OR (LOSSES) ON INVESTMENT NET INVESTMENT FROM TOTAL END
OF PERIOD INCOME SECURITIES OPERATIONS INCOME CAPITAL GAINS DISTRIBUTIONS OF PERIOD
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCED
Mar. 30, 19921 through
Oct. 31, 1992 $20.00 $0.28 $ 0.44 $ 0.72 $(0.23) $- $(0.23) $20.49
Year Ended 1993 20.49 0.47 2.27 2.74 (0.47) - (0.47) 22.76
Year Ended 1994 22.76 0.44 (0.66) (0.22) (0.44) - (0.44) 22.10
Year Ended 1995 22.10 0.49 3.77 4.26 (0.47) - (0.47) 25.89
Year Ended 1996 25.89 0.47 2.64 3.11 (0.47) (0.55) (1.02) 27.98
GROWTH AND INCOME
Dec. 29, 19891 through
Oct. 31, 1990 20.00 0.69 (2.05) (1.36) (0.65) - (0.65) 17.99
Year Ended 1991 17.99 0.79 3.75 4.54 (0.81) - (0.81) 21.72
Year Ended 1992 21.72 0.69 0.56 1.25 (0.70) - (0.70) 22.27
Year Ended 19932 22.27 0.56 1.63 2.19 (0.57) (0.19) (0.76) 23.70
Year Ended 1994 23.70 0.43 (0.03) 0.40 (0.42) (0.59) (1.01) 23.09
Year Ended 1995 23.09 0.37 5.14 5.51 (0.38) (0.60) (0.98) 27.62
Year Ended 1996 27.62 0.42 6.61 7.03 (0.39) (1.19) (1.58) 33.07
EQUITY INDEX
Dec. 29, 19891 through
Oct. 31, 1990 25.00 0.59 (3.41) (2.82) (0.55) - (0.55) 21.63
Year Ended 1991 21.63 0.73 6.31 7.04 (0.74) (0.06) (0.80) 27.87
Year Ended 19923 27.87 0.73 1.86 2.59 (0.73) (0.01) (0.74) 29.72
Year Ended 1993 29.72 0.75 3.32 4.07 (0.75) - (0.75) 33.04
Year Ended 1994 33.04 0.77 0.35 1.12 (0.75) - (0.75) 33.41
Year Ended 1995 33.41 0.70 7.70 8.40 (0.68) (0.06) (0.74) 41.07
Year Ended 1996 41.07 0.77 8.69 9.46 (0.78) (0.35) (1.13) 49.40
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (CONT.) SUPPLEMENTAL DATA AND RATIOS
-----------------------------------------------------------------
RATIO OF NET
NET RATIO OF NET INVESTMENT
ASSETS, EXPENSES TO INCOME TO PORTFOLIO AVERAGE
TOTAL END AVERAGE NET AVERAGE NET TURNOVER COMMISSION
RETURN4, 5 PERIOD (000S) ASSETS6 ASSETS6 RATE RATE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCED
Mar. 30, 19921 through
Oct. 31, 1992 3.72% $ 45,653 0.75%7 2.48%7 29.04% N/A
Year Ended 1993 13.49% 82,099 0.75%7 2.24%7 71.60% N/A
Year Ended 1994 (0.93%) 94,657 0.75%7 2.03%7 59.77% N/A
Year Ended 1995 19.55% 21,832 0.94%7 2.05%7 61.87% N/A
Year Ended 1996 12.30% 29,034 1.00%7 1.80%7 63.91% $0.0581
GROWTH AND INCOME
Dec. 29, 19891 through
Oct. 31, 1990 (6.96%) 65,741 0.74%8 4.39%8 49.85% N/A
Year Ended 1991 25.63% 103,414 0.75%8 3.93%8 28.05% N/A
Year Ended 1992 5.82% 135,713 0.75%8 3.16%8 31.25% N/A
Year Ended 19932 9.93% 160,704 0.88%8 2.44%8 86.24% N/A
Year Ended 1994 1.84% 164,053 0.90%8 1.89%8 56.85% N/A
Year Ended 1995 24.75% 42,424 1.09%8 1.51%8 47.85% N/A
Year Ended 1996 26.62% 71,310 1.15%8 1.42%8 51.37% $0.0573
EQUITY INDEX
Dec. 29, 19891 through
Oct. 31, 1990 (11.46%) 35,569 0.49%9 3.01%9 9.09% N/A
Year Ended 1991 32.90% 51,481 0.50%9 2.82%9 1.38% N/A
Year Ended 19923 9.36% 81,070 0.50%9 2.48%9 5.50% N/A
Year Ended 1993 13.79% 83,820 0.50%9 2.32%9 13.78% N/A
Year Ended 1994 3.51% 107,563 0.50%9 2.38%9 13.28% N/A
Year Ended 1995 25.79% 18,663 0.66%9 2.14%9 4.61% N/A
Year Ended 1996 23.36% 39,656 0.66%9 1.76%9 7.48% $0.0604
<FN>
1 Commencement of operations.
2 Effective June 17, 1993, FIRMCO assumed the investment advisory responsibilities of Firstar Trust Company, an affiliate of
FIRMCO.
3 Effective February 3, 1992, FIRMCO assumed the investment advisory responsibilities of Firstar Trust Company, an affiliate
of FIRMCO.
4 Not annualized for the period ended October 31, 1990 for the Growth and Income, Equity Index and Special Growth Funds, for
the period ended October 31, 1992 for the Balanced Fund, for the period ended October 31, 1993 for the MidCore Growth Fund
and for the period ended October 31, 1994 for the International Equity Fund.
5 The total return calculations for the Funds do not reflect the maximum sales charge of 4.00%.
6 Annualized for the period ended October 31, 1990 for the Growth and Income, Equity Index and Special Growth Funds, for the
period ended October 31, 1992 for the Balanced Fund, for the period ended October 31, 1993 for the MidCore Growth Fund and
for the period ended October 31, 1994 for the International Equity Fund.
7 Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1996, 1995, 1994,
1993 and the period ended October 31, 1992 would have been 1.28%, 1.25%, 1.05%, 1.12% and 1.13%, respectively; and ratios of
net investment income to average net assets for the fiscal years ended October 31, 1996, 1995, 1994, 1993 and the period
ended October 31, 1992 would have been 1.52%, 1.74%, 1.73%, 1.87% and 2.10%, respectively.
8 Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1996, 1995, 1994,
1993, 1992, 1991 and the period ended October 31, 1990 would have been 1.23%, 1.20%, 1.01%, 1.02%, 1.03%, 1.04% and 1.06%,
respectively; and ratios of net investment income to average net assets for the fiscal years ended October 31, 1996, 1995,
1994, 1993, 1992, 1991 and the period ended October 31, 1990 would have been 1.35%, 1.40%, 1.78%, 2.30%, 2.88%, 3.64% and
4.07%, respectively.
9 Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1996, 1995, 1994,
1993, 1992, 1991 and the period ended October 31, 1990 would have been 0.73%, 0.73%, 0.57%, 0.56%, 0.60%, 0.63% and 0.70%,
respectively; and ratios of net investment income to average net assets for the fiscal years ended October 31, 1996, 1995,
1994, 1993, 1992, 1991 and the period ended October 31, 1990 would have been 1.69%, 2.07%, 2.31%, 2.26%, 2.39%, 2.69% and
2.80%, respectively.
10 Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1996, 1995, 1994
and the period ended October 31, 1993 would have been 1.23%, 1.21%, 1.00% and 1.08%, respectively; and ratios of net
investment income to average net assets for the fiscal years ended October 31, 1996, 1995, 1994 and the period ended October
31, 1993 would have been (0.36)%, (0.18)%, 0.19% and 0.39%, respectively.
11 Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1996, 1995, 1994,
1993, 1992, 1991 and the period ended October 31, 1990 would have been 1.20%, 1.17%, 0.98%, 1.01%, 1.02%, 1.06% and 1.13%,
respectively; and ratios of net investment income to average net assets for the fiscal years ended October 31, 1996, 1995,
1994, 1993, 1992, 1991 and the period ended October 31, 1990 would have been (0.42)%, (0.27)%, 0.04%, 0.11%, 0.39%, 0.79%
and 1.02%, respectively.
12 Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1996, 1995 and the
period ended October 31, 1994 would have been 2.61%, 2.85% and 2.85%, respectively; and ratios of net investment income to
average net assets for the fiscal years ended October 31, 1996, 1995 and the period ended October 31, 1994 would have been
(0.48)%, (0.69)% and (0.92)%, respectively.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (CONT.)
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
--------------------------------------- --------------------------------------
NET ASSET NET REALIZED AND NET ASSET
VALUE, NET UNREALIZED GAINS TOTAL FROM DIVIDENDS FROM DISTRIBUTIONS VALUE,
BEGINNING INVESTMENT OR (LOSSES) ON INVESTMENT NET INVESTMENT FROM TOTAL END
OF PERIOD INCOME SECURITIES OPERATIONS INCOME CAPITAL GAINS DISTRIBUTIONS OF PERIOD
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MIDCORE GROWTH
Dec. 29, 19921 through
Oct. 31, 1993 $20.09 $0.09 $ 1.32 $ 1.41 $(0.10) $ - $(0.10) $21.40
Year Ended 1994 21.40 0.06 0.06 0.12 (0.05) - (0.05) 21.47
Year Ended 1995 21.47 (0.02) 4.16 4.14 (0.03) - (0.03) 25.58
Year Ended 1996 25.58 (0.07) 4.81 4.74 - - - 30.32
SPECIAL GROWTH
Dec. 28, 19891 through
Oct. 31, 1990 20.00 0.22 (2.30) (2.08) (0.20) - (0.20) 17.72
Year Ended 1991 17.72 0.27 10.34 10.61 (0.28) - (0.28) 28.05
Year Ended 19923 28.05 0.17 2.18 2.35 (0.18) (1.72) (1.90) 28.50
Year Ended 1993 28.50 0.07 4.47 4.54 (0.08) (0.62) (0.70) 32.34
Year Ended 1994 32.34 0.04 0.85 0.89 (0.04) - (0.04) 33.19
Year Ended 1995 33.19 (0.07) 8.49 8.42 - (0.21) (0.21) 41.40
Year Ended 1996 41.40 (0.13) 4.70 4.57 - (4.59) (4.59) 41.38
INTERNATIONAL EQUITY
Apr. 28, 19941 through
Oct. 31, 1994 20.00 0.04 (0.05) (0.01) - - - 19.99
Year Ended 1995 19.99 0.08 (0.87) (0.79) (0.04) (0.01) (0.05) 19.15
Year Ended 1996 19.15 0.07 1.43 1.50 (0.07) (0.37) (0.44) 20.21
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (CONT.)
SUPPLEMENTAL DATA AND RATIOS
-----------------------------------------------------------------
RATIO OF NET
NET RATIO OF NET INVESTMENT
ASSETS, EXPENSES TO INCOME TO PORTFOLIO AVERAGE
TOTAL END AVERAGE NET AVERAGE NET TURNOVER COMMISSION
RETURN4, 5 PERIOD (000S) ASSETS6 ASSETS6 RATE RATE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MIDCORE GROWTH
Dec. 29, 19921 through
Oct. 31, 1993 $ 7.53% $ 84,467 0.89%10 0.57%10 46.29% N/A
Year Ended 1994 0.56% 113,197 0.88%10 0.30%10 33.24% N/A
Year Ended 1995 19.31% 10,105 1.09%10 (0.06%)10 49.84% N/A
Year Ended 1996 18.53% 16,636 1.15%10 (0.29%)10 56.75% $0.0582
SPECIAL GROWTH
Dec. 28, 19891 through
Oct. 31, 1990 (10.47%) 39,179 0.74%11 1.41%11 41.79% N/A
Year Ended 1991 60.23% 96,017 0.75%11 1.10%11 48.39% N/A
Year Ended 19923 8.86% 205,207 0.76%11 0.65%11 31.94% N/A
Year Ended 1993 16.15% 347,130 0.88%11 0.24%11 58.80% N/A
Year Ended 1994 2.77% 395,584 0.89%11 0.13%11 69.74% N/A
Year Ended 1995 25.56% 87,269 1.09%11 (0.19%)11 79.25% N/A
Year Ended 1996 12.27% 111,159 1.13%11 (0.35%)11 103.34% $0.0576
INTERNATIONAL EQUITY
Apr. 28, 19941 through
Oct. 31, 1994 (0.05%) 23,756 1.49%12 0.44%12 6.55% N/A
Year Ended 1995 (3.95%) 1,633 1.70%12 0.46%12 15.12% N/A
Year Ended 1996 7.95% 3,769 1.75%12 0.37%12 31.57% $0.0167
<FN>
1 Commencement of operations.
2 Effective June 17, 1993, FIRMCO assumed the investment advisory responsibilities of Firstar Trust Company, an affiliate of
FIRMCO.
3 Effective February 3, 1992, FIRMCO assumed the investment advisory responsibilities of Firstar Trust Company, an affiliate
of FIRMCO.
4 Not annualized for the period ended October 31, 1990 for the Growth and Income, Equity Index and Special Growth Funds, for
the period ended October 31, 1992 for the Balanced Fund, for the period ended October 31, 1993 for the MidCore Growth Fund
and for the period ended October 31, 1994 for the International Equity Fund.
5 The total return calculations for the Funds do not reflect the maximum sales charge of 4.00%.
6 Annualized for the period ended October 31, 1990 for the Growth and Income, Equity Index and Special Growth Funds, for the
period ended October 31, 1992 for the Balanced Fund, for the period ended October 31, 1993 for the MidCore Growth Fund and
for the period ended October 31, 1994 for the International Equity Fund.
7 Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1996, 1995, 1994,
1993 and the period ended October 31, 1992 would have been 1.28%, 1.25%, 1.05%, 1.12% and 1.13%, respectively; and ratios of
net investment income to average net assets for the fiscal years ended October 31, 1996, 1995, 1994, 1993 and the period
ended October 31, 1992 would have been 1.52%, 1.74%, 1.73%, 1.87% and 2.10%, respectively.
8 Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1996, 1995, 1994,
1993, 1992, 1991 and the period ended October 31, 1990 would have been 1.23%, 1.20%, 1.01%, 1.02%, 1.03%, 1.04% and 1.06%,
respectively; and ratios of net investment income to average net assets for the fiscal years ended October 31, 1996, 1995,
1994, 1993, 1992, 1991 and the period ended October 31, 1990 would have been 1.35%, 1.40%, 1.78%, 2.30%, 2.88%, 3.64% and
4.07%, respectively.
9 Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1996, 1995, 1994,
1993, 1992, 1991 and the period ended October 31, 1990 would have been 0.73%, 0.73%, 0.57%, 0.56%, 0.60%, 0.63% and 0.70%,
respectively; and ratios of net investment income to average net assets for the fiscal years ended October 31, 1996, 1995,
1994, 1993, 1992, 1991 and the period ended October 31, 1990 would have been 1.69%, 2.07%, 2.31%, 2.26%, 2.39%, 2.69% and
2.80%, respectively.
10 Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1996, 1995, 1994
and the period ended October 31, 1993 would have been 1.23%, 1.21%, 1.00% and 1.08%, respectively; and ratios of net
investment income to average net assets for the fiscal years ended October 31, 1996, 1995, 1994 and the period ended October
31, 1993 would have been (0.36)%, (0.18)%, 0.19% and 0.39%, respectively.
11 Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1996, 1995, 1994,
1993, 1992, 1991 and the period ended October 31, 1990 would have been 1.20%, 1.17%, 0.98%, 1.01%, 1.02%, 1.06% and 1.13%,
respectively; and ratios of net investment income to average net assets for the fiscal years ended October 31, 1996, 1995,
1994, 1993, 1992, 1991 and the period ended October 31, 1990 would have been (0.42)%, (0.27)%, 0.04%, 0.11%, 0.39%, 0.79%
and 1.02%, respectively.
12 Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1996, 1995 and the
period ended October 31, 1994 would have been 2.61%, 2.85% and 2.85%, respectively; and ratios of net investment income to
average net assets for the fiscal years ended October 31, 1996, 1995 and the period ended October 31, 1994 would have been
(0.48)%, (0.69)% and (0.92)%, respectively.
</TABLE>
PERFORMANCE
HISTORY
AVERAGE ANNUAL SINCE INCEPTION
TOTAL RETURN* 1 YEAR 5 YEARS 10 YEARS (INCEPTION DATE)
- -------------------------------------------------------------------------------
BALANCED 7.80% - - 9.28% (Mar. 30, 1992)
GROWTH AND INCOME 21.56% 12.42% - 11.44% (Dec. 29, 1989)
EQUITY INDEX 18.43% 13.92% 13.16% N/A
MIDCORE GROWTH 13.77% - - 10.51% (Dec. 29, 1992)
SPECIAL GROWTH 7.77% 11.95% - 14.47% (Dec. 28, 1989)
INTERNATIONAL EQUITY 3.62% - - (0.20)% (Apr. 28, 1994)
- -------------------------------------------------------------------------------
* Average annual total return calculations are for periods ended October 31,
1996 and reflect the 4.00% front end sales load.
The performance of the Equity Index Fund for the period prior
to December 29, 1989 is represented
by the performance of a collective investment fund which
operated prior to the effectiveness of the registration
statement of the Portico Equity Index Fund. At the time of the
Portico Equity Index Fund's inception, the collective
investment fund was operated using substantially the same
investment objectives, policies and restrictions as the
Portico Equity Index Fund. In connection with the Portico
Equity Index Fund's commencement of operations, on December
28, 1989, the collective investment fund transferred its
assets to the Portico Equity Index Fund. The collective
investment fund was not registered under the Investment
Company Act of 1940 (the "1940 Act") and was not subject to
certain restrictions that are imposed by the 1940 Act. If the
collective investment fund had been registered under the 1940
Act, performance may have been adversely affected. Performance
of the collective investment fund has been restated to reflect
the Portico Equity Index Fund's actual expenses during the
Fund's first fiscal year.
Prior to January 10, 1995, the Fund offered to retail and
institutional investors one series of shares with neither a
sales charge nor a 0.25% service organization fee. Retail
Share performance reflects the deduction of the current
maximum sales charge of 4.00%, but for period prior to January
10, 1995, Retail Share performance does not reflect service
organization fees. If service organization fees had been
reflected, performance would be reduced.
Performance assumes the reinvestment of all net investment
income and capital gains and reflects fee waivers. In the
absence of fee waivers, performance would be reduced.
Performance quotations represent past performance, and should
not be considered as representative of future results.
INVESTMENT The descriptions that follow are designed to help you choose
OBJECTIVES the Fund that best fits your investment objectives. You may
AND POLICIES want to pursue more than one objective by investing in more
than one of the Portico Funds. You are reminded that there are
risks in an investment in the Funds and there can be no
assurance that each Fund's investment objective will be
attained. An investor should not consider an investment in any
individual Fund to be a complete investment program.
BALANCED FUND INVESTMENT OBJECTIVE. The investment objective of the Balanced
Fund is to achieve a balance of capital appreciation and
current income with relatively low volatility of capital. The
Fund seeks to achieve its objective through a policy of
diversified investments in fixed-income and equity securities.
Equity securities will be selected on the basis of their
potential for capital appreciation. Current income will not be
a significant consideration in the selection of equity
securities. Fixed-income securities will be selected in an
effort to provide an annual rate of total return with respect
to the fixed-income portion of the Fund's portfolio that is
similar to the annual rate of total return of the Lehman
Brothers Government/Corporate Bond Index on a consistent
basis. In investing in fixed-income securities, the Adviser
will use specialized quantitative investment techniques. (For
a description of the Lehman Brothers Government/Corporate Bond
Index, see "Description of Bond Index" below. For a
description of the specialized quantitative investment
techniques see "Investment Techniques" below).
The Fund's policy is to invest at least 25% of the value of
its total assets in fixed-income senior securities and at
least 50% and no more than 65% in equity securities at all
times. The actual percentage of assets invested in fixed-
income and equity securities will vary from time to time,
depending on the judgment of the Adviser as to the general
market and economic conditions, trends and yields, interest
rates and fiscal and monetary developments.
INVESTMENT TECHNIQUES. Most equity securities held by the Fund
will be publicly traded common stocks of companies
incorporated in the United States, although up to 25% of its
total assets may be invested, either directly or through
investments in sponsored American Depository Receipts, in the
securities of foreign issuers. From time to time, the Fund may
also acquire preferred stocks. In addition, the Fund may
invest in domestic securities convertible into common stock,
such as certain bonds and preferred stocks, and may invest up
to 5% of its net assets in other types of domestic securities
having common stock characteristics, such as rights and
warrants to purchase equity securities.
The Fund generally invests in companies that the Adviser
considers to be well managed and to have "attractive
fundamental financial characteristics." "Attractive
fundamental financial characteristics" include, among other
factors, low debt, return on equity substantially above the
market average and consistent revenue and earnings per share
growth over the prior three to five years. Companies in which
the Fund may make equity investments generally will have stock
market capitalizations between $100 million and $10 billion.
The median stock market capitalization is generally
anticipated to be between $1 billion and $3 billion and the
weighted average stock market capitalization is generally
anticipated to be between $1.5 billion and $5 billion. Stock
market capitalizations are calculated by multiplying the total
number of common shares outstanding by the market price per
share. The Fund may also invest from time to time a portion of
its assets, not to exceed 20% at the time of purchase, in
companies with larger or smaller market capitalizations.
In constructing and maintaining the fixed-income portion of
the portfolio, the Adviser attempts to achieve an annual rate
of total return, before Fund expenses, comparable to that of
the Lehman Brothers Government/Corporate Bond Index.
Specialized structured investment management techniques are
used in conjunction with traditional methods of investment
management that rely on economic, financial and market
analysis to select portfolio investments.
Fixed-income securities purchased by the Fund may include a
broad range of corporate, government, government agency,
stripped government, asset-backed and mortgage-backed
obligations. The Fund may purchase fixed-income securities
without regard to any maturity limitation.
Debt obligations acquired by the Fund will be rated
"investment grade" at the time of purchase by S&P, Moody's or
other nationally recognized rating agencies. That is,
obligations will be rated within the four highest rating
categories by Standard and Poor's Rating Group ("S&P") (AAA,
AA, A and BBB), Moody's Investors Service, Inc. ("Moody's")
(Aaa, Aa, A and Baa) or other nationally recognized rating
agencies or obligations that are unrated but determined by the
Adviser to be comparable in quality to instruments that are so
rated. Obligations rated in the lowest of the top four rating
categories are considered to have speculative characteristics
and are subject to greater credit and market risk than higher
rated securities. As a result, the market value of these
securities may be expected to fluctuate more than those of
securities with higher ratings.
Subsequent to its purchase by the Fund, a rated security may
cease to be rated or its rating may be reduced below the
minimum rating required for purchase by the Fund. The Adviser
will consider such an event in determining whether the Fund
should continue to hold the security. The Adviser will sell
promptly any securities that are not rated investment grade by
at least one nationally recognized rating agency and that
exceed 5% of the Fund's net assets.
DESCRIPTION OF BOND INDEX. The Lehman Brothers
Government/Corporate Bond Index is a market value weighted
total return index measuring both the principal price change
of and income provided by the underlying universe of
securities underlying the index. The Lehman Brothers
Government/Corporate Bond Index is intended to measure
performance of its fixed-rate debt market over given time
intervals. The index is comprised of U.S. Treasury securities,
U.S. Government agency securities, dollar-denominated debt of
certain foreign, sovereign or supranational entities and
investment grade corporate debt obligations of domestic
entities satisfying the following criteria as defined by
Lehman Brothers:
- Fixed-rate debt (as opposed to variable-rate debt);
- From one to thirty years or more remaining until maturity;
- Minimum outstanding par value of $100 million; and
- Minimum quality rating of Baa by Moody's, or BBB by S&P, or
BBB by Fitch Investors Service, Inc. ("Fitch").
As of October 31, 1996, 4,856 issues were included in the
Lehman Brothers Government/Corporate Bond Index representing
$3.2 trillion in market value.
The Lehman Brothers Government/Corporate Bond Index is a
trademark of Lehman Brothers. The Funds, their Adviser and the
Co-Administrators are not affiliated in any way with Lehman
Brothers. See "Management of the Funds." Inclusion of a
security in the bond index in no way implies an opinion by
Lehman Brothers as to its attractiveness or appropriateness as
an investment. Lehman Brothers' publication of the bond index
is not made in connection with any sale or offer for sale of
securities or any solicitations of orders for the purchase of
securities.
GROWTH AND INVESTMENT OBJECTIVE. The investment objective of the Growth
INCOME FUND and Income Fund is to seek both reasonable income and long-
term capital appreciation. In seeking to obtain "reasonable
income," the Fund will emphasize income-producing securities.
Common stocks purchased by the Fund will be selected primarily
from a universe of domestic companies that have established
dividend-paying histories. During normal market conditions at
least 50% of the Fund's net assets will be invested in income-
producing equity securities, and each company initially
selected for inclusion in the Fund's portfolio must pay a
current dividend. In addition to dividend considerations, the
Fund generally invests in medium- to large-sized companies
with stock market capitalizations over $750 million that the
Adviser considers to be well managed and to have attractive
fundamental financial characteristics. See "Balanced Fund" for
a description of "attractive fundamental financial
characteristics." The Fund may also invest a portion of its
assets, not to exceed 20% at the time of purchase, in
companies with smaller market capitalizations. The median
stock market capitalization is generally expected to be
between $2 billion and $5 billion and the weighted average
stock market capitalization between $9 billion and $15
billion.
In addition to investments in common stocks, the Fund may
invest in bonds, notes, debentures and preferred stocks
convertible into common stocks but only to the extent that
those securities also provide a current interest or dividend
payment stream. Although convertible securities frequently
have speculative characteristics and may be acquired by the
Fund without regard to minimum quality ratings, the Fund
intends to invest less than 5% of its net assets in non-
investment grade securities. Up to 25% of the Fund's total
assets may be invested, either directly or through sponsored
American Depository Receipts, in the securities of foreign
issuers. The Fund may also purchase put and call options, sell
covered call options and enter into transactions involving
futures contracts and options on futures as described later in
this Prospectus.
The Fund may, to the extent consistent with its investment
objective, purchase nonconvertible debt securities. Such debt
obligations acquired by the Fund will be investment grade, as
described above under "Balanced Fund," at the time of purchase
or unrated obligations deemed by the Adviser to be comparable
in quality to instruments so rated.
EQUITY INDEX INVESTMENT OBJECTIVE. The investment objective of the Equity
FUND Index Fund is to seek returns, before Fund expenses,
comparable to the price and yield performance of publicly
traded common stocks in the aggregate, as represented by the
S&P 500 Index. Under normal market conditions the Fund intends
to invest substantially all of its total assets in securities
included in the S&P 500 Index.
In seeking to attain its investment objective, the Fund uses
the S&P 500 Index as the standard performance comparison
because it represents approximately two-thirds of the total
market value of all domestic common stocks and is well known
to investors. The S&P 500 Index consists of 500 selected
common stocks, most of which are listed on the New York Stock
Exchange. Standard & Poor's selects the stocks included in the
S&P 500 Index on a statistical basis, and the S&P 500 Index is
heavily weighted toward stocks with large market
capitalizations. The S&P 500 Index and the Equity Index Fund
currently have a median stock market capitalization of $5.3
billion and a weighted average stock market capitalization of
$36 billion. Standard & Poor's makes no representation or
warranty, implied or express, to the purchasers of Fund
shares, or any member of the public, regarding the
advisability of investing in index funds or the ability of the
S&P 500 Index to track general stock market performance.
PORTFOLIO MANAGEMENT. Traditional methods of fund investment
management typically involve relatively frequent changes in a
portfolio of securities on the basis of economic, financial
and market analysis. Index funds such as the Fund are not
managed in this manner, however. Instead, with the aid of a
computer program, the Adviser purchases and sells securities
for the Fund in an attempt to produce investment results that
substantially duplicate the performance of the common stocks
of the issuers represented in the S&P 500 Index, taking into
account redemptions, sales of additional Fund shares and other
adjustments as described below.
The Fund does not expect to hold at any particular time all of
the stocks included in the S&P 500 Index. The Adviser
believes, however, that through the application of a
capitalization weighting and sector balancing technique that
it will be able to construct and maintain the Fund's
investment portfolio so that it reasonably tracks the
performance of the S&P 500 Index.
The Adviser believes that the Fund will, under normal
conditions, hold securities of approximately 400 to 475
issuers included in the S&P 500 Index, and that the quarterly
performance of the Fund and the S&P 500 Index will be within
+0.3% under normal market conditions. Redemptions of a
substantial number of shares of the Fund could, however,
reduce the number of issuers represented in the Fund's
investment portfolio, which could, in turn, adversely affect
the accuracy with which the Fund tracks the performance of the
S&P 500 Index. In the event the performance of the Fund is not
comparable to the performance of the S&P 500 Index, the Board
of Directors will examine the reasons for the deviation and
the availability of corrective measures. These measures would
include additional fee waivers by the Adviser and Co-
Administrators or adjustments to the Adviser's portfolio
management practices. If substantial deviation in the Fund's
performance continued for extended periods, it is expected
that the Board of Directors would consider possible changes to
the Fund's investment objective.
If an issuer drops in ranking, or is eliminated entirely from
the S&P 500 Index, the Adviser may be required to sell some or
all of the common stock of such issuer then held by the Fund.
Sales of portfolio securities may be made at times when, if
the Adviser were not required to effect purchases and sales of
portfolio securities in accordance with the S&P 500 Index,
such securities might not be sold. Such sales may result in
lower prices for such securities than may have been realized
or in losses that may not have been incurred if the Adviser
were not required to effect the purchases and sales. "Adverse
events" will not necessarily be the basis for the disposition
of portfolio securities, unless an event causes the issuer to
be eliminated entirely from the S&P 500 Index. "Adverse
events" include the failure of an issuer to declare or pay
dividends, the institution against an issuer of materially
adverse legal proceedings, the existence or threat of defaults
materially and adversely affecting an issuer's future
declaration and payment of dividends, or the existence of
other materially adverse credit factors. However, although the
Adviser does not intend to screen securities for investment by
the Fund by traditional methods of financial and market
analysis, the Adviser will monitor the Fund's investment with
a view towards removing stocks of companies which may impair
for any reason the Fund's ability to achieve its investment
objective.
The Fund invests primarily in the common stocks that comprise
the S&P 500 Index in accordance with their relative
capitalization and sector weightings as described above. It is
possible, however, that the Fund will from time to time
receive, as a part of a "spin-off" or other corporate
reorganization of an issuer included in the S&P 500 Index,
securities that are themselves outside the S&P 500 Index. Such
securities will be disposed of by the Fund in due course
consistent with the Fund's investment objective.
A portion of the Fund's assets may be invested in options and
futures contracts as described below under "Other Investment
Information."
MIDCORE GROWTH INVESTMENT OBJECTIVE. The investment objective of the MidCore
FUND Growth Fund is capital appreciation. The Fund seeks to achieve
its objective through investment in securities of medium- to
large-sized companies, selected on the basis of their
potential for price appreciation. Current income is not a
significant consideration in the selection of securities for
this Fund.
The Fund's policy is to invest at least 50% of the value of
its total assets in equity securities under normal market
conditions. Most equity securities held by the Fund will be
publicly traded common stocks of companies incorporated in the
United States, although up to 25% of its total assets may be
invested, either directly or through investments in American
Depository Receipts, in the securities of foreign issuers.
From time to time, the Fund may also acquire preferred stocks
and obligations, such as bonds, debentures and notes, that in
the opinion of the Adviser present opportunities for capital
appreciation. In addition, the Fund may invest in securities
convertible into common stock, such as certain bonds and
preferred stocks.
The Fund generally invests in medium- to large-sized
companies, with stock market capitalizations over $750
million, that the Adviser considers to be well managed and to
have attractive fundamental financial characteristics. See
"Balanced Fund" above for a description of "attractive
fundamental financial characteristics." The Adviser intends to
focus its selection of securities on medium-sized companies
and anticipates the Fund's median capitalization would be
between $2 billion and $2.8 billion; compared with the S&P 500
Index which currently has a median capitalization of $5.3
billion. The Fund may also invest from time to time a portion
of its assets, not to exceed 20% at the time of purchase, in
companies with market capitalizations below $750 million.
The Fund may, to the extent consistent with its investment
objective, purchase nonconvertible debt securities. Such debt
obligations acquired by the Fund will be investment grade, as
described above under "Balanced Fund," at the time of purchase
or unrated obligations deemed by the Adviser to be comparable
in quality to instruments so rated.
SPECIAL GROWTH INVESTMENT OBJECTIVE. The investment objective of the Special
FUND Growth Fund is capital appreciation. The Fund seeks to achieve
its objective through investment in securities of small- to
medium-sized companies. Current income is not a significant
consideration in the selection of securities for this Fund.
Securities are selected for the Fund by the Adviser on the
basis of their potential for price appreciation.
The Fund's policy is to invest at least 50% of the value of
its total assets in equity securities under normal market
conditions. Most equity securities held by the Fund will be
publicly traded common stocks of companies incorporated in the
United States, although up to 25% of its total assets may be
invested, either directly or through investments in American
Depository Receipts, in the securities of foreign issuers.
From time to time, the Fund may also acquire preferred stocks
and obligations, such as bonds, debentures and notes, that in
the opinion of the Adviser present opportunities for capital
appreciation. In addition, the Fund may invest in securities
convertible into common stock, such as certain bonds and
preferred stocks, and may invest up to 5% of its net assets in
other types of securities having common stock characteristics,
such as rights and warrants to purchase equity securities.
The Fund generally invests in small- to medium-sized companies
that the Adviser considers to be well managed and to have
attractive fundamental financial characteristics. See
"Balanced Fund" above for a description of "attractive
fundamental financial characteristics." The Adviser believes
greater potential for price appreciation exists among small-
to medium-sized companies since they tend to be less widely
followed by other securities analysts and thus may be more
likely to be undervalued by the market. Companies with stock
market capitalizations between $250 million and $5 billion are
considered by the Adviser to be small- to medium-sized. The
Fund generally anticipates the median stock market
capitalization to be between $1.0 billion to $2.0 billion and
the weighted average to be between $1.5 billion and $3.0
billion. The Fund may also invest from time to time a portion
of its assets, not to exceed 20% at the time of purchase, in
companies with larger or smaller market capitalizations.
Securities of unseasoned companies, that is, companies with
less than three years' continuous operation, which present
risks considerably greater than do common stocks of more
established companies, may be acquired from time to time by
the Fund when the Adviser believes such investments offer
possibilities of attractive capital appreciation. However, the
Fund will not invest more than 5% of the value of its total
assets in the securities of unseasoned companies. In addition,
the Adviser may, to the extent consistent with the Fund's
investment objective of capital appreciation, acquire for the
Fund bonds and other debt securities. Debt obligations
acquired by the Fund will be investment grade, as described
above under "Balanced Fund," at the time of purchase or
unrated obligations deemed by the Adviser to be comparable in
quality to instruments so rated.
In view of the specialized nature of its investment
activities, investment in the Fund's shares may be suitable
only for those investors who are prepared to invest without
concern for current income and are financially able to assume
risk in search of long-term capital gain.
INTERNATIONAL INVESTMENT OBJECTIVE. The investment objective of the
EQUITY FUND International Equity Fund is to seek capital appreciation
through investment in foreign equity securities of small- to
medium-sized companies. The Fund pursues its objective by
investing under normal market conditions substantially all
(and in any event at least 65%) of the value of its total
assets in foreign common stocks and equity related securities
(including convertible securities and warrants) of small to
medium market capitalization (generally between $250 million
and $5 billion) issuers included in the gross domestic product
weighted Morgan Stanley Capital International Europe,
Australia and Far East Index (the "GDP EAFE Index" or
"Index"). The Fund will not follow traditional methods of fund
management but rather investments will be selected through a
structured selection process based on the GDP EAFE Index and
its country weightings. The Fund will attempt to duplicate
substantially the country weightings of the GDP EAFE Index
and, within these parameters, invest primarily in companies
included in the Index with small to medium market
capitalizations. The Adviser believes that companies with
small to medium market capitalizations present greater long-
term growth potential than companies with larger market
capitalizations. Although the Fund will follow this structured
selection process based on the GDP EAFE Index, its country
weightings may differ from the actual weightings of the Index,
and its performance will not necessarily be comparable to the
performance of the Index because of the Fund's selected market
capitalization range. It is not the Fund's objective to track
the performance or replicate the holdings of the entire Index.
GDP EAFE INDEX. The GDP EAFE Index is composed of a sample of
companies representative of the market structure of 20
European and Pacific Basin countries. The objective of the GDP
EAFE Index is to represent an unmanaged portfolio containing a
broad selection of companies listed within each local market
included in the Index. The GDP EAFE Index seeks to replicate
the industry composition of each local market, and a
representative sampling of large, medium and small
capitalization companies from each local market, taking into
account the stocks' liquidity. The securities included in the
Index and the industry weightings within each local market are
changed periodically. The country weightings, which are based
on each country's relative gross domestic product, are
adjusted periodically throughout the year. As of October 31,
1996, the total GDP EAFE Index included 1,107 companies in 20
European and Pacific Basin countries. Approximately 787
companies (out of 1,107 in the GDP EAFE Index) or about 24% of
the dollar amount of the total Index fall in the Fund's
selected market capitalization range. The following table
lists the countries included in the GDP EAFE Index and their
weightings in the Index as of October 31, 1996.
GDP EAFE INDEX
COMPOSITION
GDP EAFE
% OF TOTAL MARKET
MARKET CAPITALIZATION1
------ ------------------
Austria 1.6%
Belgium 2.0
Denmark 1.8
Finland 1.1
France 11.8
Germany 18.5
Ireland 0.5
Italy 8.0
Netherlands 3.1
Norway 1.1
Spain 4.4
Sweden 2.0
Switzerland 2.2
United Kingdom 8.9
EUROPE 67.0%
Australia 2.6%
Hong Kong 1.1
Japan 27.8
Malaysia 0.6
New Zealand 0.4
Singapore 0.5
PACIFIC 33.0%
TOTAL 100.0%
1 The weightings are as of October 31, 1996 and will
fluctuate. Because the Fund does not expect to hold at
any particular time all of the stocks included in the
Index or, depending on the asset size of the Fund,
stocks of companies located in all of the countries
comprising the Index, the information should be
considered only as an approximation of the Fund's
intended exposure to the countries indicated.
The Adviser and Sub-Adviser utilize the "gross domestic
product weighted" Index in order to reduce the relative
exposure to any single country (namely, Japan) which results
from an Index that is capitalization weighted. In reducing the
relative exposure to Japan, the weighting process increases
the representation of certain other countries within the
Index. Notwithstanding the GDP weighting, as of October 31,
1996, securities from Japan, Germany and France represented on
a GDP weighted basis an aggregate of approximately 58% of the
Index. Therefore, stocks from these countries will represent a
correspondingly large component of the Fund's total assets.
Such a large investment in these markets subjects the Fund to
relatively greater exposure to the political and economic
circumstances of these countries. Based upon the current
country weightings of the Index, the Fund intends to invest
more than 25% of its total assets in Japan. To the extent the
Fund's assets are concentrated in the securities of Japanese
issuers, the Fund will be subject to a greater extent to the
risks of adverse social, political or economic events which
occur in Japan. Specifically, investments in the Japanese
stock market may entail a higher degree of risk than
investments in other markets. By fundamental measures of
corporate valuation, such as its high price-earnings ratios
and low dividend yields, the Japanese markets as a whole may
presently appear expensive relative to other world stock
markets (i.e., the prices of Japanese stocks may presently be
relatively high). In addition, the prices of securities traded
on the Japanese markets may be more volatile than many other
markets.
The "GDP EAFE Index" is a registered service mark of Morgan
Stanley Capital International, which does not sponsor and is
in no way affiliated with the Fund. Inclusion of a security in
the GDP EAFE Index in no way implies an opinion by Morgan
Stanley Capital International as to its attractiveness or
appropriateness as an investment. The publication of the GDP
EAFE Index is not made in connection with any sale or offer
for sale of securities or any solicitations of orders for the
purchase of securities, and Morgan Stanley Capital
International has no liability, contingent or otherwise, to
any person for any loss arising from results obtained from the
use of the Index data.
PORTFOLIO MANAGEMENT. Traditional methods of fund investment
management typically involve changes in a portfolio of
securities based on economic, financial and market analysis.
The Fund is not managed in this manner. The Adviser and Sub-
Adviser will use a structured selection process described
below to select securities for the Fund from those included in
the GDP EAFE Index. The structured selection process utilized
by the Fund will attempt to duplicate substantially the GDP
EAFE Index country weightings. When purchasing securities for
the Fund's portfolio, the relative market capitalization
weightings of the equity securities included in each of the
local markets of the GDP EAFE Index will be considered. The
weighted capitalization of an issuer is determined by dividing
the issuer's market capitalization by the total market
capitalizations of all issuers included in the local market.
Stocks in the GDP EAFE Index will be selected within each
market with market capitalizations at the time of acquisition
of between $250 million and $5 billion. The Fund may retain up
to 20% of its total assets directly in stocks of companies
whose market capitalizations either rise above $5 billion or
fall below $250 million after acquisition but are still
included in the GDP EAFE Index (and may invest up to an
additional 10% of its total assets indirectly in such stocks
through the use of international stock index futures contracts
and related options). Companies with larger market
capitalizations that are included in the Index will not be
purchased except indirectly through the investment in
international stock index futures contracts and related
options.
Since the Fund bases its stock selection process on the
country weightings of the GDP EAFE Index, the Fund will
normally invest in the securities which are included in the
Index. The Fund may, however, acquire a security that at the
time of purchase is not included in the GDP EAFE Index if
Morgan Stanley Capital International has announced that the
security will be included at the next adjustment of the Index.
It is anticipated that no more than 5% of the Fund's assets
would be invested in equity securities which, at the time of
purchase, are not included in the GDP EAFE Index. The Fund may
also invest up to 15% of the Fund's total assets in warrants
to purchase, and securities convertible into, securities
included in the Index. Up to 15% of its total assets may be
invested in eligible securities that are held in the form of
American Depository Receipts, European Depository Receipts,
and Global Depository Receipts. The Fund may also invest in
international stock index futures contracts. See "Other
Investment Information" below.
On a periodic basis, the Adviser and Sub-Adviser, through
reports of the International Monetary Fund, will monitor
developments relating to the gross domestic product of
countries within the Index. The Fund will be periodically
rebalanced to reflect these changes in country weightings
through the investment of new money received by the Fund. In
June of each year, Morgan Stanley Capital International
revises all of the country weightings of the Index. At that
time, the Fund, through the investment of new money or through
the reallocation of current portfolio holdings, will rebalance
the portfolio in light of the adjustments made by Morgan
Stanley Capital International to the Index's country
weightings.
Although the Fund will attempt to duplicate substantially the
country weightings of the GDP EAFE Index, the Fund will not
hold at any particular time all of the stocks included in the
Index because of the Fund's selected market capitalization
range. The volatility of the Fund may, therefore, be more or
less than the Index because of the Fund's selected market
capitalization range. Approximately 787 securities (out of
1,107 in the GDP EAFE Index) fall in the Fund's selected
market capitalization range representing 24% of the dollar
amount of the total index. The volatility of the Fund may be
more or less than the Index depending on the securities held
by the Fund. Depending upon the total asset size of the Fund,
the number of securities held by the Fund is expected to vary
from 450 to 750 and to represent 16 to 20 countries of the GDP
EAFE Index. Redemptions of a substantial number of shares of
the Fund could, however, reduce the number of issuers
represented in the Fund's investment portfolio, which could,
in turn, adversely affect the accuracy with which the Fund
tracks the country and industry allocation of the GDP EAFE
Index.
To maintain liquidity in an amount to meet anticipated
redemption requests or for day to day operating purposes, a
portion of the Fund's assets (normally not exceeding 5% of
total assets) may be invested in money market instruments and
other short-term obligations. See "Money Market Instruments."
In addition, to the extent the Fund experiences cash inflows
through the issuance of new shares or the sale of portfolio
securities, or at times when desirable equity securities which
are consistent with the Fund's investment objective are
unavailable in sufficient quantities, the Fund may invest in
short-term obligations for a limited time. It is the policy of
the Fund to be as fully invested as practicable in equity and
equity related securities (and stock index futures) at all
times. While this policy permits the Fund to take full
advantage of a period of rising international stock prices, it
limits the Fund from investing in short-term debt securities
as a defensive investment posture during falling markets
(except as described above). Accordingly, shareowners bear the
risk of general declines in stock prices, and bear any risk
that the Fund's exposure to such declines will be lessened by
investment in short-term debt securities.
Because of the Fund's investment policies, securities may be
purchased, retained, and sold by the Fund when such
transactions would not be consistent with traditional
investment criteria. If an issuer drops in ranking, or is
eliminated entirely from the GDP EAFE Index, the Adviser and
Sub-Adviser will be required to sell some or all of the common
stock of such issuer then held by the Fund. Sales of portfolio
securities may be made at times when such securities might
otherwise have not been sold, if the Adviser and Sub-Adviser
were not required to effect purchases and sales of portfolio
securities in accordance with the GDP EAFE Index. Such sales
may result in lower prices for such securities than may have
been realized or in losses that may not have been incurred if
the Fund were not required to effect the purchases and sales.
Adverse events will not necessarily be the basis for the
disposition of portfolio securities, unless an event causes
the issuer to be eliminated entirely from the GDP EAFE Index.
See "Equity Index Fund" for a description of "adverse events."
However, although it is not intended that securities will be
screened for investment by the Fund by traditional methods of
financial and market analysis, the Fund's investments will be
monitored with a view towards removing stocks of companies
which may impair for any reason the Fund's ability to achieve
its investment policies.
Because of the risks associated with international common
stock investments, the Fund is intended to be a long-term
investment vehicle and is not designed to provide investors
with a means of speculating on short-term stock market
movements.
OTHER INVESTMENT MONEY MARKET INSTRUMENTS. The Funds may hold short-term
INFORMATION U.S. Government obligations, high quality money market
instruments (i.e., rated A-1 or better by S&P or Prime-1 by
Moody's or unrated instruments deemed by the Adviser to be of
comparable quality), repurchase agreements, bank obligations
and cash, pending investment, to meet anticipated redemption
requests, if, in the opinion of the Adviser, other suitable
securities are unavailable. The foregoing investments may
include among other things commercial paper, variable amount
master demand notes and corporate bonds with remaining
maturities of thirteen months or less and may be in such
proportions as, in the opinion of the Adviser, existing
circumstances may warrant. Variable amount master demand notes
are unsecured instruments that permit the indebtedness
thereunder to vary and provide for periodic adjustments in the
interest rate. Although the notes are not normally traded and
there may be no secondary market in the notes, the Funds may
demand payment of the principal of the instrument at any time.
The notes are not typically rated by credit rating agencies,
but they must satisfy the criteria set forth above for high
quality money market instruments. If an issuer of a variable
amount master demand note defaulted on its payment obligation,
the Funds might be unable to dispose of the note because of
the absence of a secondary market and might, for this or other
reasons, suffer a loss to the extent of the default. The Funds
invest in variable amount master demand notes only when the
Adviser deems the investment to involve minimal credit risk.
The Funds may also invest in obligations of foreign banks and
foreign branches of U.S. banks and may invest their cash
balances in securities issued by other investment companies
which invest in high quality, short-term debt securities. None
of the Funds will invest in any other Portico Fund. In
addition to the advisory fees and other expenses the Fund
bears directly in connection with its own operations, as a
shareowner of another investment company, the Fund would bear
its pro rata portion of the other investment company's
advisory fees and other expenses, and such fees and other
expenses will be borne indirectly by the Fund's shareowners.
GOVERNMENT OBLIGATIONS. To the extent consistent with its
objective, the Balanced Fund may invest in a variety of U.S.
Treasury obligations consisting of bills, notes and bonds,
which principally differ only in their interest rates,
maturities and time of issuance. This Fund may also invest in
other securities issued or guaranteed by the U.S. Government,
its agencies and instrumentalities. Obligations of certain
agencies and instrumentalities, such as the Government
National Mortgage Association ("GNMA"), are supported by the
full faith and credit of the U.S. Treasury; others, such as
those of the Export-Import Bank of the United States, are
supported by the right of the issuer to borrow from the
Treasury; others, such as those of the Federal National
Mortgage Association ("FNMA"), are supported by the
discretionary authority of the U.S. Government to purchase the
agency's obligations; still others, such as those of the
Student Loan Marketing Association, are supported only by the
credit of the instrumentalities. No assurance can be given
that the U.S. Government would provide financial support to
its agencies or instrumentalities if it is not obligated to do
so by law. There is no assurance that these commitments will
be undertaken or complied with in the future.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. The Balanced Fund
may purchase residential and commercial mortgage-backed as
well as other asset-backed securities (i.e., securities backed
by credit card receivables, automobile loans or other assets).
The average life of these securities varies with the
maturities of the underlying instruments which, in the case of
mortgages, have maximum maturities of thirty years. The
average life of a mortgage-backed instrument may be
substantially less than the original maturity of the mortgages
underlying the securities as the result of scheduled principal
payments and mortgage prepayments. The rate of such mortgage
prepayments, and hence the life of the certificates, will be a
function of current market rates and current conditions in the
relevant housing and commercial markets. In periods of falling
interest rates, the rate of mortgage prepayments tends to
increase. During such periods, the reinvestment of prepayment
proceeds by the Fund will generally be at lower rates than the
rates that were carried by the obligations that have been
prepaid. As a result, the relationship between mortgage
prepayments and interest rates may give some high-yielding
mortgage-related securities less potential for growth in value
than non-callable bonds with comparable maturities. In
calculating the average weighted maturity of the Fund, the
maturity of asset-backed securities will be based on estimates
of average life. There can be no assurance that these
estimates will be accurate.
Presently there are several types of mortgage-backed
securities which provide the holder with a pro rata interest
in the underlying mortgages, and collateralized mortgage
obligations ("CMOs") which provide the holder with a specified
interest in the cash flow of a pool of underlying mortgages or
other mortgage-backed securities. CMOs are issued in multiple
classes, each with a specified fixed or floating interest rate
and a final distribution date. The relative payment rights of
the various CMO classes may be subject to greater volatility
and interest rate risk than other types of mortgage-backed
obligations.
Asset-backed securities may involve certain risks that are not
presented by mortgage-backed securities arising primarily from
the nature of the underlying assets (i.e., credit card and
automobile loan receivables as opposed to real estate
mortgages). For example, credit card receivables are generally
unsecured and may require the repossession of personal
property upon the default of the debtor which may be difficult
or impracticable in some cases.
Non-mortgage asset-backed securities do not have the benefit
of the same security in the collateral as mortgage-backed
securities. Credit card receivables are generally unsecured
and the debtors are entitled to the protection of a number of
state and federal consumer credit laws, many of which have
given debtors the right to reduce the balance due on the
credit cards. Most issuers of automobile receivables permit
the servicers to retain possession of the underlying
obligations. If the servicer were to sell these obligations to
another party, there is the risk that the purchaser would
acquire an interest superior to that of the holders of related
automobile receivables. In addition, because of the large
number of vehicles involved in a typical issuance and
technical requirements under state laws, the trustee for the
holders of the automobile receivables may not have an
effective security interest in all of the obligations backing
such receivables. Therefore, there is a possibility that
payments on the receivables together with recoveries on
repossessed collateral may not, in some cases, be able to
support payments on these securities.
Asset-backed securities may be subject to greater risk of
default during periods of economic downturn than other
instruments. Also, while the secondary market for asset-backed
securities is ordinarily quite liquid, in times of financial
stress the secondary market may not be as liquid as the market
for other types of securities, which could result in the
Fund's experiencing difficulty in valuing or liquidating such
securities.
RESTRICTED SECURITIES. Each Fund will not knowingly invest
more than 10% (except the International Equity Fund which is
limited to 5%), and in all cases will not invest more than
15%, of the value of its respective net assets in securities
that are illiquid at the time of purchase. Repurchase
agreements and time deposits that do not provide for payment
to a Fund within seven days, over-the-counter options, and
securities that are not registered under the Securities Act of
1933 (the "Act") but may be purchased by institutional buyers
under Rule 144A, are subject to these limits (unless such
securities are variable amount master demand notes with
maturities of nine months or less or unless the Board of
Directors or the Adviser (or Adviser and Sub-Adviser with
regard to the International Equity Fund), pursuant to
guidelines adopted by the Board of Directors, determines that
a liquid trading market exists).
BORROWINGS. Each Fund may borrow money to the extent described
below under "Investment Limitations." A Fund would borrow
money to meet redemption requests prior to the settlement of
securities already sold or in the process of being sold by the
Fund. If the securities held by a Fund should decline in value
while borrowings are outstanding, the net asset value of a
Fund's outstanding shares will decline in value by
proportionately more than the decline in value suffered by a
Fund's securities. As a result, a Fund's share price may be
subject to greater fluctuation until the borrowing is paid
off.
Reverse repurchase agreements are considered to be borrowings
under the Investment Company Act of 1940 (the "1940 Act"). At
the time a Fund enters into a reverse repurchase agreement (an
agreement under which the Fund sells portfolio securities and
agrees to repurchase them at an agreed-upon date and price),
it will place in a segregated custodial account U.S.
Government securities or other liquid high-grade debt
securities having a value equal to or greater than the
repurchase price (including accrued interest), and will
subsequently monitor the account to insure that such value is
maintained. Reverse repurchase agreements involve the risk
that the market value of the securities sold by the Fund may
decline below the price of the securities it is obligated to
repurchase.
WHEN-ISSUED PURCHASES AND FORWARD COMMITMENTS. Each Fund may
purchase securities on a "when-issued" or delayed delivery
basis and may purchase or sell securities on a "forward
commitment" basis. These transactions, which involve a
commitment by the Fund to purchase or sell particular
securities with payment and delivery taking place at a future
date (perhaps one or two months later), permit the Fund to
lock in a price or yield on a security it owns or intends to
purchase, regardless of future changes in interest rates. The
Fund does not accrue income until the securities delivery
occurs. When-issued and forward commitment transactions
involve the risk, however, that the price or yield obtained in
a transaction (and therefore the value of the security) may be
less favorable than the price or yield (and therefore the
value of the security) available in the market when the
securities delivery takes place. Each Fund's forward
commitments and when-issued purchases are not expected to
exceed 25% of the value of its total assets absent unusual
market conditions. The Funds do not intend to engage in when-
issued purchases and forward commitments for speculative
purposes but only in furtherance of their respective
investment objectives.
FOREIGN SECURITIES. Each Fund, except the Equity Index Fund,
may invest in foreign securities. The Funds' investments in
the securities of foreign issuers may include both securities
of foreign corporations and banks, as well as securities of
foreign governments and their political subdivisions.
Investments in foreign securities, whether made directly or
through American Depository Receipts, involve certain inherent
risks and considerations not typically associated with
investing in U.S. companies, such as political or economic
instability of the issuer or the country of issue, the
difficulty of predicting international trade patterns, changes
in exchange rates of foreign currencies and the possibility of
adverse changes in investment or exchange control regulations.
There may be less publicly available information about a
foreign company than about a U.S. company. Foreign companies
are not subject to uniform accounting, auditing and financial
reporting standards comparable to those applicable to domestic
companies. Further, foreign stock markets are generally not as
developed or efficient as those in the U.S., and in most
foreign markets volume and liquidity are less than in the U.S.
Fixed commissions on foreign stock exchanges are generally
higher than the negotiated commissions on U.S. exchanges, and
there is generally less government supervision and regulation
of foreign stock exchanges, brokers and companies than in the
U.S. With respect to certain foreign countries, there is a
possibility of expropriation or confiscatory taxation,
limitations on the removal of assets or diplomatic
developments that could affect investment within those
countries. Additionally, foreign securities and dividends and
interest payable on those securities may be subject to foreign
taxes, including foreign withholding taxes, and other foreign
taxes may apply with respect to securities transactions. See
"Taxes." Transactions in foreign securities may involve
greater time from the trade date until the settlement date
than for domestic securities transactions, and may involve the
risk of possible losses through the holding of securities in
custodians and securities depositories in foreign countries.
Additional costs associated with an investment in foreign
securities may include higher transaction costs and the cost
of foreign currency conversions. Changes in foreign exchange
rates will also affect the value of securities denominated or
quoted in currencies other than the U.S. dollar. In this
regard, the Funds do not intend to hedge against foreign
currency risk (except on unsettled trades), and changes in
currency exchange rates will impact a Fund's net asset value
(positively or negatively) irrespective of the performance of
the portfolio securities held by the Fund. The Funds and their
shareowners may encounter substantial difficulties in
obtaining and enforcing judgments against non-U.S. resident
individuals and companies. Because of these and other factors,
securities of foreign companies acquired by the Funds may be
subject to greater fluctuation in price than securities of
domestic companies. Furthermore, because the International
Equity Fund will invest substantially all (and in any event,
at least 65%) of the value of its total assets in foreign
securities, the net asset value of the International Equity
Fund is expected to be volatile.
STRIPPED SECURITIES. To the extent consistent with its
investment objective, the Balanced Fund may purchase
participations in trusts that hold U.S. Treasury and agency
securities (such as TIGRs and CATs) and also may purchase
Treasury receipts and other "stripped" securities that
evidence ownership in either the future interest payments or
the future principal payments of U.S. Government obligations.
These participations are issued at a discount to their "face
value," and may (particularly in the case of stripped
mortgage-backed securities) exhibit greater price volatility
than ordinary debt securities because of the manner in which
their principal and interest are returned to investors. The
SEC staff believes that participations in CATs and TIGRs and
other similar trusts are not U.S. Government securities.
OPTIONS. The Growth and Income and Equity Index Funds may
purchase put and call options in an amount not to exceed 5% of
their respective net assets. Such options may relate to
particular securities or various stock indices and may or may
not be listed on a national securities exchange and issued by
the Options Clearing Corporation. Purchasing options is a
specialized investment technique which entails a substantial
risk of a complete loss of the amount paid as premiums to the
writer of the option.
Each Fund may purchase put options on portfolio securities at
or about the same time that it purchases the underlying
security or at a later time. By buying a put, a Fund limits
its risk of loss from a decline in the market value of the
security until the put expires. Any appreciation in the value
of and yield otherwise available from the underlying security,
however, will be partially offset by the amount of the premium
paid for the put option and any related transaction costs.
Call options may be purchased by a Fund in order to acquire
the underlying security at a later date at a price that avoids
any additional cost that would result from an increase in the
market value of the security. A call option may also be
purchased to increase a Fund's return to investors at a time
when the call is expected to increase in value due to
anticipated appreciation of the underlying security. Prior to
its expiration, a purchased put or call option may be sold in
a "closing sale transaction" (a sale by a Fund, prior to the
exercise of the option that it has purchased, of an option of
the same series), and profit or loss from the sale will depend
on whether the amount received is more or less than the
premium paid for the option plus the related transaction
costs.
In addition, the Growth and Income and Equity Index Funds may
write call options on securities and on various stock indices.
Each Fund may write a call option only if the option is
"covered" by the Fund's holding of a position in the
underlying securities or otherwise, which would allow for
immediate satisfaction of its obligation. Such options will be
listed on a national securities exchange and the aggregate
value of the Fund's assets subject to options written by the
Growth and Income Fund and the Equity Index Fund will not
exceed 25% and 5%, respectively, of the value of its net
assets during the current year. In order to close out an
option position, a Fund will be required to enter into a
"closing purchase transaction" (the purchase of a call option
on a security or an index with the same exercise price and
expiration date as the call option which it previously wrote
on the same security or index).
By writing a covered call option on a security, a Fund
foregoes the opportunity to profit from an increase in the
market price of the underlying security above the exercise
price except insofar as the premium represents such a profit,
and it is not able to sell the underlying security until the
option expires or is exercised or the Fund effects a closing
purchase transaction by purchasing an option of the same
series. Except to the extent that a written call option on an
index is covered by an option on the same index purchased by
the Fund, movements in the index may result in a loss to the
Fund; however, such losses may be mitigated by changes in the
value of securities held by the Fund during the period the
option was outstanding. The use of covered call options will
not be a primary investment technique of the Funds.
For additional information relating to option trading
practices and related risks, see the Statement of Additional
Information.
FUTURES CONTRACTS AND RELATED OPTIONS. The Adviser may
determine that it would be in the interest of the Growth and
Income, Equity Index and International Equity Funds to
purchase or sell futures contracts, or options thereon, as a
hedge against changes resulting from market conditions in the
value of the securities held by the Funds, or of securities
which it intends to purchase, to maintain liquidity, to have
fuller exposure to price movements in the respective
securities index or to reduce transaction costs. For example,
a Fund may enter into transactions involving a stock index
futures contract, which is a bilateral agreement pursuant to
which the parties agree to take or make delivery of an amount
of cash equal to a specified dollar amount times the
difference between the index value (which assigns relative
values to the common stocks included in the index) at the
close of the last trading day of the contract and the price at
which the futures contract is originally struck. No physical
delivery of the underlying bonds or stocks in the index is
made. The Adviser may also determine it would be in the
interest of a Fund to purchase or sell interest rate futures
contracts, or options thereon, which provide for the future
delivery of specified fixed-income securities. In addition,
the Equity Index Fund will purchase and sell futures and
related options (based only on the S&P 500 Index), to maintain
cash reserves while simulating full investment in the stocks
underlying the S&P 500 Index to keep substantially all of its
assets exposed to the market (as represented by the S&P 500
Index), and to reduce transaction costs. The International
Equity Fund also may invest in international stock index
futures contracts and related options which are traded on an
exchange to maintain cash reserves while simulating full
investment in the stocks underlying the GDP EAFE Index, to
facilitate trading, reduce transaction costs or seek higher
investment returns when a futures contract is priced more
attractively than the underlying index. The Funds will not use
futures contracts for speculative purposes.
Risks associated with the use of futures contracts include (a)
imperfect correlation between the change in market values of
the securities held by a Fund and the prices of stock index
futures contracts, (b) the possible lack of a liquid secondary
market for futures contracts and the resulting inability of a
Fund to close open futures positions, and (c) with regard to
the International Equity Fund, the limited portion of the
Fund's securities which may be included in any one of the
foreign stock index futures which may be utilized by the Fund.
During the current fiscal year, the Growth and Income Fund
intends to limit transactions in futures contracts and related
options so that not more than 5% of its net assets are at
risk. The Equity Index Fund and International Equity Fund
intend to limit their transactions in futures contracts so
that not more than 10% of their respective net assets are at
risk. For a more detailed description of futures contracts and
futures options, including a discussion of the limitations
imposed by federal tax law, see Appendix B to the Statement of
Additional Information.
CONVERTIBLE SECURITIES AND WARRANTS. The Balanced, Growth and
Income, MidCore Growth, Special Growth, and International
Equity Funds may invest in convertible securities, including
bonds, notes and preferred stock, that may be converted into
common stock either at a stated price or within a specified
period of time. In investing in convertibles, a Fund is
looking for the opportunity, through the conversion feature,
to participate in the capital appreciation of the common stock
into which the securities are convertible, while earning
higher current income than is available from the common stock.
During normal market conditions, no more than 5% of a Fund's
net assets will be purchased or held in convertible or other
securities that (1) are not rated at the time of purchase
investment grade by S&P, Moody's or other nationally
recognized rating agencies; (2) are unrated and have not been
determined by the Adviser (or Adviser and Sub-Adviser with
regard to the International Equity Fund) to be of comparable
quality to a security rated investment grade; or (3) in the
case of the International Equity Fund, have not received the
foreign equivalent of investment grade by a rating agency
recognized in the local market and determined to be of
comparable quality by the Adviser and Sub-Adviser. Securities
rated below investment grade are predominantly speculative and
are commonly referred to as junk bonds. To the extent a Fund
purchases convertibles rated below investment grade or
convertibles that are not rated, a greater risk exists as to
the timely repayment of the principal of, and the timely
payment of interest or dividends on, such securities.
Subsequent to its purchase by a Fund, a rated security may
cease to be rated or its rating may be reduced below a minimum
rating for purchase by the Fund. The Adviser (and Sub-Adviser
for the International Equity Fund) will consider such an event
in determining whether a Fund should continue to hold the
security. The Adviser (and Sub-Adviser for the International
Equity Fund) will sell promptly any securities that are non-
investment grade as a result of these events and that exceed
5% of a Fund's net assets.
The Balanced, Growth and Income, MidCore Growth, Special
Growth, and International Equity Funds may purchase warrants
and similar rights, which are privileges issued by
corporations enabling the owners to subscribe to and purchase
a specified number of shares of the corporation at a specified
price during a specified period of time. The purchase of
warrants involves the risk that a Fund could lose the purchase
value of a warrant if the right to subscribe to additional
shares is not exercised prior to the warrant's expiration.
Also, the purchase of warrants involves the risk that the
effective price paid for the warrant added to the subscription
price of the related security may exceed the value of the
subscribed security's market price such as when there is no
movement in the level of the underlying security. During
normal market conditions, no more than 5% of each Fund's net
assets will be invested in warrants.
SECURITIES LENDING. Although none of the Funds intend to
during the current fiscal year, each of the Funds may lend
portfolio securities.
AMERICAN DEPOSITORY RECEIPTS ("ADRS"), EUROPEAN DEPOSITORY
RECEIPTS ("EDRS"), AND GLOBAL DEPOSITORY RECEIPTS ("GDRS").
The Funds, except for the Equity Index Fund, may invest in
sponsored ADRs, which are receipts issued by an American bank
or trust company evidencing ownership of underlying securities
issued by a foreign issuer. ADRs may be listed on a national
securities exchange or may trade in the over-the-counter
market. ADR prices are denominated in U.S. dollars; the
underlying security may be denominated in a foreign currency.
The International Equity Fund may also invest in EDRs and
GDRs. EDRs are receipts issued by a European financial
institution evidencing ownership of underlying foreign
securities and are usually denominated in foreign currencies.
EDRs may not be denominated in the same currency as the
securities they represent. Generally, EDRs, in bearer form,
are designed for use in the European securities markets. GDRs
are issued and traded in several international financial
markets. The underlying security may be subject to foreign
government taxes which would reduce the yield on such
securities. See "Other Investment Information - Foreign
Securities" for a discussion on certain risks in investing in
foreign securities.
CONCENTRATION. The Adviser (and Sub-Adviser for the
International Equity Fund) anticipate that from time to time
certain industry sectors will not be represented in the Funds'
portfolios while other sectors will represent a significant
portion. As a matter of fundamental policy, however, the
Adviser (and Sub-Adviser for the International Equity Fund)
will not purchase any securities which would cause 25% or more
of a Fund's total assets at the time of purchase to be
invested in the securities of issuers conducting their
principal business activities in the same industry, and each
Fund's investments will be diversified among individual
issuers.
SMALL COMPANIES. Small companies in which the Funds may invest
may have limited product lines, markets, or financial
resources, or may be dependent upon a small management group,
and their securities may be subject to more abrupt or erratic
market movements than larger, more established companies, both
because their securities are typically traded in lower volume
and because the issuers are typically subject to greater
degree of changes in their earnings and prospects.
PORTFOLIO TURNOVER. Each Fund may sell a portfolio investment
soon after its acquisition if the Adviser believes that such a
disposition is consistent with attaining the investment
objective of the Fund. Portfolio investments may be sold for a
variety of reasons, such as a more favorable investment
opportunity or other circumstances bearing on the desirability
of continuing to hold such investments. A high rate of
portfolio turnover (over 100%) may involve correspondingly
greater brokerage commission expenses and other transaction
costs, which must be borne directly by the Fund and ultimately
by its shareowners. High portfolio turnover may result in the
realization of substantial net capital gains; to the extent
net short-term capital gains are realized, distributions
resulting from such gains will be ordinary income for federal
income tax purposes. (See "Taxes-Federal.") See "Financial
Highlights" for each Fund's portfolio turnover rates.
PURCHASE Retail Shares of the Funds are offered and sold on a
OF SHARES continuous basis by the distributor for the Funds, B.C.
Ziegler and Company (the "Distributor"), which is independent
of the Adviser. The Distributor is a registered broker-dealer
with offices at 215 North Main Street, West Bend, Wisconsin
53095.
THE MINIMUM INITIAL INVESTMENT FOR SHARES IN A FUND IS $1,000;
WITH THE EXCEPTION OF IRAS, WHICH HAVE A MINIMUM INITIAL
INVESTMENT OF $100. The minimum investment for all accounts
for subsequent purchases is $50. The minimum initial
investment will be waived if you participate in the Periodic
Investment Plan. The Funds reserve the right to close your
account if the value is less than $1,000 and you are not
currently participating in the Periodic Investment Plan. For
additional information on involuntary redemptions, see "Other
Redemption Information" below. The $1,000 minimum account
balance applies only to accounts opened with Portico on or
after February 28, 1997. Accounts opened with Portico on or
before February 27, 1997 must maintain a minimum account
balance of $50.
Purchase orders for shares may be placed through the transfer
agent of the Funds, registered representatives of Elan
Investment Services, Inc. ("Elan"), or organizations that have
entered into distribution or servicing agreements with the
Funds (including Elan, "Shareowner Organizations"). For a
discussion of transactions through Shareowner Organizations,
see "Shareowner Organizations" below.
Once each business day, two share prices are calculated for
each Fund: the offering price and the net asset value (NAV).
Retail Shares are purchased at the offering price which is the
net asset value plus a sales charge which varies in accordance
with the amount of the purchase as indicated below:
SHAREOWNER
SALES CHARGE SALES CHARGE ORGANIZATION
AMOUNT OF AS A AS A REALLOWANCE AS
TRANSACTION AT PERCENTAGE OF PERCENTAGE OF A PERCENTAGE OF
OFFERING PRICE OFFERING PRICE NET ASSET VALUE OFFERING PRICE
-------------------------------------------------------------------------
Less than $50,000 4.00% 4.16% 3.50%
$50,000 to $99,999 3.00% 3.09% 2.50%
$100,000 to $249,999 2.00% 2.04% 1.50%
$250,000 or more none none none
The Distributor may reallow the entire sales charge to certain
Shareowner Organizations. To the extent that 90% or more of
the sales charge is reallowed, Shareowner Organizations may be
deemed to be underwriters under the Act.
You may purchase shares without a sales charge if: (a) you
were a Portico shareowner as of January 1, 1995 and have
continuously maintained a shareowner account with the Company;
(b) you make any purchase within 60 days of a redemption of
Portico Institutional Shares, (c) you are an employee,
director or retiree of Firstar Corporation or its affiliates
or of Portico; (d) you maintain a personal trust account with
an affiliate of Firstar Corporation at the time of purchase;
(e) you make any purchase within 60 days of a termination of a
personal trust account with an affiliate of Firstar
Corporation; (f) you make any purchase for your medical
savings account for which Firstar Corporation or an affiliate
serves in a custodial capacity; (g) you make any purchase for
your individual retirement account; (h) you make any purchase
within 60 days of a redemption of a mutual fund on which you
paid an initial sales charge or a contingent deferred sales
charge; (i) you are a registered investment adviser that has
entered into an agreement with the Distributor to purchase
shares for your own account or for discretionary client
accounts; (j) you are a spouse, parent or child of an
individual who falls within the preceding categories (a), or
(d) above; or (k) you are a spouse, parent, sibling or child
of an individual who falls within the preceding category (c)
above. In addition, you may reinvest all or any portion of
your proceeds from redemption of shares of the Funds in Retail
Shares of the Funds or Retail Shares of other Portico funds,
within 365 days of a redemption without paying a sales charge.
Shares so reinvested will be purchased at a price equal to the
net asset value next determined after the transfer agent
receives payment in proper form.
QUANTITY DISCOUNTS. You may be entitled to reduced sales
charges through the Right of Accumulation or under a Letter of
Intent, even if you do not make an investment of a size that
would normally qualify for a quantity discount.
To qualify for a reduction of or exception to the sales
charge, you must notify your Shareowner Organization or the
Distributor at the time of purchase or exchange. The reduction
in sales charge is subject to confirmation of your holdings
through a check of records. The Fund may modify or terminate
quantity discounts at any time. For more information about
quantity discounts, contact your Shareowner Organization or
Portico Investor Services at 1-800-982-8909.
RIGHTS OF ACCUMULATION. A reduced sales charge applies to any
purchase of shares of any Portico Fund that is purchased with
a sales charge (an "Eligible Fund") where an investor's then
current aggregate investment is $50,000 or more. "Aggregate
investment" means the total of: (a) the dollar amount of the
then current purchase of shares of an Eligible Fund, and (b)
the value (based on current net asset value) of previously
purchased and beneficially owned shares of any Eligible Funds
on which a sales charge has been paid. If, for example, an
investor beneficially owns shares of one or more Eligible
Funds, with an aggregate current value of $49,000 on which a
sales charge has been paid and subsequently purchases shares
of an Eligible Fund having a current value of $1,000, the
sales charge applicable to the subsequent purchase would be
reduced to 3.00% of the offering price. Similarly, each
subsequent investment in Eligible Fund shares may be added to
an investor's aggregate investment at the time of purchase to
determine the applicable sales charge.
LETTER OF INTENT. By signing a Letter of Intent (available
from the Distributor and Shareowner Organizations), an
investor becomes eligible for the reduced sales charge
applicable to the total number of Eligible Fund shares
purchased in a 13-month period pursuant to the terms and under
the conditions set forth in the Letter of Intent. To compute
the applicable sales charge, the offering price of shares of
an Eligible Fund on which a sales charge has been paid,
beneficially owned by an investor on the date of submission of
the Letter of Intent, may be used as a credit toward
completion of the Letter of Intent. However, the reduced sales
charge will be applied only to new purchases.
During the term of the Letter of Intent, the Transfer Agent
will hold in escrow shares equal to 5% of the amount indicated
in the Letter of Intent for payment of a higher sales charge
if an investor does not purchase the full amount indicated in
the Letter of Intent. The escrow will be released when an
investor fulfills the terms of the Letter of Intent by
purchasing the specified amount. Any redemptions made during
the 13-month period will be subtracted from the amount of
purchases in determining whether the Letter of Intent has been
completed. If total purchases qualify for a further sales
charge reduction, the sales charge will be adjusted to reflect
an investor's total purchases. If total purchases are less
than the amount specified in the Letter of Intent, an investor
will be requested to remit an amount equal to the difference
between the sales charge actually paid and the sales charge
applicable to the total purchases. If such remittance is not
received within 20 days, the transfer agent, as attorney-in-
fact pursuant to the terms of the Letter of Intent and at the
Distributor's direction, will redeem an appropriate number of
shares held in escrow to realize the difference. Signing a
Letter of Intent does not bind an investor to purchase the
full amount indicated at the sales charge in effect at the
time of signing, but an investor must complete the intended
purchase in accordance with the terms of the Letter of Intent
to obtain the reduced sales charge. To apply, an investor must
indicate his or her intention to do so under a Letter of
Intent at the time of purchase of Shares.
QUALIFICATION FOR DISCOUNTS. For purposes of applying the
Rights of Accumulation and Letter of Intent privileges
described above, the scale of sales charges applies to the
combined purchases made by any individual and/or spouse
purchasing securities for his, her or their own account, or
the aggregate investments of a trustee or other fiduciary or
IRA for the benefit of the persons listed above.
PURCHASE ORDERS. Investors may purchase shares of the Funds
through registered representatives of Elan located at Firstar
Banks ("Firstar Investment Offices") or directly with the
Funds' transfer agent. All checks must be drawn on a bank
located within the United States and must be payable in U.S.
dollars. Subsequent investments in an existing account in a
Fund may be made at any time by sending to the address below a
check or money order payable to the Fund in which the
investment is being made as shown above, along with a letter
stating the amount of the investment, the name of the Fund and
the account number in which the investment is to be made. A
$20 fee will be imposed by the Funds' transfer agent if any
check used for investment in an account does not clear, and
the investor involved will be responsible for any loss
incurred by a Fund.
PURCHASE ORDERS PLACED THROUGH REGISTERED REPRESENTATIVES
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
------------------- ---------------------
IN PERSON - Complete an application - Bring your check to a
at a Firstar Investment Firstar Investment
Office. Call 1-800-982-8909 Office. Call 1-800-982-8909
for the office nearest you. for the office nearest you.
BY PHONE - Call your registered - Call your registered
representative representative
or call 1-800-982-8909 for or call 1-800-982-8909 for
the office nearest you. the office nearest you.
AUTOMATICALLY - Call your registered - Complete a Periodic
representative to obtain Investment Plan
a purchase application Application to automatically
which includes purchase more shares.
information for a Periodic
Investment Plan.
PURCHASE ORDERS PLACED THROUGH THE TRANSFER AGENT
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
------------------- ---------------------
BY MAIL - Complete an application - Make your check payable to
and mail it along with a Portico Funds. Please
check payable to include your account
Portico Funds, P.O. Box 3011, number on your check and
Milwaukee, WI 53201-3011. mail it to the address on
your statement.
OVERNIGHT - Complete an application - Make your check payable to
DELIVERY and deliver it along with a Portico Funds. Please
check payable to include your account
Portico Funds, 615 East number on your check and
Michigan St., Milwaukee, deliver it to the
WI 53202. address at the left.
IN PERSON - Bring your application and - Bring your check to a
check to a Firstar Investment Firstar Investment
Office. Call 1-800-982-8909 Office. Call 1-800-982-8909
for the office nearest you. for the office nearest you.
AUTOMATICALLY - Call 1-800-982-8909 to - Complete a Periodic
obtain a purchase application Investment Plan
which includes information Application to
for a Periodic Investment automatically purchase
Plan. more shares.
- Open a ConvertiFund(R)
account to automatically
invest proceeds from one
account to another account
of the Portico family of
funds.
BY WIRE - Call 1-800-228-1024 to - Call 1-800-228-1024 to
arrange a wire transaction. arrange a wire
Ask your bank to transmit transaction. Ask your bank
immediately available funds to transmit immediately
by wire in the amount of your available funds by wire
purchase to: Firstar Bank as described at the left.
Milwaukee, N.A. ABA # Please include your
0750-00022, Account # account number.
112-952-137 for further credit
to [name of Fund] [name/
title on the account].
BY PHONE - Call 1-800-228-1024 to - Call 1-800-228-1024 to
exchange from another exchange from another
Portico Fund account with Portico Fund account with
the same registration the same registration
including name, address including name, address
and taxpayer ID number. and taxpayer ID number.
Investors making initial investments by wire must promptly
complete a Purchase Application and forward it to the
respective Fund. REDEMPTIONS WILL NOT BE PAID UNTIL THE
COMPLETED APPLICATION HAS BEEN RECEIVED BY THE TRANSFER AGENT.
If an order and payment are received by the transfer agent in
proper form (as described above) before the close of regular
trading hours on the New York Stock Exchange (the "Exchange"),
currently 3:00 p.m. Central Time, on a business day, Fund
shares will be purchased as of the determination of net asset
value on that day. Purchase orders which are received after
the close of regular trading hours on the Exchange, or on non-
business days, and orders for which payment is not received by
the close of regular trading hours on the Exchange on a
business day, will be executed on the next business day after
receipt of both the order and payment in proper form by the
transfer agent.
The Funds will not accept payment in cash or third party
checks for the purchase of shares. Federal regulations require
that each investor provide a Social Security number or other
certified taxpayer identification number upon opening or
reopening an account. The Funds reserve the right to reject
applications without such a number or an indication that a
number has been applied for. If a number has been applied for,
the number must be provided and certified within sixty days of
the date of the application. Any accounts opened without a
proper number will be subject to backup withholding at a rate
of 31% on all liquidations and dividend and capital gain
distributions.
Certificates for shares will be issued only upon shareowner
request. The Funds reserve the right to reject any purchase
order. Payment for shares of a Fund in the amount of
$1,000,000 or more may, at the discretion of the Adviser, be
made in the form of securities that are permissible
investments for the respective Fund. For further information
see the Statement of Additional Information or contact the
Portico Investor Services at 1-800-982-8909 or 414-287-3710
(Milwaukee area).
REDEMPTION OF Redemption orders are effected at the net asset value per
SHARES share next determined after receipt of the order by the
transfer agent. If a redemption order is received in proper
form (as described below) before the close of regular trading
hours on the Exchange, currently 3:00 p.m. Central Time, on a
business day, Fund shares will be redeemed as of the
determination of net asset value on that day. Redemption
orders which are received after the close of regular trading
hours on the Exchange, or on non-business days, will be
executed on the next business day. Depending upon the current
net asset value of the redeemed shares at the time of
redemption, the value of the shares redeemed may be more or
less than the investor's cost.
REDEMPTION ORDERS
THROUGH THE THROUGH A REGISTERED
TRANSFER AGENT REPRESENTATIVE
--------------- ---------------
BY PHONE - Call 1-800-228-1024 with - Call your registered
your account name, account representative at
number and amount of 1-800-982-8909.
redemption (minimum $500).
Redemption proceeds will
only be sent to a
shareowner's address or bank
account of a commercial bank
located within the United
States as shown on the
transfer agent's records.
(Available only if
established on the account
application and if there has
been no change of address by
telephone within the
preceding 15 days.)
BY MAIL, - Mail your instructions to - Bring your instructions to
OVERNIGHT the Portico Funds, the Portico Funds,
DELIVERY P.O. Box 3011, P.O. Box 3011,
OR IN PERSON Milwaukee, WI 53201-3011, Milwaukee, WI 53201-3011,
or deliver them (via or deliver them to
overnight delivery or in 615 E. Michigan Street,
person) to 615 E. Michigan Milwaukee, WI 53202,
Street, Milwaukee, or bring your instructions
WI 53202. Include the to your registered
number of shares or the representative's office.
amount to be redeemed,
your shareowner account
number and Social Security
number or other taxpayer
identification number.
Your instructions must be
signed by all persons
required to sign for
transactions exactly as
their names appear on the
account. If the redemption
amount exceeds $50,000, or
if the proceeds are to be
sent elsewhere than the
address of record, or the
address of record has been
changed by telephone
within the preceding 15
days, each signature must
be guaranteed in writing
by either a commercial
bank that is a member of
the FDIC, a trust company,
a credit union, a savings
association, a member firm
of a national securities
exchange or other eligible
guarantor institution.
AUTOMATICALLY - Call 1-800-982-8909 for a - Call your registered
Systematic Withdrawal Plan representative to
application ($15,000 establish a Systematic
account minimum and Withdrawal Plan.
$100 minimum per
transaction).
Guarantees must be signed by an eligible guarantor institution
and "Signature Guaranteed" must appear with the signature. If
certificates have been issued, the certificates, properly
endorsed or accompanied by a properly executed stock power and
accompanied by signature guarantees, must be received by the
transfer agent or Elan. The Funds may require additional
supporting documents for redemptions made by corporations,
executors, administrators, trustees and guardians. A
redemption request will not be deemed to be properly received
until the transfer agent or Elan receives all required
documents in proper form. Purchases of additional shares
concurrently with withdrawals could be disadvantageous because
of the sales charge involved in the additional purchases.
The transfer agent charges a $12.00 fee for each payment made
by wire of redemption proceeds, which will be deducted from
the shareowner's account. The transfer agent also charges a
$15.00 fee for each IRA distribution (unless it is part of a
Systematic Withdrawal Plan), which will be deducted from the
shareowner's account.
In order to arrange for telephone redemptions after an account
has been opened or to change the bank or account designated to
receive redemption proceeds, a written request must be sent to
Portico Investor Services at the address listed above or
contact your registered representative. The request must be
signed by each shareowner of the account. Further
documentation may be requested from corporations, executors,
administrators, trustees and guardians.
The Funds reserve the right to refuse a telephone redemption
if they believe it is advisable to do so. Procedures for
redeeming shares by telephone may be modified or terminated by
the Funds at any time upon notice to shareowners. During
periods of substantial economic or market change, telephone
redemptions may be difficult to implement. If a shareowner is
unable to contact the transfer agent by telephone, shares may
also be redeemed by delivering the redemption request to the
transfer agent.
In an effort to prevent unauthorized or fraudulent redemption
requests by telephone, Portico and the transfer agent employ
reasonable procedures specified by a Fund to confirm that such
instructions are genuine. Among the procedures used to
determine authenticity, investors electing to redeem or
exchange by telephone will be required to provide their
account number. All such telephone transactions will be tape
recorded and confirmed in writing to the shareowner. Portico
may implement other procedures from time to time. If
reasonable procedures are not implemented, Portico and/or the
transfer agent may be liable for any loss due to unauthorized
or fraudulent transactions. In all other cases, the shareowner
is liable for any loss for unauthorized transactions.
OTHER REDEMPTION The Funds will make payment for redeemed shares typically
INFORMATION within one or two business days, but no later than the seventh
day after receipt by the transfer agent of a request in proper
form, except as provided by SEC rules. HOWEVER, IF ANY PORTION
OF THE SHARES TO BE REDEEMED REPRESENTS AN INVESTMENT MADE BY
CHECK, THE FUNDS MAY DELAY THE PAYMENT OF THE REDEMPTION
PROCEEDS UNTIL THE TRANSFER AGENT IS REASONABLY SATISFIED THAT
THE CHECK HAS BEEN COLLECTED, WHICH MAY TAKE TWELVE DAYS FROM
THE PURCHASE DATE. This procedure does not apply to shares
purchased by wire payment. An investor must have filed a
Purchase Application before any redemption requests can be
paid.
The Funds impose no charge when shares are redeemed and
reserve the right to redeem an account involuntarily, upon
sixty days' written notice, if redemptions cause the account's
net asset value to remain at less than $1,000. A Fund may also
redeem shares involuntarily if it is appropriate to do so to
carry out the Fund's responsibilities under the 1940 Act and,
in certain cases, may make payment for redemption in
securities. Investors would bear any brokerage or other
transaction costs incurred in converting the securities so
received to cash. See the Statement of Additional Information
for examples of when such redemptions might be appropriate.
Questions concerning the proper form for redemption requests
should be directed to Portico Investor Services at 1-800-228-
1024 or 414-287-3808 (Milwaukee area).
SHAREOWNER The services and privileges described below are available to
SERVICES retail shareowners of the Funds. These may be modified or
terminated at any time upon notice to shareowners.
SHAREOWNER Shareowners will be provided with a report showing portfolio
REPORTS investments and other information at least semiannually; and
after the close of the Funds' fiscal year which ends October
31, with an annual report containing audited financial
statements. To eliminate unnecessary duplication, only one
copy of shareowner reports will be sent to shareowners with
the same mailing address. Shareowners who desire a duplicate
copy of shareowner reports to be mailed to their residence
should call Portico Investor Services at 1-800-982-8909, or
write Portico Investor Services at the address listed above.
In addition, account statements will be mailed to shareowners
after each purchase, reinvestment of dividends and redemption.
AUTOMATED Shareowners using a touch-tone telephone can access
TELERESPONSE information on the Funds twenty-four hours a day, seven
SERVICE days a week. When calling Portico Investor Services at 1-800-
228-1024, shareowners may choose to use the automated
information feature or, during regular business hours (8:00
a.m. to 7:00 p.m. Central Time, Monday through Friday), speak
with a Portico Investor Services representative.
The automated service provides the information most frequently
requested by shareowners. After calling the 800-number,
pressing "2" on their touch-tone phone, shareowners can:
1. Determine closing prices for each Fund.
2. Learn how the price of a Fund has changed from the previous
day.
3. Hear daily yields for Portico money market funds.
Money market fund yields reflect fee waivers in effect,
represent past performance and will vary. If fees were not
waived, yields would be reduced. Past performance is no
guarantee of future results. Current yield refers to income
earned by a fund's investments over a 7-day period. It is then
annualized and stated as a percentage of the investment.
Effective yield is the same as current yield except that it
assumes the income earned by an investment in a fund will be
reinvested. An investment in any one of the Portico money
market funds is neither insured nor guaranteed by the U.S.
government nor is there any assurance the funds will be able
to maintain a stable net asset value of $1.00 per share.
To speak with a Portico Investor Services representative
anytime during an automated teleresponse session (during
regular business hours), shareowners may press "0."
For total return information, shareowners must call Portico
Investor Services at 1-800-982-8909 or 414-287-3710 (Milwaukee
area).
TELEPHONE If shares may legally be sold in the state of the investor's
EXCHANGE residence, shareowners are generally permitted to exchange
PRIVILEGE their Retail Shares in a Fund (with a minimum current value of
$1,000) for Retail Shares of other funds in the Portico family
of funds without charge or commission by the Fund. A sales
charge will be imposed on the exchange if the shares of the
Fund being acquired have a sales charge and the shares being
redeemed were purchased or otherwise acquired without a sales
charge unless a shareowner qualifies for a sales charge
exemption as described in the section "Purchase of Shares".
Telephone exchange privileges automatically apply to each
shareowner of record and the representative of record unless
and until the transfer agent receives written instructions
from the shareowner(s) of record canceling the privilege.
Portico reserves the right to terminate indefinitely the
exchange privilege of any shareowner, broker, investment
adviser or agent who requests more than four exchanges within
a calendar year, whether for oneself or one's customers.
Portico may determine to do so with prior notice to the
shareowner, broker, investment adviser or agent based on a
consideration of both the number of exchanges the particular
shareowner, broker, investment adviser or agent has requested
and the time period over which those exchange requests have
been made, together with the level of expense to the Funds or
other adverse effects which may result from the additional
exchange requests. If any portion of the shares to be
exchanged represents an investment made by check, a Fund may
delay the acquisition of new shares in an exchange until the
transfer agent is reasonably satisfied that the check has been
collected, which may take twelve days from the purchase date.
Investors may find the exchange privilege useful if their
investment objectives or market outlook should change after
they invest in the Portico family of funds. For federal income
tax purposes, an exchange of shares is a taxable event and,
accordingly, a capital gain or loss may be realized by an
investor. Before making an exchange request, an investor
should consult a tax or other financial adviser to determine
the tax consequences of a particular exchange. No exchange fee
is currently imposed by Portico on exchanges. Portico,
however, reserves the right to impose a charge in the future.
In order to request an exchange by telephone, a shareowner
must give the account name, account number and the amount or
number of shares to be exchanged. During periods of
significant economic or market change, telephone exchanges may
be difficult to implement. If a shareowner is unable to
contact the transfer agent by telephone, shares may also be
exchanged by delivering the exchange request to the transfer
agent in person or by mail at the addresses listed above under
"Redemption of Shares."
The Funds reserve the right to reject any exchange request
with prior notice to a shareowner and the exchange privilege
may be modified or terminated at any time. At least sixty
days' notice will be given to shareowners of any material
modification or termination except where notice is not
required under SEC regulations. The responsibility of the
Funds and their transfer agent for the authenticity of
telephone exchange instructions is limited as described above
under "Redemption of Shares."
RETIREMENT PLANS The Funds offer individual retirement accounts and prototype
defined contribution plans, including simplified employee;
401(k), profit-sharing and money purchase pension plans
("Retirement Plans"). For details concerning Retirement Plans
(including service fees), please call Portico Investor
Services at 1-800-982-8909 or 414-287-3710 (Milwaukee area).
DIVIDENDS AND Dividends from net investment income of the Balanced, Growth
DISTRIBUTIONS and Income, and Equity Index Funds are declared and paid
quarterly. Dividends from net investment income of the MidCore
Growth, Special Growth, and International Equity Funds are
declared and paid annually. Each Fund's net realized capital
gains are distributed at least annually to avoid tax to the
Fund.
Dividends and distributions will reduce the net asset value of
the Retail Shares by the amount of the dividend or
distribution. Dividends and distributions are automatically
reinvested in additional Retail Shares of the Fund on which
the dividend or distribution is paid at their net asset value
per share (as determined on the payable date), unless the
shareowner notifies the Fund's transfer agent or a registered
representative that dividends or capital gains distributions,
or both, should be paid in cash. Cash dividends and
distributions will be paid by check unless the Fund's transfer
agent receives a voided check or deposit ticket to enable the
dividends or distributions to be directly deposited into the
shareowner's bank account. Cash dividends and distributions
will be paid within five business days after the end of the
month in which dividends are declared or within five business
days after a redemption of all of a shareowner's shares of a
Fund. Reinvested dividends and distributions receive the same
tax treatment as those paid in cash.
MANAGEMENT The business and affairs of the Funds are managed under the
OF THE FUNDS direction of the Board of Directors of the Portico Funds, Inc.
("Portico" or the "Company"). The Statement of Additional
Information contains the name and background information
regarding each Director.
ADVISORY FIRMCO, a Wisconsin corporation and subsidiary of Firstar
SERVICES Corporation, a bank holding company, serves as investment
adviser to each Fund. FIRMCO, with principal offices at
Firstar Center, 777 East Wisconsin Avenue, 8th Floor,
Milwaukee, Wisconsin 53202, has been engaged in the business
of providing investment advisory services since 1986. FIRMCO
currently has $19.5 billion in assets under active management,
of which $11.6 billion is invested in fixed-income and money
market securities and $7.9 billion in equity securities.
Subject to the general supervision of the Board of Directors
and in accordance with the respective investment objective and
policies of each Fund, the Adviser manages each Fund's
portfolio, makes decisions with respect to and places orders
for all purchases and sales of each Fund's portfolio
securities, and maintains records relating to such purchases
and sales (except for the International Equity Fund). Subject
to the general supervision of the Board of Directors and in
accordance with the investment objective and policies of the
International Equity Fund, the Adviser is responsible for the
management of the Fund's investments and business affairs.
Under the terms of the Advisory Agreement between the Fund and
the Adviser, the Adviser is authorized to delegate its duties
under that agreement to another adviser. As described below,
the Adviser has retained State Street Global Advisors (the
"Sub-Adviser") with respect to the International Equity Fund's
investments. The Adviser and Sub-Adviser jointly determine the
specific securities to be purchased, retained or sold by the
Fund.
The Adviser (or Sub-Adviser for the International Equity Fund)
is authorized to allocate purchase and sale orders for
portfolio securities to Shareowner Organizations, including,
in the case of agency transactions, Shareowner Organizations
which are affiliated with the Adviser (or Sub-Adviser), to
take into account the sale of Fund shares if the Adviser (or
Sub-Adviser for the International Equity Fund) believes that
the quality of the transaction and the amount of the
commission are comparable to what they would be with other
qualified brokerage firms.
The Adviser is entitled to receive from each Fund a fee,
calculated daily and payable monthly, at the following annual
rates (as a percentage of the Fund's average daily net
assets): 0.25% for the Equity Index Fund; 0.75% for each of
the Balanced, Growth and Income, MidCore Growth and Special
Growth Funds; and 1.50% on the International Equity Fund's
first $25 million, 1.45% on the next $25 million, 1.40% on the
next $50 million, and 1.35% on average daily net assets in
excess of $100 million. The Adviser earned fees, net of
waivers, for the fiscal year ended October 31, 1996, at the
annual rate of 0.25% for the Equity Index Fund, 0.54% for the
Balanced Fund, 0.74% for the Growth and Income Fund, 0.74% for
the MidCore Growth Fund, 0.75% for the Special Growth Fund,
and 0.71% for the International Equity Fund.
The Adviser may voluntarily waive all or a portion of the
advisory fee otherwise payable by a Fund from time to time.
These waivers may be terminated at any time at the Adviser's
discretion.
State Street Global Advisors, a division of State Street Bank
and Trust Company, Two International Place, Boston,
Massachusetts 02110, provides sub-advisory services to the
International Equity Fund. State Street Bank and Trust Company
is a wholly-owned subsidiary of State Street Boston
Corporation, a bank holding company. Subject to the oversight
and supervision of the Fund's Board of Directors, the Sub-
Adviser assists the Adviser in managing the Fund, and jointly
with the Adviser selects investments in accordance with the
Fund's investment objective and policies. Pursuant to its
agreement, the Sub-Adviser places orders for purchases and
sales of the Fund's securities. The Sub-Adviser may utilize
affiliated brokers in connection with the execution of the
Fund's portfolio transactions subject to applicable law and
procedures adopted by the Fund's Board of Directors.
Additional information appears in the Statement of Additional
Information.
The Sub-Adviser began investment advisory operations in 1978.
Currently, the Sub-Adviser manages $244 billion in assets of
which $52 billion are invested in international equity
securities.
The Sub-Adviser is entitled to a fee, payable by the Adviser,
for its services and expenses incurred with respect to the
Fund. The fee is computed daily and paid monthly at the
following annual rates (as a percentage of the Fund's average
daily net assets): 0.40% on the Fund's first $25 million of
average daily net assets, 0.35% on the next $25 million, 0.30%
on the next $50 million, and 0.25% of the Fund's average daily
net assets in excess of $100 million. The Sub-Adviser earned
fees for the fiscal year ended October 31, 1996 at the annual
rate of 0.38% of the Fund's average net asset
The Sub-Adviser also acts as custodian and provides accounting
services for the portfolio securities of the International
Equity Fund. See "Custodian, Transfer and Dividend Disbursing
Agent, and Accounting Services Agent" below.
The following are biographies of the portfolio managers of
each Fund.
Teresa Westman and Marian Zentmyer co-manage the Balanced
Fund. A Senior Vice President and Senior Portfolio Manager of
FIRMCO, Ms. Westman joined Firstar in 1987 and has ten years
of investment management experience. Ms. Westman is a
Chartered Financial Analyst and has managed the Fund since its
inception on March 30, 1992. Ms. Zentmyer, a Senior Vice
President and Senior Portfolio Manager of FIRMCO, has been
with Firstar since 1982 and has eighteen years of investment
management experience. Ms. Zentmyer is a Chartered Financial
Analyst and Certified Financial Planner and has managed the
Fund since June 18, 1996.
Marian Zentmyer and Maya Bittar co-manage the Growth and
Income Fund. Ms. Zentmyer has managed the Fund since February
22, 1993. Ms. Bittar is a Vice President and Portfolio Manager
of FIRMCO and has been with Firstar since 1993. She has four
years of investment management experience and has managed the
Fund since October 1, 1995. Ms. Bittar is a Chartered
Financial Analyst.
Daniel Tranchita manages the Equity Index Fund. Mr. Tranchita
is a Vice President and Portfolio Manager of FIRMCO and has
been with Firstar since 1989. He has eight years of investment
management experience and has managed the Fund since July 1,
1992. He is a Chartered Financial Analyst.
Marian Zentmyer, Maya Bittar, and Matthew D'Attilio co-manage
the MidCore Growth Fund. Mr. D'Attilio has been with Firstar
since 1993 and has four years of investment management
experience. He is an Assistant Vice President of FIRMCO. Ms.
Zentmyer has managed the Fund since June 18, 1996. Ms. Bittar
and Mr. D'Attilio have co-managed the fund since December 1,
1996.
J. Scott Harkness, Todd Krieg and Mark Westman co-manage the
Special Growth Fund. Mr. Harkness has managed the Fund since
its inception on December 28, 1989. Mr. Harkness is Chairman,
a Director and Chief Investment Officer of FIRMCO. He has been
with Firstar for sixteen years and has seventeen years of
investment management experience. Mr. Krieg and Mr. Westman
have been with Firstar since 1992 and have five years of
investment management experience. Both Mr. Krieg and Mr.
Westman are Vice Presidents and Senior Portfolio Managers of
FIRMCO and have managed the fund since September 1, 1994 and
January 1, 1994, respectively. Mr. Harkness, Mr. Krieg and Mr.
Westman are Chartered Financial Analysts.
Daniel Tranchita has managed the International Equity Fund for
the Adviser since its inception on April 28, 1994. The Sub-
Adviser's portfolio management services for the Fund are
conducted by committee, and no one person is primarily
responsible for making recommendations to that committee. The
committee uses a structured selection process which attempts
to duplicate substantially the GDP EAFE Index country
weightings.
ADMINISTRATIVE Firstar Trust Company ("Firstar Trust") and B. C. Ziegler and
SERVICES Company ("Ziegler") serve as the Co-Administrators (the "Co-
Administrators" ). The Co-Administrators have agreed to
provide the following administrative services for the Portico
Funds: assist in maintaining office facilities for the Funds;
furnish clerical and certain other services required by the
Funds; compile data for and prepare notices to the SEC;
prepare semiannual reports to the SEC and current shareowners
and filings with state securities commissions; coordinate
federal and state tax returns; monitor the arrangements
pertaining to the Funds' agreements with Shareowner
Organizations; monitor the Funds' expense accruals; monitor
compliance with the Funds' investment policies and
limitations; and generally assist the Funds' operations. As
further described in the Statement of Additional Information,
certain services under the Co-Administration Agreement are
provided jointly by Firstar Trust and Ziegler and other
services are provided separately by either Firstar Trust or
Ziegler. The Co-Administrators are entitled to receive a fee
for their administrative services, computed daily and payable
monthly, at the annual rate of .125% of Portico's first $2
billion of average aggregate daily net assets, plus .10% of
Portico's average aggregate daily net assets in excess of $2
billion. The Co-Administrators may voluntarily waive all or a
portion of their administrative fee from time to time. These
waivers may be terminated at any time at the Co-
Administrators' discretion.
For the fiscal year ended October 31, 1996, the Funds accrued
administrative fees, after waivers, at the effective annual
rate of 0.05% for the Balanced, Growth and Income, Equity
Index, MidCore Growth, Special Growth, and International
Equity Funds.
SHAREOWNER Portico may enter into agreements from time to time with
ORGANIZATIONS certain Shareowner Organizations, including affiliates of the
Adviser (such as Elan), providing for certain support and/or
distribution services to their customers who are the
beneficial owners of Retail Shares of the Funds. Under the
Service Agreements, shareowner support services, which are
described more fully in the Statement of Additional
Information, may include assisting investors in processing
purchase, exchange and redemption requests; processing
dividend and distribution payments from the Funds; providing
information periodically to customers showing their positions
in Retail Shares of the Funds; and providing sub-accounting
with respect to Retail Shares beneficially owned by customers
or the information necessary for sub-accounting. In addition,
Shareowner Organizations under a Distribution and Service
Agreement may provide the foregoing shareowner support
services and may also provide assistance, such as the
forwarding of sales literature and advertising to their
customers, in connection with the distribution of Retail
Shares. For their services, Shareowner Organizations may be
entitled to receive fees from a Fund at annual rates of up to
0.25% of the average daily net asset value of the Retail
Shares covered by their agreements. For the 1996 calendar
year, Shareowner Organizations received fees pursuant to such
agreements at the annual rates of 0.25% of their average net
assets.
Under the terms of their agreements with Portico, Shareowner
Organizations are required to provide a schedule of any fees
that they may charge to their customers relating to the
investment of their assets in Retail Shares covered by the
agreements. Investors should read this Prospectus in light of
such fee schedules and under the terms of their Shareowner
Organization's agreement with Portico. In addition, investors
should contact their Shareowner Organization with respect to
the availability of shareowner services and the particular
Shareowner Organization's procedures for purchasing and
redeeming shares. It is the responsibility of Shareowner
Organizations to transmit purchase and redemption orders and
record those orders in customers' accounts on a timely basis
in accordance with their agreements with customers. At the
request of a Shareowner Organization, the transfer agent's
charge of $12.00 for each payment made by wire of redemption
proceeds may be billed directly to the Shareowner
Organization.
The Glass-Steagall Act and other applicable laws, among other
things, prohibit banks from engaging in the business of
underwriting securities. Accordingly, banks will be engaged
under agreements with Portico only to perform the
administrative and investor servicing functions described
above, and will represent to Portico that in no event will the
services provided by them under the agreements be primarily
intended to result in the sale of Retail Shares.
Conflict-of-interest restrictions may apply to the receipt of
compensation paid by Portico to a Shareowner Organization in
connection with the investment of fiduciary funds in Retail
Shares. Institutions, including banks regulated by the
Comptroller of the Currency and investment advisers and other
money managers subject to the jurisdiction of the SEC, the
Department of Labor or state securities commissions, are urged
to consult legal counsel before entering into agreements with
Portico.
Agreements that contemplate the provision of distribution
services by Shareowner Organizations are governed by a
Distribution and Service Plan (the "Plan") that has been
adopted by Portico pursuant to Rule 12b-1 under the 1940 Act.
In the case of the Funds, no payments are made to their
Distributor under the Plan. However, payments to Shareowner
Organizations, including affiliates of the Adviser and Sub-
Adviser, under the Plan are not tied directly to their own
out-of-pocket expenses and therefore may be used as they elect
(for example, to defray their overhead expenses), and may
exceed their direct and indirect costs.
CUSTODIAN, Firstar Trust, an affiliate of the Adviser, provides
TRANSFER transfer agency and dividend disbursing agency services
AND DIVIDEND for all the Funds and custodial and accounting services for
DISBURSING each Fund, except the International Equity Fund. State
AGENT, Street Bank and Trust Company, 225 Franklin Street, Boston,
AND ACCOUNTING Massachusetts 02110, provides custodial and accounting
SERVICES AGENT services for the International Equity Fund. For the fiscal
year ended October 31, 1996, total transfer agency, dividend
disbursing agency, custodial and accounting services fees
earned by Firstar Trust were approximately 0.11%, 0.07%,
0.08%, 0.07%, 0.06%, and 0.07% of the Balanced , Growth and
Income, Equity Index, MidCore Growth, Special Growth, and
International Equity Funds' average net assets, respectively.
Additional information regarding the fees payable by the Funds
to Firstar Trust and State Street Bank and Trust Company for
these services is provided in the Statement of Additional
Information. Inquiries to the transfer agent may be sent to
the following address: Firstar Trust Company, P.O. Box 3011,
Milwaukee, WI 53201-3011.
INVESTMENT Except for the limitations detailed below, the investment
LIMITATIONS objective and policies of each Fund described in this
Prospectus are not fundamental and may be changed by the Board
of Directors without the affirmative vote of the holders of a
majority of a Fund's outstanding shares. If there is a change
in a Fund's investment objective, shareowners should consider
whether the Fund remains an appropriate investment in light of
their then current financial position and needs. The following
descriptions summarize several of each Fund's fundamental
investment limitations which are set forth in full in the
Statement of Additional Information.
No Fund may:
1. Purchase securities of any one issuer (other than U.S.
Government securities) if more than 5% of the value of its
total assets will be invested in the securities of such
issuer, except that up to 25% of the value of a Fund's
total assets may be invested without regard to this 5%
limitation.
2. Subject to the foregoing 25% exception, purchase more than
10% of the outstanding voting securities of any issuer.
3. Invest 25% or more of its total assets in one or more
issuers conducting their principal business activities in
the same industry.
4. Borrow money or enter into reverse repurchase agreements
except for temporary purposes in amounts up to 10% of the
value of the total assets at the time of such borrowing,
or mortgage, pledge or hypothecate any assets except in
connection with such borrowings. Whenever borrowings
(including reverse repurchase agreements) exceed 5% of the
Fund's total assets, the Fund will not make any
investments. If a percentage limitation is satisfied at
the time of investment, a later increase or decrease in
such percentage resulting from a change in the value of
the Fund's portfolio securities will not constitute a
violation of such limitation. If due to market
fluctuations or other reasons the amount of borrowings or
reverse repurchase agreements exceed the 10% limit stated
above, a Fund will promptly reduce such amount.
TAXES Portico's management intends that each Fund will qualify as a
FEDERAL "regulated investment company" under the Internal Revenue Code
of 1986, as amended (the "Code"). Such qualification generally
will relieve each Fund of liability for federal income taxes
to the extent its earnings are distributed in accordance with
the Code.
Each Fund contemplates declaring as dividends each year at
least 90% of its investment company income. An investor who
receives a dividend derived from investment company taxable
income (which includes any excess of net short-term capital
gain over net long-term capital loss) treats it as a receipt
of ordinary income in the computation of his gross income,
whether such dividend is paid in the form of cash or
additional shares of the Fund. Subject to certain holding
requirements, the dividends received deduction for
corporations may apply to such ordinary income distributions
to the extent of the total qualifying dividends received by a
Fund from domestic corporations for the taxable year.
Any dividend or distribution of a Fund's excess of net long-
term capital gain over its net short-term capital loss will be
taxable to a shareowner of the Fund as long-term capital gain,
regardless of how long the shareowner has held shares of the
Fund.
Before purchasing Fund shares, the impact of dividend or
capital gain distributions which are expected to be declared
or have been declared but not paid, should be carefully
considered. Any dividend or distribution paid by the Fund
shortly after the purchase of shares of the Fund will have the
effect of reducing the per share net asset value by the per
share amount of the dividend or distribution. Such dividends
or distributions, although in effect a return of capital to
shareowners, are subject to income taxes.
Each Fund will be required in certain cases to withhold and
remit to the U.S. Treasury 31% of the dividends or gross sale
proceeds paid to any shareowner (i) who has provided either an
incorrect taxpayer identification number or no number at all,
(ii) who is subject to withholding by the Internal Revenue
Service for failure to properly include on his return payments
of interest or dividends, or (iii) who has failed, when
required to do so, to certify that he is not subject to backup
withholding. Each Fund generally also will withhold and remit
to the U.S. Treasury 10% of all distributions from individual
retirement accounts (including simplified employee plans) to
any investor unless the transfer agent receives a written
request not to withhold federal income tax from the investor
prior to the distribution date; withholding on distributions
from other types of Retirement Plans may be mandatory and may
be at a higher rate.
A taxable gain or loss may be realized by a shareowner upon a
redemption, transfer or exchange of Fund shares, depending on
the tax basis of the shares and their price at the time of
such disposition.
Generally, a shareowner may include sales charges incurred
upon the purchase of Retail Shares in his or her tax basis for
such shares for the purpose of determining gain or loss on a
redemption, transfer or exchange of shares. However, if the
shareowner effects an exchange of such shares for Retail
Shares of another fund of the Company within 90 days of the
purchase and is able to reduce the sales charge applicable to
the new shares (by virtue of the Company's exchange
privilege), the amount equal to such reduction may not be
included in the tax basis of the shareowner's exchanged
shares, but may be included (subject to the limitation) in the
tax basis of the new shares. If a shareowner held shares for
six months or less, any loss realized by the shareowner will
be treated as long-term loss to the extent of any long-term
capital gain distribution received.
Certain income received by the International Equity Fund may
be subject to foreign taxes. If more than 50% in value of the
Fund's total assets at the close of any taxable year consists
of stocks or securities of foreign corporations, the Fund may
elect to treat any foreign taxes paid by it as paid by its
shareowners. If the Fund makes this election, each shareowner
generally will be required to include in income his respective
pro rata portions of foreign taxes and, if he itemizes his
deductions, will be entitled to deduct such respective pro
rata portions in computing his taxable income or,
alternatively, to claim foreign tax credits (subject, in
either case, to certain limitations). Each year that the Fund
makes this election, it will report to its shareowners the
amount per share of foreign taxes it has elected to have
treated as paid by its shareowners. If the Fund's dividends
exceed its taxable income in any year, as a result of
currency-related losses or otherwise, all or a portion of the
Fund's dividends may be treated as a return of capital to
shareowners for tax purposes.
The foregoing is only a brief summary of some of the important
federal income tax considerations generally affecting the
Funds and their shareowners, and is not intended as a
substitute for careful tax planning and is based on tax laws
and regulations which are in effect on the date of this
Prospectus. Such laws and regulations may be changed by
legislative or administrative action. Accordingly, investors
in the Funds should consult their tax advisers with specific
reference to their own tax situation. Shareowners will be
advised at least annually as to the federal income tax
consequences of dividends and distributions made each year.
STATE AND LOCAL Investors are advised to consult their tax advisers concerning
the application of state and local tax laws, which may have
different consequences from those of the federal income tax
law described above.
DESCRIPTION The Company was incorporated under the laws of the State of
OF SHARES Wisconsin on February 15, 1988 and is registered with the SEC
as an open-end management company. The Articles of
Incorporation authorize the Board of Directors to issue up to
150 billion full and fractional shares of common stock, $.0001
par value per share. The Company currently has 16 classes
representing interests in 16 investment portfolios. Each class
of the Funds is currently divided into two separate series, a
Retail Series and Institutional Series representing interests
in the same Fund. Of these authorized shares, 500 million
shares have been classified for the Retail Series of each Fund
discussed in this Prospectus.
Shares of each series bear their pro rata portion of all
operating expenses paid by the Funds, except certain payments
under the Funds' Distribution and Service Plan and Shareowner
Servicing Plan applicable only to Retail Series Shares.
Institutional Shares are offered in a separate prospectus and
are sold without a sales charge. The differences in expenses
and sales charges will affect the performance of Institutional
and Retail Shares. Institutional Shares are only sold to and
held by (i) trust, agency or custodial accounts opened through
trust companies or trust departments affiliated with Firstar
Corporation; (ii) employer sponsored qualified retirement
plans; and (iii) clients of the Adviser. Retail Shares are
available to any investor who does not fall within the three
preceding categories. Portico Funds does not offer the
Periodic Investment Plan, ConvertiFund(R), and Systematic
Withdrawal Plan to Shareowners of the Institutional Series. A
salesperson and any other person or Shareowner Organization
entitled to receive compensation for selling or servicing
shares may receive different compensation with respect to
different series of shares.
For information regarding the other funds and series, contact
Portico Investor Services at 1-800-982-8909 or 414-287-3710
(Milwaukee area) or your Shareowner Organization.
Portico does not presently intend to hold annual meetings of
shareowners except as required by the 1940 Act or other
applicable law. Portico will call a meeting of shareowners for
the purpose of voting upon the question of removal of a member
of the Board of Directors upon written request of shareowners
owning at least 10% of the outstanding shares of Portico that
are entitled to vote. To the extent required by law, Portico
will assist in shareowner communication in such matters.
Shareowners of each class of the Funds are entitled to one
vote for each full share held and proportionate fractional
votes for fractional shares held, and will vote in the
aggregate and not by Fund except where otherwise required by
law. It is contemplated that the shareowners of a Fund will
vote separately on matters relating to its investment advisory
agreement (or sub-advisory agreement with respect to the
International Equity Fund) and any changes in its fundamental
investment limitations. On any matter submitted to the vote of
shareowners which only pertains to agreements, liabilities or
expenses applicable to the Retail Shares but not the
Institutional Shares of the same Fund, only the Retail Shares
will be entitled to vote. Shares of Portico have noncumulative
voting rights and, accordingly, the holders of more than 50%
of Portico's outstanding shares (irrespective of Fund) may
elect all of the Directors. As of January 31, 1997, the
Adviser and its affiliates held, on behalf of their underlying
accounts, approximately 72% of Portico's shares that were
outstanding on that date.
Each Retail Share of a Fund represents an equal proportionate
interest with other Retail Shares in the Fund, and is entitled
to such dividends and distributions earned on its assets as
are declared at the discretion of the Board of Directors.
Shares of the Funds do not have preemptive rights. Each Fund
is classified as a diversified company under the 1940 Act.
NET ASSET VALUE The net asset value of each Fund for purposes of pricing
AND DAYS OF purchase and redemption orders is determined as of the close
OPERATION of regular trading hours on the Exchange, currently 3:00 p.m.
Central Time, on each day the Exchange is open for trading. As
a result, shares of the Funds will not be priced on the days
which the Exchange observes: New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. Net asset value per Retail
Share is calculated by dividing the value of all securities
and other assets owned by each Fund that are allocated to
Retail Shares, less the liabilities charged to Retail Shares,
by the number of the Fund's outstanding Retail Shares.
Securities which are traded on a recognized domestic stock
exchange are valued at the last sale price on the securities
exchange on which such securities are primarily traded or at
the last sale price on the national securities market.
Portfolio securities which are primarily traded on foreign
securities exchanges are generally valued at the preceding
closing values of such securities on their respective
exchanges, except when an occurrence subsequent to the time a
value was so established is likely to have changed such value.
In such an event, the fair value of those securities will be
determined through the consideration of other factors by or
under the direction of the Board of Directors. Exchange-traded
securities for which there were no transactions are valued on
the average of the current bid and asked prices for the
International Equity Fund and at the current bid prices for
the other Funds. Securities traded on only over-the-counter
markets are valued on the basis of closing over-the-counter
bid prices. Restricted securities, securities for which market
quotations are not readily available and other assets are
valued at fair value by the Adviser under the supervision of
the Board of Directors. Short-term investments having a
maturity of 60 days or less are valued at amortized cost,
unless the amortized cost does not approximate market value.
Each Fund's securities may be valued based on valuations
provided by an independent pricing service. These valuations
are reviewed by the Adviser. If the Adviser believes that a
valuation received from the service does not represent a fair
value, it values the security by a method that the Board of
Directors believes will determine a fair value. Any pricing
service used may employ electronic data processing techniques,
including a "matrix" system, to determine valuations.
Quotations of foreign securities in foreign currency are
converted to U.S. dollar equivalents using the foreign
exchange quotation in effect at the time net asset value is
computed. Foreign securities held by the International Equity
Fund may trade in their local markets on days the Fund is
closed, and the Fund's net asset value may, therefore, change
on days when investors may not purchase or redeem shares.
PERFORMANCE From time to time, total return data for Retail Shares of a
CALCULATIONS Fund may be quoted in advertisements or in communications to
shareowners. The total return of a Fund's Retail Shares will
be calculated on an average annual (compound) total return
basis, and may also be calculated on an aggregate total return
basis, for various periods. Average annual total return
reflects the average annual percentage change in value of an
investment in Retail Shares of a Fund over the measuring
period. Aggregate total return reflects the total percentage
change in value over the measuring period. Both methods of
calculating total return assume that dividends and capital
gain distributions made by the Retail Shares of the Fund
during the period are reinvested in Retail Shares of the Fund
and that the maximum sales charge during the period has been
deducted from the investment at the time of purchase.
All the Funds may advertise total return data without
reflecting the sales charge if they are accompanied, in
accordance with SEC rules, by average annual total return data
reflecting the maximum sales charge. Quotations which do not
reflect the sales charge will, of course, be higher than
quotations which do.
The total return of a Fund's Retail Shares may be compared to
those of other mutual funds with similar investment objectives
and to stock, bond and other relevant indices or to rankings
prepared by independent services or other financial or
industry publications that monitor the performance of mutual
funds. For example, the total return of a Fund's Retail Shares
may be compared to data prepared by Lipper Analytical
Services, Inc. In addition, the total return of a Fund's
Retail Shares may be compared to the S&P 500 Index; the S&P
MidCap 400 Index, S&P SmallCap 600 Index, the NASDAQ Composite
Index, an index of unmanaged groups of common stocks of
domestic companies that are quoted on the National Association
of Securities Quotation System; the Dow Jones Industrial
Average, a recognized unmanaged index of common stocks of 30
industrial companies listed on the New York Stock Exchange;
the Wilshire Top 750 Index, an index of domestic equity issues
which are traded over the national exchanges; the Russell 2000
Index; the Value Line Composite Index, an unmanaged index of
nearly 1,700 stocks reviewed in Ratings & Reports; the Russell
MidCap; the Wilshire MidCap 750 Index; the Lehman Brothers
Intermediate Government/Corporate Bond Index; the Lehman
Brothers Government/Corporate Bond Index; and the Consumer
Price Index; the GDP EAFE Index; the Salmon-Russell Indices;
the Russell Universe Indices; and the Lipper International
Indices. Total return data as reported in national financial
publications, such as Money Magazine, Forbes, Barron's,
Morningstar Mutual Funds, The Wall Street Journal and The New
York Times, or in publications of a local or regional nature,
may also be used in comparing the performance of the Funds.
Performance quotations represent past performance, and should
not be considered as representative of future results. The
investment return and principal value of an investment in a
Fund's Retail Shares will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their
original cost. Since performance will fluctuate, performance
data for a Fund cannot necessarily be used to compare an
investment in a Fund's Retail Shares with bank deposits,
savings accounts and similar investment alternatives which
often provide an agreed or guaranteed fixed yield for a stated
period of time. Investors should remember that performance is
generally a function of the kind and quality of the
investments held in a portfolio, portfolio maturity, operating
expenses and market conditions. Any fees charged by Shareowner
Organizations directly to their customer accounts in
connection with investments in a Fund will not be included in
the Fund's calculations of total return and will reduce the
total return received by the accounts. The methods used to
compute total return are described in more detail in the
Statement of Additional Information.
_______________________
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR
IN THE FUNDS' STATEMENT OF ADDITIONAL INFORMATION INCORPORATED
HEREIN BY REFERENCE, IN CONNECTION WITH THE OFFERING MADE BY
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUNDS OR THEIR DISTRIBUTOR. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFERING BY THE FUNDS OR BY THEIR
DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE
OBTAINED BY THE EQUITY INDEX FUND, BY SHAREOWNERS OF THE FUND,
BY ANY PERSON OR BY ANY ENTITY FROM THE USE OF THE S&P 500
INDEX OR ANY DATA INCLUDED THEREIN IN CONNECTION WITH THE USE
LICENSED BY THE FUND, OR FOR ANY OTHER USE. S&P MAKES NO
EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL
SUCH WARRANTIES OR MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE FOR USE WITH RESPECT TO THE S&P 500 INDEX OR DATA
INCLUDED HEREIN. "STANDARD & POOR'S(R)," "S&P(R)," "S&P
500(R)," "STANDARD & POOR'S 500(R)," AND "500(R)" ARE SERVICE
MARKS OF S&P AND HAVE BEEN LICENSED FOR USE BY PORTICO.
TO OPEN AN ACCOUNT OR REQUEST INFORMATION
1-800-982-8909
1-414-287-3710
FOR ACCOUNT BALANCES AND INVESTOR SERVICES
1-800-228-1024
1-414-287-3808
PORTICO INVESTOR SERVICES
615 East Michigan Street
P.O. Box 3011
Milwaukee, Wisconsin 53201-3011
- ------------------------------------------------------------------------------
PORTICO FUNDS, INC.
(Money Market Fund, U.S. Treasury Money Market Fund,
U.S. Government Money Market Fund, Tax-Exempt Money Market Fund)
Form N-1A
Cross Reference Sheet
_________________________________
Part A
Item No. Prospectus Heading
- -------- ------------------
1. Cover Page................................... Cover Page
2. Synopsis..................................... Expense Summary
3. Condensed Financial Information.............. Financial
Highlights; Yield
4. General Description of Registrant............ Cover Page;
Investment
Objectives and
Policies; Other
Investment
Information;
Description of
Shares;
Investment
Limitations
5. Management of the Fund....................... Management of the
Funds
5A. Management's Discussion of Fund Performance.. Inapplicable
6. Capital Stock and Other Securities........... Dividends and
Distributions;
Management of the
Funds; Taxes;
Description of
Shares
7. Purchase of Securities Being Offered......... Purchase of Shares;
Shareholder
Services; Net Asset
Value and Days of
Operation
8. Redemption or Repurchase..................... Redemption of
Shares; Shareholder
Services; Net Asset
Value and Days of
Operation
9. Pending Legal Proceedings.................... Not Applicable
- ------------------------------------------------------------------------------
PROSPECTUS
FEBRUARY 28, 1997
MONEY MARKET FUND
U.S. TREASURY
MONEY MARKET FUND
U.S. GOVERNMENT
MONEY MARKET FUND
TAX-EXEMPT
MONEY MARKET FUND
PORTICO FUNDS
TABLE OF CONTENTS
Expense Summary 2
Financial Highlights 3
Investment Objectives and Policies 6
Other Investment Information 11
Purchase of Shares 11
Redemption of Shares 14
Shareowner Services 16
Dividends and Distributions 18
Management of the Funds 18
Investment Limitations 21
Taxes 21
Description of Shares 23
Net Asset Value and Days of Operation 23
Yield 24
PORTICO FUNDS, INC. is a family of sixteen mutual funds that offer a variety of
investment objectives designed to meet the needs of individual and institutional
investors. This Prospectus describes four separate money market funds (the
"Funds") that are designed to meet the cash management and investment needs of
investors. Portico Funds also offers retail and institutional shares of bond and
equity funds, which are described in separate prospectuses.
AN INVESTMENT IN THE MONEY MARKET FUNDS IS NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE FUNDS WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
THE MONEY MARKET FUND seeks to provide a high level of taxable current income
consistent with liquidity, the preservation of capital and a stable net asset
value. The Fund attempts to attain its objective by investing in a broad range
of government, bank and commercial money market instruments.
THE U.S. TREASURY MONEY MARKET FUND seeks 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. The Fund pursues its
objective by investing in obligations issued or guaranteed as to principal and
interest by the U.S. Treasury, the interest income from which is exempt from
state income taxation.
THE U.S. GOVERNMENT MONEY MARKET FUND seeks to provide a high level of taxable
current income consistent with liquidity, the preservation of capital and a
stable net asset value. The Fund attempts to attain its objective by investing
in obligations that are issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, and in repurchase agreements relating to such
obligations, irrespective of state income tax considerations.
THE TAX-EXEMPT MONEY MARKET FUND seeks to provide a high level of current income
exempt from federal income taxes consistent with liquidity, the preservation of
capital and a stable net asset value. In pursuing its investment objective, the
Fund invests primarily in short-term debt obligations issued by state and local
governments.
Firstar Investment Research & Management Company ("FIRMCO" or the "Adviser")
serves as investment adviser to each Fund, and the Funds are sponsored by B.C.
Ziegler and Company (the "Distributor"). Shareowner Organizations may perform
shareowner servicing and provide assistance in connection with the distribution
of the Funds' shares and receive fees from the Funds for their services. (See
"Management of the Funds.") This Prospectus sets forth concisely the information
about the Money Market Fund, U.S. Treasury Money Market Fund, U.S. Government
Money Market Fund and Tax-Exempt Money Market Fund that a prospective investor
should consider before investing. You should read this Prospectus and retain it
for future reference. Additional information about the Funds, contained in a
Statement of Additional Information, has been filed with the Securities and
Exchange Commission ("SEC") and is available upon request without charge by
writing Portico Investor Services at 615 East Michigan Street, P.O. Box 3011,
Milwaukee, WI 53201-3011, or by calling 1-800-982-8909 or 414-287-3710
(Milwaukee area). The SEC maintains a website (http://www.sec.gov.) that
contains the Statement of Additional Information, material incorporated by
reference and other information regarding registrants that file electronically
with the SEC. The Statement of Additional Information bears the same date as
this Prospectus and is incorporated by reference in its entirety into the
Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
SHARES OF THE 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.
February 28, 1997
EXPENSE SUMMARY Below is a summary of the shareowner transaction expenses and
the annual operating expenses incurred by the Money Market,
U.S. Treasury Money Market, U.S. Government Money Market, and
Tax-Exempt Money Market Funds during the fiscal year ended
October 31, 1996. An example based on the summary is also
shown.
SHAREOWNER TRANSACTION EXPENSES
- -------------------------------------------------------------------
Maximum Sales Charge Imposed on Purchases None
Maximum Sales Charge on Reinvested Dividends None
Deferred Sales Charge None
Redemption Fees None1
Exchange Fees None
- -------------------------------------------------------------------
ANNUAL FUND MONEY U.S. TREASURY U.S. GOVERNMENT TAX-EXEMPT
OPERATING EXPENSES MARKET MONEY MARKET MONEY MARKET MONEY
(AS A PERCENTAGE OF FUND FUND FUND MARKET FUND
AVERAGE NET ASSETS)
- ------------------------------------------------------------------------------
Advisory Fees
After Fees 2 0.36% 0.37% 0.46% 0.39%
12b-1 Fees 0.02% 0.00% 0.00% 0.00%
Shareowner
Servicing Fees 3 0.00% 0.00% 0.00% 0.00%
Other Expenses After
Fee Waivers 4 0.22% 0.23% 0.14% 0.21%
Total Fund Operating
Expenses After Fee
Waivers 5 0.60% 0.60% 0.60% 0.60%
- ------------------------------------------------------------------------------
1 A fee of $12.00 is charged for each wire redemption. See "Redemption of
Shares."
2 The Adviser has voluntarily agreed to waive a portion of its fees to the
extent that each Fund's total ordinary operating expenses exceed 0.60%
during the current fiscal year. Absent such waivers, advisory fees would be
0.50% for each Fund. See "Management of the Funds" in this Prospectus for a
more complete description and the Funds' financial statements for the
fiscal year ended October 31, 1996 incorporated into the Statement of
Additional Information.
3 The total of all 12b-1 fees and Shareowner Servicing Fees paid by a Fund
may not exceed, in the aggregate, the annual rate of 0.25% of the Fund's
average daily net assets. Only the Money Market Fund intends to pay 12b-1
fees for the current year.
4 Absent voluntary administrative fee waivers, other expenses would have been
0.29%, 0.30%, 0.21% and 0.28% for the Money Market, U.S. Treasury Money
Market, U.S. Government Money Market, and Tax-Exempt Money Market Funds,
respectively.
5 Absent fee waivers, total operating expenses would have been 0.81%, 0.80%,
0.71% and 0.78% for the Money Market, U.S. Treasury Money Market, U.S.
Government Money Market and Tax-Exempt Money Market Funds, respectively.
EXPENSE SUMMARY Example: You would pay the following expenses on a $1,000
investment in any one of the Funds, assuming (1) a 5% annual
return and (2) redemption of your investment at the end of
each time period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------------------------
Money Market Fund, U.S. Treasury
Money Market Fund, U.S. Government
Money Market Fund, Tax-Exempt Money
Market Fund $6 $19 $33 $75
- ------------------------------------------------------------------------------
The foregoing tables are intended to assist investors in
understanding the expenses that shareowners bear directly or
indirectly. In addition, Shareowner Organizations may charge
fees for providing services in connection with their clients'
investments in a Fund's shares.
The example shown above should not be considered a
representation of future investment return or operating
expenses. Actual investment return and operating expenses may
be more or less than those shown.
UNDERSTANDING EXPENSES
Operating a mutual fund involves a variety of expenses for
portfolio management, shareowner statements and reports, and
other services. These costs are paid from a Fund's assets
and their effect, except for any fees charged directly by a
Shareowner Organization to its customers, are factored into
any quoted share price or return.
FINANCIAL The financial highlights for each of the periods presented
HIGHLIGHTS have been derived from financial statements which have been
audited by Price Waterhouse LLP, independent accountants,
whose report, which appears in the annual report to
shareowners for the fiscal year ended October 31, 1996, is
incorporated by reference into the Statement of Additional
Information. The tables on the following pages should be read
in conjunction with the financial statements and related notes
also incorporated by reference into the Statement of
Additional Information. You may obtain the Statement of
Additional Information and the annual report to shareowners,
which contains additional performance information, free of
charge by calling or writing Portico Investor Services at the
address listed on the back cover of this Prospectus.
FINANCIAL HIGHLIGHTS
NET ASSET, DIVIDENDS
VALUE NET FROM
BEGINNING OF INVESTMENT NET INVESTMENT
PERIOD INCOME INCOME
- -----------------------------------------------------------------------------
MONEY MARKET FUND
March 16, 19881 through
October 31, 1988 $1.00 $0.05 $(0.05)
Year Ended October 31, 1989 1.00 0.08 (0.08)
Year Ended October 31, 1990 1.00 0.08 (0.08)
Year Ended October 31, 1991 1.00 0.06 (0.06)
Year Ended October 31, 19922 1.00 0.04 (0.04)
Year Ended October 31, 1993 1.00 0.03 (0.03)
Year Ended October 31, 1994 1.00 0.03 (0.03)
Year Ended October 31, 1995 1.00 0.05 (0.05)
Year Ended October 31, 1996 1.00 0.05 (0.05)
U.S. TREASURY MONEY MARKET FUND
April 29, 19911 through
October 31, 1991 1.00 0.03 (0.03)
Year Ended October 31, 19922 1.00 0.04 (0.04)
Year Ended October 31, 1993 1.00 0.03 (0.03)
Year Ended October 31, 1994 1.00 0.03 (0.03)
Year Ended October 31, 1995 1.00 0.05 (0.05)
Year Ended October 31, 1996 1.00 0.05 (0.05)
U.S. GOVERNMENT MONEY MARKET FUND
August 1, 19881 through
October 31, 1988 1.00 0.02 (0.02)
Year Ended October 31, 1989 1.00 0.08 (0.08)
Year Ended October 31, 1990 1.00 0.08 (0.08)
Year Ended October 31, 1991 1.00 0.06 (0.06)
Year Ended October 31, 19922 1.00 0.04 (0.04)
Year Ended October 31, 1993 1.00 0.03 (0.03)
Year Ended October 31, 1994 1.00 0.03 (0.03)
Year Ended October 31, 1995 1.00 0.05 (0.05)
Year Ended October 31, 1996 1.00 0.05 (0.05)
TAX-EXEMPT MONEY MARKET FUND
June 27, 19881 through
October 31, 1988 1.00 0.02 (0.02)
Year Ended October 31, 1989 1.00 0.06 (0.06)
Year Ended October 31, 1990 1.00 0.05 (0.05)
Year Ended October 31, 1991 1.00 0.04 (0.04)
Year Ended October 31, 19922 1.00 0.03 (0.03)
Year Ended October 31, 1993 1.00 0.02 (0.02)
Year Ended October 31, 1994 1.00 0.02 (0.02)
Year Ended October 31, 1995 1.00 0.03 (0.03)
Year Ended October 31, 1996 1.00 0.03 (0.03)
<TABLE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<CAPTION>
SUPPLEMENTAL DATA AND RATIOS
--------------------------------------------------------
RATIO OF RATIO OF NET
NET ASSET VALUE, NET ASSETS, NET EXPENSES INVESTMENT INCOME
END OF END OF TO AVERAGE TO AVERAGE TOTAL
PERIOD PERIOD (000S) NET ASSETS NET ASSETS RETURN
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MONEY MARKET FUND
March 16, 19881 through
October 31, 1988 $1.00 $100,373 0.44%3,4 7.35%3,4 4.63%5
Year Ended October 31, 1989 1.00 201,097 0.60%4 8.66%4 9.01%
Year Ended October 31, 1990 1.00 762,170 0.51%4 7.81%4 8.14%
Year Ended October 31, 1991 1.00 628,697 0.50%4 6.28%4 6.39%
Year Ended October 31, 19922 1.00 146,012 0.58%4 3.84%4 3.73%
Year Ended October 31, 1993 1.00 132,568 0.60%4 2.67%4 2.71%
Year Ended October 31, 1994 1.00 165,018 0.60%4 3.44%4 3.42%
Year Ended October 31, 1995 1.00 172,261 0.60%4 5.36%4 5.51%
Year Ended October 31, 1996 1.00 224,036 0.60%4 4.94%4 5.06%
U.S. TREASURY MONEY MARKET FUND
April 29, 19911 through
October 31, 1991 1.00 36,267 0.52%6, 7 5.23%6, 7 2.69%8
Year Ended October 31, 19922 1.00 37,342 0.60%7 3.42%7 3.48%
Year Ended October 31, 1993 1.00 40,744 0.60%7 2.55%7 2.59%
Year Ended October 31, 1994 1.00 56,020 0.60%7 3.14%7 3.20%
Year Ended October 31, 1995 1.00 64,655 0.60%7 5.04%7 5.16%
Year Ended October 31, 1996 1.00 53,430 0.60%7 4.70%7 4.80%
U.S. GOVERNMENT MONEY MARKET FUND
August 1, 19881 through
October 31, 1988 1.00 49,069 0.50%3, 9 7.56%3, 9 1.91%5
Year Ended October 31, 1989 1.00 101,497 0.61%9 8.43%9 8.72%
Year Ended October 31, 1990 1.00 153,480 0.60%9 7.55%9 7.84%
Year Ended October 31, 1991 1.00 237,752 0.60%9 5.80%9 6.02%
Year Ended October 31, 19922 1.00 221,521 0.60%9 3.56%9 3.60%
Year Ended October 31, 1993 1.00 203,165 0.60%9 2.59%9 2.63%
Year Ended October 31, 1994 1.00 183,591 0.60%9 3.29%9 3.35%
Year Ended October 31, 1995 1.00 163,068 0.60%9 5.24%9 5.37%
Year Ended October 31, 1996 1.00 198,334 0.60%9 4.84%9 4.96%
TAX-EXEMPT MONEY MARKET FUND
June 27, 19881 through
October 31, 1988 1.00 10,838 0.52%3, 10 5.10%3, 10 1.78%5
Year Ended October 31, 1989 1.00 18,429 0.60%10 5.82%10 5.99%
Year Ended October 31, 1990 1.00 16,424 0.64%10 5.38%10 5.51%
Year Ended October 31, 1991 1.00 29,714 0.63%10 4.34%10 4.49%
Year Ended October 31, 19922 1.00 74,343 0.60%10 2.83%10 2.91%
Year Ended October 31, 1993 1.00 73,621 0.60%10 2.12%10 2.17%
Year Ended October 31, 1994 1.00 70,436 0.60%10 2.23%10 2.25%
Year Ended October 31, 1995 1.00 84,084 0.60%10 3.36%10 3.42%
Year Ended October 31, 1996 1.00 79,328 0.60%10 3.09%10 3.13%
<FN>
1 Commencement of operations.
2 Effective February 3, 1992, FIRMCO assumed the investment advisory responsibilities of Firstar Trust Company, an affiliate of
FIRMCO.
3 Annualized for the period ended October 31, 1988.
4 Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1996, 1995, 1994,
1993, 1992, 1991, 1990, 1989 and the period ended October 31, 1988 would have been 0.81%, 0.90 %, 0.93%, 0.99%, 0.96%, 0.94%,
0.94%, 1.01% and 0.89%, respectively; and ratios of net investment income to average net assets for the fiscal years ended
October 31, 1996, 1995, 1994, 1993, 1992, 1991, 1990, 1989 and the period ended October 31, 1988 would have been 4.73%, 5.06
%, 3.11%, 2.28%, 3.46%, 5.84%, 7.38%, 8.25% and 6.90%, respectively.
5 Not annualized for the period ended October 31, 1988.
6 Annualized for the period ended October 31, 1991.
7 Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1996, 1995, 1994,
1993, 1992 and the period ended October 31, 1991 would have been 0.80%, 0.83 %, 0.94%, 0.93%, 1.01% and 1.10%, respectively;
and ratios of net investment income to average net assets for the fiscal years ended October 31, 1996, 1995, 1994, 1993, 1992
and the period ended October 31, 1991 would have been 4.50%, 4.81%, 2.80%, 2.22%, 3.01% and 4.65%, respectively.
8 Not annualized for the period ended October 31, 1991.
9 Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1996, 1995, 1994,
1993, 1992, 1991, 1990, 1989 and the period ended October 31, 1988 would have been 0.71%, 0.75%, 0.88%, 0.93%, 0.94%, 0.95%,
1.01%, 1.06% and 0.86%, respectively; and ratios of net investment income to average net assets for the fiscal years ended
October 31, 1996, 1995, 1994, 1993, 1992, 1991, 1990, 1989 and the period ended October 31, 1988 would have been 4.73%,
5.09%, 3.01%, 2.26%, 3.22%, 5.45%, 7.14%, 7.98% and 7.20%, respectively.
10 Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1996, 1995, 1994,
1993, 1992, 1991, 1990, 1989 and the period ended October 31, 1988 would have been 0.78%, 0.84%, 0.93%, 0.98%, 1.05%, 1.08%,
1.26%, 1.30% and 1.30%, respectively; and ratios of net investment income to average net assets for the fiscal years ended
October 31, 1996, 1995, 1994, 1993, 1992, 1991, 1990, 1989 and the period ended October 31, 1988 would have been 2.91%,
3.12%, 1.90%, 1.74%, 2.38%, 3.89%, 4.76%, 5.12% and 4.32%, respectively.
</TABLE>
INVESTMENT The descriptions that follow are designed to help you choose
OBJECTIVES the Fund that best fits your investment objectives.
AND POLICIES You may want to pursue more than one objective by investing
in more than one of the Portico Funds. You are reminded that
there are risks in an investment in the Funds and there can
be no assurance that each Fund's investment objective will
be attained. An investor should not consider an investment
in any individual Fund to be a complete investment program.
MONEY MARKET FUND The investment objective of the Money Market Fund is to seek
to provide a high level of taxable current income consistent
with liquidity, the preservation of capital and a stable net
asset value. In pursuing its investment objective, the Fund
will invest, during normal market conditions, at least 80%
of its assets in debt obligations with remaining maturities
of thirteen months or less as determined in accordance with
the rules of the Securities and Exchange Commission ("SEC").
The Fund may purchase a broad range of government, bank and
commercial obligations that are available in the money
markets.
The Money Market Fund will purchase only "First Tier
Eligible Securities" (as defined by the SEC) that present
minimal credit risks as determined by the Adviser pursuant
to guidelines approved by the Board of Directors (the "Board
of Directors") of Portico Funds, Inc. ("Portico" or the
"Company"). First Tier Eligible Securities consist of (1)
securities that either (a) have short-term debt ratings at
the time of purchase in the highest rating category by at
least two unaffiliated nationally recognized statistical
rating organizations ("NRSROs") (or one NRSRO if the
security was rated by only one NRSRO), or (b) are issued by
issuers with such ratings, and (2) certain securities that
are unrated (including securities of issuers that have long-
term but not short-term ratings) but are of comparable
quality as determined in accordance with guidelines approved
by the Board of Directors. The Appendix to the Statement of
Additional Information includes a description of applicable
NRSRO ratings. The following descriptions illustrate the
types of instruments in which the Fund invests.
The Money Market Fund may purchase bank obligations, such as
certificates of deposit, bankers' acceptances and time
deposits, including U.S. dollar-denominated instruments
issued or supported by the credit of U.S. or foreign banks
or savings institutions having total assets at the time of
purchase in excess of $1 billion. Investments by the Fund in
the obligations of foreign banks and foreign branches of
U.S. banks will not exceed 25% of the value of the Fund's
total assets at the time of investment. The Fund may also
make interest-bearing savings deposits in commercial and
savings banks in amounts not in excess of 5% of its total
assets.
The Money Market Fund may purchase commercial paper,
including asset-backed commercial paper, and corporate bonds
with remaining maturities of thirteen months or less which
meet the Fund's quality requirements set forth above.
The Money Market Fund may purchase variable and floating
rate instruments, which may have a stated maturity in excess
of thirteen months but will permit the Fund to demand
payment of the principal of the instrument at least once
every thirteen months upon not more than thirty days' notice
(unless the instrument is guaranteed by the U.S. Government
or an agency or instrumentality thereof). Such instruments
may include variable amount master demand notes, which are
unsecured instruments that permit the indebtedness
thereunder to vary in addition to providing for periodic
adjustments in the interest rate. Unrated variable and
floating rate instruments will be determined by the Adviser
(under the supervision of the Board of Directors) to be of
comparable quality at the time of purchase to First Tier
Eligible Securities. An active secondary market may not
exist, however, with respect to particular variable and
floating rate instruments, and usually will not exist with
respect to variable amount master demand notes . The absence
of a secondary market could make it difficult for the Fund
to dispose of a variable or floating rate instrument if the
issuer defaulted on its payment obligation or during periods
that the Fund could not exercise its demand rights, and the
Fund could, for these or other reasons, suffer a loss with
respect to such instruments.
The 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 rate 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 will be regarded as illiquid.
The Money Market Fund may agree to purchase U.S. Government
obligations 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
repurchase 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 the 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 Money Market Fund may
purchase obligations issued or guaranteed by the U.S.
Government or its agencies and instrumentalities. The Fund
may also purchase stripped U.S. Government Obligations and
Government-backed trusts. For further discussion of U.S.
Government securities, see "U.S. Treasury Money Market Fund
and U.S. Government Money Market Fund."
The Money Market Fund may acquire certain types of bank
instruments issued or supported by the credit of foreign
banks or foreign branches of domestic banks where the
Adviser deems the instrument to present minimal credit
risks. Such instruments nevertheless entail risks that are
different from those of investments in domestic obligations
of U.S. banks. Such risks include future political and
economic developments, the possible imposition of foreign
withholding taxes on interest income payable on such
instruments, the possible seizure or nationalization of
foreign deposits or the adoption of other foreign government
restrictions which might adversely affect the payment of
principal and interest on such instruments. In addition,
foreign banks and foreign branches of U.S. banks are subject
to less stringent reserve requirements and to different
accounting, auditing, reporting and recordkeeping standards
than those applicable to domestic branches of U.S. banks.
Because the Fund invests in securities backed by banks and
other financial institutions, changes in the credit quality
of these institutions could cause losses to the Fund and
affect its share price.
U.S. TREASURY The investment objective of the U.S. Treasury Money Market
MONEY MARKET FUND Fund is to seek to provide a high level of current
AND U.S. GOVERNMENT income exempt from state income taxes consistent
MONEY MARKET FUND with liquidity, the preservation of capital and a stable net
asset value. The Fund seeks to achieve its objective by
investing in securities with remaining maturities of
thirteen months or less (as determined in accordance with
SEC rules) that are issued or guaranteed as to principal and
interest by the U.S. Treasury (bills, certificates of
indebtedness, notes and bonds). However, under extraordinary
circumstances, such as when U.S. Treasury securities are
unavailable, the Fund may temporarily hold cash.
The investment objective of the U.S. Government Money Market
Fund is to seek to provide a high level of taxable current
income consistent with liquidity, the preservation of
capital and a stable net asset value (irrespective of state
income tax considerations). The Fund seeks to achieve its
objective by investing primarily in obligations with
remaining maturities of thirteen months or less (as
determined in accordance with SEC rules) that are issued or
guaranteed by the U.S. Government, its agencies or
instrumentalities and in repurchase agreements relating to
such obligations. Under normal market conditions, the Fund
intends to invest at least 65% of its total assets in U.S.
Government obligations. Such U.S. Government obligations may
include Treasury bills, certificates of indebtedness, notes
and bonds, as well as issues of agencies and
instrumentalities of the U.S. Government, including
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,
Resolution Trust Corporation and Tennessee Valley Authority.
Obligations of certain agencies and instrumentalities of the
U.S. Government, such as those of the Government National
Mortgage Association, are supported by the full faith and
credit of the U.S. Treasury; others, such as the Export-
Import Bank of the United States, are supported by the right
of the issuer to borrow from the Treasury; others, such as
those of the Federal National Mortgage Association, are
supported by the discretionary authority of the U.S.
Government to purchase the agency's obligations; still
others, such as those of the Student Loan Marketing
Association, are supported only by the credit of the agency
or instrumentality issuing the obligation. No assurance can
be given that the U.S. Government would provide financial
support to U.S. Government-sponsored agencies or
instrumentalities if it is not obligated to do so by law.
To the extent consistent with their respective investment
objectives, each Fund (except for the U.S. Treasury Money
Market Fund) may purchase participations in trusts that hold
U.S. Treasury and agency securities (such as TIGRs and CATs)
and also may purchase Treasury Receipts and other "stripped"
securities that evidence ownership in either the future
interest payments or the future principal payments on U.S.
Government obligations. The SEC staff believes that
participation in CATs and TIGRs and other similar trusts are
not U.S. Government securities. These participations are
issued at a discount to their "face value," and may exhibit
greater price volatility than ordinary debt securities
because of the manner in which their principal and interest
are returned to investors. The U.S. Government Money Market
Fund may also invest in Government-backed trusts which hold
obligations of foreign governments that are guaranteed or
backed by the full faith and credit of the United States.
The U.S. Treasury Money Market Fund and U.S. Government
Money Market Fund may enter into repurchase agreements with
financial institutions. See "Money Market Fund" above for a
discussion of repurchase agreements.
Although substantially all of the instruments acquired by
the U.S. Treasury Money Market Fund and U.S. Government
Money Market Fund will be U.S. Government obligations (or
repurchase agreements collateralized by such obligations),
shares of the U.S. Treasury Money Market Fund and U.S.
Government Money Market Fund are not themselves issued or
guaranteed by any government agency. U.S. Government
obligations that have stated maturities in excess of
thirteen months but have variable or floating interest rates
may be acquired by the Funds in accordance with SEC rules.
TAX-EXEMPT The investment objective of the Tax-Exempt Money Market Fund
MONEY MARKET FUND is to seek to provide a high level of current income that is
exempt from federal income taxes consistent with liquidity,
the preservation of capital and a stable net asset value. In
pursuing this investment objective, the Fund invests in a
diversified portfolio of debt obligations issued by or on
behalf of states, territories and possessions of the United
States, the District of Columbia and their authorities,
agencies, instrumentalities and political sub-divisions
("Municipal Obligations") which meet the Fund's quality
requirements set forth below. During normal market
conditions, the Fund will invest at least 80% of its assets
in Municipal Obligations with remaining maturities of
thirteen months or less as determined in accordance with SEC
rules. The Tax-Exempt Money Market Fund will purchase only
Municipal Obligations that are First Tier Eligible
Securities as defined above under "Money Market Fund."
Municipal Obligations purchased by the Fund may be backed by
letters of credit issued by foreign and domestic banks and
other financial institutions. Such letters of credit are not
necessarily subject to federal deposit insurance and adverse
developments in the banking industry could have a negative
effect on the credit quality of the Fund's portfolio
securities and its ability to maintain a stable net asset
value and share price. Letters of credit issued by foreign
banks, like other obligations of foreign banks, may involve
certain risks in addition to those of domestic obligations.
Because the Fund invests in securities backed by banks and
other financial institutions, changes in the credit quality
of these institutions could cause losses to the Fund and
affect its share price. (See "Money Market Fund" above.)
Municipal Obligations purchased by the Tax-Exempt Money
Market Fund may include variable and floating rate
instruments issued by industrial development authorities and
other governmental entities. If such instruments are
unrated, they will be determined by the Fund's Adviser
(under the supervision of the Board of Directors) to be of
comparable quality at the time of purchase to First Tier
Eligible Securities. While there may be no active secondary
market with respect to a particular variable or floating
rate demand instrument purchased by the Fund, the Fund may
(at any time or during specified periods not exceeding
thirteen months, depending upon the instrument involved)
demand payment in full of the principal of the instrument
and may re-sell the instrument to a third party. The absence
of such an active secondary market, however, could make it
difficult for the Fund to dispose of a variable or floating
rate demand instrument if the issuer defaulted on its
payment obligation or during periods that the Fund is not
entitled to exercise its demand rights, and the Fund could,
for these or other reasons, suffer a loss with respect to
such instruments.
From time to time on a temporary defensive basis due to
market conditions, the Tax-Exempt Money Market Fund may hold
uninvested cash reserves or invest in short-term taxable
money market obligations that are permissible investments
for the Money Market Fund, in such proportions as, in the
opinion of the Adviser, prevailing market or economic
conditions warrant. Uninvested cash reserves will not earn
income. Taxable obligations acquired by the Fund will not
exceed under normal market conditions 20% of the Fund's
total assets at the time of purchase.
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.
General Obligation securities are secured by the issuer's
pledge of its full faith, credit and taxing power for the
payment of principal and interest. Revenue securities are
payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the
proceeds of a special excise tax or other specific revenue
source such as the issuer of the facility being financed.
Private activity bonds (e.g., bonds issued by industrial
development authorities) that are issued by or on behalf of
public authorities to finance various privately operated
facilities are included within the term "Municipal
Obligations" if the interest paid thereon is exempt (subject
to federal alternative minimum tax) from federal income tax.
(The Fund, however, does not currently intend to acquire
private activity bonds that are subject to the federal
alternative minimum tax.) Private activity bonds are in most
cases Revenue securities and are not payable from the
unrestricted revenues of the issuer. The credit quality of
such bonds is usually directly related to the credit
standing of the corporate user of the facility involved.
The Tax-Exempt Money Market Fund may also acquire "Moral
Obligation" securities, which are normally issued by special
purpose public authorities. If the issuer of Moral
Obligation securities is unable to meet its debt service
obligations from current revenues, it may draw on a reserve
fund, the restoration of which is a moral commitment but not
a legal obligation of the state or municipality which
created the issue.
The Tax-Exempt Money Market Fund may purchase securities on
a "when-issued" or "forward commitment" basis. These
transactions, which involve a commitment by the Fund to
purchase particular securities with payment and delivery
taking place beyond the normal settlement date, permit the
Fund to lock in a price or yield on a security it intends to
purchase, regardless of future changes in interest rates.
When-issued and forward commitment transactions involve the
risk, however, that the price or yield obtained in a
transaction (and therefore the value of the security) may be
less favorable than the price or yield (and therefore the
value of the security) available in the market when the
securities delivery takes place. The Fund expects that its
when-issued purchases and forward commitments will not
exceed 25% of the value of its assets absent unusual market
conditions, and that a forward commitment or commitment to
purchase when-issued securities will not exceed forty-five
days. The Fund does not intend to engage in when-issued
purchases and forward commitments for speculative purposes
but only in furtherance of its investment objective.
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 agrees
to purchase at the Fund's option specified Municipal
Obligations at a price equal to their amortized cost value
plus accrued interest. The Fund will acquire stand-by
commitments solely to facilitate portfolio liquidity and
does not intend to exercise its rights thereunder for
trading purposes.
Although the Tax-Exempt Money Market Fund does not presently
intend to do so on a regular basis, it may invest more than
25% of its assets in Municipal Obligations, the issuers of
which are located in the same state or the interest on which
is paid solely from revenues of similar projects if such
investment is deemed necessary or appropriate by the
Adviser. To the extent that the Fund's assets are
concentrated in Municipal Obligations payable from revenues
on similar projects or issued by issuers in the same state,
the Fund will be subject to the peculiar economic, political
and business risks represented by the laws and economic
conditions relating to such states and projects to a greater
extent than it would be if the Fund's assets were not so
concentrated. Furthermore, payment of Municipal Obligations
of certain projects may be secured by mortgages or deeds of
trust. In the event of a default, enforcement of the
mortgages or deeds of trust will be subject to statutory
enforcement procedures and limitations, including rights of
redemption and limitations on obtaining deficiency
judgments. In the event of a foreclosure, collection of the
proceeds of the foreclosure may be delayed and the amount of
proceeds from the foreclosure may not be sufficient to pay
the principal of and accrued interest on the defaulted
Municipal Obligations.
Opinions relating to the validity of Municipal Obligations
and to the exemption of interest thereon from federal income
tax are rendered by bond counsel to the respective issuers
at the time of issuance. Neither Portico nor the Adviser
will review the proceedings relating to the issuance of
Municipal Obligations or the bases for such opinions.
OTHER INVESTMENT RESTRICTED SECURITIES. No Fund will knowingly invest more
INFORMATION than 10% of the value of its net assets in securities that
are illiquid. Repurchase agreements and time deposits that
do not provide for payment to a Fund within seven days, and
securities that are not registered under the Securities Act
of 1933 (the "Act") but that may be purchased by
institutional buyers under Rule 144A, are subject to this
10% limit (unless such securities are variable amount master
demand notes with maturities of nine months or less,
privately placed commercial paper, or the Board of Directors
or the Adviser, pursuant to guidelines adopted by the Board
of Directors, determines that a liquid trading market
exists).
SECURITIES OF OTHER INVESTMENT COMPANIES. In connection with
the management of their daily cash positions, each Fund may
invest in securities issued by other investment companies
with investment objectives and policies similar to their own
which invest in First Tier Eligible Securities and which
determine their net asset value per share based on the
amortized cost or penny-rounding method of valuation.
Securities of other investment companies will be acquired by
a Fund within the limits prescribed by the Investment
Company Act of 1940 (the "1940 Act"). In addition to the
advisory fees and other expenses the Fund bears directly in
connection with its own operations, as a shareowner of
another investment company, a Fund would bear its pro rata
portion of the other investment company's advisory fees and
other expenses, and such fees and other expenses will be
borne indirectly by the Fund's shareowners.
SECURITIES LENDING. Although authorized to do so, the Funds
do not presently intend to lend portfolio securities.
PURCHASE OF Shares of the Funds are offered and sold on a continuous
SHARES basis by the distributor for the Funds, B.C. Ziegler and
Company (the "Distributor"), which is independent of the
Adviser. The Distributor is a registered broker-dealer with
offices at 215 North Main Street, West Bend, Wisconsin
53095.
THE MINIMUM INITIAL AND SUBSEQUENT INVESTMENT FOR SHARES IN
A FUND IS $1,000; WITH THE EXCEPTION OF IRAS, WHICH HAVE A
MINIMUM INITIAL INVESTMENT OF $100. The minimum initial
investment will be waived if you participate in the Periodic
Investment Plan. The Funds reserve the right to close your
account if the value is less than $1,000 ($100 for IRAs) and
you are not currently participating in the Periodic
Investment Plan. For additional information on involuntary
redemptions, see "Other Redemption Information" below. The
$1,000 minimum account balance applies only to account
opened with Portico on or after February 28, 1997. Accounts
opened with Portico on or before February 27, 1997 must
maintain a required minimum balance of $50.
PURCHASE ORDERS. Investors may purchase shares of the Funds
through registered representatives of Elan Investment
Services, Inc. ("Elan") located at Firstar Banks ("Firstar
Investment Offices"), directly with the Funds' transfer
agent, or through organizations that have entered into
distribution or servicing agreements with the Funds
(including Elan, "Shareowner Organizations"). For a
discussion of transactions through Shareowner Organizations,
see "Shareowner Organizations" below. All checks must be
drawn on a bank located within the United States and must be
payable in U.S. dollars. Subsequent investments in an
existing account in a Fund may be made at any time by
sending to the address below a check or money order payable
to the Fund in which the investment is being made as shown
above, along with a letter stating the amount of the
investment, the name of the Fund and the account number in
which the investment is to be made. A $20 fee will be
imposed by the Funds' transfer agent if any check used for
investment in an account does not clear, and the investor
involved will be responsible for any loss incurred by a
Fund.
PURCHASE ORDERS PLACED THROUGH REGISTERED REPRESENTATIVES
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
------------------- ---------------------
IN PERSON - Complete an application - Bring your check to a
at a Firstar Investment Firstar Investment
Office. Call 1-800-982-8909 Office. Call 1-800-982-8909
for the office nearest you. for the office nearest you.
BY PHONE - Call your registered - Call your registered
representative representative
or call 1-800-982-8909 for or call 1-800-982-8909 for
the office nearest you. the office nearest you.
AUTOMATICALLY - Call your registered - Complete a Periodic
representative to obtain Investment Plan
a purchase application Application to automatically
which includes purchase more shares.
information for a Periodic
Investment Plan.
PURCHASE ORDERS PLACED THROUGH THE TRANSFER AGENT
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
------------------- ---------------------
BY MAIL - Complete an application - Make your check payable to
and mail it along with a Portico Funds. Please
check payable to include your account
Portico Funds, P.O. Box 3011, number on your check and
Milwaukee, WI 53201-3011. mail it to the address on
your statement.
OVERNIGHT - Complete an application - Make your check payable to
DELIVERY and deliver it along with a Portico Funds. Please
check payable to include your account
Portico Funds, 615 East number on your check and
Michigan St., Milwaukee, deliver it to the
WI 53202. address at the left.
IN PERSON - Bring your application and - Bring your check to a
check to a Firstar Investment Firstar Investment
Office. Call 1-800-982-8909 Office. Call 1-800-982-8909
for the office nearest you. for the office nearest you.
AUTOMATICALLY - Call 1-800-982-8909 to - Complete a Periodic
obtain a purchase application Investment Plan
which includes information Application to
for a Periodic Investment automatically purchase
Plan. more shares.
- Open a ConvertiFund(R)
account to automatically
invest proceeds from one
account to another account
of the Portico family of
funds.
BY WIRE - Call 1-800-228-1024 to - Call 1-800-228-1024 to
arrange a wire transaction. arrange a wire
Ask your bank to transmit transaction. Ask your bank
immediately available funds to transmit immediately
by wire in the amount of your available funds by wire
purchase to: Firstar Bank as described at the left.
Milwaukee, N.A. ABA # Please include your
0750-00022, Account # account number.
112-952-137 for further credit
to [name of Fund] [the name/
title on the account].
BY PHONE - Call 1-800-228-1024 to - Call 1-800-228-1024 to
exchange from another exchange from another
Portico Fund account with Portico Fund account with
the same registration the same registration
including name, address including name, address
and taxpayer ID number. and taxpayer ID number.
Investors making initial investments by wire must promptly
complete a Purchase Application and forward it to the
respective Fund. REDEMPTIONS WILL NOT BE PAID UNTIL THE
COMPLETED APPLICATION HAS BEEN RECEIVED BY THE TRANSFER AGENT.
Purchase orders received by the transfer agent in proper form
(as described above) before 11:30 a.m. Central Time on a
business day will be executed at that time, provided the
securities dealer or financial institution placing the order
undertakes to pay for its order in immediately available funds
wired to the transfer agent by the close of business the same
day, or in the case of orders placed by other investors,
payment in such form and by such time is guaranteed by a
creditworthy financial institution at the time the order is
placed. Purchase orders that are received before 11:30 a.m.
Central Time on a business day when payment is made in any
form other than by a same day wire of immediately available
funds, as well as orders received after 11:30 a.m. Central
Time and before the close of regular trading hours on the New
York Stock Exchange (the "Exchange"), currently 3:00 p.m.
Central Time, will be executed as of the close of regular
trading hours on the Exchange. In addition, purchase orders
received by the transfer agent before the close of regular
trading hours on the Exchange on a business day will be
executed as of the determination of net asset value on that
day if the purchase price is payable to the Fund on the next
business day out of the proceeds from the investor's
redemption of shares in certain other investment companies for
which Firstar Trust Company serves as transfer agent and/or
custodian. For information concerning this procedure, call
Portico Investor Services at 1-800-228-1024 or 414-287-3808
(Milwaukee area). Purchase orders that are received after the
close of regular trading hours on the Exchange or on non-
business days, and orders for which payment is not received by
the close of regular trading hours on the Exchange on a
business day, will be executed on the next business day after
receipt of both the order and payment in proper form by the
transfer agent.
The Funds will not accept payment in cash or third party
checks for the purchase of shares. Federal regulations require
that each investor provide a Social Security number or other
certified taxpayer identification number upon opening or
reopening an account. The Funds reserve the right to reject
applications without such a number or an indication that a
number has been applied for. If a number has been applied for,
the number must be provided and certified within sixty days of
the date of the application. Any accounts opened without a
proper number will be subject to backup withholding at a rate
of 31% on all liquidations and dividend and capital gain
distributions.
Certificates for shares will be issued only upon shareowner
request. The Funds reserve the right to reject any purchase
order. Payment for shares of a Fund in the amount of
$1,000,000 or more may, at the discretion of the Adviser, be
made in the form of securities that are permissible
investments for the respective Fund. For further information,
see the Statement of Additional Information or contact Portico
Investor Services at 1-800-982-8909 or 414-287-3710 (Milwaukee
area).
REDEMPTION OF Redemption orders are effected at the net asset value per
SHARES share next determined after receipt of the order
by the transfer agent. If a redemption order is received by
phone (as described below) before 11:30 a.m. Central Time on a
business day, Fund shares will be redeemed as of the
determination of net asset value at 11:30 a.m. Central Time.
If a redemption order is received in proper form (as described
below) before the close of regular trading hours on the
Exchange, currently 3:00 p.m. Central Time, on a business day,
Fund shares will be redeemed as of the determination of net
asset value at 3:00 p.m. Redemption orders which are received
after the close of regular trading hours on the Exchange, or
on non-business days, will be executed on the next business
day. Depending upon the current net asset value of the
redeemed shares at the time of redemption, the value of the
shares redeemed may be more or less than the investor's cost.
REDEMPTION ORDERS
THROUGH THE THROUGH A REGISTERED
TRANSFER AGENT REPRESENTATIVE
--------------- ---------------
BY PHONE - Call 1-800-228-1024 with - Call your registered
your account name, account representative at
number and amount of 1-800-982-8909.
redemption (minimum $500).
Redemption proceeds will
only be sent to a
shareowner's address or bank
account of a commercial bank
located within the United
States as shown on the
transfer agent's records.
(Available only if
established on the account
application and if there has
been no change of address by
telephone within the
preceding 15 days.)
BY MAIL, - Mail your instructions to - Bring your instructions to
OVERNIGHT the Portico Funds, the Portico Funds,
DELIVERY P.O. Box 3011, P.O. Box 3011,
OR IN PERSON Milwaukee, WI 53201-3011, Milwaukee, WI 53201-3011,
or deliver them (via or deliver them to
overnight delivery or in 615 E. Michigan Street,
person) to 615 E. Michigan Milwaukee, WI 53202,
Street, Milwaukee, or bring your instructions
WI 53202. Include the to your registered
number of shares or the representative's office.
amount to be redeemed,
your shareowner account
number and Social Security
number or other taxpayer
identification number.
Your instructions must be
signed by all persons
required to sign for
transactions exactly as
their names appear on the
account. If the redemption
amount exceeds $50,000, or
if the proceeds are to be
sent elsewhere than the
address of record, or the
address of record has been
changed by telephone
within the preceding 15
days, each signature must
be guaranteed in writing
by either a commercial
bank that is a member of
the FDIC, a trust company,
a credit union, a savings
association, a member firm
of a national securities
exchange or other eligible
guarantor institution.
AUTOMATICALLY - Call 1-800-982-8909 for a - Call your registered
Systematic Withdrawal Plan representative to
application ($15,000 establish a Systematic
account minimum and Withdrawal Plan.
$100 minimum per
transaction).
Guarantees must be signed by an eligible guarantor institution
and "Signature Guaranteed" must appear with the signature. If
certificates have been issued, the certificates, properly
endorsed or accompanied by a properly executed stock power and
accompanied by signature guarantees, must be received by the
transfer agent. The Funds may require additional supporting
documents for redemptions made by corporations, executors,
administrators, trustees and guardians. A redemption request
will not be deemed to be properly received until the transfer
agent or Elan receives all required documents in proper form.
The transfer agent charges a $12.00 fee for each payment made
by wire of redemption proceeds, which will be deducted from
the shareowner's account. The transfer agent also charges a
$15.00 fee for each IRA distribution (unless it is part of a
Systematic Withdrawal Plan), which will be deducted from the
shareowner's account.
In order to arrange for telephone redemptions after an account
has been opened or to change the bank or account designated to
receive redemption proceeds, a written request must be sent to
Portico Investor Services at the address listed above or
contact your registered representative. The request must be
signed by each shareowner of the account. Further
documentation may be requested from corporations, executors,
administrators, trustees and guardians.
The Funds reserve the right to refuse a telephone redemption
if they believe it is advisable to do so. Procedures for
redeeming shares by telephone may be modified or terminated by
the Funds at any time upon notice to shareowners . During
periods of substantial economic or market change, telephone
redemptions may be difficult to implement. If a shareowner is
unable to contact the transfer agent by telephone, shares may
also be redeemed by delivering the redemption request to the
transfer agent.
In an effort to prevent unauthorized or fraudulent redemption
requests by telephone, Portico and the transfer agent employ
reasonable procedures specified by a Fund to confirm that such
instructions are genuine. Among the procedures used to
determine authenticity, investors electing to redeem or
exchange by telephone will be required to provide their
account number. All such telephone transactions will be tape
recorded. Portico may implement other procedures from time to
time. If reasonable procedures are not implemented, Portico
and/or the transfer agent may be liable for any loss due to
unauthorized or fraudulent transactions. In all other cases,
the shareowner is liable for any loss for unauthorized
transactions.
CHECK REDEMPTION. An investor may request on the Purchase
Application or by later written request that a Fund provide
Redemption Checks ("Checks") drawn on the Fund in which the
investor has made an investment. Checks will be sent only to
the registered owner(s) and only to the address of record.
Checks may be made payable to the order of any person in the
amount of $250 or more. Any checks drawn on a joint account
will only require one signature. Dividends are earned until
the Check clears the transfer agent. When a Check is presented
to the transfer agent for payment, the transfer agent, as the
investor's agent, will cause the particular Fund involved to
redeem a sufficient number of the investor's shares to cover
the amount of the Check. Checks written against shares
purchased by check during the previous 12 days will be
returned unpaid due to uncollected funds. Checks will not be
returned to shareowners after clearance. There is no charge to
the investor for the use of the Checks; however, the transfer
agent will impose a $20 charge for stopping payment of a Check
upon the request of the investor, or if the transfer agent
cannot honor a Check due to insufficient funds or other valid
reason. Because dividends on each Fund accrue daily, Checks
may not be used to close an account, as a small balance is
likely to result. Checks are not available for IRAs or other
retirement plans for which Firstar acts as custodian.
OTHER REDEMPTION INFORMATION. The Funds will make payment for
redeemed shares typically within one or two business days, but
no later than the seventh day after receipt by the transfer
agent of a request in proper form, except as provided by SEC
rules. HOWEVER, IF ANY PORTION OF THE SHARES TO BE REDEEMED
REPRESENTS AN INVESTMENT MADE BY CHECK, THE FUNDS MAY DELAY
THE PAYMENT OF THE REDEMPTION PROCEEDS UNTIL THE TRANSFER
AGENT IS REASONABLY SATISFIED THAT THE CHECK HAS BEEN
COLLECTED, WHICH MAY TAKE TWELVE DAYS FROM THE PURCHASE DATE.
This procedure does not apply to shares purchased by wire
payment. During the period prior to the time the shares are
redeemed, dividends on such shares will accrue and be payable,
and an investor will be entitled to exercise all other rights
of beneficial ownership. An investor must have filed a
Purchase Application before any redemption requests can be
paid.
The Funds impose no charge when shares are redeemed and
reserve the right to redeem an account involuntarily, upon
sixty days' written notice, if redemptions cause the account's
net asset value to remain at less than $1,000. A Fund may also
redeem shares involuntarily if it is appropriate to do so to
carry out the Fund's responsibilities under the 1940 Act and,
in certain cases, may make payment for redemption in
securities. Investors would bear any brokerage or other
transaction costs incurred in converting the securities so
received to cash. See the Statement of Additional Information
for examples of when such redemptions might be appropriate.
Questions concerning the proper form for redemption requests
should be directed to Portico Investor Services at 1-800-228-
1024 or 414-287-3808 (Milwaukee area).
SHAREOWNER The services and privileges described below are available to
SERVICES shareowners of the Funds. These may be modified or terminated
at any time upon notice to shareowners.
SHAREOWNER REPORTS. Shareowners will be provided with a report
showing portfolio investments and other information at least
semiannually; and after the close of the Funds' fiscal year
which ends October 31, with an annual report containing
audited financial statements. To eliminate unnecessary
duplication, only one copy of a shareowner report will be sent
to shareowners with the same mailing address. Shareowners who
desire a duplicate copy of a shareowner report to be mailed to
their residence should call Portico Investor Services at 1-
800-982-8909, or write Portico Investor Services at the
address listed above. In addition, account statements will be
mailed to shareowners monthly, summarizing all transactions,
including purchases, reinvestment of dividends and
redemptions.
AUTOMATED TELERESPONSE SERVICE. Shareowners using a touch-tone
telephone can access information on the Funds twenty-four
hours a day, seven days a week. When calling Portico Investor
Services at 1-800-228-1024, shareowners may choose to use the
automated information feature or, during regular business
hours (8:00 a.m. to 7:00 p.m. Central Time, Monday through
Friday), speak with a Portico Investor Services
representative.
The automated service provides the information most frequently
requested by shareowners. After calling the 800-number,
pressing "2" on their touch-tone phone, shareowners can:
1. Determine closing prices for each Fund.
2. Learn how the price of a Fund has changed from the previous
day.
3. Hear daily yields for Portico money market funds.
Money market fund yields reflect fee waivers in effect,
represent past performance and will vary. If fees were not
waived, yields would be reduced. Past performance is no
guarantee of future results. Current yield refers to income
earned by a Fund's investments over a 7-day period. It is then
annualized and stated as a percentage of the investment.
Effective yield is the same as current yield except that it
assumes the income earned by an investment in a Fund will be
reinvested. An investment in any one of the Portico money
market funds is neither insured nor guaranteed by the U.S.
government nor is there any assurance the Funds will be able
to maintain a stable net asset value of $1.00 per share.
To speak with a Portico Investor Services representative
anytime during an automated teleresponse session (during
regular business hours), shareowners may press "0."
For total return information, shareowners must call Portico
Investor Services at 1-800-982-8909 or 414-287-3710 (Milwaukee
area).
TELEPHONE EXCHANGE PRIVILEGE. If shares may be legally sold in
the state of the investor's residence, shareowners are
generally permitted to exchange their shares in a Fund (with a
minimum current value of $1,000) for Retail Shares of other
funds in the Portico family of funds without charge or
commission by the Fund. A sales charge will be imposed on the
exchange if the shares of the Fund being acquired have a sales
charge and the shares being redeemed were purchased or
otherwise acquired without a sales charge. Telephone exchange
privileges automatically apply to each shareowner of record
and the representative of record unless and until the transfer
agent receives written instructions from the shareowner(s) of
record canceling the privilege.
Portico reserves the right to terminate indefinitely the
exchange privilege of any shareowner, broker, investment
adviser or agent who requests more than four exchanges within
a calendar year, whether for oneself or one's customers.
Portico may determine to do so with prior notice to the
shareowner, broker, investment adviser or agent based on a
consideration of both the number of exchanges the particular
shareowner, broker, investment adviser or agent has requested
and the time period over which those exchange requests have
been made, together with the level of expense to the Funds or
other adverse effects which may result from the additional
exchange requests. If any portion of the shares to be
exchanged represents an investment made by check, a Fund may
delay the acquisition of new shares in an exchange until the
transfer agent is reasonably satisfied that the check has been
collected, which may take twelve days from the purchase date.
Investors may find the exchange privilege useful if their
investment objectives or market outlook should change after
they invest in the Portico family of funds. For federal income
tax purposes, an exchange of shares is a taxable event and,
accordingly, a capital gain or loss may be realized by an
investor. Before making an exchange request, an investor
should consult a tax or other financial adviser to determine
the tax consequences of a particular exchange. No exchange fee
is currently imposed by Portico on exchanges. Portico,
however, reserves the right to impose a charge in the future.
In order to request an exchange by telephone, a shareowner
must give the account name, account number and the amount or
number of shares to be exchanged. During periods of
significant economic or market change, telephone exchanges may
be difficult to implement. If a shareowner is unable to
contact the transfer agent by telephone, shares may also be
exchanged by delivering the exchange request to the transfer
agent in person or by mail at the addresses listed above under
"Redemption of Shares."
The Funds reserve the right to reject any exchange request
with prior notice to a shareowner and the exchange privilege
may be modified or terminated at any time. At least sixty
days' notice will be given to shareowners of any material
modification or termination except where notice is not
required under SEC regulations. The responsibility of the
Funds and their transfer agent for the authenticity of
telephone exchange instructions is limited as described above
under "Redemption of Shares."
RETIREMENT PLANS. The Funds offer individual retirement
accounts and prototype defined contribution plans, including
simplified employee, 401(k), profit-sharing and money purchase
pension plans ("Retirement Plans"). For details concerning
Retirement Plans (including service fees), please call Portico
Investor Services at 1-800-982-8909 or 414-287-3710 (Milwaukee
area).
DIVIDENDS AND Shareowners of each Fund are entitled to dividends and
DISTRIBUTIONS distributions arising only from the net income, including net
realized gains and losses, if any, earned on the investments
held by the particular Fund. Each Fund's net income is
declared as a dividend on each business day on the shares that
are outstanding immediately after 11:30 a.m. Central Time on
the declaration date. Dividends and distributions are
automatically reinvested in additional shares of the Fund on
which the dividend or distribution is paid at their net asset
value per share (as determined on the payable date), unless
the shareowner notifies the transfer agent or a registered
representative that dividends or capital gains distributions,
or both, should be paid in cash. Cash dividends or
distributions will be paid by check unless the transfer agent
receives a voided check or deposit ticket to enable the
dividends or distributions to be directly deposited into the
shareowner's bank account. Cash dividends and distributions
will be paid within five business days after the end of the
month or within five business days after a redemption of all
of a shareowner's shares of a Fund. The Funds do not expect to
realize net long-term capital gains. Reinvested dividends and
distributions receive the same tax treatment as those paid in
cash.
MANAGEMENT The business and affairs of the Funds are managed under the
OF THE FUNDS direction of the Board of Directors of the Portico Funds, Inc.
("Portico" or the "Company"). The Statement of Additional
Information contains the name and background information
regarding each Director.
ADVISORY SERVICES. FIRMCO, a Wisconsin corporation and
subsidiary of Firstar Corporation, a bank holding company,
serves as investment adviser to each Fund. FIRMCO, with
principal offices at Firstar Center, 777 East Wisconsin
Avenue, 8th Floor, Milwaukee, Wisconsin 53202, has been
engaged in the business of providing investment advisory
services since 1986. FIRMCO currently has $19.5 billion in
assets under active management, of which $11.6 billion is
invested in fixed-income and money market securities and $7.9
billion in equity securities.
Subject to the general supervision of the Board of Directors
and in accordance with the respective investment objective and
policies of each Fund, the Adviser manages each Fund's
portfolio, makes decisions with respect to and places orders
for all purchases and sales of each Fund's portfolio
securities, and maintains records relating to such purchases
and sales. The Adviser is authorized to allocate purchase and
sale orders for portfolio securities to Shareowner
Organizations, including, in the case of agency transactions,
Shareowner Organizations which are affiliated with the
Adviser, to take into account the sale of Fund Shares if the
Adviser believes that the quality of the transaction and the
amount of the commission are comparable to what they would be
with other qualified brokerage firms.
For the services provided and expenses assumed as investment
adviser, the Adviser is entitled to receive from each Fund a
fee, calculated daily and payable monthly, at the annual rate
of 0.50% of the first $2 billion of each Fund's average daily
net assets, plus 0.40% on average daily net assets over $2
billion. The Adviser earned fees, net of waivers, for the
fiscal year ended October 31, 1996, at the annual rate of
0.36% for the Money Market Fund, 0.37% for the U.S. Treasury
Fund, 0.46% for the U.S. Government Fund, and 0.39% for the
Tax-Exempt Money Market Fund.
The Adviser may voluntarily waive all or a portion of the
advisory fee otherwise payable by a Fund from time to time.
These waivers may be terminated at any time at the Adviser's
discretion.
ADMINISTRATIVE SERVICES. Firstar Trust Company ("Firstar
Trust") and B. C. Ziegler and Company ("Ziegler") serve as the
Co-Administrators (the "Co-Administrators"). The Co-
Administrators have agreed to provide the following
administrative services for the Portico Funds: assist in
maintaining office facilities for the Funds; furnish clerical
and certain other services required by the Funds; compile data
for and prepare notices to the SEC; prepare semiannual reports
to the SEC and current shareowners and filings with state
securities commissions; coordinate federal and state tax
returns; monitor the arrangements pertaining to the Funds'
agreements with Shareowner Organizations; monitor the Funds'
expense accruals; monitor compliance with the Funds'
investment policies and limitations; and generally assist in
the Funds' operations. As further described in the Statement
of Additional Information, certain services under the Co-
Administration Agreement are provided jointly by Firstar Trust
and Ziegler and other services are provided separately by
either Firstar Trust or Ziegler. The Co-Administrators are
entitled to receive a fee for their administrative services,
computed daily and payable monthly, at the annual rate of
0.125% of Portico's first $2 billion of average aggregate
daily net assets, plus 0.10% of Portico's average aggregate
daily net assets in excess of $2 billion. The Co-
Administrators may voluntarily waive all or a portion of their
administrative fee from time to time. These waivers may be
terminated at any time at the Co-Administrators' discretion.
For the fiscal year ended October 31, 1996, the Money Market
Fund, U.S. Treasury Money Market Fund, U.S. Government Money
Market Fund and Tax-Exempt Money Market Fund accrued
administrative fees, after waivers, at the effective annual
rates of 0.05 % of their average net assets.
SHAREOWNER ORGANIZATIONS. Portico may enter into agreements
from time to time with certain Shareowner Organizations,
including affiliates of the Adviser (such as Elan), providing
for certain support and/or distribution services to their
customers who are the beneficial owners of shares of the
Funds. Under the Service Agreements, shareowner support
services, which are described more fully in the Statement of
Additional Information, may include assisting investors in
processing purchase, exchange and redemption requests;
processing dividend and distribution payments from the Funds;
providing information periodically to customers showing their
positions in Fund shares; and providing sub-accounting with
respect to Fund shares beneficially owned by customers or the
information necessary for sub-accounting. In addition,
Shareowner Organizations under a Distribution and Service
Agreement may provide the foregoing shareowner support
services and may also provide assistance, such as the
forwarding of sales literature and advertising to their
customers, in connection with the distribution of Fund shares.
For their services, Shareowner Organizations may be entitled
to receive fees from a Fund at annual rates of up to 0.25% of
the average daily net asset value of the shares covered by
their agreements. For the fiscal year ended October 31, 1996,
Shareowner Organizations received fees pursuant to such
agreements at the effective annualized rates of 0.02%, 0%, 0%
and 0% of the average net assets of the Money Market Fund,
U.S. Treasury Money Market Fund, U.S. Government Money Market
Fund and Tax-Exempt Money Market Fund, respectively.
Under the terms of their agreements with Portico, Shareowner
Organizations are required to provide a schedule of any fees
that they may charge to their customers relating to the
investment of their assets in shares covered by the
agreements. Investors should read this Prospectus in light of
such fee schedules and under the terms of their Shareowner
Organization's agreement with Portico. In addition, investors
should contact their Shareowner Organizations with respect to
the availability of shareowner services and the particular
Shareowner Organization's procedures for purchasing and
redeeming shares. It is the responsibility of Shareowner
Organizations to transmit purchase and redemption orders and
record those orders in customers' accounts on a timely basis
in accordance with their agreements with customers. At the
request of a Shareowner Organization, the transfer agent's
charge of $12.00 for each payment made by wire of redemption
proceeds may be billed directly to the Shareowner
Organization.
The Glass-Steagall Act and other applicable laws, among other
things, prohibit banks from engaging in the business of
underwriting securities. Accordingly, banks will be engaged
under agreements with Portico only to perform the
administrative and investor servicing functions described
above, and will represent to Portico that in no event will the
services provided by them under the agreements be primarily
intended to result in the sale of Fund shares.
Conflict-of-interest restrictions may apply to the receipt of
compensation paid by Portico to a Shareowner Organization in
connection with the investment of fiduciary funds in Fund
shares. Institutions, including banks regulated by the
Comptroller of the Currency and investment advisers and other
money managers subject to the jurisdiction of the SEC, the
Department of Labor or state securities commissions, are urged
to consult legal counsel before entering into agreements with
Portico.
Agreements that contemplate the provision of distribution
services by Shareowner Organizations are governed by a
Distribution and Service Plan (the "Plan") that has been
adopted by Portico pursuant to Rule 12b-1 under the 1940 Act.
In the case of the Funds, no payments are made to their
Distributor under the Plan. However, payments to Shareowner
Organizations, including affiliates of the Adviser, under the
Plan are not tied directly to their own out-of-pocket expenses
and therefore may be used as they elect (for example, to
defray their overhead expenses), and may exceed their direct
and indirect costs.
CUSTODIAN, Firstar Trust, an affiliate of the Adviser, provides
TRANSFER custodial, transfer agency, dividend disbursing
AND DIVIDEND agency and accounting services for the Funds. For the fiscal
DISBURSING AGENT,year ended October 31, 1996, total custodial, transfer agency,
AND ACCOUNTING dividend disbursing agency and accounting services fees earned
SERVICES AGENT by Firstar Trust were approximately 0.12%, 0.10%, 0.06% and
0.09% of the Money Market, U.S. Treasury Money Market, U.S.
Government Money Market and Tax-Exempt Money Market Funds'
average net assets, respectively. Additional information
regarding the fees payable by the Funds to Firstar Trust for
these services is provided in the Statement of Additional
Information. Inquiries to the transfer agent may be sent to
the following address: Firstar Trust Company, P.O. Box 3011,
Milwaukee, Wisconsin 53201-3011.
INVESTMENT Except for the limitations detailed below, the investment
LIMITATIONS objective and policies of each Fund described in this
Prospectus are not fundamental and may be changed by the Board
of Directors without the affirmative vote of the holders of a
majority of a Fund's outstanding shares. If there is a change
in a Fund's investment objective, shareowners should consider
whether the Fund remains an appropriate investment in light of
their then current financial position and needs. The following
descriptions summarize several of each Fund's fundamental
investment limitations which are set forth in full in the
Statement of Additional Information.
NO FUND MAY:
1. Purchase securities of any one issuer (other than U.S.
Government securities) if more than 5% of the value of its
total assets will be invested in the securities of such
issuer, except that up to 25% of the value of the Fund's
total assets may be invested without regard to this 5%
limitation.
2. Subject to the foregoing 25% exception, purchase more than
10% of the outstanding voting securities of any issuer.
3. Invest 25% or more of its total assets in one or more
issuers conducting their principal business activities in
the same industry.
4. Borrow money or enter into reverse repurchase agreements
except for temporary purposes in amounts up to 10% of the
value of the total assets at the time of such borrowing, or
mortgage, pledge or hypothecate any assets except in
connection with such borrowings. Whenever borrowings
(including reverse repurchase agreements) exceed 5% of the
Fund's total assets, the Fund will not make any
investments.
In addition, the Tax-Exempt Money Market Fund may not:
5. Invest less than 80% of its net assets in securities the
interest on which is exempt from federal income tax, except
during defensive periods or during periods of unusual
market conditions. For purposes of this fundamental policy,
Municipal Obligations that are subject to federal
alternative minimum tax are considered taxable.
With respect to Investment Limitation No. 1, in accordance
with current SEC regulations, the Money Market Fund intends
(as a matter of nonfundamental policy) to limit investments in
the securities of any single issuer (other than securities
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities) to not more than 5% of the Fund's total
assets at the time of purchase, 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.
If a percentage limitation is satisfied at the time of
investment, a later increase or decrease in such percentage
resulting from a change in the value of a Fund's portfolio
securities will not constitute a violation of such limitation.
If due to market fluctuations or other reasons the amount of
borrowings exceed the limit stated above, a Fund will promptly
reduce such amount.
TAXES Portico's management intends that each Fund will qualify as
FEDERAL a "regulated investment company" under the Internal Revenue
Code of 1986, as amended (the "Code"). Such qualification
generally will relieve each Fund of liability for federal
income taxes to the extent its earnings are distributed in
accordance with the Code.
Each Fund contemplates declaring as dividends each year at
least 90% of its investment company income. An investor who
receives a dividend derived from investment company taxable
income (which includes any excess of net short-term capital
gain over net long-term capital loss) treats it as a receipt
of ordinary income in the computation of his gross income,
whether such dividend is paid in the form of cash or
additional shares of the Fund.
In addition, the Tax-Exempt Money Market Fund contemplates
paying to its shareowners at least 90% of its exempt interest
income net of certain deductions. Dividends derived from
exempt interest income may be treated by shareowners as items
of interest excludable from their gross income under Section
103(a) of the Code, unless under the circumstances applicable
to the particular shareowner, exclusion would be disallowed.
(See Statement of Additional Information under "Additional
Information Concerning Taxes.") If the Tax-Exempt Money Market
Fund should hold certain private activity bonds issued after
August 7, 1986, shareowners must include, as an item of tax
preference, the portion of dividends paid by the Fund that is
attributable to interest on such bonds in their federal
alternative minimum taxable income for purposes of determining
liability (if any) for the 26%-28% alternative minimum tax
applicable to individuals and the 20% alternative minimum tax
and the environmental tax applicable to corporations.
Corporate shareowners must also take all exempt-interest
dividends into account in determining certain adjustments for
federal alternative minimum and environmental tax purposes.
The environmental tax applicable to corporations is imposed at
the rate of 0.12% of the excess of the corporation's modified
federal alternative minimum taxable income over $2,000,000.
Shareowners receiving Social Security benefits should note
that all exempt-interest dividends will be taken into account
in determining the taxability of such benefits.
Since all of the net income of the Money Market Fund, U.S.
Treasury Money Market Fund and U.S. Government Money Market
Fund is expected to be derived from earned interest, it is
anticipated that all dividends paid by these Funds will be
taxable as ordinary income to those shareowners who are not
exempt for federal income tax purposes, and that no part of
any distribution paid by these Funds will be eligible for the
dividends received deduction. Any dividends paid out of income
realized by the Tax Exempt Money Market Fund on taxable
securities will also be taxable to shareowners as ordinary
income.
Although the Funds anticipate that they will not have net
long-term capital gain, any dividend or distribution of a
Fund's excess of net long-term capital gain over its net
short-term capital loss will be taxable to a shareowner of the
Fund as long-term capital gain, regardless of how long the
shareowner has held shares of the Fund.
Each Fund will be required in certain cases to withhold and
remit to the U.S. Treasury 31% of the dividends or gross sale
proceeds paid to any shareowner (i) who has provided either an
incorrect taxpayer identification number or no number at all,
(ii) who is subject to withholding by the Internal Revenue
Service for failure to properly include on his return payments
of interest or dividends, or (iii) who has failed, when
required to do so, to certify that he is not subject to backup
withholding . Each Fund generally also will withhold and remit
to the U.S. Treasury 10% of all distributions from individual
retirement accounts (including simplified employee plans) to
any investor unless the transfer agent receives a written
request not to withhold federal income tax from the investor
prior to the distribution date; withholding on distributions
from other types of Retirement Plans may be mandatory and may
be at a higher rate.
The foregoing is only a brief summary of some of the important
federal income tax considerations generally affecting the
Funds and their shareowners and is not intended as a
substitute for careful tax planning and is based on tax laws
and regulations which are in effect on the date of this
Prospectus. Such laws and regulations may be changed by
legislative or administrative action. Accordingly, investors
in the Funds should consult their tax advisers with specific
reference to their own tax situation. Shareowners will be
advised at least annually as to the federal income tax
consequences of dividends and distributions made each year.
STATE AND LOCAL Investors are advised to consult their tax advisers concerning
the application of state and local tax laws, which may have
different consequences from those of the federal income tax
law described above. In particular, although the U.S. Treasury
Money Market Fund intends to invest primarily in U.S. Treasury
obligations, the interest on which is generally exempt from
state income taxation, an investor should consult his or her
own tax adviser to determine whether distributions from the
Fund are exempt from state taxation in the investor's own
state. Similarly, dividends paid by the other Funds may be
taxable to investors under state or local law as dividend
income even though all or a portion of such dividends may be
derived from interest on obligations which, if realized
directly, would be exempt from such income taxes.
DESCRIPTION The Company was incorporated under the laws of the State of
OF SHARES Wisconsin on February 15, 1988 and is registered with the SEC
as an open-end management company. The Articles of
Incorporation authorize the Board of Directors to issue up to
150 billion full and fractional shares of common stock, $.0001
par value per share. The Company currently has 16 classes
representing interests in 16 investment portfolios. Of the
authorized shares, five billion shares have been classified
for each Fund discussed in this Prospectus. Each Fund is
classified as a diversified company under the 1940 Act. For
information regarding the other portfolios, contact Portico
Investor Services at 1-800-982-8909 or 414-287-3710 (Milwaukee
area) or your Shareowner Organization.
Portico does not presently intend to hold annual meetings of
shareowners except as required by the 1940 Act or other
applicable law. Portico will call a meeting of shareowners for
the purpose of voting upon the question of removal of a member
of the Board of Directors upon written request of shareowners
owning at least 10% of the outstanding shares of Portico
entitled to vote. To the extent required by law, Portico will
assist in shareowner communication in such matters.
Shareowners of each class of Portico's common stock are
entitled to one vote for each full share held and
proportionate fractional votes for fractional shares held, and
will vote in the aggregate and not by class, except where
otherwise required by law. It is contemplated that the
shareowners of a Fund will vote separately as a class on
matters relating to its investment advisory agreement and any
changes in its fundamental investment limitations. Shares of
Portico have noncumulative voting rights and, accordingly, the
holders of more than 50% of Portico's outstanding shares
(irrespective of class) may elect all of the Directors. As of
January 31, 1997, the Adviser and its affiliates held, on
behalf of their underlying accounts, approximately 72% of
Portico's shares that were outstanding on that date.
Each share of a Fund represents an equal proportionate
interest in the Fund, and is entitled to such dividends and
distributions earned on its assets as are declared at the
discretion of the Board of Directors. Shares of the Funds do
not have preemptive rights.
NET ASSET VALUE The net asset value of each Fund for purposes of pricing
AND DAYS OF purchase and redemption orders is determined as of 11:30 a.m.
OPERATION Central Time and as of the close of regular trading hours on
the Exchange, currently 3:00 p.m. Central Time, on each day on
which both the Exchange is open for trading and the Federal
Reserve Banks' Fedline System is open. As a result, shares of
the Funds will not be priced on the days which the Exchange or
Federal Reserve Banks observe: New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veterans Day,
Thanksgiving Day and Christmas Day. Net asset value per share
is calculated by dividing the value of all securities and
other assets owned by each Fund, less the liabilities charged
to that Fund by the number of the Fund's outstanding shares.
The Company intends to use its best efforts to maintain the
net asset value of each Fund at $1.00 per share, although
there is no assurance that it will be able to do so on a
continuous basis. Net asset value is computed using the
amortized cost method. In connection with the use of this
valuation method, Portico limits the dollar-weighted average
maturity of each Fund to not more than 90 days and the
remaining maturity of each portfolio security to not more than
thirteen months with certain exceptions permitted by SEC
rules.
YIELD From time to time each Fund may quote its "yield" and
"effective yield," and the Tax-Exempt Money Market Fund may
also quote its "tax-equivalent yield," in advertisements or in
communications to shareowners. Each yield figure is based on
historical earnings and is not intended to indicate future
performance. The "yield" of a Fund refers to the income
generated by an investment in the Fund over a seven-day period
identified in the advertisement. This income is then
"annualized." That is, the amount of income generated by the
investment during that week is assumed to be generated each
week over a 52-week period and is shown as a percentage of the
investment. The "effective yield" is calculated similarly but,
when annualized, the income earned by an investment in the
Fund is assumed to be reinvested. The "effective yield" will
be slightly higher than the "yield" because of the compounding
effect of this assumed reinvestment. The "tax-equivalent
yield" of the Tax-Exempt Money Market Fund shows the level of
taxable yield needed to produce an after-tax equivalent to the
Fund's tax-free yield. This is done by increasing the Fund's
yield (calculated as above) by the amount necessary to reflect
the payment of federal income tax at a stated tax rate. The
"tax-equivalent yield" will always be higher than the "yield"
of the Tax-Exempt Money Market Fund.
Additionally, the yields of the Funds may be compared in such
advertisements or reports to shareowners to those of other
mutual funds with similar investment objectives and to other
relevant indices or to rankings prepared by independent
services or other financial or industry publications that
monitor the performance of mutual funds. For example, the
yields of the Money Market Fund may be compared to
IBCFinancial Data, Inc.' s ("IBC's") Money Fund Average, the
yields of the U.S. Treasury Money Market Fund and the U.S.
Government Money Market Fund may be compared to IBC's
Government Money Fund Average, and the yields of the Tax-
Exempt Money Market Fund may be compared to IBC's Tax-Free
Money Fund Average, which are averages compiled by IBC
Financial Data, Inc.' s Money Fund Report, a widely recognized
independent publication that monitors the performance of money
market funds. In addition, the yields of the Money Market,
U.S. Treasury Money Market and the U.S. Government Money
Market Funds may be compared to the average yields reported by
the Bank Rate Monitor for money market deposit accounts
offered by the 50 leading banks and thrift institutions in the
top five standard metropolitan statistical areas.
Yield data as reported in national financial publications
including Money Magazine, Forbes, Barron's, Morningstar Mutual
Funds, The Wall Street Journal and The New York Times, or in
publications of a local or regional nature, may also be used
in comparing the yields of the Funds.
Since yields fluctuate, yield data cannot necessarily be used
to compare an investment in a Fund's shares with bank
deposits, savings accounts and similar investment alternatives
which often provide an agreed or guaranteed fixed yield for a
stated period of time. Investors should remember that
performance and yield are generally functions of the kind and
quality of the instruments held in a portfolio, portfolio
maturity, operating expenses, and market conditions. Any fees
charged by Shareowner Organizations directly to their customer
accounts in connection with investments in shares of the Funds
will not be included in the Funds' calculations of yield.
____________________________
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR
IN THE FUNDS' STATEMENT OF ADDITIONAL INFORMATION INCORPORATED
HEREIN BY REFERENCE, IN CONNECTION WITH THE OFFERING MADE BY
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUNDS OR THEIR DISTRIBUTOR. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFERING BY THE FUNDS OR BY THEIR
DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
TO OPEN AN ACCOUNT OR REQUEST INFORMATION
1-800-982-8909
1-414-287-3710
FOR ACCOUNT BALANCES AND INVESTOR SERVICES
1-800-228-1024
1-414-287-3808
PORTICO INVESTOR SERVICES
615 East Michigan Street
P.O. Box 3011
Milwaukee, Wisconsin 53201-3011
- -------------------------------------------------------------------------------
PORTICO FUNDS, INC.
(Institutional Version)
Money Market Fund,
Institutional Money Market Fund,
U.S. Treasury Money Market Fund,
U.S. Government Money Market Fund,
Tax-Exempt Money Market Fund,
Short-Term Bond Market Fund,
Intermediate Bond Market Fund,
Tax-Exempt Intermediate Bond Fund,
Bond IMMDEX/TM Fund,
Balanced Fund,
Growth and Income Fund,
Special Growth Fund,
Equity Index Fund,
MidCore Growth Fund,
International Equity Fund
Form N-1A
Cross Reference Sheet
________________________________________
Part A
Item No. Prospectus Heading
- -------- ------------------
1. Cover Page................................. Cover Page
2. Synopsis................................... Expense Summary
3. Condensed Financial Information............ Financial
Highlights;
Performance
Calculations
4. General Description of Registrant.......... Cover Page;
Investment
Objectives and
Policies; Other
Investment
Information;
Description of
Shares; Invest-
ment Limitations
5. Management of the Fund..................... Management of the
Funds
5A. Management's Discussion of Fund Performance Inapplicable
6. Capital Stock and Other Securities......... Dividends and
Distributions;
Management of the
Funds; Taxes;
Description of
Shares
7. Purchase of Securities Being Offered....... Purchase of Shares;
Net Asset
Value and Days of
Operation
8. Redemption or Repurchase................... Redemption of
Shares; Net Asset
Value and Days of
Operation
9. Pending Legal Proceedings.................. Not Applicable
- -------------------------------------------------------------------------------
FEBRUARY 28, 1997
PROSPECTUS
INSTITUTIONAL
SHARES
MONEY MARKET FUND
INSTITUTIONAL MONEY MARKET FUND
U.S. TREASURY MONEY MARKET FUND
U.S. GOVERNMENT MONEY MARKET FUND
TAX-EXEMPT MONEY MARKET FUND
SHORT-TERM BOND MARKET FUND
INTERMEDIATE BOND MARKET FUND
TAX-EXEMPT INTERMEDIATE BOND FUND
BOND IMMDEX/TM FUND
BALANCED FUND
GROWTH AND INCOME FUND
EQUITY INDEX FUND
MIDCORE GROWTH FUND
SPECIAL GROWTH FUND
INTERNATIONAL EQUITY FUND
(LOGO)
TABLE OF CONTENTS
Expense Summary 3
Financial Highlights 5
Performance History 12
Investment Objectives and Policies 13
Other Investment Information 29
Purchase of Shares 36
Redemption of Shares 38
Exchange of Shares 39
Dividends and Distributions 39
Management of the Funds 40
Investment Limitations 43
Taxes 44
Description of Shares 45
Net Asset Value and Days of Operation 46
Performance Calculations 47
PORTICO FUNDS, INC. is a family of sixteen mutual funds that offer a variety of
investment objectives designed to meet the needs of institutional and individual
investors. This Prospectus describes the five money market funds, four bond
funds and six equity funds available to institutional investors.
MONEY MARKET FUNDS
AN INVESTMENT IN THE MONEY MARKET FUNDS IS NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THESE FUNDS WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
THE MONEY MARKET FUND seeks to provide a high level of taxable current income
consistent with liquidity, the preservation of capital and a stable net asset
value. The Fund attempts to attain its objective by investing in a broad range
of government, bank and commercial money market instruments.
THE INSTITUTIONAL MONEY MARKET FUND seeks to provide a high level of taxable
current income consistent with liquidity, the preservation of capital and a
stable net asset value. The Fund attempts to attain its objective by investing
in a broad range of government, bank and commercial money market instruments.
THE U.S. TREASURY MONEY MARKET FUND seeks 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. The Fund pursues its
objective by investing in obligations issued or guaranteed as to principal and
interest by the U.S. Treasury, the interest income from which is exempt from
state income taxation.
THE U.S. GOVERNMENT MONEY MARKET FUND seeks to provide a high level of taxable
current income consistent with liquidity, the preservation of capital and a
stable net asset value. The Fund attempts to attain its objective by investing
in obligations that are issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, and in repurchase agreements relating to such
obligations, irrespective of state income tax considerations.
THE TAX-EXEMPT MONEY MARKET FUND seeks to provide a high level of current income
exempt from federal income taxes consistent with liquidity, the preservation of
capital and a stable net asset value. In pursuing its investment objective, the
Fund invests primarily in short-term debt obligations issued by state and local
governments.
BOND FUNDS
THE SHORT-TERM BOND MARKET FUND seeks to provide an annual rate of total return,
before Fund expenses, comparable to the annual rate of total return of the
Lehman Brothers 1-3 year Government/Corporate Bond Index.
THE INTERMEDIATE BOND MARKET FUND seeks to provide an annual rate of total
return, before Fund expenses, comparable to the annual rate of total return of
the Lehman Brothers Intermediate Government/Corporate Bond Index.
THE TAX-EXEMPT INTERMEDIATE BOND MARKET FUND seeks to provide current income
that is substantially exempt from federal income tax and emphasize total return
with relatively low volatility of principal.
THE BOND IMMDEX/TM FUND seeks to provide an annual rate of total return, before
Fund expenses, comparable to the annual rate of total return of the Lehman
Brothers Government/Corporate Bond Index.
EQUITY FUNDS
THE BALANCED FUND seeks capital appreciation and current income with relatively
low volatility of capital.
THE GROWTH AND INCOME FUND seeks both reasonable income and long-term capital
appreciation.
THE EQUITY INDEX FUND seeks returns, before Fund expenses, comparable to the
price and yield performance of publicly traded common stocks in the aggregate as
represented by the S&P 500 Stock Index.
THE MIDCORE GROWTH FUND seeks capital appreciation through investment in
securities of medium- to large-sized companies.
THE SPECIAL GROWTH FUND seeks capital appreciation through investment in
securities of small- to medium-sized companies.
THE INTERNATIONAL EQUITY FUND seeks capital appreciation through investment in
foreign equity securities of small- to medium-sized companies.
Firstar Investment Research & Management Company ("FIRMCO" or the "Adviser")
serves as investment adviser to each Fund, and the Funds are sponsored by B.C.
Ziegler and Company (the "Distributor"). State Street Global Advisors, a
division of State Street Bank and Trust Company (the "Sub-Adviser"), serves as
the sub-adviser to the International Equity Fund.
This Prospectus sets forth concisely the information about the Funds that a
prospective investor should consider before investing. You
should read this Prospectus and retain it for future reference. Additional
information about the Funds, contained in a Statement of Additional Information,
has been filed with the Securities and Exchange Commission ("SEC") and is
available upon request without charge by writing Portico Investor Services at
615 East Michigan Street, P.O. Box 3011, Milwaukee, Wisconsin 53201-3011, or by
calling 1-800-982-8909 or 414-287-3710 (Milwaukee area). The SEC maintains a
website (http://www.sec.gov.) that contains the Statement of Additional
Information, material incorporated by reference and other information regarding
registrants that file electronically with the SEC. The Statement of Additional
Information bears the same date as this Prospectus and is incorporated by
reference in its entirety into the Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
SHARES OF THE 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.
February 28, 1997
EXPENSE SUMMARY Below is a summary of the shareowner transaction expenses and
the annual operating expenses incurred by the Money Market,
Institutional Money Market, U.S. Treasury Money Market, U.S.
Government Money Market and Tax-Exempt Money Market Funds and
by Institutional Shares of the Short-Term Bond Market,
Intermediate Bond Market, Tax-Exempt Intermediate Bond, Bond
IMMDEX/TM, Balanced, Growth and Income, Equity Index, MidCore
Growth, Special Growth and International Equity, during the
fiscal year ended October 31, 1996. An example based on the
summaries is also shown.
SHAREOWNER MONEY MARKET BOND EQUITY
TRANSACTION EXPENSES FUNDS FUNDS FUNDS
- --------------------------------------------------------------------------
Maximum Sales Charge
Imposed on Purchases None None None
Maximum Sales Charge Imposed
on Reinvested Dividends None None None
Deferred Sales Charge None None None
Redemption Fees None None None
Exchange Fees None None None
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
ANNUAL FUND ADVISORY SHAREOWNER OTHER TOTAL FUND
OPERATING EXPENSES FEES AFTER 12B-1 SERVICING EXPENSES OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS) FEE WAIVERS1 FEES2 FEES2 AFTER FEE WAIVERS3 AFTER FEE WAIVERS4
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MONEY MARKET FUNDS:
Money Market Fund 0.36% 0.02% 0.00% 0.22% 0.60%
Institutional Money Market Fund 0.29% 0.00% 0.00% 0.06% 0.35%
U.S.Treasury Money Market Fund 0.37% 0.00% 0.00% 0.23% 0.60%
U.S. Government Money Market Fund 0.46% 0.00% 0.00% 0.14% 0.60%
Tax-Exempt Money Market Fund 0.39% 0.00% 0.00% 0.21% 0.60%
BOND FUNDS:
Short-Term Bond Market Fund 0.30% 0.00% N.A. 0.20% 0.50%
Intermediate Bond Market Fund 0.33% 0.00% N.A. 0.17% 0.50%
Tax-Exempt Intermediate Bond Fund 0.10% 0.00% N.A. 0.40% 0.50%
Bond IMMDEX/TM Fund 0.30% 0.00% N.A. 0.13% 0.43%
EQUITY FUNDS:
Balanced Fund 0.54% 0.00% N.A. 0.21% 0.75%
Growth and Income Fund 0.74% 0.00% N.A. 0.16% 0.90%
Equity Index Fund 0.25% 0.00% N.A. 0.16% 0.41%
MidCore Growth Fund 0.74% 0.00% N.A. 0.16% 0.90%
Special Growth Fund 0.75% 0.00% N.A. 0.13% 0.88%
International Equity Fund 0.71% 0.00% N.A. 0.79% 1.50%
<FN>
1 The Adviser has voluntarily agreed to waive a portion of its fees. Absent fee waivers, advisory fees would be 0.50%, 0.50%,
0.50%, 0.50%, 0.50%, 0.60%, 0.50%, 0.50%, 0.75%, 0.75%, 0.75% and 1.50% for the Money Market, U.S. Treasury Money Market,
U.S. Government Money Market, Tax-Exempt Money Market, Institutional Money Market, Short-Term Bond Market, Intermediate Bond
Market, Tax-Exempt Intermediate Bond, Balanced, Growth and Income, Midcore and International Equity Funds, respectively.
Fees of 0.75% or more are higher than the advisory fee payable by most other investment companies. See "Management of the
Funds" in this Prospectus for a more complete description and the financial statements for the Funds for the fiscal year
ended October 31, 1996 incorporated into the Statement of Additional Information.
2 The total of all 12b-1 fees and Shareowner Servicing Fees may not exceed, in the aggregate, the annual rate of 0.25% of a
Fund's average daily net assets.
3 Absent voluntary administrative fee waivers, other expenses would have been 0.29%, 0.30%, 0.21%, 0.28%, 0.14%, 0.27%, 0.24%,
0.47%, 0.20%, 0.28%, 0.23%, 0.23%, 0.23%, 0.20%, and 0.86% for the Money Market, U.S. Treasury Money Market, U.S. Government
Money Market, Tax-Exempt Money Market, Institutional Money Market, Short-Term Bond Market, Intermediate Bond Market, Tax-
Exempt Intermediate Bond, Bond IMMDEX/TM, Balanced, Growth and Income, Equity Index, MidCore Growth, Special Growth and
International Equity Funds, respectively.
4 Absent fee waivers, total operating expenses would have been 0.81%, 0.80%, 0.71%, 0.78%, 0.64%, 0.87%, 0.74%, 0.97%, 0.50%,
1.03%, 0.98%, 0.48%, 0.98%, 0.95%, and 2.36% for the Money Market, U.S. Treasury Money Market, U.S. Government Money Market,
Tax-Exempt Money Market, Institutional Money Market, Short-Term Bond Market, Intermediate Bond Market, Tax-Exempt
Intermediate Bond, Bond IMMDEX/TM, Balanced, Growth and Income, Equity Index, MidCore Growth, Special Growth and
International Equity Funds, respectively.
</TABLE>
Example: You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual returns, and (2) redemption
of your investment at the end of the following periods:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------------------------------------------------------------
Money Market Fund $ 6 $19 $33 $ 75
Institutional Money
Market Fund 4 11 20 44
U.S. Treasury Money
Market Fund 6 19 33 75
U.S. Government
Money Market Fund 6 19 33 75
Tax-Exempt
Money Market Fund 6 19 33 75
Short-Term Bond
Market Fund 5 16 28 63
Intermediate Bond
Market Fund 5 16 28 63
Tax-Exempt Intermediate
Bond Fund 5 16 28 63
Bond IMMDEX/TM Fund 4 14 24 54
Balanced Fund 8 24 42 93
Growth and Income Fund 9 29 50 111
Equity Index Fund 4 13 23 52
MidCore Growth Fund 9 29 50 111
Special Growth Fund 9 28 49 108
International
Equity Fund 15 47 82 179
-------------------------------------------------------------
The foregoing tables are intended to assist investors in
understanding the expenses that shareowners bear either
directly or indirectly. In addition, Institutions may charge
fees for providing services in connection with their clients'
investments in a Fund's shares.
The example shown above should not be considered a
representation of future investment return or operating
expenses. Actual investment return and operating expenses may
be more or less than those shown. Information regarding the
Funds' actual performance will appear in their annual report
to shareowners. Each shareowner of record at the close of the
fiscal year will be sent the annual report.
FINANCIAL The financial highlights for each of the periods presented
HIGHLIGHTS have been derived from financial statements which have been
audited by Price Waterhouse LLP, independent accountants,
whose report, which appears in the annual report to
shareowners for the fiscal year ended October 31, 1996, is
incorporated by reference into the Statement of Additional
Information. Prior to January 9, 1995, the Short-Term Bond
Market, Intermediate Bond Market, Tax-Exempt Intermediate
Bond, Bond IMMDEX/TM, Balanced, Growth and Income, Equity
Index, MidCore Growth, Special Growth and International Equity
Funds offered only one class of shares to both institutional
and retail investors. On that date, the Funds began offering
Institutional Shares to institutional investors as described
in this Prospectus and Retail Shares to retail investors as
described in a separate prospectus. The tables on the
following pages should be read in conjunction with the
financial statements and related notes also incorporated by
reference into the Statement of Additional Information. You
may obtain the Statement of Additional Information and the
annual report to shareowners, which contain additional
performance information, free of charge by calling Portico
Investor Services or writing to Portico Investor Services at
the address listed on the back cover of this Prospectus.
<TABLE>
<CAPTION>
FINANCIAL
HIGHLIGHTS Net Dividends
Asset Value, Net from
Beginning of Investment Net Investment
Period Income Income
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MONEY MARKET FUND
Mar. 16, 19881 through
Oct. 31, 1988 $1.00 $0.05 $(0.05)
Year Ended 1989 1.00 0.08 (0.08)
Year Ended 1990 1.00 0.08 (0.08)
Year Ended 1991 1.00 0.06 (0.06)
Year Ended 19922 1.00 0.04 (0.04)
Year Ended 1993 1.00 0.03 (0.03)
Year Ended 1994 1.00 0.03 (0.03)
Year Ended 1995 1.00 0.05 (0.05)
Year Ended 1996 1.00 0.05 (0.05)
INSTITUTIONAL MONEY MARKET FUND
Apr. 26, 19911 through
Oct. 31, 1991 1.00 0.03 (0.03)
Year Ended 19922 1.00 0.04 (0.04)
Year Ended 1993 1.00 0.03 (0.03)
Year Ended 1994 1.00 0.04 (0.04)
Year Ended 1995 1.00 0.06 (0.06)
Year Ended 1996 1.00 0.05 (0.05)
U.S. TREASURY MONEY MARKET FUND
Apr. 29, 19911 through
Oct. 31, 1991 1.00 0.03 (0.03)
Year Ended 19922 1.00 0.04 (0.04)
Year Ended 1993 1.00 0.03 (0.03)
Year Ended 1994 1.00 0.03 (0.03)
Year Ended 1995 1.00 0.05 (0.05)
Year Ended 1996 1.00 0.05 (0.05)
U.S. GOVERNMENT MONEY MARKET FUND
Aug. 1, 19881 through
Oct. 31, 1988 1.00 0.02 (0.02)
Year Ended 1989 1.00 0.08 (0.08)
Year Ended 1990 1.00 0.08 (0.08)
Year Ended 1991 1.00 0.06 (0.06)
Year Ended 19922 1.00 0.04 (0.04)
Year Ended 1993 1.00 0.03 (0.03)
Year Ended 1994 1.00 0.03 (0.03)
Year Ended 1995 1.00 0.05 (0.05)
Year Ended 1996 1.00 0.05 (0.05)
TAX-EXEMPT MONEY MARKET FUND
June 27, 19881 through
Oct. 31, 1988 1.00 0.02 (0.02)
Year Ended 1989 1.00 0.06 (0.06)
Year Ended 1990 1.00 0.05 (0.05)
Year Ended 1991 1.00 0.04 (0.04)
Year Ended 19922 1.00 0.03 (0.03)
Year Ended 1993 1.00 0.02 (0.02)
Year Ended 1994 1.00 0.02 (0.02)
Year Ended 1995 1.00 0.03 (0.03)
Year Ended 1996 1.00 0.03 (0.03)
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL Supplemental Data and Ratios
HIGHLIGHTS (CONT.) ---------------------------------------------------------------
Net Asset Net Assets, Ratio of Net Ratio of Net
Value, End of Expenses to Investment Income Total
End of Period Period (000s) Average Net Assets Average Net Assets Return
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MONEY MARKET FUND
Mar. 16, 19881 through
Oct. 31, 1988 $1.00 $100,373 0.44%3, 4 7.35%3, 4 4.63% 5
Year Ended 1989 1.00 201,097 0.60%4 8.66%4 9.01%
Year Ended 1990 1.00 762,170 0.51%4 7.81%4 8.14%
Year Ended 1991 1.00 628,697 0.50%4 6.28%4 6.39%
Year Ended 19922 1.00 146,012 0.58%4 3.84%4 3.73%
Year Ended 1993 1.00 132,568 0.60%4 2.67%4 2.71%
Year Ended 1994 1.00 165,018 0.60%4 3.44%4 3.42%
Year Ended 1995 1.00 172,261 0.60%4 5.36%4 5.51%
Year Ended 1996 1.00 224,036 0.60%4 4.94%4 5.06%
INSTITUTIONAL MONEY
MARKET FUND
Apr. 26, 19911 through
Oct. 31, 1991 1.00 189,048 0.50%6, 7 5.47%6, 7 2.87%9
Year Ended 19922 1.00 696,132 0.41%7 3.75%7 3.88%
Year Ended 1993 1.00 588,301 0.38%7 2.87%7 2.92%
Year Ended 1994 1.00 754,636 0.37%7 3.64%7 3.65%
Year Ended 1995 1.00 716,566 0.35%7 5.63%7 5.77%
Year Ended 1996 1.00 750,051 0.35%7 5.19%7 5.32%
U.S. TREASURY MONEY
MARKET FUND
Apr. 29, 19911 through
Oct. 31, 1991 1.00 36,267 0.52%6, 8 5.23%6, 8 2.69%9
Year Ended 19922 1.00 37,342 0.60%8 3.42%8 3.48%
Year Ended 1993 1.00 40,744 0.60%8 2.55%8 2.59%
Year Ended 1994 1.00 56,020 0.60%8 3.14%8 3.20%
Year Ended 1995 1.00 64,655 0.60%8 5.04%8 5.16%
Year Ended 1996 1.00 53,430 0.60%8 4.70%8 4.80%
U.S. GOVERNMENT MONEY
MARKET FUND
Aug. 1, 19881 through
Oct. 31, 1988 1.00 49,069 0.50%3, 10 7.56%3, 10 1.91%5
Year Ended 1989 1.00 101,497 0.61%10 8.43%10 8.72%
Year Ended 1990 1.00 153,480 0.60%10 7.55%10 7.84%
Year Ended 1991 1.00 237,752 0.60%10 5.80%10 6.02%
Year Ended 19922 1.00 221,521 0.60%10 3.56%10 3.60%
Year Ended 1993 1.00 203,165 0.60%10 2.59%10 2.63%
Year Ended 1994 1.00 183,591 0.60%10 3.29%10 3.35%
Year Ended 1995 1.00 163,068 0.60%10 5.24%10 5.37%
Year Ended 1996 1.00 198,334 0.60%10 4.84%10 4.96%
TAX-EXEMPT MONEY
MARKET FUND
June 27, 19881 through
Oct. 31, 1988 1.00 10,838 0.52%3, 11 5.10%3, 11 1.78%5
Year Ended 1989 1.00 18,429 0.60%11 5.82%11 5.99%
Year Ended 1990 1.00 16,424 0.64%11 5.38%11 5.51%
Year Ended 1991 1.00 29,714 0.63%11 4.34%11 4.49%
Year Ended 19922 1.00 74,343 0.60%11 2.83%11 2.91%
Year Ended 1993 1.00 73,621 0.60%11 2.12%11 2.17%
Year Ended 1994 1.00 70,436 0.60%11 2.23%11 2.25%
Year Ended 1995 1.00 84,084 0.60%11 3.36%11 3.42%
Year Ended 1996 1.00 79,328 0.60%11 3.09%11 3.13%
<FN>
1 Commencement of operations.
2 Effective February 3, 1992, FIRMCO assumed the investment advisory responsibilities of Firstar Trust Company, an affiliate
of FIRMCO.
3 Annualized for the period ended October 31, 1988.
4 Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1996, 1995, 1994,
1993, 1992, 1991, 1990 and 1989 and the period ended October 31, 1988 would have been 0.81%, 0.90%, 0.93%, 0.99%, 0.96%,
0.94%, 0.94%, 1.01% and 0.89%, respectively; and ratios of net investment income to average net assets for the fiscal years
ended October 31, 1996, 1995, 1994, 1993, 1992, 1991, 1990 and 1989 and the period ended October 31, 1988 would have been
4.73%, 5.06%, 3.11%, 2.28%, 3.46%, 5.84%, 7.38%, 8.25% and 6.90%, respectively.
5 Not annualized for the period ended October 31, 1988.
6 Annualized for the period ended October 31, 1991.
7 Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1996, 1995, 1994,
1993, 1992 and the period ended October 31, 1991 would have been 0.64%, 0.69%, 0.85%, 0.87%, 0.88% and 0.98%, respectively;
and ratios of net investment income to average net assets for the fiscal years ended October 31, 1996, 1995, 1994, 1993,
1992 and the period ended October 31, 1991 would have been 4.90%, 5.29%, 3.16%, 2.37%, 3.28% and 4.99%, respectively.
8 Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1996, 1995, 1994,
1993, 1992 and the period ended October 31, 1991 would have been 0.80%, 0.83%, 0.94%, 0.93%, 1.01% and 1.10%, respectively;
and ratios of net investment income to average net assets for the fiscal years ended October 31, 1996, 1995, 1994, 1993,
1992 and the period ended October 31, 1991 would have been 4.50%, 4.81%, 2.80%, 2.22%, 3.01% and 4.65%, respectively.
9 Not annualized for the period ended October 31, 1991.
10 Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1996, 1995, 1994,
1993, 1992, 1991, 1990 and 1989 and the period ended October 31, 1988 would have been 0.71%, 0.75%, 0.88%, 0.93%, 0.94%,
0.95%, 1.01%, 1.06% and 0.86%, respectively; and ratios of net investment income to average net assets for the fiscal years
ended October 31, 1996, 1995, 1994, 1993, 1992, 1991, 1990 and 1989 and the period ended October 31, 1988 would have been
4.73%, 5.09%, 3.01%, 2.26%, 3.22%, 5.45%, 7.14%, 7.98% and 7.20%, respectively.
11 Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1996, 1995, 1994,
1993, 1992, 1991, 1990 and 1989 and the period ended October 31, 1988 would have been 0.78%, 0.84%, 0.93%, 0.98%, 1.05%,
1.08%, 1.26%, 1.30% and 1.30%, respectively; and ratios of net investment income to average net assets for the fiscal years
ended October 31, 1996, 1995, 1994, 1993, 1992, 1991, 1990 and 1989 and for the period ended October 31, 1988 would have
been 2.91%, 3.12%, 1.90%, 1.74%, 2.38%, 3.89%, 4.76%, 5.12% and 4.32%, respectively.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL Income From Investment Operations
HIGHLIGHTS --------------------------------------------------
Net Asset Net Realized and
Value, Net Unrealized Gains Total from
Beginning Investment or (Losses) on Investment
of Period Income5 Securities Operations
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHORT-TERM BOND MARKET
Dec. 29, 19891 through
Oct. 31, 1990 $10.00 $0.66 $(0.21) $0.45
Year Ended 1991 9.79 0.73 0.54 1.27
Year Ended 19922 10.33 0.64 0.29 0.93
Year Ended 1993 10.60 0.58 0.10 0.68
Year Ended 1994 10.56 0.56 (0.41) 0.15
Year Ended 1995 10.03 0.63 0.24 0.87
Year Ended 1996 10.28 0.61 (0.03) 0.58
INTERMEDIATE BOND MARKET
Jan. 5, 19931 through
Oct. 31, 1993 10.00 0.40 0.45 0.85
Year Ended 1994 10.45 0.51 (0.69) (0.18)
Year Ended 1995 9.67 0.62 0.53 1.15
Year Ended 1996 10.21 0.59 (0.02) 0.57
TAX-EXEMPT INTERMEDIATE BOND
Feb. 8, 19931 through
Oct. 31, 1993 10.00 0.27 0.26 0.53
Year Ended 1994 10.26 0.41 (0.48) (0.07)
Year Ended 1995 9.78 0.44 0.46 0.90
Year Ended 1996 10.24 0.43 (0.03) 0.40
BOND IMMDEX/TM
Dec. 29, 19891 through
Oct. 31, 1990 25.00 1.67 (0.66) 1.01
Year Ended 1991 24.52 1.85 1.98 3.83
Year Ended 19922 26.50 1.75 0.96 2.71
Year Ended 1993 27.31 1.68 1.83 3.51
Year Ended 1994 28.91 1.65 (2.74) (1.09)
Year Ended 1995 25.67 1.74 2.29 4.03
Year Ended 1996 27.82 1.70 (0.27) 1.43
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL Less Distributions
HIGHLIGHTS -----------------------------------------------------
Dividends Distributions Net Asset
from from Value,
Net Investment Capital Total End
Income Gains Distributions of Period
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHORT-TERM
BOND MARKET
Dec. 29, 19891 through
Oct. 31, 1990 $(0.66) $ - $(0.66) $ 9.79
Year Ended 1991 (0.73) - (0.73) 10.33
Year Ended 19922 (0.64) (0.02) (0.66) 10.60
Year Ended 1993 (0.58) (0.14) (0.72) 10.56
Year Ended 1994 (0.56) (0.12) (0.68) 10.03
Year Ended 1995 (0.62) - (0.62) 10.28
Year Ended 1996 (0.61) - (0.61) 10.25
INTERMEDIATE
BOND MARKET
Jan. 5, 19931 through
Oct. 31, 1993 (0.40) - (0.40) 10.45
Year Ended 1994 (0.51) (0.09) (0.60) 9.67
Year Ended 1995 (0.61) - (0.61) 10.21
Year Ended 1996 (0.59) - (0.59) 10.19
TAX-EXEMPT
INTERMEDIATE BOND
Feb. 8, 19931 through
Oct. 31, 1993 (0.27) - (0.27) 10.26
Year Ended 1994 (0.41) - (0.41) 9.78
Year Ended 1995 (0.44) - (0.44) 10.24
Year Ended 1996 (0.43) - (0.43) 10.21
BOND IMMDEX/TM
Dec. 29, 19891 through
Oct. 31, 1990 (1.49) - (1.49) 24.52
Year Ended 1991 (1.85) - (1.85) 26.50
Year Ended 19922 (1.76) (0.14) (1.90) 27.31
Year Ended 1993 (1.70) (0.21) (1.91) 28.91
Year Ended 1994 (1.65) (0.50) (2.15) 25.67
Year Ended 1995 (1.84) (0.04) (1.88) 27.82
Year Ended 1996 (1.70) - (1.70) 27.55
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL Supplemental Data and Ratios
HIGHLIGHTS (CONT.) ----------------------------------------------------------------------------------------
Ratio of Net
Net Ratio of Net Investment
Assets, Expenses to Income to Portfolio
Total End of Average Net Average Net Turnover
Return4 Period (000s) Assets3 Assets3 Rate
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SHORT-TERM
BOND MARKET
Dec. 29, 19891 through
Oct. 31, 1990 4.64% $ 22,731 0.60%6 7.93%6 57.40%
Year Ended 1991 13.39% 63,183 0.60%6 7.13%6 66.80%
Year Ended 19922 9.28% 129,409 0.60%6 6.00%6 82.20%
Year Ended 1993 6.70% 142,518 0.52%6 5.53%6 87.62%
Year Ended 1994 1.46% 122,368 0.50%6 5.43%6 76.13%
Year Ended 1995 8.95% 94,959 0.50%6 6.23%6 100.58%
Year Ended 1996 5.80% 147,466 0.50%6 5.92%6 59.62%
INTERMEDIATE
BOND MARKET
Jan. 5, 19931 through
Oct. 31, 1993 8.58% 56,794 0.50%7 4.65%7 82.37%
Year Ended 1994 (1.73%) 88,306 0.50%7 5.19%7 56.25%
Year Ended 1995 12.25% 128,941 0.50%7 6.26%7 66.69%
Year Ended 1996 5.77% 173,468 0.50%7 5.84%7 59.29%
TAX-EXEMPT
INTERMEDIATE BOND
Feb. 8, 19931 through
Oct. 31, 1993 5.36% 23,866 0.59%8 3.75%8 3.23%
Year Ended 1994 (0.73%) 26,167 0.60%8 4.04%8 58.54%
Year Ended 1995 9.38% 27,595 0.51%8 4.45%8 44.13%
Year Ended 1996 4.02% 36,652 0.50%8 4.24%8 30.46%
BOND IMMDEX/TM
Dec. 29, 19891 through
Oct. 31, 1990 4.21% 44,241 0.50%9 8.10%9 111.28%
Year Ended 1991 16.16% 90,034 0.50%9 7.85%9 131.69%
Year Ended 19922 10.49% 181,421 0.50%9 6.92%9 37.72%
Year Ended 1993 13.30% 260,486 0.50%9 6.10%9 81.18%
Year Ended 1994 (3.89%) 256,778 0.48%9 6.14%9 49.70%
Year Ended 1995 16.26% 290,274 0.44%9 6.51%9 41.67%
Year Ended 1996 5.35% 370,556 0.43%9 6.23%9 33.38%
<FN>
1 Commencement of operations.
2 Effective February 3, 1992, FIRMCO assumed the investment advisory responsibilities of Firstar Trust Company, an affiliate
of FIRMCO.
3 Annualized for the period ended October 31, 1990 for the Short-Term Bond Market and Bond IMMDEX/TM Funds and for the period
ended October 31, 1993 for the Intermediate Bond Market and Tax-Exempt Intermediate Bond Funds.
4 Not annualized for the period ended October 31, 1990 for the Short-Term Bond Market and Bond IMMDEX/TM Funds and for the
period ended October 31, 1993 for the Intermediate Bond Market and Tax-Exempt Intermediate Bond Funds.
5 For the Tax-Exempt Intermediate Bond Fund, substantially all investment income is exempt from federal income tax.
6 Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1996, 1995, 1994,
1993, 1992, 1991 and the period ended October 31, 1990 would have been 0.87%, 0.91%, 0.90%, 0.90%, 0.93%, 0.97% and 1.17%,
respectively; and ratios of net investment income to average net assets for the fiscal years ended October 31, 1996, 1995,
1994, 1993, 1992, 1991 and the period ended October 31, 1990 would have been 5.55%, 5.82%, 5.03%, 5.15%, 5.67%, 6.76% and
7.36%, respectively.
7 Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1996, 1995, 1994
and the period ended October 31, 1993 would have been 0.74%, 0.79%, 0.78% and 0.89%, respectively; and ratios of net
investment income to average net assets for the fiscal years ended October 31, 1996, 1995, 1994, and the period ended
October 31, 1993 would have been 5.60%, 5.97%, 4.91% and 4.26%, respectively.
8 Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1996, 1995, 1994
and the period ended October 31, 1993 would have been 0.97%, 1.00%, 0.98% and 1.28%, respectively; and ratios of net
investment income to average net assets for the fiscal years ended October 31, 1996, 1995, 1994 and the period ended October
31, 1993 would have been 3.77%, 3.96%, 3.67% and 3.07%, respectively.
9 Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1996, 1995, 1994,
1993, 1992, 1991 and the period ended October 31, 1990 would have been 0.50%, 0.51%, 0.51%, 0.52%, 0.56%, 0.60% and 0.65%
respectively; and ratios of net investment income to average net assets for the fiscal years ended October 31, 1996, 1995,
1994, 1993, 1992, 1991 and the period ended October 31, 1990 would have been 6.16%, 6.44%, 6.10%, 6.08%, 6.86%, 7.75% and
7.94%, respectively.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL Income from Investment Operations Less Distributions
HIGHLIGHTS --------------------------------------- ----------------------------------
Net Realized
Net Asset Net and Unrealized Dividends Distributions
Value, Investment Gains or Total from from Net from
Beginning Income or (Losses) on Investment Investment Capital Total
of Period (Loss) Securities Operations Income Gains Distributions
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCED
Mar. 30, 19921 through
Oct. 31, 1992 $20.00 $0.28 $ 0.44 $ 0.72 $(0.23) $ - $(0.23)
Year Ended 1993 20.49 0.47 2.27 2.74 (0.47) - (0.47)
Year Ended 1994 22.76 0.44 (0.66) (0.22) (0.44) - (0.44)
Year Ended 1995 22.10 0.53 3.78 4.31 (0.51) - (0.51)
Year Ended 1996 25.90 0.55 2.62 3.17 (0.53) (0.55) (1.08)
GROWTH AND INCOME
Dec. 29, 19891 through
Oct. 31, 1990 20.00 0.69 (2.05) (1.36) (0.65) - (0.65)
Year Ended 1991 17.99 0.79 3.75 4.54 (0.81) - (0.81)
Year Ended 1992 21.72 0.69 0.56 1.25 (0.70) - (0.70)
Year Ended 19933 22.27 0.56 1.63 2.19 (0.57) (0.19) (0.76)
Year Ended 1994 23.70 0.43 (0.03) (0.40) (0.42) (0.59) (1.01)
Year Ended 1995 23.09 0.42 5.14 5.56 (0.42) (0.60) (1.02)
Year Ended 1996 27.63 0.50 6.61 7.11 (0.47) (1.19) (1.66)
EQUITY INDEX
Dec. 29, 19891 through
Oct. 31, 1990 25.00 0.59 (3.41) (2.82) (0.55) - (0.55)
Year Ended 1991 21.63 0.73 6.31 7.04 (0.74) (0.06) (0.80)
Year Ended 19922 27.87 0.73 1.86 2.59 (0.73) (0.01) (0.74)
Year Ended 1993 29.72 0.75 3.32 4.07 (0.75) - (0.75)
Year Ended 1994 33.04 0.77 0.35 1.12 (0.75) - (0.75)
Year Ended 1995 33.41 0.76 7.71 8.47 (0.74) (0.06) (0.80)
Year Ended 1996 41.08 0.91 8.68 9.59 (0.89) (0.35) (1.24)
MIDCORE GROWTH
Dec. 29, 19921 through
Oct. 31, 1993 20.09 0.09 1.32 1.41 (0.10) - (0.10)
Year Ended 1994 21.40 0.06 0.06 0.12 (0.05) - (0.05)
Year Ended 1995 21.47 0.03 4.16 4.19 (0.05) - (0.05)
Year Ended 1996 25.61 (0.01) 4.83 4.82 - - -
SPECIAL GROWTH
Dec. 28, 19891 through
Oct. 31, 1990 20.00 0.22 (2.30) (2.08) (0.20) - (0.20)
Year Ended 1991 17.72 0.27 10.34 10.61 (0.28) - (0.28)
Year Ended 19922 28.05 0.17 2.18 2.35 (0.18) (1.72) (1.90)
Year Ended 1993 28.50 0.07 4.47 4.54 (0.08) (0.62) (0.70)
Year Ended 1994 32.34 0.04 0.85 0.89 (0.04) - (0.04)
Year Ended 1995 33.19 0.00 8.49 8.49 - (0.21) (0.21)
Year Ended 1996 41.47 (0.04) 4.74 4.70 - (4.59) (4.59)
INTERNATIONAL EQUITY
Apr. 28, 19941 through
Oct. 31, 1994 20.00 0.04 (0.05) (0.01) - - -
Year Ended 1995 19.99 0.12 (0.87) (0.75) (0.04) (0.01) (0.05)
Year Ended 1996 19.15 0.11 1.44 1.55 (0.10) (0.37) (0.47)
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL Supplemental Data and Ratios
HIGHLIGHTS ---------------------------------------------------------------------
Ratio of Net
Investment
Net Asset Net Ratio of Net Income or
Value, Assets, Expenses to (Loss) Portfolio Average
End Total End of Average Net to Average Net Turnover Commission
of Period Return4 Period (000s) Assets5 Assets5 Rate Rate
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCED
Mar. 30, 19921 through
Oct. 31, 1992 $20.49 3.72% $ 45,653 0.75%6 2.48%6 29.04% N/A
Year Ended 1993 22.76 13.49% 82,099 0.75%6 2.24%6 71.60% N/A
Year Ended 1994 22.10 (0.93%) 94,657 0.75%6 2.03%6 59.77% N/A
Year Ended 1995 25.90 19.79% 104,552 0.75%6 2.24%6 61.87% N/A
Year Ended 1996 27.99 12.56% 129,415 0.75%6 2.05%6 63.91% $0.0581
GROWTH AND INCOME
Dec. 29, 19891 through
Oct. 31, 1990 17.99 (6.96%) 65,741 0.74%7 4.39%7 49.85% N/A
Year Ended 1991 21.72 25.63% 103,414 0.75%7 3.93%7 28.05% N/A
Year Ended 1992 22.27 5.82% 135,713 0.75%7 3.16%7 31.25% N/A
Year Ended 19933 23.70 9.93% 160,704 0.88%7 2.44%7 86.24% N/A
Year Ended 1994 23.09 1.84% 164,053 0.90%7 1.89%7 56.85% N/A
Year Ended 1995 27.63 25.00% 162,752 0.90%7 1.70%7 47.85% N/A
Year Ended 1996 33.08 26.90% 226,888 0.90%7 1.67%7 51.37% $0.0573
EQUITY INDEX
Dec. 29, 19891 through
Oct. 31, 1990 21.63 (11.46%) 35,569 0.49%8 3.01%8 9.09% N/A
Year Ended 1991 27.87 32.90% 51,481 0.50%8 2.82%8 1.38% N/A
Year Ended 19922 29.72 9.36% 81,070 0.50%8 2.48%8 5.50% N/A
Year Ended 1993 33.04 13.79% 83,820 0.50%8 2.32%8 13.78% N/A
Year Ended 1994 33.41 3.51% 107,563 0.50%8 2.38%8 13.28% N/A
Year Ended 1995 41.08 26.02% 138,106 0.46%8 2.34%8 4.61% N/A
Year Ended 1996 49.43 23.68% 212,072 0.41%8 2.01%8 7.48% $0.0604
MIDCORE GROWTH
Dec. 29, 19921 through
Oct. 31, 1993 21.40 7.53% 84,467 0.89%9 0.57%9 46.29% N/A
Year Ended 1994 21.47 0.56% 113,197 0.88%9 0.30%9 33.24% N/A
Year Ended 1995 25.61 19.55% 134,428 0.90%9 0.13%9 49.84% N/A
Year Ended 1996 30.43 18.82% 155,293 0.90%9 (0.04)%9 56.75% $0.0582
SPECIAL GROWTH
Dec. 28, 19891 through
Oct. 31, 1990 17.72 (10.47%) 39,179 0.74%10 1.41%10 41.79% N/A
Year Ended 1991 28.05 60.23% 96,017 0.75%10 1.10%10 48.39% N/A
Year Ended 19922 28.50 8.86% 205,207 0.76%10 0.65%10 31.94% N/A
Year Ended 1993 32.34 16.15% 347,130 0.88%10 0.24%10 58.80% N/A
Year Ended 1994 33.19 2.77% 395,584 0.89%10 0.13%10 69.74% N/A
Year Ended 1995 41.47 25.79% 434,228 0.90%10 0.00%10 79.25% N/A
Year Ended 1996 41.58 12.58% 482,857 0.88%10 (0.10)%10 103.34% $0.0576
INTERNATIONAL EQUITY
Apr. 28, 19941 through
Oct. 31, 1994 19.99 (0.05%) 23,756 1.49%11 0.44%11 6.55% N/A
Year Ended 1995 19.19 (3.75%) 31,187 1.50%11 0.66%11 15.12% N/A
Year Ended 1996 20.27 8.21% 43,182 1.50%11 0.62%11 31.57% $0.0167
<FN>
1 Commencement of operations.
2 Effective February 3, 1992, FIRMCO assumed the investment advisory responsibilities of Firstar Trust Company, an affiliate
of FIRMCO.
3 Effective June 17, 1993, FIRMCO assumed the investment advisory responsibilities of Firstar Trust Company, an affiliate of
FIRMCO.
4 Not annualized for the period ended October 31, 1990 for the Growth and Income, Equity Index and Special Growth Funds, for
the period ended October 31, 1992 for the Balanced Fund, for the period ended October 31, 1993 for the MidCore Growth Fund
and for the period ended October 31, 1994 for the International Equity Fund.
5 Annualized for the period ended October 31, 1990 for the Growth and Income, Equity Index and Special Growth Funds, for the
period ended October 31, 1992 for the Balanced Fund, for the period ended October 31, 1993 for the MidCore Growth Fund and
for the period ended October 31, 1994 for the International Equity Fund.
6 Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1996, 1995, 1994,
1993 and the period ended October 31, 1992 would have been 1.03%, 1.06%, 1.05%, 1.12% and 1.13%, respectively; and ratios of
net investment income to average net assets for the fiscal years ended October 31, 1996, 1995, 1994, 1993 and the period
ended October 31, 1992 would have been 1.77%, 1.93%, 1.73%, 1.87% and 2.10%, respectively.
7 Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1996, 1995, 1994,
1993, 1992, 1991 and the period ended October 31, 1990 would have been 0.98%, 1.01%, 1.01%, 1.02%, 1.03%, 1.04% and 1.06%,
respectively; and ratios of net investment income to average net assets for the fiscal years ended October 31, 1996, 1995,
1994, 1993, 1992, 1991 and the period ended October 31, 1990 would have been 1.59%, 1.59%, 1.78%, 2.30%, 2.88%, 3.64% and
4.07%, respectively.
8 Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1996, 1995, 1994,
1993, 1992, 1991 and the period ended October 31, 1990 would have been 0.48%, 0.53%, 0.57%, 0.56%, 0.60%, 0.63% and 0.70%,
respectively; and ratios of net investment income to average net assets for the fiscal years ended October 31, 1996, 1995,
1994, 1993, 1992, 1991 and the period ended October 31, 1990 would have been 1.94%, 2.27%, 2.31%, 2.26%, 2.39%, 2.69% and
2.80%, respectively.
9 Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1996, 1995, 1994
and the period ended October 31, 1993 would have been 0.98%, 1.02%, 1.00% and 1.08%, respectively; and ratios of net
investment income to average net assets for the fiscal years ended October 31, 1996, 1995, 1994 and the period ended October
31, 1993 would have been (0.12)%, 0.01%, 0.19% and 0.39%, respectively.
10 Without fees waived, ratios of net expenses to average net assets for the fiscal years ended October 31, 1996, 1995, 1994,
1993, 1992, 1991 and the period ended October 31, 1990 would have been 0.95%, 0.98%, 0.98%, 1.01%, 1.02%, 1.06% and 1.13%,
respectively; and ratios of net investment income to average net assets for the fiscal years ended October 31, 1996, 1995,
1994, 1993, 1992, 1991 and the period ended October 31, 1990 would have been (0.17)%, (0.08)%, 0.04%, 0.11%, 0.39%, 0.79%
and 1.02%, respectively.
11 Without fees waived, ratios of net expenses to average net assets for the fiscal year ended October 31, 1996, 1995 and the
period ended October 31, 1994 would have been 2.36%, 2.65% and 2.85%, respectively; and ratios of net investment income to
average net assets for the fiscal years ended October 31, 1996, 1995 and the period ended October 31, 1994 would have been
(0.24)%, (0.49)% and (0.92)%, respectively.
</TABLE>
PERFORMANCE
HISTORY
SINCE INCEPTION
AVERAGE ANNUAL TOTAL RETURN 1 YEAR 5 YEARS 10 YEARS (INCEPTION DATE)
- --------------------------------------------------------------------------------
SHORT-TERM BOND MARKET 5.80% 6.39% 7.17% N/A
INTERMEDIATE BOND MARKET 5.77% - - 6.38% (Jan. 5, 1993)
TAX-EXEMPT INTERMEDIATE BOND 4.02% - - 4.78% (Feb. 8, 1993)
BOND IMMDEX/TM 5.35% 8.05% 8.58% N/A
BALANCED 12.56% - - 10.36% (Mar. 30, 1992)
GROWTH AND INCOME 26.90% 13.43% - 12.18% (Dec. 29, 1989)
EQUITY INDEX 23.68% 14.94% 14.14% N/A
MIDCORE GROWTH 18.82% - - 11.82% (Dec. 29, 1992)
SPECIAL GROWTH 12.58% 12.96% - 15.23% (Dec. 28, 1989)
INTERNATIONAL EQUITY 8.21% - - 1.61% (Apr. 28, 1994)
* Average annual total return calculations are for periods ended October 31,
1996.
The performance of the Short-Term Bond Market, Bond IMMDEX/TM,
and Equity Index Funds for theperiod prior to December 29,
1989 is represented by the performance of collective
investment funds which operated prior to the effectiveness of
the registration statement of the Portico Short-Term Bond
Market, Bond IMMDEX/TM and Equity Index Funds. At the time of
the Portico Short-Term Bond Market, Bond IMMDEX/TM and Equity
Index Funds' inception, each collective investment fund was
operated using substantially the same investment objectives,
policies and restrictions as its corresponding Portico Fund.
In connection with the Portico Short-Term Bond Market, Bond
IMMDEX/TM and Equity Index Funds' commencement of operations,
on December 29, 1989, each collective investment fund
transferred its assets to its Portico Fund equivalent. The
collective investment funds were not registered under the
Investment Company Act of 1940 (the "1940 Act") and were not
subject to certain restrictions that are imposed by the 1940
Act. If the collective investment funds had been registered
under the 1940 Act, performance may have been adversely
affected. Performance of the collective investment funds has
been restated to reflect the Portico Short-Term Bond Market,
Bond IMMDEX/TM and Equity Index Funds' respective actual
expenses during such Fund's first fiscal year.
Performance assumes the reinvestment of all net investment
income and capital gains and reflects fee waivers. In the
absence of fee waivers, performance would be reduced.
Performance quotations represent past performance, and should
not be considered as representative of future results.
INVESTMENT The descriptions that follow are designed to help you choose
OBJECTIVES the Fund that best fits your investment objectives. You may
AND POLICIES want to pursue more than one objective by investing in more
than one of the Portico Funds. You are reminded that there are
risks in an investment in the Funds and there can be no
assurance that each Fund's investment objective will be
attained. An investor should not consider an investment in any
individual Fund to be a complete investment program.
MONEY MARKET FUNDS
MONEY MARKET The investment objective of the Money Market Fund and the
FUND Institutional Money Market Fund is to seek to provide a high
AND INSTITUTIONAL level of taxable current income consistent with liquidity, the
MONEY MARKET FUND preservation of capital and a stable net asset value. In
pursuing its investment objective, each Fund will invest,
during normal market conditions, at least 80% of its assets in
debt obligations with remaining maturities of thirteen months
or less as determined in accordance with the rules of the
Securities and Exchange Commission ("SEC"). Each Fund may
purchase a broad range of government, bank and commercial
obligations that are available in the money markets.
The Money Market Fund and the Institutional Money Market Fund
will purchase only "First Tier Eligible Securities" (as
defined by the SEC) that present minimal credit risks as
determined by the Adviser pursuant to guidelines approved by
the Board of Directors (the "Board of Directors") of Portico
Funds, Inc. ("Portico" or the "Company"). First Tier Eligible
Securities consist of (1) securities that either (a) have
short-term debt ratings at the time of purchase in the highest
rating category by at least two unaffiliated nationally
recognized statistical rating organizations ("NRSROs") (or one
NRSRO if the security was rated by only one NRSRO), or (b) are
issued by issuers with such ratings, and (2) certain
securities that are unrated (including securities of issuers
that have long-term but not short-term ratings) but are of
comparable quality as determined in accordance with guidelines
approved by the Board of Directors. The Appendix to the
Statement of Additional Information includes a description of
applicable NRSRO ratings. The following descriptions
illustrate the types of instruments in which each Fund
invests.
The Money Market Fund and the Institutional Money Market Fund
may purchase bank obligations, such as certificates of
deposit, bankers' acceptances and time deposits, including
U.S. dollar-denominated instruments issued or supported by the
credit of U.S. or foreign banks or savings institutions having
total assets at the time of purchase in excess of $1 billion.
Investments by each Fund in the obligations of foreign banks
and foreign branches of U.S. banks will not exceed 25% of the
value of the Fund's total assets at the time of investment.
Each Fund may also make interest-bearing savings deposits in
commercial and savings banks in amounts not in excess of 5% of
its total assets.
Each Fund may purchase commercial paper, including asset-
backed commercial paper, and corporate bonds with remaining
maturities of thirteen months or less which meet the Fund's
quality requirements set forth above.
The Money Market Fund and the Institutional Money Market Fund
may purchase variable and floating rate instruments, which may
have a stated maturity in excess of thirteen months but will
permit each Fund to demand payment of the principal of the
instrument at least once every thirteen months upon not more
than thirty days' notice (unless the instrument is guaranteed
by the U.S. Government or an agency or instrumentality
thereof). Such instruments may include variable amount master
demand notes, which are unsecured instruments that permit the
indebtedness thereunder to vary in addition to providing for
periodic adjustments in the interest rate. Issues of unrated
variable and floating rate instruments will be determined by
the Adviser (under the supervision of the Board of Directors)
to be of comparable quality at the time of purchase to First
Tier Eligible Securities. An active secondary market may not
exist, however, with respect to particular variable and
floating rate instruments, and usually will not exist with
respect to variable amount master demand notes. The absence of
a secondary market could make it difficult for the Fund to
dispose of a variable or floating rate instrument if the
issuer defaulted on its payment obligation or during periods
that the Fund could not exercise its demand rights, and the
Fund could, for these or other reasons, suffer a loss with
respect to such instruments.
The 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 will be regarded
as illiquid.
The Money Market Fund and the Institutional Money Market Fund
may agree to purchase U.S. Government obligations 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 repurchase 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
the 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. Each Fund may purchase
obligations issued or guaranteed by the U.S. Government or its
agencies and instrumentalities. Each Fund may also purchase
stripped U.S. Government obligations and Government-backed
trusts. For further discussion of U.S. Government obligations
and stripped securities, see "Other Investment Information -
Government Obligations."
The Money Market Fund and the Institutional Money Market Fund
may acquire certain types of bank instruments issued or
supported by the credit of foreign banks or foreign branches
of domestic banks where the Adviser deems the instrument to
present minimal credit risks. Because the Funds invest in
securities backed by banks and other financial institutions,
changes in the credit quality of these institutions could
cause losses to the Fund and affect its share price. For a
discussion of the inherent risks of foreign securities, see
"Other Investment Information - Foreign Securities."
U.S. TREASURY The investment objective of the U.S. Treasury Money Market
MONEY MARKET FUND Fund is to seek to provide a high level of current income
AND U.S. exempt from state income taxes consistent with liquidity, the
GOVERNMENT preservation of capital and a stable net asset value.
MONEY MARKET FUNDThe Fund seeks to achieve its objective by investing in
securities with remaining maturities of thirteen months or
less (as determined in accordance with SEC rules) that are
issued or guaranteed as to principal and interest by the U.S.
Treasury (bills, certificates of indebtedness, notes and
bonds). However, under extraordinary circumstances, such as
when U.S. Treasury securities are unavailable, the Fund may
temporarily hold cash.
The investment objective of the U.S. Government Money Market
Fund is to seek to provide a high level of taxable current
income consistent with liquidity, the preservation of capital
and a stable net asset value (irrespective of state income tax
considerations). The Fund seeks to achieve its objective by
investing primarily in obligations with remaining maturities
of thirteen months or less (as determined in accordance with
SEC rules) that are issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, and in
repurchase agreements relating to such obligations. Under
normal market conditions, the Fund intends to invest at least
65% of its total assets in U.S. Government obligations. Such
U.S. Government obligations may include Treasury bills,
certificates of indebtedness, notes and bonds, as well as
issues of agencies and instrumentalities of the U.S.
Government, including 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,
Resolution Trust Corporation and Tennessee Valley Authority.
The U.S. Government Money Market Fund may also purchase
stripped U.S. Government Obligations and Government backed
trusts. For further discussion of U.S. Government obligations,
see "Other Investment Information - Government Obligations."
The U.S. Government Money Market Fund may enter into
repurchase agreements with financial institutions. See "Money
Market Fund and Institutional Money Market Fund" above for a
discussion of repurchase agreements.
Although substantially all of the instruments acquired by the
U.S. Treasury Money Market Fund and U.S. Government Money
Market Fund will be U.S. Government obligations (or repurchase
agreements collateralized by such obligations), shares of the
U.S. Treasury Money Market Fund and U.S. Government Money
Market Fund are not themselves issued or guaranteed by any
government agency. U.S. Government obligations that have
stated maturities in excess of thirteen months but have
variable or floating interest rates may be acquired by the
Funds in accordance with SEC rules.
TAX-EXEMPT The investment objective of the Tax-Exempt Money Market Fund
MONEY MARKET FUNDis to seek to provide a high level of current income that is
exempt from federal income taxes consistent with liquidity,
the preservation of capital and a stable net asset value. In
pursuing this investment objective, the Fund invests in a
diversified portfolio of debt obligations issued by or on
behalf of states, territories and possessions of the United
States, the District of Columbia and their authorities,
agencies, instrumentalities and political subdivisions
("Municipal Obligations") which meet the Fund's quality
requirements set forth below. During normal market conditions,
the Fund will invest at least 80% of its assets in Municipal
Obligations with remaining maturities of thirteen months or
less as determined in accordance with SEC rules. The Tax-
Exempt Money Market Fund will purchase only Municipal
Obligations that are First Tier Eligible Securities as defined
above under "Money Market Fund and Institutional Money Market
Fund."
Municipal Obligations purchased by the Fund may be backed by
letters of credit issued by foreign and domestic banks and
other financial institutions. Such letters of credit are not
necessarily subject to federal deposit insurance and adverse
developments in the banking industry could have a negative
effect on the credit quality of the Fund's portfolio
securities and its ability to maintain a stable net asset
value and share price. Letters of credit issued by foreign
banks, like other obligations of foreign banks, may involve
certain risks in addition to those of domestic obligations.
Because the Fund invests in securities backed by banks and
other financial institutions, changes in the credit quality of
these institutions could cause losses to the Fund and affect
its share price. See "Other Investment Information - Foreign
Securities."
Municipal Obligations purchased by the Tax-Exempt Money Market
Fund may include variable and floating rate instruments issued
by industrial development authorities and other governmental
entities. If such instruments are unrated, they will be
determined by the Fund's Adviser (under the supervision of the
Board of Directors) to be of comparable quality at the time of
purchase to First Tier Eligible Securities. While there may be
no active secondary market with respect to a particular
variable or floating rate demand instrument purchased by the
Fund, the Fund may (at any time or during specified periods
not exceeding thirteen months, depending upon the instrument
involved) demand payment in full of the principal of the
instrument and may re-sell the instrument to a third party.
The absence of such an active secondary market, however, could
make it difficult for the Fund to dispose of a variable or
floating rate demand instrument if the issuer defaulted on its
payment obligation or during periods that the Fund is not
entitled to exercise its demand rights, and the Fund could,
for these or other reasons, suffer a loss with respect to such
instruments.
From time to time on a temporary defensive basis due to market
conditions, the Tax-Exempt Money Market Fund may hold
uninvested cash reserves or invest in short-term taxable money
market obligations that are permissible investments for the
Money Market Fund, in such proportions as, in the opinion of
the Adviser, prevailing market or economic conditions warrant.
Uninvested cash reserves will not earn income. Taxable
obligations acquired by the Fund will not exceed under normal
market conditions 20% of the Fund's total assets at the time
of purchase.
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.
General Obligation securities are secured by the issuer's
pledge of its full faith, credit and taxing power for the
payment of principal and interest. Revenue securities are
payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the
proceeds of a special excise tax or other specific revenue
source such as the issuer of the facility being financed.
Private activity bonds (e.g., bonds issued by industrial
development authorities) that are issued by or on behalf of
public authorities to finance various privately operated
facilities are included within the term "Municipal
Obligations" if the interest paid thereon is exempt (subject
to federal alternative minimum tax) from federal income tax.
(The Fund, however, does not currently intend to acquire
private activity bonds that are subject to the federal
alternative minimum tax.) Private activity bonds are in most
cases Revenue securities and are not payable from the
unrestricted revenues of the issuer. The credit quality of
such bonds is usually directly related to the credit standing
of the corporate user of the facility involved.
The Tax-Exempt Money Market Fund may also acquire "Moral
Obligation" securities, which are normally issued by special
purpose public authorities. If the issuer of Moral Obligation
securities is unable to meet its debt service obligations from
current revenues, it may draw on a reserve fund, the
restoration of which is a moral commitment but not a legal
obligation of the state or municipality which created the
issuer.
The Tax-Exempt Money Market Fund may purchase securities on a
"when-issued" or delayed delivery basis and may purchase or
sell securities on a "forward commitment" basis. For more
information, see "Other Investment Information - When Issued
Purchases and Forward 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 agrees to
purchase at the Fund's option specified Municipal Obligations
at a price equal to their amortized cost value plus accrued
interest. The Fund will acquire stand-by commitments solely to
facilitate portfolio liquidity and does not intend to exercise
its rights thereunder for trading purposes.
Although the Tax-Exempt Money Market Fund does not presently
intend to do so on a regular basis, it may invest more than
25% of its assets in Municipal Obligations, the issuers of
which are located in the same state or the interest on which
is paid solely from revenues of similar projects if such
investment is deemed necessary or appropriate by the Adviser.
To the extent that the Fund's assets are concentrated in
Municipal Obligations payable from revenues on similar
projects or issued by issuers in the same state, the Fund will
be subject to the peculiar economic, political and business
risks represented by the laws and economic conditions relating
to such states and projects to a greater extent than it would
be if the Fund's assets were not so concentrated. Furthermore,
payment of Municipal Obligations of certain projects may be
secured by mortgages or deeds of trust. In the event of a
default, enforcement of the mortgages or deeds of trust will
be subject to statutory enforcement procedures and
limitations, including rights of redemption and limitations on
obtaining deficiency judgments. In the event of a foreclosure,
collection of the proceeds of the foreclosure may be delayed
and the amount of proceeds from the foreclosure may not be
sufficient to pay the principal of and accrued interest on the
defaulted Municipal Obligations.
Opinions relating to the validity of Municipal Obligations and
to the exemption of interest thereon from federal income tax
are rendered by bond counsel to the respective issuers at the
time of issuance. Neither the Fund nor the Adviser will review
the proceedings relating to the issuance of Municipal
Obligations or the bases for such opinions.
BOND FUNDS
<TABLE>
COMPARISON OF PORTICO BOND FUNDS
---------------------------------
<CAPTION>
SHORT-TERM FULL-TERM BOND
BOND FUND INTERMEDIATE-TERM BOND FUNDS FUND
- ------------------------------------------------------------------------------------------------------------------------------------
PORTICO PORTICO PORTICO PORTICO
SHORT-TERM INTERMEDIATE TAX-EXEMPT BOND
BOND MARKET BOND MARKET INTERMEDIATE IMMDEX/TM
FUND FUND BOND FUND FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C>
The Benchmark: The Benchmark: The Benchmark: The Benchmark:
Lehman Bros. 1-3 Yr. Lehman Bros. Lehman Bros. 5-Year Lehman Bros
Gov't./Corp. Bond Intermediate General Obligation Gov't./Corp. Bond
Index Gov't./Corp. Bond Index Bond Index Index
Average Quality* Average Quality* Average Quality* Average Quality*
of Holdings - AA of Holdings - AA of Holdings - AAA of Holdings - AA
Average Maturity Average Maturity Average Maturity Average Maturity
2.8 Years 4.6 Years 4.9 Years 9.8 Years
1.7 Years Duration 3.3 Years Duration 4.0 Years Duration 5.1 Years Duration
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
Lehman Brothers is neither a sponsor of nor in any way affiliated with Portico Funds.
Average quality, maturity, and duration reflect the portfolios as of October 31, 1996, and will change from
time to time in connection with the management of the portfolios pursuant to the policies described in this
Prospectus.
*Dollar-weighted average quality of portfolio securities held by the Funds.
</TABLE>
TAXABLE BOND FUNDS
SHORT-TERM BOND INVESTMENT OBJECTIVES. The SHORT-TERM BOND MARKET FUND
MARKET FUND seeks to provide an annual rate of total return, before
Fund expenses, comparable to the annual rate of total
return of the Lehman Brothers 1-3 Year Government/Corporate
Bond Index (the "Lehman 1-3 Gov't./Corp."). The
INTERMEDIATE BOND INTERMEDIATE BOND MARKET FUND seeks to provide an annual
MARKET FUND rate of total return, before Fund expenses, comparable to
the annual rate of total return of the Lehman Brothers
Intermediate Government/Corporate Bond Index (the
BOND IMMDEX/TM FUND "Lehman Intermediate Gov't./Corp."). The BOND IMMDEX/TM
FUND seeks to provide an annual rate of total return, before
Fund expenses, comparable to the annual rate of total
return of the Lehman Brothers Government/Corporate Bond
Index (the "Lehman Gov't./Corp.").
Each Fund will attempt to achieve its objective by
maintaining a comparable duration to that of its benchmark
index, and may invest a substantial portion of its assets
in securities that are not included in its benchmark index.
The Funds, therefore, are not "index" funds, which
typically hold only securities that are included in the
indices they attempt to replicate.
DESCRIPTION OF BOND INDICES. The bond indices are market
value weighted total return indices measuring both the
principal price changes of and income provided by the
underlying universe of securities that comprise the
respective index. The bond indices are intended to measure
performance of their respective fixed-rate debt market over
given time intervals and differ with respect to the
maturity range of securities included. Each index is
comprised of U.S. Treasury securities, U.S. Government
agency securities, dollar denominated debt of certain
foreign, sovereign or supranational entities and investment
grade corporate debt obligations satisfying the following
criteria as defined by Lehman Brothers:
- Fixed-rate debt (as opposed to variable-rate debt);
- At least one year until maturity;
- Minimum outstanding par value of $100 million;
- Minimum quality rating of Baa by Moody's Investors
Service, Inc. ("Moody's"), BBB by Standard and Poor's
Rating Group ("S&P"), or BBB by Fitch Investors Service,
Inc. ("Fitch"); and
LEHMAN 1-3 GOV'T./CORP.
- From one to three years remaining until maturity.
LEHMAN INTERMEDIATE GOV'T./CORP.
- From one to ten years remaining until maturity.
LEHMAN GOV'T./CORP.
- From one to thirty years or more remaining until
maturity.
As of October 31, 1996, 896 issues were included in the
Lehman 1-3 Gov't./Corp. representing $1.0 trillion in
market value; 3,425 issues were included in the Lehman
Intermediate Gov't./Corp. representing $2.3 trillion in
market value; and 4,856 issues were included in the Lehman
Gov't./Corp. representing $3.2 trillion in market value.
INVESTMENT TECHNIQUES. In constructing and maintaining each
Fund's portfolio, the Adviser attempts to maintain an
overall interest rate sensitivity equivalent to its
respective bond index and is intended to produce an annual
rate of total return, before Fund expenses, comparable to
that of the respective bond index. These techniques are
used in conjunction with traditional methods of investment
management that rely on economic, financial and market
analysis to select portfolio investments.
The approach employed by the Adviser in managing each
Fund's portfolio is to define and measure the various
duration characteristics of each bond index. "Duration" is
a term used to express the average time to receipt of
expected cash flows (discounted to their present value) on
a particular fixed-income instrument or a portfolio of
instruments. For example, the duration of a five-year zero
coupon bond which pays no interest or principal until the
maturity of the bond is five years. This is because a zero
coupon bond produces no cash flow until the maturity date.
On the other hand, a coupon bond that pays interest
semiannually and matures in five years will have a duration
of less than five years reflecting the semiannual cash
flows resulting from coupon payments.
Duration generally defines the effect of interest rate
changes on bond prices. However, for large interest rate
changes (generally changes of 1% or more) this measure will
not completely explain the interest rate sensitivity of a
bond.
APPLICATION OF INVESTMENT TECHNIQUES. The Adviser will
select securities for each Fund's portfolio based upon
their expected contribution to the portfolio's overall
duration and total return as compared to each bond index.
The Adviser expects that typically each Fund will hold less
than 200 securities that in the aggregate have similar
price sensitivities or durations as the respective bond
index. Although the Adviser expects that as a general
matter a significant percentage of the securities acquired
by each Fund will also be securities that are included in
the respective bond index, each Fund may invest more than
50% of its total assets in securities that are not so
included.
In order to reduce a negative deviation in return between
each Fund and the respective bond index, each Fund will
normally attempt to be fully invested. The Adviser may
engage in practices that are intended to achieve an
enhanced return, before Fund expenses, over the respective
bond index. As indicated above, each Fund will hold only a
percentage of the large number of issues included in its
respective bond index. In addition, a Fund may hold
securities which are not included in its respective bond
index, including stripped government, asset-backed and
mortgage-backed obligations, collateralized mortgage
obligations, medium-term notes and Eurobonds, among others.
This permits the Adviser to engage in sampling and other
strategies that are designed to achieve an enhanced
incremental gross return above the return on the respective
bond index. For example, the Adviser may, in light of
current changes in market conditions, "swap" portfolio
securities whereby a bond or a group of bonds is sold and
another bond or group of bonds is bought that has similar
duration characteristics but, in the Adviser's opinion, a
higher expected return. Furthermore, the percentage mix of
government and corporate issues held by a Fund will differ
from the percentage included in its respective bond index
whenever, in the Adviser's judgment, such a mix is
desirable. Moreover, the average quality of bonds held by
each Fund (which is expected to be at least the second
highest rating category - AA by S&P or Aa by Moody's) may
vary from the average quality of bonds included in its
respective bond index, and in selecting among the various
securities available for investment by a Fund the Adviser
will make its own creditworthiness determinations. These
and other practices, although intended to result in a
positive incremental return in favor of a Fund, may instead
result in a negative deviation.
In an effort to make a Fund's duration and return
comparable to those of its respective bond index, the
Adviser will continue to monitor a Fund's portfolio and
market changes in accordance with procedures established by
the Adviser under the supervision of the Board of
Directors. It should be recognized, however, that while the
sensitivity of a Fund's portfolio to interest rate changes
is expected to be similar to that of its respective bond
index, because of the smaller number of issues held by a
Fund, material events affecting a Fund's portfolio (for
example, an issuer's decline in credit quality) may
influence the performance of a Fund to a greater degree
than such events will influence its respective bond index
and may prevent a Fund from attaining its investment
objective for particular periods. In the event the
performance of a Fund is not comparable to the performance
of its respective bond index, the Board of Directors will
examine the reasons for the deviation and the availability
of corrective measures.
Each Fund's policy is to invest at least 65% of the total
value of its assets in a broad range of corporate,
government, government agencies, stripped government,
asset-backed and mortgage-backed and collateralized
mortgage obligations during normal market conditions, as
described in greater detail below. The duration of a Fund
will be similar to its respective bond index during normal
market conditions. In addition, the dollar-weighted average
portfolio maturity of each Fund's portfolio will be more
than one year but less than three years for the Short-Term
Bond Market Fund; more than three years but less than ten
for the Intermediate Bond Market Fund; and greater than
five years for the Bond IMMDEX/TM Fund during normal market
conditions.
The calculation of a Fund's duration and average portfolio
maturity will, however, be based on certain estimates
relating to the duration and maturity of the securities
held by a Fund. There can be no assurance that these
estimates will be accurate or that the duration or average
portfolio maturity of a Fund will always remain within the
maximum limits described above. Debt obligations acquired
by each Fund will be rated "investment grade" at the time
of purchase by S&P, or Moody's or other nationally
recognized rating agencies. That is, obligations will be
rated within the four highest rating categories by S&P
(AAA, AA, A and BBB), Moody's (Aaa, Aa, A and Baa) or other
nationally recognized rating agencies or obligations that
are unrated but determined by the Adviser to be comparable
in quality to instruments that are so rated. Obligations
rated in the lowest of the top four rating categories are
considered to have speculative characteristics and are
subject to greater credit and market risk than higher rated
securities. As a result, the market value of these
securities may be expected to fluctuate more than those of
securities with higher ratings. Subsequent to its purchase
by a Fund, a rated security may cease to be rated or its
rating may be reduced below the minimum rating required for
purchase by that Fund. The Adviser will consider such an
event in determining whether the Fund should continue to
hold the security. The Adviser will sell promptly any
securities that are non-investment grade as a result of
these events that exceed 5% of the Fund's net assets. See
Appendix A to the Statement of Additional Information for a
description of applicable debt ratings.
Each Fund may make limited investments in guaranteed
investment contracts ("GICs") issued by highly rated U.S.
insurance companies. Pursuant to such contracts, the Fund
makes cash contributions to a separate account of the
insurance company which has been segregated from the
general assets of the issuer. The insurance company then
pays to the Fund at the end of the contract an amount equal
to the cash contributions adjusted for the total return of
an index. A GIC is a separate account obligation of the
issuing insurance company. The Fund will only purchase GICs
from issuers which, at the time of purchase, are rated A or
higher by Moody's or S&P, have assets of $1 billion or more
and meet quality and credit standards established by the
Adviser. Generally, GICs are not assignable or transferable
without the permission of the issuing insurance companies,
and an active secondary market in GICs does not currently
exist. Therefore, GICs are considered by the Fund to be
subject to the 10% limitation on illiquid investments
described under "Other Investment Information." Generally,
a GIC allows a purchaser to buy an annuity with the money
accumulated under the contract; however, the Fund will not
purchase any such annuities.
The Funds may invest in certain other securities not
contained in the indices such as options, futures,
repurchase agreements and other cash market instruments.
See "Other Investment Information."
The value of each Fund's portfolio, as is generally the
case with each bond index, can be expected to vary
inversely from changes in prevailing interest rates.
TAX-EXEMPT The investment objective of the Tax-Exempt Intermediate
INTERMEDIATE Bond Fund is to seek to provide current income that is
BOND FUND substantially exempt from federal income tax and emphasize
total return with relatively low volatility of principal.
The Fund will invest primarily in investment grade
intermediate-term municipal obligations issued by state and
local governments exempt from federal income tax. In
pursuing its investment objective, the Fund invests in a
diversified portfolio of Municipal Obligations (as defined
above under "Tax-Exempt Money Market Fund"). As a
fundamental policy, the Fund will invest at least 80% of
its net assets in securities, the interest on which is
exempt from regular federal income and alternative minimum
taxes, except during defensive periods. (See "Investment
Limitations.") The Fund intends to maintain an average
weighted maturity between three and ten years. There is no
limit on the maturity of any individual security in the
Fund.
For a discussion of "General Obligation," "Revenue" and
"Moral Obligation" securities, see "Tax-Exempt Money Market
Fund" above.
Although the Fund does not presently intend to do so on a
regular basis, it may invest more than 25% of its assets in
Municipal Obligations, the issuers of which are located in
the same state or the interest on which is paid solely from
revenues of similar projects. For a discussion of the risks
involved with concentrating in such types of investments,
see "Tax-Exempt Money Market Fund."
Opinions relating to the validity of Municipal Obligations
and to the exemption of interest thereon from federal
income tax are rendered by bond counsel to the respective
issuers at the time of issuance. Neither the Fund nor the
Adviser will review the proceedings relating to the
issuance of Municipal Obligations or the bases for such
opinions.
Municipal Obligations purchased by the Fund will be
investment grade at the time of purchase. See "Taxable Bond
Funds - Application of Investment Techniques" above for a
description of "investment grade securities." The Fund may
also purchase Municipal Obligations which are unrated at
the time of purchase but are determined to be of comparable
quality by the Adviser or have comparable ratings from
other nationally recognized rating agencies. The Fund may
also acquire municipal notes and other short-term
obligations rated SP-1 by S&P, or MIG-1 by Moody's; tax-
exempt commercial paper rated A-1 or higher by S&P, or
VMIG-1 by Moody's. Subsequent to its purchase by the Fund,
a rated security may cease to be rated or its rating may be
reduced below the minimum rating required for purchase by
the Fund. The Adviser will consider such event in
determining whether the Fund should continue to hold the
security. The Adviser will sell promptly any securities
that are not rated investment grade by at least one
nationally recognized rating agency and that exceed 5% of
the Fund's net assets. As indicated, the Fund's cash
balances may be invested in short-term municipal notes and
tax-exempt commercial paper, as well as municipal bonds
with remaining maturities of thirteen months or less and
securities issued by other investment companies which
invest in high quality, short-term municipal debt
securities. Except during temporary defensive periods, at
least 65% of the Fund's total assets will be invested in
bonds and debentures. The value of the Fund's portfolio can
be expected to vary inversely to changes in prevailing
interest rates.
Municipal Obligations purchased by the Fund may be backed
by letters of credit issued by foreign and domestic banks
and other financial institutions. Such letters of credit
are not necessarily subject to federal deposit insurance
and adverse developments in the banking industry could have
a negative effect on the credit quality of the Fund's
portfolio securities and its ability to maintain a stable
net asset value and share price. Letters of credit issued
by foreign banks, like other obligations of foreign banks,
may involve certain risks in addition to those of domestic
obligations. See "Other Investment Information - Foreign
Securities."
Municipal Obligations purchased by the Fund may include
variable and floating rate instruments issued by industrial
development authorities and other governmental entities. If
such instruments are unrated, they will be determined by
the Fund's Adviser (under the supervision of the Board of
Directors) to be of comparable quality at the time of
purchase to investment grade. While there may be no active
secondary market with respect to a particular variable or
floating rate demand instrument purchased by the Fund, the
Fund may (at any time or during specified periods not
exceeding thirteen months, depending upon the instrument
involved) demand payment in full of the principal of the
instrument and has the right to resell the instrument to a
third party. The absence of such an active secondary
market, however, could make it difficult for the Fund to
dispose of a variable or floating rate demand instrument if
the issuer defaulted on its payment obligation or during
periods that the Fund is not entitled to exercise its
demand rights, and the Fund could, for these or other
reasons, suffer a loss with respect to such instruments.
In addition, from time to time, on a temporary defensive
basis due to market conditions, the Fund may hold without
any limitation uninvested cash reserves and invest without
any limitations in high quality short-term taxable money
market obligations in such proportions as in the opinion of
the Adviser, prevailing market or economic conditions
warrant. Uninvested cash reserves will not earn income. See
"Other Investment Information - Money Market Instruments"
below. Taxable obligations acquired by the Fund will not
exceed under normal market conditions 20% of the Fund's net
assets at the time of purchase.
The Fund may purchase put options on Municipal Obligations.
A put gives the Fund the right to sell a Municipal
Obligation at a specified price at any time before a
specified date. A put will be sold, transferred or assigned
only with the related Municipal Obligation. The Fund will
acquire puts only to enhance liquidity, shorten the
maturity of the related municipal security or permit the
Fund to invest its assets at more favorable rates. The
aggregate price of a security subject to a put may be
higher than the price which otherwise would be paid for the
security without such an option, thereby increasing the
security's cost and reducing its yield.
The Fund may also acquire "stand-by commitments" with
respect to Municipal Obligations held in its portfolio. See
"Tax-Exempt Money Market Fund" for a description of stand-
by commitments.
In addition, the Fund may acquire municipal lease
obligations which are issued by a state or local government
or authority to acquire land and a wide variety of
equipment and facilities. These obligations typically are
not fully backed by the municipality's credit, and their
interest may become taxable if the lease is assigned. If
the funds are not appropriated for the following year's
lease payments, the lease may terminate, with the
possibility of default on the lease obligation and
significant loss to the Fund. Certificates of participation
in municipal lease obligations or installment sale
contracts entitle the holder to a proportionate interest in
the lease-purchase payments made. The Adviser determines
and monitors the liquidity of municipal lease obligations
(including certificates of participation) under guidelines
approved by the Board of Directors requiring the Adviser to
evaluate the credit quality of such obligations and report
on the nature of and the Fund's trading experience in the
municipal lease market. Under the guidelines, municipal
lease obligations that are not readily marketable and
transferable are treated as illiquid. The Fund will not
knowingly invest more than 10% of the value of its net
assets in securities, including municipal leases, that are
illiquid.
EQUITY FUNDS
BALANCED FUND INVESTMENT OBJECTIVE. The investment objective of the
Balanced Fund is to achieve a balance of capital
appreciation and current income with relatively low
volatility of capital. The Fund seeks to achieve its
objective through a policy of diversified investments in
fixed-income and equity securities. Equity securities will
be selected on the basis of their potential for capital
appreciation. Current income will not be a significant
consideration in the selection of equity securities. Fixed-
income securities will be selected in an effort to provide
an annual rate of total return with respect to the fixed-
income portion of the Fund's portfolio that is similar to
the annual rate of total return of the Lehman Brothers
Government/Corporate Bond Index on a consistent basis. In
investing in fixed-income securities, the Adviser will use
specialized quantitative investment techniques. (For a
description of the Lehman Brothers Government/Corporate
Bond Index see "Bond Funds - Description of Bond Indices."
For a description of the specialized quantitative
investment techniques see "Investment Techniques" below).
The Fund's policy is to invest at least 25% of the value of
its total assets in fixed-income senior securities and at
least 50% and no more than 65% in equity securities at all
times. The actual percentage of assets invested in fixed-
income and equity securities will vary from time to time,
depending on the judgment of the Adviser as to the general
market and economic conditions, trends and yields, interest
rates and fiscal and monetary developments.
INVESTMENT TECHNIQUES. Most equity securities held by the
Fund will be publicly traded common stocks of companies
incorporated in the United States, although up to 25% of
its total assets may be invested, either directly or
through investments in sponsored American Depository
Receipts, in the securities of foreign issuers. From time
to time, the Fund may also acquire preferred stocks. In
addition, the Fund may invest in domestic securities
convertible into common stock, such as certain bonds and
preferred stocks, and may invest up to 5% of its net assets
in other types of domestic securities having common stock
characteristics, such as rights and warrants to purchase
equity securities.
The Fund generally invests in companies that the Adviser
considers to be well managed and to have "attractive
fundamental financial characteristics." Attractive
fundamental financial characteristics include, among other
factors, low debt, return on equity substantially above the
market average and consistent revenue and earnings per
share growth over the prior three to five years. Companies
in which the Fund may make equity investments generally
will have stock market capitalizations between $100 million
and $10 billion. The median stock market capitalization is
generally anticipated to be between $1 billion and $3
billion and the weighted average stock market
capitalization is generally anticipated to be between $1.5
billion and $5 billion. Stock market capitalizations are
calculated by multiplying the total number of common shares
outstanding by the market price per share. The Fund may
also invest from time to time a portion of its assets, not
to exceed 20% at the time of purchase, in companies with
larger or smaller market capitalizations.
In constructing and maintaining the fixed-income portion of
the portfolio, the Adviser attempts to achieve an annual
rate of total return, before Fund expenses, comparable to
that of the Lehman Brothers Government/Corporate Bond
Index. See "Bond Funds - Description of Bond Indices."
Specialized structured investment management techniques are
used in conjunction with traditional methods of investment
management that rely on economic, financial and market
analysis to select portfolio investments.
Fixed-income securities purchased by the Fund may include a
broad range of corporate, government, government agency,
stripped government, asset-backed and mortgage-backed
obligations. The Fund may purchase fixed-income securities
without regard to any maturity limitation.
Debt obligations acquired by the Fund will be "investment
grade," as described above under "Taxable Bond Funds -
Application of Investment Techniques," at the time of
purchase, or unrated obligations deemed by the Adviser to
be comparable in quality to instruments so rated.
GROWTH AND INVESTMENT OBJECTIVE. The investment objective of the
INCOME FUND Growth and Income Fund is to seek both reasonable income
and long-term capital appreciation. In seeking to obtain
"reasonable income," the Fund will emphasize income-
producing securities.
Common stocks purchased by the Fund will be selected
primarily from a universe of domestic companies that have
established dividend-paying histories. During normal market
conditions, at least 50% of the Fund's net assets will be
invested in income-producing equity securities and each
company initially selected for inclusion in the Fund's
portfolio must pay a current dividend. In addition to
dividend considerations, the Fund generally invests in
medium- to large-sized companies with stock market
capitalizations over $750 million that the Adviser
considers to be well managed and to have attractive
fundamental financial characteristics. See "Balanced Fund"
for a description of "attractive fundamental financial
characteristics." The Fund may also invest a portion of its
assets, not to exceed 20% at the time of purchase, in
companies with smaller market capitalizations. The median
stock market capitalization is generally expected to be
between $2 billion and $5 billion and the weighted average
stock market capitalizations between $9 billion and $15
billion.
In addition to investments in common stocks, the Fund may
invest in bonds, notes, debentures and preferred stocks
convertible into common stocks but only to the extent that
those securities also provide a current interest or
dividend payment stream. Although convertible securities
frequently have speculative characteristics and may be
acquired by the Fund without regard to minimum quality
ratings, the Fund intends to invest less than 5% of its net
assets in non-investment grade securities. Up to 25% of the
Fund's total assets may be invested, either directly or
through sponsored American Depository Receipts, in the
securities of foreign issuers. The Fund may also purchase
put and call options, sell covered call options and enter
into transactions involving futures contracts and options
on futures as described later in this Prospectus.
The Fund may, to the extent consistent with its investment
objective, purchase nonconvertible debt securities. Such
debt obligations acquired by the Fund will be investment
grade, as described above under "Taxable Bond Funds -
Application of Investment Techniques," at the time of
purchase or unrated obligations deemed by the Adviser to be
comparable in quality to instruments so rated.
EQUITY INDEX FUND INVESTMENT OBJECTIVE. The investment objective of the
Equity Index Fund is to seek returns, before Fund expenses,
comparable to the price and yield performance of publicly
traded common stocks in the aggregate, as represented by
the S&P 500 Index. Under normal market conditions, the Fund
intends to invest substantially all of its total assets in
securities included in the S&P 500 Index.
In seeking to attain its investment objective, the Fund
uses the S&P 500 Index as the standard performance
comparison because it represents approximately two-thirds
of the total market value of all domestic common stocks and
is well known to investors. The S&P 500 Index consists of
500 selected common stocks, most of which are listed on the
New York Stock Exchange. Standard & Poor's selects the
stocks included in the S&P 500 Index on a statistical
basis, and the S&P 500 Index is heavily weighted toward
stocks with large market capitalizations. The S&P 500 Index
and the Equity Index Fund currently have a median stock
market capitalization of $5.3 billion and a weighted
average stock market capitalization of $36 billion.
Standard & Poor's makes no representation or warranty,
implied or express, to the purchasers of Fund shares, or
any member of the public, regarding the advisability of
investing in index funds or the ability of the S&P 500
Index to track general stock market performance.
PORTFOLIO MANAGEMENT. Traditional methods of fund
investment management typically involve relatively frequent
changes in a portfolio of securities on the basis of
economic, financial and market analysis. Index funds such
as the Equity Index Fund are not managed in this manner,
however. Instead, with the aid of a computer program, the
Adviser purchases and sells securities for the Fund in an
attempt to produce investment results that substantially
duplicate the performance of the common stocks of the
issuers represented in the S&P 500 Index, taking into
account redemptions, sales of additional Fund shares and
other adjustments as described below.
The Fund does not expect to hold at any particular time all
of the stocks included in the S&P 500 Index. The Adviser
believes, however, that through the application of a
capitalization weighting and sector balancing technique
that it will be able to construct and maintain the Fund's
investment portfolio so that it reasonably tracks the
performance of the S&P 500 Index.
The Adviser believes that the Fund will, under normal
conditions, hold securities of approximately 400 to 475
issuers included in the S&P 500 Index, and that the
quarterly performance of the Fund and the S&P 500 Index
will be within +0.3% under normal market conditions.
Redemptions of a substantial number of shares of the Fund
could, however, reduce the number of issuers represented in
the Fund's investment portfolio, which could, in turn,
adversely affect the accuracy with which the Fund tracks
the performance of the S&P 500 Index. In the event the
performance of the Fund is not comparable to the
performance of the S&P 500 Index, the Board of Directors
will examine the reasons for the deviation and the
availability of corrective measures. These measures would
include additional fee waivers by the Adviser and Co-
Administrators or adjustments to the Adviser's portfolio
management practices. If substantial deviation in the
Fund's performance continued for extended periods, it is
expected the Board of Directors would consider possible
changes to the Fund's investment objective.
If an issuer drops in ranking, or is eliminated entirely
from the S&P 500 Index, the Adviser may be required to sell
some or all of the common stock of such issuer then held by
the Fund. Sales of portfolio securities may be made at
times when, if the Adviser were not required to effect
purchases and sales of portfolio securities in accordance
with the S&P 500 Index, such securities might not be sold.
Such sales may result in lower prices for such securities
than may have been realized or in losses that may not have
been incurred if the Adviser were not required to effect
the purchases and sales. "Adverse events" will not
necessarily be the basis for the disposition of portfolio
securities, unless an event causes the issuer to be
eliminated entirely from the S&P 500 Index. "Adverse
events" include the failure of an issuer to declare or pay
dividends, the institution against an issuer of materially
adverse legal proceedings, the existence or threat of
defaults materially and adversely affecting an issuer's
future declaration and payment of dividends, or the
existence of other materially adverse credit factors.
However, although the Adviser does not intend to screen
securities for investment by the Fund by traditional
methods of financial and market analysis, the Adviser will
monitor the Fund's investment with a view towards removing
stocks of companies which may impair for any reason the
Fund's ability to achieve its investment objective.
The Fund invests primarily in the common stocks that
comprise the S&P 500 Index in accordance with their
relative capitalization and sector weightings as described
above. It is possible, however, that the Fund will from
time to time receive, as a part of a "spin-off" or other
corporate reorganization of an issuer included in the S&P
500 Index, securities that are themselves outside the S&P
500 Index. Such securities will be disposed of by the Fund
in due course consistent with the Fund's investment
objective.
A portion of the Fund's assets may be invested in options
and futures contracts as described below under "Other
Investment Information."
MIDCORE GROWTH FUND INVESTMENT OBJECTIVE. The investment objective of the
MidCore Growth Fund is capital appreciation. The Fund seeks
to achieve its objective through investment in securities
of medium- to large-sized companies, selected on the basis
of their potential for price appreciation. Current income
is not a significant consideration in the selection of
securities for this Fund.
The Fund's policy is to invest at least 50% of the value of
its total assets in equity securities under normal market
conditions. Most equity securities held by the Fund will be
publicly traded common stocks of companies incorporated in
the United States, although up to 25% of its total assets
may be invested, either directly or through investments in
American Depository Receipts, in the securities of foreign
issuers. From time to time, the Fund may also acquire
preferred stocks and obligations, such as bonds, debentures
and notes, that in the opinion of the Adviser present
opportunities for capital appreciation. In addition, the
Fund may invest in securities convertible into common
stock, such as certain bonds and preferred stocks.
The Fund generally invests in medium- to large-sized
companies, with stock market capitalizations over $750
million, that the Adviser considers to be well managed and
to have attractive fundamental financial characteristics.
See "Balanced Fund" above for description of "attractive
fundamental financial characteristics." The Adviser intends
to focus its selection of securities on medium-sized
companies and anticipates the Fund's median capitalization
would be between $2 billion and $2.8 billion; compared with
the S&P 500 Index which currently has a median
capitalization of $4.7 billion. The Fund may also invest
from time to time a portion of its assets, not to exceed
20% at the time of purchase, in companies with market
capitalizations below $750 million.
The Fund may, to the extent consistent with its investment
objective, purchase nonconvertible debt securities. Such
debt obligations acquired by the Fund will be investment
grade, as described above under "Taxable Bond Funds -
Application of Investment Techniques," at the time of
purchase or unrated obligations deemed by the Adviser to be
comparable in quality to instruments so rated.
SPECIAL GROWTH FUND INVESTMENT OBJECTIVE. The investment objective of the
Special Growth Fund is capital appreciation. The Fund seeks
to achieve its objective through investments in securities
of small- to medium-sized companies. Current income is not
a significant consideration in the selection of securities
for this Fund. Securities are selected for the Fund by the
Adviser on the basis of their potential for price
appreciation.
The Fund's policy is to invest at least 50% of the value of
its total assets in equity securities under normal market
conditions. Most equity securities held by the Fund will be
publicly traded common stocks of companies incorporated in
the United States, although up to 25% of its total assets
may be invested, either directly or through investments in
American Depository Receipts, in the securities of foreign
issuers. From time to time, the Fund may also acquire
preferred stocks and obligations, such as bonds, debentures
and notes, that in the opinion of the Adviser present
opportunities for capital appreciation. In addition, the
Fund may invest in securities convertible into common
stock, such as certain bonds and preferred stocks, and may
invest up to 5% of its net assets in other types of
securities having common stock characteristics, such as
rights and warrants to purchase equity securities.
The Fund generally invests in small- to medium-sized
companies that the Adviser considers to be well managed and
to have attractive fundamental financial characteristics.
See "Balanced Fund" above for a description of "attractive
fundamental financial characteristics." The Adviser
believes greater potential for price appreciation exists
among small- to medium-sized companies since they tend to
be less widely followed by other securities analysts and
thus may be more likely to be undervalued by the market.
Companies with stock market capitalizations between $250
million and $5 billion are considered by the Adviser to be
small- to medium-sized. The Fund generally anticipates the
median stock market capitalization to be between $1.0
billion to $2.0 billion and the weighted average to be
between $1.5 billion and $3 billion. The Fund may also
invest from time to time a portion of its assets, not to
exceed 20% at the time of purchase, in companies with
larger or smaller market capitalizations.
Securities of unseasoned companies, that is, companies with
less than three years' continuous operation, which present
risks considerably greater than do common stocks of more
established companies, may be acquired from time to time by
the Fund when the Adviser believes such investments offer
possibilities of attractive capital appreciation. However,
the Fund will not invest more than 5% of the value of its
total assets in the securities of unseasoned companies. In
addition, the Adviser may, to the extent consistent with
the Fund's investment objective of capital appreciation,
acquire for the Fund, bonds and other debt securities. Debt
obligations acquired by the Fund will be investment grade,
as described above under "Taxable Bond Funds - Application
of Investment Techniques," at the time of purchase or
unrated obligations deemed by the Adviser to be comparable
in quality to instruments so rated.
In view of the specialized nature of its investment
activities, investment in the Fund's shares may be suitable
only for those investors who are prepared to invest without
concern for current income and are financially able to
assume risk in search of long-term capital gain.
INTERNATIONAL INVESTMENT OBJECTIVE. The investment objective of the
EQUITY FUND International Equity Fund is to seek capital appreciation
through investment in foreign equity securities of small-
to medium-sized companies. The Fund pursues its objective
by investing under normal market conditions substantially
all (and in any event at least 65%) of the value of its
total assets in foreign common stocks and equity related
securities (including convertible securities and warrants)
of small to medium market capitalization (generally between
$250 million and $5 billion) issuers included in the gross
domestic product weighted Morgan Stanley Capital
International Europe, Australia and Far East Index (the
"GDP EAFE Index" or "Index"). The Fund will not follow
traditional methods of fund management but rather
investments will be selected through a structured selection
process based on the GDP EAFE Index and its country
weightings. The Fund will attempt to duplicate
substantially the country weightings of the GDP EAFE Index
and, within these parameters, invest primarily in companies
included in the Index with small to medium market
capitalizations. The Adviser believes that companies with
small to medium market capitalizations present greater
long-term growth potential than companies with larger
market capitalizations. Although the Fund will follow this
structured selection process based on the GDP EAFE Index,
its country weightings may differ from the actual
weightings of the Index, and its performance will not
necessarily be comparable to the performance of the Index
because of the Fund's selected market capitalization range.
It is not the Fund's objective to track the performance or
replicate the holdings of the entire Index.
GDP EAFE INDEX. The GDP EAFE Index is composed of a sample
of companies representative of the market structure of 20
European and Pacific Basin countries. The objective of the
GDP EAFE Index is to represent an unmanaged portfolio
containing a broad selection of companies listed within
each local market included in the Index. The GDP EAFE Index
seeks to replicate the industry composition of each local
market, and a representative sampling of large, medium and
small capitalization companies from each local market,
taking into account the stocks' liquidity. The securities
included in the Index and the industry weightings within
each local market are changed periodically. The country
weightings, which are based on each country's relative
gross domestic product, are adjusted periodically
throughout the year. As of October 31, 1996, the total GDP
EAFE Index included 1,107 companies in 20 European and
Pacific Basin countries. Approximately 787 companies (out
of 1,107 in the GDP EAFE Index) or about 24% of the dollar
amount of the total Index fall in the Fund's selected
market capitalization range. The following table lists the
countries included in the GDP EAFE Index and their
weightings in the Index as of October 31, 1996.
GDP EAFE INDEX
COMPOSITION
GDP EAFE
% OF TOTAL MARKET
MARKET CAPITALIZATION1
Austria 1.6%
Belgium 2.0
Denmark 1.8
Finland 1.1
France 11.8
Germany 18.5
Ireland 0.5
Italy 8.0
Netherlands 3.1
Norway 1.1
Spain 4.4
Sweden 2.0
Switzerland 2.2
United Kingdom 8.9
EUROPE 67.0%
Australia 2.6%
Hong Kong 1.1
Japan 27.8
Malaysia 0.6
New Zealand 0.4
Singapore 0.5
PACIFIC 33.0%
TOTAL 100.0%
1 The weightings are as of October 31, 1996 and will
fluctuate. Because the Fund does not expect to hold at
any particular time all of the stocks included in the
Index or, depending on the asset size of the Fund, stocks
of companies located in all of the countries comprising
the Index, the information should be considered only as
an approximation of the Fund's intended exposure to the
countries indicated.
The Adviser and Sub-Adviser utilize the "gross domestic
product weighted" Index in order to reduce the relative
exposure to any single country (namely, Japan) which results
from an Index that is capitalization weighted. In reducing the
relative exposure to Japan, the weighting process increases
the representation of certain other countries within the
Index. Notwithstanding the GDP weighting, as of October 31,
1996, securities from Japan, Germany and France represented on
a GDP weighted basis an aggregate of approximately 58% of the
Index. Therefore, stocks from these countries will represent a
correspondingly large component of the Fund's total assets.
Such a large investment in these markets subjects the Fund to
relatively greater exposure to the political and economic
circumstances of these countries. Based upon the current
country weightings of the Index, the Fund intends to invest
more than 25% of its total assets in Japan. To the extent the
Fund's assets are concentrated in the securities of Japanese
issuers, the Fund will be subject to a greater extent to the
risks of adverse social, political or economic events which
occur in Japan. Specifically, investments in the Japanese
stock market may entail a higher degree of risk than
investments in other markets. By fundamental measures of
corporate valuation, such as its high price-earnings ratios
and low dividend yields, the Japanese markets as a whole may
presently appear expensive relative to other world stock
markets (i.e., the prices of Japanese stocks may presently be
relatively high). In addition, the prices of securities traded
on the Japanese markets may be more volatile than many other
markets.
The "GDP EAFE Index" is a registered service mark of Morgan
Stanley Capital International, which does not sponsor and is
in no way affiliated with the Fund. Inclusion of a security in
the GDP EAFE Index in no way implies an opinion by Morgan
Stanley Capital International as to its attractiveness or
appropriateness as an investment. The publication of the GDP
EAFE Index is not made in connection with any sale or offer
for sale of securities or any solicitations of orders for the
purchase of securities, and Morgan Stanley Capital
International has no liability, contingent or otherwise, to
any person for any loss arising from results obtained from the
use of the Index data.
PORTFOLIO MANAGEMENT. Traditional methods of fund investment
management typically involve changes in a portfolio of
securities based on economic, financial and market analysis.
The Fund is not managed in this manner. The Adviser and Sub-
Adviser will use a structured selection process described
below to select securities for the Fund from those included in
the GDP EAFE Index. The structured selection process utilized
by the Fund will attempt to duplicate substantially the GDP
EAFE Index country weightings. When purchasing securities for
the Fund's portfolio, the relative market capitalization
weightings of the equity securities included in each of the
local markets of the GDP EAFE Index will be considered. The
weighted capitalization of an issuer is determined by dividing
the issuer's market capitalization by the total market
capitalizations of all issuers included in the local market.
Stocks in the GDP EAFE Index will be selected within each
market with market capitalizations at the time of acquisition
of between $250 million and $5 billion. The Fund may retain up
to 20% of its total assets directly in stocks of companies
whose market capitalizations either rise above $5 billion or
fall below $250 million after acquisition but are still
included in the GDP EAFE Index (and may invest up to an
additional 10% of its total assets indirectly in such stocks
through the use of international stock index futures contracts
and related options). Companies with larger market
capitalizations that are included in the Index will not be
purchased except indirectly through the investment in
international stock index futures contracts and related
options.
Since the Fund bases its stock selection process on the
country weightings of the GDP EAFE Index, the Fund will
normally invest in the securities which are included in the
Index. The Fund may, however, acquire a security that at the
time of purchase is not included in the GDP EAFE Index if
Morgan Stanley Capital International has announced that the
security will be included at the next adjustment of the Index.
It is anticipated that no more than 5% of the Fund's assets
would be invested in equity securities which, at the time of
purchase, are not included in the GDP EAFE Index. The Fund may
also invest up to 15% of the Fund's total assets in warrants
to purchase, and securities convertible into, securities
included in the Index. Up to 15% of its total assets may be
invested in eligible securities that are held in the form of
American Depository Receipts, European Depository Receipts,
and Global Depository Receipts. The Fund may also invest in
international stock index futures contracts. For further
discussion of American Depository Receipts, European
Depository Receipts, and Global Depository Receipts and stock
index futures contracts, see "Other Investment Information"
below.
On a periodic basis, the Adviser and Sub-Adviser, through
reports of the International Monetary Fund, will monitor
developments relating to the gross domestic product of
countries within the Index. The Fund will be periodically
rebalanced to reflect these changes in country weightings
through the investment of new money received by the Fund. In
June of each year, Morgan Stanley Capital International
revises all of the country weightings of the Index. At that
time, the Fund, through the investment of new money or through
the reallocation of current portfolio holdings, will rebalance
the portfolio in light of the adjustments made by Morgan
Stanley Capital International to the Index's country
weightings.
Although the Fund will attempt to duplicate substantially the
country weightings of the GDP EAFE Index, the Fund will not
hold at any particular time all of the stocks included in the
Index because of the Fund's selected market capitalization
range. The volatility of the Fund may, therefore, be more or
less than the Index because of the Fund's selected market
capitalization range. Approximately 787 securities (out of
1,107 in the GDP EAFE Index) fall in the Fund's selected
market capitalization range representing 24% of the dollar
amount of the total Index. The volatility of the Fund may be
more or less than the Index depending on the securities held
by the Fund. Depending upon the total asset size of the Fund,
the number of securities held by the Fund is expected to vary
from 450 to 750 and to represent 16 to 20 countries of the GDP
EAFE Index. Redemptions of a substantial number of shares of
the Fund could, however, reduce the number of issuers
represented in the Fund's investment portfolio, which could,
in turn, adversely affect the accuracy with which the Fund
tracks the country and industry allocation of the GDP EAFE
Index.
To maintain liquidity in an amount to meet anticipated
redemption requests or for day to day operating purposes, a
portion of the Fund's assets (normally not exceeding 5% of
total assets) may be invested in money market instruments and
other short-term obligations. See "Other Investment
Information - Money Market Instruments." In addition, to the
extent the Fund experiences cash inflows through the issuance
of new shares or the sale of portfolio securities, or at times
when desirable equity securities which are consistent with the
Fund's investment objective are unavailable in sufficient
quantities, the Fund may invest in short-term obligations for
a limited time. It is the policy of the Fund to be as fully
invested as practicable in equity and equity related
securities (and stock index futures) at all times. While this
policy permits the Fund to take full advantage of a period of
rising international stock prices, it limits the Fund from
investing in short-term debt securities as a defensive
investment posture during falling markets (except as described
above). Accordingly, shareowners bear the risk of general
declines in stock prices, and bear any risk that the Fund's
exposure to such declines will be lessened by investment in
short-term debt securities.
Because of the Fund's investment policies, securities may be
purchased, retained, and sold by the Fund when such
transactions would not be consistent with traditional
investment criteria. If an issuer drops in ranking, or is
eliminated entirely from the GDP EAFE Index, the Adviser and
Sub-Adviser will be required to sell some or all of the common
stock of such issuer then held by the Fund. Sales of portfolio
securities may be made at times when such securities might
otherwise have not been sold, if the Adviser and Sub-Adviser
were not required to effect purchases and sales of portfolio
securities in accordance with the GDP EAFE Index. Such sales
may result in lower prices for such securities than may have
been realized or in losses that may not have been incurred if
the Fund were not required to effect the purchases and sales.
Adverse events will not necessarily be the basis for the
disposition of portfolio securities, unless an event causes
the issuer to be eliminated entirely from the GDP EAFE Index.
See "Equity Index Fund" for a description of "adverse events."
However, although it is not intended that securities will be
screened for investment by the Fund by traditional methods of
financial and market analysis, the Fund's investments will be
monitored with a view towards removing stocks of companies
which may impair for any reason the Fund's ability to achieve
its investment policies.
Because of the risks associated with international common
stock investments, the Fund is intended to be a long-term
investment vehicle and is not designed to provide investors
with a means of speculating on short-term stock market
movements.
OTHER INVESTMENT MONEY MARKET INSTRUMENTS. The Funds may hold short-term U.S.
INFORMATION Government obligations, high quality money market instruments
(i.e., rated A-1 or better by S&P or Prime-1 or better by
Moody's or unrated instruments deemed by the Adviser to be of
comparable quality), repurchase agreements, bank obligations
and cash, pending investment, to meet anticipated redemption
requests if, in the opinion of the Adviser, other suitable
securities are unavailable. The foregoing investments may
include among other things commercial paper, variable amount
master demand notes and corporate bonds with remaining
maturities of thirteen months or less and may be in such
proportions as, in the opinion of the Adviser, existing
circumstances may warrant. Variable amount master demand notes
are unsecured instruments that permit the indebtedness
thereunder to vary and provide for periodic adjustments in the
interest rate. Although the notes are not normally traded and
there may be no secondary market in the notes, the Funds may
demand payment of the principal of the instrument at any time.
The notes are not typically rated by credit rating agencies,
but they must satisfy the criteria set forth above for high
quality money market instruments. If an issuer of a variable
amount master demand note defaulted on its payment obligation,
the Funds might be unable to dispose of the note because of
the absence of a secondary market and might, for this or other
reasons, suffer a loss to the extent of the default. The Funds
invest in variable amount master demand notes only when the
Adviser deems the investment to involve minimal credit risk.
The Funds may also invest in obligations of foreign banks and
foreign branches of U.S. banks.
SECURITIES OF OTHER INVESTMENT COMPANIES. In connection with
the management of daily cash positions, each Money Market Fund
may invest in securities issued by other investment companies
with investment objectives and policies similar to their own
which invest in First Tier Eligible Securities and which
determine their net asset value per share based on the
amortized cost or penny-rounding method valuation. In
addition, the Bond and Equity Funds may invest their cash
balances in securities issued by other investment companies
which invest in high quality, short-term debt securities. None
of the Funds will invest in any other Portico Fund. Securities
of other investment companies will be acquired by a Fund
within the limits prescribed by the Investment Company Act of
1940 (the "1940 Act"). In addition to the advisory fees and
other expenses the Fund bears directly in connection with its
own operations, as a shareowner of another investment company,
the Fund would bear its pro rata portion of the other
investment company's advisory fees and other expenses, and
such fees and other expenses will be borne indirectly by the
Fund's shareowners.
GOVERNMENT OBLIGATIONS. To the extent consistent with their
investment objectives, the Money Market, Institutional Money
Market, U.S. Treasury Money Market, U.S. Government Money
Market, Short-Term Bond Market, Intermediate Bond Market, Bond
IMMDEX/TM and Balanced Funds may invest in a variety of U.S.
Treasury obligations consisting of bills, notes and bonds,
which principally differ only in their interest rates,
maturities and time of issuance. These Funds may also invest
in other securities issued or guaranteed by the U.S.
Government, its agencies and instrumentalities. Obligations of
certain agencies and instrumentalities, such as the Government
National Mortgage Association ("GNMA"), are supported by the
full faith and credit of the U.S. Treasury; others, such as
those of the Export-Import Bank of the United States, are
supported by the right of the issuer to borrow from the
Treasury; others, such as those of the Federal National
Mortgage Association ("FNMA"), are supported by the
discretionary authority of the U.S. Government to purchase the
agency's obligations; still others, such as those of the
Student Loan Marketing Association, are supported only by the
credit of the instrumentalities. No assurance can be given
that the U.S. Government would provide financial support to
its agencies or instrumentalities if it is not obligated to do
so by law. There is no assurance that these commitments will
be undertaken or complied with in the future.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. The Short-Term
Bond Market, Intermediate Bond Market, Bond IMMDEX/TM and
Balanced Funds may purchase residential and commercial
mortgage-backed as well as other asset-backed securities
(i.e., securities backed by credit card receivables,
automobile loans or other assets). The average life of these
securities varies with the maturities of the underlying
instruments which, in the case of mortgages, have maximum
maturities of thirty years. The average life of a mortgage-
backed instrument may be substantially less than the original
maturity of the mortgages underlying the securities as the
result of scheduled principal payments and mortgage
prepayments. The rate of such mortgage prepayments, and hence
the life of the certificates, will be a function of current
market rates and current conditions in the relevant housing
and commercial markets. In periods of falling interest rates,
the rate of mortgage prepayments tends to increase. During
such periods, the reinvestment of prepayment proceeds by a
Fund will generally be at lower rates than the rates that were
carried by the obligations that have been prepaid. As a
result, the relationship between mortgage prepayments and
interest rates may give some high-yielding mortgage-related
securities less potential for growth in value than non-
callable bonds with comparable maturities. In calculating the
average weighted maturity of each Fund, the maturity of asset-
backed securities will be based on estimates of average life.
There can be no assurance that these estimates will be
accurate.
Presently there are several types of mortgage-backed
securities which provide the holder with a pro rata interest
in the underlying mortgages, and collateralized mortgage
obligations ("CMOs") which provide the holder with a specified
interest in the cash flow of a pool of underlying mortgages or
other mortgage-backed securities. CMOs are issued in multiple
classes, each with a specified fixed or floating interest rate
and a final distribution date. The relative payment rights of
the various CMO classes may be subject to greater volatility
and interest rate risk than other types of mortgage-backed
obligations. The Short-Term Bond Market, Intermediate Bond
Market and Bond IMMDEX/TM Funds will invest less than 25% of
their respective total assets in CMOs.
Asset-backed securities may involve certain risks that are not
presented by mortgage-backed securities arising primarily from
the nature of the underlying assets (i.e., credit card and
automobile loan receivables as opposed to real estate
mortgages). For example, credit card receivables are generally
unsecured and may require the repossession of personal
property upon the default of the debtor which may be difficult
or impracticable in some cases.
Non-mortgage asset-backed securities do not have the benefit
of the same security in the collateral as mortgage-backed
securities. Credit card receivables are generally unsecured
and the debtors are entitled to the protection of a number of
state and federal consumer credit laws, many of which have
given debtors the right to reduce the balance due on the
credit cards. Most issuers of automobile receivables permit
the servicers to retain possession of the underlying
obligations. If the servicer were to sell these obligations to
another party, there is the risk that the purchaser would
acquire an interest superior to that of the holders of related
automobile receivables. In addition, because of the large
number of vehicles involved in a typical issuance and
technical requirements under state laws, the trustee for the
holders of the automobile receivables may not have an
effective security interest in all of the obligations backing
such receivables. Therefore, there is a possibility that
payments on the receivables together with recoveries on
repossessed collateral may not, in some cases, be able to
support payments on these securities.
Asset-backed securities may be subject to greater risk of
default during periods of economic downturn than other
instruments. Also, while the secondary market for asset-backed
securities is ordinarily quite liquid, in times of financial
stress the secondary market may not be as liquid as the market
for other types of securities, which could result in a Fund's
experiencing difficulty in valuing or liquidating such
securities.
ZERO COUPON OBLIGATIONS. The Short-Term Bond Market,
Intermediate Bond Market, Tax-Exempt Intermediate Bond and
Bond IMMDEX/TM Funds may acquire zero coupon obligations. Zero
coupon obligations have greater price volatility than similar
maturity coupon obligations and will not result in the payment
of interest until maturity. The Funds will purchase such zero
coupon obligations only if the likely relative greater price
volatility of such zero coupon obligations is not inconsistent
with such Fund's investment objective. The Funds will accrue
income on such investments for tax and accounting purposes, as
required, which is distributable to shareowners and which,
because no cash is received at the time of accrual, may
require the liquidation of other portfolio securities to
satisfy each Fund's distribution obligations.
RESTRICTED SECURITIES. Each Fund will not knowingly invest
more than 10% (except the International Equity Fund which is
limited to 5%), and in all cases will not invest more than
15%, of the value of its respective net assets in securities
that are illiquid at the time of purchase. Repurchase
agreements and time deposits that do not provide for payment
to a Fund within seven days, over-the-counter options, and
securities that are not registered under the Securities Act of
1933 (the "Act" ) but may be purchased by institutional buyers
under Rule 144A, are subject to these limits (unless such
securities are variable amount master demand notes with
maturities of nine months or less, privately placed commercial
paper, or unless the Board of Directors or the Adviser (or
Adviser and Sub-Adviser with regard to the International
Equity Fund), pursuant to guidelines adopted by the Board of
Directors, determines that a liquid trading market exists).
BORROWINGS. Each Fund may borrow money to the extent described
below under "Investment Limitations." A Fund would borrow
money to meet redemption requests prior to the settlement of
securities already sold or in the process of being sold by the
Fund. If the securities held by a Fund should decline in value
while borrowings are outstanding, the net asset value of a
Fund's outstanding shares will decline in value by
proportionately more than the decline in value suffered by a
Fund's securities. As a result, a Fund's share price may be
subject to greater fluctuation until the borrowing is paid
off.
Reverse repurchase agreements are considered to be borrowings
under the 1940 Act. At the time a Fund enters into a reverse
repurchase agreement (an agreement under which the Fund sells
portfolio securities and agrees to repurchase them at an
agreed-upon date and price), it will place in a segregated
custodial account U.S. Government securities or other liquid
high-grade debt securities having a value equal to or greater
than the repurchase price (including accrued interest), and
will subsequently monitor the account to insure that such
value is maintained. Reverse repurchase agreements involve the
risk that the market value of the securities sold by the Fund
may decline below the price of the securities it is obligated
to repurchase.
WHEN-ISSUED PURCHASES AND FORWARD COMMITMENTS. Each non-money
market Fund and the Tax-Exempt Money Market Fund may purchase
securities on a "when-issued" or delayed delivery basis and
may purchase or sell securities on a "forward commitment"
basis. These transactions, which involve a commitment by the
Fund to purchase or sell particular securities with payment
and delivery taking place at a future date (perhaps one or two
months later), permit the Fund to lock in a price or yield on
a security it owns or intends to purchase, regardless of
future changes in interest rates. The Fund does not accrue
income until the securities delivery occurs. When-issued and
forward commitment transactions involve the risk, however,
that the price or yield obtained in a transaction (and
therefore the value of the security) may be less favorable
than the price or yield (and therefore the value of the
security) available in the market when the securities delivery
takes place. Each Fund's forward commitments and when-issued
purchases are not expected to exceed 25% of the value of its
total assets absent unusual market conditions and in the case
of the Tax-Exempt Money Market Fund a forward commitment or
commitment to purchase will not exceed forty-five days. These
Funds do not intend to engage in when-issued purchases and
forward commitments for speculative purposes but only in
furtherance of their respective investment objectives.
FOREIGN SECURITIES. Each Fund, except the U.S. Treasury Money
Market, U.S. Government Money Market and Equity Index Funds,
may invest in foreign securities. The Money Market Fund and
Institutional Money Market Fund may acquire certain types of
bank instruments issued or supported by the credit of foreign
banks or foreign branches of domestic banks where the Adviser
deems the instrument to present minimal credit risks. The Tax-
Exempt Money Market Fund may purchase Municipal Obligations
backed by letters of credit issued by foreign banks. The
remaining Funds' investments in the securities of foreign
issuers may include both obligations of foreign corporations
and banks, as well as obligations of foreign governments and
their political subdivisions.
Investments in foreign securities, whether made directly or
through American Depository Receipts, involve certain inherent
risks and considerations not typically associated with
investing in U.S. companies, such as political or economic
instability of the issuer or the country of issue, the
difficulty of predicting international trade patterns, changes
in exchange rates of foreign currencies and the possibility of
adverse changes in investment or exchange control regulations.
There may be less publicly available information about a
foreign company than about a U.S. company. Foreign companies
are not subject to uniform accounting, auditing and financial
reporting standards comparable to those applicable to domestic
companies. In addition, foreign banks and foreign branches of
U.S. banks are subject to less stringent reserve requirements
and to different accounting, auditing, reporting and
recordkeeping standards than those applicable to domestic
branches of U.S. banks. Further, foreign stock markets are
generally not as developed or efficient as those in the U.S.,
and in most foreign markets volume and liquidity are less than
in the U.S. Fixed commissions on foreign stock exchanges are
generally higher than the negotiated commissions on U.S.
exchanges, and there is generally less government supervision
and regulation of foreign stock exchanges, brokers and
companies than in the U.S. With respect to certain foreign
countries, there is a possibility of expropriation or
confiscatory taxation, limitations on the removal of assets or
diplomatic developments that could affect investment within
those countries. Additionally, foreign securities and
dividends and interest payable on those securities may be
subject to foreign taxes, including foreign withholding taxes,
and other foreign taxes may apply with respect to securities
transactions. See "Taxes." Transactions in foreign securities
may involve greater time from the trade date until the
settlement date than domestic securities transactions, and may
involve the risk of possible losses through the holding of
securities in custodians and securities depositories in
foreign countries. Additional costs associated with an
investment in foreign securities may include higher
transaction costs and the cost of foreign currency
conversions. Changes in foreign exchange rates will also
affect the value of securities denominated or quoted in
currencies other than the U.S. dollar. In this regard, the
Funds do not intend to hedge against foreign currency risk
(except on unsettled trades), and changes in currency exchange
rates will impact a Fund's net asset value (positively or
negatively) irrespective of the performance of the portfolio
securities held by the Fund. The Funds and their shareowners
may encounter substantial difficulties in obtaining and
enforcing judgments against non-U.S. resident individuals and
companies. Because of these and other factors, securities of
foreign companies acquired by the Funds may be subject to
greater fluctuation in price than securities of domestic
companies. Furthermore, because the International Equity Fund
will invest substantially all (and in any event, at least 65%)
of the value of its total assets in foreign securities, the
net asset value of the International Equity Fund is expected
to be volatile.
AMERICAN DEPOSITORY RECEIPTS ("ADRS"), EUROPEAN DEPOSITORY
RECEIPTS ("EDRS"), AND GLOBAL DEPOSITORY RECEIPTS ("GDRS").
The Short-Term Bond Market, Intermediate Bond Market, Bond
IMMDEX/TM, Balanced, Growth and Income, MidCore Growth, Special
Growth and International Equity Funds may invest in sponsored
ADRs, which are receipts issued by an American bank or trust
company evidencing ownership of underlying securities issued
by a foreign issuer. ADRs may be listed on a national
securities exchange or may trade in the over-the-counter
market. ADR prices are denominated in U.S. dollars; the
underlying security may be denominated in a foreign currency.
The International Equity Fund may also invest in EDRs and
GDRs. EDRs are receipts issued by a European financial
institution evidencing ownership of underlying foreign
securities and are usually denominated in foreign currencies.
EDRs may not be denominated in the same currency as the
securities they represent. Generally, EDRs, in bearer form,
are designed for use in the European securities markets. GDRs
are issued and traded in several international financial
markets. The underlying security may be subject to foreign
government taxes which would reduce the yield on such
securities. See "Other Investment Information - Foreign
Securities" above for a discussion of certain risks in
investing in foreign securities.
SECURITIES LENDING. Although none of the Funds intend to
during the current fiscal year, each of the Funds may lend
portfolio securities.
STRIPPED SECURITIES. To the extent consistent with their
investment objectives, the Money Market, Institutional Money
Market, U.S. Government Money Market, Short-Term Bond Market,
Intermediate Bond Market, Bond IMMDEX/TM and Balanced Funds may
purchase participations in trusts that hold U.S. Treasury and
agency securities (such as TIGRs and CATs) and also may
purchase Treasury receipts and other "stripped" securities
that evidence ownership in either the future interest payments
or the future principal payments of U.S. Government
obligations. These participations are issued at a discount to
their "face value," and may (particularly in the case of
stripped mortgage-backed securities) exhibit greater price
volatility than ordinary debt securities because of the manner
in which their principal and interest are returned to
investors. The SEC staff believes that participations in CATs
and TIGRs and other similar trusts are not U.S. Government
securities. The U.S. Government Money Market Fund may also
invest in Government-backed trusts which hold obligations of
foreign governments that are guaranteed or backed by the full
faith and credit of the United States.
OPTIONS. The Short-Term Bond Market, Intermediate Bond Market,
Bond IMMDEX/TM, Growth and Income and Equity Index Funds may
purchase put and call options in an amount not to exceed 5% of
their respective net assets. Such options may relate to
particular securities or various stock or bond indices and may
or may not be listed on a national securities exchange and
issued by the Options Clearing Corporation. Purchasing options
is a specialized investment technique which entails a
substantial risk of a complete loss of the amount paid as
premiums to the writer of the option.
The Short-Term Bond Market, Intermediate Bond Market and Bond
IMMDEX/TM Funds will engage in unlisted over-the-counter
options only with broker-dealers deemed creditworthy by the
Adviser. Closing transactions in certain options are usually
effected directly with the same broker-dealer that effected
the original option transaction. A Fund bears the risk that
the broker-dealer will fail to meet its obligations. There is
no assurance that a liquid secondary trading market exists for
closing out an unlisted option position. Furthermore, unlisted
options are not subject to the protections afforded purchasers
of listed options by the Options Clearing Corporation, which
performs the obligations of its members who fail to perform in
connection with the purchase or sale of options.
Each Fund may purchase put options on portfolio securities at
or about the same time that it purchases the underlying
security or at a later time. By buying a put, a Fund limits
its risk of loss from a decline in the market value of the
security until the put expires. Any appreciation in the value
of and yield otherwise available from the underlying security,
however, will be partially offset by the amount of the premium
paid for the put option and any related transaction costs.
Call options may be purchased by a Fund in order to acquire
the underlying security at a later date at a price that avoids
any additional cost that would result from an increase in the
market value of the security. A call option may also be
purchased to increase a Fund's return to investors at a time
when the call is expected to increase in value due to
anticipated appreciation of the underlying security. Prior to
its expiration, a purchased put or call option may be sold in
a "closing sale transaction" (a sale by a Fund, prior to the
exercise of the option that it has purchased, of an option of
the same series), and profit or loss from the sale will depend
on whether the amount received is more or less than the
premium paid for the option plus the related transaction
costs.
In addition, the Short-Term Bond Market, Intermediate Bond
Market, Bond IMMDEX/TM, Growth and Income and Equity Index
Funds may write call options on securities and on various
stock or bond indices. Each Fund may write a call option only
if the option is "covered" by the Fund's holding a position in
the underlying securities or otherwise, which would allow for
immediate satisfaction of its obligation. Such options will be
listed on a national securities exchange and the aggregate
value of the Fund's assets subject to options written by the
Short-Term Bond Market, Intermediate Bond Market, Bond
IMMDEX/TM, Growth and Income, and Equity Index Funds will not
exceed 5%, 5%, 5%, 25%, and 5%, respectively, of the value of
its net assets during the current year. In order to close out
an option position, a Fund will be required to enter into a
"closing purchase transaction" (the purchase of a call option
on a security or an index with the same exercise price and
expiration date as the call option which it previously wrote
on the same security or index).
By writing a covered call option on a security, a Fund
foregoes the opportunity to profit from an increase in the
market price of the underlying security above the exercise
price except insofar as the premium represents such a profit,
and it is not able to sell the underlying security until the
option expires or is exercised or the Fund effects a closing
purchase transaction by purchasing an option of the same
series. Except to the extent that a written call option on an
index is covered by an option on the same index purchased by
the Fund, movements in the index may result in a loss to the
Fund; however, such losses may be mitigated by changes in the
value of securities held by the Fund during the period the
option was outstanding. The use of covered call options will
not be a primary investment technique of the Funds.
For additional information relating to option trading
practices and related risks, see the Statement of Additional
Information.
FUTURES CONTRACTS AND RELATED OPTIONS. The Adviser may
determine that it would be in the interest of the Short-Term
Bond Market, Intermediate Bond Market, Bond IMMDEX/TM, Growth
and Income, Equity Index and International Equity Funds to
purchase or sell futures contracts, or options thereon, as a
hedge against changes resulting from market conditions in the
value of the securities held by the Funds, or of securities
which it intends to purchase, to maintain liquidity, to have
fuller exposure to price movements in the respective stock or
bond index or to reduce transaction costs. For example, a Fund
may enter into transactions involving a bond or stock index
futures contract, which is a bilateral agreement pursuant to
which the parties agree to take or make delivery of an amount
of cash equal to a specified dollar amount times the
difference between the index value (which assigns relative
values to the securities included in the index) at the close
of the last trading day of the contract and the price at which
the futures contract is originally struck. No physical
delivery of the underlying bonds or stocks in the index is
made. The Adviser may also determine that it would be in the
interest of a Fund to purchase or sell interest rate futures
contracts, or options thereon, which provide for the future
delivery of specified fixed-income securities. In addition,
the Equity Index Fund may purchase and sell futures and
related options (based only on the S&P 500 Index) to maintain
cash reserves while simulating full investment in the stocks
underlying the S&P 500 Index, to keep substantially all of its
assets exposed to the market (as represented by the S&P 500
Index), and to reduce transaction costs. The International
Equity Fund also may invest in international stock index
futures contracts and related options which are traded on an
exchange to maintain cash reserves while stimulating full
investment in the stocks underlying the GDP EAFE Index, to
facilitate trading, reduce transaction costs or seek higher
investment returns when a futures contract is priced more
attractively than the underlying index. The Funds will not use
futures contracts for speculative purposes or to leverage net
assets.
Risks associated with the use of futures contracts include (a)
imperfect correlation between the change in market values of
the securities held by a Fund and the prices of bond or stock
index futures contracts, (b) the possible lack of a liquid
secondary market for futures contracts and the resulting
inability of a Fund to close open futures positions and (c)
with regard to the International Equity Fund, the limited
portion of the Fund's securities which may be included in any
one of the foreign stock index futures which may be utilized
by the Fund. The Short-Term Bond Market, Intermediate Bond
Market, Bond IMMDEX/TM and Growth and Income Funds intend to
limit Fund's transactions in futures contracts and related
options so that not more than 5% of a Fund's respective net
assets are at risk. The Equity Index Fund and International
Equity Fund intend to limit their transactions in futures
contracts so that not more than 10% of a Fund's respective net
assets are at risk. For a more detailed description of futures
contracts and futures options, including a discussion of the
limitations imposed by federal tax law, see Appendix B to the
Statement of Additional Information.
CONVERTIBLE SECURITIES AND WARRANTS. The Balanced, Growth and
Income, MidCore Growth, Special Growth and International
Equity Funds may invest in convertible securities and
warrants, including bonds, notes and preferred stock, that may
be converted into common stock either at a stated price or
within a specified period of time. In investing in
convertibles, a Fund is looking for the opportunity, through
the conversion feature, to participate in the capital
appreciation of the common stock into which the securities are
convertible, while earning higher current income than is
available from the common stock.
During normal market conditions, no more than 5% of a Fund's
net assets will be purchased or held in convertible or other
securities that (1) are not rated at the time of purchase
investment grade by S&P, Moody's or other nationally
recognized rating agencies; (2) are unrated and have not been
determined by the Adviser (or Adviser and Sub-Adviser with
regard to the International Equity Fund) to be of comparable
quality to a security rated investment grade in the case of
the International Equity Fund, have not received the foreign
equivalent of investment grade by a rating agency recognized
in the local market and determined to be of comparable quality
by the Adviser and Sub-Adviser; or (3) in the case of the
International Equity Fund, have not received the foreign
equivalent of investment grade by a rating agency recognized
in the local market and determined to be of comparable quality
by the Adviser and Sub-Adviser are unrated and have not been
determined by the Adviser and Sub-Adviser to be of comparable
quality to a security rated investment grade. Securities rated
below investment grade are predominantly "Baa" by Moody's or
"BBB" by S&P have speculative and are commonly referred to as
junk bonds characteristics and changes in economic conditions
or other circumstances are more likely to lead to a weakened
capacity to make principal and interest payments than is the
case with higher grade securities. To the extent a Fund
purchases convertibles rated below investment grade or
convertibles that are not rated, a greater risk exists as to
the timely repayment of the principal of, and the timely
payment of interest or dividends on, such securities.
Subsequent to its purchase by a Fund, a rated security may
cease to be rated or its rating may be reduced below a minimum
rating for purchase by the Fund. The Adviser (and Sub-Adviser
for the International Equity Fund) will consider such an event
in determining whether a Fund should continue to hold the
security. The Adviser (and Sub-Adviser for the International
Equity Fund) will sell promptly any securities that are non-
investment grade as a result of these events and that exceed
5% of a Fund's net assets.
The Balanced, Growth and Income, MidCore Growth, Special
Growth and International Equity Funds may purchase warrants
and similar rights, which are privileges issued by
corporations enabling the owners to subscribe to and purchase
a specified number of shares of the corporation at the
specified price during a specified period of time. The
purchase of warrants involves the risk that a Fund could lose
the purchase value of a warrant if the right to subscribe to
additional shares is not exercised prior to the warrant's
expiration. Also, the purchase of warrants involves the risk
that the effective price paid for the warrant added to the
subscription price of the related security may exceed the
value of the subscribed security's market price such as when
there is no movement in the level of the underlying security.
During normal market conditions, no more than 5% of each
Fund's net assets will be invested in warrants.
CONCENTRATION. The Adviser (and Sub-Adviser for the
International Equity Fund) anticipates that from time to time
certain industry sectors will not be represented in the
portfolios of the Equity Funds while other sectors will
represent a significant portion. As a matter of fundamental
policy, however, the Adviser (and Sub-Adviser for the
International Equity Fund) will not purchase any securities
which would cause 25% or more of a Fund's total assets at the
time of purchase to be invested in the securities of issuers
conducting their principal business activities in the same
industry, and each Fund's investments will be diversified
among individual investors.
SMALL COMPANIES. Small companies in which the Funds may invest
may have limited product lines, markets, or financial
resources, or may be dependent upon a small management group,
and their securities may be subject to more abrupt or erratic
market movements than larger, more established companies, both
because their securities are typically traded in lower volume
and because the issuers are typically subject to greater
degree of changes in their earnings and prospects.
BOND INDICES. The Lehman Brothers 1-3 Gov't./Corp., the Lehman
Brothers Intermediate Gov't./Corp. and the Lehman Brothers
Gov't./Corp. are trademarks of Lehman Brothers. The Funds,
their Adviser and Co-Administrators are not affiliated in any
way with Lehman Brothers. See "Management of the Funds."
Inclusion of a security in the bond indices in no way implies
an opinion by Lehman Brothers as to its attractiveness or
appropriateness as an investment. Lehman Brothers' publication
of the bond indices is not made in connection with any sale or
offer for sale of securities or any solicitations of orders
for the purchase of securities.
PORTFOLIO TURNOVER. Each Fund may sell a portfolio investment
soon after its acquisition if the Adviser believes that such a
disposition is consistent with attaining the investment
objective of the Fund. Portfolio investments may be sold for a
variety of reasons, such as a more favorable investment
opportunity or other circumstances bearing on the desirability
of continuing to hold such investments. A high rate of
portfolio turnover (over 100%) may involve correspondingly
greater brokerage commission expenses and other transaction
costs, which must be borne directly by the Fund and ultimately
by its shareowners. High portfolio turnover may result in the
realization of substantial net capital gains; to the extent
net short-term capital gains are realized, distributions
resulting from such gains will be ordinary income for federal
income tax purposes. (See "Taxes-Federal.") See "Financial
Highlights" for the Funds' portfolio turnover rates.
PURCHASE Institutional Shares of the Bond and Equity Funds and Shares
OF SHARES of the Money Market Funds are offered and sold on a continuous
basis by the distributor for the Funds, B.C. Ziegler and
Company (the "Distributor"), which is independent of the
Adviser. The Distributor is a registered broker-dealer with
offices at 215 North Main Street, West Bend, Wisconsin 53095.
Institutional Shares of the Bond and Equity Funds are
exclusively sold to and held by (a) trust, agency or custodial
accounts opened through a Firstar Corporation trust
department, trust company or trust affiliate; (b) employer-
sponsored qualified retirement plans and (c) clients of
FIRMCO. All share purchases are effected pursuant to a
customer's account at Firstar Trust Company ("Firstar Trust")
or at another chosen institution pursuant to procedures
established in connection with the requirements of the
account. Confirmations of share purchases and redemptions will
be sent to Firstar Trust or the other institution involved.
Firstar Trust and the other institutions (or their nominees)
(collectively referred to as "Institutions") will normally be
the holders of record of Fund shares, and will reflect their
customers' beneficial ownership of shares in the account
statements provided by them to their customers. The exercise
of voting rights and the delivery to customers of shareowner
communications from the Fund will be governed by the
customers' account agreements with Firstar Trust and the other
Institutions. Investors wishing to purchase shares of the
Funds should contact their account representatives.
Institutional Shares and Shares of the Money Market Funds are
sold without a charge imposed by the Fund, although
Institutions may charge fees for providing administrative or
other services in connection with investments in Fund shares.
The minimum initial investment for shares in the Institutional
Money Market Fund is $1,000,000 to be made by an individual
account or combination of accounts; however, Institutions may
set different minimums for their customers. There is no
minimum initial or subsequent investment for Shares of the
other Money Market Funds or for Institutional Shares of the
Bond and Equity Funds.
Purchase orders must be transmitted to the Fund's transfer
agent by telephone (1-800-228-1024; in Milwaukee area: 414-
287-3808 or by fax 414-287-3781 only if preceded by a
telephone call) and will be effected by the transfer agent at
its Milwaukee office. Purchase orders for Money Market Funds
that are received by the transfer agent before 11:30 a.m.
Central Time (12:30 p.m. Central Time for the Institutional
Money Market Fund) on a business day will be executed at that
time, provided the Institution placing the order undertakes to
pay for its order in immediately available funds wired to the
transfer agent by the close of regular trading hours on the
New York Stock Exchange (the "Exchange"), or in the case of
orders placed by other investors, payment in such form and by
such time is guaranteed by a creditworthy financial
institution at the time the order is placed. Purchase orders
for Money Market Funds received before 11:30 a.m. Central Time
(12:30 p.m. Central Time for the Institutional Money Market
Fund) on a business day when payment is made in any form other
than by a same day wire of immediately available funds, as
well as orders received after 11:30 a.m. Central Time (12:30
p.m. Central Time for the Institutional Money Market Fund) and
before the close of regular trading hours on the Exchange,
currently 3:00 p.m. Central Time, will be executed as of the
close of regular trading hours on the Exchange, provided that
payment is received by the close of regular trading hours on
the Exchange. Purchase orders for all other Funds that are
received by the transfer agent before the close of regular
trading hours on the Exchange, currently 3:00 p.m. Central
Time, will be executed as of the close of regular trading
hours on the Exchange, provided that payment is received by
the close of regular trading hours on the Exchange. Purchase
orders that are received after the close of regular trading
hours on the Exchange or on nonbusiness days, and orders for
which payment is not received by the close of regular trading
hours on the Exchange on a business day, will be executed on
the next business day after receipt of both the order and
payment in proper form by the transfer agent.
Payment for Fund shares should be transmitted by wire in
immediately available funds to:
Firstar Bank Milwaukee, N.A.
ABA #0750-00022
Account #112-952-137
for further credit to
[name of the Fund]
[the investor's account number and the name/title of the
account].
Payment may also be made by check payable to: Portico Funds,
P.O. Box 3011, Milwaukee, WI 53201-3011, or delivered (via
overnight delivery or in person) to 615 E. Michigan Street,
Milwaukee, WI 53202.
It is the responsibility of Institutions to transmit orders
and payment for the purchase of shares by their customers to
the transfer agent on a timely basis, in accordance with the
procedures stated above.
Certificates for shares will be issued only upon the request
of an Institution. The Funds reserve the right to reject any
purchase order.
Payment for shares of a Fund in the amount of $1,000,000 or
more may, at the discretion of the Fund, be made in the form
of securities that are permissible investments for the Fund
involved as described in this Prospectus. For further
information, see the Statement of Additional Information or
contact Portico Investor Services at 1-800-982-8909 or 414-
287-3710 (Milwaukee area).
REDEMPTION Customers who purchase Institutional Shares of a Fund through
OF SHARES accounts at an Institution may redeem all or part of their
shares in accordance with the instructions and limitations
pertaining to such accounts. The procedures will vary
according to the type of account and Institution involved, and
customers should consult their account representatives in this
regard.
Redemption orders must be transmitted by an Institution to the
transfer agent in writing or by telephone in the manner
described under "Purchase of Shares." Shares are redeemed at
the net asset value per share next determined after the
transfer agent's receipt of the redemption order.
Payment for redeemed shares will normally be wired in federal
funds on the next business day if the redemption order is
received by the transfer agent before 3:00 p.m. Central Time.
A Fund reserves the right, however, to delay the wiring of
redemption proceeds for up to seven days after receipt of a
redemption order if, in the judgment of the Adviser, an
earlier payment could adversely affect the Fund. However, if
any portion of the shares to be redeemed represents an
investment made by check, the Funds may delay the payment of
the redemption proceeds until the transfer agent is reasonably
satisfied that the check has been collected, which may take
twelve days from the purchase date. The transfer agent
currently charges a $15.00 fee for each IRA distribution,
which will be deducted from the shareowner's account or, at
the request of an Institution, billed directly to the
Institution requesting the redemption.
Portico imposes no charge when shares are redeemed. However,
Institutions may charge a fee for providing administrative or
other services in connection with investments in Fund shares.
If a customer has agreed with a particular Institution to
maintain a minimum account balance and the balance falls below
that minimum, the customer may be obliged by the Institution
to redeem all or part of the customer's shares in the Fund to
the extent necessary to maintain the required minimum balance.
Portico may also redeem shares of the Fund involuntarily or
make payment for redemption in securities if it appears
appropriate to do so in light of Portico's responsibilities
under the 1940 Act. Investors would bear any brokerage or
other transaction costs incurred in converting the securities
received to cash. See the Statement of Additional Information
for examples of when such redemptions might be appropriate.
It is the responsibility of Institutions to transmit
redemption orders and credit their customers' accounts with
the redemption proceeds on a timely basis in accordance with
their agreements with the customers and to provide their
customers with account statements with respect to share
transactions made for the accounts.
In an effort to prevent unauthorized or fraudulent redemption
requests by telephone, Portico and the transfer agent employ
reasonable procedures specified by the Funds to confirm that
such instructions are genuine. Among the procedures used to
determine authenticity, investors electing to redeem or
exchange by telephone will be required to provide their
account number. All such telephone transactions will be tape
recorded and, except for transactions in Money Market Funds,
confirmed in writing to the shareowner. Portico may implement
other procedures from time to time. If reasonable procedures
are not implemented, Portico and/or the transfer agent may be
liable for any loss due to unauthorized or fraudulent
transactions. In all other cases, the shareowner is liable for
any loss for unauthorized transactions.
The Funds will not accept payment in cash or third party
checks for the purchase of shares. Federal regulations require
that each investor provide a Social Security number or other
certified taxpayer identification number upon opening or
reopening an account. The Funds reserve the right to reject
applications without such a number or an indication that a
number has been applied for. If a number has been applied for,
the number must be provided and certified within sixty days of
the date of the application. Any accounts opened without a
proper number will be subject to backup withholding at a rate
of 31% on all liquidations and dividend and capital gain
distributions.
EXCHANGE Institutional Shareowners generally are permitted to exchange
OF SHARES their Institutional Shares in a Fund (with minimum current
value of $1,000) for Institutional Shares of other funds in
the Portico family of funds, provided that such other shares
may legally be sold in the state of the investor's residence
and the investor is eligible for Institutional Shares at the
time of the exchange. This exchange privilege does not apply
to shares of the Institutional Money Market Fund. Portico
reserves the right to terminate indefinitely the exchange
privilege of any shareowner or account representative who
requests more than four exchanges within a calendar year,
whether for oneself or one's customers. Portico may determine
to do so with prior notice to the shareowner or account
representative based on a consideration of both the number of
exchanges the particular shareowner or account representative
has requested and the time period over which those exchange
requests have been made, together with the level of expense to
the Funds or other adverse effects which may result from the
additional exchange requests.
Investors may find the exchange privilege useful if their
investment objectives or market outlook should change after
they invest in the Portico family of funds. For federal income
tax purposes, an exchange of shares is a taxable event and,
accordingly, a capital gain or loss may be realized by an
investor. Before making an exchange request, an investor
should consult a tax or other financial adviser to determine
the tax consequences of a particular exchange. No exchange fee
is currently imposed by Portico on exchanges. Portico
reserves, however, the right to impose a charge in the future.
In addition, Institutions may charge a fee for providing
administrative or other services in connection with exchanges.
The Funds reserve the right to reject any exchange request
with prior notice to a shareowner and the exchange privilege
may be modified or terminated at any time. At least sixty
days' notice will be given to shareowners of any material
modification or termination except where notice is not
required under SEC regulations. The responsibility of the
Funds and their transfer agent for the authenticity of
telephone exchange instructions is limited as described above
under "Redemption of Shares."
DIVIDENDS AND Dividends from net investment income of the Money Market,
DISTRIBUTIONS Institutional Money Market, U.S. Treasury Money Market, U.S.
Government Money Market and Tax-Exempt Money Market Funds are
declared on each business day on the shares that are
outstanding immediately after 11:30 a.m. Central Time (12:30
p.m. Central Time for the Institutional Money Market Fund) on
the declaration date.
Dividends from net investment income of the Short-Term Bond
Market, Intermediate Bond Market, Tax-Exempt Intermediate Bond
and Bond IMMDEX/TM Funds are declared and paid monthly.
Dividends from net investment income of the Balanced, Growth
and Income and Equity Index Funds are declared and paid
quarterly. Dividends from net investment income of the MidCore
Growth, Special Growth and International Equity Funds are
declared and paid annually. Each non-money market Fund's net
realized capital gains are distributed at least annually to
avoid tax to the Fund. The money market Funds do not expect to
realize net long-term capital gains.
Dividends and distributions will reduce the net asset value of
the Funds' Institutional Shares of or Shares of the non-money
market Funds by the amount of the dividend or distribution.
Dividends and distributions are automatically reinvested in
additional Institutional Shares of the non-money market Funds
or Shares of the Money Market Funds on which the dividend or
distribution is paid at their net asset value per share (as
determined on the payable date), unless the shareowner
notifies the transfer agent or account representative that
dividends or capital gains distributions, or both, should be
paid in cash. Cash dividends and distributions will be paid by
check, or by wire transfer if requested by the shareowner,
within five business days after the end of the month or within
five business days after a redemption of all of a shareowner's
shares of a Fund. Reinvested dividends and distributions
receive the same tax treatment as those paid in cash.
MANAGEMENT The business and affairs of the Funds are managed under the
OF THE FUNDS direction of the Board of Directors of the Portico Funds, Inc.
("Portico" or the "Company"). The Statement of Additional
Information contains the name and background information
regarding each Director.
ADVISORY FIRMCO, a Wisconsin corporation and subsidiary of Firstar
SERVICES Corporation, a bank holding company, serves as investment
adviser to each Fund. FIRMCO, with principal offices at
Firstar Center, 777 East Wisconsin Avenue, 8th Floor,
Milwaukee, Wisconsin 53202, has been engaged in the business
of providing investment advisory services since 1986. FIRMCO
currently has $19.5 billion in assets under active management,
of which $11.6 billion is invested in fixed income and money
market securities and $7.9 billion in equity securities.
Subject to the general supervision of the Board of Directors
and in accordance with the respective investment objective and
policies of each Fund, the Adviser manages each Fund's
portfolio, makes decisions with respect to and places orders
for all purchases and sales of each Fund's portfolio
securities, and maintains records relating to such purchases
and sales (except for the International Equity Fund). Subject
to the general supervision of the Board of Directors and in
accordance with the investment objective and policies of the
International Equity Fund, the Adviser is responsible for the
management of the Fund's investments and business affairs.
Under the terms of the Advisory Agreement between the Fund and
the Adviser, the Adviser is authorized to delegate its duties
under that agreement to another adviser. As described below,
the Adviser has retained State Street Global Advisers (the
"Sub-Adviser") with respect to the Fund's investments. The
Adviser and Sub-Adviser jointly determine the specific
securities to be purchased, retained or sold by the Fund.
The Adviser (or Sub-Adviser for the International Equity Fund)
is authorized to allocate purchase and sale orders for
portfolio securities to Shareowner Organizations, including,
in the case of agency transactions, Shareowner Organizations
which are affiliated with the Adviser (or Sub-Adviser), to
take into account the sale of Fund shares if the Adviser (or
Sub-Adviser for the International Equity Fund) believes that
the quality of the transaction and the amount of the
commission are comparable to what they would be with other
qualified brokerage firms.
The Adviser is entitled to receive from each Fund a fee,
calculated daily and payable monthly, at the following annual
rates (as a percentage of the Fund's average daily net assets,
which vary according to the level of Fund assets): 0.50% on
the first $2 billion of the Money Market, Institutional Money
Market, U.S. Treasury Money Market, U.S. Government Money
Market and Tax-Exempt Money Market Funds, plus 0.40% on
average daily net assets in excess of $2 billion; 0.60% for
the Short-Term Bond Market Fund; 0.50% for each of the
Intermediate Bond Market and Tax-Exempt Intermediate Bond
Funds; 0.30% for the Bond IMMDEX/TM Fund; 0.75% for each of the
Balanced, Growth and Income, MidCore Growth and Special Growth
Funds; 0.25% for the Equity Index Fund; 1.50% on the
International Equity Fund's first $25 million, 1.45% on the
next $25 million, 1.40% of the next $50 million, and 1.35% on
average daily net assets in excess of $100 million. The
Adviser earned fees, net of waivers, for the fiscal period
year ended October 31, 1996, at the annual rate of 0.36% for
the Money Market Fund, 0.29% for the Institutional Money
Market Fund, 0.37% for the U.S. Treasury Money Market Fund,
0.46% for the U.S. Government Money Market Fund, 0.39% for the
Tax-Exempt Money Market Fund, 0.30% for the Short-Term Bond
Market Fund, 0.33% for the Intermediate Bond Market Fund,
0.10% for the Tax-Exempt Intermediate Bond Fund, 0.30% for the
Bond IMMDEX/TM Fund, 0.54% for the Balanced Fund, 0.74% for the
Growth and Income Fund, 0.74% for the MidCore Growth Fund,
0.25% for the Equity Index Fund, 0.75% for the Special Growth
Fund and 0.71% for the International Equity Fund.
The Adviser may voluntarily waive all or a portion of the
advisory fee otherwise payable by a Fund from time to time.
These waivers may be terminated at any time at the Adviser's
discretion.
State Street Global Advisors, a division of State Street Bank
and Trust Company, Two International Place, Boston,
Massachusetts, 02110, provides sub-advisory services to the
International Equity Fund. State Street Bank and Trust Company
is a wholly-owned subsidiary of State Street Boston
Corporation, a bank holding company. Subject to the oversight
and supervision of the Fund's Board of Directors, the Sub-
Adviser assists the Adviser in managing the Fund, and jointly
with the Adviser selects investments in accordance with the
Fund's investment objective and policies. Pursuant to its
agreement, the Sub-Adviser places orders for purchases and
sales of the Fund's securities. The Sub-Adviser may utilize
affiliated brokers in connection with the execution of the
Fund's portfolio transactions subject to applicable law and
procedures adopted by the Fund's Board of Directors.
Additional information appears in the Statement of Additional
Information.
The Sub-Adviser began investment advisory operations in 1978.
Currently, the Sub-Adviser manages $244 billion in assets of
which $52 billion is invested in international equity
securities.
The Sub-Adviser is entitled to a fee, payable by the Adviser,
for its services and expenses incurred with respect to the
Fund. The fee is computed daily and paid monthly at the
following annual rates (as a percentage of the Fund's average
daily net assets): 0.40% on the Fund's first $25 million of
average daily net assets, 0.35% on the next $25 million, 0.30%
on the next $50 million, and 0.25% of the Fund's average daily
net assets in excess of $100 million. The Sub-Adviser earned
fees for the fiscal year ended October 31, 1996 at the annual
rate of 0.38% of the Fund's average net assets.
The Sub-Adviser also acts as custodian and provides accounting
services for the portfolio securities of the International
Equity Fund. See "Custodian, Transfer and Dividend Disbursing
Agent, and Accounting Services Agent" below.
The following are biographies of the portfolio managers of
each non-money market Fund.
Mary Ellen Stanek and Daniel Tranchita co-manage the Short-
Term Bond Market Fund. Ms. Stanek is the President of FIRMCO
and Director of Fixed Income Services; she has served in this
role since 1994. In addition, Ms. Stanek has served as an
officer of the Funds since September 1994. She has eighteen
years of investment management experience and was named a
Director of FIRMCO in 1992. Prior to joining FIRMCO, Ms.
Stanek headed the Fixed Income and Quantitative Investment
Management Department at Firstar Trust Company. She has been
the Fund's portfolio manager since its inception on December
29, 1989 and is a Chartered Financial Analyst. Mr. Tranchita
is a Vice President and has been with Firstar since 1989. He
has eight years of investment management experience and has
been a portfolio manager of the Fund since January 1, 1993.
Both Ms. Stanek and Mr. Tranchita are Chartered Financial
Analysts.
Mary Ellen Stanek and Teresa Westman co-manage the
Intermediate Bond Market Fund. A Senior Vice President and
Senior Portfolio Manager of FIRMCO, Ms. Westman joined Firstar
in 1987 and has ten years of investment management experience.
Ms. Westman is a Chartered Financial Analyst. Both Ms. Stanek
and Ms. Westman have managed the Fund since its inception on
January 5, 1993.
Warren Pierson manages the Tax-Exempt Intermediate Bond Fund.
Mr. Pierson joined Firstar in 1985 and has eleven years of
fixed income experience at Firstar. He is a Vice President of
FIRMCO and has been the portfolio manager of the Fund since
June 22, 1993. Mr. Pierson is a Chartered Financial Analyst.
Mary Ellen Stanek and Teresa Westman co-manage the Bond
IMMDEX/TM Fund. Ms. Stanek has managed the Fund since its
inception on December 29, 1989. Ms. Westman has been a
portfolio manager of the Fund since January 1, 1992.
Teresa Westman and Marian Zentmyer co-manage the Balanced
Fund. Ms. Westman, a Chartered Financial Analyst, has managed
the Fund since its inception on March 30, 1992. Ms. Zentmyer,
a Senior Vice President and Senior Portfolio Manager of
FIRMCO, has been with Firstar since 1982 and has eighteen
years of investment management experience. Ms. Zentmyer is a
Chartered Financial Analyst and Certified Financial Planner
and has managed the Fund since June 18, 1996.
Marian Zentmyer and Maya Bittar co-manage the Growth and
Income Fund. Ms. Zentmyer has managed the Fund since February
22, 1993. Ms. Bittar is a Vice President and Portfolio Manager
of FIRMCO and has been with Firstar since 1993. She has four
years of investment management experience and has managed the
Fund since October 1, 1995. Ms. Bittar is a Chartered
Financial Analyst.
Daniel Tranchita manages the Equity Index Fund. He has managed
the Fund since July 1, 1992.
Marian Zentmyer, Maya Bittar and Matthew D'Attilio co-manage
the MidCore Growth Fund. Mr. D'Attilio has been with Firstar
since 1993 and has four years of investment management
experience. He is an Assistant Vice President of FIRMCO. Ms.
Zentmyer has managed the Fund since June 18, 1996. Ms. Bittar
and Mr. D'Attilio have co-managed the Fund since December 1,
1996.
J. Scott Harkness, Todd Krieg and Mark Westman co-manage the
Special Growth Fund. Mr. Harkness has managed the Fund since
its inception on December 28, 1989. Mr. Harkness is Chairman,
a Director and Chief Investment Officer of FIRMCO. He has been
with Firstar for sixteen years and has seventeen years of
investment management experience. Mr. Krieg and Mr. Westman
have been with Firstar since 1992 and have five years of
investment management experience. Both Mr. Krieg and Mr.
Westman are Vice Presidents and Senior Portfolio Managers of
FIRMCO and have managed the Fund since September 1, 1994 and
January 1, 1994, respectively. Mr. Harkness, Mr. Krieg and Mr.
Westman are Chartered Financial Analysts.
Daniel Tranchita has managed the International Equity Fund for
the Adviser since its inception on April 28, 1994. The Sub-
Adviser's portfolio management services for the Fund are
conducted by committee, and no one person is primarily
responsible for making recommendations to that committee. The
committee uses a structured selection process which attempts
to duplicate substantially the GDP EAFE Index country
weightings.
ADMINISTRATIVE Firstar Trust Company ("Firstar Trust") and B.C. Ziegler and
SERVICES Company ("Ziegler") serve as the Co-Administrators (the "Co-
Administrators"). The Co-Administrators have agreed to provide
the following administrative services for the Portico Funds:
assist in maintaining office facilities for the Funds; furnish
clerical and certain other services required by the Funds;
compile data for and prepare notices to the SEC; prepare
semiannual reports to the SEC and current shareowners and
filings with state securities commissions; coordinate federal
and state tax returns; monitor the arrangements pertaining to
the Funds' agreements with shareowner organizations; monitor
the Funds' expense accruals; monitor compliance with the
Funds' investment policies and limitations; and generally
assist the Funds' operations. As further described in the
Statement of Additional Information, certain services under
the Co-Administration Agreement are provided jointly by
Firstar Trust and Ziegler and other services are provided
separately by either Firstar Trust or Ziegler. The Co-
Administrators are entitled to receive a fee for their
administrative services, computed daily and payable monthly,
at the annual rate of 0.125% of Portico's first $2 billion of
average aggregate daily net assets, plus 0.10% of Portico's
average aggregate daily net assets in excess of $2 billion.
The Co-Administrators may voluntarily waive all or a portion
of their administrative fee from time to time. These waivers
may be terminated at any time at the Co-Administrators'
discretion.
For the fiscal year ended October 31, 1996, the Funds accrued
administrative fees, after waivers, at the following effective
annual rates of each Fund's respective average net assets:
0.04%, 0.03%, 0.05%, 0.04%, 0.05%, 0.05%, 0.05%, 0.05%, 0.04%,
0.04%, 0.05%, 0.04%, 0.05%, 0.05% and 0.05% for the Money
Market, Institutional Money Market, U.S. Treasury Money
Market, U.S. Government Money Market, Tax-Exempt Money Market,
Short-Term Bond Market, Intermediate Bond Market, Tax-Exempt
Intermediate Bond, Bond IMMDEX/TM, Balanced, Growth and Income,
Equity Index, MidCore Growth, Special Growth and International
Equity Funds.
CUSTODIAN, Firstar Trust, an affiliate of the Adviser, provides transfer
TRANSFER agency and dividend disbursing agency services for all
AND DIVIDEND the Funds and custodial and accounting services for the Funds,
DISBURSING except for the International Equity Fund. State Street Bank
AGENT, and Trust Company, 225 Franklin Street, Boston,
AND ACCOUNTING Massachusetts, 02110, provides custodial and accounting
SERVICES AGENT services for the International Equity Fund. For the fiscal
year ended October 31, 1996, total transfer agency, dividend
disbursing agency, custodial and accounting services fees
earned by Firstar Trust were approximately: 0.12%, 0.03%,
0.10%, 0.06%, 0.09%, 0.10%, 0.08%, 0.22%, 0.06%, 0.11%, 0.07%,
0.08%, 0.07%, 0.06% and 0.07% of the Money Market,
Institutional Money Market, U.S. Treasury Money Market, U.S.
Government Money Market, Tax-Exempt Money Market, Short-Term
Bond Market, Intermediate Bond Market, Tax-Exempt Intermediate
Bond, Bond IMMDEX/TM, Balanced, Growth and Income, Equity
Index, MidCore Growth, Special Growth and International Equity
Funds' average daily net assets, respectively. Additional
information regarding the fees payable by the Funds to Firstar
Trust and State Street Bank and Trust Company for these
services is provided in the Statement of Additional
Information. Inquiries to the transfer agent may be sent to
the following address: Firstar Trust Company, P.O. Box 3011,
Milwaukee, Wisconsin 53201-3011.
INVESTMENT Except for the limitations detailed below, the investment
LIMITATIONS objective and policies of each Fund described in this
Prospectus are not fundamental and may be changed by the Board
of Directors without the affirmative vote of the holders of a
majority of a Fund's outstanding shares. If there is a change
in a Fund's investment objective, shareowners should consider
whether the Fund remains an appropriate investment in light of
their then current financial position and needs. The following
descriptions summarize several of each Fund's fundamental
investment limitations which are set forth in full in the
Statement of Additional Information.
NO FUND MAY:
1. Purchase securities of any one issuer (other than U.S.
Government securities) if more than 5% of the value of its
total assets will be invested in the securities of such
issuer, except that up to 25% of the value of a Fund's total
assets may be invested without regard to this 5% limitation.
2. Subject to the foregoing 25% exception, purchase more than
10% of the outstanding voting securities of any issuer.
3. Invest 25% or more of its total assets in one or more
issuers conducting their principal business activities in
the same industry.
4. Borrow money or enter into reverse repurchase agreements
except for temporary purposes in amounts up to 10% of the
value of the total assets at the time of such borrowing, or
mortgage, pledge or hypothecate any assets except in
connection with such borrowings. Whenever borrowings
(including reverse repurchase agreements) exceed 5% of the
Fund's total assets, the Fund will not make any investments.
In addition, the Tax-Exempt Money Market Fund and the Tax-
Exempt Intermediate Bond Fund may not:
5. Invest less than 80% of its net assets in securities the
interest on which is exempt from federal income tax, except
during defensive periods or during periods of unusual market
conditions. For purposes of this fundamental policy,
Municipal Obligations that are subject to federal
alternative minimum tax are considered taxable.
With respect to Investment Limitation No. 1, in accordance
with current SEC regulations, the Money Market Fund intends
(as a matter of nonfundamental policy) to limit investments in
the securities of any single issuer (other than securities
issued or guaranteed by the U.S. Government, it agencies or
instrumentalities) to not more than 5% of the Fund's total
assets at the time of purchase, 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.
If a percentage limitation is satisfied at the time of
investment, a later increase or decrease in such percentage
resulting from a change in the value of the Fund's portfolio
securities will not constitute a violation of such limitation.
If due to market fluctuations or other reasons the amount of
borrowings or reverse repurchase agreements exceed the limit
stated above, a Fund will promptly reduce such amount.
TAXES Portico's management intends that each Fund will qualify as a
"regulated investment company" under the Internal Revenue
FEDERAL Code of 1986, as amended (the "Code"). Such qualification
generally will relieve each Fund of liability for federal
income taxes to the extent its earnings are distributed in
accordance with the Code.
Each Fund contemplates declaring as dividends each year at
least 90% of its investment company income. An investor who
receives a dividend derived from investment company taxable
income (which includes any excess of net short-term capital
gain over net long-term capital loss) treats it as a receipt
of ordinary income in the computation of his gross income,
whether such dividend is paid in the form of cash or
additional shares of the Fund. Subject to certain holding
requirements, the dividends received deduction for
corporations may apply to such ordinary income distributions
to the extent of the total qualifying dividends received by a
Fund from domestic corporations for the taxable year.
In addition, the Tax-Exempt Money Market Fund and the Tax-
Exempt Intermediate Bond Fund each contemplate paying to its
respective shareowners at least 90% of its exempt interest
income net of certain deductions. Dividends derived from
exempt-interest income generally may be treated by shareowners
as items of interest excludable from their gross income under
Section 103(a) of the Code, unless under the circumstances
applicable to the particular shareowner, exclusion would be
disallowed. (See Statement of Additional Information under
"Additional Information Concerning Taxes.") If a Fund should
hold certain private activity bonds issued after August 7,
1986, shareowners must include, as an item of tax preference,
the portion of dividends paid by the Fund that is attributable
to interest on such bonds in their federal alternative minimum
taxable income for purposes of determining liability (if any)
for the 26%-28% alternative minimum tax applicable to
individuals and the 20% alternative minimum tax and the
environmental tax applicable to corporations. Corporate
shareowners also must also take all exempt-interest dividends
into account in determining certain adjustments for federal
alternative minimum and environmental tax purposes. The
environmental tax applicable to corporations is imposed at the
rate of 0.12% on the excess of the corporation's modified
federal alternative minimum taxable income over $2,000,000.
Shareowners receiving Social Security benefits should note
that all exempt-interest dividends will be taken into account
in determining the taxability of such benefits.
Any dividend or distribution of a Fund's excess of net long-
term capital gain over its net short-term capital loss will be
taxable to a shareowner of the Fund as long-term capital gain,
regardless of how long the shareowner has held shares of the
Fund.
Before purchasing Fund shares, the impact of dividend or
capital gain distributions which are expected to be declared
or have been declared, but not paid, should be carefully
considered. Any dividend or distribution paid by the Fund
shortly after the purchase of shares of the Fund will have the
effect of reducing the per share net asset value by the per
share amount of the dividend or distribution. Such dividends
or distributions, although in effect a return of capital to
shareowners, are subject to income taxes.
Each Fund will be required in certain cases to withhold and
remit to the U.S. Treasury 31% of the dividends or gross
proceeds realized upon sale paid to any shareowner (i) who has
provided an incorrect taxpayer identification number or no
number at all, (ii) who is subject to withholding by the
Internal Revenue Service for failure to properly include on
his return payments of interest or dividends or (iii) who has
failed, when required to do so, to certify that he is not
subject to backup withholding. Each Fund generally will also
withhold and remit to the U.S. Treasury 10% of all
distributions from individual retirement accounts (including
simplified employee plans) to any investor unless the transfer
agent receives a written request not to withhold federal
income tax from the investor prior to the distribution date;
withholding on distributions from other types of Retirement
Plans may be mandatory and may be at a higher rate.
A taxable gain or loss may be realized by a shareowner upon a
redemption, transfer or exchange of Fund shares, depending on
the tax basis of the shares and their price at the time of
such disposition. If a shareowner held shares for six months
or less, any loss realized by the shareowner will be
disallowed to the extent of the amount of exempt-interest
dividends received with respect to the shares and will be
treated as long-term loss to the extent of any long-term
capital distribution received.
Certain income received by the International Equity Fund may
be subject to foreign taxes. If more than 50% in value of the
Fund's total assets at the close of any taxable year consists
of stocks or securities of foreign corporations, the Fund may
elect to treat any foreign taxes paid by it as paid by its
shareowners. If the Fund makes this election, each shareowner
generally will be required to include in income his respective
pro rata portions of foreign taxes and, if he itemizes his
deductions, will be entitled to deduct such respective pro
rata portions in computing his taxable income or,
alternatively, to claim foreign tax credits (subject, in
either case, to certain limitations). Each year that the Fund
makes this election, it will report to its shareowners the
amount per share of foreign taxes it has elected to have
treated as paid by its shareowners. If the Fund's dividends
exceed its taxable income in any year, as a result of
currency-related losses or otherwise, all or a portion of the
Fund's dividends may be treated as a return of capital to
shareowners for tax purposes.
The foregoing is only a brief summary of some of the important
federal income tax considerations generally affecting the
Funds and their shareowners and is not intended as a
substitute for careful tax planning and is based on tax laws
and regulations which are in effect on the date of this
Prospectus. Such laws and regulations may be changed by
legislative or administrative action. Accordingly, investors
in the Funds should consult their tax advisers with specific
reference to their own tax situation. Shareowners will be
advised at least annually as to the federal income tax
consequences of dividends and distributions made each year.
STATE AND LOCAL Investors are advised to consult their tax advisers concerning
the application of state and local taxes, which may have
different consequences from those of the federal income tax
law described above. In particular, although the U.S. Treasury
Money Market Fund intends to invest primarily in U.S. Treasury
obligations, the interest on which is generally exempt from
state income taxation, an investor should consult his or her
own tax adviser to determine whether distributions from the
Fund are exempt from state taxation in the investor's own
state. Similarly, dividends paid by the Money Market,
Institutional Money Market, U.S. Government Money Market, Tax-
Exempt Money Market and Tax-Exempt Intermediate Bond Funds may
be taxable to investors under state or local law as dividend
income even though all or a portion of such dividends may be
derived from interest on obligations which, if realized
directly, would be exempt from such income taxes.
DESCRIPTION The Company was incorporated under the laws of the State of
OF SHARES Wisconsin on February 15, 1988 and is registered with the SEC
as an open-end management company. The Articles of
Incorporation authorize the Board of Directors to issue up to
150 billion full and fractional shares of common stock, $.0001
par value per share. The Company currently has 16 classes
representing interests in 16 investment portfolios. Each class
of the Funds is currently divided into two separate series, an
Institutional Series and a Retail Series, representing
interests in the same Fund. Of these authorized shares, 5
billion shares have been classified for each Money Market
Fund, and 500 million shares for each Institutional series of
each non-money market Fund discussed in this Prospectus.
Shares of each series bear their pro rata portion of all
operating expenses paid by the Funds, except certain payments
of up to 0.25% of the average daily net assets of the Retail
Shares under the Funds' Distribution and Service Plan and
Shareowner Servicing Plan applicable only to Retail Series
Shares. Retail Shares are offered in separate prospectuses
and, subject to certain exceptions, are sold with sales
charges. Institutional Shares are only available to sold to
and held by (i) trust, agency or custodial accounts opened
through trust companies or trust departments affiliated with
Firstar Corporation; (ii) employer-sponsored qualified
retirement plans; and (iii) clients of FIRMCO. Retail Shares
are available to any investor who does not fall within the
three preceding categories. Portico Funds offers various
services and privileges in connection with Retail Shares that
are not offered in connection with Institutional Shares,
including a Periodic Investment Plan, ConvertiFund(R), FIRMCO
and a Systematic Withdrawal Plan. A salesperson and any other
person or Institution entitled to receive compensation for
selling or servicing shares may receive different compensation
with respect to different series of shares.
For information regarding the other funds and series, contact
Portico Investor Services at 1-800-982-8909 or 414-287-3710
(Milwaukee area) or your Institution.
Portico does not presently intend to hold annual meetings of
shareowners except as required by the 1940 Act or other
applicable law. Portico will call a meeting of shareowners for
the purpose of voting upon the question of removal of a member
of the Board of Directors upon written request of shareowners
owning at least 10% of the outstanding shares of Portico that
are entitled to vote. To the extent required by law, Portico
will assist in shareowner communication in such matters.
Shareowners of each class of Funds are entitled to one vote
for each full share held and proportionate fractional votes
for fractional shares held and will vote in the aggregate and
not by Fund except where otherwise required by law. It is
contemplated that the shareowners of a Fund will vote
separately on matters relating to its investment advisory
agreement (or sub-advisory agreement with respect to the
International Equity Fund) and any changes in its fundamental
investment limitations. On any matter submitted to the vote of
shareowners which only pertains to agreements, liabilities or
expenses applicable to the Institutional Shares but not the
Retail Shares of the same Fund, only the Institutional Shares
will be entitled to vote. Shares of Portico have noncumulative
voting rights and, accordingly, the holders of more than 50%
of Portico's outstanding shares (irrespective of Fund) may
elect all of the Directors. As of January 31, 1997, the
Adviser and its affiliates held, on behalf of their underlying
accounts, approximately 72% of Portico's shares that were
outstanding on that date.
Each Institutional Share of a non-money market Fund represents
an equal proportionate interest with other Institutional
Shares in the non-money market Fund. Each share of a Money
Market Fund represents an equal proportionate interest in that
Fund. Shares are entitled to such dividends and distributions
earned on its assets as are declared at the discretion of the
Board of Directors. Shares of the Funds do not have preemptive
rights. Each Fund is classified as a diversified company under
the 1940 Act.
NET ASSET VALUE The net asset value of the Money Market Funds for purposes of
AND DAYS OF pricing purchase and redemption orders is determined as of
OPERATION 11:30 a.m. Central Time (12:30 p.m. Central Time for the
Institutional Money Market Fund) and as of the close of
regular trading hours on the Exchange, currently, 3:00 p.m.
MONEY MARKET Central Time, on each day on which both the Exchange is open
FUNDS for trading and the Federal Reserve Banks' Fedline System is
open. As a result, shares of the Funds will not be priced on
the days which the Exchange or Federal Reserve Banks observe:
New Year's Day, Martin Luther King, Jr. Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day,
Columbus Day, Veterans Day, Thanksgiving Day and Christmas
Day. Net asset value per share is calculated by dividing the
value of all securities and other assets owned by each Fund,
less the liabilities charged to the Fund, by the number of the
Fund's outstanding shares.
The Company intends to use its best efforts to maintain the
net asset value of each Money Market Fund at $1.00 per share,
although there is no assurance that it will be able to do so
on a continuous basis. Net asset value is computed using the
amortized cost method. In connection with the use of this
valuation method, Portico limits the dollar-weighted average
maturity of each Fund to not more than 90 days and the
remaining maturity of each portfolio security to not more than
thirteen months with certain exceptions permitted by SEC
rules..
NON-MONEY MARKET The net asset value of each non-money market Fund for purposes
FUNDS of pricing purchase and redemption orders is determined as of
the close of regular trading hours on the Exchange, currently,
3:00 p.m. Central Time, on each day the Exchange is open for
trading. As a result, shares of the Funds will not be priced
on the days which the Exchange observes: New Year's Day,
Martin Luther King, Jr. Day (Bond Funds only), Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. Net asset value per
Institutional Share is calculated by dividing the value of all
securities and other assets owned by each Fund that are
allocable to Institutional Shares, less the liabilities
charged to Institutional Shares, by the number of the Fund's
outstanding Institutional Shares.
Shares which are traded on a recognized domestic stock
exchange are valued at the last sale price on the securities
exchange on which such securities are primarily traded or at
the last sale price on the national securities market.
Portfolio securities which are primarily traded on foreign
securities exchanges are generally valued at the preceding
closing values of such securities on their respective
exchanges, except when an occurrence subsequent to the time a
value was so established is likely to have changed such value.
In such an event, the fair value of those securities will be
determined through the consideration of other factors by or
under the direction of the Board of Directors. Exchange-traded
securities for which there were no transactions are valued on
the average of the current bid and asked prices for the
International Equity Fund and at the current bid prices for
the other non-money market Funds. Securities traded on only
over-the-counter markets are valued on the basis of closing
over-the-counter bid prices. Restricted securities, securities
for which market quotations are not readily available and
other assets are valued at fair value by the Adviser under the
supervision of the Board of Directors. Short-term investments
having a maturity of 60 days or less are valued at amortized
cost, unless the amortized cost does not approximate market
value.
Each Fund's securities may be valued based on valuations
provided by an independent pricing service. These valuations
are reviewed by the Adviser. If the Adviser believes that a
valuation received from the service does not represent a fair
value, it values the security by a method that the Board of
Directors believes will determine a fair value. Any pricing
service used may employ electronic data processing techniques,
including a "matrix" system, to determine valuations.
Quotations of foreign securities in foreign currency are
converted to U.S. dollar equivalents using the foreign
exchange quotation in effect at the time net asset value is
computed. Foreign securities held by the International Equity
Fund may trade in their local markets on days the Fund is
closed, and the Fund's net asset value may, therefore, change
on days when investors may not purchase or redeem Fund shares.
PERFORMANCE From time to time each Money Market Fund may quote its
CALCULATIONS "yield" and "effective yield," and the Tax-Exempt Money Market
Fund may also quote its "tax-equivalent yield," in
advertisements or in communications to shareowners. Each
MONEY MARKET yield figure is based on historical earnings and is not
FUNDS intended to indicate future performance. The "yield" of a Fund
refers to the income generated by an investment in the Fund
over a seven-day period identified in the advertisement. This
income is then "annualized." That is, the amount of income
generated by the investment during that week is assumed to be
generated each week over a 52-week period and is shown as a
percentage of the investment. The "effective yield" is
calculated similarly but, when annualized, the income earned
by an investment in the Fund is assumed to be reinvested. The
"effective yield" will be slightly higher than the "yield"
because of the compounding effect of this assumed
reinvestment. The "tax-equivalent yield" of the Tax-Exempt
Money Market Fund shows the level of taxable yield needed to
produce an after-tax equivalent to the Fund's tax-free yield.
This is done by increasing the Fund's yield (calculated as
above) by the amount necessary to reflect the payment of
federal income tax at a stated tax rate. The "tax-equivalent
yield" will always be higher than the "yield" of the Tax-
Exempt Money Market Fund.
Additionally, the yields of the Funds may be compared in such
advertisements or reports to shareowners to those of other
mutual funds with similar investment objectives and to other
relevant indices or to rankings prepared by independent
services or other financial or industry publications that
monitor the performance of mutual funds. For example, the
yields of the Money Market Fund and the Institutional Money
Market Fund may be compared to IBCFinancial Data, Inc.' s
("IBC's") Money Fund Average, the yields of the U.S. Treasury
Money Market Fund and the U.S. Government Money Market Fund
may be compared to IBC's Government Money Fund Average, and
the yields of the Tax-Exempt Money Market Fund may be compared
to IBC's Tax-Free Money Fund Average, which are averages
compiled by IBC Financial Data, Inc.' s Money Fund Report, a
widely recognized independent publication that monitors the
performance of money market funds. In addition, the yields of
the Money Market, Institutional Money Market, U.S. Treasury
Money Market, and U.S. Government Money Market Funds may be
compared to the average yields reported by the Bank Rate
Monitor for money market deposit accounts offered by the 50
leading banks and thrift institutions in the top five standard
metropolitan statistical areas.
Yield data as reported in national financial publications
including Money Magazine, Forbes, Barron's, Morningstar Mutual
Funds, The Wall Street Journal and The New York Times, or in
publications of a local or regional nature, may also be used
in comparing the yields of the Funds.
NON-MONEY MARKET From time to time, total return and yield data for the
FUNDS Institutional Shares of a bond or equity Fund may be quoted in
advertisements or in communications to shareowners. The total
return of a Fund's Institutional Shares will be calculated on
an average annual (compound) total return basis, and may also
be calculated on an aggregate total return basis, for various
periods. Average annual total return reflects the average
annual percentage change in value of an investment in
Institutional Shares of a Fund over the measuring period.
Aggregate total return reflects the total percentage change in
value over the measuring period. Both methods of calculating
total return assume that dividends and capital gain
distributions made by the Institutional Shares of the Fund
during the period are reinvested in Institutional Shares of
the Fund.
Yield is computed based on the net income of the Institutional
Shares of a bond Fund during a 30-day (or one-month) period,
which will be identified in connection with the particular
yield quotation. More specifically, the yield of the
Institutional Shares of the Fund is computed by dividing the
net income of the Institutional Shares of the Fund per share
during a 30-day (or one-month) period by the net asset value
per share on the last day of the period and annualizing the
result on a semiannual basis. The Tax-Exempt Intermediate Bond
Fund may also quote a tax-equivalent yield which shows the
level of taxable yield needed to produce an after-tax
equivalent to the tax-free yield of the Institutional Shares
of the Fund. This is done by increasing the yield of the
Institutional Shares of the Fund (calculated as above) by the
amount necessary to reflect the payment of federal income tax
at a stated tax rate. The "tax equivalent yield" will always
be higher than the "yield" of the Fund.
The total return and yield of a Fund's Institutional Shares
may be compared to those of other mutual funds with similar
investment objectives and to stock, bond and other relevant
indices or to rankings prepared by independent services or
other financial or industry publications that monitor the
performance of mutual funds. For example, the total return and
yield, as appropriate, of a Fund's Institutional Shares may be
compared to data prepared by Lipper Analytical Services, Inc.
The total return of a bond or balanced Fund's Institutional
Shares may be compared to the Lehman Brothers
1-3 Year Government/Corporate Bond Index; the Merrill Lynch 1-
2.99 U.S. Treasury Bond Index; the Lehman Brothers
Intermediate Government/Corporate Bond Index; the Lehman
Brothers 5-Year General Obligation Bond Index; the Lehman
Brothers Government/Corporate Bond Index; and the Consumer
Price Index. In addition, the total return of an equity Fund's
Institutional Shares may be compared to the S&P 500 Index; the
S&P MidCap 400 Index, the S&P SmallCap 600 Index, the NASDAQ
Composite Index, an index of unmanaged groups of common stocks
of domestic companies that are quoted on the National
Association of Securities Quotation System; the Dow Jones
Industrial Average, a recognized unmanaged index of common
stocks of 30 industrial companies listed on the New York Stock
Exchange; the Wilshire Top 750 Index, an index of all domestic
equity issues which are traded over the national exchanges;
the Russell 2000 Index; the Value Line Composite Index, an
unmanaged index of nearly 1,700 stocks reviewed in Ratings &
Reports; the Russell MidCap; the Wilshire MidCap 750 Index;
and the Consumer Price Index. In addition, the total return of
the Institutional Shares of the International Equity Fund will
be compared to the GDP EAFE Index and may be compared to the
Salomon-Russell Indices, Russell Universe Indices, Lipper
International Indices, and the domestic indices listed above.
Total return and yield data as reported in national financial
publications, such as Money Magazine, Forbes, Barron's,
Morningstar Mutual Funds, The Wall Street Journal and The New
York Times, or in publications of a local or regional nature,
may also be used in comparing the performance of the Funds.
Performance quotations represent past performance, and should
not be considered as representative of future results. The
investment return and principal value of an investment in a
Fund's Institutional Shares will fluctuate so that an
investor's shares, when redeemed, may be worth more or less
than their original cost. Since performance will fluctuate,
performance data for a Fund cannot necessarily be used to
compare an investment in a Fund's Institutional Shares with
bank deposits, savings accounts and similar investment
alternatives which often provide an agreed or guaranteed fixed
yield for a stated period of time. Investors should remember
that performance is generally a function of the kind and
quality of the investments held in a portfolio, portfolio
maturity, operating expenses and market conditions. Any fees
charged by Institutions directly to their customer accounts in
connection with investments in a Fund will not be included in
the Fund's calculations of yield and total return and will
reduce the yield and total return received by the accounts.
The methods used to compute yield and total return are
described in more detail in the Statement of Additional
Information.
_______________________
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR
IN THE FUNDS' STATEMENT OF ADDITIONAL INFORMATION INCORPORATED
HEREIN BY REFERENCE, IN CONNECTION WITH THE OFFERING MADE BY
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUNDS OR THEIR DISTRIBUTOR. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFERING BY THE FUNDS OR BY THEIR
DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE
OBTAINED BY THE EQUITY INDEX FUND, BY SHAREOWNERS OF THE FUND,
BY ANY PERSON OR BY ANY ENTITY FROM THE USE OF THE S&P 500
INDEX OR ANY DATA INCLUDED THEREIN IN CONNECTION WITH THE USE
LICENSED BY THE FUND, OR FOR ANY OTHER USE. S&P MAKES NO
EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL
SUCH WARRANTIES OR MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE FOR USE WITH RESPECT TO THE S&P 500 INDEX OR DATA
INCLUDED THEREIN. "STANDARD & POOR'S(R)," "S&P(R)," "S&P
500(R)," "STANDARD & POOR'S 500(R)," AND "500(R)" ARE SERVICE
MARKS OF S&P AND HAVE BEEN LICENSED FOR USE BY PORTICO.
TO OPEN AN ACCOUNT OR REQUEST INFORMATION
1-800-982-8909
1-414-287-3710
FOR ACCOUNT BALANCES AND INVESTOR SERVICES
1-800-228-1024
1-414-287-3808
PORTICO INVESTOR SERVICES
615 East Michigan Street
P.O. Box 3011
Milwaukee, Wisconsin 53201-3011
89-9069A
- ------------------------------------------------------------------------------
PORTICO FUNDS, INC.
(Retail and Institutional Series)
MicroCap Fund
Form N-1A
Cross Reference Sheet
________________________________________
Part A
Item No Prospectus Heading
- -------- ------------------
1. Cover Page................................... Cover Page
2. Synopsis..................................... Expense Summary
3. Condensed Financial Information.............. Financial
Highlights;
Performance
Calculations
4. General Description of Registrant............ Cover Page;
Investment
Objectives and
Policies; Other
Investment
Information;
Description of
Shares; Invest-
ment Limitations
5. Management of the Fund....................... Management of the
Funds
5A. Management's Discussion of Fund Performance.. Inapplicable
6. Capital Stock and Other Securities........... Dividends and
Distributions;
Management of the
Funds; Taxes;
Description of
Shares
7. Purchase of Securities Being Offered......... Purchase of Shares;
Shareholder
Services; Net Asset
Value and Days of
Operation
8. Redemption or Repurchase..................... Redemption of
Shares; Shareholder
Services; Net Asset
Value and Days of
Operation
9. Pending Legal Proceedings.................... Not Applicable
- ------------------------------------------------------------------------------
PROSPECTUS
FEBRUARY 28, 1997
MICROCAP FUND
PORTICO FUNDS
TABLE OF CONTENTS
Expense Summary 2
Financial Highlights 4
Investment Objective and Policies 6
Other Investment Information 7
Purchase of Shares 12
Redemption of Shares 17
Exchange of Shares 20
Shareowners Services (Retail Shareowners Only) 21
Dividends and Distributions 22
Management of the Fund 23
Investment Limitations 25
Taxes 25
Description of Shares 27
Net Asset Value and Days of Operation 28
Performance Calculations 28
This Prospectus describes the MicroCap Fund, one of the sixteen mutual funds in
the Portico family of funds. The MicroCap Fund seeks capital appreciation
through investment in securities of small companies (companies with
capitalizations at the time of purchase below the median market capitalization
of the Russell 2000 Index, which is currently approximately $250 million).
Portico Funds offer a variety of portfolios with different investment objectives
designed to meet the needs of individual and institutional investors, including
money market, bond, balanced, and domestic and international equity funds, which
are described in separate prospectuses.
Firstar Investment Research & Management Company ("FIRMCO" or the "Adviser")
serves as investment adviser to the Fund, and the Fund is sponsored by B.C.
Ziegler and Company (the "Distributor"). Shareowner Organizations may perform
shareowner servicing and assistance in connection with the distribution of the
Fund's Retail Shares and receive fees from the Fund for their services. (See
"Management of the Fund").
This Prospectus sets forth concisely the information about the MicroCap Fund
that a prospective investor should consider before investing. You should read
this Prospectus and retain it for future reference. Additional information about
the Fund, contained in a Statement of Additional Information, has been filed
with the Securities and Exchange Commission ("SEC") and is available upon
request without charge by writing Portico Investor Services at 615 East Michigan
Street, P.O. Box 3011, Milwaukee, Wisconsin 53201-3011, or by calling 1-800-982-
8909 or 414-287-3710 (Milwaukee area). The SEC maintains a website
(http://www.sec.gov.) that contains the Statement of Additional Information,
material incorporated by reference and other information regarding registrants
that file electronically with the SEC. The Statement of Additional Information
bears the same date as this Prospectus and is incorporated by reference in its
entirety into the Prospectus.
THE FUND IS CLOSED TO NEW INVESTORS AND TO ADDITIONAL SHARE PURCHASES EXCEPT FOR
REINVESTMENT OF DIVIDENDS FROM THE FUND.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
SHARES OF THE FUND ARE NOT BANK DEPOSITS, AND ARE NEITHER ENDORSED BY, INSURED
BY, GUARANTEED BY, OBLIGATIONS OF, NOR OTHERWISE SUPPORTED BY THE FDIC, THE
FEDERAL RESERVE BOARD, FIRSTAR INVESTMENT RESEARCH & MANAGEMENT COMPANY, FIRSTAR
TRUST COMPANY, FIRSTAR CORPORATION, ITS AFFILIATES OR ANY OTHER BANK, OR OTHER
GOVERNMENTAL AGENCY. AN INVESTMENT IN THE PORTICO FUNDS INVOLVES INVESTMENT
RISKS INCLUDING POSSIBLE LOSS OF PRINCIPAL.
February 28, 1997
EXPENSE SUMMARY Below is a summary of the shareowner transaction expenses and
the annual operating expenses incurred by Retail and
Institutional Shares of the MicroCap Fund during the fiscal
period ended October 31, 1996. An example based on the summary
is also shown.
RETAIL INSTITUTIONAL
SHAREOWNER TRANSACTION EXPENSES SHARES SHARES
- -----------------------------------------------------------------------------
Maximum Sales Charge Imposed on Purchases 4.00% None
Maximum Sales Charge on Reinvested Dividends None None
Deferred Sales Charge None None
Redemption Fees1 None None
Exchange Fees None None
- -----------------------------------------------------------------------------
ANNUAL FUND
OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
- -----------------------------------------------------------------------------
Advisory Fees 2 1.50% 1.50%
12b-1 Fees 0.00%3 0.00%
All Other Expenses After Fee Waivers
Shareowner Servicing Fees 0.25% 0.00%
Other Expenses After Fee Waivers 4 0.22% 0.47% 0.22% 0.22%
Total Fund Operating Expenses After
Fee Waivers 5 1.97% 1.72%
- -----------------------------------------------------------------------------
1A fee of $12.00 is charged for each wire redemption on Retail Shares. See
"Redemption of Shares."
2To the extent that the Fund's total ordinary operating expenses exceed 2.00%
and 1.75%, respectively, for the Retail and Institutional Shares, the Adviser
will voluntraily waive a portion of its fee. The advisory fees of 1.50% is
higher than the advisory fee payable by most other investment companies. See
"Management of the Fund" in this Prospectus for a more complete description
and the financial statements for the Fund for the fiscal period ended October
31, 1996 incorporated into the Statement of Additional Information.
3 The total of all 12b-1 fees and Shareowner Servicing Fees paid by Retail
Shares of the Fund may not exceed, in the aggregate, the annual rate of 0.25%
of the Fund's average daily net assets. The Fund does not expect to pay any
12b-1 fees for the current year. If 12b-1 fees are paid in the future, long-
term shareowners may pay more than the economic equivalent of the maximum
front end sales charge permitted by the National Association of Securities
Dealers.
4 Absent voluntary administrative fee waivers, other expenses would have been
0.29% for both Retail and Institutional Shares.
5 Absent fee waivers, total operating expenses would have been 2.04% and 1.79%
for Retail and Institutional Shares, respectively.
EXPENSE SUMMARY Example: You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return; and (2)
redemption of your investment at the end of the following
periods:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------------------------
Retail Shares $59 $99 $142 $260
Institutional Shares $17 $54 $ 93 $203
----------------------------------------------------------
The foregoing tables are intended to assist investors in understanding the
expenses that shareowners bear either directly or indirectly and have been
restated to reflect current fees. In addition, Shareowner Organizations or
Institutions (as defined below) may charge fees for providing services in
connection with their clients' investments in the Fund's shares.
The example shown above should not be considered a representation of future
investment return or operating expenses. Actual investment return and operating
expenses may be more or less than those shown.
UNDERSTANDING EXPENSES
Operating a mutual fund involves a variety of expenses for portfolio management,
shareowner statements and reports, and other services. These costs are paid from
the Fund's assets and their effect, except for fees charged directly by a
Shareowner Organization or Institution to its customers, are factored into any
quoted share price or return.
FINANCIAL HIGHLIGHTS The financial highlights for the period ended October 31,
1996 have been derived from financial records of the Fund
which have been audited by Price Waterhouse LLP,
independent accountants, whose report, which appears in
the annual report to shareowners for the fiscal period
ended October 31, 1996, is incorporated by reference into
the Statement of Additional Information. The table below
should be read in conjunction with the financial
statements and related notes also incorporated by
reference in the Statement of Additional Information. You
may obtain the Statement of Additional Information and the
annual report to shareowners, which contain additional
performance information, free of charge by calling Portico
Investor Services or writing to Portico Investor Services
at the address listed on the back cover of this
Prospectus.
FINANCIAL HIGHLIGHTS
Income from Investment Operations
-----------------------------------
Net Asset Net Realized
Value, Net And Unrealized Total from
Beginning Investment Gains on Investment
of Period (Loss) Securities Operations
- -------------------------------------------------------------------------------
Aug. 1, 19951 though
June 30,1996 Institutional $10.00 $(0.02) $6.14 $6.12
July 1, 1996 through
Oct. 31, 1996 Institutional 15.45 (0.07) 0.82 0.75
Aug. 1 19951 through
June 30, 1996 Retail 10.00 (0.02) 6.10 6.08
July 1, 1996 through
Oct. 31, 1996 Retail 15.42 (0.08) 0.82 0.74
1 Commencement of operations.
Less Distributions
-------------------------
Net Asset
Dividends from Distributions Value,
Net Investment from Total End
Income Capital Gains Distributions of Period
- --------------------------------------------------------------------------------
Aug. 1, 19951 though
June 30,1996 Institutional $(0.05) $(0.62) $(0.67) $15.45
July 1, 1996 through
Oct. 31, 1996 Institutional - - - 16.20
Aug. 1 19951 through
June 30, 1996 Retail (0.04) (0.62) (0.66) 15.42
July 1, 1996 through
Oct. 31, 1996 Retail - - - 16.16
1 Commencement of operations.
<TABLE>
<CAPTION> Supplemental Data and Ratios
------------------------------------
Ratio of Net
Net Ratio of Net Investment
Assets, Expenses to (Loss) to Portfolio Average
Total End of Average Net Average Net Turnover Commission
Return23 Period(000s) Assets4 Assets4 Rate27 Rate7
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aug. 1, 19951 though
June 30,1996 Institutional 63.93% $63,595 1.74%5 (0.16)%5 283.67% $0.0423
July 1, 1996 through
Oct. 31, 1996 Institutional 4.85% 66,368 1.72%5 (1.44)%5 64.44% 0.0460
Aug. 1 19951 through
June 30, 1996 Retail 63.52% 9,036 1.99%6 (0.36)%6 283.67% 0.0423
July 1, 1996 through
Oct. 31, 1996 Retail 4.80% 9,273 1.97%6 (1.69)%6 64.44% 0.0460
<FN>
1 Commencement of operations.
2 Not annualized.
3 The total return calculation for the Retail Series of the Fund does not
reflect the maximum sales charge of 4.00%.
4 Annualized.
5 Without fees waived, the ratio of net expenses to average net assets for
the periods ended October 31, 1996 and June 30, 1996 would have been 1.79%
and 1.97%, respectively, and the ratio of net investment (loss) to average
net assets for the periods ended October 31, 1996 and June 30, 1996 would
have been (1.51)% and (.39)%, respectively.
6 Without fees waived, the ratio of net expenses to average net assets for
the periods ended October 31, 1996 and June 30, 1996 would have been 2.04%
and 2.22%, respectively, and the ratio of net investment (loss) to average
net assets for the periods ended October 31, 1996 and June 30, 1996 would
have been (1.76)% and (.59)%, respectively.
7 Portfolio turnover and average commission rate paid is calculated on the
basis of the Fund as a whole without distinguishing between the classes of
shares issued.
</TABLE>
INVESTMENT OBJECTIVES AND POLICIES
INVESTMENT OBJECTIVE. The investment objective of the MicroCap Fund is capital
appreciation. The Fund seeks to achieve its objective primarily through
investments in securities of small companies. At least 65% of the Fund's
total assets will be invested in securities of small capitalization companies
(companies with capitalizations at the time of purchase below the median market
capitalization of the Russell 2000 Index, which is currently approximately $250
million). Current income is not a significant consideration in the selection of
securities for this Fund. Securities are selected for the Fund by the Adviser
on the basis of their potential for price appreciation.
Most common equity securities held by the Fund will be common stocks of
companies incorporated in the United States, although up to 25% of its total
assets may be invested, either directly or through investments in American
Depository Receipts, in the securities of foreign issuers. In addition to
investing in common equity securities, the Fund may also acquire preferred
stocks and obligations, such as bonds, debentures and notes that, in the
opinion of the Adviser, present opportunities for capital appreciation. In
addition, the Fund may invest in securities convertible into common stock,
such as certain bonds and preferred stocks, and may invest up to 5% of its net
assets in other types of securities having common stock characteristics, such
as rights and warrants to purchase equity securities.
The Fund generally invests in small companies that the Adviser considers to be
well managed and to have attractive fundamental financial characteristics, which
include, among other factors, low debt, return on equity substantially above the
market average and consistent revenue and earnings per share growth over the
prior three to five years. The Adviser believes greater potential for price
appreciation exists among small companies since they tend to be less widely
followed by other securities analysts and thus may be more likely to be
undervalued by the market. The Fund generally anticipates the median stock
market capitalization of the securities it purchases will be between $50 million
and $250 million and the weighted average of such securities will be between
$10 million and $250 million at the time of purchase. The Fund may invest from
time to time a portion of its assets, not to exceed 35% at the time of
purchase, in companies with market capitalizations in excess of the median
market capitalization of the Russell 2000 Index, which is currently
approximately $250 million. If the market capitalization of a company
in which the Fund has invested increases above the median market
capitalization of the Russell 2000 Index, the Fund, consistent with
its investment objective, may continue to hold the security.
Securities of unseasoned companies, that is, companies with less than three
years' continuous operation, which present risks considerably greater than do
common stocks of more established companies, may be acquired from time to time
by the Fund when the Adviser believes such investments offer possibilities of
attractive capital appreciation. However, the Fund will not invest more than
5% of the value of its total assets in the securities of unseasoned companies.
Companies in which the Fund primarily invests will include those that have
limited product lines, markets, or financial resources, or are dependent upon
a small management group. In addition, because these stocks are not well known
to the investing public, do not have significant institutional ownership, and
are followed by relatively few securities analysts, there will normally be less
publicly available information concerning these securities compared to what is
available for the securities of larger companies. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, can decrease the
value and liquidity of securities held by the Fund. Historically, small
capitalization stocks have been more volatile in price than larger
capitalization stocks. Among the reasons for the greater price volatility
of these small company stocks are the less certain growth prospects of
smaller firms, the lower degree of liquidity in the markets for such
stocks, the greater sensitivity of small companies to changing economic
conditions and the fewer market makers and the wider spreads between quoted
bid and asked prices which exist in the over-the-counter market for such
stocks. Besides exhibiting greater volatility, small company stocks may,
to a degree, fluctuate independently of larger company stocks. Small company
stocks may decline in price as large company stocks rise, or rise in price as
large company stocks decline. Investors should therefore expect that the Fund
will be more volatile than, and may fluctuate independently of, broad stock
market indices such as the Standard & Poor's 500 Index.
The securities in which the Fund invests will often be traded only in the
over-the- counter market or on a regional securities exchange, may be listed
only in the quotation service commonly known as the "pink sheets," and may
not be traded every day or in the volume typical of trading on a national
securities exchange. They may be subject to wide fluctuations in market
value. The trading market for any given security may be sufficiently thin
as to make it difficult for the Fund to dispose of a substantial block of
such securities. The disposition by the Fund of portfolio securities to
meet redemptions or otherwise may require the Fund to sell these securities
at a discount from market prices or during periods when, in the Adviser's
judgment, such disposition is not desirable or to make many small sales
over a lengthy period of time.
The Adviser anticipates that from time to time certain industry sectors will
not be represented in the Fund's portfolio while other sectors will represent a
significant portion. However, the Adviser will not purchase any securities which
would cause 25% or more of the Fund's total assets at the time of purchase to be
invested in the securities of issuers conducting their principal business
activities in the same industry, and will not purchase securities of any issuer
which would cause 10% or more of the Fund's total assets at the time of purchase
to be invested in that issuer.
The Fund may sell a portfolio investment soon after its acquisition if the
Adviser believes that such a disposition is consistent with attaining the
investment objective of the Fund. Portfolio investments may be sold for a
variety of reasons, such as a more favorable investment opportunity or other
circumstances bearing on the desirability of continuing to hold such
investments. A high rate of portfolio turnover (over 100%) may involve
correspondingly greater brokerage commission expenses and other transaction
costs, which must be borne directly by the Fund and ultimately by its
shareowners. High portfolio turnover may result in the realization of
substantial net capital gains. To the extent short-term net capital
gains are realized, distributions resulting from such gains will be
ordinary income for federal income tax purposes. (See "Taxes - Federal").
See "Financial Highlights" for the Fund's portfolio turnover rates.
The Fund may engage in short sales as further discussed below. In view of the
specialized nature of its investment activities, investment in the Fund will be
suitable only for those investors who are prepared to invest without concern for
current income and are financially able to assume considerably more risk than
the risks presented by a mutual fund that invests in companies traded on a
national securities exchange or NASDAQ. The Fund's expenses in a year may
exceed income. There can be no assurance that the investment objective of the
Fund will be realized or that the value of the Fund's investments will not
decline in value. For these reasons, the Fund should be considered as a
long-term investment and not as a vehicle for seeking short-term profits and
income.
OTHER INVESTMENT INFORMATION
MONEY MARKET INSTRUMENTS.
The Fund may hold short-term U.S. Government obligations,
high quality money market instruments (i.e., rated A-1 or better by Standard and
Poor's Ratings Group ("S&P") or Prime-1 by Moody's Investors Service, Inc.
("Moody's") or unrated instruments deemed by the Adviser to be of comparable
quality), repurchase agreements, bank obligations and cash, pending investment,
to meet anticipated redemption requests, or if, in the opinion of the Adviser,
other suitable securities are unavailable. The foregoing investments may include
among other things commercial paper and variable amount master demand notes and
corporate bonds with remaining maturities of thirteen months or less, and may
be in such proportions as, in the opinion of the Adviser, existing circumstances
may warrant. Variable amount master demand notes are unsecured instruments that
permit the indebtedness thereunder to vary and provide for periodic adjustments
in the interest rate. Although the notes are not normally traded and there may
be no secondary market in the notes, the Fund may demand payment of the
principal of the instrument at any time. The notes are not typically rated
by credit rating agencies, but they must satisfy the criteria set forth above
for high quality money market instruments. If an issuer of a variable amount
master demand note defaulted on its payment obligation, the Fund might be
unable to dispose of the note because of the absence of a secondary market
and might, for this or other reasons, suffer a loss to the extent of the
default. The Fund invests in variable amount master demand notes only when
the Adviser deems the investment to involve minimal credit risk. The Fund may
invest in obligations of foreign banks and foreign branches of U.S. banks. The
Fund may also invest in securities issued by other investment companies. The
Fund will not invest in any other Portico Fund. In addition to the advisory
fees and other expenses the Fund bears directly in connection with its own
operations, as a shareowner of another investment company, the Fund would bear
its pro rata portion of the other investment company's advisory fees and other
expenses, and such fees and other expenses will be borne indirectly by the
Fund's shareowners.
RESTRICTED SECURITIES. The Fund will not knowingly invest more than 15% of the
value of its net assets in securities that are illiquid at the time of purchase.
Repurchase agreements and time deposits that do not provide for payment to the
Fund within seven days, over-the-counter options, and securities that are not
registered under the Securities Act of 1933 (the "Act") but may be purchased
by institutional buyers under Rule 144A, are subject to this 15% limit (unless
such securities are variable amount master demand notes with maturities of nine
months or less or unless the Board of Directors or the Adviser, pursuant to
guidelines adopted by the Board of Directors, determines that a liquid trading
market exists). The Fund may invest up to 15% of the value of its net assets in
securities which are not registered under the Act but which can be sold to
"qualified institutional buyers" in accordance with Rule 144A under the Act.
Any such security will not be considered illiquid so long as it is determined
by the Adviser, acting under guidelines approved and monitored by the Board,
that an adequate trading market exists for that security. This investment
practice could have the effect of increasing the level of illiquidity in the
Fund during any period that qualified institutional buyers become uninterested
in purchasing these restricted securities.
BORROWINGS. The Fund may borrow money in amounts up to 25% of the value of the
total assets at the time of entering into the borrowing. The Fund would borrow
money to meet redemption requests prior to the settlement of securities already
sold or in the process of being sold by the Fund. If the securities held by the
Fund should decline in value while borrowings are outstanding, the net asset
value of the Fund's outstanding shares will decline in value by proportionately
more than the decline in value suffered by the Fund's securities. As a result,
the Fund's share price may be subject to greater fluctuation until the
borrowing is paid off.
Reverse repurchase agreements are considered to be borrowings under the
Investment Company Act of 1940 (the "1940 Act"). At the time the Fund enters
into a reverse repurchase agreement (an agreement under which the Fund sells
portfolio securities and agrees to repurchase them at an agreed-upon date and
price), it will place in a segregated custodial account U.S. Government
securities or other liquid high-grade debt securities having a value equal
to or greater than the repurchase price (including accrued interest), and
will subsequently monitor the account to insure that such value is
maintained. Reverse repurchase agreements involve the risk that the market
value of the securities sold by the Fund may decline below the price of
the securities it is obligated to repurchase.
WHEN-ISSUED PURCHASES AND FORWARD COMMITMENTS. The Fund may purchase securities
on a "when-issued" or delayed delivery basis and may purchase or sell securities
on a "forward commitment" basis. These transactions, which involve a commitment
by the Fund to purchase or sell particular securities with payment and delivery
taking place at a future date (perhaps one or two months later), permit the
Fund to lock in a price or yield on a security it owns or intends to purchase,
regardless of future changes in interest rates. The Fund does not accrue income
until the securities delivery occurs. When-issued and forward commitment
transactions involve the risk, however, that the price or yield obtained in
a transaction (and therefore the value of the security) may be less favorable
than the price or yield (and therefore the value of the security) available in
the market when the securities delivery takes place. The Fund's forward
commitments and when-issued purchases are not expected to exceed 20% of
the value of its total assets absent unusual market conditions. The Fund
does not intend to engage in when-issued purchases and forward
commitments for speculative purposes but only in furtherance of its investment
objective.
SHORT SALES. The Fund may enter into short sales with respect to its equity
security holdings. In a short sale transaction, the Fund borrows a security
from a broker and sells it with the expectation that it will replace the
security borrowed from the broker by repurchasing the same security at a
lower price. These transactions may result in gains if a security's price
declines, but may result in losses if a security's price does not decline
in price.
When the Fund engages in short sales, unless the short sale is otherwise
"covered" in accordance with the policies of the SEC, the Fund will be
required to maintain in a segregated account an amount of liquid assets
equal to the difference between: (a) the market value of the security sold
short at the time they were sold short and (b) any cash or United States
Government securities required to be deposited as collateral with the broker
in connection with the short sale (not including the proceeds from the short
sale). In addition, until the Fund replaces the borrowed security, the Fund
will maintain the segregated account on a daily basis at such a level that
(a) the amount deposited in the account plus the amount deposited with the
broker as collateral will equal the current market value of the security sold
short and (b) the amount deposited in the segregated account plus the amount
deposited with the broker as collateral will not be less than the market value
of the security at the time it was sold short. Short sale transactions will be
conducted so that not more than 20% of the value of the Fund's net assets at the
time of entering into the short sale (exclusive of proceeds from short sales)
will be, when added together, (a) in deposits collateralizing the obligation to
replace securities borrowed to effect short sales, and (b) allocated to the
segregated account in connection with short sales.
FOREIGN SECURITIES. The Fund may invest in foreign securities. The Fund's
investments in the obligations of foreign issuers may include both obligations
of foreign corporations and banks, as well as obligations of foreign governments
and their political subdivisions. Investments in foreign securities, whether
made directly or through American Depository Receipts, involve certain inherent
risks and considerations not typically associated with investing in U.S.
companies, such as political or economic instability of the issuer or the
country of issue, the difficulty of predicting international trade patterns,
changes in exchange rates of foreign currencies and the possibility of adverse
changes in investment or exchange control regulations. There may be less
publicly available information about a foreign company than about a U.S.
company. Foreign companies are not subject to uniform accounting, auditing
and financial reporting standards comparable to those applicable to domestic
companies. Further, foreign stock markets are generally not as developed or
efficient as those in the U.S., and in most foreign markets volume
and liquidity are less than in the U.S. Fixed commissions on foreign stock
exchanges are generally higher than the negotiated commissions on U.S.
exchanges, and there is generally less government supervision and regulation
of foreign stock exchanges, brokers and companies than in the U.S. With respect
to certain foreign countries, there is a possibility of expropriation or
confiscatory taxation, limitations on the removal of assets or diplomatic
developments that could affect investment within those countries. Because
of these and other factors, securities of foreign companies acquired by the
Fund may be subject to greater fluctuation in price than securities of domestic
companies.
SECURITIES LENDING. Although the Fund does not intend to during the current
fiscal year, the Fund may lend portfolio securities.
OPTIONS. The Fund may purchase put and call options in an amount not to exceed
5% of its net assets. Such options may relate to particular securities or
various stock indices and may or may not be listed on a national securities
exchange and issued by the Options Clearing Corporation. Purchasing options
is a specialized investment technique which entails a substantial risk of a
complete loss of the amount paid as premiums to the writer of the option.
The Fund may purchase put options on portfolio securities at or about the same
time that it purchases the underlying security or at a later time. By buying a
put, the Fund limits its risk of loss from a decline in the market value of the
security until the put expires. Any appreciation in the value of and yield
otherwise available from the underlying security, however, will be partially
ts. Call options may be purchased by the Fund in order to acquire the
underlying security at a later date at a price that avoids any additional
cost that would result from an increase in the market value of the security.
A call option may also be purchased to increase the Fund's return to investors
at a time when the call is expected to increase in value due to anticipated
appreciation of the underlying security. Prior to its expiration, a purchased
put or call option may be sold in a "closing sale transaction" (a sale by the
Fund, prior to the exercise of the option that it has purchased, of an option
of the same series), and profit or loss from the sale will depend on whether
the amount received is more or less than the premium paid for the option plus
the related transaction costs.
In addition, the Fund may write call options on securities and on various stock
indices. The Fund may write a call option only if the option is "covered" by the
Fund's holding a position in the underlying securities or otherwise, which would
allow for immediate satisfaction of its obligation. Such options will be listed
on a national securities exchange and the aggregate value of the Fund's assets
subject to options written by the Fund will not exceed 5% of the value of its
net assets during the current year. In order to close out an option position,
the Fund will be required to enter into a "closing purchase transaction" (the
purchase of a call option on a security or an index with the same exercise
price and expiration date as the call option which it previously wrote on
the same security or index).
By writing a covered call option on a security, the Fund foregoes the
opportunity to profit from an increase in the market price of the underlying
security above the exercise price except insofar as the premium represents
such a profit, and it is not able to sell the underlying security until the
option expires or is exercised or the Fund effects a closing purchase
transaction by purchasing an option of the same series. Except to the
extent that a written call option on an index is covered by an option on
the same index purchased by the Fund, movements in the index may result
in a loss to the Fund; however, such losses may be mitigated by changes in
the value of securities held by the Fund during the period the option was
outstanding. The use of covered call options will not be a primary investment
technique of the Fund. For additional information relating to option trading
practices and related risks, see the Statement of Additional Information.
FUTURES CONTRACTS AND RELATED OPTIONS. The Adviser may determine that it would
be in the interest of the Fund to purchase or sell futures contracts, or options
thereon, as a hedge against changes resulting from market conditions in the
value of the securities held by the Funds, or of securities which it intends to
purchase, to maintain liquidity, to have fuller exposure to price movements in
the respective security index or to reduce transaction costs. For example, the
Fund may enter into transactions involving a stock index futures contract,
which is a bilateral agreement pursuant to which the parties agree to take or
make delivery of an amount of cash equal to a specified dollar amount times the
difference between the index value (which assigns relative values to the common
stocks included in the index) at the close of the last trading day of the
contract and the price at which the futures contract is originally struck.
No physical delivery of the underlying bonds or stocks in the index is made.
The Adviser may also determine it would be in the interest of the Fund to
purchase or sell interest rate futures contracts, or options thereon, which
provide for the future delivery of specified fixed-income securities. The Fund
will not use futures contracts for speculative purposes.
Risks associated with the use of futures contracts include (a) imperfect
correlation between the change in market values of the securities held by the
Fund and the prices of stock index futures contracts, and (b) the possible lack
of a liquid secondary market for futures contracts and the resulting inability
of the Fund to close open futures positions. During the current fiscal year,
the Fund intends to limit its transactions in futures contracts and related
options so that not more than 5% of its net assets are at risk. For a more
detailed description of futures contracts and futures options, including a
discussion of the limitations imposed by federal tax law, see Appendix A to
the Statement of Additional Information.
CONVERTIBLE SECURITIES. The Fund may invest in convertible securities, including
bonds, notes and preferred stock, that may be converted into common stock either
at a stated price or within a specified period of time. In investing in
convertibles, the Fund is looking for the opportunity, through the conversion
feature, to participate in the capital appreciation of the common stock into
which the securities are convertible, while earning higher current income than
is available from the common stock.
During normal market conditions, no more than 5% of the Fund's net assets will
be purchased or held in convertible or other securities rated below investment
grade. Securities rated below investment grade are predominantly speculative
and are commonly referred to as junk bonds. To the extent the Fund purchases
convertibles rated below investment grade or convertibles that are not rated,
a greater risk exists as to the timely repayment of the principal of, and the
timely payment of interest or dividends on, such securities. Subsequent to
its purchase, a rated security may cease to be rated or its rating may be
reduced below a minimum rating for purchase by the Fund. The Adviser will
consider such an event in determining whether the Fund should continue to
hold the security. The Adviser will sell promptly any securities that are
non-investment grade as a result of these events and that exceed 5% of
the Fund's net assets.
WARRANTS. The Fund may purchase warrants and similar rights, which are
privileges issued by corporations enabling the owners to subscribe to and
purchase a specified number of shares of the corporation at a specified price
during a specified period of time. The purchase of warrants involves the risk
that the Fund could lose the purchase value of a warrant if the right to
subscribe to additional shares is not exercised prior to the warrant's
expiration. Also, the purchase of warrants involves the risk that the
effective price paid for the warrant added to the subscription price of
the related security may exceed the value of the subscribed security's
market price such as when there is no movement in the level of the
underlying security. During normal market conditions, no more than 5%
of the Fund's net assets will be invested in warrants.
PURCHASE OF SHARES
THE FUND IS CLOSED TO NEW INVESTORS AND TO ADDITIONAL SHARE PURCHASES EXCEPT FOR
REINVESTMENT OF DIVIDENDS FROM THE FUND.
Shares of the Fund are offered and sold by the distributor for the Fund, B.C.
Ziegler and Company (the "Distributor"), which is independent of the Adviser.
The Distributor is a registered broker/dealer with offices at 215 North Main
Street, West Bend, Wisconsin 53095.
Institutional Shares of the Fund are exclusively sold to and held by (a) trust,
agency or custodial accounts opened through a Firstar Corporation trust
department, trust company or trust affiliate; (b) employer-sponsored qualified
retirement plans; and (c) all clients of FIRMCO. All other persons must
purchase Retail Shares of the Fund.
THE MINIMUM INITIAL INVESTMENT FOR RETAIL SHARES IN THE FUND IS $10,000. THE
MINIMUM SUBSEQUENT INVESTMENT FOR RETAIL SHARES IN THE FUND IS $100. THERE IS NO
MINIMUM INITIAL OR SUBSEQUENT INVESTMENT FOR INSTITUTIONAL SHARES. THE MAXIMUM
INVESTMENT IN THE FUND FOR AN INVESTOR IS $5,000,000.
HOW TO PURCHASE RETAIL SHARES
Purchase orders for Retail Shares may be placed through the transfer agent of
the Fund, registered representatives of Elan Investment Services, Inc.
("Elan"), or organizations that have entered into distribution or servicing
agreements with the Fund (including Elan, "Shareowner Organizations"). For a
discussion of transactions through Shareowner Organizations, see "Shareowner
Organizations" below.
Once each business day, two share prices of the Retail Shares are calculated for
the Fund: the offering price and the net asset value (NAV). Retail Shares are
purchased at the offering price which is the net asset value plus a sales charge
which varies in accordance with the amount of the purchase as indicated below:
Shareowner
Organization
Amount of Sales Charge as a Sales Charge as a Reallowance as a
Transaction Percentage of Percentage of Percentage of
at Offering Price Offering Price Net Asset Value Offering Price
- --------------------------------------------------------------------------------
Less than $50,000..... 4.00% 4.16% 3.50%
$50,000 to $99,999.... 3.00% 3.09% 2.50%
$100,000 to $249,999 2.00% 2.04% 1.50%
$250,000 or more...... none none none
- --------------------------------------------------------------------------------
The Distributor may reallow the entire sales charge to certain Shareowner
Organizations. To the extent that 90% or more of the sales charge is reallowed,
Shareowner Organizations may be deemed to be underwriters under the Act.
You may purchase Retail Shares without a sales charge if: (a) you were a Portico
shareowner as of January 1, 1995 and have continuously maintained a shareowner
account with the Company; (b) you make any purchase within 60 days of a
redemption of Portico Institutional Shares, (c) you are an employee, director
or retiree of Firstar Corporation or its affiliates or of Portico; (d) you
maintain a personal trust account with an affiliate of Firstar Corporation
at the time of purchase; (e) you make any purchase within 60 days of a
termination of a personal trust account with an affiliate of Firstar
Corporation; (f) you make any purchase for your medical savings account for
which Firstar Corporation or an affiliate serves in a custodial capacity;
(g) you make any purchase for your individual retirement account; (h) you
make any purchase within 60 days of a redemption of a mutual fund on which you
paid an initial sales charge or a contingent deferred sales charge; (i) you are
a registered investment adviser that has entered into an agreement with the
Distributor to purchase shares for your own account or for discretionary
client accounts; (j) you are a spouse, parent or child of an individual
who falls within the preceding categories (a) or (d) above; or (k) you are
a spouse, parent, sibling or child of an individual who falls within the
preceding category (c) above. In addition, you may reinvest all or any
portion of your proceeds from redemption of shares of the Fund in Retail
Shares of other Portico funds, within 365 days of redemption without paying a
sales charge. Shares so reinvested will be purchased at a price equal to the net
asset value next determined after the transfer agent receives payment in proper
form.
QUANTITY DISCOUNTS. You may be entitled to reduced sales charges through the
Right of Accumulation or under a Letter of Intent, even if you do not make an
investment of a size that would normally qualify for a quantity discount.
To qualify for a reduction of or exception to the sales charge, you must notify
your Shareowner Organization or the Distributor at the time of purchase or
exchange. The reduction in sales charge is subject to confirmation of your
holdings through a check of records. The Fund may modify or terminate quantity
discounts at any time. For more information about quantity discounts, contact
your Shareowner Organization or Portico Investors Services at 1-800-982-8909.
RIGHTS OF ACCUMULATION. A reduced sales charge applies to any purchase of Retail
Shares of any Portico Fund that is sold with a sales charge (an "Eligible Fund")
where an investor's then current aggregate investment is $50,000 or more.
"Aggregate investment" means the total of: (a) the dollar amount of the then
current purchase of shares of an Eligible Fund, and (b) the value (based on
current net asset value) of previously purchased and beneficially owned shares
of any Eligible Fund on which a sales charge has been paid. If, for example,
an investor beneficially owns shares of one or more Eligible Funds, with an
aggregate current value of $49,000 on which a sales charge has been paid and
subsequently purchases shares of an Eligible Fund having a current value of
$1,000, the sales charge applicable to the subsequent purchase would be reduced
to 3.00% of the offering price. Similarly, each subsequent investment in
Eligible Fund shares may be added to an investor's aggregate investment
at the time of purchase to determine the applicable sales charge.
LETTER OF INTENT. By signing a Letter of Intent (available from the Distributor
and Shareowner Organizations), an investor becomes eligible for the reduced
sales charge applicable to the total number of Eligible Fund shares purchased
in a 13-month period pursuant to the terms and under the conditions set forth
in the Letter of Intent. To compute the applicable sales charge, the offering
price of shares of an Eligible Fund on which a sales charge has been paid,
beneficially owned by an investor on the date of submission of the Letter
of Intent, may be used as a credit toward completion of the Letter of
Intent. However, the reduced sales charge will be applied only to new
purchases.
During the term of the Letter of Intent, the Transfer Agent will hold in escrow
shares equal to 5% of the amount indicated in the Letter of Intent for payment
of a higher sales charge if an investor does not purchase the full amount
indicated in the Letter of Intent. The escrow will be released when an investor
fulfills the terms of the Letter of Intent by purchasing the specified amount.
Any redemptions made during the 13-month period will be subtracted from the
amount of purchases in determining whether the Letter of Intent has been
completed. If total purchases qualify for a further sales charge reduction,
the sales charge will be adjusted to reflect an investor's total purchases.
If total purchases are less than the amount specified in the Letter of Intent,
an investor will be requested to remit an amount equal to the difference
between the sales charge actually paid and the sales charge applicable to the
total purchases. If such remittance is not received within 20 days, the transfer
agent, as attorney-in-fact pursuant to the terms of the Letter of Intent and at
the Distributor's direction, will redeem an appropriate number of shares held
in escrow to realize the difference. Signing a Letter of Intent does not bind
an investor to purchase the full amount indicated at the sales charge in effect
at the time of signing, but an investor must complete the intended purchase
in accordance with the terms of the Letter of Intent to obtain the reduced
sales charge. To apply, an investor must indicate his or her intention to
do so under a Letter of Intent at the time of purchase of Shares.
QUALIFICATION FOR DISCOUNTS. For purposes of applying the Rights of Accumulation
and Letter of Intent privileges described above, the scale of sales charges
applies to the combined purchases made by any individual and/or spouse
purchasing securities for his, her or their own account, or the aggregate
investments of a trustee or other fiduciary or IRA for the benefit of the
persons listed above.
PURCHASE ORDERS. Investors may purchase Retail Shares of the Fund through
registered representatives of Elan located at Firstar Banks ("Firstar
Investment Offices"), or directly with the Fund's transfer agent. All checks
must be drawn on a bank located within the United States and must be payable
in U.S. dollars. Subsequent investments in an existing account in the Fund
may be made at any time by sending to the address below a check or money
order payable to the Fund, along with a letter stating the amount of the
investment, the name of the Fund and the account number in which the
investment is to be made. A $20 fee will be imposed by the Fund's transfer
agent if any check used for investment in an account does not clear, and the
investor involved will be responsible for any loss incurred by a Fund.
<TABLE>
PURCHASE ORDERS PLACED THROUGH REGISTERED REPRESENTATIVES
<CAPTION>
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
------------------- ---------------------
<S> <C> <C>
IN PERSON - Complete an application at a Firstar - Bring your check to
Investment Office. Call 1-800-982-8909 Firstar Investment Office. Call
for the office nearest you. 1-800-982-8909 for the
office nearest you.
BY PHONE - Call your registered representative - Call your registered representative at
or call 1-800-982-8909 for or call 1-800-982-8909 for
the office nearest you. the office nearest you.
AUTOMATICALLY - Call your registered representative - Complete a Periodic Investment
to obtain a purchase application Plan Application to automatically
which includes information about purchase more shares.
a Periodic Investment Plan.
PURCHASE ORDERS PLACED THROUGH THE TRANSFER AGENT
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
------------------- ---------------------
BY MAIL - Complete an application and mail - Make your check payable to Portico
it along with a check payable to Funds. Please include your account
Portico Funds, P.O. Box 3011, number on your check and mail it to
Milwaukee, WI 53201-3011. the address on your statement.
OVERNIGHT - Complete an application and deliver - Make your check payable to Portico
DELIVERY it along with a check payable to Funds. Please include your account
Portico Funds, 615 E. Michigan St., number on your check and deliver
Milwaukee, WI 53202. it to the address at the left.
IN PERSON - Bring your application and check - Bring your check to a Firstar Investment
to a Firstar Investment Office. Call Office. Call 1-800-982-8909 for the
1-800-982-8909 for the office office nearest you.
nearest you.
AUTOMATICALLY - Call 1-800-982-8909 to obtain a - Complete a Periodic Investment Plan
purchase application which includes Application to automatically purchase
information for a Periodic more shares.
Investment Plan.
- Open a ConvertiFund account to
automatically invest proceeds from one
account to another account of the Portico
family of funds.
BY WIRE - Call 1-800-228-1024 to arrange a - Call 1-800-228-1024 to arrange a wire
wire transaction. Ask your bank to transaction. Ask your bank to transmit
transmit immediately available funds immediately available funds by wire as
by wire in the amount of your described at the left. Please also
purchase to Firstar Bank include your account number.
Milwaukee, N.A.,
ABA # 0750-00022, Account #
112-952-137 for further credit to
Portico MicroCap Fund [name/title
on the account].
BY PHONE - Call 1-800-228-1024 to exchange - Call 1-800-228-1024 to exchange from
from another Portico Fund account another Portico Fund account with the
with the same registration including same registration including name,
name, address and taxpayer address and taxpayer ID number.
ID number.
<FN>
Investors making initial investments by wire must promptly complete a Purchase Application and forward it to the Fund. REDEMPTIONS
WILL NOT BE PAID UNTIL THE COMPLETED APPLICATION HAS BEEN RECEIVED BY THE TRANSFER AGENT.
</TABLE>
If an order and payment are received by the transfer agent in proper form (as
described above) before the close of regular trading hours on the New York Stock
Exchange (the "Exchange"), currently 3:00 p.m. Central Time, on a business day,
Fund shares will be purchased as of the determination of net asset value on that
day. Purchase orders which are received after the close of regular trading hours
on the Exchange, or on non-business days, and orders for which payment is not
received by the close of regular trading hours on the Exchange on a business
day, will be executed on the next business day after receipt of both the order
and payment in proper form by the transfer agent.
The Fund will not accept payment in cash or third party checks for the purchase
of shares. Federal regulations require that each investor provide a Social
Security number or other certified taxpayer identification number upon opening
or reopening an account. The Fund reserves the right to reject applications
without such a number or an indication that a number has been applied for. If a
number has been applied for, the number must be provided and certified within
sixty days of the date of the application. Any accounts opened without a proper
number will be subject to backup withholding and may be liquidated and
distributed to the owner(s) of record on or after the first business day
following the sixtieth day of investment, net of the backup withholding tax.
Certificates for shares will be issued only upon shareowner request. The Fund
reserves the right to reject any purchase order. Payment for shares of the Fund
in the amount of $1,000,000 or more may, at the discretion of the Adviser, be
made in the form of securities that are permissible investments for the Fund.
For further information see the Statement of Additional Information or contact
Portico Investor Services at 1-800-982-8909 or 414-287-3710 (Milwaukee area).
HOW TO PURCHASE INSTITUTIONAL SHARES
All Institutional Share purchases are effected pursuant to a customer's account
at Firstar Trust Company ("Firstar Trust") or at another chosen institution
pursuant to procedures established in connection with the requirements of the
account. Confirmations of share purchases and redemptions will be sent to
Firstar Trust or the other institution involved. Firstar Trust and the other
institutions (or their nominees) (collectively referred to as "Institutions")
will normally be the owners of record of Fund shares, and will reflect their
customers' beneficial ownership of shares in the account statements provided by
them to their customers. The exercise of voting rights and the delivery to
customers of shareowner communications from the Fund will be governed by the
customers' account agreements with Firstar Trust and the other Institutions.
Investors wishing to purchase shares of the Fund should contact their account
representatives.
Institutional Shares are sold without a charge imposed by the Fund, although
Institutions may charge fees for providing administrative or other services in
connection with investments in Fund shares.
Purchase orders must be transmitted to the Fund's transfer agent by telephone
(1-800-228-1024; in Milwaukee area: 414-287-3808 or by fax 414-287-3781 only if
preceded by a telephone call) and will be effected by the transfer agent at its
Milwaukee office. Purchase orders that are received by the transfer agent before
the close of regular trading hours on the New York Stock Exchange (the
"Exchange"), currently 3:00 p.m. Central Time, will be executed as of the close
of regular trading hours on the Exchange, provided that payment is received by
the close of regular trading hours. Purchase orders that are received after the
close of regular trading hours on the Exchange or on non-business days, and
orders for which payment is not received by the close of regular trading hours
on the Exchange on a business day, will be executed on the next business day
after receipt of both the order and payment in proper form by the transfer
agent.
Payment for Fund shares should be transmitted by wire in immediately available
funds to:
Firstar Bank Milwaukee, N.A.
ABA #0750-00022,
Account #112-952-137
For further credit to Portico MicroCap Fund
[the investor's account number and the name/title of the account].
Payment may also be made by check payable to: Portico Funds, P.O. Box 3011,
Milwaukee, WI 53201-3011, or delivered (via overnight delivery or in person) to
615 E. Michigan St., Milwaukee, WI 53202.
It is the responsibility of Institutions to transmit orders and payment for the
purchase of shares by their customers to the transfer agent on a timely basis,
in accordance with the procedures stated above.
Certificates for shares will be issued only upon the request of an Institution.
The Fund reserves the right to reject any purchase order.
Payment for shares of the Fund in the amount of $1,000,000 or more may, at the
discretion of the Fund, be made in the form of securities that are permissible
investments for the Fund as described in this Prospectus. For further
information see the Statement of Additional Information or contact Portico
Investor services at 1-800-982-8909 or 414-287-3710 (Milwaukee area).
REDEMPTION OF SHARES
HOW TO REDEEM RETAIL SHARES
Redemption orders are effected at the net asset value per share next determined
after receipt of the order by the transfer agent. If a redemption order is
received in proper form (as described below) before the close of regular trading
hours on the Exchange, currently 3:00 p.m. Central Time, on a business day, Fund
shares will be redeemed as of the determination of net asset value on that day.
Redemption orders which are received after the close of regular trading hours on
the Exchange, or on non-business days, will be executed on the next business
day. Depending upon the current net asset value of the redeemed shares at the
time of redemption, the value of the shares redeemed may be more or less than
the investor's cost.
REDEMPTION ORDERS
THROUGH THE TRANSFER AGENT THROUGH A REGISTERED REPRESENTATIVE
-------------------------- -----------------------------------
BY PHONE _ Call 1-800-228-1024 with your _ Call your registered
account name, account number and representative at
amount of redemption (minimum the number on your
$500). Redemption proceeds will statement, or
only be sent to a shareowner's 1-800-982-8909.
address or bank account of a
commercial bank located within
the United States as shown on the
transfer agent's records. (Available
only if established on the account
application and if there has been
no change of address by telephone
within the preceding 15 days.)
BY MAIL, _ Mail your instructions to the _Mail your instructions to
OVERNIGHT the Portico Funds, P.O. Box 3011, the Portico Funds, P.O.
DELIVERY Milwaukee, Wisconsin 53201-3011, Box 3011, Milwaukee, WI
OR IN PERSON or deliver them (via overnight 53201-3011,
delivery or in person) to 615 E. or deliver them to
Michigan Street, Milwaukee, WI 615 E.Michigan Street,
53202. Include the number of Milwaukee,WI, 53202,
shares or the amount to or bring your instructions
be redeemed, your shareowner to your registered
account number and Social representative's office.
Security number or other taxpayer
identification number. Your
instructions must be signed by all
persons required to sign for transactions
exactly as their names appear on the
account. If the redemption amount
exceeds $50,000, or if the proceeds are
to be sent elsewhere than the address
of record, or the address of record has
been changed within the preceding 15
days, each signature must be guaranteed
in writing by either a commercial bank
that is a member of the FDIC, a trust
company, a credit union, a savings
association, a member firm of a
national securities exchange or other
eligible guarantor institution.
AUTOMATICALLY _ Call 1-800-982-8909 for a _ Call your registered
Systematic Withdrawal Plan representative to
application($15,000 account minimum establish a
and $100 minimum per transaction). Systematic Withdrawal
Plan.
Guarantees must be signed by an eligible guarantor institution and "Signature
Guaranteed" must appear with the signature. If certificates have been issued,
the certificates, properly endorsed or accompanied by a properly executed stock
power and accompanied by signature guarantees, must be received by the transfer
agent or Elan. The Fund may require additional supporting documents for
redemptions made by corporations, executors, administrators, trustees and
guardians. A redemption request will not be deemed to be properly received until
the transfer agent or Elan receives all required documents in proper form.
Purchases of additional shares concurrently with withdrawals would be
disadvantageous because of the sales charge involved in the additional
purchases.
The transfer agent charges a $12.00 fee for each payment made by wire of
redemption proceeds, which will be deducted from the shareowner's account. The
transfer agent also charges a $15.00 fee for each IRA distribution (unless it is
part of a Systematic Withdrawal Plan), which will be deducted from the
shareowner's account.
In order to arrange for telephone redemptions after an account has been opened
or to change the bank or account designated to receive redemption proceeds, a
written request must be sent to Portico Investor Services at the address listed
above or contact your registered representative. The request must be signed by
each shareowner of the account. Further documentation may be requested from
corporations, executors, administrators, trustees and guardians.
The Fund reserves the right to refuse a telephone redemption if it believes it
is advisable to do so. Procedures for redeeming shares by telephone may be
modified or terminated by the Fund at any time upon notice to shareowners.
During periods of substantial economic or market change, telephone redemptions
may be difficult to implement. If a shareowner is unable to contact the transfer
agent by telephone, shares may also be redeemed by delivering the redemption
request to the transfer agent.
In an effort to prevent unauthorized or fraudulent redemption requests by
telephone, Portico and the transfer agent employ reasonable procedures specified
by the Fund to confirm that such instructions are genuine. Among the procedures
used to determine authenticity, investors electing to redeem or exchange by
telephone will be required to provide their account number. All such telephone
transactions will be tape recorded and confirmed in writing to the shareowner.
Portico may implement other procedures from time to time. If reasonable
procedures are not implemented, Portico and/or the transfer agent may be liable
for any loss due to unauthorized or fraudulent transactions. In all other cases,
the shareowner is liable for any loss for unauthorized transactions.
OTHER REDEMPTION INFORMATION The Fund will make payment for redeemed shares
typically within one or two business days, but no later than the seventh day
after receipt by the transfer agent of a request in proper form, except as
provided by the rules of the SEC. HOWEVER, IF ANY PORTION OF THE SHARES TO BE
REDEEMED REPRESENTS AN INVESTMENT MADE BY CHECK, THE FUND MAY DELAY THE PAYMENT
OF THE REDEMPTION PROCEEDS UNTIL THE TRANSFER AGENT IS REASONABLY SATISFIED THAT
THE CHECK HAS BEEN COLLECTED, WHICH MAY TAKE TWELVE DAYS FROM THE PURCHASE DATE.
This procedure does not apply to shares purchased by wire payment. An investor
must have filed a Purchase Application before any redemption requests can be
paid.
The Fund imposes no charge when shares are redeemed and reserves the right to
redeem an account involuntarily, upon sixty days' written notice, if redemptions
cause the account's net asset value to remain at less than $1,000. The Fund may
also redeem shares involuntarily if it is appropriate to do so to carry out the
Fund's responsibilities under the 1940 Act and, in certain cases, may make
payment for redemption in securities. Investors would bear any brokerage or
other transaction costs incurred in converting the securities so received to
cash. See the Statement of Additional Information for examples of when such
redemptions might be appropriate.
Questions concerning the proper form for redemption requests should be directed
to Portico Investor Services at 1-800-228-1024 or 414-287-3808 (Milwaukee area).
HOW TO REDEEM INSTITUTIONAL SHARES Customers who purchase Institutional Shares
of the Fund through accounts at an Institution may redeem all or part of their
shares in accordance with the instructions and limitations pertaining
to such accounts. The procedures will vary according to the type of account and
Institution involved, and customers should consult their account representatives
in this regard.
Redemption orders must be transmitted by an Institution to the transfer agent in
writing or by telephone in the manner described under "How to Purchase
Institutional Shares." Shares are redeemed at the net asset value per share next
determined after the transfer agent's receipt of the redemption order.
Payment for redeemed shares will normally be wired in federal funds on the next
business day if the redemption order is received by the transfer agent before
3:00 p.m. Central Time. The Fund reserves the right, however, to delay the
wiring of redemption proceeds for up to seven days after receipt of a redemption
order if, in the judgment of the Adviser, an earlier payment could adversely
affect the Fund. However, if any portion of the shares to be redeemed represents
an investment made by check, the Fund may delay the payment of the redemption
proceeds until the transfer agent is reasonably satisfied that the check has
been collected, which may take twelve days from the purchase date. The transfer
agent currently charges a $15.00 fee for each IRA distribution, which will be
deducted from the shareowner's account or, at the request of an Institution,
billed directly to the Institution requesting the redemption.
Portico imposes no charge when shares are redeemed. However, Institutions may
charge a fee for providing administrative or other services in connection with
investments in Fund shares. If a customer has agreed with a particular
Institution to maintain a minimum account balance and the balance falls below
that minimum, the customer may be obliged by the Institution to redeem all or
part of the customer's shares in the Fund to the extent necessary to maintain
the required minimum balance. Portico may also redeem shares of the Fund
involuntarily or make payment for redemption in securities if it appears
appropriate to do so in light of Portico's responsibilities under the 1940 Act.
Investors would bear any brokerage or other transaction costs incurred in
converting the securities received to cash. See the Statement of Additional
Information for examples of when such redemptions might be appropriate.
It is the responsibility of Institutions to transmit redemption orders and
credit their customers' accounts with the redemption proceeds on a timely basis
in accordance with their agreements with the customers and to provide their
customers with account statements with respect to share transactions made for
the accounts.
In an effort to prevent unauthorized or fraudulent redemption requests by
telephone, Portico and the transfer agent employ reasonable procedures specified
by the Fund to confirm that such instructions are genuine. Among the procedures
used to determine authenticity, investors electing to redeem or exchange by
telephone will be required to provide their account number. All such telephone
transactions will be tape recorded and confirmed in writing to the shareowner.
Portico may implement other procedures from time to time. If reasonable
procedures are not implemented, Portico and/or the transfer agent may be liable
for any loss due to unauthorized or fraudulent transactions. In all other cases,
the shareowner is liable for any loss for unauthorized transactions.
EXCHANGE OF SHARES If shares may legally be sold in the state of the
investor's residence, Retail shareowners are generally permitted to exchange
their Retail Shares in a Fund (with a minimum current value of $1,000) for
Retail Shares of other funds in the Portico family of funds without charge or
commission by the Fund. A sales charge will be imposed on the exchange if the
shares of the Fund being acquired have a sales charge and the shares being
redeemed were purchased or otherwise acquired without a sales charge unless a
shareowner qualifies for a sales charge exemption as described in the section
"Purchase of Shares". Institutional shareowners also are generally permitted to
exchange their Institutional Shares in a Fund (with a minimum current value of
$1,000) for Institutional Shares of other funds in the Portico family of funds,
provided such other shares may legally be sold in the state of the investor's
residence and the investor is eligible for Institutional Shares at the time of
the exchange. This exchange privilege does not apply to shares of the
Institutional Money Market Fund. Telephone exchange privileges automatically
apply to each shareowner of record and the representative of record unless and
until the transfer agent receives written instructions from the shareowner(s) of
record canceling the privilege.
Portico reserves the right to terminate indefinitely the exchange privilege of
any shareowner, broker, investment adviser, agent, or account representative who
requests more than four exchanges within a calendar year, whether for oneself or
one's customers. Portico may determine to do so with prior notice to the
shareowner, broker, investment adviser, agent, or account representative based
on a consideration of both the number of exchanges the particular shareowner,
broker, investment adviser, agent, or account representative has requested and
the time period over which those exchange requests have been made, together with
the level of expense to the funds or other adverse effects which may result from
the additional exchange requests. If any portion of the shares to be exchanged
represents an investment made by check, a fund may delay the acquisition of new
shares in an exchange until the transfer agent is reasonably satisfied that the
check has been collected, which may take twelve days from the purchase date.
Investors may find the exchange privilege useful if their investment objectives
or market outlook should change after they invest in the Portico family of
funds. For federal income tax purposes, an exchange of shares is a taxable event
and, accordingly, a capital gain or loss may be realized by an investor. Before
making an exchange request, an investor should consult a tax or other financial
adviser to determine the tax consequences of a particular exchange. No exchange
fee is currently imposed by Portico on exchanges. Portico reserves, however, the
right to impose a charge in the future. In addition, Institutions may charge a
fee for providing administrative or other services in connection with exchanges.
In order to request an exchange by telephone, a shareowner must give the account
name, account number and the amount or number of shares to be exchanged. During
periods of significant economic or market change, telephone exchanges may be
difficult to implement. If a shareowner is unable to contact the transfer agent
by telephone, shares may also be exchanged by delivering the exchange request to
the transfer agent in person or by mail at the address listed above under
"Redemption of Shares."
The Fund reserves the right to reject any exchange request with prior notice to
a shareowner and the exchange privilege may be modified or terminated at any
time. At least sixty days' notice will be given to shareowners of any material
modification or termination except where notice is not required under SEC
regulations. The responsibility of the Fund and its transfer agent for the
authenticity of telephone exchange instructions is limited as described above
under "Redemption of Shares."
SHAREOWNER SERVICES (Retail Shareowners Only)
The services and privileges described below are available to Retail Shareowners
of the Fund. These may be modified or terminated at any time upon notice to
shareowners.
SHAREOWNER REPORTS. Shareowners will be provided with a report showing
portfolio investments and other information at least semiannually; and after the
close of the Fund's fiscal year which ends October 31, with an annual report
containing audited financial statements. To eliminate unnecessary duplication,
only one copy of shareowner reports will be sent to shareowners with the same
mailing address. Shareowners who desire a duplicate copy of shareowner reports
to be mailed to their residence should call Portico Investor Services at
1-800-982-8909, or write Portico Investor Services at the address listed above.
In addition, account statements will be mailed to shareowners after each
purchase, reinvestment of dividends and redemption.
AUTOMATED TELERESPONSE SERVICE. Shareowners using a touch-tone telephone can
access information on the Fund twenty-four hours a day, seven days a week. When
calling Portico Investor Services at 1-800-228-1024, shareowners may choose to
use the automated information feature or, during regular business hours (8:00
a.m. to 7:00 p.m. Central Time, Monday through Friday), speak with a Portico
Investor Services representative.
The automated service provides the information most frequently requested by
shareowners. After calling the 800-number, pressing "2" on their touch-tone
phone, shareowners can:
1. Determine closing prices for the Fund.
2. Learn how the price of a Fund has changed from the previous day.
3. Hear daily yields for Portico's money market funds.
Money market fund yields reflect fee waivers in effect, represent past
performance and will vary. If fees were not waived, yields would be reduced.
Past performance is no guarantee of future results. Current yield refers to
income earned by a fund's investments over a 7-day period. It is then annualized
and stated as a percentage of the investment. Effective yield is the same as
current yield except that it assumes the income earned by an investment in a
fund will be reinvested. An investment in any one of the Portico money market
funds is neither insured nor guaranteed by the U.S. Government nor is there any
assurance the funds will be able to maintain a stable net asset value of $1.00
per share.
To speak with a Portico Investor Services representative anytime during an
automated teleresponse session (during regular business hours), shareowners may
press "0."
For total return information, shareowners must call Portico Investor Services at
1-800-982-8909 or 414-287-3710 (Milwaukee area).
RETIREMENT PLANS. The Fund offers individual retirement accounts and prototype
defined contribution plans, including simplified employee, 401(k), profit-
sharing and money purchase pension plans ("Retirement Plans"). For details
concerning Retirement Plans (including service fees), please call Portico
Investors Services at 1-800-982-8909 or 414-287-3710 (Milwaukee area).
DIVIDENDS AND DISTRIBUTIONS
Dividends from the Fund's net investment income are declared and paid annually.
The Fund's net realized capital gains are distributed at least annually to avoid
tax to the Fund.
Dividends and distributions will reduce the net asset value of the Retail and
Institutional Shares by the amount of the dividend or distribution. Dividends
and distributions are automatically reinvested in additional Retail or
Institutional Shares of the Fund (as applicable) on which the dividend or
distribution is paid at their net asset value per share (as determined on the
payable date), unless the shareowner notifies the Fund's transfer agent or
registered representative, as appropriate, that dividends or capital gains
distributions, or both, should be paid in cash. Cash dividends and distributions
will be paid by check unless the Fund's transfer agent receives a voided check
or deposit ticket to enable the dividends or distributions to be directly
deposited into the shareowner's bank account. Cash dividends and distributions
will be paid within five business days after the end of the month in which
dividends are declared or within five business days after a redemption of all of
a shareowner's shares of a Fund. Reinvested dividends and distributions receive
the same tax treatment as those paid in cash.
MANAGEMENT OF THE FUND
The business and affairs of the Fund are managed under the direction of the
Board of Directors of the Portico Funds, Inc. ("Portico" or the "Company"). The
Statement of Additional Information contains the name and background information
regarding each Director.
ADVISORY SERVICES FIRMCO, a Wisconsin corporation and subsidiary of Firstar
Corporation, a bank holding company, serves as investment adviser to the Fund.
FIRMCO, with principal offices at Firstar Center, 777 East Wisconsin Avenue, 8th
Floor, Milwaukee, Wisconsin 53202, has been engaged in the business of providing
investment advisory services since 1986. FIRMCO currently has $19.5 billion in
assets under active management, of which $11.6 billion is invested in fixed-
income and money market securities and $7.9 billion in equity securities.
Subject to the general supervision of the Board of Directors and in accordance
with the investment objective and policies of the Fund, the Adviser manages the
Fund's portfolio, makes decisions with respect to and places orders for all
purchases and sales of the Fund's portfolio securities, and maintains records
relating to such purchases and sales. The Adviser is authorized to allocate
purchase and sale orders for portfolio securities to Shareowner Organizations,
including, in the case of agency transactions, Shareowner Organizations which
are affiliated with the Adviser, if the Adviser believes that the quality of the
transaction and the amount of the commission are comparable to what they would
be with other qualified brokerage firms.
The Adviser is entitled to receive from the Fund a fee, calculated daily and
payable monthly, at the annual rate of 1.50% of the Fund's average daily net
assets. The Adviser may voluntarily waive all or a portion of the advisory fee
otherwise payable by the Fund from time to time. These waivers may be terminated
at any time at the Adviser's discretion. The Adviser earned fees, net of
waivers, for the fiscal periods August 1, 1995 through June 30, 1996 and July 1,
1996 through October 31, 1996, at the annual rate of 1.34% and 1.50%,
respectively for the MicroCap Fund.
The Adviser's portfolio management services for the Fund are conducted by Mark
Westman. Mr. Westman has been with Firstar since 1992 and has five years of
investment management experience and has managed the MicroCap Fund since its
inception. He is a Vice President and Portfolio Manager of FIRMCO and a
Chartered Financial Analyst.
ADMINISTRATIVE SERVICES Firstar Trust Company ("Firstar Trust") and B.C.
Ziegler and Company ("Ziegler") serve as the Co-Administrators (the "Co-
Administrators"). The Co-Administrators have agreed to provide the following
administrative services for the Portico Funds: assist in maintaining office
facilities for the Funds; furnish clerical and certain other services required
by the Funds; compile data for and prepare notices to the SEC; prepare
semiannual reports to the SEC and current shareowners and filings with state
securities commissions; coordinate federal and state tax returns; monitor the
arrangements pertaining to the Funds' agreements with Shareowner Organizations
and Institutions; monitor the Funds' expense accruals; monitor compliance with
the Funds' investment policies and limitations; and generally assist the Funds'
operations. As further described in the Statement of Additional Information,
certain services under the Co-Administration Agreement are provided jointly by
Firstar Trust and Ziegler and other services are provided separately by either
Firstar Trust or Ziegler. The Co-Administrators are entitled to receive a fee
for their administrative services, computed daily and payable monthly, at the
annual rate of 0.125% of Portico's first $2 billion of average aggregate daily
net assets, plus 0.10% of Portico's average aggregate daily net assets in excess
of $2 billion. The Co-Administrators may voluntarily waive all or a portion
of their administrative fee from time to time. These waivers may be terminated
at any time at the Co-Administrators' discretion. For the fiscal periods August
1, 1995 through June 30, 1996 and July 1, 1996 through October 31, 1996, the
MicroCap Fund accrued administrative fees, after waivers, at the effective
annual rate of 0.05%.
SHAREOWNER ORGANIZATIONS Portico may enter into agreements from time to time
with certain Shareowner Organizations, including affiliates of the Adviser (such
as Elan), providing for certain support and/or distribution services to their
customers who are the beneficial owners of Retail Shares of the Fund. Under the
Service Agreements, shareowner support services, which are described more fully
in the Statement of Additional Information, may include assisting investors in
processing purchase, exchange and redemption requests; processing dividend and
distribution payments from the Funds; providing information periodically to
customers showing their positions in Retail Shares of the Funds; and providing
sub-accounting with respect to Retail Shares beneficially owned by customers or
the information necessary for sub-accounting. In addition, Shareowner
Organizations under a Distribution and Service Agreement may provide the
foregoing shareowner support services and may also provide assistance, such as
the forwarding of sales literature and advertising to their customers, in
connection with the distribution of Retail Shares. For their services,
Shareowner Organizations may be entitled to receive fees from the Fund at annual
rates of up to 0.25% of the average daily net asset value of the Retail Shares
covered by their agreements. For the fiscal periods August 1, 1995 through June
30, 1996 and July 1, 1996 through October 31, 1996, Shareowner Organizations
received fees pursuant to such agreements at the annual rate of 0.25% of its
average net assets.
Under the terms of their agreements with Portico, Shareowner Organizations are
required to provide a schedule of any fees that they may charge to their
customers relating to the investment of their assets in Retail Shares covered by
the agreements. Investors should read this Prospectus in light of such fee
schedules and under the terms of their Shareowner Organization's agreement with
Portico. In addition, investors should contact their Shareowner Organization
with respect to the availability of shareowner services and the particular
Shareowner Organization's procedures for purchasing and redeeming shares. It is
the responsibility of Shareowner Organizations to transmit purchase and
redemption orders and record those orders in customers' accounts on a timely
basis in accordance with their agreements with customers. At the request of a
Shareowner Organization, the transfer agent's charge of $12.00 for each payment
made by wire of redemption proceeds may be billed directly to the Shareowner
Organization.
The Glass-Steagall Act and other applicable laws, among other things, prohibit
banks from engaging in the business of underwriting securities. Accordingly,
banks will be engaged under agreements with Portico only to perform the
administrative and investor servicing functions described above, and will
represent to Portico that in no event will the services provided by them under
the agreements be primarily intended to result in the sale of Retail Shares.
Conflict-of-interest restrictions may apply to the receipt of compensation paid
by Portico to a Shareowner Organization in connection with the investment of
fiduciary funds in Retail Shares. Institutions, including banks regulated by the
Comptroller of the Currency and investment advisers and other money managers
subject to the jurisdiction of the SEC, the Department of Labor or state
securities commissions, are urged to consult legal counsel before entering into
agreements with Portico.
Agreements that contemplate the provision of distribution services by Shareowner
Organizations are governed by a Distribution and Service Plan (the "Plan") that
has been adopted by Portico pursuant to Rule 12b-1 under the 1940 Act. In the
case of the Fund, no payments are made to their Distributor under the Plan.
However, payments to Shareowner Organizations, including affiliates of the
Adviser, under the Plan are not tied directly to their own out-of-pocket
expenses and therefore may be used as they elect (for example, to defray their
overhead expenses), and may exceed their direct and indirect costs.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, AND ACCOUNTING SERVICES
AGENT. Firstar Trust, an affiliate of the Adviser, provides custodial, transfer
agency, dividend disbursing agency services, and accounting services for the
Fund. Total custodial, transfer agency, dividend disbursing agency, and
accounting services fees paid to Firstar Trust were approximately 0.12%
(annualized) of the Fund's average net assets for the fiscal period ended
October 31, 1996. Additional information regarding the fees payable by the Fund
to Firstar Trust for these services is provided in the Statement of Additional
Information. Inquiries to the transfer agent may be sent to the following
address: Firstar Trust Company, P.O. Box 3011, Milwaukee, WI 53201-3011.
INVESTMENT LIMITATIONS
Except for the limitations detailed below, the investment objective and policies
of the Fund described in this Prospectus are not fundamental and may be changed
by the Board of Directors without the affirmative vote of the owners of a
majority of the Fund's outstanding shares. If there is a change in the Fund's
investment objective, shareowners should consider whether the Fund remains an
appropriate investment in light of their then current financial position and
needs. The following descriptions summarize several of the Fund's fundamental
investment limitations which are set forth in full in the Statement of
Additional Information.
THE FUND MAY NOT:
1. Purchase securities of any one issuer (other than U.S. Government
securities) if more than 5% of the value of its total assets will be
invested in the securities of such issuer, except that up to 25% of the
value of a Fund's total assets may be invested without regard to this 5%
limitation.
2. Subject to the foregoing 25% exception, purchase more than 10% of the
outstanding voting securities of any issuer.
3. Invest 25% or more of its total assets in one or more issuers conducting
their principal business activities in the same industry.
4. Borrow money or enter into reverse repurchase agreements in amounts over
one-third of the value of the total assets at the time of such borrowing,
or mortgage, pledge or hypothecate any assets except in connection with
such borrowings.
If a percentage limitation is satisfied at the time of investment, a later
increase or decrease in such percentage resulting from a change in the value of
the Fund's portfolio securities will not constitute a violation of such
limitation.
TAXES
Federal Portico's management intends that the Fund will qualify as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended (the
"Code"). Such qualification generally will relieve the Fund of liability for
federal income taxes to the extent its earnings are distributed in accordance
with the Code.
The Fund contemplates declaring as dividends each year at least 90% of its
investment company income. An investor who receives a dividend derived from
investment company taxable income (which includes any excess of net short-term
capital gain over net long-term capital loss) treats it as a receipt of ordinary
income in the computation of his gross income, whether such dividend is paid in
the form of cash or additional shares of the Fund.
Any dividend or distribution of the excess of the Fund's net long-term capital
gain over its net short-term capital loss will be taxable to a shareowner of the
Fund as long-term capital gain, regardless of how long the shareowner has held
shares of the Fund.
Before purchasing Fund shares, the impact of dividend or capital gain
distributions which are expected to be declared or have been declared but not
paid, should be carefully considered. Any dividend or distribution paid by the
Fund shortly after the purchase of shares of the Fund will have the effect of
reducing the per share net asset value by the per share amount of the dividend
or distribution. Such dividends or distributions, although in effect a return of
capital to shareowners, are subject to income taxation.
The Fund will be required in certain cases to withhold and remit to the U.S.
Treasury 31% of the dividends or gross sale proceeds paid to any shareowner (i)
who has provided either an incorrect taxpayer identification number or no number
at all, (ii) who is subject to withholding by the Internal Revenue Service for
failure to properly include on his return payments of interest or dividends, or
(iii) who has failed, when required to do so, to certify that he is not subject
to backup withholding. The Fund generally also will withhold and remit to the
U.S. Treasury 10% of all distributions from individual retirement accounts
(including simplified employee plans) to any investor unless the transfer agent
receives a written request not to withhold federal income tax from the investor
prior to the distribution date; withholding on distributions from other types of
Retirement Plans may be mandatory and may be at a higher rate.
A taxable gain or loss may be realized by a shareowner upon a redemption,
transfer or exchange of Fund shares, depending on the tax basis of the shares
and their price at the time of such disposition.
Generally, a shareowner may include sales charges incurred upon the purchase of
Retail Shares in his or her tax basis for such shares for the purpose of
determining gain or loss on a redemption, transfer or exchange of shares.
However, if the shareowner effects an exchange of such shares for Retail Shares
of another fund of the Company within 90 days of the purchase and is able to
reduce the sales charge applicable to the new shares (by virtue of the Company's
exchange privilege), the amount equal to such reduction may not be included in
the tax basis of the shareowner's exchanged shares, but may be included (subject
to the limitation) in the tax basis of the new shares. If a shareowner held
shares for six months or less, any loss realized by the shareowner will be
treated as long-term loss to the extent of any long-term capital gain
distribution received.
The foregoing is only a brief summary of some of the important federal income
tax considerations generally affecting the Fund and its shareowners, and is not
intended as a substitute for careful tax planning and is based on tax laws and
regulations which are in effect on the date of this Prospectus. Such laws and
regulations may be changed by legislative or administrative action. Accordingly,
investors in the Fund should consult their tax advisers with specific reference
to their own tax situation. Shareowners will be advised at least annually as to
the federal income tax consequences of dividends and distributions made each
year.
State and Local Investors are advised to consult their tax advisers concerning
the application of state and local tax laws, which may have different
consequences from those of the federal income tax law described above.
DESCRIPTION OF SHARES
The Company was incorporated under the laws of the State of Wisconsin on
February 15, 1988 and is registered with the SEC as an open-end management
company. The Articles of Incorporation authorize the Board of Directors to issue
up to 150 billion full and fractional shares of common stock, $.0001 par value
per share. The Company currently has 16 classes representing interests in 16
existing investment portfolios. Each class of the Funds is currently divided
into two separate series, a Retail and Institutional Series representing
interests in the same Fund. Of these authorized shares, 50 million shares have
been classified for each of the Retail and Institutional Series discussed in
this Prospectus.
Shares of each series bear their pro rata portion of all operating expenses paid
by the Fund, except certain payments of up to 0.25% of the average daily net
assets of the Retail Shares under the Fund's Distribution and Service Plan and
Shareowner Servicing Plan applicable only to Retail Series Shares. In addition,
Retail Shares, subject to certain exceptions described under Purchase of Shares
above, are sold with a maximum sales charge of 4.00% with respect to the
Company's equity funds and 2.00% with respect to the Company's fixed income
funds. Institutional Shares are sold without a sales charge. The differences in
expenses and sales charges will affect the performance of Institutional and
Retail Shares. Institutional Shares are only available to (i) trust, agency or
custodial accounts opened through trust companies or trust departments
affiliated with Firstar Corporation; (ii) all employer sponsored qualified
retirement plans; and (iii) clients of the Adviser. Retail Shares are available
to any investor who does not fall within the three preceding categories. Portico
Funds offer various services and privileges in connection with Retail Shares
that are not offered in connection with the Institutional Shares, including a
Periodic Investment Plan, ConvertiFund/TM, and Systematic Withdrawal Plan. A
salesperson and any other person or Shareowner Organization entitled to receive
compensation for selling or servicing shares may receive different compensation
with respect to different series of shares.
For information regarding the other funds and series, contact Portico Investor
Services at 1-800-982-8909 or 414-287-3710 (Milwaukee area) or your Shareowner
Organization.
Portico does not presently intend to hold annual meetings of shareowners except
as required by the 1940 Act or other applicable law. Portico will call a meeting
of shareowners for the purpose of voting upon the question of removal of a
member of the Board of Directors upon written request of shareowners owning at
least 10% of the outstanding shares of Portico that are entitled to vote. To the
extent required by law, Portico will assist in shareowner communication in such
matters.
Shareowners of each class of the Funds are entitled to one vote for each full
share held and proportionate fractional votes for fractional shares held, and
will vote in the aggregate and not by Fund except where otherwise required by
law. It is contemplated that shareowners of the Fund will vote separately on
matters relating to its investment advisory agreement and any changes in its
fundamental investment limitations. On any matter submitted to the vote of
shareowners which only pertains to agreements, liabilities or expenses
applicable to the Retail Shares but not the Institutional Shares of the Fund,
only the Retail Shares will be entitled to vote. Shares of Portico have
noncumulative voting rights and, accordingly, the owners of more than 50% of
Portico's outstanding shares (irrespective of Fund) may elect all of the
Directors. As of January 31, 1997, the Adviser and its affiliates held, on
behalf of their underlying accounts, approximately 72% of Portico's shares that
were outstanding on that date.
Each Retail and Institutional Share of the Fund represents an equal
proportionate interest with other shares of the same series in the Fund, and is
entitled to such dividends and distributions earned on its assets as are
declared at the discretion of the Board of Directors. Shares of the Fund do not
have preemptive rights. The Fund is classified as a diversified company under
the 1940 Act.
NET ASSET VALUE AND DAYS OF OPERATION
The net asset value of each series of the Fund for purposes of pricing purchase
and redemption orders is determined as of the close of regular trading hours on
the Exchange, currently, 3:00 p.m. Central Time, on each day the Exchange is
open for trading. As a result, shares of the Fund will not be priced on the days
which the Exchange observes: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Net asset value per Retail and Institutional Share is calculated by dividing the
value of all securities and other assets owned by the Fund that are allocated to
Retail or Institutional Shares, respectively, less the liabilities charged to
the particular series by the number of the Fund's outstanding Shares of that
series.
Securities which are traded on a recognized domestic stock exchange are valued
at the last sale price on the securities exchange on which such securities are
primarily traded or at the last sale price on the national securities market.
Exchange-traded securities for which there were no transactions are valued at
the current bid prices. Securities traded on only over-the-counter markets are
valued on the basis of closing over-the-counter bid prices. Restricted
securities, securities for which market quotations are not readily available and
other assets are valued at fair value by the Adviser under the supervision of
the Board of Directors. Short-term investments having a maturity of 60 days or
less are valued at amortized cost, unless the amortized cost does not
approximate market value.
The Fund's securities may be valued based on valuations provided by an
independent pricing service. These valuations are reviewed by the Adviser. If
the Adviser believes that a valuation received from the service does not
represent a fair value, it values the security by a method that the Board of
Directors believes will determine a fair value. Any pricing service used may
employ electronic data processing techniques, including a "matrix" system, to
determine valuations.
PERFORMANCE CALCULATION
From time to time, total return data for Retail or Institutional Shares of the
Fund may be quoted in advertisements or in communications to shareowners. The
total return of the Fund's Retail or Institutional Shares will be calculated on
an average annual (compound) total return basis, and may also be calculated on
an aggregate total return basis, for various periods. Average annual total
return reflects the average annual percentage change in value of an investment
in Retail or Institutional shares of the Fund over the measuring period.
Aggregate total return reflects the total percentage change in value over the
measuring period. Both methods of calculating total return assume that dividends
and capital gain distributions made by the Retail and Institutional Shares of
the Fund during the period are reinvested in Retail and Institutional Shares of
the Fund, respectively, and that, for Retail Shares, the maximum sales charge
during the period has been deducted from the investment at the time of purchase.
The Fund may advertise total return data for Retail Shares of the Fund without
reflecting the sales charge if it is accompanied, in accordance with the SEC
rules, by average annual total return data reflecting the maximum sales charge.
Quotations which do not reflect the sales charge will, of course, be higher than
quotations which do.
The total return of the Fund's Retail and Institutional Shares may be compared
to those of other mutual funds with similar investment objectives and to stock,
bond and other relevant indices or to rankings prepared by independent services
or other financial or industry publications that monitor the performance of
mutual funds. For example, the total return of the Fund's Retail and
Institutional Shares may be compared to data prepared by Lipper Analytical
Services, Inc. In addition, the total return of the Fund's Retail and
Institutional Shares may be compared to the S&P 500 Index; the S&P MidCap 400
Index; the S&P SmallCap 600 Index; the NASDAQ Composite Index, an index of
unmanaged groups of common stocks of domestic companies that are quoted on the
National Association of Securities Quotation System; the Dow Jones Industrial
Average, a recognized unmanaged index of common stocks of 30 industrial
companies listed on the New York Stock Exchange; the Russell 2000 Index; the
Value Line Composite Index, an unmanaged index of nearly 1,700 stocks reviewed
in Ratings & Reports; and the Consumer Price Index. Total return data as
reported in national financial publications, such as Money Magazine, Forbes,
Barron's, Morningstar Mutual Funds, The Wall Street Journal and The New York
Times, or in publications of a local or regional nature, may also be used in
comparing the performance of the Fund.
Performance quotations represent past performance, and should not be considered
as representative of future results. The investment return and principal value
of an investment in the Fund's Retail and Institutional Shares will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost. Since performance will fluctuate, performance data for the Fund
cannot necessarily be used to compare an investment in the Fund's Retail and
Institutional Shares with bank deposits, savings accounts and similar investment
alternatives which often provide an agreed or guaranteed fixed yield for a
stated period of time. Investors should remember that performance is generally a
function of the kind and quality of the investments held in a portfolio,
portfolio maturity, operating expenses and market conditions. Any fees charged
by Shareowner Organizations directly to their customer accounts in connection
with investments in the Fund will not be included in the Fund's calculations of
total return and will reduce the total return received by the accounts. The
methods used to compute total return are described in more detail in the
Statement of Additional Information.
-------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S STATEMENT OF
ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR
ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND OR
BY ITS DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY
BE MADE.
TO OPEN AN ACCOUNT OR REQUEST INFORMATION
1-800-982-8909
1-414-287-3710
FOR ACCOUNT BALANCES AND INVESTOR SERVICES
1-800-228-1024
1-414-287-3808
PORTICO INVESTOR SERVICES
615 East Michigan Street
P.O. Box 3011
Milwaukee, WI 53201-3011
- ------------------------------------------------------------------------------
PORTICO FUNDS, INC.
(Retail and Institutional Series)
Balanced Fund
Growth and Income Fund
Special Growth Fund
Equity Index Fund
MidCore Growth Fund
International Equity Fund
Short-Term Bond Market Fund
Intermediate Bond Market Fund
Tax-Exempt Intermediate Bond Fund
Bond IMMDEX/TM Fund
Equity Index Fund
Form N-1A
Cross Reference Sheet
________________________________
Part B
Item No. Heading
- -------- -------
10. Cover Page................................. Cover Page
11. Table of Contents.......................... Table of
Contents
12. General Information and History........... Inapplicable
13. Investment Objectives and Policies......... Investment
Objectives
and Policies
14. Management of the Fund..................... Management of
the Company
15. Control Persons and Principal Holders
of Securities............................. Management of
the Company;
Miscellaneous
16. Investment Advisory and Other Services Management of the
Company;
Custodian,
Transfer
Agent and
Accounting
Services Agent;
Expenses
17. Brokerage Allocation and Other Practices... Management of
the Company
18. Capital Stock and Other Securities Description of
Shares
19. Purchase, Redemption and Pricing of Securities Net Asset
Being Offered Value;
Additional
Purchase and
Redemption
Information
20. Tax Status................................. Additional
Information
Concerning
Taxes
21. Underwriters................................. Management of
the Company
22. Calculation of Performance Data.............. Additional
Information
on
Performance
PART C
Information to be included in Part C is set forth under the appropriate item so
numbered in Part C to this Registration Statement.
- -------------------------------------------------------------------------------
PORTICO FUNDS, INC.
Statement of Additional Information
Short-Term Bond Market Fund Balanced Fund MidCore Growth Fund
Intermediate Bond Market Fund Growth and Income Fund Special Growth Fund
Tax-Exempt Intermediate Bond Fund Equity Index Fund International Equity Fund
Bond IMMDEX/TM Fund
February 28, 1997
TABLE OF CONTENTS
Page
Portico Funds..................................................... 2
Investment Objectives and Policies................................ 2
Net Asset Value................................................... 23
Additional Purchase and Redemption Information.................... 23
Description of Shares............................................. 28
Additional Information Concerning Taxes........................... 30
Management of the Company......................................... 33
Custodian, Transfer Agent and Accounting Services Agent........... 42
Expenses.......................................................... 43
Independent Accountants........................................... 43
Counsel........................................................... 44
Additional Information on Performance ............................ 44
Miscellaneous..................................................... 49
Appendix A........................................................ A-1
Appendix B........................................................ B-1
This Statement of Additional Information is meant to be read in
conjunction with the Portico Funds' Prospectuses dated February 28, 1997,
for the Institutional and Retail Shares of the Short-Term Bond Market Fund,
Intermediate Bond Market Fund, Tax-Exempt Intermediate Bond Fund, Bond IMMDEX/TM
Fund, Balanced Fund, Growth and Income Fund, Equity Index Fund, MidCore Growth
Fund, Special Growth Fund, and International Equity Fund (collectively referred
to as the "Funds") and is incorporated by reference in its entirety into the
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 Prospectus for the Funds may be
obtained by writing Portico Investor Services at 615 East Michigan Street, P.O.
Box 3011, Milwaukee, WI 53201-3011 or by calling 1-800-982-8909 or 414-287-3710
(Milwaukee area). Capitalized terms used but not defined herein have the same
meanings as in the Prospectus.
SHARES OF THE 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 RISKS
INCLUDING POSSIBLE LOSS OF PRINCIPAL.
PORTICO FUNDS
Portico Funds, Inc. (the "Company") is a Wisconsin corporation which was
incorporated on February 15, 1988 as a management investment company. The
Company is authorized to issue separate classes of shares of Common Stock
representing interests in separate investment portfolios. Each class for the
Funds is currently divided into two series, a retail and institutional series.
This Statement of Additional Information pertains to Retail Series and
Institutional Series Shares of ten diversified portfolios, the Short-Term Bond
Market Fund, Intermediate Bond Market Fund, Tax-Exempt Intermediate Bond
Fund, Bond IMMDEX/TM Fund, Balanced Fund, Growth and Income Fund, Equity Index
Fund, MidCore Growth Fund, Special Growth Fund, and International Equity Fund
(collectively the "Funds"). The Short-Term Bond Market Fund changed its name
from Short-Intermediate Fixed Income Fund effective January 1, 1993. The Growth
and Income Fund changed its name from the Income and Growth Fund effective
August 16, 1993. The Balanced Fund commenced operations on March 30, 1992; the
Growth and Income Fund, Equity Index Fund, Short-Term Bond Market Fund and Bond
IMMDEX/TM Fund commenced operations on December 29,1989; the Special Growth Fund
commenced operations on December 28, 1989; the MidCore Growth Fund commenced
operations on December 29, 1992; the Intermediate Bond Market Fund commenced
operations on January 5, 1993; the Tax-Exempt Intermediate Bond Fund commenced
operations on February 8, 1993; and the International Equity Fund commenced
operations on April 28, 1994. 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 the Portico Investor Services at 1-800-982-8909 or write to 615 East
Michigan Street, P.O. Box 3011, Milwaukee, Wisconsin 53201-3011.
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of the Short-Term Bond Market Fund is to seek to
provide an annual rate of total return, before Fund expenses, comparable to the
annual rate of total return on the Lehman Brothers 1-3 Year Government Corporate
Bond Index. The investment objective of the Intermediate Bond Market Fund is to
seek to provide an annual rate of total return, before Fund expenses, comparable
to the annual rate of total return on the Lehman Brothers Intermediate
Government/Corporate Bond Index. The investment objective of the Tax-Exempt
Intermediate Bond Fund is to seek to provide current income that is
substantially exempt from federal income tax and emphasize total return with
relatively low volatility of principal. The investment objective of the Bond
IMMDEX/TM Fund is to seek to provide an annual rate of total return, before
Fund expenses, comparable to the annual rate of total return on the Lehman
Brothers Government Corporate Bond Index. The investment objective of the
Balanced Fund is to seek capital appreciation and current income with low
volatility of capital. The investment objective of the Growth and Income Fund
is to seek both reasonable income and long-term capital appreciation. The
investment objective of the Equity Index Fund is to seek returns, before Fund
expenses, comparable to the price and yield performance of publicly-traded
common stocks in the aggregate, as represented by the S&P 500. The investment
objective of the MidCore Growth Fund is to seek capital appreciation through
investment in securities of medium- to large-sized companies. The investment
objective of the Special Growth Fund is to seek capital appreciation through
investment in securities of small- to medium-sized companies. The investment
objective of the International Equity Fund is to seek capital appreciation
through investment in foreign equity securities of small- to medium-sized
companies. There is no assurance, however, that the Funds' investment
objectives will in fact be attained. The following policies supplement the
Funds' respective investment objectives and policies as set forth in the
Prospectus.
PORTFOLIO TRANSACTIONS
Subject to the general supervision of the Board of Directors, the Adviser
is responsible for, makes decisions with respect to, and places orders for all
purchases and sales of portfolio securities for each Fund except the
International Equity Fund. Subject to the general supervision of the Board of
Directors, the Adviser is responsible for the portfolio management of the
International Equity Fund. Pursuant to the terms of the Adviser's Advisory
Agreement with the Fund, the Adviser has delegated certain of its duties to
State Street Global Advisors, a division of State Street Bank and Trust Company
(the "Sub-Adviser" or "SSBT"). The Adviser and Sub-Adviser, subject to the
supervision of the Board of Directors, jointly determine the securities to be
purchased, retained or sold by the International Equity Fund. However, the Sub-
Adviser is responsible for placing orders for the purchase and sale of the
Fund's portfolio securities.
The portfolio turnover rate for each Fund is calculated by dividing the
lesser of purchases or sales of portfolio securities for the reporting period by
the monthly average value of the portfolio securities owned during the reporting
period. The calculation excludes all securities, including options, whose
maturities or expiration dates at the time of acquisition are one year or less.
Portfolio turnover may vary greatly from year to year as well as within a
particular year, and may be affected by cash requirements for redemption of
shares and by requirements which enable the Funds to receive favorable tax
treatment. Portfolio turnover will not be a limiting factor in making portfolio
decisions, and each Fund may engage in short-term trading to achieve its
investment objective.
Transactions on U.S. stock exchanges involve the payment of negotiated
brokerage commissions. On exchanges on which commissions are negotiated, the
cost of transactions may vary among different brokers. Unlike transactions on
U.S. stock exchanges which involve the payment of negotiated brokerage
commissions, transactions in foreign securities generally involve the payment of
fixed brokerage commissions which are generally higher than those in the United
States.
Transactions in the over-the-counter market are generally principal
transactions with dealers and the costs of such transactions involve dealer
spreads rather than brokerage commissions. With respect to over-the-counter
transactions, the Adviser and Sub-Adviser will normally deal directly with
dealers who make a market in the securities involved except in those
circumstances where better prices and execution are available elsewhere or as
described below.
Securities purchased and sold by the Short-Term Bond Market Fund,
Intermediate Bond Market Fund, Tax-Exempt Intermediate Bond Fund and Bond
IMMDEX/TM 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.
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 or Sub-
Adviser, in its sole discretion, believes such practice to be in the Funds'
interests.
For the fiscal years ended October 31, 1996, 1995, and 1994, the Company
paid brokerage commissions of $364,819, $226,925, and $202,429 with respect to
the Growth and Income Fund (including commissions of $16,262 on $8,134,565 in
brokerage transactions paid because of services provided in 1994); $1,128,115,
$714,710, and $556,029 with respect to the Special Growth Fund; and $109,625,
$41,610, and $55,904 with respect to the Equity Index Fund, respectively. For
the same periods, the Short-Term Bond Market and Bond IMMDEX/TM Funds paid no
brokerage commissions. For the fiscal years ended October 31, 1996, 1995 and
1994, the Company paid brokerage commissions of $161,362, $128,583, and
$117,641 with respect to the Balanced Fund (including commissions of $35,713 on
$14,573,796 in brokerage transactions paid because of services provided in
1994). For the fiscal years ended October 31, 1996, 1995 and 1994, the Company
paid brokerage commissions of $224,353, $190,681, and $135,711 with respect to
the MidCore Growth Fund (including commissions of $31,722 on $12,936,494 in
brokerage transactions paid because of services provided in 1994). The
Intermediate Bond Market and Tax-Exempt Intermediate Bond Funds paid no
brokerage commissions for the fiscal years ended October 31, 1996, 1995 and
1994. For the fiscal years ended October 31, 1996, 1995, and 1994 the Company
paid brokerage commissions of $40,498, $23,067, and $21,346 with respect to the
International Equity Fund. None of the brokerage commissions were paid to
affiliates of the Company, the Adviser, Sub-Adviser or the Co-Administrator.
The Advisory Agreement between the Company and the Adviser and with respect
to the International Equity Fund, the Sub-Advisory Agreement among the Company,
the Adviser and Sub-Adviser, provides that, in executing portfolio transactions
and selecting brokers or dealers, the Adviser and Sub-Adviser will seek to
obtain the best overall terms available. In assessing the best overall terms
available for any transaction, the Adviser or Sub-Adviser shall consider factors
it deems relevant, including the breadth of the market in the security, the
price of the security, the financial condition and execution capability of the
broker or dealer, and the reasonableness of the commissions, if any, both for
the specific transaction and on a continuing basis. In addition, the Agreements
authorize the Adviser and Sub-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 or Sub-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 and Sub-
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 or Sub-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 Sub-Adviser, and the Distributor
or an affiliated person of any of them (as such term is defined in the 1940 Act)
acting as principal. In addition, the Funds will not purchase securities during
the existence of any underwriting or selling group relating thereto of which the
Distributor or its Adviser, or an affiliated person of any of them, is a member,
except to the extent permitted by the Securities and Exchange Commission
("SEC").
Investment decisions for the Funds are made independently from those for
other investment companies and accounts advised or managed by its Adviser or
Sub-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 or
Sub-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 or Sub-Adviser
may aggregate the securities to be sold or purchased for a Fund with those
sold or purchased for other investment companies or accounts in executing
transactions.
As of October 31, 1996, the Funds held securities of its regular brokers or
dealers (as defined under the 1940 Act) or their parents as follows: the Short-
Term Bond Market, Intermediate Bond Market, Bond IMMDEX/TM, and Balanced Funds
held securities of Lehman Brothers totaling $7,053, $7,375, $13,615, and $1,647,
respectively; the Intermediate Bond Market, Bond IMMDEX/TM, and Balanced Funds
held securities of Goldman Sachs totaling $9,649, $4,825, and $1,447,
respectively; the Institutional Money Market and Equity Index Funds held
securities of Morgan Stanley totaling $38,808 and $357, respectively; and the
Short-Term Bond Market, Intermediate Bond Market, Balanced, Growth and Income,
and Equity Index Funds held securities of Merrill Lynch totaling $1,088, $131,
$1,034, $6,827 and $555, respectively.
ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS
RATINGS. The ratings of Standard & Poor's, Moody's and other nationally
recognized rating agencies represent their opinions as to the quality of debt
securities. It should be emphasized, however, that ratings are general and are
not absolute standards of quality, and debt securities with the same maturity,
interest rate and rating may have different yields while debt securities of the
same maturity and interest rate with different ratings may have the same yield.
The payment of principal and interest on most debt securities purchased by
a Fund will depend upon the ability of the issuers to meet their obligations.
An issuer's obligations under its debt securities are subject to the provisions
of bankruptcy, insolvency, and other laws affecting the rights and remedies
of creditors, such as the Federal Bankruptcy Code, and laws, if any, which may
be enacted by federal or state legislatures extending the time for payment of
principal or interest, or both, or imposing other constraints upon enforcement
of such obligations. The power or ability of an issuer to meet its obligations
for the payment of interest on, and principal of, its debt securities may be
materially adversely affected by litigation or other conditions.
Subsequent to its purchase by a Fund, a rated security may cease to be
rated or its rating may be reduced below the minimum rating required for
purchase by the Fund. The Adviser or Sub-Adviser will consider such an event in
determining whether the Fund involved should continue to hold the security.
SECURITIES LENDING. Although none of the Funds intend to during the
current fiscal year, each of the Funds may lend its portfolio securities to
unaffiliated domestic broker/dealers and other institutional investors pursuant
to agreements requiring that the loans be secured by collateral equal in value
to at least the market value of the securities loaned in order to increase
return on portfolio securities. Collateral for such loans may include cash,
securities of the U.S. Government, its agencies or instrumentalities, or an
irrevocable letter of credit issued by a bank which meets the investment
standards stated below under "Money Market Instruments," or any combination
thereof. Such loans will not be made during the current year. The Funds may at
any time call a loan and obtain the return of the securities loaned within five
business days. 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 (and Sub-Adviser in
the case of the International Equity Fund) to be of good standing and when, in
the Adviser's (and Sub-Adviser's in the case of the International Equity Fund)
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.
MONEY MARKET INSTRUMENTS. As described in the Prospectuses, the Funds may
invest from time to time in "money market instruments," a term that includes,
among other things, bank obligations, commercial paper, variable amount master
demand notes and corporate bonds with remaining maturities of thirteen months or
less. However, as stated in the International Equity Fund's prospectus, the
Fund intends to stay fully invested and therefore investments in money market
instruments by the International Equity Fund are expected to represent normally
less than 5% of the Fund's net assets.
Bank obligations include bankers' acceptances, negotiable certificates of
deposit and nonnegotiable time deposits, including U.S. dollar-denominated
instruments issued or supported by the credit of U.S. or foreign banks or
savings institutions. Although the Funds will invest in money market
obligations of foreign banks or foreign branches of U.S. banks only where the
Adviser (and Sub-Adviser in the case of the International Equity Fund)
determines the instrument to present minimal credit risks, such investments may
nevertheless entail risks that are different from those of investments in
domestic obligations of U.S. banks due to differences in political, regulatory
and economic systems and conditions. All investments in bank obligations are
limited to the obligations of financial institutions having more than $1 billion
in total assets at the time of purchase, and investments by each Fund in the
obligations of foreign banks and foreign branches of U.S. banks will not exceed
25% of such Fund's total assets at the time of purchase. The Funds may also
make interest-bearing savings deposits in commercial and savings banks in
amounts not in excess of 5% of its net assets.
Investments by a Fund in commercial paper will consist of issues rated at
the time A-1 and/or P-1 by Standard & Poor's, Moody's or similar rating by
another nationally recognized rating agency. In addition, the Funds may acquire
unrated commercial paper and corporate bonds that are determined by the Adviser
at the time of purchase to be of comparable quality to rated instruments that
may be acquired by such Fund as previously described.
The Funds may also purchase variable amount master demand notes which are
unsecured instruments that permit the indebtedness thereunder to vary and
provide for periodic adjustments in the interest rate. Although the notes are
not normally traded and there may be no secondary market in the notes, a Fund
may demand payment of the principal of the instrument at any time. The notes
are not typically rated by credit rating agencies, but issuers of variable
amount master demand notes must satisfy the same criteria as set forth above for
issuers of commercial paper. If an issuer of a variable amount master demand
note defaulted on its payment obligation, a Fund might be unable to dispose of
the note because of the absence of a secondary market and might, for this or
other reasons, suffer a loss to the extent of the default. The Funds invest in
variable amount master demand notes only when the Adviser (and Sub-Adviser in
the case of the International Equity Fund) deem the investment to involve
minimal credit risk.
REPURCHASE AGREEMENTS. Each 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 (and Sub-Adviser in the case of the International Equity
Fund) will continue to monitor the creditworthiness of the seller and will
require the seller to maintain the value of the securities subject to the
agreement at not less than 102% of the repurchase price. Default or bankruptcy
of the seller would, however, expose the Fund to possible loss because of
adverse market action or delay in connection with the disposition of the
underlying securities. The securities held subject to a repurchase agreement
may have stated maturities exceeding one year, provided the repurchase agreement
itself matures in less than one year.
The repurchase price under the repurchase agreements described in the
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. Investments in repurchase agreements for the International Equity
Fund are limited to no more than 5% of the Fund's net assets.
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.
The Funds may invest from time to time in securities issued by other
investment companies which invest in high-quality, short-term debt securities.
Securities of other investment companies will be acquired by the Funds within
the limits prescribed by the 1940 Act. As a shareowner of another investment
company, the Funds would bear, along with other shareowners, its pro rata
portion of the other investment company's expenses, including advisory fees and
such fees and other expenses will be borne indirectly by the Fund's shareowners.
These expenses would be in addition to the advisory and other expenses that the
Funds bear directly in connection with their own operations. Investment in
securities issued by other investment companies are not expected to exceed 5% of
the International Equity Fund's net assets.
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.
BANK OBLIGATIONS. For purposes of the Funds' investment policies with
respect to bank obligations, the assets of a bank or savings institution will be
deemed to include the assets of its domestic and foreign branches. A Fund's
investments in the obligations of foreign branches of U.S. banks and of foreign
banks may subject the Fund to investment risks (similar to those discussed below
under "American Depository Receipts") that are different in some respects from
those of investments in obligations of U.S. domestic issuers. Such risks
include future political and economic developments, the possible imposition of
withholding taxes on interest income, possible seizure or nationalization of
foreign deposits, the possible establishment of exchange controls or the
adoption of other foreign governmental restrictions which might adversely affect
the payment of principal and interest of such obligations. In addition, foreign
branches of U.S. banks and foreign banks may be subject to less stringent
reserve requirements and to different accounting, auditing, reporting and record
keeping standards than those applicable to domestic branches of U.S. banks.
OTHER INVESTMENT CONSIDERATIONS - BALANCED FUND, MIDCORE GROWTH FUND, SPECIAL
GROWTH FUND, AND INTERNATIONAL EQUITY FUND
The Balanced Fund, MidCore Growth Fund, Special Growth Fund, and
International Equity Fund maintain a long-term investment horizon with respect
to investments in equity securities. However, when a company's growth in
earnings and valuation results in price appreciation that reaches a level which
meets the Fund's established return objective, the stock is normally sold.
Holdings are also sold if there has been significant deterioration in the
underlying fundamentals of the securities involved since their acquisition.
Sale proceeds are either re-invested in money market instruments or in other
securities which meet the respective Fund's investment criteria.
The increase or decrease of cash equivalents in a Fund is primarily the
residual effect of the research process. The portion of a Fund invested in cash
equivalents tends to rise when the pool of acceptable securities is limited and
tends to fall when the Fund's valuation screening process identifies a large
number of attractive securities. Short-term forecasts for the economy and
financial markets are not an important determinant of the level of cash
equivalents in a Fund. As stated in the Prospectuses, however, under normal
market conditions not more than 65% of the value of the Balanced Fund's and at
least 50% of the value of the MidCore Growth Fund's and Special Growth Fund's,
and at least 65% of the value of the International Equity Fund's total assets
will be invested in equity securities. The Funds do not attempt to "time" the
securities market.
Certain securities owned by the Special Growth Fund may be traded only in
the over-the-counter market or on a regional securities exchange, may be listed
only in the quotation service commonly known as the "pink sheets," and may not
be traded every day or in the volume typical of trading on a national securities
exchange. As a result, there may be a greater fluctuation in the value of
redemptions or for other reasons, to sell these securities at a discount from
market prices, to sell during periods when such disposition is not desirable, or
to make many small sales over a lengthy period of time.
WHEN-ISSUED PURCHASES, DELAYED DELIVERY AND FORWARD COMMITMENTS. When any
Fund agrees to purchase securities on a when-issued or delayed delivery basis or
enter into a forward commitment to purchase securities, its custodian will set
aside cash or liquid high grade debt securities equal to the amount of the
commitment in a segregated account. Normally, the custodian will set aside
portfolio securities to satisfy a purchase commitment, and in such a case the
Fund may be required subsequently to place additional assets in the segregated
account in order to ensure that the value of the account remains equal to the
amount of the Fund's commitments. It may be expected that the market value of a
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 a Fund will set aside cash or liquid assets to satisfy its
purchase commitments in the manner described, the Fund's liquidity and ability
to manage its portfolio might be affected in the event its commitments ever
exceeded 25% of the value of its assets. In the case of a forward commitment to
sell portfolio securities, the Funds' custodian will hold the portfolio
securities themselves in a segregated account while the commitment is
outstanding. When-issued and forward commitment transactions involve the risk
that the price or yield obtained in a transaction (and therefore that value of a
security) may be less favorable then the price or yield (and therefore the value
of a security) available in the market when the securities delivery takes place.
The Funds will make commitments to purchase securities on a when-issued
basis or to purchase or sell securities on a forward commitment basis only with
the intention of completing the transaction and actually purchasing or selling
the securities. If deemed advisable as a matter of investment strategy, however,
a Fund may dispose of or renegotiate a commitment after it is entered into, and
may sell securities it has committed to purchase before those securities are
delivered to the Fund on the settlement date. In these cases the Fund may
realize a capital gain or loss.
When these Funds engage in when-issued, delayed delivery and forward
commitment transactions, they rely on the other party to consummate the trade.
Failure of such party to do so may result in a 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 net asset value
of a Fund starting on the day the Fund agrees to purchase the securities. The
Fund does not earn interest on the securities it has committed to purchase until
they are paid for and delivered on the settlement date. When a Fund makes a
forward commitment to sell securities it owns, the proceeds to be received upon
settlement are included in the Fund's assets. Fluctuations in the market value
of the underlying securities are not reflected in the Fund's net asset value as
long as the commitment remains in effect.
OTHER INVESTMENT CONSIDERATIONS - INTERNATIONAL EQUITY FUND, FOREIGN
FUTURES AND OPTIONS. The Adviser and Sub-Adviser may determine that it would
be in the interest of the International Equity Fund to purchase or sell stock
index futures contracts, or options thereon, for the purpose of remaining fully
invested and reducing transactions costs. A stock index futures contract is a
bilateral agreement pursuant to which parties agree to take or make delivery of
an amount of cash equal to a specified dollar amount times the difference
between the index value (which assigns relative values to the securities
included in the index) at the close of the last trading day of the contract and
the price at which the futures contract is originally struck. No physical
delivery of the underlying securities in the index is made.
The International Equity Fund intends to limit its transactions in stock
index futures contracts and related options so that not more than 10% of its net
assets are at risk. In connection with a futures transaction, unless the
transaction is covered in accordance with SEC positions, the Fund will maintain
a segregated account with its custodian or sub-custodian consisting of cash or
liquid high grade debt securities equal to the entire amount at risk (less
margin deposits) on a continuous basis.
Futures purchased or sold by the International Equity Fund (and related
options) will normally be traded in foreign securities. Participation in
foreign futures and foreign options transactions involves the execution and
clearing of trades on or subject to the rules of a foreign board of trade.
Neither the National Futures Association nor any domestic exchange regulates
activities of any foreign boards of trade, including the execution, delivery and
clearing of transactions, or has the power to compel enforcement of the rules of
a foreign board of trade or any applicable foreign law. This is true even if
the exchange is formally linked to a domestic market so that a position taken on
the market may be liquidated by a transaction on another market. Moreover, such
laws or regulations will vary depending on the foreign country in which the
foreign futures or foreign options transaction occurs. For these reasons,
customers who trade foreign futures of foreign options contracts may not be
afforded certain of the protective measures provided by the Commodity
Exchange Act, the Commodity Futures Trading Commission's ("CFTC") regulations
and the rules of the National Futures Association and any domestic exchange,
including the right to use reparations proceedings before the CFTC and
arbitration proceedings provided the by the National Futures Association or any
domestic futures exchange. In particular, the International Equity Fund's
investments in foreign futures or foreign options transactions may not be
provided the same protections in respect of transactions on United States
futures exchanges. In addition, the price of any foreign futures or foreign
options contract and, therefore the potential profit and loss thereon may be
affected by any variance in the foreign exchange rate between the time an order
is placed and the time it is liquidated, offset or exercised. For a further
description of futures contracts and related options, including a discussion of
the limitations imposed by federal tax law, See Appendix B to the Statement of
Additional Information.
OTHER INVESTMENT CONSIDERATIONS - BALANCED FUND, SHORT-TERM BOND MARKET FUND,
INTERMEDIATE BOND MARKET FUND, AND BOND IMMDEX/TM FUND
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. The Balanced Fund, Short
- -Term Bond Market Fund, Intermediate Bond Market Fund and Bond IMMDEX/TM Fund
may purchase residential and commercial mortgage-backed as well as other asset-
backed securities (collectively called "asset-backed securities") that are
secured or backed by automobile loans, installment sale contracts, credit card
receivables or other assets and are issued by entities such as Government
National Mortgage Association ("GNMA"), Federal National Mortgage Association
("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC"), commercial banks,
trusts, financial companies, finance subsidiaries of industrial companies,
savings and loan associations, mortgage banks and investment banks. These
securities represent interests in pools of assets in which periodic payments of
interest and/or principal on the securities are made, thus, in effect passing
through periodic payments made by the individual borrowers on the assets that
underlie the securities, net of any fees paid to the issuer or guarantor of the
securities. The average life of these securities varies with the maturities and
the prepayment experience of the underlying instruments.
There are a number of important differences among the agencies and
instrumentalities of the U.S. Government that issue mortgage-backed securities
and among the securities that they issue. Mortgage-backed securities guaranteed
by GNMA include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie
Maes") which are guaranteed as to the timely payment of principal and interest
by GNMA and such guarantee is backed by the full faith and credit of the United
States. GNMA is a wholly owned U.S. Government corporation within the
Department of Housing and Urban Development. GNMA certificates also are
supported by the authority of GNMA to borrow funds from the U.S. Treasury to
make payments under its guarantee. Mortgage-backed securities issued by FNMA
include FNMA Guaranteed Mortgage Pass-Through Certificates (also known as
"Fannie Maes") which are solely the obligations of FNMA and are not backed by or
entitled to the full faith and credit of the United States, but are supported by
the right of the issuer to borrow from the Treasury. FNMA is a government-
sponsored organization owned entirely by private stockholders. Fannie Maes are
guaranteed as to timely payment of the principal and interest by FNMA.
Mortgage-backed securities issued by the FHLMC include FHLMC Mortgage
Participation Certificates (also known as "Freddie Macs" or "PCs"). FHLMC is a
corporate instrumentality of the United States, created pursuant to an Act of
Congress. Freddie Macs are not guaranteed by the United States or by any
Federal Home Loan Bank and do not constitute a debt or obligation of the United
States or of any Federal Home Loan Bank. Freddie Macs entitle the holder to
timely payment of interest, which is guaranteed by the FHLMC. FHLMC guarantees
either ultimate collection or timely payment of all principal payments on the
underlying mortgage loans. When FHLMC does not guarantee timely payment of
principal, FHLMC may remit the amount due on account of its guarantee of
ultimate payment of principal at any time after default on an underlying
mortgage, but in no event later than one year after it becomes payable.
As stated in the Prospectuses for the Balanced Fund, Short-Term Bond
Market Fund, Intermediate Bond Market Fund and Bond IMMDEX/TM Fund, mortgage-
backed securities such as CMOs may be purchased. CMOs are issued in multiple
classes and their relative payment rights may be structured in many ways. In
many cases, however, payments of principal are applied to the CMO classes in
order of their respective maturities, so that no principal payments will be made
on a CMO class until all other classes having an earlier maturity date are paid
in full. The classes may include accrual certificates (also known as "Z-
Bonds"), which do not accrue interest at a specified rate until other specified
classes have been retired and are converted thereafter to interest-paying
securities. They may also include planned amortization classes ("PACs") which
generally require, within certain limits, that specified amounts of principal be
applied to each payment date, and generally exhibit less yield and market
volatility than other classes. Investments in CMO certificates can expose the
Fund to greater volatility and interest rate risk than other types of mortgage-
backed obligations. Prepayments on mortgage-backed securities generally
increase with falling interest rates and decrease with rising interest rates;
furthermore, prepayment rates are influenced by a variety of economic and social
factors.
The yield characteristics of asset-backed securities differ from
traditional debt securities. A major difference is that the principal amount of
the obligations may be prepaid at any time because the underlying assets (i.e.,
loans) generally may be prepaid at any time. As a result, if an asset-backed
security is purchased at a premium, a prepayment rate that is faster than
expected may reduce yield to maturity, while a prepayment rate that is slower
than expected may have the opposite effect of increasing yield to maturity.
Conversely, if an asset-backed security is purchased at a discount, faster than
expected prepayments may increase, while slower than expected prepayments may
decrease, yield to maturity.
In general, the collateral supporting non-mortgage asset-backed securities
is of shorter maturity than mortgage loans. Like other fixed-income securities,
when interest rates rise the value of an asset-backed security generally will
decline; however, when interest rates decline, the value of an asset-backed
security with prepayment features may not increase as much as that of other
fixed-income securities.
VARIABLE RATE MEDIUM TERM NOTES. The Funds may purchase variable rate
medium term notes which provide for periodic adjustments in the interest rates.
The adjustments in interest rates reflect changes in an index (which may be the
Lehman Brothers 1-3 Year Government/Corporate Bond Index, the Lehman Brothers
Intermediate Government/Corporate Bond Index or the Lehman Brothers
Government/Corporate Bond Index).
OTHER INVESTMENT CONSIDERATIONS - TAX-EXEMPT INTERMEDIATE BOND FUND
MUNICIPAL OBLIGATIONS. Municipal Obligations which may be acquired by the
Tax-Exempt Intermediate Bond 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.
Certain of the Municipal Obligations held by the 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, including credit downgrades, supply and demand. The Fund may,
from time to time, invest more than 25% of its assets in Municipal Obligations
covered by insurance policies.
The payment of principal and interest on most securities purchased by the
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 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 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.
MUNICIPAL LEASE OBLIGATIONS. As stated in the Prospectus, the Fund may
acquire municipal lease obligations which are issued by a state or local
government authority to acquire land and a wide variety of equipment and
facilities. In making a determination that a municipal lease obligation is
liquid, the Adviser may consider, among other things (i) whether the lease can
be canceled; (ii) the likelihood that the assets represented by the lease can be
sold; (iii) the strength of the lessee's general credit; (iv) the likelihood
that the municipality will discontinue appropriating funds for the leased
property because the property is no longer deemed essential to the operations of
the municipality; and (v) availability of legal recourse in the event of failure
to appropriate.
STAND-BY COMMITMENTS. The Tax-Exempt Intermediate Bond Fund may acquire
"stand-by commitments" with respect to Municipal Obligations held in its
portfolio. Under a "stand-by commitment," a dealer agrees to buy from the Fund,
at the Fund's option, specified Municipal Obligations at a specified price.
"Stand-by commitments" acquired by the Fund may also be referred to in this
Statement of Additional Information as "put" options.
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 the portfolio securities
which are acquired subject to the commitment (thus reducing the yield to
maturity otherwise available for the same securities). 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 investment adviser's opinion, present
minimal credit risks. The Fund's reliance upon the credit of these 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" would not affect
the valuation or assumed maturity of the underlying Municipal Securities, which
would continue to be valued in accordance with the ordinary method of valuation
employed by the Fund. "Stand-by commitments" which would be 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 during which
the commitment was held by the Fund.
VARIABLE AND FLOATING RATE INSTRUMENTS. With respect to the variable and
floating rate instruments that may be acquired by the Tax-Exempt Intermediate
Bond Fund as described in its Prospectus, 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 can recover payment of principal as
specified in the instrument. Variable U.S. Government obligations held by the
Fund, however, will be deemed to have maturities equal to the period remaining
until the next interest rate adjustment.
EQUITY INDEX FUND MANAGEMENT TECHNIQUES. When purchasing securities for
the Equity Index Fund's portfolio, the Adviser will consider initially the
relative market capitalization weightings of the stocks included in the S&P 500
Index. The weighted capitalization of an issuer is determined by dividing the
issuer's market capitalization by the total market capitalizations of all
issuers included in the S&P 500 Index.
The Adviser will then compare the industry sector diversification of the
stocks in the Fund, acquired solely on the basis of their weighted
capitalizations, with the industry sector diversification of all issuers
included in the S&P 500 Index. This comparison is made because the Adviser
believes, unless the Fund holds all stocks included in the S&P 500 Index, that
the selection of stocks for purchase by the Fund solely on the basis of their
weighted market capitalizations would tend to place heavier concentration (as
compared to the S&P 500 Index) in certain industry sectors that are dominated by
the larger corporations, such as communications, automobile, oil and energy. As
a result, events disproportionately affecting such industries could affect the
performance of the S&P 500 Index. Conversely, if smaller companies were not
purchased by the Fund, industries included in the S&P 500 Index that are
dominated by smaller market-capitalized companies would be underrepresented (as
compared to the S&P 500 Index).
For these reasons, the Adviser will identify the sectors which are (or,
except for sector balancing, would be) most underrepresented in the Fund's
portfolio and will purchase balancing securities in these sectors until the
portfolio's sector weightings closely match that of the S&P 500 Index. This
process continues until the portfolio is fully invested (except for cash
holdings).
THE IMMDEX/TM MODEL. The IMMDEX/TM model has been developed and is
maintained by Capital Management Sciences ("Capital Management") under the
"IMMDEX/TM" trademark. Capital Management is neither a sponsor of the Bond
IMMDEX/TM Fund nor affiliated in any way with the Bond IMMDEX/TM Fund or the
Adviser. Neither is Capital Management in any way affiliated with Lehman
Brothers which claims no interest in the model or its ability to effectively or
accurately replicate the Lehman Brothers Government/Corporate Bond Index.
Further, Capital Management is not responsible for the management or results
of the Bond IMMDEX/TM Fund's portfolio. Rather, the Adviser will use the
IMMDEX/TM model and the other investment techniques described in the Prospectus
in choosing portfolio securities and executing transactions in an effort to
produce an annual rate of total return for the Bond IMMDEX/TM Fund that is
comparable, before Fund expenses, to that of the Lehman Brothers
Government/Corporate Bond Index.
OTHER PORTFOLIO INFORMATION
OPTIONS TRADING. As stated in the Short-Term Bond Market Fund,
Intermediate Bond Market Fund, Tax-Exempt Intermediate Bond Fund, Bond IMMDEX/TM
Fund, Growth and Income Fund, and Equity Index Fund Prospectuses, the Funds may
purchase put and (with the exception of the Tax-Exempt Intermediate Bond Fund)
call options. Option purchases by a Fund will not exceed 5% of its net assets.
Such options may relate to particular securities or to various indices. (In the
case of the Equity Index Fund, such options will relate only to stock indices.)
This is a highly specialized activity which entails greater than ordinary
investment risks. Regardless of how much the market price of the underlying
security or index increases or decreases, the option buyer's risk is limited to
the amount of the original investment for the purchase of the option. However,
options may be more volatile than the underlying securities or indices, and
therefore, on a percentage basis, an investment in options may be subject to
greater fluctuation than an investment in the underlying securities. In
contrast to an option on a particular security, an option on an index provides
the holder with the right to make or receive a cash settlement upon exercise of
the option. The amount of this settlement will be equal to the difference
between the closing price of the index at the time of exercise and the exercise
price of the option expressed in dollars, times a specified multiple. The Tax-
Exempt Intermediate Bond Fund will only purchase put options on Municipal
Obligations, and will do so only to enhance liquidity, shorten the maturity of
the related municipal security or permit the Fund to invest its assets at more
favorable rates.
A call option gives the purchaser of the option the right to buy, and a
writer the obligation to sell, the underlying security or index at the stated
exercise price at any time prior to the expiration of the option, regardless of
the market price of the security. The premium paid to the writer is in
consideration for undertaking the obligations under the option contract.
A put option gives the purchaser the right to sell the underlying security or
index at the stated exercise price at any time prior to the expiration date of
the option, regardless of the market price of the security or index. Put and
call options purchased by a Fund will be valued at the last sale price or, in
the absence of such a price, at the mean between bid and asked prices.
These Funds (with the exception of the Tax-Exempt Intermediate Bond Fund)
may also sell covered call options listed on a national securities exchange.
Such options may relate to particular securities or to various indices. (In the
case of the Equity Index Fund, such options will relate only to stock indices.)
A call option on a security is covered if a Fund owns the security underlying
the call or has an absolute and immediate right to acquire that security without
additional cash consideration (or, if additional cash consideration is required,
cash or liquid assets in such amount as required are held in a segregated
account by its custodian) upon conversion or exchange of other securities held
by it. A call option on an index is covered if a Fund maintains with its
custodian cash or cash equivalents equal to the contract value. A call option
is also covered if a Fund holds a call on the same security or index as the call
written where the exercise price of the call held is (i) equal to or less than
the exercise price of the call written, or (ii) greater than the exercise price
of the call written provided the difference is maintained by a Fund in cash or
liquid assets in a segregated account with its custodian.
A Fund's obligation under a covered call option written by it may be
terminated prior to the expiration date of the option by the Fund's executing a
closing purchase transaction, which is effected by purchasing on an exchange an
option of the same series (i.e., same underlying security or index, exercise
price and expiration date) as the option previously written. Such a purchase
does not result in the ownership of an option. A closing purchase transaction
will ordinarily be effected to realize a profit on an outstanding option, to
prevent an underlying security from being called, to permit the sale of the
underlying security or to permit the writing of a new option containing
different terms. The cost of such a liquidation purchase plus transactions
costs may be greater than the premium received upon the original option, in
which event a Fund will have incurred a loss in the transaction. An option
position may be closed out only on an exchange which provides a secondary market
for an option of the same series. There is no assurance that a liquid secondary
market on an exchange will exist for any particular option. A covered call
option writer, unable to effect a closing purchase transaction, will not be able
to sell an underlying security until the option expires or the underlying
security is delivered upon exercise with the result that the writer in such
circumstances will be subject to the risk of market decline during such period.
A Fund will write an option on a particular security only if the Adviser
believes that a liquid secondary market will exist on an exchange for options of
the same series which will permit the Fund to make a closing purchase
transaction in order to close out its position.
When a Fund writes a covered call option, an amount equal to the net
premium (the premium less the commission) received by the Fund is included in
the liability section of the Fund's statement of assets and liabilities. The
amount of the liability will be subsequently marked-to-market to reflect the
current value of the option written. The current value of the traded option is
the last sale price or, in the absence of a sale, the average of the closing bid
and asked prices. If an option expires on the stipulated expiration date or if
the Fund enters into a closing purchase transaction, it will realize a gain (or
loss if the cost of a closing purchase transaction exceeds the net premium
received when the option is sold) and the liability related to such option will
be eliminated. Any gain on a covered call option on a security may be offset by
a decline in the market price of the underlying security during the option
period. If a covered call option on a security is exercised, the Fund may
deliver the underlying security held by it or purchase the underlying security
in the open market. In either event, the proceeds of the sale will be increased
by the net premium originally received, and the Fund will realize a gain or
loss. Premiums from expired options written by a Fund and net gains from
closing purchase transactions are treated as short-term capital gains for
federal income tax purposes, and losses on closing purchase transactions are
short-term capital losses.
As noted previously, there are several risks associated with transactions
in options on securities and indices. For example, there are significant
differences between the securities and options markets that could result in an
imperfect correlation between these markets, causing a given transaction not to
achieve its objectives. A decision as to whether, when and how to use options
involves the exercise of skill and judgment, and a transaction may be
unsuccessful to some degree because of market behavior or unexpected events.
FUTURES CONTRACTS AND RELATED OPTIONS. The Adviser may determine that it
would be in the interest of the Short-Term Bond Market Fund, Intermediate Bond
Market Fund, Bond IMMDEXTM Fund, Growth and Income Fund, and Equity Index Fund
to purchase or sell futures contracts, or options thereon, as a hedge against
changes resulting from market conditions in the value of the securities held by
a Fund, or of securities which it intends to purchase. The International Equity
Fund may engage in foreign futures and options (see "Other Investment
Considerations - International Equity Fund - Foreign Futures and Options"). In
addition, the Equity Index Fund will purchase and sell futures and related
options (based only on the S&P 500 Index) to maintain cash reserves while
simulating full investment in the stocks underlying the S&P 500 Index to keep
substantially all of its assets exposed to the market (as represented by the S&P
500 Index) and to reduce transaction costs. For example, a Fund may enter into
transactions involving an index futures contract, which is a bilateral agreement
pursuant to which the parties agree to take or make delivery of an amount of
cash equal to a specified dollar amount times the difference between the index
value (which assigns relative values to the securities included in the index) at
the close of the last trading day of the contract and the price at which the
futures contract is originally struck. No physical delivery of the underlying
securities in the index is made.
During the current fiscal year the Short-Term Bond Market, Intermediate
Bond Market, Bond IMMDEX/TM, and Growth and Income Funds intend to limit their
transactions in futures contracts and related options so that not more than 5%
of their net assets are at risk and the Equity Index Fund will limit its
transactions in futures such that obligations under the transactions and
contracts represent not more than 10% of its assets. In connection with a
futures transaction, unless the transaction is covered in accordance with SEC
positions, the Fund will maintain a segregated account with its custodian or
sub-custodian consisting of cash or liquid high grade debt securities equal to
the entire amount at risk (less margin deposits) on a continuous basis. For a
more detailed description of futures contracts and related options, including a
discussion of the limitations imposed by federal tax law, see Appendix B to the
Statement of Additional Information.
AMERICAN DEPOSITORY RECEIPTS ("ADRS"). The Short-Term Bond Market Fund,
Intermediate Bond Market Fund, Bond IMMDEX/TM Fund, Balanced Fund, Growth and
Income Fund, MidCore Growth Fund, Special Growth Fund, and International Equity
Fund may invest in sponsored ADRs, which are receipts issued by an American bank
or trust company evidencing ownership of underlying securities issued by a
foreign issuer. ADRs may be listed on a national securities exchange or may
trade in the over-the-counter market. ADR prices are denominated in U.S.
dollars; the underlying security may be denominated in a foreign currency. The
underlying security may be subject to foreign government taxes which would
reduce the yield on such securities. Investments in such securities also
involve certain inherent risks, such as political or economic instability of the
country of issue, the difficulty of predicting international trade patterns and
the possibility of imposition of exchange controls. Such securities may also be
subject to greater fluctuations in price than securities of domestic
corporations. In addition, there may be less publicly available information
about a foreign company than about a domestic company. Foreign companies
generally are not subject to uniform accounting, auditing and financial
reporting standards comparable to those applicable to domestic companies. With
respect to certain foreign countries, there is a possibility of expropriation or
confiscatory taxation, or diplomatic developments which could affect investment
in those countries.
ZERO COUPON BONDS. Zero coupon obligations have greater price volatility
than coupon obligations and will not result in the payment of interest until
maturity, provided that a Fund will purchase such zero coupon obligations only
if the likely relative greater price volatility of such zero coupon obligations
is not inconsistent with the Fund's investment objective. Although zero coupon
securities pay no interest to holders prior to maturity, interest on these
securities is reported as income to a Fund and distributed to its shareowners.
These distributions must be made from a Fund's cash assets or, if necessary,
from the proceeds of sales of portfolio securities. Additional income producing
securities may not be able to be purchased with cash used to make such
distributions and its current income ultimately may be reduced as a result.
CONVERTIBLE SECURITIES. The Balanced, Growth and Income, MidCore Growth,
Special Growth, and International Equity Funds may hold convertible securities.
Convertible securities entitle the holder to receive interest paid or accrued on
debt or the dividend paid on preferred stock until the securities mature or are
redeemed, converted or exchanged. Prior to conversion, convertible securities
have characteristics similar to ordinary debt securities in that they normally
provide a stable stream of income with generally higher yields than those of
common stock of the same or similar issuers. Convertible securities rank senior
to common stock in a corporation's capital structure and therefore generally
entail less risk than the corporation's common stock, although the extent to
which such risk is reduced depends in large measure upon the degree to which the
convertible security sells above its value as a fixed income security.
As described in the Prospectuses, the Funds may invest a portion of their
assets in convertible securities that are rated below investment grade.
WARRANTS. Warrants basically are options to purchase equity securities at
a specific price valid for a specific period of time. They do not represent
ownership of the securities, but only the right to buy them. They have no
voting rights, pay no dividends and have no rights with respect to the assets of
the company issuing them. Warrants differ from call options in that warrants
are issued by the issuer of the security which may be purchased on their
exercise, whereas call options may be written or issued by anyone. The prices
of warrants do not necessarily move parallel to the prices of the underlying
securities.
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 a 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 or with respect to the International Equity
Fund, real estate limited partnerships, 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. 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.
8. 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:
9. Purchase securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if,
immediately after such purchase, more than 5% of the value of the Fund's total
assets would be invested in the securities of such issuer, or more than 10% of
the issuer's outstanding voting securities would be owned by the Fund or Portico
Funds, Inc. (the "Company"), except that up to 25% of the value of the Fund's
total assets may be invested without regard to these limitations. For purposes
of this limitation, a security is considered to be issued by the entity (or
entities) whose assets and revenues back the security. A guarantee of a
security shall not be deemed to be a security issued by the guarantor when the
value of all securities issued and guaranteed by the guarantor, and owned by the
Fund, does not exceed 10% of the value of the Fund's total assets.
10. Purchase any securities which would cause 25% or more of the value of
the Fund's total assets at the time of purchase to be invested in the securities
of one or more issuers conducting their principal business activities in the
same industry; provided that, (a) with regard to all Funds except the Tax-Exempt
Intermediate Bond Fund, there is no limitation with respect to instruments
issued or guaranteed by the United States, its agencies or instrumentalities and
repurchase agreements secured by such instruments; (b) with regard to the Tax-
Exempt Intermediate Bond Fund, there is no limitation with respect to
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 and
repurchase agreements secured by such instruments; (c) 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
(d) utilities will be divided according to their services, for example, gas, gas
transmission, electric and gas, electric and telephone will each be considered a
separate industry.
11. Borrow money or issue senior securities, except that each Fund may
borrow from banks and enter into reverse repurchase agreements for temporary
purposes in amounts up to 10% of the value of the total assets at the time of
such borrowing; or mortgage, pledge or hypothecate any assets, except in
connection with any such borrowing and in amounts not in excess of the lesser of
the dollar amounts borrowed or 10% of the value of the Fund's total assets at
the time of such borrowing. The Fund will not purchase securities while its
borrowings (including reverse repurchase agreements) in excess of 5% of its
total assets are outstanding. Securities held in escrow or separate accounts in
connection with the Fund's investment practices described in this Statement of
Additional Information or in the Prospectus are not deemed to be pledged for
purposes of this limitation.
12. With respect to the Tax-Exempt Intermediate Bond Fund, invest less than
80% of its net assets in securities the interest on which is exempt from federal
income tax except during defensive periods or during unusual market conditions.
For purposes of this fundamental policy, Municipal Obligations that are subject
to federal alternative minimum tax are considered taxable.
If a percentage limitation is satisfied at the time of investment, a later
increase or decrease in such percentage resulting from a change in the value of
the Fund's portfolio securities will not constitute a violation of such
limitation.
If due to market fluctuations or other reasons, the amount of borrowings
and reverse repurchase agreements exceed the limit stated above, the Funds will
promptly reduce such amount. Except as otherwise provided in Investment
Restriction No. 10 above, for the purpose of such restriction, in determining
industry classification with respect to the International Equity Fund, the
Company intends to use the Morgan Stanley Capital International classification
titles.
With respect to investment limitation No. 3 under "Additional Investment
Limitations" as it relates to the Tax-Exempt Intermediate Bond Fund, real estate
shall include real estate mortgages. Although the foregoing investment
limitations would permit the Tax-Exempt Intermediate Bond Fund to invest in
options, futures contracts, options on futures contracts and engage in
securities lending, the Fund, during the current fiscal year, does not intend to
trade in such instruments (except that the Fund may purchase put options on
Municipal Obligations as described in the Prospectus) or lend portfolio
securities. Prior to engaging in any such transactions, the Fund will provide
its shareowners with notice and add any additional descriptions concerning the
instruments to the Prospectus and this Statement of Additional Information as
may be required. With respect to investment limitation No. 10 under "Additional
Investment Limitations," asset-backed securities will be divided according to
the type of assets underlying the security. For example, automobile loans,
credit card receivables and installment sales contracts will each be considered
a separate industry.
NET ASSET VALUE
The net asset value per share of each Fund is calculated separately for the
Institutional Series and Retail Series by adding the value of all portfolio
securities and other assets belonging to the particular Fund that are allocated
to a particular series, subtracting the liabilities charged to that series, and
dividing the result by the number of outstanding shares of that series. Assets
belonging to 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. The
liabilities that are charged to a Fund are borne by each share of the Fund,
except for certain payments under the Funds' Distribution and Service Plan and
Shareowner Servicing Plan applicable only to Retail Series Shares of the non-
money market funds. 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 value of a Fund's portfolio securities that are traded on stock
exchanges outside the United States are based upon the price on the exchange as
of the close of business of the exchange immediately preceding the time of
valuation, except when an occurrence subsequent to the time a value was so
established is likely to have changed such value. Securities trading in over-
the-counter markets in European and Pacific Basin countries is normally
completed well before 3:00 P.M. Central Time. In addition, European and Pacific
Basin securities trading may not take place on all business days. Furthermore,
trading takes place in Japanese markets on certain Saturdays and in various
foreign markets on days which are not business days in New York and on which net
asset value of a Fund, including the International Equity Fund, is not
calculated. The calculation of the net asset value of a Fund, including the
International Equity Fund, may not take place contemporaneously with the
determination of the prices of portfolio securities used in such calculation.
Events affecting the values of portfolio securities that occur between the time
their prices are determined and 3:00 P.M. Central Time, and at other times, may
not be reflected in the calculation of net asset value of a Fund.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
COMPUTATION OF OFFERING PRICE OF THE FUNDS. An illustration of the
computation of the initial offering price per share of the Retail Shares of the
Short-Term Bond Market, Intermediate Bond Market, Tax-Exempt Intermediate Bond,
Bond IMMDEX/TM, Balanced, Growth and Income, Equity Index, MidCore Growth,
Special Growth, and International Equity Funds based on the value of each such
Fund's net assets and number of outstanding securities at October 31, 1996,
follows:
Short-Term Intermediate Bond
Bond Market Bond Market Intermediate IMMDEX/TM
Fund Fund Bond Fund Fund
----------- ----------- --------- --------
Net Assets (000s) $58,843 $17,392 $10,690 $42,671
Number of Shares
Outstanding (000s) 5,738 1,707 1,047 1,549
Net Asset Value
Per Share $10.25 $10.19 $10.21 $27.54
Sales Charge, 2.00%
of offering price
(2.04% of net asset
value per share) 0.21 0.21 0.21 0.56
Public Offering Price $10.46 $10.40 $10.42 $28.10
Growth
and Equity MidCore Special
Balanced Income Index Growth Growth International
Fund Fund Fund Fund Fund Equity Fund
-------- ------ ------- ------- ------ -----------
Net Assets (000s) $29,034 $71,310 $39,656 $16,636 $111,159 $3,769
Number of Shares
Outstanding (000s) 1,038 2,156 803 549 2,686 186
Net Asset Value
Per Share $27.98 $33.07 $49.40 $30.32 $41.38 $20.21
Sales Charge, 4.00%
of offering price
(4.16% of net asset
value per share) 1.17 1.38 2.06 1.26 1.72 0.84
Public Offering
Price $29.15 $34.45 $51.46 $31.58 $43.10 $21.05
Prior to January 9, 1995, the Funds offered only one class of shares to
both institutional and retail investors. On that date, the Funds began offering
Institutional Shares to institutional investors and Retail Shares to retail
investors.
Retail Shares of each of the non-money market funds are sold with a front-
end sales charge. A front-end sales charge will not be imposed on reinvested
dividends or distributions. Likewise, there is no front-end sales charge
(provided the status of the investment is explained at the time of investment)
on purchases of Retail Shares if (a) you were a Portico shareowner as of January
1, 1995 and have continuously maintained a shareowner account with the Company;
(b) you make any purchase within 60 days of a redemption of Portico
Institutional Shares, (c) you are an employee, director or retiree of Firstar
Corporation or its affiliates or of Portico; (d) you maintain a personal trust
account with an affiliate of Firstar Corporation at the time of purchase; (e)
you make any purchase within 60 days of a termination of a personal trust
account with an affiliate of Firstar Corporation; (f) you make any purchase for
your medical savings account for which an affiliate of Firstar Corporation
serves in a custodial capacity; (g) you make any purchase for your individual
retirement account; (h) you make any purchase within 60 days of a redemption of
a mutual fund on which you paid an initial sales charge or a contingent deferred
sales charge; (i) you are a registered investment adviser that has entered
into an agreement with the Distributor to purchase shares for your own account
or for discretionary client accounts; (j) you are a spouse, parent or child of
an individual who falls within the preceding categories (a) or (d) above; or (k)
you are a spouse, parent, sibling or child of an individual who falls within the
preceeding category (c) above. These exemptions to the imposition of a front-
end sales charge are due to the nature of the investors and/or the reduced sales
efforts that will be needed in obtaining such investments.
Shareowner Organizations or Institutions may be paid by the Funds for
advertising, distribution or shareowner services. Depending on the terms of the
particular account, Shareowner Organizations or Institutions also may charge
their customers fees for automatic investment, redemption and other services
provided. Such fees may include, for example, account maintenance fees,
compensating balance requirements or fees based upon account transactions,
assets or income. Shareowner Organizations or Institutions are responsible for
providing information concerning these services and any charges to any customer
who must authorize the purchase of Fund shares prior to such purchase.
Shares of any Fund for which a redemption order is received in proper form
by the transfer agent or Elan before the close of the Exchange (currently 3:00
p.m. Central Time) on a business day will be redeemed as of the determination of
net asset value on that day. Orders for a redemption received after the close of
the Exchange on a business day or on a non-business day will be priced as of the
determination of net asset value on the next day on which shares of the
particular Fund are priced. If a shareowner requests that redemption proceeds
be paid by federal funds wire, the proceeds will be wired to a correspondent
member bank if the investor's designated bank is not a member of the Federal
Reserve System.
Under the 1940 Act, the 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
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 $1,000.
In addition to the situations described in the Funds' Prospectuses under
"Redemption of Shares," the Funds 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 Prospectus from time to time.
EXCHANGE PRIVILEGE. By use of the exchange privilege, shareowners authorize
the transfer agent to act on telephonic or written exchange instructions from
any person representing himself to be the shareowner or in some cases, the
shareowner's registered representative or account representative of record, and
believed by the transfer agent to be genuine. The transfer agent's records of
such instructions are binding. The exchange privilege may be modified or
terminated at any time upon notice to shareowners.
Exchange transactions described in paragraphs A, B, and C below will be made on
the basis of the relative net asset values per share of the Funds involved in
the transaction.
A. Retail Shares of any Fund purchased with a sales charge may be exchanged
without a sales charge for Retail Shares of any other Fund offered by the
Company with a sales charge.
B. Shares of any Fund offered by the Company acquired by a previous
exchange transaction involving Retail Shares on which a sales charge has
directly or indirectly been paid (e.g. shares purchased with a sales charge or
issued in connection with an exchange involving shares that had been purchased
with a sales charge) as well as additional Shares acquired through reinvestment
of dividends or distributions on such Shares may be exchanged without a sales
charge for Retail Shares of any other Fund offered by the Company with a sales
charge. To accomplish an exchange under the provisions of this paragraph,
investors must notify the transfer agent of their prior ownership of Retail
Shares and their account number.
C. Shares of any Fund offered by the Company may be exchanged without a
sales charge for Shares of any other Fund of the Company that is offered without
a sales charge.
Except as stated above, a sales charge will be imposed when Shares of a
Fund that were purchased or otherwise acquired without a sales charge are
redeemed and the proceeds are used to purchase Retail Shares of another Fund of
the Company with a sales charge.
Shares in a Fund from which the shareowner is withdrawing an investment
will be redeemed at the net asset value per share next determined on the date of
receipt. Shares of the new Fund into which the shareowner is investing will be
purchased at the net asset value per share next determined (plus any applicable
sales charge) after acceptance of the request by the Company in accordance with
the policies for accepting investments. Exchanges of Shares will be available
only in states where they may legally be made.
For federal income tax purposes, share exchanges are treated as sales on
which the shareowner may realize a gain or loss, depending upon whether the
value of the shares to be given up in exchange is more or less than the basis in
such shares at the time of the exchange. Investors exercising the exchange
privilege should request and review the Prospectus for the shares to be acquired
in the exchange prior to making an exchange.
ADDITIONAL INFORMATION REGARDING SHAREOWNER SERVICES FOR RETAIL SHARES
The Retail Shares of the Funds offer a Periodic Investment Plan whereby a
shareowner may automatically make purchases of shares of a Fund on a regular,
monthly basis ($100 minimum per transaction). Under the Periodic Investment
Plan, a shareowner's designated bank or other financial institution debits a
preauthorized amount on the shareowner's account each month and applies the
amount to the purchase of Retail Shares. The Periodic Investment Plan must be
implemented with a financial institution that is a member of the Automated
Clearing House. No service fee is currently charged by 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.
The Periodic Investment Plan permits an investor to use "Dollar Cost
Averaging" in making investments. Instead of trying to time market performance,
a fixed dollar amount is invested in Retail Shares at predetermined intervals.
This may help investors to reduce their average cost per share because the
agreed upon fixed investment amount allows more Retail Shares to be purchased
during periods of lower Retail Share prices and fewer Retail Shares to be
purchased during periods of higher Retail Share prices. In order to be
effective, Dollar Cost Averaging should usually be followed on a sustained,
consistent basis. Investors should be aware, however, that Retail Shares bought
using Dollar Cost Averaging are purchased without regard to their price on the
day of investment or to market trends. Dollar Cost Averaging does not assure a
profit and does not protect against losses in a declining market. In addition,
while investors may find Dollar Cost Averaging to be beneficial, it will not
prevent a loss if an investor ultimately redeems his Retail Shares at a price
which is lower than their purchase price. An investor may want to consider his
financial ability to continue purchases through periods of low price levels.
The Retail Shares of the Funds permit shareowners to effect ConvertiFundR
transactions, an automated method by which a Retail shareowner may invest
proceeds from one account to another account of the Retail Shares of the Portico
family of funds. Such proceeds include dividend distribution, 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.
The Retail Shares of 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.
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 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.
DESCRIPTION OF SHARES
The Company's Articles of Incorporation authorize the Board of Directors to
issue up to 150,000,000,000 full and fractional shares of common stock, $.0001
par value per share, which is divided into thirty classes (each, a "Class" or
"Fund"). Each Class below is divided into two series designated as
Institutional Series and Series A/Retail Series (each, a "Series") and consists
of the number of shares set forth next to its Fund name in the table below:
Class-Series of Fund in which Stock Number of Authorized
Common Stock Represents Interest Shares in Each Series
- ----------------- ------------------- --------------------
6-Institutional Special Growth 500 Million
6-A 500 Million
7-Institutional Bond IMMDEX/TM 500 Million
7-A 500 Million
8-Institutional Equity Index 500 Million
8-A 500 Million
9-Institutional Growth and Income 500 Million
9-A 500 Million
10-Institutional Short-Term Bond Market 500 Million
10-A 500 Million
11-Institutional Balanced Growth 500 Million
11-A 500 Million
12-Institutional MidCore Growth 500 Million
12-A 500 Million
13-Institutional Intermediate Bond Market 500 Million
13-A 500 Million
14-Institutional Tax-Exempt Intermediate Bond 500 Million
14-A 500 Million
15-Institutional International Equity 500 Million
15-A 500 Million
The Board of Directors has also authorized the issuance of Classes 1
through 5 and Classes 16 and 17 common stock representing interests in seven
other separate investment portfolios which are described in separate Statements
of Additional Information. The remaining authorized shares are classified 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 attributed to the
operation of a particular series as described in the Funds' Prospectuses,
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 shareowners of each portfolio
affected by the matter. A portfolio is affected by a matter unless it is clear
that the interests of each portfolio in the matter are substantially identical
or that the matter does not affect any interest of the portfolio. Under the
Rule, the approval of an investment advisory agreement or any change in a
fundamental investment policy would be effectively acted upon with respect to a
portfolio only if approved by a majority of the outstanding shares of such
portfolio. However, the Rule also provides that the ratification of the
appointment of independent accountants, the approval of principal underwriting
contracts and the election of Directors may be effectively acted upon by
shareowners of the Company voting together in the aggregate without regard to
particular portfolios. Similarly, on any matter submitted to the vote of
shareowners which only pertains to agreements, liabilities or expenses
applicable to one series of a Fund (such as the Distribution and Service Plan
and Shareowner Service Plan applicable to Retail Shares) but not the other
series of the same Fund, only the affected series will be entitled to vote.
When issued for payment as described in the Funds' Prospectus 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 Prospectus is not intended as a substitute for careful tax planning.
Investors are advised to consult their tax advisers with specific reference to
their own tax situations.
A 4% non-deductible excise tax is imposed on regulated investment companies
that fail to currently distribute specified percentages of their ordinary
taxable income and capital gain net income (excess of capital gains over capital
losses). The 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 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.
Investment company taxable income earned by the Fund will be distributed by
the Fund to its 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 the 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.
A taxable gain or loss may be realized by a shareowner upon his redemption,
transfer or exchange of Fund shares depending upon the tax basis of such shares
and their price at the time of redemption, transfer or exchange.
Any distribution of the excess of net long-term capital gain over net
short-term capital loss is taxable to shareowners as long-term capital gain,
regardless of how long the shareowner has held the distributing Fund's shares
and whether such gains are received in cash or additional Fund shares. The Fund
will designate such a distribution as capital gain dividend in a written notice
mailed to shareowners within 60 days after the close of the Fund's taxable year.
It should be noted that, upon the sale or exchange of Fund shares, if the
shareowner has not held such shares for more than six months, any loss on the
sale or exchange of those shares will be treated as long-term capital loss to
the extent of the capital gain dividends received with respect to the shares.
Income received by a Fund from sources within foreign countries may be
subject to withholding and other taxes imposed by such countries. Tax
conventions between certain countries and the U.S. may reduce or eliminate such
taxes. If more than 50% of the value of the International Equity Fund's total
assets at the close of its taxable year consists of stock or securities of
foreign corporations, the Fund will be eligible to elect to "pass-through" to
its shareowners the amount of foreign income and similar taxes paid by the Fund.
If this election is made, a shareowner will be required to include in gross
income (in addition to taxable dividends actually received) his or her pro rata
share of foreign income and similar taxes paid by the Fund, and will be entitled
either to deduct (provided the shareowner itemizes deductions) his or her pro
rata share of foreign income and similar taxes in computing his taxable income
or to use it (subject to limitations) as a foreign tax credit against his or her
U.S. Federal income tax liability. Foreign taxes generally are not deductible in
computing alternative minimum taxable income. Each shareowner of the
International Equity Fund will be notified within 60 days after the close of the
Fund's taxable year if the foreign income and similar taxes paid by the Fund
will "pass-through" for that year.
Generally, a credit for foreign taxes is subject to the limitation that it
may not exceed the shareowner's U.S. tax attributable to his or her total
foreign source taxable income. For this purpose, if the pass-through
election is made, the source of the International Equity Fund's income will flow
to shareowners of the Fund. With respect to the Fund, gains from the sale of
securities will be treated as derived from U.S. sources and certain currency
fluctuation gains, including fluctuation gains from foreign currency denominated
debt securities, receivables and payables, will be treated as ordinary income
derived from U.S. sources. The limitation on the foreign tax credit is applied
separately to foreign source passive income, and to certain other types of
income. Shareowners may be unable to claim a credit for the full amount of
their proportionate share of foreign taxes paid by the International Equity
Fund. Certain additional limitations are imposed on the use of foreign tax
credits to offset liability for the alternative minimum tax.
If a Fund invests in certain "passive foreign investment companies"
("PFICs") which do not distribute their income on a regular basis, it generally
will be subject to federal income tax (and possibly additional interest charges)
on a portion of any "excess distribution" or gain from the disposition of such
investments even if it distributes the income to its shareowners. If the Fund
qualifies and elects to treat the PFIC as a "qualified electing fund" ("QEF")
and the PFIC furnishes certain financial information in the required form, the
Fund would instead be required to include in income each year a portion of the
ordinary earnings and net capital gains of the QEF, whether or not received, and
such amounts would be subject to the various distribution requirements described
above. In addition, another election may be available that would involve
marking to market the Fund's PFIC holdings at the end of each taxable year (and
on certain other dates prescribed in the Code), with the result that unrealized
gains are treated as though they were realized. If this election were made, the
tax described above at the fund level under the PFIC rules generally would be
eliminated.
The Tax-Exempt Intermediate Bond Fund is designed to provide investors with
current tax-exempt interest income. The 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 because
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 ultimately would be 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 or
who occupies more than 5% of the usable area of such facilities or for whom such
facilities, part thereof where 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 Intermediate Bond
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 the 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 federal 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 Intermediate Bond Fund is generally 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 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.
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:
Principal
Position with Occupations During Past 5
Name, Address and Age the Company Years and Other Affiliations
- --------------------- ------------- ----------------------------------
James M. Wade* Chairman, Vice President and Chief Financial
2802 Wind Bluff Circle President and Officer, Johnson Controls, Inc. (a
Wilmington, NC 28409 Treasurer controls manufacturing company)
Age: 53 January 1987 - May 1991.
Glen R. Bomberger Director Executive Vice President, Chief One
Park Plaza Financial Officer and Director, A.O.
11270 West Park Place Smith Corporation (a diversified
Milwaukee, WI 53224-3690 manufacturing company) since January
Age: 59 1987. Director of companies
affiliated
with A.O. Smith Corporation;
Chief Financial Officer, Director and
Vice President, Smith Investment
Company; Officer and Director of
companies affiliated with Smith
Investment Company.
Jerry G. Remmel Director Vice President, Treasurer and Chief
16650A Lake Circle Financial Officer of Wisconsin Energy
Brookfield WI 53005 Corporation 1994-1996; Treasurer of
Age: 65 Wisconsin Electric Power Company 1973-
1996; Director Wisconsin Electric
Power Company 1989-1996; Senior Vice
President, Wisconsin Electric Power
Company 1988 - 1994; Chief Financial
Officer, Wisconsin Electric Power
Company 1983-1996; Vice President and
Treasurer, Wisconsin Electric Power
Company 1983 - 1989.
Richard K. Riederer Director President, Chief Executive Officer,
400 Three Springs Drive and Chief Operating Officer of Weirton
Weirton, WV 26062-4989 Steel since 1995; Executive Vice
Age: 52 President and Chief Financial Officer,
Weirton Steel January 1994-1995; Vice
President of Finance and Chief
Financial Officer, Weirton Steel
January 1989-1994; Member-Board of
Directors of American Iron and Steel
Institute since 1995; Member-Board of
Directors, National Association of
Manufacturers since 1995.
Charles R. Roy* Director Vice President - Finance, Chief 14245
Heatherwood Court Financial Officer and
Elm Grove, WI 53122 Secretary, Rexnord Corporation
Age: 66 (an equipment manufacturing
company), 1988 - 1992; Vice President-
Finance and Administration, Rexnord,
Inc., 1982 - 1992; Officer and
Director of several Rexnord
subsidiaries until 1992.
Mary Ellen Stanek Vice President President and Chief Operating Officer,
777 East Wisconsin Avenue FIRMCO since 1994, Director since 1992
Suite 800 and Director of Fixed Income
Milwaukee, WI 53202 Securities since 1990.
Age: 40
W. Bruce McConnel, III Secretary Partner of the law firm of Drinker
Philadelphia National Biddle & Reath.
Bank Building
1345 Chestnut Street
Philadelphia, PA 19107
Age: 53
* Messrs. Wade and Roy are considered by the Company to be "interested
directors" of the Company as defined in the 1940 Act.
The following chart provides certain information about the Director fees
for the year ended October 31, 1996 of the Company's Directors.
TOTAL
PENSION OR COMPENSATION
RETIREMENT FROM COMPANY
AGGREGATE BENEFITS ESTIMATED AND FUND
COMPENSATION ACCRUED AS ANNUAL COMPLEX *
NAME OF FROM THE PART OF FUND BENEFITS UPON PAID TO
PERSON/POSITION COMPANY EXPENSES RETIREMENT DIRECTORS
- --------------- -------- ---------- ------------- ----------
James M. Wade
President,
Treasurer and
Chairman of
the Board $15,000 $0 $0 $15,000
Glen R.
Bomberger
Director $12,000** $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.
**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 Short-Term Bond Market Fund,
Special Growth Fund, Bond IMMDEX/TM Fund and Equity Index Fund as of February 3,
1992 and became the Investment Adviser to the Growth and Income Fund effective
June 17, 1993. Prior thereto, investment advisory services were provided by
Firstar Trust Company, an affiliate of FIRMCO. Firstar Trust Company has
guaranteed all obligations incurred by FIRMCO in connection with its Investment
Advisory Agreement. FIRMCO is also the Investment Adviser to the MidCore Growth
Fund, Intermediate Bond Market Fund, Balanced Fund, Tax-Exempt Intermediate Bond
Fund, and International Equity Fund. In its Investment Advisory Agreement, the
Adviser has agreed to pay all expenses incurred by it in connection with its
advisory activities, other than the cost of securities and other investments,
including brokerage commissions and other transaction charges, if any, purchased
or sold for the Funds.
The Adviser is entitled to 4/10ths of the gross income earned by 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.
In addition, the Adviser may also voluntarily waive additional advisory fees
otherwise payable by the Funds
For the services provided and expenses assumed by the Adviser under its
investment advisory agreement in effect 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
------------------ ------------------ ----------------
Short-Term Bond
Market Fund $552,764 (556,286) $330,777 (436,239) $339,126 (444,879)
Special Growth Fund 4,279,091 (250) 3,291,584 (48,415) 2,576,044 (119,214)
Bond IMMDEX/TM Fund 1,074,956 (1,673) 831,690 (0) 774,322 (0)
Equity Index Fund 555,115 (0) 319,929 (0) 197,707 (13,606)
Intermediate Bond 562,082 (288,147) 299,128 (238,251) 217,173 (151,906)
Market Fund
MidCore Growth Fund 1,245,050 (8,639) 894,728 (61,640) 708,137 (61,181)
Balanced Fund 789,896 (309,983) 560,913 (267,253) 458,789 (213,732)
Growth and Income 1,870,213 (18,262) 1,281,117 (69,004) 1,133,488 (83,990)
Fund
Tax-Exempt 40,050 (159,121) 22,909 (128,234) 48,723 (90,055)
Intermediate Bond
Fund
International 302,570 (332,273) 119,342 (311,670) 20,285 (111,361) 1
Equity Fund
________________
1 From inception (April 28, 1994) to October 31, 1994.
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 Funds 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.
With regard to the International Equity Fund, under the Investment
Advisory Agreement, the Adviser is authorized to delegate its responsibilities
to another adviser. The Adviser has appointed State Street Global Advisors as
Sub-Adviser to the International Equity Fund. See "Sub-Adviser" below. The
Adviser and Sub-Adviser jointly determine the securities to be purchased,
retained or sold by the International Equity Fund.
SUB-ADVISER. The International Equity Fund receives sub-advisory services
from State Street Global Advisors, a division of State Street Bank and Trust
Company (the "Sub-Adviser" or "SSBT"). Under the terms of the Sub-Advisory
Agreement between the Adviser and Sub-Adviser, the Sub-Adviser furnishes
investment advisory and portfolio management services to the International
Equity Fund with respect to its investments. The Sub-Adviser is responsible,
jointly with the Adviser, for decisions to buy and sell the International Equity
Fund's investments and all other transactions related to investment therein.
The Sub-Adviser negotiates brokerage commissions and places orders of purchases
and sales of the International Equity Fund's portfolio securities. During the
term of the Sub-Advisory Agreement, the Sub-Adviser will bear all expenses
incurred by it in connection with its services under such agreement.
Pursuant to the Sub-Advisory Agreement, in the absence of willful
misfeasance, bad faith or gross negligence on the part of the Sub-Adviser or
reckless disregard of its obligations and duties thereunder, or loss resulting
from a breach of fiduciary duty with respect to the receipt of compensation for
services, the Sub-Adviser will not be subject to any liability to the Adviser,
the International Equity Fund or the Company, or to any shareowner of the
International Equity Fund or the Company, for any act or omission in the course
of, or connected with, rendering services under the Sub-Advisory Agreement. See
"Banking Laws and Regulations" below for information regarding certain banking
laws and regulations and their applicability to the Sub-Adviser and its services
under the Sub-Advisory agreement.
For the services provided under its Sub-Advisory Agreement in effect for
the fiscal year ended October 31. 1996 and October 31, 1995 and the fiscal
period from the International Equity Fund's inception (April 28, 1994) to
October 31, 1994 the Sub-Adviser earned and waived advisory fees as follows:
Sub-Advisory Fees Earned (Sub-Advisory Fees Waived)
1996 1995 1994
International Equity ------- ------ ------
Fund 161,584 (0) 113,176 (0) 38,788 (0)
BANKING LAWS AND REGULATIONS. Banking laws and regulations, including the
Glass-Steagall Act as presently interpreted by the Board of Governors of the
Federal Reserve System, presently (a) prohibit a bank holding company registered
under the Federal Bank Holding Company Act of 1956 or any bank or non-bank
affiliate thereof from sponsoring, organizing, controlling or distributing the
shares of a registered, open-end investment company continuously engaged in the
issuance of its shares, and prohibit banks generally from underwriting
securities, but (b) do not prohibit such a bank holding company or affiliate or
banks generally from acting as investment adviser, transfer agent or custodian
to such an investment company or from purchasing shares of such a company as
agent and upon order of a customer. In 1971, the United States Supreme Court
held in Investment Company Institute vs. Camp that the Glass-Steagall Act
prohibits a national bank from operating a fund for the collective investment of
managing agency accounts. Subsequently, the Board of Governors of the Federal
Reserve System (the "Board") issued a regulation and interpretation to the
effect that the Glass-Steagall Act and such decision forbid a bank holding
company registered under the Federal Bank Holding Company Act of 1956 (the
"Holding Company Act"), or any non-bank affiliate thereof from sponsoring,
organizing or controlling a registered, open-end investment company continuously
engaged in the issuance of its shares, but did not prohibit such a holding
company or affiliate from acting as investment adviser, transfer agent and
custodian to such an investment company. In 1981, the United States Supreme
Court held in Board of Governors of the Federal Reserve System v. Investment
Company Institute that the Board did not exceed its authority under the Holding
Company Act when it adopted its regulation and interpretation authorizing bank
holding companies and their non-bank affiliates to act as investment advisers to
registered closed-end investment companies. FIRMCO, Firstar Trust Company and
SSBT are subject to such banking laws and regulations.
FIRMCO and Firstar Trust Company and the Sub-Adviser 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 and or regulations. It should be noted, however,
there have been no cases deciding whether banks and their affiliates may perform
services comparable to those performed by these companies, and future changes in
either federal or state statutes and regulations relating to permissible
activities of banks or trust companies and their subsidiaries or affiliates, as
well as further judicial or administrative decisions or interpretations of
present and future statutes and regulations, could prevent such companies from
continuing to perform such services for the 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. Any new advisory or sub-advisory agreement
would be subject to shareowner approval.
Shares of the Funds are not bank deposits, are neither endorsed by,
insured by, or guaranteed by, obligations of, nor otherwise supported by the
FDIC, the Federal Reserve Board, Firstar Trust Company or FIRMCO, SSBT, their
affiliates or any other bank, or any other governmental agency. An investment
in the Funds involves risks including possible loss of principal.
ADMINISTRATION AND DISTRIBUTION SERVICES
Firstar Trust Company ("Firstar Trust") 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 Trust or counsel to the Company, as
requested by Firstar Trust ; review and comment upon sales literature and
advertising relating to the Company, as requested by Firstar Trust; assist in
the administration of the marketing budget; periodically review blue sky
registration and sales reports for the Funds; attend meetings of the Board of
Directors, as requested by the Board of Directors of the Funds; and such other
services as may be requested in writing and expressly agreed to by Ziegler. The
following administrative services will be provided by Firstar Trust: compile
data for and prepare with respect to the Funds timely Notices to the SEC
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 provides distribution services for each Fund as described
in the Funds' Prospectus 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
year ended October 31, 1996 and 1995, Ziegler received no fees for its
distribution services.
For its administrative services for the fiscal years ended October 31,
1996, 1995 and 1994, the Co-Administrators (and Sunstone for the fiscal year
ended October 31, 1994) earned and waived the following administrative fees:
ADMINISTRATION FEES EARNED (ADMINISTRATION FEES WAIVED)
1996 1995 1994
----------------- ---------------- ----------------
Short-Term Bond Market $83,969 (127,339) $59,323 (95,852) $88,025 (72,075)
Fund
Special Growth Fund 257,995 (394,054) 194,656 (345,563) 249,168 (190,836)
Bond IMMDEX/TM Fund 159,028 (251,337) 151,431 (174,586) 227,105 (85,036)
Equity Index Fund 93,843 (160,223) 57,944 (97,841) 57,234 (46,232)
Intermediate Bond 78,123 (116,341) 49,597 (80,727) 37,683 (52,610)
Market Fund
MidCore Growth Fund 75,054 (115,984) 64,612 (90,089) 71,418 (54,096)
Balanced Fund 65,092 (102,563) 51,415 (82,629) 56,667 (53,098)
Growth and Income Fund 113,216 (174,799) 82,730 (134,204) 110,256 (88,529)
Tax-Exempt Intermediate 20,315 (25,259) 14,551 (22,137) 20,580 (13,392)
Bond Fund
International Equity 20,015 (30,231) 14,701 (20,395) 5,560 (6,117) 1
Fund
1 From inception (April 28, 1994) to October 31, 1994.
SHAREOWNER ORGANIZATIONS
As stated in the Funds' Prospectus, for Retail Shares 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 Retail Shares of the Fund. 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 Retail 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, Shareowner Organizations, under the Distribution and Service Plan, may
provide assistance (such as the forwarding of sales literature and advertising
to their customers) in connection with the distribution of Fund shares. All
fees paid under these agreements are borne exclusively by the Fund's Retail
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 Retail Shares (in addition to support services), that Plan has been adopted
in accordance with Rule 12b-1 under the 1940 Act and Rule 18f-3 of 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 will benefit each Fund and the
holders of Retail Shares as a way of allowing Shareowner Organizations to
participate with the Funds in the provision of support and distribution services
to customers of the Shareowner Organization who own Retail Shares. Any material
amendment to the arrangements with Shareowner Organizations under the agreements
must be approved by a majority of the Board of Directors (including a majority
of the Disinterested Directors), and any amendment to increase materially the
costs under the Distribution and Service Plan with respect to a Fund must be
approved by the holders of a majority of the outstanding Retail Shares of the
Fund involved. So long as the Plans are in effect, the selection and nomination
of the members of the Board of Directors who are not "interested persons" (as
defined in the 1940 Act) of the Funds will be committed to the discretion of
such Disinterested Directors.
For the fiscal year ended 1994, the Company did not pay any fees to
Shareowner Organizations pursuant to Service Plans and Distribution and Service
Plans with respect to the Funds.
The Funds paid fees to Shareowner Organizations, none of which were
affiliated with the Adviser, pursuant to the Service Plan for the fiscal year
ended October 31, 1996 as follows:
FEES EARNED BY NON-AFFILIATED
SHAREOWNER ORGANIZATIONS
--------------------------
Short-Term Bond Market Fund $877
Special Growth Fund $1,427
Bond IMMDEXO Fund $0
Equity Index Fund $2,534
Intermediate Bond Market Fund $49
MidCore Growth Fund $0
Balanced Fund $0
Growth and Income Fund $437
Tax-Exempt Intermediate Bond Fund $3
International Equity Fund $0
The Funds paid fees to Shareowner Organizations, all of which were affiliated
with the Adviser, pursuant to the Service Plan for the fiscal year ended October
31, 1996 as follows:
FEES EARNED BY AFFILIATED
SHAREOWNER ORGANIZATIONS
-------------------------
Short-Term Bond Market Fund $133,220
Special Growth Fund $250,839
Bond IMMDEXO Fund $81,916
Equity Index Fund $68,573
Intermediate Bond Market Fund $36,250
MidCore Growth Fund $33,578
Balanced Fund $64,413
Growth and Income Fund $137,847
Tax-Exempt Intermediate Bond Fund $23,012
International Equity Fund $6,964
CUSTODIAN, TRANSFER AGENT AND ACCOUNTING SERVICES AGENT
Firstar Trust serves as custodian of all the Funds' assets except for the
International Equity Fund pursuant to a Custody Agreement. Under the Custody
Agreement, Firstar Trust 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 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 shall remain liable for the performance of all of
its duties under the Custody Agreement notwithstanding any delegation. For its
services as custodian, Firstar Trust is entitled to receive a fee, payable
monthly, based on the annual rate of $0.20 per $1,000 of the market value of
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, as
custodian, is entitled to certain charges for securities transactions and
reimbursement for expenses.
State Street Bank and Trust Company ("SSBT") serves as custodian of the
International Equity Fund's assets pursuant to a Custody Agreement. Under the
Custody Agreement, SSBT has agreed to, among other things, (i) maintain custody
of all Fund assets and settle Fund purchases and sales, (ii) make receipts and
disbursements of money on behalf of the Fund, (iii) collect and receive all
income and other payments and distributions on account of the Fund's portfolio
investments, (iv) respond to correspondence from shareowners, security brokers
and others relating to its duties and (v) make periodic reports to the Company
concerning the Fund's operations. SSBT may, at its own expense, open and
maintain a custody account or accounts on behalf of the Fund with other banks or
trust companies, provided that SSBT shall remain liable for the performance of
all of its duties under the Custody Agreement notwithstanding any delegation.
For its services as a custodian, SSBT is entitled to receive a fee, payable
monthly, based on the following annual rates of the market value of the Fund's
assets: 0.01% of all domestically held assets and asset charges ranging from
0.05% to 0.40% of all securities held in custody outside the U.S. depending on
where the securities are held and total Fund assets. In addition, SSBT, as
custodian, is entitled to certain charges for securities transactions and
reimbursement for expenses. Also, pursuant to the Custody Agreement, SSBT has
agreed to maintain the financial accounts and records of the Fund in compliance
with the 1940 Act and to provide other accounting services to the Fund. For
its accounting services, SSBT is entitled to receive fees in addition to its
custody fees, payable monthly, including a monthly base and quote charge and
pricing charges per security per month. In addition, SSBT is entitled to
reimbursement of certain expenses.
Firstar Trust 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 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 is entitled to receive at the rate of $15.00 per shareowner
account with an annual minimum of $24,000 per portfolio, plus certain other
transaction charges and reimbursement for expenses.
In addition, all the Funds, with the exception of the International Equity
Fund, have entered into a Fund Accounting Servicing Agreement with Firstar Trust
pursuant to which Firstar Trust 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 is
entitled to receive fees, payable monthly, at the following annual rates of the
market value of each Fund's assets: Balanced Fund, Growth and Income Fund,
Equity Index Fund, MidCore Growth Fund, and Special Growth Fund -- $27,500 on
the first $40 million, 1.25/100th of 1% on the next $200 million, and
6.25/1000ths of 1% on the balance, plus out-of-pocket expenses, including
pricing expenses; and Short-Term Bond Market Fund, Intermediate Bond Market
Fund, Tax-Exempt Intermediate Bond Fund and Bond IMMDEX/TM Fund -- $31,250 on
the first $40 million, 2.5/100th of 1% on the next $200 million, and 1.25/100th
of 1% on the next $200 million, and 6.25/1000th of 1% on the balance, plus out-
of-pocket expenses, including pricing expenses.
EXPENSES
Operating expenses of the Funds include taxes, interest, fees and expenses
of Directors and officers, Securities and Exchange Commission fees, state
securities and qualification fees, advisory fees, administrative fees,
Shareowner Organization fees (Retail Shares only), charges of the custodian and
transfer agent, dividend disbursing agent and accounting services agent, certain
insurance premiums, auditing and legal expenses, costs of preparing and printing
prospectuses for regulatory purposes and for distribution to shareowners, costs
of shareowner reports and meetings, membership fees in the Investment Company
Institute, and any extraordinary expenses. The Funds also pay any brokerage
fees, commissions and other transactions charges (if any) incurred in connection
with the purchase or sale of portfolio securities.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, independent accountants, 100 East Wisconsin Avenue,
Suite 1500, Milwaukee, Wisconsin, 53202, serve as auditors for the Company. The
financial statements and notes thereto contained in the Fund's Annual Report for
the fiscal year ended October 31, 1996 are incorporated herein by reference. No
other part of the Annual Report is incorporated herein by reference. Such
financial statements have been incorporated herein in reliance on the report of
Price Waterhouse LLP, independent accountants, given as authority of said firm
as experts in auditing and accounting.
COUNSEL
Drinker Biddle & Reath (of which Mr. McConnel, Secretary of the Company, is
a partner), Philadelphia National Bank Building, 1345 Chestnut Street,
Philadelphia, Pennsylvania 19107, serve as counsel to the Company and will pass
upon the legality of the shares offered by each Fund's Prospectus.
ADDITIONAL INFORMATION ON PERFORMANCE
From time to time, the total return of the Retail Shares and Institutional
Shares of each Fund and the yields of such shares of the Short-Term Bond Market
Fund, Intermediate Bond Market Fund, Tax-Exempt Intermediate Bond Fund and Bond
IMMDEX/TM Fund may be quoted in advertisements, shareowner reports or other
communications to shareowners. Performance information is generally available
by calling the Portico Investor Services at 1-800-982-8909.
Yield Calculations.
The yield of a series of shares is calculated by dividing the net
investment income per share for that series (as described below) earned during a
30-day (or one-month) period by the net asset value per share for that series
(including the maximum front end sales charge of 2.00% for the Retail Shares of
the bond funds) on the last day of the period and annualizing the result on a
semiannual basis by adding one to the quotient, raising the sum to the power of
six, subtracting one from the result and then doubling the difference. Net
investment income per share earned during the period attributable to that series
is based on the average daily number of shares of the series outstanding during
the period entitled to receive dividends and includes dividends and interest
earned during the period attributable to that series minus expenses accrued for
the period, attributable to that series net of reimbursements.
This calculation can be expressed as follows:
a-b
Yield = 2 [(----- + 1)6 - 1]
c x d
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends.
d = Maximum offering price per share on the last day of
the period.
For the purpose of determining net investment income earned during the
period (variable "a" in the formula), dividend income on equity securities held
by a Fund is recognized by accruing 1/360 of the stated dividend rate of the
security each day that the security is in the portfolio. A Fund calculates
interest earned on any debt obligations held in its portfolio by computing the
yield to maturity of each obligation held by it based on the market value of the
obligation (including actual accrued interest) at the close of business on the
last business day of each month, or, with respect to obligations purchased
during the month, the purchase price (plus actual accrued interest) and dividing
the result by 360 and multiplying the quotient by the market value of the obli-
gation (including actual accrued interest) in order to determine the interest
income on the obligation for each day of the subsequent month that the
obligation is in the portfolio. For purposes of this calculation, it is assumed
that each month contains 30 days. The maturity of an obligation with a call
provision is the next call date on which the obligation reasonably may be
expected to be called or, if none, the maturity date. With respect to debt
obligations purchased at a discount or premium, the formula generally calls for
amortization of the discount or premium. The amortization schedule will be
adjusted monthly to reflect changes in the market values of such debt
obligations.
Interest earned on tax-exempt obligations of the Tax-Exempt Intermediate
Bond Fund that are issued without original issue discount and have a current
market discount is calculated by using the coupon rate of interest instead of
the yield to maturity. In the case of tax-exempt obligations that are issued
with original issue discount but which have discounts based on current market
value that exceed the then-remaining portion of the original issue discount
(market discount), the yield to maturity is the imputed rate based on the
original issue discount calculation. On the other hand, in the case of tax-
exempt obligations that are issued with original issue discount but which have
the discounts based on current market value that are less than the then-
remaining portion of the original issue discount (market premium), the yield to
maturity is based on the market value.
With respect to mortgage or other receivables-backed obligations which are
expected to be subject to monthly payments of principal and interest ("pay
downs"), (a) gain or loss attributable to actual monthly pay downs are accounted
for as an increase or decrease to interest income during the period; and (b) a
Fund may elect either (i) to amortize the discount and premium on the remaining
security, based on the cost of the security, to the weighted average maturity
date, if such information is available, or to the remaining term of the
security, if any, if the weighted average maturity date is not available, or
(ii) not to amortize discount or premium on the remaining security.
Undeclared earned income may be subtracted from the net asset value per
share (variable "d" in the formula). Undeclared earned income is the net
investment income which, at the end of the 30-day base period, has not been
declared as a dividend, but is reasonably expected to be and is
declared as a dividend shortly thereafter.
In addition, the Tax-Exempt Intermediate Bond Fund may advertise a "tax-
equivalent yield" which is computed by: (a) dividing the portion of the Fund's
yield for a particular series (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.
For the 30-day period ended October 31, 1996, the annualized yields for
Institutional Shares of the Short-Term Bond Market Fund, Intermediate Bond
Market Fund and Bond IMMDEX/TM Fund were 6.04%, 6.25%, and 6.50%, respectively.
Without fees waived by the Adviser and the Co-Administrators during such period,
the annualized yields would have been 5.63%, 6.01%, and 6.42%, respectively.
For the same period, the annualized taxable yield for the Tax-Exempt
Intermediate Bond Fund was 4.26%, and the tax-equivalent annualized yield was
6.17% (3.84% and 5.57%, respectively, without fees waived by the Adviser and Co-
Administrators during such period).
For the 30-day period ended October 31, 1996, the annualized yields,
assuming the maximum sales charge, for Retail Shares of the Short-Term Bond
Market Fund, Intermediate Bond Market Fund and Bond IMMDEX/TM Fund were 5.67%,
5.88%, and 6.12%, respectively. Without fees waived by the Adviser and the Co-
Administrators during such period, the annualized yields would have been 5.27%,
5.64%, and 6.05%, respectively. For the same period, the annualized taxable
yield for the Tax-Exempt Intermediate Bond Fund would have been 3.93% and the
tax-equivalent annualized yield would have been 5.70% (3.52% and 5.10%,
respectively, without fees waived by the Adviser and Co-Administrators during
such period).
For the 30-day period ended October 31, 1996 , the annualized yields for
Retail Shares of the Short-Term Bond Market Fund, Intermediate Bond Market
Fund and Bond IMMDEX/TM Fund purchased without a front end sales charge were
5.79%, 6.00%, and 6.25%, respectively. Without fees waived by the Adviser and
the Co-Administrators during such period, the annualized yields would have been
5.38%, 5.76% and 6.18%, respectively. For the same period, the annualized
taxable yield for the Tax-Exempt Intermediate Bond Fund purchased without a
front end sales charge would have been 4.01%, and the tax-equivalent annualized
yield would have been 5.81% (3.59%, and 5.20%, respectively, without fees waived
by the Adviser and Co-Administrators during such period).
TOTAL RETURN CALCULATIONS.
Each Fund computes "average annual total return" separately for its Retail
and Institutional Shares by determining the average annual compounded rates of
return during specified periods that equate the initial amount invested in a
particular series to the ending redeemable value of such investment in the
series. This is done by dividing the ending redeemable value of a hypothetical
$1,000 initial payment by $1,000 and raising the quotient to a power equal to
one divided by the number of years (or fractional portion thereof) covered by
the computation and subtracting one from the result. This calculation can be
expressed as follows:
ERV 1/n
T = [(-----) - 1]
P
Where: T = average annual total return.
ERV = ending redeemable value at the end of the period
covered by the computation of a hypothetical $1,000
payment made at the beginning of the period.
P = hypothetical initial payment of $1,000.
n = period covered by the computation, expressed in
terms of years.
The Funds compute their aggregate total returns separately for the Retail
and Institutional Series, by determining the aggregate rates of return during
specified periods that likewise equate the initial amount invested in a
particular series to the ending redeemable value of such investment in the
series. The formula for calculating aggregate total return is as follows:
ERV
T = [(-----) - 1]
P
The calculations of average annual total return and aggregate total return
assume the reinvestment of all dividends and capital gain distributions on the
reinvestment dates during the period. The ending redeemable value (variable
"ERV" in each formula) is determined by assuming complete redemption of the
hypothetical investment and the deduction of all nonrecurring charges at the end
of the period covered by the computations. In addition, the Funds' average
annual total return and aggregate total return reflect the deduction of the 4%
maximum front-end sales charge for equity funds and 2% maximum front end sales
charge for fixed income funds in connection with the purchase of Retail Shares.
The Funds may also advertise total return data without reflecting sales charges
in accordance with the rules of the Securities and Exchange Commission.
Quotations that do not reflect the sales charge will, of course, be higher than
quotations that do reflect the sales charge.
PERFORMANCE HISTORY
AVERAGE ANNUAL TOTAL RETURN*
INSTITUTIONAL SHARES
Since inception
1 Year 5 Years 10 Years (inception date)
------ ------- -------- ---------------
SHORT-TERM BOND 5.80% 6.39% 7.17% N/A
MARKET
INTERMEDIATE BOND 5.77% --- --- 6.38% (Jan. 5, 1993)
MARKET
TAX-EXEMPT 4.02% --- --- 4.78% (Feb. 8, 1993)
INTERMEDIATE BOND
BOND IMMDEX/TM 5.35% 8.05% 8.58% N/A
BALANCED 12.56% --- --- 10.36% (Mar. 30, 1992)
GROWTH AND INCOME 26.90% 13.43% --- 12.18% (Dec. 29, 1989)
EQUITY INDEX 23.68% 14.94% 14.14% N/A
MIDCORE GROWTH 18.82% --- --- 11.82% (Dec. 29, 1992)
SPECIAL GROWTH 12.58% 12.96% --- 15.23% (Dec. 28, 1989)
INTERNATIONAL EQUITY 8.21% --- --- 1.61% (Apr. 28, 1994)
AVERAGE ANNUAL TOTAL RETURN*
RETAIL SHARES
1 Year 5 Years 10 Years Since inception
(inception date)
----------------------------------------------
SHORT-TERM BOND 3.42% 5.89% 6.69% N/A
MARKET
INTERMEDIATE BOND 3.38% --- --- 5.71% (Jan. 5, 1993)
MARKET
TAX-EXEMPT 1.78% --- --- 4.10% (Feb. 8, 1993)
INTERMEDIATE BOND
BOND IMMDEX/TM 2.95% 7.53% 8.09% N/A
BALANCED 7.80% --- --- 9.28% (Mar. 30, 1992)
GROWTH AND INCOME 21.56% 12.42% --- 11.44% (Dec. 29, 1989)
EQUITY INDEX 18.43% 13.92% 13.16% N/A
MIDCORE GROWTH 13.77% --- --- 10.51% (Dec. 29, 1992)
SPECIAL GROWTH 7.77% 11.95% --- 14.47% (Dec. 28, 1989)
INTERNATIONAL 3.62% --- --- (0.20)% (Apr. 28, 1994)
EQUITY
* Average annual total return calculations are for periods ended October31,
1996.
The performance of the Short-Term Bond Market, Bond IMMDEX/TM and Equity
Index Funds for the period prior to December 29, 1989 is represented by the
performance of collective investment funds which operated prior to the
effectiveness of the registration statement of the Portico Short-Term Bond
Market, Bond IMMDEX/TM and Equity Index Funds. At the time of the Portico Short-
Term Bond Market, Bond IMMDEX/TM and Equity Index Funds' inception, each
collective investment fund was operated using substantially the same investment
objectives, policies and restrictions as its corresponding Portico fund. In
connection with the Portico Short-Term Bond Market, Bond IMMDEX/TM and Equity
Index Funds' commencement of operations, on December 29, 1989, each collective
investment fund transferred its assets to its Portico Fund equivalent. The
collective investment funds were not registered under the Investment Company Act
of 1940 (the "1940 Act") and were not subject to certain restrictions that are
imposed by the 1940 Act. If the collective investment funds had been registered
under the 1940 Act, performance may have been adversely affected. Performance
of the collective investment funds has been restated to reflect the Portico
Short-Term Bond Market, Bond IMMDEX/TM and Equity Index Funds' respective actual
expenses during such Fund's first fiscal year.
Prior to January 10, 1995, the Funds offered to retail and institutional
investors one series of shares with neither a sales charge nor a 0.25% service
organization fee. Retail Share performance reflects the deduction of the
current maximum sales charge of 4.00% for equity funds and 2.00% for fixed
income funds, but for periods prior to January 10, 1995, Retail Share
performance does not reflect service organization fees. If service organization
fees had been reflected, performance would be reduced.
Performance assumes the reinvestment of all net investment income and
capital gains and reflects fee waivers. In the absence of fee waivers,
performance would be reduced. Performance quotations represent past
performance, and should not be considered as representative of future results.
The Funds may also from time to time include discussions or illustrations
of the effects of compounding in advertisements. "Compounding" refers to
the fact that, if dividends or other distributions on a Fund investment are
reinvested by being paid in additional Fund shares, any future income or capital
appreciation of a Fund would increase the value, not only of the original Fund
investment, but also of the additional Fund shares received through
reinvestment. As a result, the value of the Fund investment would increase more
quickly than if dividends or other distribution had been paid in cash. The
Funds may also include discussions or illustrations of the potential investment
goals of a prospective investor, investment management techniques, policies or
investment suitability of a Fund, economic conditions, the effects of inflation
and historical performance of various asset classes, including but not limited
to, stocks, bonds and Treasury bills. From time to time advertisements or
communications to shareowners may summarize the substance of information
contained in shareowner reports (including the investment composition of a
Fund), as well as the views of the Adviser or Sub-Adviser as to market,
economic, trade and interest trends, legislative, regulatory and monetary
developments, investment strategies and related matters believed to be of
relevance to a Fund. The Funds may also include in advertisements, charts,
graphs or drawings which illustrate the potential risks and rewards of
investment in various investment vehicles, including but not limited to stocks,
bonds, treasury bills and shares of a Fund. In addition, advertisement or
shareowner communications may include a discussion of certain attributes or
benefits to be derived by an investment in a Fund. Such advertisements or
communications may include symbols, headlines or other materials which highlight
or summarize the information discussed in more detail therein.
MISCELLANEOUS
As used in this Statement of Additional Information and in the Funds'
Prospectus, with respect to the approval of an investment advisory agreement or
a charge in fundamental investment policy, a majority of the outstanding shares
of a Fund or portfolio means 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 53201, and its affiliated banks held as beneficial owner five percent
or more of the outstanding shares of the following investment portfolios of the
Company because they possessed sole voting or investment power with respect to
such shares: Money Market Fund 4%; Institutional Money Market Fund 86%; Tax-
Exempt Money Market Fund 45%; U.S. Treasury Money Market Fund 50%; U.S.
Government Money Market Fund 67%; Growth and Income Fund 65%; Short-Term Bond
Market Fund 69%; Special Growth Fund 72%; Bond IMMDEX/TM Fund 80%; Equity Index
Fund 79%; Balanced Fund 79%; Intermediate Bond Market Fund 78%; MidCore Growth
Fund 86%; 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.
- -------------------------------------------------------------------------------
APPENDIX A
Commercial Paper Ratings
A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt considered short-term in the relevant
market. The following summarizes the rating categories used by Standard and
Poor's for commercial paper.
"A-1" - Issue's degree of safety regarding timely payment is strong.
Those issues determined to possess extremely strong safety characteristics are
denoted "A-1+."
"A-2" - Issue's capacity for timely payment is satisfactory. However, the
relative degree of safety is not as high as for issues designated "A-1."
"A-3" - Issue has an adequate capacity for timely payment. It is however,
somewhat more vulnerable to the adverse effects of changes and circumstances
than an obligation carrying a higher designation.
"B"- Issue has only a speculative capacity for timely payment.
"C" - Issue has a doubtful capacity for payment.
"D" - Issue is in payment default.
Moody's commercial paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of 9 months. The following summarizes the rating categories used by
Moody's for commercial paper:
"Prime-1" - Issuer or related supporting institutions are considered to
have a superior capacity for repayment of short-term promissory obligations.
Prime-1 repayment capacity will normally be evidenced by the following
characteristics: leading market positions in well-established industries; high
rates of return on funds employed; conservative capitalization structures with
moderate reliance on debt and ample asset protection; broad margins in earning
coverage of fixed financial charges and high internal cash generation; and
well-established access to a range of financial markets and assured sources of
alternate liquidity.
"Prime-2" - Issuer or related supporting institutions are considered to
have a strong capacity for repayment of short-term promissory obligations.
This will normally be evidenced by many of the characteristics cited above but
to a lesser degree. Earnings trends and coverage ratios, while sound, will be
more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternative
liquidity is maintained.
"Prime-3" - Issuer or related supporting institutions have an acceptable
capacity for repayment of short-term promissory obligations. The effects of
industry characteristics and market composition may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and the requirement for relatively high financial
leverage. Adequate alternate liquidity is maintained.
"Not Prime" - Issuer does not fall within any of the Prime rating
categories.
The three rating categories of Duff & Phelps for investment grade
commercial paper and short-term debt are "D- 1," "D- 2" and "D- 3." Duff &
Phelps employs three designations, "D- 1+," " D- 1" and "D- 1-," within the
highest rating category. The following summarizes the rating categories used
by Duff & Phelps for commercial paper:
"D-1+" - Debt possesses highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-free U.S.
Treasury short-term obligations.
"D-1" - Debt possesses very high certainty of timely payment. Liquidity
factors are excellent and supported by good fundamental protection factors.
Risk factors are minor.
"D-1-" - Debt possesses high certainty of timely payment. Liquidity
factors are strong and supported by good fundamental protection factors. Risk
factors are very small.
"D-2" - Debt possesses good certainty for timely payment. Liquidity
factors and company fundamentals are sound. Although ongoing funding needs may
enlarge total financing requirements, access to capital markets is good. Risk
factors are small.
"D-3" - Debt possesses satisfactory liquidity, and other protection
factors qualify issue as investment grade. Risk factors are larger and subject
to more variation. Nevertheless, timely payment is expected.
"D-4" - Debt possesses speculative investment characteristics. Liquidity
is not sufficient to insure against disruption in debt service. Operating
factors and market access may be subject to a high degree of variation.
"D-5" - Issuer failed to meet scheduled principal and/or interest
payments.
Fitch short-term ratings apply to debt obligations that are payable on
demand or have original maturities of up to three years. The following
summarizes the rating categories used by Fitch for short-term obligations:
"F-1+" - Securities possess exceptionally strong credit quality. Issues
assigned this rating are regarded as having the strongest degree of assurance
for timely payment.
"F-1" - Securities possess very strong credit quality. Issues assigned
this rating reflect an assurance of timely payment only slightly less in degree
than issues rated "F-1+."
"F-2" - Securities possess good credit quality. Issues assigned this
rating have a satisfactory degree of assurance for timely payment, but the
margin of safety is not as great as the "F-1+" and "F-1" categories.
"F-3" - Securities possess fair credit quality. Issues assigned this
rating have characteristics suggesting that the degree of assurance for timely
payment is adequate; however, near-term adverse changes could cause these
securities to be rated below investment grade.
"F-S" - Securities possess weak credit quality. Issues assigned this
rating have characteristics suggesting a minimal degree of assurance for timely
payment and are vulnerable to near-term adverse changes in financial and
economic conditions.
"D" - Securities are in actual or imminent payment default.
Fitch may also use the symbol "LOC" with its short-term ratings to
indicate that the rating is based upon a letter of credit issued by a
commercial bank.
Thomson BankWatch short-term ratings assess the likelihood of an untimely
payment of principal or interest of unsubordinated instruments having a
maturity of one year or less which is issued by United States commercial banks,
thrifts and non-bank banks; non-United States banks; and broker-dealers. The
following summarizes the ratings used by Thomson BankWatch:
"TBW-1" - This designation represents Thomson BankWatch's highest rating
category and indicates a very high likelihood that principal and interest will
be paid on a timely basis.
"TBW-2" - This designation indicates that while the degree of safety
regarding timely repayment of principal and interest is strong, the relative
degree of safety is not as high as for issues rated "TBW-1."
"TBW-3" - This designation represents the lowest investment grade category
and indicates that while the debt is more susceptible to adverse developments
(both internal and external) than obligations with higher ratings, the capacity
to service principal and interest in a timely fashion is considered adequate.
"TBW-4" - This designation indicates that the debt is regarded as non-
investment grade and therefore speculative.
IBCA assesses the investment quality of unsecured debt with an original
maturity of less than one year which is issued by bank holding companies and
their principal bank subsidiaries. The following summarizes the rating
categories used by IBCA for short term debt ratings:
"A1+" - Obligations which posses a particularly strong credit feature and
are supported by the highest capacity for timely repayment.
"A1" - Obligations are supported by the highest capacity for timely
repayment.
"A2" - Obligations are supported by a good capacity for timely repayment.
"A3" - Obligations are supported by a satisfactory capacity for timely
repayment.
"B" - Obligation for which there is an uncertainty as to the capacity to
ensure timely repayment.
"C" - Obligations for which there is a high risk of default or which are
currently in default.
Corporate and Municipal Long-Term Debt Ratings
The following summarizes the ratings used by Standard & Poor's for
corporate and municipal debt:
"AAA" - This designation represents the highest rating assigned by
Standard & Poor's to a debt obligation and indicates an extremely strong
capacity to pay interest and repay principal.
"AA" - Debt is considered to have a very strong capacity to pay interest
and repay principal and differs from AAA issues only in small degree.
"A" - Debt is considered to have a strong capacity to pay interest and
repay principal although such issues are somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than debt
in higher-rated categories.
"BBB" - Debt is regarded as having an adequate capacity to pay interest
and repay principal. Whereas such issues normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher-rated categories.
"BB," "B," "CCC," "CC," and "C" - Debt is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. "BB" indicates the
lowest degree of speculation and "C" the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
"CI" - This rating is reserved for income bonds on which no interest is
being paid.
"D" - Debt is in payment default. This rating is used when interest
payments or principal payments are not made on the date due, even if the
applicable grace period has not expired, unless S&P believes such payments will
be made during such grace period. Rating is also used upon the filing of a
bankruptcy petition if debt service payments are jeopardized.
PLUS (+) OR MINUS (-) - The ratings from "AA" through "CCC" may be
modified by the addition of a plus or minus sign to show relative standing
within the major rating categories.
"r" - This rating is attached to highlight derivative, hybrid, and certain
other obligations that S & P believes may experience high volatility or high
variability in expected returns due to non-credit risks. Examples of such
obligations are: securities whose principal or interest return is indexed to
equities, commodities, or currencies; certain swaps and options; and interest
only and principal only mortgage securities.
The following summarizes the ratings used by Moody's for corporate and
municipal long-term debt:
"Aaa" - Bonds are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
"Aa" - Bonds are judged to be of high quality by all standards. Together
with the "Aaa" group they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in "Aaa" securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in "Aaa" securities.
"A" - Bonds possess many favorable investment attributes and are to be
considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds considered medium-grade obligations, i.e., they are neither
highly protected nor poorly secured. Interest payments and principal security
appear adequate for the present but certain protective elements may be lacking
or may be characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have speculative
characteristics as well.
"Ba," "B," "Caa," "Ca," and "C" - Bonds that possess one of these ratings
provide questionable protection of interest and principal ("Ba" indicates some
speculative elements; "B" indicates a general lack of characteristics of
desirable investment; "Caa" represents a poor standing; "Ca" represents
obligations which are speculative in a high degree; and "C" represents the
lowest rated class of bonds). "Caa," "Ca" and "C" bonds may be in default.
Con. (--) - Bonds for which the security depends upon the completion of
some act or the fulfillment of some condition are rated conditionally. These
are bonds secured by (a) earnings of projects under construction, (b) earnings
of projects unseasoned in operation experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting
condition attaches. Parenthetical rating denotes the probable credit stature
upon completion of construction or elimination of basis of condition.
(P) - When applied to forward delivery bonds, indicates that the rating is
provisional pending delivery of the bonds. The ratings may be revised prior to
delivery if changes occur in the legal documents or the underlying credit
quality of the bonds.
Moody's applies numerical modifiers 1, 2 and 3 in each generic
classification from "Aa" to "B" in its bond rating system. The modifier 1
indicates that the issuer ranks in the higher end of its generic rating
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issuer ranks at the lower end of its generic rating
category.
The following summarizes the long-term debt ratings used by Duff & Phelps
for corporate and municipal long-term debt:
"AAA" - Debt is considered to be of the highest credit quality. The risk
factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt.
"AA" - Debt is considered of high quality. Protection factors are strong.
Risk is modest but may vary slightly from time to time because of economic
conditions.
"A" - Debt possesses protection factors which are average but adequate.
However, risk factors are more variable and greater in periods of economic
stress.
"BBB" - Debt possesses below average protection factors but such
protection factors are still considered sufficient for prudent investment.
Considerable variability in risk is present during economic cycles.
"BB," "B," "CCC," "DD," and "DP" - Debt that possesses one of these
ratings is considered to be below investment grade. Although below investment
grade, debt rated "BB" is deemed likely to meet obligations when due. Debt
rated "B" possesses the risk that obligations will not be met when due. Debt
rated "CCC" is well below investment grade and has considerable uncertainty as
to timely payment of principal, interest or preferred dividends. Debt rated
"DD" is a defaulted debt obligation, and the rating "DP" represents preferred
stock with dividend arrearages.
To provide more detailed indications of credit quality, the "AA," "A,"
"BBB," "BB" and "B" ratings may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within these major categories.
The following summarizes the highest four ratings used by Fitch for
corporate and municipal bonds:
"AAA" - bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
"AA" - Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated "AAA." Because bonds rated
in the "AAA" and "AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debts of these issuers is generally
rated "F-1+."
"A" - Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions
and circumstances than bonds with higher ratings.
"BBB" - Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have an adverse impact on these
bonds, and therefore, impair timely payment. The likelihood that the ratings
of these bonds will fall below investment grade is higher than for bonds with
higher ratings.
"BB," "B," "CCC," "CC," "C," "DDD," "DD," and "D" - bonds that possess one
of these ratings are considered by Fitch to be speculative investments. The
ratings "BB" to "C" represent Fitch's assessment of the likelihood of timely
payment of principal and interest in accordance with the terms of obligation
for bond issues not in default. For defaulted bonds, the rating "DDD" to "D"
is an assessment of the ultimate recovery value through reorganization or
liquidation.
To provide more detailed indications of credit quality, the Fitch ratings
from and including "AA" to "C" may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within these major rating categories.
Thomson BankWatch assesses the likelihood of an untimely repayment of
principal or interest over the term to maturity of long-term debt and preferred
stock which are issued by United States commercial banks, thrifts and non-bank
banks; non-United States banks; and broker-dealers. The following summarizes
the rating categories used by Thomson BankWatch for long-term debt ratings:
"AAA" - This designation represents the highest category assigned by
Thomson BankWatch to long-term debt and indicates that the ability to repay
principal and interest on a timely basis is very high.
"AA" - This designation indicates a very strong ability to repay principal
and interest on a timely basis with limited incremental risk versus issues
rated in the highest category.
"A" - This designation indicates that the ability to repay principal and
interest is strong. Issues rated "A" could be more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.
"BBB" - This designation represents Thomson BankWatch's lowest investment
grade category and indicates an acceptable capacity to repay principal and
interest. Issues rated "BBB" are, however, more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.
"BB," "B," "CCC," and "CC" - These designations are assigned by Thomson
BankWatch to non-investment grade long-term debt. Such issues are regarded as
having speculative characteristics regarding the likelihood of timely payment
of principal and interest. "BB" indicates the lowest degree of speculation and
"CC" the highest degree of speculation.
"D" - this designation indicates that the long-term debt is in default.
PLUS (+) OR MINUS (-) - The ratings from "AAA" through "CC" may include a
plus or minus sign designation which indicates where within the respective
category the issue is placed.
IBCA assesses the investment quality of unsecured debt with an original
maturity of more than one year which is issued by bank holding companies and
their principal bank subsidiaries. The following summarizes the rating
categories used by IBCA for long-term ratings:
"AAA" - Obligations for which there is the lowest expectation of
investment risk. Capacity for timely repayment of principal and interest is
substantial, such that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk substantially.
"AA" - Obligations for which there is a very low expectation of investment
risk. Capacity for timely repayment of principal and interest is substantial.
Adverse changes in business, economic or financial conditions may increase
investment risk albeit not very significantly.
"A" - Obligations for which there is a low expectation of investment risk.
Capacity for timely repayment of principal and interest is strong, although
adverse changes in business, economic or financial conditions may lead to
increased investment risk.
"BBB" - Obligations for which there is currently a low expectation of
investment risk. Capacity for timely repayment of principal and interest is
adequate, although adverse changes in business, economic or financial
conditions are more likely to lead to increased investment risk than for
obligations in other categories.
"BB," "B," "CCC," "CC," and "C" - Obligations are assigned one of these
ratings where it is considered that speculative characteristics are present.
"BB" represents the lowest degree of speculation and indicates a possibility of
investment risk developing. "C" represents the highest degree of speculation
and indicates that the obligations are currently in default.
IBCA may append a rating of plus (+) or minus (-) to a rating to denote
relative status within major rating categories.
Municipal Note Ratings
A Standard and Poor's rating reflects the liquidity concerns and market
access risks unique to notes due in three years or less. The following
summarizes the ratings used by Standard & Poor's Rating Group for municipal
notes:
"SP-1" - The issuers of these municipal notes exhibit very strong or
strong capacity to pay principal and interest. Those issues determined to
possess overwhelming safety characteristics are given a plus (+) designation.
"SP-2" - The issuers of these municipal notes exhibit satisfactory
capacity to pay principal and interest.
"SP-3" - The issuers of these municipal notes exhibit speculative capacity
to pay principal and interest.
Moody's ratings for state and municipal notes and other short-term loans
are designated Moody's Investment Grade ("MIG") and variable rate demand
obligations are designated Variable Moody's Investment Grade ("VMIG"). Such
ratings recognize the differences between short-term credit risk and long-term
risk. The following summarizes the ratings by Moody's Investors Service, Inc.
for short-term notes:
"MIG-1" / "VMIG-1" - Loans bearing this designation are of the best
quality, enjoying strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
"MIG-2" / "VMIG-2" - Loans bearing this designation are of high quality,
with margins of protection ample although not so large as in the preceding
group.
"MIG-3" / "VMIG-3" - Loans bearing this designation are of favorable
quality, with all security elements accounted for but lacking the undeniable
strength of the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well established.
"MIG-4" / "VMIG-4" - Loans bearing this designation are of adequate
quality, carrying specific risk but having protection commonly regarded as
required of an investment security and not distinctly or predominantly
speculative.
"SG" - Loans bearing this designation are of speculative quality and lack
margins of protection.
Duff & Phelps and Fitch use the short-term ratings described under commercial
Paper Ratings for Municipal notes.
APPENDIX B
ADDITIONAL INFORMATION CONCERNING FUTURES AND RELATED
OPTIONS
As stated in the Prospectus, certain of the Funds may enter into futures
contracts and options for hedging purposes. Such transactions are described in
this Appendix. In addition, the Equity Index Fund will purchase and sell
futures and related options (based only on the S&P 500 Index in the case of the
Equity Index Fund) to maintain cash reserves while-simulating full investment
in the stocks underlying the S&P 500 Index, to keep substantially all of its
assets exposed to the market (as represented by the S&P 500 Index), and to
reduce transaction costs. The International Equity Fund may also purchase and
sell index futures contracts and options to maintain cash reserves, to keep all
of its assets substantially exposed to the markets included in the GDP EAFE
Index, to facilitate trading and to reduce transaction costs. During the
current fiscal year, the Short-Term Bond Market, Intermediate Bond Market, Bond
IMMDEX/TM and Growth and Income Funds intend to limit their transactions in
futures contracts and options so that not more than 5% of their net assets, if
any, are at risk and the Equity Index Fund and International Equity Fund will
limit its transactions in futures such that obligations under the transactions
and contracts represent not more than 10% of its assets. Furthermore, in no
event would any Fund purchase or sell futures contracts, or related options
thereon if, immediately thereafter, the aggregate initial margin that is
required to be posted by the Fund under the rules of the exchange on which the
futures contract (or futures option) is traded, plus any premiums paid by the
Fund on its open futures options positions, exceeds 5% of the fund's total
assets, after taking into account any unrealized profits and unrealized losses
on the Fund's open contracts and excluding the amount that a futures option is
"in-the-money" at the time of purchase (an option to buy a futures contract is
"in-the-money" if the value of the contract that is subject to the option
exceeds the exercise price; and option to sell a futures contract is "in-the-
money" if the exercise price exceeds the value of the contract that is subject
of the option.) The International Equity Fund will only enter into futures
contracts and futures options which are standardized and traded on a U.S. or
foreign exchange, board of trade or similar entity, or in the case of futures
options, for which an established over-the-counter market exists.
I. Interest Rate Futures Contracts
Use of Interest Rate Futures Contracts. Bond prices are established in
both the cash market and the futures market. In the cash market, bonds are
purchased and sold with payment for the full purchase price of the bond being
made in cash, generally within five business days after the trade. In the
futures market, only a contract is made to purchase or sell a bond in the
future for a set price on a certain date. Historically, the prices for bonds
established in the futures markets have tended to move generally in the
aggregate in concert with the cash market prices and have maintained fairly
predictable relationships. Accordingly, the Short-Term Bond Market Fund,
Intermediate Bond Market Fund and Bond IMMDEX/TM Fund may use interest rate
futures as a defense, or hedge, against anticipated interest rate changes and
not for speculation. As described below, this would include the use of futures
contract sales to protect against expected increases in interest rates and
futures contract purchases to offset the impact of interest rate declines.
The Short-Term Bond Market Fund, Intermediate Bond Market Fund and Bond
IMMDEX/TM Fund presently could accomplish a similar result to that which they
hope to achieve through the use of futures contracts by selling bonds with long
maturities and investing in bonds with short maturities when interest rates are
expected to increase, or conversely, selling short-term bonds and investing in
long-term bonds when interest rates are expected to decline. However, because
of the liquidity that is often available in the futures market the protection
is more likely to be achieved, perhaps at a lower cost and without changing the
rate of interest being earned by the Fund, through using futures contracts.
Description of Interest Rate Futures Contracts. An interest rate futures
contract sale would create an obligation by the Short-Term Bond Market Fund,
Intermediate Bond Market Fund and Bond IMMDEX/TM Fund, as seller, to deliver
the specific type of financial instrument called for in the contract at a
specific future time for a specified price. A futures contract purchase would
create an obligation by the Fund, as purchaser, to take delivery of the
specific type of financial instrument at a specific future time at a specific
price. The specific securities delivered or taken, respectively, at settlement
date, would not be determined until at or near that date. The determination
would be in accordance with the rules of the exchange on which the futures
contract sale or purchase was made.
Although interest rate futures contracts by their terms call for actual
delivery or acceptance of securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery of
securities. Closing out a futures contract sale is effected by the Fund's
entering into a futures contract purchase for the same aggregate amount of the
specific type of financial instrument and the same delivery date. If the price
in the sale exceeds the price in the offsetting purchase, the Fund is paid the
difference and thus realizes a gain. If the offsetting purchase price exceeds
the sale price, the Fund pays the difference and realizes a loss. Similarly,
the closing out of a futures contract purchase is effected by the Fund's
entering into a futures contract sale. If the offsetting sale price exceeds
the purchase price, the Fund realizes a gain, and if the purchase price exceeds
the offsetting sale price, the Fund realizes a loss.
Interest rate futures contracts are traded in an auction environment on
the floors of several exchanges - principally, the Chicago Board of Trade, the
Chicago Mercantile Exchange and the New York Futures Exchange. The Fund would
deal only in standardized contracts on recognized exchanges. Each exchange
guarantees performance under contract provisions through a clearing
corporation, a nonprofit organization managed by the exchange membership.
A public market now exists in futures contracts covering various financial
instruments including long-term U.S. Treasury Bonds and Notes; Government
National Mortgage Association (GNMA) modified pass-through mortgage-backed
securities; three-month U.S. Treasury Bills; and ninety-day commercial paper.
The Short-Term Bond Market Fund, Intermediate Bond Market Fund and Bond
IMMDEX/TM Fund may trade in any futures contract for which there exists a
public market, including, without limitation, the foregoing instruments.
Examples of Futures Contract Sale. The Short-Term Bond Market Fund,
Intermediate Bond Market Fund and Bond IMMDEX/TM Fund would engage in an
interest rate futures contract sale to maintain the income advantage from
continued holding of a long-term bond while endeavoring to avoid part or all of
the loss in market value that would otherwise accompany a decline in long-term
securities prices. Assume that the market value of a certain security in the
Fund tends to move in concert with the futures market prices of long-term U.S.
Treasury bonds ("Treasury bonds"). The Adviser wishes to fix the current
market value of this portfolio security until some point in the future. Assume
the portfolio security has a market value of 100, and the Adviser believes
that, because of an anticipated rise in interest rates, the value will decline
to 95. The Fund might enter into futures contract sales of Treasury bonds for
an equivalent of 98. If the market value of the portfolio security does indeed
decline from 100 to 95, the equivalent futures market price for the Treasury
bonds might also decline from 98 to 93.
In that case, the five-point loss in the market value of the portfolio
security would be offset by the five-point gain realized by closing out the
futures contract sale. Of course, the futures market price of Treasury bonds
might well decline to more than 93 or to less than 93 because of the imperfect
correlation between cash and futures prices mentioned below.
The Adviser could be wrong in its forecast of interest rates and the
equivalent futures market price could rise above 98. In this case, the market
value of the portfolio securities, including the portfolio security being
protected, would increase. The benefit of this increase would be reduced by
the loss realized on closing out the futures contract sale.
If interest rate levels did not change, the Fund in the above example
might incur a loss of 2 points (which might be reduced by an offsetting
transaction prior to the settlement date). In each transaction, transaction
expenses would also be incurred.
Examples of Futures Contract Purchase. The Short-Term Bond Market Fund,
Intermediate Bond Market Fund and Bond IMMDEX/TM Fund would engage in an
interest rate futures contract purchase when it is not fully invested in long-
term bonds but wishes to defer for a time the purchase of long-term bonds in
light of the availability of advantageous interim investments, e.g., shorter-
term securities whose yields are greater than those available on long-term
bonds. The Fund's basic motivation would be to maintain for a time the income
advantage from investment in the short-term securities; the Fund would be
endeavoring at the same time to eliminate the effect of all or part of an
expected increase in market price of the long-term bonds that the fund may
purchase.
For example, assume that the market price of a long-term bond that the
Fund may purchase, currently yielding 10%, tends to move in concert with
futures market prices of Treasury bonds. The Adviser wishes to fix the current
market price (and thus 10% yield) of the long-term bond until the time (four
months away in this example) when it may purchase the bond. Assume the long-
term bond has a market price of 100, and the Adviser believes that, because of
an anticipated fall in interest rates, the price will have risen to 105 (and
the yield will have dropped to about 9 1/2%) in four months. The Fund might
enter into futures contracts purchases of Treasury bonds for an equivalent
price of 98. At the same time, the Fund would assign a pool of investments in
short-term securities that are either maturing in four months or earmarked for
sale in four months, for purchase of the long-term bond at an assumed market
price of 100. Assume these short-term securities are yielding 15%. If the
market price of the long-term bond does indeed rise from 100 to 105, the
equivalent futures market price for Treasury bonds might also rise from 98 to
103. In that case, the 5-point increase in the price that the Fund pays for
the long-term bond would be offset by the 5-point gain realized by closing out
the futures contract purchase.
The Adviser could be wrong in its forecast of interest rates; long-term
interest rates might rise to above 10%; and the equivalent futures market price
could fall below 98. If short-term rates at the same time fall to 10% or
below, it is possible that the fund would continue with its purchase program
for long-term bonds. The market price of available long-term bonds would have
decreased. The benefit of this price decrease, and thus yield increase, will
be reduced by the loss realized on closing out the futures contract purchase.
If, however, short-term rates remained above available long-term rates, it
is possible that the Fund would discontinue its purchase program for long-term
bonds. The yield on short-term securities in the portfolio, including those
originally in the pool assigned to the particular long-term bond, would remain
higher than yields on long-term bonds. The benefit of this continued
incremental income will be reduced by the loss realized on closing out the
futures contract purchase.
In each transaction, expenses would also be incurred.
II. Index Futures Contracts.
A stock or bond index assigns relative values to the stocks or bonds
included in the index and the index fluctuates with changes in the market
values of the stocks or bonds included. Some stock index futures contracts are
based on broad market indexes, such as the Standard & Poor's 500 or the New
York Stock Exchange Composite Index. In contrast, certain exchanges offer
futures contracts on narrower market indexes, such as the Standard & Poor's 100
or indexes based on an industry or market segment, such as oil and gas stocks.
Futures contracts are traded on organized exchanges regulated by the Commodity
Futures Trading Commission. Transactions on such exchanges are cleared through
a clearing corporation, which guarantees the performance of the parties to each
contract. With regard to the International Equity Fund, the Adviser and Sub-
Adviser anticipate engaging in transactions, from time to time, in foreign
stock index futures such as the ALL-ORDS (Australia), CAC-40 (France), TOPIX
(Japan) and the FTSE-100 (United Kingdom).
The Growth and Income Fund, the Equity Index and International Equity
Funds will sell index futures contracts in order to offset a decrease in market
value of its portfolio securities that might otherwise result from a market
decline. The Funds may do so either to hedge the value of its portfolio as a
whole, or to protect against declines, occurring prior to sales of securities,
in the value of the securities to be sold. Conversely, these Funds may
purchase index futures contracts in anticipation of purchases of securities,
with respect to the Equity Index Fund and International Equity Fund, to
maintain cash reserves while simulating full investment in stocks underlying
the S&P 500 Index (in the case of the Equity Index Fund) and the portion of the
GDP EAFE Index within which the International Equity Fund invests (in the case
of the International Equity Fund) and to keep substantially all of its assets
exposed to market. In a substantial majority of these transactions, the Funds
will purchase such securities upon termination of the long futures position,
but a long futures position may be terminated without a corresponding purchase
of securities.
In addition, the funds may utilize index futures contracts in anticipation
of changes in the composition of its portfolio holdings. For example, in the
event that a Fund expects to narrow the range of industry groups represented in
its holdings it may, prior to making purchases of the actual securities,
establish a long futures position based on a more restricted index, such as an
index comprised of securities of a particular industry group. The Fund may
also sell futures contracts in connection with this strategy, in order to
protect against the possibility that the value of the securities to be sold as
part of the restructuring of the portfolio will decline prior to the time of
sale.
The following are examples of transactions in stock index futures (net of
commissions and premiums, if any).
ANTICIPATORY PURCHASE HEDGE: Buy the Future Hedge
Objective: Protect Against Increasing Price
Portfolio Futures
-Day Hedge is Placed-
Anticipate Buying $62,500 Buying 1 Index Futures at 125
Equity Portfolio Value of Futures=$62,500/Contract
-Day Hedge is Lifted-
Buy Equity Portfolio with Sell 1 Index Futures at 130
Actual Cost = $65,000 Value of Futures = $65,000/Contract
Increase in Purchase Price = $2,500 Gain on Futures = $2,500
HEDGING A STOCK PORTFOLIO: Sell the Future
Hedge Objective: Protect Against Declining
Value of the Portfolio
Factors:
Value of Stock Portfolio = $1,000,000
Value of Futures Contract = 125 x $500 = $62,500
Portfolio Beta Relative to the Index = 1.0
Portfolio Futures
-Day Hedge is Placed-
Anticipate Selling $1,000,000 Sell 16 Index Futures at 125
Equity Portfolio Value of Futures = $1,000,000
-Day Hedge is Lifted-
Equity Portfolio - Own Buy 16 Index Futures at 120
Stock with Value = $960,000 Value of Futures = $960,000
Loss in Portfolio Value = $40,000 Gain on Futures = $40,000
If however, the market moved in the opposite direction, that is, market value
decreased and the Fund had entered into an anticipatory purchase hedge, or
market value increased and the fund had hedged its stock portfolio, the results
of the Fund's transactions in stock index futures would be as set forth below.
Portfolio Futures
-Day Hedge is Placed-
Anticipate Buying $62,500 Buying 1 Index Futures at 125
Equity Portfolio Value of Futures=$62,500/Contract
Portfolio Futures
-Day Hedge is Lifted-
Buy Equity Portfolio with Sell 1 Index Futures at 120
Actual Cost - $60,000 Value of Futures = $60,000/Contract
Decrease in Purchase Price = $2,500 Loss on Futures = $2,500
HEDGING A STOCK PORTFOLIO: Sell the Future
Hedge Objective: Protect Against Declining
Value of the Portfolio
Factors:
Value of Stock Portfolio = $1,000,000
Value of Futures Contract = 125 x $500 = $62,500
Portfolio Beta Relative to the Index = 1.0
Portfolio Futures
-Day Hedge is Placed-
Anticipate Selling $1,000,000 Sell 16 Index Futures at 125
Equity Portfolio Value of Futures = $1,000,000
-Day Hedge is Lifted-
Equity Portfolio - Own Buy 16 Index Futures at 130
Stock with Value = $1,040,000 Value of Futures = $1,040,000
Loss in Portfolio Value = $40,000 Gain on Futures = $40,000
III. Margin Payments.
Unlike when a Fund purchases or sells a security, no price is paid or
received by the Fund upon the purchase or sale of a futures contract.
Initially, in accordance with the terms of the exchange on which such futures
contract is traded, the fund may be required to deposit with the broker or in a
segregated account with the Fund's custodian an amount of cash or cash
equivalents, the value of which may vary but is generally equal to 10% or less
of the value of the contract. This amount is known as initial margin. The
nature of initial margin in futures transactions is different from that of
margin in security transactions in that futures contract margin does not
involve the borrowing of funds by the customer to finance the transactions.
Rather, the initial margin is in the nature of a performance bond or good faith
deposit on the contract which is returned to the Fund upon termination of the
futures contract assuming all contractual obligations have been satisfied.
Subsequent payments, called variation margin, to and from the broker, will be
made on a daily basis as the price of the underlying security or index
fluctuates making the long and short positions in the futures contract more or
less valuable, a process known as marking to the market. For example, when a
Fund has purchased a futures contract and the price of the contract has risen
in response to a rise in the underlying instruments, that position will have
increased in value and the Fund will be entitled to receive from the broker a
variation margin payment equal to that increase in value. Conversely, where a
Fund has purchased a futures contract and the price of the future contract has
declined in response to a decrease in the underlying instruments, the position
would be less valuable and the Fund would be required to make a variation
margin payment to the broker. At any time prior to expiration of the futures
contract, the Adviser and the Sub-Adviser may elect to close the position by
taking an opposite position, subject to the availability of a secondary market,
which will operate to terminate the Fund's position in the futures contract. A
final determination of variation margin is then made, additional cash is
required to be paid by or released to the Fund, and the Fund realizes a loss or
gain.
IV. Risks of Transactions in Futures Contracts.
There are several risks in connection with the use of futures by a Fund as
a hedging devise. One risk arises because of the imperfect correlation between
movements in the price of the future and movements in the price of the
securities which are the subject of the hedge. The price of the future may
move more than or less than the price of the securities being hedged. If the
price of the future moves less than the price of the securities which are the
subject of the hedge, the hedge will not be fully effective but, if the price
of the securities being hedged has moved in an unfavorable direction, the Fund
would be in a better position than if it had not hedged at all. If the price
of the securities being hedged has moved in an unfavorable direction, the Fund
would be in a better position than if it had not hedged at all. If the price
of the securities being hedged has moved in a favorable direction, this
advantage will be partially offset by the loss on the future. If the price of
the future moves more than the price of the hedged securities, the Fund
involved will experience either a loss or gain on the future which will not be
completely offset by movements in the price of the securities which are the
subject of the hedge. To compensate for the imperfect correlation of movements
in the price of securities being hedged and movements in the price of futures
contracts, a Fund may buy or sell futures contracts in a greater dollar amount
than the dollar amount of securities being hedged if the volatility over a
particular time period of the prices of such securities has been greater than
the volatility over such time period of the future, or if otherwise deemed to
be appropriate by the Adviser. Conversely, a Fund may buy or sell fewer
futures contracts if the volatility over a particular time period of the prices
of the securities being hedged is less than the volatility over such time
period of the futures contract being used, or if otherwise deemed to be
appropriate by the Adviser. It is also possible that, where a Fund has sold
futures to hedge its portfolio against a decline in the market, the market may
advance and the value of securities held by the Fund may decline. If this
occurred, the Fund would lose money on the future and also experience a decline
in value in its portfolio securities. With regard to the International Equity
Fund, there is presently no index futures contract that is based on the GDP
EAFE Index and there is an imperfect correlation between the securities
represented by the various international stock index futures available to the
Fund and the GDP EAFE Index.
Where futures are purchased to hedge against a possible increase in the
price of securities before a Fund is able to invest its cash (or cash
equivalents) in securities (or options) in an orderly fashion, it is possible
that the market may decline instead; if the Fund then concludes not to invest
in securities or options at that time because of concern as to possible further
market decline or for other reasons, the Fund will realize a loss on the
futures contract that is not offset by a reduction in the price of securities
purchased.
In instances involving the purchase of futures contracts by a Fund, an
amount of cash and cash equivalents, equal to the market value of the futures
contracts, will be deposited in a segregated account with the Fund's custodian
and/or in a margin account with a broker to collateralize the position and
thereby insure that the use of such futures is unleveraged.
In addition to the possibility that there may be an imperfect correlation,
or no correlation at all, between movements in the futures and the securities
being hedged, the price of futures may not correlate perfectly with movement in
the cash market due to certain market distortions. Rather than meeting
additional margin deposit requirements, investors may close futures contracts
through off-setting transactions which could distort the normal relationship
between the cash and futures markets. Second, with respect to financial
futures contracts, the liquidity of the futures market depends on participants
entering into off-setting transactions rather than making or taking delivery.
To the extent participants decide to make or take delivery, liquidity in the
futures market could be reduced thus producing distortions. Third, from the
point of view of speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities market. Therefore,
increased participation by speculators in the futures market may also cause
temporary price distortions. Due to the possibility of price distortion in the
futures market, and because of the imperfect correlation between the movements
in the cash market and movements in the price of futures, a correct forecast of
general market trends or interest rate movements by the Adviser and Sub-Adviser
may still not result in a successful hedging transaction over a short time
frame.
Positions in futures may be closed out only on an exchange or board of
trade which provides a secondary market for such futures. Although the Fund
intends to purchase or sell futures only on exchanges or boards of trade where
there appear to be active secondary markets, there is no assurance that a
liquid secondary market on any exchange or board of trade will exist for any
particular contract or at any particular time. In such event, it may not be
possible to close a futures investment position, and in the event of adverse
price movements, a Fund would continue to be required to make daily cash
payments of variation margin. However, in the event futures contracts have
been used to hedge portfolio securities, such securities will not be sold until
the futures contract can be terminated. In such circumstances, an increase in
the price of the securities, if any, may partially or completely offset losses
on the futures contract and thus provide an offset on a futures contract.
Further, it should be noted that the liquidity of a secondary market in a
futures contract may be adversely affected by "daily price fluctuation limits"
established by commodity exchanges which limit the amount of fluctuation in a
futures contract price during a single trading day. Once the daily limit has
been reached in the contract, no trades may be entered into at a price beyond
the limit, thus preventing the liquidation of open futures positions.
Successful use of futures by a Fund is also subject to the Adviser's
ability to predict correctly movements in the direction of the market. For
example, if a Fund has hedged against the possibility of a decline in the
market adversely affecting securities held in its portfolio and securities
prices increase instead, the Fund will lose part or all of the benefit to the
increased value of its securities which it has hedged because it will have
offsetting losses in its futures positions. In addition, in such situations,
if the Fund has insufficient cash, it may have to sell securities to meet daily
variation margin requirements. Such sales of securities may be, but will not
necessarily be, at increased prices which reflect the rising market. A Fund
may have to sell securities at a time when it may be disadvantageous to do so.
V. Options on Futures Contracts.
A Fund may purchase options on the futures contracts described above. A
futures option gives the holder, in return for the premium paid, the right to
buy (call) from or sell (put) to the writer of the option a futures contract at
a specified price at any time during the period of the option. Upon exercise,
the writer of the option is obligated to pay the difference between the cash
value of the futures contract and the exercise price. Like the buyer or seller
of a futures contract, the holder, or writer, of an option has the right to
terminate its position prior to the scheduled expiration of the option by
selling, or purchasing, an option of the same series, at which time the person
entering into the closing transaction will realize a gain or loss.
Investments in futures options involve some of the same considerations
that are involved in connection with investments in futures contracts (for
example, the existence of a liquid secondary market). In addition, the
purchase of an option also entails the risk that changes in the value of the
underlying futures contract will not be fully reflected in the value of the
option purchased. Depending on the pricing of the option compared to either
the futures contract upon which it is based, or upon the price of the
securities being hedged, an option may or may not be less risky than ownership
of the futures contract or such securities. In general, the market prices of
options can be expected to be more volatile than the market prices on the
underlying futures contract. Compared to the purchase or sale of futures
contracts, however, the purchase of call or put options on futures contracts
may frequently involve less potential risk to a Fund because the maximum amount
at risk is the premium paid for the options (plus transaction costs). Although
permitted by their fundamental investment policies, the Funds do not currently
intend to write futures options, and will not do so in the future absent any
necessary regulatory approvals.
VI. Accounting and Tax Treatment.
Accounting for futures contracts and options will be in accordance with
generally accepted accounting principles.
Generally, futures contracts held by a Fund at the close of the Fund's
taxable year will be treated for federal income tax purposes as sold for their
fair market value on the last business day of such year, a process known as
"mark-to-market." Forty percent of any gain or loss resulting from such
constructive sale will be treated as short-term capital gain or loss and 60% of
such gain or loss will be treated as long-term capital gain or loss without
regard to the length of time the Fund holds the futures contract ("the 40%-60%
rule"). The amount of any capital gain or loss actually realized by a Fund in
a subsequent sale or other disposition of those futures contracts will be
adjusted to reflect any capital gain or loss taken into account by the Fund in
a prior year as a result of the constructive sale of the contracts. With
respect to futures contracts to sell, which will be regarded as parts of a
"mixed straddle" because their values fluctuate inversely to the values of
specific securities held by the Fund, losses as to such contracts to sell will
be subject to certain loss deferral rules which limit the amount of loss
currently deductible on either part of the straddle to the amount thereof which
exceeds the unrecognized gain (if any) with respect to the other part of the
straddle, and to certain wash sales regulations. Under short sales rules,
which will also be applicable, the holding period of the securities forming
part of the straddle will (if they have not been held for the long-term holding
period) be deemed not to begin prior to termination of the straddle. With
respect to certain futures contracts, deductions for interest and carrying
charges will not be allowed. Notwithstanding the rules described above, with
respect to futures contracts to sell which are properly identified as such, a
Fund may make an election which will exempt (in whole or in part) those
identified futures contracts from being treated for federal income tax purposes
as sold on the last business day of the Fund's taxable year, but gains and
losses will be subject to such short sales, wash sales, loss deferral rules and
the requirement to capitalize interest and carrying charges. Under temporary
regulations, a Fund would be allowed (in lieu of the foregoing) to elect to
either (1) to offset gains or losses from portions which are part of a mixed
straddle by separately identifying each mixed straddle to which such treatment
applies, or (2) to establish a mixed straddle account for which gains and
losses would be recognized and offset on a periodic basis during the taxable
year. Under either election, the 40%-60% rule will apply to the net gain or
loss attributable to the futures contracts, but in the case of a mixed straddle
account election, not more than 50% of any net gain may be treated as long-term
and no more than 40% of any net loss may be treated as short-term. Options on
futures contracts generally receive federal tax treatment similar to that
described above.
Special rules govern the federal income tax treatment of certain
transactions denominated in terms of a currency other than the U.S. dollar or
determined by reference to the value of one or more currencies other than the
U.S. dollar. The types of transactions covered by the special rules include
the following: (i) the acquisition of, or becoming the obligor under, a bond or
other debt instrument (including, to the extent provided in Treasury
regulations, preferred stock); (ii) the accruing of certain trade receivables
and payables; and (iii) the entering into or acquisition of any forward
contract, futures contract, option or similar financial instrument. The
disposition of a currency other than the U.S. dollar by a U.S. taxpayer is also
treated as a transaction subject to the special currency rules. However,
foreign currency-related regulated futures contracts and nonequity options are
generally not subject to the special currency rules if they are or would be
treated as sold for their fair market value at year-end under the mark-to-
market rules unless an election is made to have such currency rules apply.
With respect to transactions covered by the special rules, foreign currency
gain or loss is calculated separately from any gain or loss on the underlying
transaction and is normally taxable as ordinary gain or loss. The Fund may
elect to treat as capital gain or loss foreign currency gain or loss arising
from certain identified forward contracts, futures contracts and options that
are capital assets in the hands of the Fund and which are not part of a
straddle. In accordance with Treasury regulations, certain transactions
subject to the special currency rules that are part of a "Section 988 hedging
transactions" (as defined in the Code and the Treasury regulations) will be
integrated and treated as a single transaction or otherwise treated
consistently for purposes of the Code. "Section 988 hedging transactions" are
not subject to the mark-to-market or loss deferral rules under the Code. It is
possible that some of the non-U.S. dollar denominated investments that Growth
and Income Fund, and International Equity Fund may make will be subject to the
special currency rules described above. Gain or loss attributable to the
foreign currency component of transactions engaged in by a Fund which are not
subject to the special currency rules (such as foreign equity investment other
than certain preferred stocks) will be treated as capital gain or loss and will
not be segregated from the gain or loss on the underlying transaction.
Qualification as a regulated investment company under the Code requires
that each Fund satisfy certain requirements with respect to the source of its
income during a taxable year. At least 90% of the gross income of each Fund
must be derived from dividends, interest, certain payments with respect to
securities loans, gains from the sale or other disposition of stock, securities
or foreign currencies, and other income (including but not limited to gains
from options, futures or forward contracts) derived with respect to the Fund's
business of investing in such stock, securities or currencies. The Treasury
Department may by regulation exclude from qualifying income foreign currency
gains which are not directly related to a Fund's principal business of
investment in stock or securities, or options and futures with respect to stock
or securities. Any income derived by a Fund from a partnership or trust is
treated for this purpose as derived with respect to the Fund's business of
investment in stock, securities or currencies only to the extent that such
income is attributable to items of income which would have been qualifying
income if realized by the Fund in the same manner as by the partnership or
trust.
An additional requirement for qualification as a regulated investment
company under the Code is that less than 30% of a Fund's gross income must be
derived from gains realized on the sale or other disposition of the following
investments held for less than three months: (1) stock and securities (as
defined in section 2(a)(36) of the 1940 Act); (2) options, futures and forward
contracts other than those on foreign currencies; and (3) foreign currencies
(and options, futures and forward contracts on foreign currencies) that are not
directly related to a Fund's principal business of investment in stock and
securities (and options and futures with respect to stock and securities).
With respect to futures contracts and other financial instruments subject to
the marking-to-market rules, the Internal Revenue Service has ruled in private
letter rulings that a gain realized from such a futures contract or financial
instrument will be treated as being derived from a security held for three
months or more (regardless of the actual period for which the contract or
instrument is held) if the gain arises as a result of a constructive sale under
the marking-to-market rules, and will be treated as being derived from a
security held for less than three months only if the contract or instrument is
terminated (or transferred) during the taxable year (other than by reason of
mark-to-market) and less than three months have elapsed between the date the
contract or instrument is acquired and the termination date. In determining
whether the 30% test is met for a taxable year, increases and decreases in the
value of each Fund's futures contracts and other investments that qualify as
part of a "designated hedge," as defined in the Code, may be netted.
- -------------------------------------------------------------------------------
PORTICO FUNDS, INC.
(Money Market Fund, U.S. Treasury Money Market Fund,
U.S. Government Money Market Fund, Tax-Exempt Money Market Fund
and Institutional Money Market Fund)
Form N-1A
Cross Reference Sheet
-----------------------------------
Part B
Item No. Heading
- -------- -------
10. Cover Page................................. Cover Page
11. Table of Contents.......................... Table of Contents
12. General Information and History............ Inapplicable
13. Investment Objectives and Policies......... Investment
Objectives and
Policies
14. Management of the Fund..................... Management of the
Company
15. Control Persons and Principal Holders
of Securities. . . . . . . . . . . . . . . Management of the
Company;
Miscellaneous
16. Investment Advisory and Other Services .... Management of the
the Company;
Custodian, Transfer
Agent and
Accounting
Services Agent;
Expenses
17. Brokerage Allocation and Other Practices... Management of the
Company
18. Capital Stock and Other Securities......... Description of
Shares
19. Purchase, Redemption and Pricing of Securities Net Asset Value;
Being Offered................................ Additional Purchase
and Redemption
Information
20. Tax Status................................. Additional
Information
Concerning Taxes
21. Underwriters................................. Management of the
Company
22. Calculation of Performance Data.............. Additional
Information
on Yield
PART C
Information to be included in Part C is set forth under the appropriate item so
numbered in Part C to this Registration Statement.
- -------------------------------------------------------------------------------
PORTICO FUNDS, INC.
Statement of Additional Information
for the 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
TABLE OF CONTENTS
-----------------
Page
----
Portico Funds........................................... 2
Investment Objectives and Policies...................... 2
Additional Information on Portfolio
Instruments............................................. 11
Net Asset Value......................................... 13
Additional Purchase and Redemption Information.......... 14
Additional Information Regarding Shareowner Services
for the U.S. Government Money Market, U.S. Treasury
Money Market, Money Market and Tax-Exempt Money
MarketFunds ......................................... 17
Description of Shares................................... 17
Additional Information Concerning Taxes................. 19
Management of the Company............................... 22
Custodian, Transfer Agent, Disbursing Agent
and Accounting Services Agent ....................... 30
Expenses................................................ 31
Independent Accountants................................. 31
Counsel................................................. 31
Additional Information on Yield......................... 32
Miscellaneous........................................... 33
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.
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.
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/R Transactions
- --------------------------
The Funds permit shareowners to effect ConvertiFund/R 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/R 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 of Fund in Which Stock Number of Authorized Shares
Common Stock Represents Interest 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:
Principal
Position with Occupations During Past 5
Name, Address and Age the Company Years and Other Affiliations
- --------------------- ------------- ----------------------------
James M. Wade* Chairman, Vice President and Chief
2802 Wind Bluff Circle President and Financial Officer, Johnson
Wilmington, NC 28409 Treasurer Controls, Inc. (a controls
Age: 53 manufacturing company),
January 1987 - May 1991.
Glen R. Bomberger Director Executive Vice President,
One Park Plaza Chief Financial Officer and
11270 West Park Place Director, A.O. Smith
Milwaukee, WI 53224-3690 Corporation (a diversified
Age: 59 manufacturing company) since
January 1987; Director of
companies affiliated with
A.O. Smith Corporation;
Chief Financial Officer,
Director and Vice President,
Smith Investment Company;
Officer and Director of
companies affiliated with
Smith Investment Company.
Jerry G. Remmel Director Vice President, Treasurer
16650A Lake Circle and Chief Financial Officer
Brookfield, WI 53005 of Wisconsin Energy
Age: 65 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 Director President, Chief Executive
400 Three Springs Drive Officer, and Chief Operating
Weirton, WV 26062-4989 Officer of Weirton Steel
Age: 52 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* Director Vice President - Finance,
14245 Heatherwood Court Chief Financial Officer and
Elm Grove, WI 53122 Secretary, Rexnord
Age: 66 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 Vice President President and Chief
777 East Wisconsin Avenue Operating Officer FIRMCO
Suite 800 since 1994, Director since
Milwaukee, WI 53202 1992 and Director of Fixed
Age: 40 Income series since 1990.
W. Bruce McConnel, III Secretary Partner of the law firm of
Philadelphia National Bank Drinker Biddle & Reath.
1345 Chestnut Street
Philadelphia, PA 19107
Age: 53
* Messrs. Wade and Roy are considered by the Company to be "interested
directors" of the Company as defined in the 1940 Act.
The following chart provides certain information about the Director
fees for the year ended October 31, 1996 of the Company's Directors.
TOTAL
PENSION OR COMPENSATION
RETIREMENT ESTIMATED FROM COMPANY
AGGREGATE BENEFITS ANNUAL AND FUND
COMPENSATION ACCRUED AS BENEFITS COMPLEX *
NAME OF FROM THE PART OF FUND UPON PAID TO
PERSON/POSITION COMPANY EXPENSES RETIREMENT DIRECTORS
--------------- ------------ ------------ ---------- -----------
James M. Wade
President,
Treasurer and
Chairman of the $15,000 $0 $0 $15,000
Board
Glen R. Bomberger
Director 12,000+ $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.
+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 $422,104 $319,171
(266,408) (365,955) (384,249)
U.S. Treasury Money 228,672 199,277 102,634
Market Fund (84,582) (97,487) (130,917)
U.S. Government Money 886,823 730,168 524,889
Market Fund (74,691) (136,091) (442,933)
Tax-Exempt Money 307,395 232,548 171,919
Market Fund (88,415) (118,037) (214,967)
Institutional Money 2,207,362 1,670,220 722,865
Market Fund (1,670,748) (1,882,153) (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 29,446 (42,094) 27,263 (44,793) 29,836 (27,368)
Market Fund
U. S. Government Money 84,282 (135,306) 77,856 (130,337) 132,045 (105,050)
Market Fund
Tax-Exempt Money 37,207 (53,187) 31,469 (51,566) 56,785 (37,943)
Market Fund
Institutional Money 205,168 (680,504) 215,820 (647,783) 221,920 (593,834)
Market Fund
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 shares (in addition to support services), that Plan has been adopted in
accordance with Rule 12b-1 under the 1940 Act. In accordance with the Plans,
the Board of Directors reviews, at least quarterly, a written report of the
amounts expended in connection with the 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
oney Market Fund $45,429 $35,574 $19,423
.S. Government Money 501 365 573
arket Fund
ax-Exempt Money 140 260 222
arket Fund
nstitutional Money 0 0 0
arket Fund
.S. Treasury Money 0 46 0
arket Fund
The Funds paid fees to Shareowner Organizations, all of which were affiliated
with the 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 0 48,913 367,140
Money Market Fund
Tax-Exempt Money 0 16,271 110,489
Market Fund
Institutional Money 0 293,262 1,324,778
Market Fund
U. S. Treasury Money 0 12,934 50,187
Market Fund
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 IMMDEX/TM 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.
- -------------------------------------------------------------------------------
APPENDIX A
Commercial Paper Ratings
A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt considered short-term in the relevant
market. The following summarizes the rating categories used by Standard and
Poor's for commercial paper.
"A-1" - Issue's degree of safety regarding timely payment is strong.
Those issues determined to possess extremely strong safety characteristics are
denoted "A-1+."
"A-2" - Issue's capacity for timely payment is satisfactory. However, the
relative degree of safety is not as high as for issues designated "A-1."
"A-3" - Issue has an adequate capacity for timely payment. It is however,
somewhat more vulnerable to the adverse effects of changes and circumstances
than an obligation carrying a higher designation.
"B"- Issue has only a speculative capacity for timely payment.
"C" - Issue has a doubtful capacity for payment.
"D" - Issue is in payment default.
Moody's commercial paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of 9 months. The following summarizes the rating categories used by
Moody's for commercial paper:
"Prime-1" - Issuer or related supporting institutions are considered to
have a superior capacity for repayment of short-term promissory obligations.
Prime-1 repayment capacity will normally be evidenced by the following
characteristics: leading market positions in well-established industries; high
rates of return on funds employed; conservative capitalization structures with
moderate reliance on debt and ample asset protection; broad margins in earning
coverage of fixed financial charges and high internal cash generation; and
well-established access to a range of financial markets and assured sources of
alternate liquidity.
"Prime-2" - Issuer or related supporting institutions are considered to
have a strong capacity for repayment of short-term promissory obligations.
This will normally be evidenced by many of the characteristics cited above but
to a lesser degree. Earnings trends and coverage ratios, while sound, will be
more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternative
liquidity is maintained.
"Prime-3" - Issuer or related supporting institutions have an acceptable
capacity for repayment of short-term promissory obligations. The effects of
industry characteristics and market composition may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and the requirement for relatively high financial
leverage. Adequate alternate liquidity is maintained.
"Not Prime" - Issuer does not fall within any of the Prime rating
categories.
The three rating categories of Duff & Phelps for investment grade
commercial paper and short-term debt are "D- 1," "D- 2" and "D- 3." Duff &
Phelps employs three designations, "D- 1+," " D- 1" and "D- 1-," within the
highest rating category. The following summarizes the rating categories used
by Duff & Phelps for commercial paper:
"D-1+" - Debt possesses highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-free U.S.
Treasury short-term obligations.
"D-1" - Debt possesses very high certainty of timely payment. Liquidity
factors are excellent and supported by good fundamental protection factors.
Risk factors are minor.
"D-1-" - Debt possesses high certainty of timely payment. Liquidity
factors are strong and supported by good fundamental protection factors. Risk
factors are very small.
"D-2" - Debt possesses good certainty for timely payment. Liquidity
factors and company fundamentals are sound. Although ongoing funding needs may
enlarge total financing requirements, access to capital markets is good. Risk
factors are small.
"D-3" - Debt possesses satisfactory liquidity, and other protection
factors qualify issue as investment grade. Risk factors are larger and subject
to more variation. Nevertheless, timely payment is expected.
"D-4" - Debt possesses speculative investment characteristics. Liquidity
is not sufficient to insure against disruption in debt service. Operating
factors and market access may be subject to a high degree of variation.
"D-5" - Issuer failed to meet scheduled principal and/or interest
payments.
Fitch short-term ratings apply to debt obligations that are payable on
demand or have original maturities of up to three years. The following
summarizes the rating categories used by Fitch for short-term obligations:
"F-1+" - Securities possess exceptionally strong credit quality. Issues
assigned this rating are regarded as having the strongest degree of assurance
for timely payment.
"F-1" - Securities possess very strong credit quality. Issues assigned
this rating reflect an assurance of timely payment only slightly less in degree
than issues rated "F-1+."
"F-2" - Securities possess good credit quality. Issues assigned this
rating have a satisfactory degree of assurance for timely payment, but the
margin of safety is not as great as the "F-1+" and "F-1" categories.
"F-3" - Securities possess fair credit quality. Issues assigned this
rating have characteristics suggesting that the degree of assurance for timely
payment is adequate; however, near-term adverse changes could cause these
securities to be rated below investment grade.
"F-S" - Securities possess weak credit quality. Issues assigned this
rating have characteristics suggesting a minimal degree of assurance for timely
payment and are vulnerable to near-term adverse changes in financial and
economic conditions.
"D" - Securities are in actual or imminent payment default.
Fitch may also use the symbol "LOC" with its short-term ratings to
indicate that the rating is based upon a letter of credit issued by a
commercial bank.
Thomson BankWatch short-term ratings assess the likelihood of an untimely
payment of principal or interest of unsubordinated instruments having a
maturity of one year or less which is issued by United States commercial banks,
thrifts and non-bank banks; non-United States banks; and broker-dealers. The
following summarizes the ratings used by Thomson BankWatch:
"TBW-1" - This designation represents Thomson BankWatch's highest rating
category and indicates a very high likelihood that principal and interest will
be paid on a timely basis.
"TBW-2" - This designation indicates that while the degree of safety
regarding timely repayment of principal and interest is strong, the relative
degree of safety is not as high as for issues rated "TBW-1."
"TBW-3" - This designation represents the lowest investment grade category
and indicates that while the debt is more susceptible to adverse developments
(both internal and external) than obligations with higher ratings, the capacity
to service principal and interest in a timely fashion is considered adequate.
"TBW-4" - This designation indicates that the debt is regarded as non-
investment grade and therefore speculative.
IBCA assesses the investment quality of unsecured debt with an original
maturity of less than one year which is issued by bank holding companies and
their principal bank subsidiaries. The following summarizes the rating
categories used by IBCA for short term debt ratings:
"A1+" - Obligations which posses a particularly strong credit feature and
are supported by the highest capacity for timely repayment.
"A1" - Obligations are supported by the highest capacity for timely
repayment.
"A2" - Obligations are supported by a good capacity for timely repayment.
"A3" - Obligations are supported by a satisfactory capacity for timely
repayment.
"B" - Obligation for which there is an uncertainty as to the capacity to
ensure timely repayment.
"C" - Obligations for which there is a high risk of default or which are
currently in default.
Corporate and Municipal Long-Term Debt Ratings
The following summarizes the ratings used by Standard & Poor's for
corporate and municipal debt:
"AAA" - This designation represents the highest rating assigned by
Standard & Poor's to a debt obligation and indicates an extremely strong
capacity to pay interest and repay principal.
"AA" - Debt is considered to have a very strong capacity to pay interest
and repay principal and differs from AAA issues only in small degree.
"A" - Debt is considered to have a strong capacity to pay interest and
repay principal although such issues are somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than debt
in higher-rated categories.
"BBB" - Debt is regarded as having an adequate capacity to pay interest
and repay principal. Whereas such issues normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher-rated categories.
"BB," "B," "CCC," "CC," and "C" - Debt is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. "BB" indicates the
lowest degree of speculation and "C" the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
"CI" - This rating is reserved for income bonds on which no interest is
being paid.
"D" - Debt is in payment default. This rating is used when interest
payments or principal payments are not made on the date due, even if the
applicable grace period has not expired, unless S&P believes such payments will
be made during such grace period. Rating is also used upon the filing of a
bankruptcy petition if debt service payments are jeopardized.
PLUS (+) OR MINUS (-) - The ratings from "AA" through "CCC" may be
modified by the addition of a plus or minus sign to show relative standing
within the major rating categories.
"r" - This rating is attached to highlight derivative, hybrid, and certain
other obligations that S & P believes may experience high volatility or high
variability in expected returns due to non-credit risks. Examples of such
obligations are: securities whose principal or interest return is indexed to
equities, commodities, or currencies; certain swaps and options; and interest
only and principal only mortgage securities.
The following summarizes the ratings used by Moody's for corporate and
municipal long-term debt:
"Aaa" - Bonds are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
"Aa" - Bonds are judged to be of high quality by all standards. Together
with the "Aaa" group they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in "Aaa" securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in "Aaa" securities.
"A" - Bonds possess many favorable investment attributes and are to be
considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds considered medium-grade obligations, i.e., they are neither
highly protected nor poorly secured. Interest payments and principal security
appear adequate for the present but certain protective elements may be lacking
or may be characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have speculative
characteristics as well.
"Ba," "B," "Caa," "Ca," and "C" - Bonds that possess one of these ratings
provide questionable protection of interest and principal ("Ba" indicates some
speculative elements; "B" indicates a general lack of characteristics of
desirable investment; "Caa" represents a poor standing; "Ca" represents
obligations which are speculative in a high degree; and "C" represents the
lowest rated class of bonds). "Caa," "Ca" and "C" bonds may be in default.
Con. (--) - Bonds for which the security depends upon the completion of
some act or the fulfillment of some condition are rated conditionally. These
are bonds secured by (a) earnings of projects under construction, (b) earnings
of projects unseasoned in operation experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting
condition attaches. Parenthetical rating denotes the probable credit stature
upon completion of construction or elimination of basis of condition.
(P) - When applied to forward delivery bonds, indicates that the rating is
provisional pending delivery of the bonds. The ratings may be revised prior to
delivery if changes occur in the legal documents or the underlying credit
quality of the bonds.
Moody's applies numerical modifiers 1, 2 and 3 in each generic
classification from "Aa" to "B" in its bond rating system. The modifier 1
indicates that the issuer ranks in the higher end of its generic rating
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issuer ranks at the lower end of its generic rating
category.
The following summarizes the long-term debt ratings used by Duff & Phelps
for corporate and municipal long-term debt:
"AAA" - Debt is considered to be of the highest credit quality. The risk
factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt.
"AA" - Debt is considered of high quality. Protection factors are strong.
Risk is modest but may vary slightly from time to time because of economic
conditions.
"A" - Debt possesses protection factors which are average but adequate.
However, risk factors are more variable and greater in periods of economic
stress.
"BBB" - Debt possesses below average protection factors but such
protection factors are still considered sufficient for prudent investment.
Considerable variability in risk is present during economic cycles.
"BB," "B," "CCC," "DD," and "DP" - Debt that possesses one of these
ratings is considered to be below investment grade. Although below investment
grade, debt rated "BB" is deemed likely to meet obligations when due. Debt
rated "B" possesses the risk that obligations will not be met when due. Debt
rated "CCC" is well below investment grade and has considerable uncertainty as
to timely payment of principal, interest or preferred dividends. Debt rated
"DD" is a defaulted debt obligation, and the rating "DP" represents preferred
stock with dividend arrearages.
To provide more detailed indications of credit quality, the "AA," "A,"
"BBB," "BB" and "B" ratings may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within these major categories.
The following summarizes the highest four ratings used by Fitch for
corporate and municipal bonds:
"AAA" - bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
"AA" - Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated "AAA." Because bonds rated
in the "AAA" and "AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debts of these issuers is generally
rated "F-1+."
"A" - Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions
and circumstances than bonds with higher ratings.
"BBB" - Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have an adverse impact on these
bonds, and therefore, impair timely payment. The likelihood that the ratings
of these bonds will fall below investment grade is higher than for bonds with
higher ratings.
"BB," "B," "CCC," "CC," "C," "DDD," "DD," and "D" - bonds that possess one
of these ratings are considered by Fitch to be speculative investments. The
ratings "BB" to "C" represent Fitch's assessment of the likelihood of timely
payment of principal and interest in accordance with the terms of obligation
for bond issues not in default. For defaulted bonds, the rating "DDD" to "D"
is an assessment of the ultimate recovery value through reorganization or
liquidation.
To provide more detailed indications of credit quality, the Fitch ratings
from and including "AA" to "C" may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within these major rating categories.
Thomson BankWatch assesses the likelihood of an untimely repayment of
principal or interest over the term to maturity of long-term debt and preferred
stock which are issued by United States commercial banks, thrifts and non-bank
banks; non-United States banks; and broker-dealers. The following summarizes
the rating categories used by Thomson BankWatch for long-term debt ratings:
"AAA" - This designation represents the highest category assigned by
Thomson BankWatch to long-term debt and indicates that the ability to repay
principal and interest on a timely basis is very high.
"AA" - This designation indicates a very strong ability to repay principal
and interest on a timely basis with limited incremental risk versus issues
rated in the highest category.
"A" - This designation indicates that the ability to repay principal and
interest is strong. Issues rated "A" could be more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.
"BBB" - This designation represents Thomson BankWatch's lowest investment
grade category and indicates an acceptable capacity to repay principal and
interest. Issues rated "BBB" are, however, more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.
"BB," "B," "CCC," and "CC" - These designations are assigned by Thomson
BankWatch to non-investment grade long-term debt. Such issues are regarded as
having speculative characteristics regarding the likelihood of timely payment
of principal and interest. "BB" indicates the lowest degree of speculation and
"CC" the highest degree of speculation.
"D" - this designation indicates that the long-term debt is in default.
PLUS (+) OR MINUS (-) - The ratings from "AAA" through "CC" may include a
plus or minus sign designation which indicates where within the respective
category the issue is placed.
IBCA assesses the investment quality of unsecured debt with an original
maturity of more than one year which is issued by bank holding companies and
their principal bank subsidiaries. The following summarizes the rating
categories used by IBCA for long-term ratings:
"AAA" - Obligations for which there is the lowest expectation of
investment risk. Capacity for timely repayment of principal and interest is
substantial, such that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk substantially.
"AA" - Obligations for which there is a very low expectation of investment
risk. Capacity for timely repayment of principal and interest is substantial.
Adverse changes in business, economic or financial conditions may increase
investment risk albeit not very significantly.
"A" - Obligations for which there is a low expectation of investment risk.
Capacity for timely repayment of principal and interest is strong, although
adverse changes in business, economic or financial conditions may lead to
increased investment risk.
"BBB" - Obligations for which there is currently a low expectation of
investment risk. Capacity for timely repayment of principal and interest is
adequate, although adverse changes in business, economic or financial
conditions are more likely to lead to increased investment risk than for
obligations in other categories.
"BB," "B," "CCC," "CC," and "C" - Obligations are assigned one of these
ratings where it is considered that speculative characteristics are present.
"BB" represents the lowest degree of speculation and indicates a possibility of
investment risk developing. "C" represents the highest degree of speculation
and indicates that the obligations are currently in default.
IBCA may append a rating of plus (+) or minus (-) to a rating to denote
relative status within major rating categories.
Municipal Note Ratings
A Standard and Poor's rating reflects the liquidity concerns and market
access risks unique to notes due in three years or less. The following
summarizes the ratings used by Standard & Poor's Rating Group for municipal
notes:
"SP-1" - The issuers of these municipal notes exhibit very strong or
strong capacity to pay principal and interest. Those issues determined to
possess overwhelming safety characteristics are given a plus (+) designation.
"SP-2" - The issuers of these municipal notes exhibit satisfactory
capacity to pay principal and interest.
"SP-3" - The issuers of these municipal notes exhibit speculative capacity
to pay principal and interest.
Moody's ratings for state and municipal notes and other short-term loans
are designated Moody's Investment Grade ("MIG") and variable rate demand
obligations are designated Variable Moody's Investment Grade ("VMIG"). Such
ratings recognize the differences between short-term credit risk and long-term
risk. The following summarizes the ratings by Moody's Investors Service, Inc.
for short-term notes:
"MIG-1" / "VMIG-1" - Loans bearing this designation are of the best
quality, enjoying strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
"MIG-2" / "VMIG-2" - Loans bearing this designation are of high quality,
with margins of protection ample although not so large as in the preceding
group.
"MIG-3" / "VMIG-3" - Loans bearing this designation are of favorable
quality, with all security elements accounted for but lacking the undeniable
strength of the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well established.
"MIG-4" / "VMIG-4" - Loans bearing this designation are of adequate
quality, carrying specific risk but having protection commonly regarded as
required of an investment security and not distinctly or predominantly
speculative.
"SG" - Loans bearing this designation are of speculative quality and lack
margins of protection.
Duff & Phelps and Fitch use the short-term ratings described under commercial
Paper Ratings for Municipal notes.
------------------------------------------------------------------------------
PORTICO FUNDS, INC.
MicroCap Fund
Form N-1A
Cross Reference Sheet
________________________________
Part B
Item No. Heading
- -------- -------
10. Cover Page................................. Cover Page
11. Table of Contents.......................... Table of
Contents
12. General Information and History........... Inapplicable
13. Investment Objectives and Policies......... Investment
Objectives
and Policies
14. Management of the Fund..................... Management of
the Company
15. Control Persons and Principal Holders
of Securities............................. Management of
the Company;
Miscellaneous
16. Investment Advisory and Other Services Management of the
Company;
Custodian,
Transfer
Agent and
Accounting
Services Agent;
Expenses
17. Brokerage Allocation and Other Practices... Management of
the Company
18. Capital Stock and Other Securities Description of
Shares
19. Purchase, Redemption and Pricing of Securities Net Asset
Being Offered Value;
Additional
Purchase and
Redemption
Information
20. Tax Status................................. Additional
Information
Concerning
Taxes
21. Underwriters................................. Management of
the Company
22. Calculation of Performance Data.............. Additional
Information
on
Performance
PART C
Information to be included in Part C is set forth under the appropriate item so
numbered in Part C to this Registration Statement.
- -------------------------------------------------------------------------------
PORTICO FUNDS, INC.
Statement of Additional Information
for the
MicroCap Fund
February 28, 1997
TABLE OF CONTENTS
-----------------
Page
----
Portico Funds ...................................... 2
Investment Objective and Policies .................. 2
Net Asset Value .................................... 14
Additional Purchase and Redemption Information ..... 14
Description of Shares .............................. 18
Additional Information Concerning Taxes ............ 20
Management of the Company .......................... 21
Custodian, Transfer Agent, Disbursing Agent and
Accounting Services Agent ........................ 28
Expenses............................................ 29
Independent Accountants ............................ 29
Counsel ............................................ 29
Additional Information on Performance ............. 30
Miscellaneous ...................................... 31
Appendix A ......................................... A-1
This Statement of Additional Information is meant to be read in
conjunction with the Portico Fund Prospectus dated February 28, 1997, for
the Retail and Institutional Shares of the MicroCap Fund (the "Fund") and is
incorporated by reference in its entirety into the Prospectus. Because this
Statement of Additional Information is not itself a prospectus, no
investment in shares of this Fund should be made solely upon the information
contained herein. Copies of the Prospectus for the Fund may be obtained by
writing Portico Investor Services at 615 East Michigan Street, P.O. Box
3011, Milwaukee, Wisconsin 53201-3011, or by calling 1-800-982-8909 or 414-
287-3710 (Milwaukee area). Capitalized terms used but not defined herein
have the same meanings as in the Prospectus.
SHARES OF THE FUND ARE NOT BANK DEPOSITS, AND ARE NEITHER ENDORSED BY,
INSURED BY, GUARANTEED BY, OBLIGATIONS OF, NOR OTHERWISE SUPPORTED BY THE
FDIC, THE FEDERAL RESERVE BOARD, FIRSTAR INVESTMENT RESEARCH & MANAGEMENT
COMPANY, FIRSTAR TRUST COMPANY, FIRSTAR CORPORATION, ITS AFFILIATES OR ANY
OTHER BANK, OR OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN THE PORTICO
FUNDS INVOLVES RISKS INCLUDING POSSIBLE LOSS OF PRINCIPAL.
PORTICO FUNDS
Portico Funds, Inc. (the "Company") is a Wisconsin corporation which
was incorporated on February 15, 1988 as a management investment company. The
Company is authorized to issue separate classes of shares of Common Stock
representing interests in separate investment portfolios. Each class for the
Funds is currently divided into two series, a retail and institutional series.
This Statement of Additional Information pertains to Retail Series and
Institutional Series Shares of the MicroCap Fund. The Company also offers other
investment portfolios which are described in separate Prospectuses and
Statements of Additional Information. For information concerning these other
portfolios contact Portico Investor Services at 1-800-982-8909 or write to 615
East Michigan Street, P.O. Box 3011, Milwaukee, Wisconsin 53201-3011.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the MicroCap Fund is to seek capital
appreciation through investment in securities of small sized companies. Small
sized companies are generally defined as those companies with market
capitalizations below the median market capitalization of the Russell 2000
Index, which is currently approximately $250 million, at the time of purchase.
There is no assurance, however, that the Fund's investment objective will in
fact be attained. The following policies supplement the Fund's investment
objectives and policies as set forth in the Prospectus.
Portfolio Transactions
- ----------------------
Subject to the general supervision of the Board of Directors, the
Adviser is responsible for, makes decisions with respect to, and places orders
for all purchases and sales of portfolio securities for the Fund.
The portfolio turnover rate for the Fund is calculated by dividing the
lesser of purchases or sales of portfolio securities for the reporting period by
the monthly average value of the portfolio securities owned during the reporting
period. The calculation excludes all securities, including options, whose
maturities or expiration dates at the time of acquisition are one year or less.
Portfolio turnover may vary greatly from year to year as well as within a
particular year, and may be affected by cash requirements for redemption of
shares and by requirements which enable the Fund to receive favorable tax
treatment. Portfolio turnover will not be a limiting factor in making portfolio
decisions, and the Fund may engage in short-term trading to achieve its
investment objective.
Transactions on U.S. stock exchanges involve the payment of negotiated
brokerage commissions. On exchanges on which commissions are negotiated, the
cost of transactions may vary among different brokers. Unlike transactions on
U.S. stock exchanges which involve the payment of negotiated brokerage
commissions, transactions in foreign securities generally involve the payment of
fixed brokerage commissions which are generally higher than those in the United
States.
Transactions in the over-the-counter market are generally principal
transactions with dealers and the costs of such transactions involve dealer
spreads rather than brokerage commissions. With respect to over-the-counter
transactions, the Adviser will normally deal directly with dealers who make a
market in the securities involved except in those circumstances where better
prices and execution are available elsewhere or as described below.
The Fund may participate, if and when practicable, in bidding for the
purchase of portfolio securities directly from an issuer in order to take
advantage of the lower purchase price available to members of a bidding group.
The Fund will engage in this practice, however, only when the Adviser in its
sole discretion, believes such practice to be in the Fund's interests.
For the fiscal periods August 1, 1995 through June 30, 1996 and July
1, 1996 through October 31, 1996, the MicroCap Fund paid brokerage commissions
of $62,266 and $75,526, respectively. None of the brokerage commissions were
paid to the affiliates of the Company, the Adviser or the Co-Administrator.
The Advisory Agreement between the Company and the Adviser provides
that, in executing portfolio transactions and selecting brokers or dealers, the
Adviser will seek to obtain the best overall terms available. In assessing the
best overall terms available for any transaction, the Adviser shall consider
factors it deems relevant, including the breadth of the market in the security,
the price of the security, the financial condition and execution capability of
the broker or dealer, and the reasonableness of the commissions, if any, both
for the specific transaction and on a continuing basis. In addition, the
Agreement authorizes the Adviser to cause the Fund to pay a broker-dealer which
furnishes brokerage and research services a higher commission than that which
might be charged by another broker-dealer for effecting the same transaction,
provided that the Adviser determines in good faith that such commission is
reasonable in relation to the value of the brokerage and research services
provided by such broker-dealer, viewed in terms of either the particular
transaction or the overall responsibilities of the Adviser to the Funds. Such
brokerage and research services might consist of reports and statistics relating
to specific companies or industries, general summaries of groups of stocks or
bonds and their comparative earnings and yields, or broad overviews of the
stock, bond and government securities markets and the economy.
Supplementary research information so received is in addition to, and
not in lieu of, services required to be performed by the Adviser and does not
reduce the advisory fees payable to it by the Fund. The Directors will
periodically review the commissions paid by the Fund to consider whether the
commissions paid over representative periods of time appear to be reasonable in
relation to the benefits inuring to the Fund. It is possible that certain of
the supplementary research or other services received will primarily benefit one
or more other investment companies or other accounts for which investment
discretion is exercised. Conversely, the Fund may be the primary beneficiary of
the research or services received as a result of portfolio transactions effected
for such other account or investment company.
Portfolio securities will not be purchased from or sold to (and
savings deposits will not be made in and repurchase and reverse repurchase
agreements will not be entered into with) the Adviser and the Distributor or an
affiliated person of any of them (as such term is defined in the 1940 Act)
acting as principal. In addition, the Fund will not purchase securities during
the existence of any underwriting or selling group relating thereto of which the
Distributor or its Adviser, or an affiliated person of any of them, is a member,
except to the extent permitted by the Securities and Exchange Commission
("SEC").
Investment decisions for the Fund are made independently from those
for other investment companies and accounts advised or managed by its Adviser.
Such other investment companies and accounts may also invest in the same
securities as the Fund. When a purchase or sale of the same security is made at
substantially the same time on behalf of a Fund and another investment company
or account, the transaction will be averaged as to price and available
investments allocated as to amount, in a manner which the Adviser believes to be
equitable to the Fund and such other investment company or account. In some
instances, this investment procedure may adversely affect the price paid or
received by a Fund or the size of the position obtained or sold by the Fund. To
the extent permitted by law, the Adviser may aggregate the securities to be sold
or purchased for a Fund with those to be sold or purchased for other investment
companies or accounts in executing transactions.
As of October 31, 1996, the Company held securities of its regular
brokers or dealers (as defined under the 1940 Act) or their parents as follows:
the Short-Term Bond Market, Intermediate Bond Market, Bond IMMDEX/TM, and
Balanced Funds held securities of Lehman Brothers totaling $7,053, $7,375,
$13,615, and $1,647, respectively; the Intermediate Bond Market, Bond IMMDEX/TM,
and Balanced Funds held securities of Goldman Sachs totaling $9,649, $4,825, and
$1,447, respectively; the Institutional Money Market and Equity Index Funds held
securities of Morgan Stanley totaling $38,808 and $357, respectively; and the
Short-Term Bond Market, Intermediate Bond Market, Balanced, Growth and Income,
and Equity Index Funds held securities of Merrill Lynch totaling $1,088, $131,
$1,034, $6,827, and $555, respectively.
SECURITIES LENDING. Although the Fund does not intend to during the
current fiscal year, it may lend its portfolio securities with a value of up to
30% of its total assets to unaffiliated domestic broker/dealers and other
institutional investors pursuant to agreements requiring that the loans be
secured by collateral equal in value to at least the market value of the
securities loaned in order to increase return on portfolio securities.
Collateral for such loans may include cash, securities of the U.S. Government,
its agencies or instrumentalities, or an irrevocable letter of credit issued by
a bank which meets the investment standards stated below under "Money Market
Instruments," or any combination thereof. There may be risks of delay in
receiving additional collateral or in recovering the securities loaned or even a
loss of rights in the collateral should the borrower of the securities fail
financially. However, loans will be made only to borrowers deemed by the
Adviser to be of good standing and when, in the Adviser's judgment, the income
to be earned from the loan justifies the attendant risks. When a Fund lends its
securities, it continues to receive interest or dividends on the securities
loaned and may simultaneously earn interest on the investment of the cash
collateral which will be invested in readily marketable, high-quality, short-
term obligations. Although voting rights, or rights to consent, attendant to
securities on loan pass to the borrower, such loans may be called at any time
and will be called so that the securities may be voted by the Fund if a material
event affecting the investment is to occur.
Securities lending arrangements with broker/dealers require that the
loans be secured by collateral equal in value to at least the market value of
the securities loaned. During the term of such arrangements, the Fund will
maintain such value by the daily marking-to-market of the collateral.
MONEY MARKET INSTRUMENTS. As described in the Prospectus, the Fund
may invest from time to time in "money market instruments," a term that
includes, among other things, bank obligations, commercial paper, variable
amount master demand notes and corporate bonds with remaining maturities of
thirteen months or less. However, investments in money market instruments under
normal market conditions are expected to represent less than 10% of the Fund's
net assets, but may increase to 30% during abnormal market conditions.
Bank obligations include bankers' acceptances, negotiable certificates
of deposit and nonnegotiable time deposits, including U.S. dollar-denominated
instruments issued or supported by the credit of U.S. or foreign banks or
savings institutions. Although the Fund will invest in money market obligations
of foreign banks or foreign branches of U.S. banks only where the Adviser
determines the instrument to present minimal credit risks, such investments may
nevertheless entail risks that are different from those of investments in
domestic obligations of U.S. banks due to differences in political, regulatory
and economic systems and conditions. All investments in bank obligations are
limited to the obligations of financial institutions having more than $1 billion
in total assets at the time of purchase, and investments by the Fund in the
obligations of foreign banks and foreign branches of U.S. banks will not exceed
25% of the Fund's total assets at the time of purchase. The Fund may also make
interest-bearing savings deposits in commercial and savings banks in amounts not
in excess of 5% of its net assets.
Investments by the Fund in commercial paper will consist of issues
rated at the time A-1 and/or P-1 by Standard & Poor's, Moody's or similar rating
by another nationally recognized rating agency. In addition, the Fund may
acquire unrated commercial paper and corporate bonds that are determined by the
Adviser at the time of purchase to be of comparable quality rated instruments
that may be acquired by the Fund as previously described.
The Fund may also purchase variable amount master demand notes which
are unsecured instruments that permit the indebtedness thereunder to vary and
provide for periodic adjustments in the interest rate. Although the notes are
not normally traded and there may be no secondary market in the notes, the Fund
may demand payment of the principal of the instrument at any time. The notes
are not typically rated by credit rating agencies, but issuers of variable
amount master demand notes must satisfy the same criteria as set forth above for
issuers of commercial paper. If an issuer of a variable amount master demand
note defaulted on its payment obligation, the Fund might be unable to dispose of
the note because of the absence of a secondary market and might, for this or
other reasons, suffer a loss to the extent of the default. The Fund will invest
in variable amount master demand notes only when the Adviser deems the
investment to involve minimal credit risk.
REPURCHASE AGREEMENTS. The Fund may agree to purchase securities from
financial institutions subject to the seller's agreement to repurchase them at
an agreed upon time and price ("repurchase agreements"). During the term of the
agreement, the Adviser will continue to monitor the creditworthiness of the
seller and will require the seller to maintain the value of the securities
subject to the agreement at not less than 102% of the repurchase price. Default
or bankruptcy of the seller would, however, expose the Fund to possible loss
because of adverse market action or delay in connection with the disposition of
the underlying securities. The securities held subject to a repurchase
agreement may have stated maturities exceeding one year, provided the repurchase
agreement itself matures in less than one year.
The repurchase price under the repurchase agreements described in the
Prospectus generally equals the price paid by the Fund plus interest negotiated
on the basis of current short-term rates (which may be more or less than the
rate on the securities underlying the repurchase agreement). Securities subject
to repurchase agreements will be held by the Fund's custodian or in the Federal
Reserve/Treasury book-entry system or other authorized securities depository.
Repurchase agreements are considered to be loans under the 1940 Act.
INVESTMENT COMPANIES. The Fund currently intends to limit its
investments in securities issued by other investment companies so that, as
determined immediately after a purchase of such securities is made: (i) not
more than 5% of the value of the Fund's total assets will be invested in the
securities of any one investment company; (ii) not more than 10% of the value of
its total assets will be invested in the aggregate in securities of investment
companies as a group; and (iii) not more than 3% of the outstanding voting stock
of any one investment company will be owned by the Fund or by the Company as a
whole.
The Fund may invest from time to time in securities issued by other
investment companies which invest in high-quality, short-term debt securities.
Securities of other investment companies will be acquired by the Fund within the
limits prescribed by the 1940 Act. As a shareowner of another investment
company, the Fund would bear, along with other shareowners, its pro rata portion
of the other investment company's expenses, including advisory fees and such
fees and other expenses will be borne indirectly by the Fund's shareowners.
These expenses would be in addition to the advisory and other expenses that the
Fund bears directly in connection with its own operations.
U.S. GOVERNMENT OBLIGATIONS. Examples of the types of U.S. Government
obligations that may be acquired by the Fund include U.S. Treasury bonds, notes
and bills and the obligations of Federal Home Loan Banks, Federal Farm Credit
Banks, Federal Land Banks, the Federal Housing Administration, Farmers Home
Administration, Export-Import Bank of the United States, Small Business
Administration, Government National Mortgage Association, Federal National
Mortgage Association, General Services Administration, Student Loan Marketing
Association, Central Bank for Cooperatives, Federal Home Loan Mortgage
Corporation, Federal Intermediate Credit Banks, Maritime Administration, and
Resolution Trust Corp.
BANK OBLIGATIONS. For purposes of the Fund's investment policies with
respect to bank obligations, the assets of a bank or savings institution will be
deemed to include the assets of its domestic and foreign branches. The Fund's
investments in the obligations of foreign branches of U.S. banks and of foreign
banks may subject the Fund to investment risks (similar to those discussed below
under "American Depository Receipts") that are different in some respects from
those of investments in obligations of U.S. domestic issuers. Such risks
include future political and economic developments, the possible imposition of
withholding taxes on interest income, possible seizure or nationalization of
foreign deposits, the possible establishment of exchange controls or the
adoption of other foreign governmental restrictions which might adversely affect
the payment of principal and interest of such obligations. In addition, foreign
branches of U.S. banks and foreign banks may be subject to less stringent
reserve requirements and to different accounting, auditing, reporting and record
keeping standards than those applicable to domestic branches of U.S. banks.
Other Investment Considerations
- -------------------------------
The MicroCap Fund maintains a long-term investment horizon with
respect to investments in equity securities. However, when a company's growth
in earnings and valuation results in price appreciation that reaches a level
which meets the Fund's established return objective, the stock is normally sold.
Holdings are also sold if there has been significant deterioration in the
underlying fundamentals of the securities involved since their acquisition.
Sale proceeds are either re-invested in money market instruments or in other
securities which meet the Fund's investment criteria.
The increase or decrease of cash equivalents in a Fund is primarily
the residual effect of the research process. The portion of a Fund invested in
cash equivalents tends to rise when the pool of acceptable securities is limited
and tends to fall when the Fund's valuation screening process identifies a large
number of attractive securities. Short-term forecasts for the economy and
financial markets are not an important determinant of the level of cash
equivalents in the Fund. The Fund does not attempt to "time" the securities
market.
WHEN-ISSUED PURCHASES, DELAYED DELIVERY AND FORWARD COMMITMENTS. When
the Fund agrees to purchase securities on a when-issued or delayed delivery
basis or enter into a forward commitment to purchase securities, its custodian
will set aside cash or liquid high grade debt securities equal to the amount of
the commitment in a segregated account. Normally, the custodian will set aside
portfolio securities to satisfy a purchase commitment, and in such a case the
Fund may be required subsequently to place additional assets in the segregated
account in order to ensure that the value of the account remains equal to the
amount of the Fund's commitments. It may be expected that the market value of
the Fund's net assets will fluctuate to a greater degree when it sets aside
portfolio securities to cover such purchase commitments than when it sets aside
cash. Because the Fund will set aside cash or liquid assets to satisfy its
purchase commitments in the manner described, the Fund's liquidity and ability
to manage its portfolio might be affected in the event its commitments ever
exceeded 25% of the value of its assets. In the case of a forward commitment to
sell portfolio securities, the Fund's custodian will hold the portfolio
securities themselves in a segregated account while the commitment is
outstanding. When-issued and forward commitment transactions involve the risk
that the price obtained in a transaction (and therefore the value of a security)
may be less favorable then the price (and therefore the value of a security)
available in the market when the securities delivery takes place.
The Fund will make commitments to purchase securities on a when-issued
basis or to purchase or sell securities on a forward commitment basis only with
the intention of completing the transaction and actually purchasing or selling
the securities. If deemed advisable as a matter of investment strategy, however,
the Fund may dispose of or renegotiate a commitment after it is entered into,
and may sell securities it has committed to purchase before those securities are
delivered to the Fund on the settlement date. In these cases the Fund may
realize a capital gain or loss.
When the Fund engages in when-issued, delayed delivery and forward
commitment transactions, it relies on the other party to consummate the trade.
Failure of such party to do so may result in the Fund incurring a loss or
missing an opportunity to obtain a price considered to be advantageous.
The market value of the securities underlying a when-issued purchase
or a forward commitment to purchase securities, and any subsequent fluctuations
in their market value, are taken into account when determining the net asset
value of the Fund starting on the day the Fund agrees to purchase the
securities. The Fund does not earn interest on the securities it has committed
to purchase until they are paid for and delivered on the settlement date. When
the Fund makes a forward commitment to sell securities it owns, the proceeds to
be received upon settlement are included in the Fund's assets. Fluctuations in
the market value of the underlying securities are not reflected in the Fund's
net asset value as long as the commitment remains in effect.
Other Portfolio Information
- ---------------------------
OPTIONS TRADING. As stated in the Fund's Prospectus, the Fund may
purchase put and call options. Option purchases by the Fund will not exceed 5%
of its net assets. Such options may relate to particular securities or to
various indices. This is a highly specialized activity which entails greater
than ordinary investment risks. Regardless of how much the market price of the
underlying security or index increases or decreases, the option buyer's risk is
limited to the amount of the original investment for the purchase of the option.
However, options may be more volatile than the underlying securities or indices,
and therefore, on a percentage basis, an investment in options may be subject to
greater fluctuation than an investment in the underlying securities. In
contrast to an option on a particular security, an option on an index provides
the holder with the right to make or receive a cash settlement upon exercise of
the option. The amount of this settlement will be equal to the difference
between the closing price of the index at the time of exercise and the exercise
price of the option expressed in dollars, times a specified multiple.
A call option gives the purchaser of the option the right to buy, and
a writer the obligation to sell, the underlying security or index at the stated
exercise price at any time prior to the expiration of the option, regardless of
the market price of the security. The premium paid to the writer is in
consideration for undertaking the obligations under the option contract. A put
option gives the purchaser the right to sell the underlying security or index at
the stated exercise price at any time prior to the expiration date of the
option, regardless of the market price of the security or index. Put and call
options purchased by the Fund will be valued at the last sale price or, in the
absence of such a price, at the mean between bid and asked prices.
The Fund may also sell covered call options listed on a national
securities exchange. Such options may relate to particular securities or to
various indices. A call option on a security is covered if the Fund owns the
security underlying the call or has an absolute and immediate right to acquire
that security without additional cash consideration (or, if additional cash
consideration is required, cash or liquid securities in such amount as required
are held in a segregated account by its custodian) upon conversion or exchange
of other securities held by it. A call option on an index is covered if the
Fund maintains with its custodian cash or cash equivalents equal to the contract
value. A call option is also covered if the Fund holds a call on the same
security or index as the call written where the exercise price of the call held
is (i) equal to or less than the exercise price of the call written, or (ii)
greater than the exercise price of the call written provided the difference is
maintained by the Fund in cash or liquid securities in a segregated account with
its custodian.
The Fund's obligation under a covered call option written by it may be
terminated prior to the expiration date of the option by the Fund's executing a
closing purchase transaction, which is effected by purchasing on an exchange an
option of the same series (i.e., same underlying security or index, exercise
price and expiration date) as the option previously written. Such a purchase
does not result in the ownership of an option. A closing purchase transaction
will ordinarily be effected to realize a profit on an outstanding option, to
prevent an underlying security from being called, to permit the sale of the
underlying security or to permit the writing of a new option containing
different terms. The cost of such a liquidation purchase plus transactions
costs may be greater than the premium received upon the original option, in
which event the Fund will have incurred a loss in the transaction. An option
position may be closed out only on an exchange which provides a secondary market
for an option of the same series. There is no assurance that a liquid secondary
market on an exchange will exist for any particular option. A covered call
option writer, unable to effect a closing purchase transaction, will not be able
to sell an underlying security until the option expires or the underlying
security is delivered upon exercise with the result that the writer in such
circumstances will be subject to the risk of market decline during such period.
The Fund will write an option on a particular security only if the Adviser
believes that a liquid secondary market will exist on an exchange for options of
the same series which will permit the Fund to make a closing purchase
transaction in order to close out its position.
When the Fund writes a covered call option, an amount equal to the net
premium (the premium less the commission) received by the Fund is included in
the liability section of the Fund's statement of assets and liabilities. The
amount of the liability will be subsequently marked-to-market to reflect the
current value of the option written. The current value of the traded option is
the last sale price or, in the absence of a sale, the average of the closing bid
and asked prices. If an option expires on the stipulated expiration date or if
the Fund enters into a closing purchase transaction, it will realize a gain (or
loss if the cost of a closing purchase transaction exceeds the net premium
received when the option is sold) and the liability related to such option will
be eliminated. Any gain on a covered call option on a security may be offset by
a decline in the market price of the underlying security during the option
period. If a covered call option on a security is exercised, the Fund may
deliver the underlying security held by it or purchase the underlying security
in the open market. In either event, the proceeds of the sale will be increased
by the net premium originally received, and the Fund will realize a gain or
loss. Premiums from expired options written by the Fund and net gains from
closing purchase transactions are treated as short-term capital gains for
federal income tax purposes, and losses on closing purchase transactions are
short-term capital losses.
As noted previously, there are several risks associated with
transactions in options on securities and indices. For example, there are
significant differences between the securities and options markets that could
result in an imperfect correlation between these markets, causing a given
transaction not to achieve its objectives. A decision as to whether, when and
how to use options involves the exercise of skill and judgment, and a
transaction may be unsuccessful to some degree because of market behavior or
unexpected events.
FUTURES CONTRACTS AND RELATED OPTIONS. The Adviser may determine that
it would be in the interest of the Fund to purchase or sell futures contracts,
or options thereon, as a hedge against changes resulting from market conditions
in the value of the securities held by the Fund, or of securities which it
intends to purchase. For example, the Fund may enter into transactions involving
an index futures contract, which is a bilateral agreement pursuant to which the
parties agree to take or make delivery of an amount of cash equal to a specified
dollar amount times the difference between the index value (which assigns
relative values to the securities included in the index) at the close of the
last trading day of the contract and the price at which the futures contract is
originally struck. No physical delivery of the underlying securities in the
index is made.
The Fund intends to limit its transactions in futures contracts and
related options so that not more than 5% of its net assets are at risk. In
connection with a futures transaction, unless the transaction is covered in
accordance with SEC positions, the Fund will maintain a segregated account with
its custodian or sub-custodian consisting of cash or liquid high grade debt
securities equal to the entire amount at risk (less margin deposits) on a
continuous basis. For a more detailed description of futures contracts and
related options, including a discussion of the limitations imposed by federal
tax law, see Appendix A to the Statement of Additional Information.
AMERICAN DEPOSITORY RECEIPTS ("ADRS"). The Fund may invest in
sponsored ADRs, which are receipts issued by an American bank or trust company
evidencing ownership of underlying securities issued by a foreign issuer. ADRs
may be listed on a national securities exchange or may trade in the over-the-
counter market. ADR prices are denominated in U.S. dollars; the underlying
security may be denominated in a foreign currency. The underlying security may
be subject to foreign government taxes which would reduce the yield on such
securities. Investments in such securities also involve certain inherent risks,
such as political or economic instability of the country of issue, the
difficulty of predicting international trade patterns and the possibility of
imposition of exchange controls. Such securities may also be subject to greater
fluctuations in price than securities of domestic corporations. In addition,
there may be less publicly available information about a foreign company than
about a domestic company. Foreign companies generally are not subject to
uniform accounting, auditing and financial reporting standards comparable to
those applicable to domestic companies. With respect to certain foreign
countries, there is a possibility of expropriation or confiscatory taxation, or
diplomatic developments which could affect investment in those countries.
CONVERTIBLE SECURITIES. The Fund may hold convertible securities.
Convertible securities entitle the holder to receive interest paid or accrued on
debt or the dividend paid on preferred stock until the securities mature or are
redeemed, converted or exchanged. Prior to conversion, convertible securities
have characteristics similar to ordinary debt securities in that they normally
provide a stable stream of income with generally higher yields than those of
common stock of the same or similar issuers. Convertible securities rank senior
to common stock in a corporation's capital structure and therefore generally
entail less risk than the corporation's common stock, although the extent to
which such risk is reduced depends in large measure upon the degree to which the
convertible security sells above its value as a fixed income security.
As described in its Prospectus, the Fund may invest a portion of its
assets in convertible securities that are rated below investment grade.
WARRANTS. Warrants basically are options to purchase equity
securities at a specific price valid for a specific period of time. They do not
represent ownership of the securities, but only the right to buy them. They
have no voting rights, pay no dividends and have no rights with respect to the
assets of the company issuing them. Warrants differ from call options in that
warrants are issued by the issuer of the security which may be purchased on
their exercise, whereas call options may be written or issued by anyone. The
prices of warrants do not necessarily move parallel to the prices of the
underlying securities.
SHORT SALES. If the Fund engages in short sales, it need not
segregate Fund assets if it "covers" the position. A position is "covered"
if, at the time the Fund sells the security or thereafter, the Fund also owns
that security or holds a call option on that security with a strike price no
higher than the price at which the security was sold. For federal tax purposes,
a short sale is considered consummated upon delivery of securities to close the
short sale. The gains or losses realized by the Fund from short sale
transactions normally will be characterized as capital gains or losses although
short sales that are part of certain hedging transactions or straddles may
receive different tax treatment. Special rules generally operate to prevent the
use of short sales to convert short-term capital gain into long-term capital
gain and long-term capital loss into short-term capital loss. As a result,
these transactions may increase the amount of short-term capital gain realized
by the Fund which is taxed as ordinary income when distributed to its
shareowners and may reduce the Fund's short-term capital loss available to
reduce its ordinary income. The impact of the tax consequences of short sale
transactions engaged in by the Fund on distributions to shareowners will be
closely monitored.
Investment Limitations
- ----------------------
The Fund is subject to the investment limitations enumerated in this
subsection which may be changed only by a vote of the holders of a majority of
the Fund's outstanding shares (as defined under "Miscellaneous" below).
The Fund may not:
1. Make loans, except that the Fund may purchase and hold debt
instruments and enter into repurchase agreements in accordance with its
investment objective and policies and may lend portfolio securities in an amount
not exceeding 30% of its total assets.
2. Purchase securities of companies for the purpose of exercising
control.
3. Purchase or sell real estate except that the Fund may purchase
securities of issuers which deal in real estate and may purchase securities
which are secured by interests in real estate.
4. Acquire any other investment company or investment company security
except in connection with a merger, consolidation, reorganization or acquisition
of assets or where otherwise permitted by the 1940 Act.
5. Act as an underwriter of securities within the meaning of the
Securities Act of 1933 except insofar as the Fund might be deemed to be an
underwriter upon the disposition of portfolio securities acquired within the
limitation on purchases of restricted securities and except to the extent that
the purchase of securities directly from the issuer thereof in accordance with
the Fund's investment objective, policies and limitations may be deemed to be
underwriting.
6. Write or sell put options, call options, straddles, spreads, or any
combination thereof, except for transactions in options on securities, indices
of securities, futures contracts and options on futures contracts.
7. Purchase securities on margin, make short sales of securities or
maintain a short position in an amount exceeding one-third of the Fund's net
assets, except that (a) this investment limitation shall not apply to a Fund's
transactions in futures contracts, related options, and short sales against the
box, and (b) the Fund may obtain short-term credit as may be necessary for the
clearance of purchases and sales of portfolio securities.
8. Purchase or sell commodity contracts, or invest in oil, gas or mineral
exploration or development programs, except that the Fund may, to the extent
appropriate to its investment objective, purchase publicly traded securities of
companies engaging in whole or in part in such activities and may enter into
futures contracts and related options.
In addition, as summarized in the Prospectus, the Fund may not:
9. Purchase securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if,
immediately after such purchase, more than 5% of the value of the Fund's total
assets would be invested in the securities of such issuer, or more than 10% of
the issuer's outstanding voting securities would be owned by the Fund or Portico
Funds, Inc. ("the Company"), except that up to 25% of the value of the Fund's
total assets may be invested without regard to these limitations. For purposes
of this limitation, a security is considered to be issued by the entity (or
entities) whose assets and revenues back the security. A guarantee of a
security shall not be deemed to be a security issued by the guarantor when the
value of all securities issued and guaranteed by the guarantor, and owned by the
Fund, does not exceed 10% of the value of the Fund's total assets.
10. Purchase any securities which would cause 25% or more of the value of
the Fund's total assets at the time of purchase to be invested in the securities
of one or more issuers conducting their principal business activities in the
same industry; provided that, (a) there is no limitation with respect to
instruments issued or guaranteed by the United States, its agencies or
instrumentalities and repurchase agreements secured by such instruments; (b)
wholly owned finance companies will be considered to be in the industries of
their parents if their activities are primarily related to financing the
activities of the parents; and (c) utilities will be divided according to their
services, for example, gas, gas transmission, electric and gas, electric and
telephone will each be considered a separate industry.
11. Borrow money or issue senior securities, except that the Fund may
borrow from banks and enter into reverse repurchase agreements for temporary
purposes in amounts up to one-third of the value of the total assets at the time
of such borrowing; or mortgage, pledge or hypothecate any assets, except in
connection with any such borrowing and in amounts not in excess of the lesser of
the dollar amounts borrowed or one-third of the value of the Fund's total assets
at the time of such borrowing. In addition, as a matter of fundamental policy,
the Fund may not enter into reverse repurchase agreements exceeding in the
aggregate one-third of its total assets. Securities held in escrow or separate
accounts in connection with the Fund's investment practices described in this
Statement of Additional Information or in the Prospectus are not deemed to be
pledged for purposes of this limitation.
If a percentage limitation is satisfied at the time of investment, a
later increase or decrease in such percentage resulting from a change in the
value of the Fund's portfolio securities will not constitute a violation of such
limitation. If due to market fluctuations or other reasons, the total assets of
the Fund fall below 300% of its borrowings, the Fund will reduce its borrowings
in compliance with the 1940 Act. As a matter of fundamental policy, the Fund
will not purchase securities while its borrowings (including reverse repurchase
agreements) in excess of 5% of its total assets are outstanding.
NET ASSET VALUE
The net asset value per share of the Fund is calculated separately for
the Institutional Series and Retail Series by adding the value of all portfolio
securities and other assets belonging to the Fund that are allocated to a
particular series, subtracting the liabilities charged to that series, and
dividing the result by the number of outstanding shares of that series. Assets
belonging to the Fund consist of the consideration received upon the issuance of
shares of the Fund together with all net investment income, realized
gains/losses and proceeds derived from the investment thereof, including any
proceeds from the sale of such investments, any funds or payments derived from
any reinvestment of such proceeds, and a portion of any general assets of the
Company not belonging to a particular investment portfolio. The liabilities that
are charged to the Fund are borne by each share of the Fund, except for certain
payments under the Fund's Distribution and Service Plan and Shareowner Servicing
Plan applicable only to Retail Shares. Subject to the provisions of the Articles
of Incorporation, determinations by the Board of Directors as to the direct and
allocable liabilities, and the allocable portion of any general assets, with
respect to the Fund are conclusive.
The value of the Fund's portfolio securities that are traded on stock
exchanges outside the United States are normally based upon the price on the
exchange as of the close of business of the exchange immediately preceding the
time of valuation. Securities trading in over-the-counter markets in European
and Pacific Basin countries is normally completed well before 3:00 P.M. Central
Time. In addition, European and Pacific Basin securities trading may not take
place on all business days. Furthermore, trading takes place in Japanese
markets on certain Saturdays and in various foreign markets on days which are
not business days in New York and on which net asset value of the Fund is not
calculated. The calculation of the net asset value of the Fund may not take
place contemporaneously with the determination of the prices of portfolio
securities used in such calculation. Events affecting the values of portfolio
securities that occur between the time their prices are determined and 3:00 P.M.
Central Time, and at other times, may not be reflected in the calculation of net
asset value of the Fund.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Computation of Offering Price of the Fund. An illustration of the
computation of the initial offering price per share of the Retail Shares of the
MicroCap Fund based on the value of its net assets and number of outstanding
securities at October 31, 1996, follows:
Net Assets (000s) $9,273
Numbers of Shares
Outstanding (000s) 574
Net Asset Value $16.16
Per Share
Sales Charge, 4.00% of Offering Price $0.67
(4.16% of net asset value per share) ------
Public Offering Price $16.83
Retail Shares are sold with a front-end sales charge. A front-end
sales charge will not be imposed on reinvested dividends or distributions.
Likewise, there is no front-end sales charge (provided the status of the
investment is explained at the time of investment) on purchases of Retail Shares
if (a) you were a Portico shareowner as of January 1, 1995 and have continuously
maintained a shareowner account with the Company; (b) you make any purchase
within 60 days of a redemption of Portico Institutional Shares, (c) you are an
employee, director or retiree of Firstar Corporation or its affiliates or of
Portico; (d) you maintain a personal trust account with an affiliate of Firstar
Corporation at the time of purchase; (e) you make any purchase within 60 days of
a termination of a personal trust account with an affiliate of Firstar
Corporation; (f) you make any purchase for your medical savings account for
which an affiliate of Firstar Corporation serves in a custodial capacity; (g)
you make any purchase for your individual retirement account; (h) you make any
purchase within 60 days of a redemption of a mutual fund on which you paid an
initial sales charge or a contingent deferred sales charge; (i) you are a
registered investment adviser that has entered into an agreement with the
Distributor to purchase shares for your own account or for discretionary client
accounts; (j) you are a spouse, parent or child of an individual who falls
within the preceding categories (a) or (d) above; or (k) you are a spouse,
parent, sibling or child of an individual who falls within the preceding
category (c) above. These exemptions to the imposition of a front-end sales
charge are due to the nature of the investors and/or the reduced sales efforts
that will be needed in obtaining such investments.
Shareowner Organizations or Institutions may be paid by the Fund for
advertising, distribution or shareowner services. Depending on the terms of the
particular account, Shareowner Organizations or Institutions also may charge
their customers fees for automatic investment, redemption and other services
provided. Such fees may include, for example, account maintenance fees,
compensating balance requirements or fees based upon account transactions,
assets or income. Shareowner Organizations or Institutions are responsible for
providing information concerning these services and any charges to any customer
who must authorize the purchase of Fund shares prior to such purchase.
Shares of the Fund for which a redemption order is received in proper
form by the transfer agent or Elan before the close of the Exchange (currently
3:00 p.m. Central Time) on a business day will be redeemed as of the
determination of net asset value on that day. Orders for a redemption received
after the close of the Exchange on a business day or on a non-business day will
be priced as of the determination of net asset value on the next day on which
shares of the particular Fund are priced. If a shareowner requests that
redemption proceeds be paid by federal funds wire, the proceeds will be wired to
a correspondent member bank if the investor's designated bank is not a member of
the Federal Reserve System.
Under the 1940 Act, the Fund may suspend the right of redemption or
postpone the date of payment for shares during any period when (a) trading on
the Exchange is restricted by applicable rules and regulations of the SEC; (b)
the Exchange is closed for other than customary weekend and holiday closings;
(c) the SEC has by order permitted such suspension; or (d) an emergency exists
as determined by the SEC. (The Fund may also suspend or postpone the recording
of the transfer of its shares upon the occurrence of any of the foregoing
conditions.)
The Company's Articles of Incorporation permit the Fund to redeem an
account involuntarily, upon sixty days' notice, if redemptions cause the
account's net asset value to remain at less than $1,000.
In addition to the situations described in the Fund's Prospectus under
"Redemption of Shares," the Fund may redeem shares involuntarily to reimburse
the Fund for any loss sustained by reason of the failure of a shareowner to make
full payment for shares purchased by the shareowner or to collect any charge
relating to a transaction effected for the benefit of a shareowner which is
applicable to Fund shares as provided in the Prospectus from time to time.
EXCHANGE PRIVILEGE. By use of the exchange privilege, shareowners
authorize the transfer agent to act on telephonic or written exchange
instructions from any person representing himself to be the shareowner or in
some cases, the shareowner's registered representative or account representative
of record, and believed by the transfer agent to be genuine. The transfer
agent's records of such instructions are binding. The exchange privilege may be
modified or terminated at any time upon notice to shareowners.
Exchange transactions described in paragraphs A, B, and C below will be made on
the basis of the relative net asset values per share of the Funds involved in
the transaction.
A. Retail Shares of any Fund purchased with a sales charge may be exchanged
without a sales charge for Retail Shares of any other Fund offered by the
Company with a sales charge.
B. Shares of any Fund offered by the Company acquired by a previous
exchange transaction involving Retail Shares on which a sales charge has
directly or indirectly been paid (e.g. shares purchased with a sales charge or
issued in connection with an exchange involving shares that had been purchased
with a sales charge) as well as additional Shares acquired through reinvestment
of dividends or distributions on such Shares may be exchanged without a sales
charge for Retail Shares of any other Fund offered by the Company with a sales
charge. To accomplish an exchange under the provisions of this paragraph,
investors must notify the transfer agent of their prior ownership of Retail
Shares and their account number.
C. Shares of any Fund offered by the Company may be exchanged without a
sales charge for Shares of any other Fund of the Company that is offered without
a sales charge.
Except as stated above, a sales charge will be imposed when Shares of a
Fund that were purchased or otherwise acquired without a sales charge are
redeemed and the proceeds are used to purchase Retail Shares of another Fund of
the Company with a sales charge.
Shares in a Fund from which the shareowner is withdrawing an investment
will be redeemed at the net asset value per share next determined on the date of
receipt. Shares of the new Fund into which the shareowner is investing will be
purchased at the net asset value per share next determined (plus any applicable
sales charge) after acceptance of the request by the Company in accordance with
the policies for accepting investments. Exchanges of Shares will be available
only in states where they may legally be made.
For federal income tax purposes, share exchanges are treated as sales
on which the shareowner may realize a gain or loss, depending upon whether the
value of the shares to be given up in exchange is more or less than the basis in
such shares at the time of the exchange. Investors exercising the exchange
privilege should request and review the Prospectus for the shares to be acquired
in the exchange prior to making an exchange.
Additional Information Regarding Shareowner Services for Retail Shares
- ----------------------------------------------------------------------
The Retail Shares of the Fund offer a Periodic Investment Plan whereby
a shareowner may automatically make purchases of shares of the Fund on a
regular, monthly basis ($50 minimum per transaction). Under the Periodic
Investment Plan, a shareowner's designated bank or other financial institution
debits a preauthorized amount on the shareowner's account each month and applies
the amount to the purchase of Retail Shares. The Periodic Investment Plan must
be implemented with a financial institution that is a member of the Automated
Clearing House. No service fee is currently charged by the Fund for
participation in the Periodic Investment Plan. A $20 fee will be imposed by the
transfer agent if sufficient funds are not available in the shareowner's account
or the shareowner's account has been closed at the time of the automatic
transaction.
The Periodic Investment Plan permits an investor to use "Dollar Cost
Averaging' in making investments. Instead of trying to time market
performance, a fixed dollar amount is invested in Retail Shares at predetermined
intervals. This may help investors to reduce their average cost per share
because the agreed upon fixed investment amount allows more Retail Shares to be
purchased during periods of lower Retail Share prices and fewer Retail Shares to
be purchased during periods of higher Retail Share prices. In order to be
effective, Dollar Cost Averaging should usually be followed on a sustained,
consistent basis. Investors should be aware, however, that Retail Shares bought
using Dollar Cost Averaging are purchased without regard to their price on the
day of investment or to market trends. Dollar Cost Averaging does not assure a
profit and does not protect against losses in a declining market. In addition,
while investors may find Dollar Cost Averaging to be beneficial, it will not
prevent a loss if an investor ultimately redeems his Retail Shares at a price
which is lower than their purchase price. An investor may want to consider his
financial ability to continue purchases through periods of low price levels.
The Retail Shares of the Fund permits shareowners to effect
ConvertiFund/R transactions, an automated method by which a Retail shareowner
may invest proceeds from one account to another account of the Retail Shares of
the Portico family of funds. Such proceeds include dividend distributions,
capital gain distributions and systematic withdrawals. ConvertiFund/R
transactions may be used to invest funds from a regular account to another
regular account, from a qualified plan account to another qualified plan
account, or from a qualified plan account to a regular account.
The Retail Shares of the Fund offers shareowners a Systematic
Withdrawal Plan, which allows a shareowner who owns shares of a Fund worth at
least $15,000 at current net asset value at the time the shareowner initiates
the Systematic Withdrawal Plan to designate that a fixed sum ($50 minimum per
transaction) be distributed to the shareowner or as otherwise directed at
regular intervals. Purchase of additional shares concurrently with withdrawals
will be disadvantageous because of the sales charge involved in the additional
purchases.
Special Procedures for In-Kind Payments
- ---------------------------------------
Payment for shares of the Fund may, in the discretion of the Fund, be
made in the form of securities that are permissible investments for the Fund as
described in its Prospectus. For further information about this form of
payment, contact Investor Services at 414-287-3710. In connection with an
in-kind securities payment, the Fund will require, among other things, that the
securities be valued on the day of purchase in accordance with the pricing
methods used by the Fund; that the Fund receive satisfactory assurances that it
will have good and marketable title to the securities received by it; that the
securities be in proper form for transfer to the Fund; that adequate information
be provided to the Fund concerning the basis and other tax matters relating to
the securities; and that the amount of the purchase be at least $1,000,000
DESCRIPTION OF SHARES
The Company's Articles of Incorporation authorize the Board of
Directors to issue up to 150,000,000,000 full and fractional shares of common
stock, $.0001 par value per share, divided into thirty classes (each, a
"Class" or "Fund"). Each Class is divided into two series designated as
Institutional Series and Series A/Retail Series (each, a "Series") and, in the
case of the Fund, consists of the number of shares set forth in the table below:
Class-Series of Fund in which Stock Number of Authorized
Common Stock Represents Interest Shares in Each Series
- ------------ ------------------- ---------------------
16-Institutional MicroCap 50 Million
16-A/Retail 50 Million
The Board of Directors has also authorized the issuance of Classes 1
through 15 and Class 17 common stock representing interests in sixteen other
separate investment portfolios which are described in separate Statements of
Additional Information. The remaining authorized shares are classified into
fourteen additional classes representing interests in other potential future
investment portfolios of the Company. The Directors may similarly classify or
reclassify any particular class of shares into one or more additional series.
In the event of a liquidation or dissolution of the Company or the
Fund, shareowners of the Fund would be entitled to receive the assets available
for distribution belonging to the Fund, and a proportionate distribution, based
upon the relative assets of the Company's respective investment portfolios, of
any general assets not belonging to any particular portfolio which are available
for distribution. Subject to the allocation of certain costs, expenses, charges
and reserves attributed to the operation of a particular series as described in
the Fund's Prospectus, shareowners of the Fund are entitled to participate
equally in the net distributable assets of the Fund on liquidation, based on the
number of shares of the Fund that are held by each shareowner.
Shareowners of the Fund, as well as those of any other investment
portfolio offered by the Company, will vote together in the aggregate and not
separately on a portfolio-by-portfolio basis, except as otherwise required by
law or when the Board of Directors determines that the matter to be voted upon
affects only the interests of the shareowners of a particular class or a
particular series within a class. Rule 18f-2 under the 1940 Act provides that
any matter required to be submitted to the holders of the outstanding voting
securities of an investment company such as the Company shall not be deemed to
have been effectively acted upon unless approved by the shareowners of each
portfolio affected by the matter. A portfolio is affected by a matter unless it
is clear that the interests of each portfolio in the matter are substantially
identical or that the matter does not affect any interest of the portfolio.
Under the Rule, the approval of an investment advisory agreement or any change
in a fundamental investment policy would be effectively acted upon with respect
to a portfolio only if approved by a majority of the outstanding shares of such
portfolio. However, the Rule also provides that the ratification of the
appointment of independent accountants, the approval of principal underwriting
contracts and the election of Directors may be effectively acted upon by
shareowners of the Company voting together in the aggregate without regard to
particular portfolios. Similarly, on any matter submitted to the vote of
shareowners which only pertains to agreements, liabilities or expenses
applicable to one series of the Fund (such as the Distribution and Service Plan
applicable to Retail Shares) but not the other series of the Fund, only the
affected series will be entitled to vote.
When issued for payment as described in the Fund's Prospectus and this
Statement of Additional Information, shares of the Fund will be fully paid and
non-assessable by the Company, except as provided in Section 180.0622(2)(b) of
the Wisconsin Business Corporation Law, as amended, which in general provides
for personal liability on the part of a corporation's shareowners for unpaid
wages of employees. The Company does not intend to have any employees and, to
that extent, the foregoing statute will be inapplicable to holders of Fund
shares and will not have a material effect on the Company.
The Articles of Incorporation authorize the Board of Directors,
without shareowner approval (unless otherwise required by applicable law), to:
(a) sell and convey the assets belonging to a series of shares to another
management investment company for consideration which may include securities
issued by the purchaser and, in connection therewith, to cause all outstanding
shares of such series to be redeemed at a price which is equal to their net
asset value and which may be paid in cash or by distribution of the securities
or other consideration received from the sale and conveyance; (b) sell and
convert the assets belonging to a series of shares into money and, in connection
therewith, to cause all outstanding shares of such series to be redeemed at
their net asset value; or (c) combine the assets belonging to a series of shares
with the assets belonging to one or more other series of shares if the Board of
Directors reasonably determines that such combination will not have a material
adverse effect on the shareowners of any series participating in such
combination and, in connection therewith, to cause all outstanding shares of any
such series to be redeemed or converted into shares of another series of shares
at their net asset value.
ADDITIONAL INFORMATION CONCERNING TAXES
The following is only a summary of certain additional tax
considerations generally affecting the Fund and its shareowners that are not
described in the Fund's Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of the Fund or its shareowners, and the
discussion here and in the Prospectus is not intended as a substitute for
careful tax planning. Investors are advised to consult their tax advisers with
specific reference to their own tax situations.
A 4% non-deductible excise tax is imposed on regulated investment
companies that fail to currently distribute specified percentages of their
ordinary taxable income and capital gain net income (excess of capital gains
over capital losses). The Fund intends to make sufficient distributions or
deemed distributions of its ordinary taxable income and any capital gain net
income with respect to each calendar year to avoid liability for this excise
tax.
The Fund is treated as a separate tax entity under the Code. Although
the Fund expects to qualify as a "regulated investment company" and to be
relieved of all or substantially all federal income taxes, depending upon the
extent of the Company's activities in states and localities in which its offices
are maintained, in which its agents or independent contractors are located or in
which it is otherwise deemed to be conducting business, the Fund may be subject
to the tax laws of such states or localities. In addition, in those states and
localities which have income tax laws, the treatment of the Fund and its
shareowners under such laws may differ from their treatment under federal income
tax laws.
If for any taxable year the Fund does not qualify for the special
federal income tax treatment afforded regulated investment companies, all of its
taxable income will be subject to federal income tax at regular corporate rates
(without any deduction for distributions to its shareowners). In such event,
dividend distributions would be taxable as ordinary income to shareowners to the
extent of the Fund's current and accumulated earnings and profits and would be
eligible for the dividends received deduction in the case of corporate
shareowners.
The Fund will designate any distribution of the excess of net long-
term capital gain over net short-term capital loss as a capital gain dividend in
a written notice mailed to shareowners within 60 days after the close of the
Fund's taxable year.
Income received by the Fund from sources within foreign countries may
be subject to withholding and other taxes imposed by such countries. Tax
conventions between certain countries and the U.S. may reduce or eliminate such
taxes.
The foregoing discussion is based on federal tax laws and regulations
which are in effect on the date of this Statement of Additional Information;
such laws and regulations may be changed by legislative or administrative
action.
MANAGEMENT OF THE COMPANY
Directors and Officers
- ----------------------
The Directors and Officers of the Company, their addresses, principal
occupations during the past five years and other affiliations are as follows:
Principal
Position with Occupations During Past 5
Name, Address & Age the Company Years and Other Affiliations
- ------------------- ------------- ----------------------------
James M. Wade* Chairman, Vice President and Chief Financial
2802 Wind Bluff Circle President and Officer, Johnson Controls, Inc. (a
Wilmington, NC 28409 Treasurer controls manufacturing company)
Age: 53 January 1987 - May 1991.
Glen R. Bomberger Director Executive Vice President, Chief
One Park Plaza Financial Officer and Director, A.O.
11270 West Park Place Smith Corporation (a diversified
Milwaukee, WI 53224-3690 manufacturing company) since January
Age: 59 1987. Director of companies
affiliated with A.O. Smith
Corporation; Chief Financial Officer,
Director and Vice President, Smith
Investment Company; Officer and
Director of companies affiliated with
Smith Investment Company
Jerry G. Remmel Director Vice President, Treasurer and Chief
16650A Lake Circle Financial Officer of Wisconsin
Brookfield WI 53005 Energy Corporation 1994-1996;
Age: 65 Treasurer of Wisconsin Electric Power
Company 1973-1996; Director Wisconsin
Electric Power Company 1989-1996;
Senior Vice President, Wisconsin
Electric Power Company 1988 - 1994;
Chief Financial Officer, Wisconsin
Electric Power Company 1983-1996; Vice
President and Treasurer, Wisconsin
Electric Power Company 1983 - 1989.
Richard K. Riederer Director President, Chief Executive Officer,
400 Three Springs Drive and Chief Operating Officer of Weirton
Weirton, WV 26062-4989 Steel since 1995; Executive Vice
Age: 52 President and Chief Financial Officer,
Weirton Steel January 1994-1995;
VicePresident of Finance and Chief
Financial Officer, Weirton Steel
January 1989-1994; Member-Board of
Directors of American Iron and Steel
Institute since 1995; Member-Board of
Directors, National Association of
Manufacturers since 1995.
Charles R. Roy* Director Vice President - Finance, Chief
14245 Heatherwood Court Financial Officer and Secretary,
Elm Grove, WI 53122 Rexnord Corporation (an equipment
Age: 66 manufacturing company), 1988 - 1992;
Vice President - Finance and
Administration, Rexnord Inc., 1982 -
1988; Officer and Director of several
Rexnord subsidiaries until 1992.
Mary Ellen Stanek Vice President President and Chief Operating Officer,
777 East Wisconsin Avenue FIRMCO since 1994, Director since 1992
Suite 800 and Director of Fixed Income
Milwaukee, WI 53202 Securities since 1990.
Age: 40
W. Bruce McConnel, III Secretary Partner of the law firm of Drinker
Philadelphia National Biddle & Reath.
Bank Building
1345 Chestnut Street
Philadelphia, PA 19107
Age: 53
* Messrs. Wade and Roy are considered by the Company to be "interested
directors" of the Company as defined in the 1940 Act.
The following chart provides certain information about the Director fees
for the Company's fiscal year ended October 31, 1996 of the Company's Directors.
TOTAL
PENSION OR COMPENSATION
RETIREMENT ESTIMATED FROM
AGGREGATE BENEFITS ANNUAL COMPANY
COMPENSATION ACCRUED AS PART BENEFITS AND FUND
NAME OF FROM THE OF FUND UPON COMPLEX* PAID
PERSON/POSITION COMPANY EXPENSES RETIREMENT TO DIRECTORS
--------------- ------------ --------------- ---------- -------------
James M. Wade $15,000 $0 $0 $15,000
President,
Treasurer and
Chairman of the
Board
Glen R. Bomberger $12,000+ $0 $0 $12,000
Director
Jerry G. Remmel $12,000 $0 $0 $12,000
Director
Richard K. Riederer $12,000 $0 $0 $12,000
Director
Charles R. Roy $12,000 $0 $0 $12,000
Director
*The "Fund Complex" includes only the Company.
+Includes $12,000 which Mr. Bomberger elected to defer under the Company's
deferred compensation plan.
Each Director receives an annual fee of $7,000, a $1,000 per meeting
attendance fee and reimbursement of expenses incurred as a Director. The
Chairman of the Board is entitled to receive an additional $3,000 per annum for
services in such capacity. For the Company's 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 the Fund.
Advisory Services
- -----------------
FIRMCO is the Investment Adviser to the Fund. In its Investment
Advisory Agreement, the Adviser has agreed to pay all expenses incurred by it in
connection with its advisory activities, other than the cost of securities and
other investments, including brokerage commissions and other transaction
charges, if any, purchased or sold for the Funds. The Adviser may voluntarily
waive advisory fees otherwise payable by the Fund.
In addition to the compensation stated in the Prospectus, the Adviser
is entitled to 4/10ths of the gross income earned by the Fund on each loan of
its securities, excluding capital gains or losses, if any. Pursuant to current
policy of the Securities and Exchange Commission, the Adviser does not intend to
receive separate compensation for securities lending activity.
For services provided and expenses assumed by the Adviser under its
investment advisory agreement in effect for the fiscal periods August 1, 1995
through June 30, 1996 and July 1, 1996 through October 31, 1996, the Adviser
earned $609,197 and $356,130, respectively and waived advisory fees of $72,149
and $135, respectively.
Under its Investment Advisory Agreement, the Adviser is not liable for
any error of judgment or mistake of law or for any loss suffered by the Fund in
connection with the performance of such Agreement, except a loss resulting from
a breach of fiduciary duty with respect to the receipt of compensation for
services or a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the Adviser in the performance of its duties or from
its reckless disregard of its duties and obligations under the Agreement.
BANKING LAWS AND REGULATIONS. Banking laws and regulations, including the
Glass-Steagall Act as presently interpreted by the Board of Governors of the
Federal Reserve System, presently (a) prohibit a bank holding company registered
under the Federal Bank Holding Company Act of 1956 or any bank or non-bank
affiliate thereof from sponsoring, organizing, controlling or distributing the
shares of a registered, open-end investment company continuously engaged in the
issuance of its shares, and prohibit banks generally from underwriting
securities, but (b) do not prohibit such a bank holding company or affiliate or
banks generally from acting as investment adviser, transfer agent or custodian
to such an investment company or from purchasing shares of such a company as
agent and upon order of a customer. In 1971, the United States Supreme Court
held in INVESTMENT COMPANY INSTITUTE VS. CAMP that the Glass-Steagall Act
prohibits a national bank from operating a fund for the collective investment of
managing agency accounts. Subsequently, the Board of Governors of the Federal
Reserve System (the "Board") issued a regulation and interpretation to the
effect that the Glass-Steagall Act and such decision forbid a bank holding
company registered under the Federal Bank Holding Company Act of 1956 (the
"Holding Company Act"), or any non-bank affiliate thereof from sponsoring,
organizing or controlling a registered, open-end investment company continuously
engaged in the issuance of its shares, but did not prohibit such a holding
company or affiliate from acting as investment adviser, transfer agent and
custodian to such an investment company. In 1981, the United States Supreme
Court held in BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM V. INVESTMENT
COMPANY INSTITUTE that the Board did not exceed its authority under the Holding
Company Act when it adopted its regulation and interpretation authorizing bank
holding companies and their non-bank affiliates to act as investment advisers to
registered closed-end investment companies. FIRMCO and Firstar Trust Company
are subject to such banking laws and regulations.
FIRMCO and Firstar Trust Company believe that they may perform the
services for the Fund contemplated by their respective agreements with the
Company without violation of the Glass-Steagall Act or other applicable banking
laws or regulations. These companies further believe that, if the question were
properly presented, a court should hold that these companies may each perform
such activities without violation of the Glass-Steagall Act or other applicable
banking laws and or regulations. It should be noted, however, there have been
no cases deciding whether banks and their affiliates may perform services
comparable to those performed by these companies, and future changes in either
federal or state statutes and regulations relating to permissible activities of
banks or trust companies and their subsidiaries or affiliates, as well as
further judicial or administrative decisions or interpretations of present and
future statutes and regulations, could prevent such companies from continuing to
perform such services for the Fund. If the companies were prohibited from
continuing to perform advisory, accounting, shareowner servicing and custody
services for the Fund, it is expected that the Board of Directors would
recommend that the Fund enter into new agreements or would consider the possible
termination of the Fund. Any new advisory or sub-advisory agreement would be
subject to shareowner approval.
Shares of the Fund are not bank deposits, are neither endorsed by,
insured by, or guaranteed by, obligations of, nor otherwise supported by the
FDIC, the Federal Reserve Board, Firstar Trust Company or FIRMCO, their
affiliates or any other bank, or any other governmental agency. An investment
in the Fund involves risks including possible loss of principal.
Administration and Distribution Services
- ----------------------------------------
Firstar Trust Company ("Firstar Trust") and B. C. Ziegler and
Company ("Ziegler") serve as the Co-Administrators. Under the Co-
Administration Agreement, the following administrative services will be provided
jointly by the Co-Administrators: assist in maintaining office facilities;
furnish clerical services and stationery and office supplies; monitor Portico
Funds' arrangements with respect to services provided by Shareowner
Organizations and Institutions; and generally assist in the Funds' operations.
The following administrative services will be provided by Ziegler: review and
comment upon the registration statement and amendments thereto prepared by
Firstar Trust or counsel to the Company, as requested by Firstar Trust; review
and comment upon sales literature and advertising relating to the Company, as
requested by Firstar Trust; assist in the administration of the marketing
budget; periodically review Blue Sky registration and sales reports for the
Funds; attend meetings of the Board of Directors, as requested by the Board of
Directors of the Funds; and such other services as may be requested in writing
and expressly agreed to by Ziegler. The following administrative services will
be provided by Firstar Trust: compile data for and prepare with respect to the
Fund timely Notices to the Securities and Exchange Commission required pursuant
to Rule 24f-2 under the 1940 Act and Semi-Annual Reports on Form N-SAR;
coordinate execution and filing by the Company's of all federal and state tax
returns and required tax filings other than those required to be made by the
Company's custodian and transfer agent; prepare compliance filings and Blue Sky
registrations pursuant to state securities laws with the advice of the Company's
counsel; assist to the extent requested by the Company with the Company's
preparation of Annual and Semi-Annual Reports to Fund shareowners and
Registration Statements for the Funds; monitor the Fund's expense accruals and
cause all appropriate expenses to be paid on proper authorization from the Fund;
monitor the Fund's status as a regulated investment company under Subchapter M
of the Code; maintain the Fund's fidelity bond as required by the 1940 Act; and
monitor compliance with the policies and limitations of the Fund as set forth in
the Prospectus, Statement of Additional Information, By-laws and Articles of
Incorporation.
Each of the Co-Administrators have agreed to pay all expenses incurred
by it in connection with its administrative activities. Under the Co-
Administration Agreement, the Co-Administrators are not liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with the performance of the Co-Administration Agreement, except a loss resulting
from willful misfeasance, bad faith or gross negligence on the part of the Co-
Administrators in the performance of their respective duties or from their
reckless disregard of their duties and obligations under the Agreement.
The Distributor provides distribution services for the Fund as
described in the Fund's Prospectus pursuant to a Distribution Agreement with the
Fund under which the Distributor, as agent, sells shares of the Fund on a
continuous basis. The Distributor has agreed to use its best efforts to solicit
orders for the sale of shares, although it is not obliged to sell any particular
amount of shares. The Distributor causes expenses to be paid for the cost of
printing and distributing prospectuses to persons who are not shareowners of the
Fund (excluding preparation and printing expenses necessary for the continued
registration of the Fund's shares) and of printing and distributing all sales
literature.
For its administrative services for the fiscal periods August 1, 1995
through June 30, 1996 and July 1, 1996 through October 31, 1996, the Co-
Administrators earned $23,766 and $12,113, respectively and waived $30,742 and
$12,058, respectively.
Shareowner Organizations
- ------------------------
As stated in the Fund's Prospectus, for Retail Shares the Fund intends
to enter into agreements from time to time with Shareowner Organizations
providing for support and/or distribution services to customers of the
Shareowner Organizations who are the beneficial owners of Retail Shares of the
Fund. Under the agreements, the Fund may pay Shareowner Organizations up to
0.25% (on an annualized basis) of the average daily net asset value of Retail
Shares beneficially owned by their customers. Support services provided by
Shareowner Organizations under their Service Agreements or Distribution and
Service Agreements may include: (i) processing dividend and distribution
payments from the Fund; (ii) providing information periodically to customers
showing their share positions; (iii) arranging for bank wires; (iv) responding
to customer inquiries; (v) providing sub-accounting with respect to shares
beneficially owned by customers or the information necessary for sub-accounting;
(vi) forwarding shareowner communications; (vii) assisting in processing share
purchase, exchange and redemption requests from customers; (viii) assisting
customers in changing dividend options, account designations and addresses; and
(ix) other similar services requested by the Fund. In addition, Shareowner
Organizations, under the Distribution and Service Plan, may provide assistance
(such as the forwarding of sales literature and advertising to their customers)
in connection with the distribution of Retail Shares. All fees paid under these
agreements are borne exclusively by the Fund's Retail Shares.
The Fund's arrangements with Shareowner Organizations under the
agreements are governed by two Plans (a Service Plan and a Distribution and
Service Plan), which have been adopted by the Board of Directors. Because the
Distribution and Service Plan contemplates the provision of services related to
the distribution of Retail Shares (in addition to support services), that Plan
has been adopted in accordance with Rule 12b-1 under the 1940 Act. In
accordance with the Plans, the Board of Directors reviews, at least quarterly, a
written report of the amounts expended in connection with the Fund's
arrangements with Shareowner Organizations and the purposes for which the
expenditures were made. In addition, the Fund's arrangements with Shareowner
Organizations must be approved annually by a majority of the Directors,
including a majority of the Directors who are not "interested persons" of the
Funds as defined in the 1940 Act and have no direct or indirect financial
interest in such arrangements (the "Disinterested Directors").
The Fund believes that there is a reasonable likelihood that its
arrangements with Shareowner Organizations will benefit the holders of Retail
Shares as a way of allowing Shareowner Organizations to participate with the
Fund in the provision of support and distribution services to customers of the
Shareowner Organization who own Retail Shares. Any material amendment to the
arrangements with Shareowner Organizations under the agreements must be approved
by a majority of the Board of Directors (including a majority of the
Disinterested Directors), and any amendment to increase materially the costs
under the Distribution and Service Plan with respect to the Fund must be
approved by the holders of a majority of the outstanding Retail Shares of the
Fund. So long as the Plans are in effect, the selection and nomination of the
members of the Board of Directors who are not "interested persons" (as defined
in the 1940 Act) of the Fund will be committed to the discretion of such
disinterested Directors.
The MicroCap Fund paid $7,353 and $13,678, respectively to Shareowner
Organizations, all of which were affiliated with the Advisor, pursuant to the
Service Plan for the fiscal periods August 1, 1995 through June 30, 1996 and
July 1, 1996 through October 31, 1996.
CUSTODIAN, TRANSFER AGENT, DISBURSING AGENT AND ACCOUNTING SERVICES AGENT
Firstar Trust serves as custodian of all the Fund's assets. Under the
Custody Agreement, Firstar Trust has agreed to (i) maintain a separate account
in the name of the Fund, (ii) make receipts and disbursements of money on behalf
of the Fund, (iii) collect and receive all income and other payments and
distributions on account of the Fund's portfolio investments, (iv) respond to
correspondence from shareowners, security brokers and others relating to its
duties and (v) make periodic reports to the Company concerning the Fund's
operations. Firstar Trust may, at its own expense, open and maintain a custody
account or accounts on behalf of the Fund with other banks or trust companies,
provided that Firstar Trust Company shall remain liable for the performance of
all of its duties under the Custody Agreement notwithstanding any delegation.
For its services as custodian, Firstar Trust is entitled to receive a fee,
payable monthly, based on the annual rate of $0.20 per $1,000 of the market
value of the Fund's first $2 billion of assets, $0.15 per $1,000 of the market
value of the Fund's next $2 billion of assets, and $0.10 per $1,000 on the
balance of such assets. In addition, Firstar Trust, as custodian, is entitled
to certain charges for securities transactions and reimbursement for expenses.
Firstar Trust also serves as transfer agent and dividend disbursing
agent for the Fund under a Shareholder Servicing Agent Agreement. As transfer
and dividend disbursing agent, Firstar Trust has agreed to (i) issue and redeem
shares of the Fund, (ii) make dividend and other distributions to shareowners of
the Fund, (iii) respond to correspondence by Fund shareowners and others
relating to its duties, (iv) maintain shareowner accounts, and (v) make periodic
reports to the Fund. For its transfer agency and dividend disbursing services
for the Fund, Firstar Trust is entitled to receive fees at the rate of $15.00
per shareowner account with an annual minimum of $24,000 per portfolio, plus
certain other transaction charges and reimbursement for expenses.
In addition, the Fund has entered into a Fund Accounting Servicing
Agreement with Firstar Trust Company pursuant to which Firstar Trust has agreed
to maintain the financial accounts and records of the Fund in compliance with
the 1940 Act and to provide other accounting services to the Fund. For its
accounting services, Firstar Trust is entitled to receive fees, payable monthly,
at the following annual rates of the market value of the Fund's assets: --
$27,500 on the first $40 million, 1.25/100th of 1% on the next $200 million, and
6.25/1000ths of 1% on the balance, plus out-of-pocket expenses, including
pricing expenses.
EXPENSES
Operating expenses of the Fund include taxes, interest, fees and expenses of
Directors and officers, SEC fees, state securities and qualification fees,
advisory fees, administrative fees, Shareowner Organization fees (Retail Shares
only), charges of the custodian and transfer agent, dividend disbursing agent
and accounting services agent, certain insurance premiums, auditing and legal
expenses, costs of preparing and printing prospectuses for regulatory purposes
and for distribution to shareowners, costs of shareowner reports and meetings
and any extraordinary expenses. The Fund also pays any brokerage fees,
commissions and other transactions charges (if any) incurred in connection with
the purchase or sale of portfolio securities.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, independent accountants, 100 East Wisconsin
Avenue, Suite 1500, Milwaukee, Wisconsin, 53202, serve as auditors for the
Company. The financial statements and notes thereto contained in the Fund's
Annual Report for the fiscal period ended October 31, 1996 are incorporated
herein by reference. No other part of the Annual Report is incorporated herein
by reference. Such financial statements have been incorporated herein in
reliance on the report of Price Waterhouse LLP, independent accountants, given
as authority of said firm as experts in auditing and accounting.
COUNSEL
Drinker Biddle & Reath (of which Mr. McConnel, Secretary of the
Company, is a partner), Philadelphia National Bank Building, 1345 Chestnut
Street, Philadelphia, Pennsylvania 19107, serve as counsel to the Company and
will pass upon the legality of the shares offered by the Fund's Prospectus.
ADDITIONAL INFORMATION ON PERFORMANCE
From time to time, the total return of the Retail Shares and
Institutional Shares of the Fund may be quoted in advertisements, shareowner
reports or other communications to shareowners. Performance information is
generally available by calling the Portico Investor Services at 1-800-982-8909.
Total Return Calculations.
- -------------------------
The Fund computes "average annual total return" separately for its
Retail and Institutional Shares by determining the average annual compounded
rates of return during specified periods that equate the initial amount invested
in a particular series to the ending redeemable value of such investment in the
series. This is done by dividing the ending redeemable value of a hypothetical
$1,000 initial payment by $1,000 and raising the quotient to a power equal to
one divided by the number of years (or fractional portion thereof) covered by
the computation and subtracting one from the result. This calculation can be
expressed as follows:
ERV 1/n
T = [(-----) - 1]
P
Where: T = average annual total return.
ERV = ending redeemable value at the end of the period
covered by the computation of a hypothetical $1,000
payment made at the beginning of the period.
P = hypothetical initial payment of $1,000.
n = period covered by the computation, expressed in terms
of years.
The Fund computes its aggregate total returns separately for Retail
and Institutional Shares, by determining the aggregate rates of return during
specified periods that likewise equate the initial amount invested in a
particular series to the ending redeemable value of such investment in the
series. The formula for calculating aggregate total return is as follows:
ERV
T = [(-----) - 1]
P
The calculations of average annual total return and aggregate total
return assume the reinvestment of all dividends and capital gain distributions
on the reinvestment dates during the period. The ending redeemable value
(variable "ERV" in each formula) is determined by assuming complete redemption
of the hypothetical investment and the deduction of all nonrecurring charges at
the end of the period covered by the computations. In addition, the Fund's
average annual total return and aggregate total return reflect the deduction of
the maximum front-end sales charge of 4% in connection with the purchase of
Retail Shares. The Fund may also advertise total return data without reflecting
sales charges in accordance with the rules of the Securities and Exchange
Commission. Quotations that do not reflect the sales charge will, of course, be
higher than quotations that do reflect the sales charge.
The average annual total return for the period from commencement of
operations (August 1, 1995) to October 31, 1996 and for the one year ended
October 31, 1996 were respectively 54.13% and 54.72% with respect to the
Institutional Series, and 53.61% and 54.39% with respect to the Retail Series.
Assuming the deduction of the maximum sales charge for Retail Shares
of the Fund, the average annual total return for the period of commencement of
operations (August 1, 1995) to October 31, 1996 and for the one year ended
October 31, 1996 would have been respectively 48.66% and 48.24%.
The Fund may also from time to time include discussions or
illustrations of the effects of compounding in advertisements. "Compounding"
refers to the fact that, if dividends or other distributions on the Fund's
investment are reinvested by being paid in additional Fund shares, any future
income or capital appreciation of the Fund would increase the value, not only of
the original Fund investment, but also of the additional Fund shares received
through reinvestment. As a result, the value of the Fund investment would
increase more quickly than if dividends or other distribution had been paid in
cash. The Fund may also include discussions or illustrations of the potential
investment goals of a prospective investor, investment management techniques,
policies or investment suitability of the Fund, economic conditions, the effects
of inflation and historical performance of various asset classes, including but
not limited to, stocks, bonds and Treasury bills. From time to time
advertisements or communications to shareowners may summarize the substance of
information contained in shareowner reports (including the investment
composition of the Fund), as well as the views of the Adviser as to market,
economic, trade and interest rate trends, legislative, regulatory and monetary
developments, investment strategies and related matters believed to be of
relevance to the Fund. The Fund may also include in advertisements, charts,
graphs or drawings which illustrate the potential risks and rewards of
investment in various investment vehicles, including but not limited to stocks,
bonds, treasury bills and shares of the Fund. In addition, advertisement or
shareowner communications may include a discussion of certain attributes or
benefits to be derived by an investment in the Fund. Such advertisements or
communications may include symbols, headlines or other materials which highlight
or summarize the information discussed in more detail therein.
MISCELLANEOUS
As used in this Statement of Additional Information and in the Fund's
Prospectus, a majority of the outstanding shares of the Fund or portfolio means,
with respect to the approval of an investment advisory agreement or a charge in
a fundamental investment policy, the lesser of (1) 67% of the shares of the Fund
or portfolio represented at a meeting at which the holders of more than 50% of
the outstanding shares of the Fund or portfolio are present in person or by
proxy, or (2) more than 50% of the outstanding shares of the Fund or portfolio.
As of 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 53201, and its affiliated banks held as beneficial owner five percent
or more of the outstanding shares of the following investment portfolios of the
Company because they possessed sole voting or investment power with respect to
such shares: Money Market Fund 4%, Institutional Money Market Fund 86%; Tax-
Exempt Money Market Fund 45%; U.S. Treasury Money Market Fund 50%; U.S.
Government Money Market Fund 67%; Growth and Income Fund 65%; Short-Term Bond
Market Fund 69%, Special Growth Fund 72%; Bond IMMDEX/TM Fund 80%; Equity Index
Fund 79%; Balanced Fund 79%; Intermediate Bond Market Fund 78%; MidCore Growth
Fund 86%; 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.
- -------------------------------------------------------------------------------
APPENDIX A
ADDITIONAL INFORMATION CONCERNING FUTURES AND RELATED
OPTIONS
As stated in the Prospectus, the Fund may enter into futures contracts and
options for hedging purposes, to maintain liquidity, to have fuller exposure to
price movements in a security index or to reduce transaction costs. Such
transactions are described in this Appendix. During the current fiscal year,
the Fund intends to limit its transactions in futures contracts and options so
that not more than 5% of its total assets are at risk. Furthermore, in no
event would the Fund purchase or sell futures contracts, or related options
thereon if, immediately thereafter, the aggregate initial margin that is
required to be posted by the Fund under the rules of the exchange on which the
futures contract (or futures option) is traded, plus any premiums paid by the
Fund on its open futures options positions, exceeds 5% of the Fund's total
assets, after taking into account any unrealized profits and unrealized losses
on the Fund's open contracts and excluding the amount that a futures option is
"in-the-money" at the time of purchase (an option to buy a futures contract is
"in-the-money" if the value of the contract that is subject to the option
exceeds the exercise price; and an option to sell a futures contract is "in-
the-money" if the exercise price exceeds the value of the contract that is
subject of the option.)
I. Index Futures Contracts.
A stock index assigns relative values to the stocks included in the index
and the index fluctuates with changes in the market values of the stocks
included. Some stock index futures contracts are based on broad market
indexes, such as the Standard & Poor's 500 or the New York Stock Exchange
Composite Index. In contrast, certain exchanges offer futures contracts on
narrower market indexes, such as the Standard & Poor's 100 or indexes based on
an industry or market segment, such as oil and gas stocks. Futures contracts
are traded on organized exchanges regulated by the Commodity Futures Trading
Commission. Transactions on such exchanges are cleared through a clearing
corporation, which guarantees the performance of the parties to each contract.
The MicroCap Fund will sell index futures contracts in order to offset a
decrease in market value of its portfolio securities that might otherwise
result from a market decline. The Fund may do so either to hedge the value of
its portfolio as a whole, or to protect against declines, occurring prior to
sales of securities, in the value of the securities to be sold. Conversely,
the Fund may purchase index futures contracts in anticipation of purchases of
securities and to keep substantially all of its assets exposed to the market.
In a substantial majority of these transactions, the Fund will purchase such
securities upon termination of the long futures position, but a long futures
position may be terminated without a corresponding purchase of securities.
In addition, the Fund may utilize index futures contracts in anticipation
of changes in the composition of its portfolio holdings. For example, in the
event that the Fund expects to narrow the range of industry groups represented
in its holdings it may, prior to making purchases of the actual securities,
establish a long futures position based on a more restricted index, such as an
index comprised of securities of a particular industry group. The Fund may
also sell futures contracts in connection with this strategy, in order to
protect against the possibility that the value of the securities to be sold as
part of the restructuring of the portfolio will decline prior to the time of
sale.
The following are examples of transactions in stock index futures (net of
commissions and premiums, if any).
ANTICIPATORY PURCHASE HEDGE: Buy the Future Hedge
Objective: Protect Against Increasing Price
Portfolio Futures
-Day Hedge is Placed-
Anticipate Buying $62,500 Buying 1 Index Futures at 125
Equity Portfolio Value of Futures=$62,500/Contract
-Day Hedge is Lifted-
Buy Equity Portfolio with Sell 1 Index Futures at 130
Actual Cost = $65,000 Value of Futures = $65,000/Contract
Increase in Purchase Price = $2,500 Gain on Futures = $2,500
HEDGING A STOCK PORTFOLIO: Sell the Future
Hedge Objective: Protect Against Declining
Value of the Portfolio
Factors:
Value of Stock Portfolio = $1,000,000
Value of Futures Contract = 125 x $500 = $62,500
Portfolio Beta Relative to the Index = 1.0
Portfolio Futures
-Day Hedge is Placed-
Anticipate Selling $1,000,000 Sell 16 Index Futures at 125
Equity Portfolio Value of Futures = $1,000,000
-Day Hedge is Lifted-
Equity Portfolio - Own Buy 16 Index Futures at 120
Stock with Value = $960,000 Value of Futures = $960,000
Loss in Portfolio Value = $40,000 Gain on Futures = $40,000
If however, the market moved in the opposite direction, that is, market value
decreased and the Fund had entered into an anticipatory purchase hedge, or
market value increased and the fund had hedged its stock portfolio, the results
of the Fund's transactions in stock index futures would be as set forth below.
Portfolio Futures
-Day Hedge is Placed-
Anticipate Buying $62,500 Buying 1 Index Futures at 125
Equity Portfolio Value of Futures=$62,500/Contract
Portfolio Futures
-Day Hedge is Lifted-
Buy Equity Portfolio with Sell 1 Index Futures at 120
Actual Cost - $60,000 Value of Futures = $60,000/Contract
Decrease in Purchase Price = $2,500 Loss on Futures = $2,500
HEDGING A STOCK PORTFOLIO: Sell the Future
Hedge Objective: Protect Against Declining
Value of the Portfolio
Factors:
Value of Stock Portfolio = $1,000,000
Value of Futures Contract = 125 x $500 = $62,500
Portfolio Beta Relative to the Index = 1.0
Portfolio Futures
-Day Hedge is Placed-
Anticipate Selling $1,000,000 Sell 16 Index Futures at 125
Equity Portfolio Value of Futures = $1,000,000
-Day Hedge is Lifted-
Equity Portfolio - Own Buy 16 Index Futures at 130
Stock with Value = $1,040,000 Value of Futures = $1,040,000
Loss in Portfolio Value = $40,000 Gain on Futures = $40,000
II. Margin Payments.
Unlike when the Fund purchases or sells a security, no price is paid or
received by the Fund upon the purchase or sale of a futures contract.
Initially, in accordance with the terms of the exchange on which such futures
contract is traded, the Fund may be required to deposit with the broker or in a
segregated account with the Fund's custodian an amount of cash or cash
equivalents, the value of which may vary but is generally equal to 10% or less
of the value of the contract. This amount is known as initial margin. The
nature of initial margin in futures transactions is different from that of
margin in security transactions in that futures contract margin does not
involve the borrowing of funds by the customer to finance the transactions.
Rather, the initial margin is in the nature of a performance bond or good faith
deposit on the contract which is returned to the Fund upon termination of the
futures contract assuming all contractual obligations have been satisfied.
Subsequent payments, called variation margin, to and from the broker, will be
made on a daily basis as the price of the underlying security or index
fluctuates making the long and short positions in the futures contract more or
less valuable, a process known as marking to the market. For example, when the
Fund has purchased a futures contract and the price of the contract has risen
in response to a rise in the underlying instruments, that position will have
increased in value and the Fund will be entitled to receive from the broker a
variation margin payment equal to that increase in value. Conversely, where
the Fund has purchased a futures contract and the price of the future contract
has declined in response to a decrease in the underlying instruments, the
position would be less valuable and the Fund would be required to make a
variation margin payment to the broker. At any time prior to expiration of the
futures contract, the Adviser may elect to close the position by taking an
opposite position, subject to the availability of a secondary market, which
will operate to terminate the Fund's position in the futures contract. A final
determination of variation margin is then made, additional cash is required to
be paid by or released to the Fund, and the Fund realizes a loss or gain.
III. Risks of Transactions in Futures Contracts.
There are several risks in connection with the use of futures by a Fund as
a hedging devise. One risk arises because of the imperfect correlation between
movements in the price of the future and movements in the price of the
securities which are the subject of the hedge. The price of the future may
move more than or less than the price of the securities being hedged. If the
price of the future moves less than the price of the securities which are the
subject of the hedge, the hedge will not be fully effective but, if the price
of the securities being hedged has moved in an unfavorable direction, the Fund
would be in a better position than if it had not hedged at all. If the price
of the securities being hedged has moved in an unfavorable direction, the Fund
would be in a better position than if it had not hedged at all. If the price
of the securities being hedged has moved in a favorable direction, this
advantage will be partially offset by the loss on the future. If the price of
the future moves more than the price of the hedged securities, the Fund
involved will experience either a loss or gain on the future which will not be
completely offset by movements in the price of the securities which are the
subject of the hedge. To compensate for the imperfect correlation of movements
in the price of securities being hedged and movements in the price of futures
contracts, the Fund may buy or sell futures contracts in a greater dollar
amount than the dollar amount of securities being hedged if the volatility over
a particular time period of the prices of such securities has been greater than
the volatility over such time period of the future, or if otherwise deemed to
be appropriate by the Adviser. Conversely, the Fund may buy or sell fewer
futures contracts if the volatility over a particular time period of the prices
of the securities being hedged is less than the volatility over such time
period of the futures contract being used, or if otherwise deemed to be
appropriate by the Adviser. It is also possible that, where the Fund has sold
futures to hedge its portfolio against a decline in the market, the market may
advance and the value of securities held by the Fund may decline. If this
occurred, the Fund would lose money on the future and also experience a decline
in value in its portfolio securities.
Where futures are purchased to hedge against a possible increase in the
price of securities before the Fund is able to invest its cash (or cash
equivalents) in securities (or options) in an orderly fashion, it is possible
that the market may decline instead; if the Fund then concludes not to invest
in securities or options at that time because of concern as to possible further
market decline or for other reasons, the Fund will realize a loss on the
futures contract that is not offset by a reduction in the price of securities
purchased.
In instances involving the purchase of futures contracts by the Fund, an
amount of cash and cash equivalents, equal to the market value of the futures
contracts, will be deposited in a segregated account with the Fund's custodian
and/or in a margin account with a broker to collateralize the position and
thereby insure that the use of such futures is unleveraged.
In addition to the possibility that there may be an imperfect correlation,
or no correlation at all, between movements in the futures and the securities
being hedged, the price of futures may not correlate perfectly with movement in
the cash market due to certain market distortions. Rather than meeting
additional margin deposit requirements, investors may close futures contracts
through off-setting transactions which could distort the normal relationship
between the cash and futures markets. Second, with respect to financial
futures contracts, the liquidity of the futures market depends on participants
entering into off-setting transactions rather than making or taking delivery.
To the extent participants decide to make or take delivery, liquidity in the
futures market could be reduced thus producing distortions. Third, from the
point of view of speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities market. Therefore,
increased participation by speculators in the futures market may also cause
temporary price distortions. Due to the possibility of price distortion in the
futures market, and because of the imperfect correlation between the movements
in the cash market and movements in the price of futures, a correct forecast of
general market trends or interest rate movements by the Adviser may still not
result in a successful hedging transaction over a short time frame.
Positions in futures may be closed out only on an exchange or board of
trade which provides a secondary market for such futures. Although the Fund
intends to purchase or sell futures only on exchanges or boards of trade where
there appear to be active secondary markets, there is no assurance that a
liquid secondary market on any exchange or board of trade will exist for any
particular contract or at any particular time. In such event, it may not be
possible to close a futures investment position, and in the event of adverse
price movements, the Fund would continue to be required to make daily cash
payments of variation margin. However, in the event futures contracts have
been used to hedge portfolio securities, such securities will not be sold until
the futures contract can be terminated. In such circumstances, an increase in
the price of the securities, if any, may partially or completely offset losses
on the futures contract and thus provide an offset on a futures contract.
Further, it should be noted that the liquidity of a secondary market in a
futures contract may be adversely affected by "daily price fluctuation limits"
established by commodity exchanges which limit the amount of fluctuation in a
futures contract price during a single trading day. Once the daily limit has
been reached in the contract, no trades may be entered into at a price beyond
the limit, thus preventing the liquidation of open futures positions.
Successful use of futures by the Fund is also subject to the Adviser's
ability to predict correctly movements in the direction of the market. For
example, if the Fund has hedged against the possibility of a decline in the
market adversely affecting securities held in its portfolio and securities
prices increase instead, the Fund will lose part or all of the benefit to the
increased value of its securities which it has hedged because it will have
offsetting losses in its futures positions. In addition, in such situations,
if the Fund has insufficient cash, it may have to sell securities to meet daily
variation margin requirements. Such sales of securities may be, but will not
necessarily be, at increased prices which reflect the rising market. The Fund
may have to sell securities at a time when it may be disadvantageous to do so.
IV. Options on Futures Contracts.
The Fund may purchase options on the futures contracts described above. A
futures option gives the holder, in return for the premium paid, the right to
buy (call) from or sell (put) to the writer of the option a futures contract at
a specified price at any time during the period of the option. Upon exercise,
the writer of the option is obligated to pay the difference between the cash
value of the futures contract and the exercise price. Like the buyer or seller
of a futures contract, the holder, or writer, of an option has the right to
terminate its position prior to the scheduled expiration of the option by
selling, or purchasing, an option of the same series, at which time the person
entering into the closing transaction will realize a gain or loss.
Investments in futures options involve some of the same considerations
that are involved in connection with investments in futures contracts (for
example, the existence of a liquid secondary market). In addition, the
purchase of an option also entails the risk that changes in the value of the
underlying futures contract will not be fully reflected in the value of the
option purchased. Depending on the pricing of the option compared to either
the futures contract upon which it is based, or upon the price of the
securities being hedged, an option may or may not be less risky than ownership
of the futures contract or such securities. In general, the market prices of
options can be expected to be more volatile than the market prices on the
underlying futures contract. Compared to the purchase or sale of futures
contracts, however, the purchase of call or put options on futures contracts
may frequently involve less potential risk to the Fund because the maximum
amount at risk is the premium paid for the options (plus transaction costs).
Although permitted by its fundamental investment policies, the Fund does not
currently intend to write futures options, and will not do so in the future
absent any necessary regulatory approvals.
V. Accounting and Tax Treatment.
Accounting for futures contracts and options will be in accordance with
generally accepted accounting principles.
Generally, futures contracts held by the Fund at the close of the Fund's
taxable year will be treated for federal income tax purposes as sold for their
fair market value on the last business day of such year, a process known as
"mark-to-market." Forty percent of any gain or loss resulting from such
constructive sale will be treated as short-term capital gain or loss and 60% of
such gain or loss will be treated as long-term capital gain or loss without
regard to the length of time the Fund holds the futures contract ("the 40-60
rule"). The amount of any capital gain or loss actually realized by the Fund
in a subsequent sale or other disposition of those futures contracts will be
adjusted to reflect any capital gain or loss taken into account by the Fund in
a prior year as a result of the constructive sale of the contracts. With
respect to futures contracts to sell, which will be regarded as parts of a
"mixed straddle" because their values fluctuate inversely to the values of
specific securities held by the Fund, losses as to such contracts to sell will
be subject to certain loss deferral rules which limit the amount of loss
currently deductible on either part of the straddle to the amount thereof which
exceeds the unrecognized gain (if any) with respect to the other part of the
straddle, and to certain wash sales regulations. Under short sales rules,
which will also be applicable, the holding period of the securities forming
part of the straddle will (if they have not been held for the long-term holding
period) be deemed not to begin prior to termination of the straddle. With
respect to certain futures contracts, deductions for interest and carrying
charges will not be allowed. Notwithstanding the rules described above, with
respect to futures contracts to sell which are properly identified as such, the
Fund may make an election which will exempt (in whole or in part) those
identified futures contracts from being treated for federal income tax purposes
as sold on the last business day of the Fund's taxable year, but gains and
losses will be subject to such short sales, wash sales, loss deferral rules and
the requirement to capitalize interest and carrying charges. Under temporary
regulations, the Fund would be allowed (in lieu of the foregoing) to elect to
either (1) to offset gains or losses from portions which are part of a mixed
straddle by separately identifying each mixed straddle to which such treatment
applies, or (2) to establish a mixed straddle account for which gains and
losses would be recognized and offset on a periodic basis during the taxable
year. Under either election, the 40-60 rule will apply to the net gain or loss
attributable to the futures contracts, but in the case of a mixed straddle
account election, not more than 50% of any net gain may be treated as long-term
and no more than 40% of any net loss may be treated as short-term. Options on
futures contracts generally receive federal tax treatment similar to that
described above.
Special rules govern the federal income tax treatment of certain
transactions denominated in terms of a currency other than the U.S. dollar or
determined by reference to the value of one or more currencies other than the
U.S. dollar. The types of transactions covered by the special rules include
the following: (i) the acquisition of, or becoming the obligor under, a bond or
other debt instrument (including, to the extent provided in Treasury
regulations, preferred stock); (ii) the accruing of certain trade receivables
and payables; and (iii) the entering into or acquisition of any forward
contract, futures contract, option or similar financial instrument. The
disposition of a currency other than the U.S. dollar by a U.S. taxpayer is also
treated as a transaction subject to the special currency rules. However,
foreign currency-related regulated futures contracts and nonequity options are
generally not subject to the special currency rules if they are or would be
treated as sold for their fair market value at year-end under the mark-to-
market rules unless an election is made to have such currency rules apply.
With respect to transactions covered by the special rules, foreign currency
gain or loss is calculated separately from any gain or loss on the underlying
transaction and is normally taxable as ordinary gain or loss. The Fund may
elect to treat as capital gain or loss foreign currency gain or loss arising
from certain identified forward contracts, futures contracts and options that
are capital assets in the hands of the Fund and which are not part of a
straddle. In accordance with Treasury regulations, certain transactions
subject to the special currency rules that are part of a "Section 988 hedging
transactions" (as defined in the Code and the Treasury regulations) will be
integrated and treated as a single transaction or otherwise treated
consistently for purposes of the Code. "Section 988 hedging transactions" are
not subject to the mark-to-market or loss deferral rules under the Code. It is
possible that some of the non-U.S. dollar denominated investments that the Fund
may make will be subject to the special currency rules described above. Gain
or loss attributable to the foreign currency component of transactions engaged
in by the Fund which are not subject to the special currency rules (such as
foreign equity investment other than certain preferred stocks) will be treated
as capital gain or loss and will not be segregated from the gain or loss on the
underlying transaction.
Qualification as a regulated investment company under the code requires
that the Fund satisfy certain requirements with respect to the source of its
income during a taxable year. At least 90% of the gross income of the Fund
must be derived from dividends, interest, certain payments with respect to
securities loans, gains from the sale or other disposition of stock, securities
or foreign currencies, and other income (including but not limited to gains
from options, futures or forward contracts) derived with respect to the Fund's
business of investing in such stock, securities or currencies. The Treasury
Department may by regulation exclude from qualifying income foreign currency
gains which are not directly related to the Fund's principal business of
investment in stock or securities, or options and futures with respect to stock
or securities. Any income derived by the Fund from a partnership or trust is
treated for this purpose as derived with respect to the Fund's business of
investment in stock, securities or currencies only to the extent that such
income is attributable to items of income which would have been qualifying
income if realized by the Fund in the same manner as by the partnership or
trust.
An additional requirement for qualification as a regulated investment
company under the Code is that less than 30% of the Fund's gross income must be
derived from gains realized on the sale or other disposition of the following
investments held for less than three months: (1) stock and securities (as
defined in section 2(a)(36) of the 1940 Act); (2) options, futures and forward
contracts other than those on foreign currencies; and (3) foreign currencies
(and options, futures and forward contracts on foreign currencies) that are not
directly related to the Fund's principal business of investment in stock and
securities (and options and futures with respect to stock and securities).
With respect to futures contracts and other financial instruments subject to
the mark-to-market rules, the Internal Revenue Service has ruled in private
letter rulings that a gain realized from such a futures contract or financial
instrument will be treated as being derived from a security held for three
months or more (regardless of the actual period for which the contract or
instrument is held) if the gain arises as a result of a constructive sale under
the mark-to-market rules, and will be treated as being derived from a security
held for less than three months only if the contract or instrument is
terminated (or transferred) during the taxable year (other than by reason of
mark-to-market) and less than three months have elapsed between the date the
contract or instrument is acquired and the termination date. In determining
whether the 30% test is met for a taxable year, increases and decreases in the
value of the Fund's futures contracts and other investments that qualify as
part of a "designated hedge," as defined in the Code, may be netted.
- --------------------------------------------------------------------------------
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
Financial Statements:
(1) Included in the Retail Prospectus for the Money Market Fund, U.S.
Treasury Money Market Fund (formerly, U.S. Federal Money Market
Fund), U.S. Government Money Market Fund, and Tax-Exempt Money
Market Fund:
Financial Highlights for the Money Market Fund, U.S. Government
Money Market Fund and Tax-Exempt Money Market Fund for the years
ended October 31, 1996, October 31, 1995, October 31, 1994,
October 31, 1993, October 31, 1992, October 31, 1991, October 31,
1990 and October 31, 1989 and the period from commencement of
operations (March 16, 1988, August 1, 1988 and June 27, 1988 with
respect to the Money Market Fund, U.S. Government Money Market
Fund and Tax-Exempt Money Market Fund, respectively) to
October 31, 1988.
Financial Highlights for the U.S. Treasury Money Market Fund
(formerly, U.S. Federal Money Market Fund) for the years ended
October 31, 1996, October 31, 1995, October 31, 1994, October 31,
1993, October 31, 1992 and the period from commencement of
operations (April 29, 1991 with respect to U.S. Treasury Money
Market Fund (formerly, U.S. Federal Money Market Fund)) to
October 31, 1991.
Incorporated by reference into the Statement of Additional
Information for the Money Market Fund, Institutional Money Market
Fund, U.S. Treasury Money Market Fund (formerly, U.S. Federal
Money Market Fund), U.S. Government Money Market Fund, and Tax-
Exempt Money Market Fund:
Reports of Independent Accountants -- December 6, 1996 -- Money
Market Fund, U.S. Treasury Money Market Fund (formerly, U.S.
Federal Money Market Fund), U.S. Government Money Market Fund,
Tax-Exempt Money Market Fund and Institutional Money Market Fund.
Statement of Assets and Liabilities -- October 31, 1996 -- Money
Market Fund, U.S. Government Money Market Fund, U.S. Treasury
Money Market Fund (formerly, U.S. Federal Money Market Fund),
Tax-Exempt Money Market Fund and Institutional Money Market Fund.
Schedule of Investments -- October 31, 1996 -- Money Market Fund,
U.S. Treasury Money Market Fund (formerly, U.S. Federal Money
Market Fund), U.S. Government Money Market Fund, Tax-Exempt Money
Market Fund and Institutional Money Market Fund.
Statement of Operations for the year ended October 31, 1996 --
Money Market Fund, U.S. Treasury Money Market Fund (formerly,
U.S. Federal Money Market Fund), U.S. Government Money Market
Fund, Tax-Exempt Money Market Fund and Institutional Money Market
Fund.
Statement of Changes in Net Assets for the years ended October
31, 1996 and October 31, 1995 -- Money Market Fund, U.S.
Government Money Market Fund, Tax-Exempt Money Market Fund, U.S.
Treasury Money Market Fund (formerly, U.S. Federal Money Market
Fund) and Institutional Money Market Fund.
Financial Highlights for the Money Market Fund, U.S. Government
Money Market Fund and Tax-Exempt Money Market Fund for the years
ended October 31, 1996, October 31, 1995, October 31, 1994,
October 31, 1993, October 31, 1992, October 31, 1991, October 31,
1990 and October 31, 1989 and the period from commencement of
operations (March 16, 1988, August 1, 1988 and June 27, 1988 with
respect to the Money Market Fund, U.S. Government Money Market
Fund and Tax-Exempt Money Market Fund, respectively) to October
31, 1988.
Financial Highlights for the Institutional Money Market Fund and
U.S. Treasury Money Market Fund (formerly, U.S. Federal Money
Market Fund) for the years ended October 31, 1996, October 31,
1995, October 31, 1994, October 31, 1993, October 31, 1992, and
the period from commencement of operations (April 26, 1991 and
April 29, 1991 with respect to the Institutional Money Market
Fund and U.S. Treasury Money Market Fund (formerly, U.S. Federal
Money Market Fund), respectively) to October 31, 1991.
Notes to Financial Statements -- October 31, 1996 -- Money Market
Fund, U.S. Treasury Money Market Fund (formerly, U.S. Federal
Money Market Fund), U.S. Government Money Market Fund, Tax-Exempt
Money Market Fund and Institutional Money Market Fund.
(2) Included in the Retail Prospectus for the Balanced Fund, Growth
and Income Fund (formerly, Income and Growth Fund), Special
Growth Fund, Equity Index Fund, MidCore Growth Fund and
International Equity Fund:
Financial Highlights for the Growth and Income Fund (formerly,
Income and Growth Fund), Special Growth Fund and Equity Index
Fund for the years ended October 31, 1996, October 31, 1995,
October 31, 1994, October 31, 1993, October 31, 1992, October 31,
1991 and for the period from the commencement of operations
(December 28, 1989 with respect to the Special Growth Fund and
December 29, 1989 with respect to the Growth and Income
(formerly, Income and Growth Fund), and Equity Index Fund) to
October 31, 1990.
Financial Highlights for the Balanced Fund for the years ended
October 31, 1996, October 31, 1995, October 31, 1994, October 31,
1993 and for the period from commencement of operations (March
30, 1992 with respect to the Balanced Fund) to October 31, 1992.
Financial Highlights for the MidCore Growth Fund for the years
ended October 31, 1996, October 31, 1995, October 31, 1994 and
for the period from commencement of operations (December 29, 1992
with respect to the MidCore Growth Fund) to October 31, 1993.
Financial Highlights for the International Equity Fund for the
years ended October 31, 1996, October 31, 1995 and for the period
from commencement of operations (April 28, 1994 with respect to
the International Equity Fund) to October 31, 1994.
(3) Included in the Retail Prospectus for the Short-Term Bond Market
Fund (formerly, Short-Intermediate Fixed Income Fund), Bond
IMMDEX/TM Fund, Intermediate Bond Market Fund and Tax-Exempt
Intermediate Bond Fund:
Financial Highlights for the Short-Term Bond Market Fund
(formerly, Short-Intermediate Fixed Income Fund) and Bond
IMMDEX/TM Fund for the years ended October 31, 1996, October 31,
1995, October 31, 1994, October 31, 1993, October 31, 1992,
October 31, 1991 and for the period from the commencement of
operations (December 29, 1989 with respect to the Short-Term Bond
Market Fund (formerly, Short-Intermediate Fixed Income Fund) and
Bond IMMDEX/TM Fund to October 31, 1990.
Financial Highlights for the Intermediate Bond Market Fund and
Tax-Exempt Intermediate Bond Fund for the years ended October 31,
1996, October 31, 1995 and October 31, 1994 and for the period
from commencement of operations (January 5, 1993 with respect to
the Intermediate Bond Market Fund and February 8, 1993 with
respect to the Tax-Exempt Intermediate Bond Fund) to October 31,
1993.
(4) Included in the Institutional Prospectus for the Money Market
Fund, Institutional Money Market Fund, U.S. Treasury Money Market
Fund, U.S. Government Money Market Fund, Tax-Exempt Money Market
Fund, Balanced Fund, Growth and Income Fund (formerly, Income and
Growth Fund), Special Growth Fund, Equity Index Fund, MidCore
Growth Fund, International Equity Fund, Short-Term Bond Market
Fund (formerly, Short-Intermediate Fixed Income Fund), Bond
IMMDEX/TM Fund, Intermediate Bond Market Fund and Tax-Exempt
Intermediate Bond Fund:
Financial Highlights for the Institutional Money Market Fund for
the years ended October 31, 1996, October 31, 1995, October 31,
1994, October 31, 1993, October 31, 1992 and the period from
commencement of operations (April 26, 1991) to October 31, 1991.
Financial Highlights for the Money Market Fund, U.S. Government
Money Market Fund and Tax-Exempt Money Market Fund for the years
ended October 31, 1996, October 31, 1995, October 31, 1994,
October 31, 1993, October 31, 1992, October 31, 1991, October 31,
1990 and October 31, 1989 and the period from commencement of
operations (March 16, 1988, August 1, 1988 and June 27, 1988 with
respect to the Money Market Fund, U.S. Government Money Market
Fund and Tax-Exempt Money Market Fund, respectively) to October
31, 1988.
Financial Highlights for the U.S. Treasury Money Market Fund
(formerly, U.S. Federal Money Market Fund) for the years ended
October 31, 1996, October 31, 1995, October 31, 1994, October 31,
1993, October 31, 1992 and the period from commencement of
operations (April 29, 1991 with respect to U.S. Treasury Money
Market Fund (formerly, U.S. Federal Money Market Fund)) to
October 31, 1991.
Financial Highlights for the Growth and Income Fund (formerly,
Income and Growth Fund), Special Growth Fund and Equity Index
Fund for the years ended October 31, 1996, October 31, 1995,
October 31, 1994, October 31, 1993, October 31, 1992, October 31,
1991 and for the period from the commencement of operations
(December 28, 1989 with respect to the Special Growth Fund and
December 29, 1989 with respect to the Growth and Income
(formerly, Income and Growth Fund), and Equity Index Fund) to
October 31, 1990.
Financial Highlights for the Balanced Fund for the years ended
October 31, 1996, October 31, 1995, October 31, 1994, October 31,
1993 and for the period from commencement of operations (March
30, 1992 with respect to the Balanced Fund) to October 31, 1992.
Financial Highlights for the MidCore Growth Fund for the years
ended October 31, 1996, October 31, 1995, October 31, 1994 and
for the period from commencement of operations (December 29, 1992
with respect to the MidCore Growth Fund) to October 31, 1993.
Financial Highlights for the International Equity Fund for the
years October 31, 1996, October 31, 1995 and for the period from
commencement of operations (April 28, 1994 with respect to the
International Equity Fund) to October 31, 1994.
Financial Highlights for the Short-Term Bond Market Fund
(formerly, Short-Intermediate Fixed Income Fund) and Bond
IMMDEX/TM Fund for the years ended October 31, 1996, October 31,
1995, October 31, 1994, October 31, 1993, October 31, 1992,
October 31, 1991 and for the period from the commencement of
operations (December 29, 1989 with respect to the Short-Term Bond
Market Fund (formerly, Short-Intermediate Fixed Income Fund) and
Bond IMMDEX/TM Fund to October 31, 1990.
Financial Highlights for the Intermediate Bond Market Fund and
Tax-Exempt Intermediate Bond Fund for the years ended October 31,
1996, October 31, 1995 and October 31, 1994 and for the period
from commencement of operations (January 5, 1993 with respect to
the Intermediate Bond Market Fund and February 8, 1993 with
respect to the Tax-Exempt Intermediate Bond Fund) to October 31,
1993.
(5) Incorporated by reference in the Statement of Additional
Information for the Short-Term Bond Market Fund, Intermediate
Bond Market Fund, Tax-Exempt Intermediate Bond Fund, Bond
IMMDEX/TM Fund, Balanced Fund, Growth and Income Fund, Equity
Index Fund, MidCore Growth Fund, Special Growth Fund and
International Equity Fund:
Report of Independent Accountants -- December 6, 1996 -- Short-
Term Bond Market Fund, Intermediate Bond Market Fund, Tax-Exempt
Intermediate Bond Fund, and Bond IMMDEX/TM Fund.
Statement of Assets and Liabilities -- October 31, 1996 -- Short-
Term Bond Market Fund, Intermediate Bond Market Fund, Tax-Exempt
Intermediate Bond Fund, and Bond IMMDEX/TM Fund.
Schedule of Investments -- October 31, 1996 -- Short-Term Bond
Market Fund, Intermediate Bond Market Fund, Tax-Exempt
Intermediate Bond Fund, and Bond IMMDEX/TM Fund.
Statement of Operations for the year ended October 31, 1996 --
Short-Term Bond Market Fund, Intermediate Bond Market Fund, Tax-
Exempt Intermediate Bond Fund, and Bond IMMDEX/TM Fund.
Statement of Changes in Net Assets for the years ended October
31, 1996 and October 31, 1995, -- Short-Term Bond Market Fund
(formerly, Short-Intermediate Fixed Income Fund) Intermediate
Bond Market Fund, Tax-Exempt Intermediate Bond Fund and Bond
IMMDEX/TM Fund.
Financial Highlights for the Short-Term Bond Market Fund and Bond
IMMDEX/TM Fund for the years ended October 31, 1996, October 31,
1995, October 31, 1994, October 31, 1993, October 31, 1992,
October 31, 1991 and for the period from the commencement of
operations (December 29, 1989 with respect to the Short-Term Bond
Market Fund and Bond IMMDEX/TM Fund) to October 31, 1990.
Financial Highlights for the Intermediate Bond Market Fund and
Tax-Exempt Intermediate Bond Fund for the years ended October 31,
1996, October 31, 1995 and October 31, 1994 and for the period
from commencement of operations (January 5, 1993 with respect to
the Intermediate Bond Market Fund and February 8, 1993 with
respect to the Tax-Exempt Intermediate Bond Fund) to October 31,
1993.
Notes to Financial Statements -- October 31, 1996 -- Short-Term
Bond Market Fund (formerly, Short-Intermediate Fixed Income
Fund), Intermediate Bond Market Fund, Tax-Exempt Intermediate
Bond Fund, and Bond IMMDEX/TM Fund.
Report of Independent Accountants -- December 6, 1996 -- Balanced
Fund, Growth and Income Fund, Equity Index Fund, MidCore Growth
Fund, Special Growth Fund and International Equity Fund.
Statement of Assets and Liabilities -- October 31, 1996 --
Balanced Fund, Growth and Income Fund, Equity Index Fund, MidCore
Growth Fund, Special Growth Fund and International Equity Fund.
Schedule of Investments -- October 31, 1996 -- Balanced Fund,
Growth and Income Fund, Equity Index Fund, MidCore Growth Fund,
Special Growth Fund and International Equity Fund.
Statement of Operations -- October 31, 1996 -- Balanced Fund,
Growth and Income Fund, Equity Index Fund, MidCore Growth Fund,
Special Growth Fund and International Equity Fund.
Statement of Changes in Net Assets for the years ended October
31, 1996 and October 31, 1995, -- Growth and Income Fund, Equity
Index Fund and Special Growth Fund, Balanced Fund, MidCore Growth
Fund and International Equity Fund.
Financial Highlights for the Growth and Income Fund, Special
Growth Fund, and Equity Index Fund for the years ended October
31, 1996, October 31, 1995, October 31, 1994, October 31, 1993,
October 31, 1992, October 31, 1991 and for the period from the
commencement of operations (December 28, 1989 with respect to the
Special Growth Fund and December 29, 1989 with respect to the
Growth and Income and Equity Index Fund) to October 31, 1990.
Financial Highlights for the Balanced Fund for the years ended
October 31, 1996, October 31, 1995, October 31, 1994, October 31,
1993 and for the period from commencement of operations
(March 30, 1992 with respect to the Balanced Fund) to October 31,
1992.
Financial Highlights for the MidCore Growth Fund for the years
ended October 31, 1996, October 31, 1995 and October 31, 1994 and
for the period from commencement of operations (December 29, 1992
with respect to the MidCore Growth Fund) to October 31, 1993.
Financial Highlights for the International Equity Fund for the
years ended October 31, 1996, October 31, 1995 and for the period
from the commencement of operations (April 28, 1994 with respect
to the International Equity Fund) to October 31, 1994.
Notes to Financial Statements -- October 31, 1996 -- Balanced
Fund, Growth and Income Fund (formerly, Income and Growth Fund),
Equity Index Fund, MidCore Growth Fund, Special Growth Fund and
International Equity Fund.
(6) Included in the Prospectus for the MicroCap Fund - Financial
Highlights for the period from the commencement of operations
(August 1, 1995) to June 30, 1996 and for the period from July 1,
1996 to October 31, 1996.
(7) Incorporated by reference in the Statement of Additional
Information for the MicroCap Fund --
Report of Independent Accountants -- December 6, 1996 -- MicroCap
Fund.
Statement of Assets and Liabilities -- October 31, 1996 --
MicroCap Fund.
Schedule of Investments -- October 31, 1996 -- MicroCap Fund.
Statement of Operations -- and for the period from July 1, 1996
to October 31, 1996 -- MicroCap Fund.
Statement of Changes in Net Assets for the period from January 1,
1996 to June 30, 1996 and for the period from July 1, 1996 to
October 31, 1996 -- MicroCap Fund.
Financial Highlights for the period from the commencement of
operations (August 1, 1995) to June 30, 1996 and for the period
from July 1, 1996 to October 31, 1996.
Notes to Financial Statements -- October 31, 1996 --MicroCap
Fund.
(8) All required financial statements are included in Parts A and B
hereof, or incorporated by reference. All other financial
statements and schedules are inapplicable.
(b) Exhibits
(1) (a) Articles of Incorporation filed February 19, 1988 is
incorporated by reference to Exhibit (1)(a) to Post-
Effective Amendment No. 28 to the Registration Statement,
filed February 15, 1996 ("Post-Effective Amendment No. 28").
(b) Amendment No. 1 to the Articles of Incorporation filed June
30, 1989 is incorporated by reference to Exhibit (1)(b) to
Post-Effective Amendment No. 28.
(c) Amendment No. 2 to the Articles of Incorporation filed June
30, 1989 is incorporated by reference to Exhibit (1)(c) to
Post-Effective Amendment No. 28.
(d) Amendment No. 3 to the Articles of Incorporation filed
November 12, 1991 is incorporated by reference to Exhibit
(1)(d) to Post-Effective Amendment No. 28.
(e) Amendment No. 4 to the Articles of Incorporation filed
August 18, 1992 is incorporated by reference to Exhibit
(1)(e) to Post-Effective Amendment No. 28.
(f) Amendment No. 5 to the Articles of Incorporation filed
October 23, 1992 is incorporated by reference to Exhibit
(1)(f) to Post-Effective Amendment No. 28.
(g) Amendment No. 6 to the Articles of Incorporation filed
January 26, 1993 is incorporated by reference to Exhibit
(1)(g) to Post-Effective Amendment No. 28.
(h) Amendment No. 7 to the Articles of Incorporation filed
February 10, 1994 is incorporated by reference to Exhibit
(1)(h) to Post-Effective Amendment No. 28.
(i) Amendment No. 8 to the Articles of Incorporation filed
December 29, 1994 is incorporated by reference to Exhibit
(1)(i) to Post-Effective Amendment No. 28.
(j) Amendment No. 9 to the Articles of Incorporation filed July
20, 1995 is incorporated by reference to Exhibit (1)(j) to
Post-Effective Amendment No. 28.
(k) Amendment No. 10 to the Articles of Incorporation filed
November 10, 1995 is incorporated by reference to Exhibit
(1)(k) to Post-Effective Amendment No. 28.
(2) (a) Registrant's By-laws dated September 9, 1988 are
incorporated by reference to Exhibit (2)(a) to Post-
Effective Amendment No. 28.
(b) Amendment to By-Laws as approved by the Registrant's Board
of Directors on February 23, 1990 is incorporated by
reference to Exhibit (2)(b) to Post-Effective Amendment No.
28.
(c) Amendment to By-Laws as approved by the Registrant's Board
of Directors on February 15, 1991 is incorporated by
reference to Exhibit (2)(c) to Post-Effective Amendment No.
28.
(d) Amendment to By-Laws as approved by the Registrant's Board
of Directors on June 21, 1991 is incorporated by reference
to Exhibit (2)(d) to Post-Effective Amendment No. 28.
(3) None.
(4) (a) See Articles V and VII of the Articles of Incorporation
which are incorporated by reference to Exhibits (1)(a) and
(1)(i) to Post-Effective Amendment No. 28 and Article II,
Sections 1, 9 and 10 of Article III, Sections 1, 2 and 3 of
Article V and Section II of Article VII of the By-laws which
are incorporated by reference to Exhibits 2(a)-2(d) of Post-
Effective Amendment No. 28.
(5) (a) Investment Advisory Agreement between Registrant and First
Wisconsin Trust Company dated August 29, 1991 with respect
to the Money Market Fund, U.S. Government Money Market Fund,
Tax-Exempt Money Market Fund, Income and Growth Fund, Short-
Intermediate Fixed Income Fund, Special Growth Fund, Bond
IMMDEX/TM Fund, Equity Index Fund, Institutional Money
Market Fund and U.S. Federal Money Market Fund is
incorporated by reference to Exhibit (5)(a) to Post-
Effective Amendment No. 28.
(b) Assumption and Guarantee Agreement between First Wisconsin
Trust Company and First Wisconsin Asset Management dated
February 3, 1992 is incorporated by reference to Exhibit
(5)(b) to Post-Effective Amendment No. 28.
(c) Investment Advisory Agreement between Registrant and First
Wisconsin Asset Management dated March 27, 1992 with respect
to the Balanced Fund is incorporated by reference to Exhibit
(5)(c) to Post-Effective Amendment No. 28.
(d) Addendum No. 1 dated December 27, 1992 to Investment
Advisory Agreement between Registrant and Firstar Investment
Research and Management Company dated March 27, 1992 with
respect to the MidCore Growth Fund and Intermediate Bond
Market Fund is incorporated by reference to Exhibit (5)(d)
to Post-Effective Amendment No. 28.
(e) Addendum No. 2 dated February 5, 1993, to Investment
Advisory Agreement between the Registrant and Firstar
Investment Research and Management Company dated March 27,
1992 with respect to the Tax-Exempt Intermediate Bond Fund
is incorporated by reference to Exhibit (5)(e) to Post-
Effective Amendment No. 28.
(f) Assumption and Guarantee Agreement between Firstar Trust
Company and Firstar Investment Research and Management
Company dated June 17, 1993 with respect to the Income and
Growth Fund is incorporated by reference to Exhibit (5)(f)
to Post-Effective Amendment No. 28.
(g) Addendum No. 3 dated April 26, 1994, to Investment Advisory
Agreement between the Registrant and Firstar Investment
Research and Management Company dated March 27, 1992 with
respect to the International Equity Fund is incorporated by
reference to Exhibit (5)(g) to Post-Effective Amendment No.
28.
(h) Sub-Advisory Agreement among Firstar Investment Research and
Management Company, the Registrant and State Street Bank and
Trust Company dated April 26, 1994, with respect to the
International Equity Fund is incorporated by reference to
Exhibit (5)(h) to Post-Effective Amendment No. 28.
(i) Addendum No. 4 to the Investment Advisory Agreement between
Registrant and Firstar Investment Research and Management
Company dated March 27, 1992 with respect to the MicroCap
Fund is incorporated by reference to Exhibit (5)(i) to Post-
Effective Amendment No. 28.
(j) Form of Addendum No. 5 to the Investment Advisory Agreement
between Registrant and Firstar Investment Research &
Management Company dated March 27, 1992 with respect to the
Balanced Income Fund is incorporated by reference to Exhibit
(5)(j) to Post-Effective Amendment No. 28.
(6) (a) Distribution Agreement between Registrant and B.C. Ziegler &
Company dated as of January 1, 1995, with respect to Money
Market Fund, U.S. Government Money Market Fund, Tax-Exempt
Money Market Fund, Growth and Income Fund, Short-Term Bond
Market Fund, Special Growth Fund, Bond IMMDEX/TM Fund,
Equity Index Fund, Institutional Money Market Fund, U.S.
Treasury Money Market Fund, Balanced Fund, Intermediate Bond
Market Fund, MidCore Growth Fund, Tax-Exempt Intermediate
Bond Fund and International Equity Fund is incorporated by
reference to Exhibit (6)(a) to Post-Effective Amendment No.
28.
(b) Addendum No. 1 to the Distribution Agreement between
Registrant and B.C. Ziegler and Company dated as of January
1, 1995 with respect to the MicroCap Fund is incorporated by
reference to Exhibit (6)(b) to Post-Effective Amendment No.
28.
(c) Form of Addendum No. 2 to the Distribution Agreement between
Registrant and B.C. Ziegler and Company dated as of January
1, 1995 with respect to the Balanced Income Fund is
incorporated by reference to Exhibit (6)(c) to Post-
Effective Amendment No. 28.
(7) Deferred Compensation Plan dated September 16, 1994 and Deferred
Compensation Agreement between Registrant and its Directors is
incorporated by reference to Exhibit (7) to Post-Effective
Amendment No. 28.
(8) (a) Custodian Agreement between Registrant and First Wisconsin
Trust Company dated July 29, 1988 is incorporated by
reference to Exhibit (8)(a) to Post-Effective Amendment No.
28.
(b) Letter dated December 28, 1989 with respect to the Custodian
Agreement with respect to the Equity Index Fund is
incorporated by reference to Exhibit (8)(b) to Post-
Effective Amendment No. 28.
(c) Revised Mutual Fund Custodial Agent Service Annual Fee
Schedule dated February 23, 1990 to the Custodian Agreement
is incorporated by reference to Exhibit (8)(c) to Post-
Effective Amendment No. 28.
(d) Amendment dated May 1, 1990 to the Custodian Agreement
between Registrant and First Wisconsin Trust Company is
incorporated by reference to Exhibit (8)(d) to Post-
Effective Amendment No. 28.
(e) Letter dated April 19, 1991 with respect to the Custodian
Agreement with respect to the Institutional Money Market
Fund and U.S. Federal Money Market Fund is incorporated by
reference to Exhibit (8)(e) to Post-Effective Amendment No.
28.
(f) Letter dated March 27, 1992 with respect to the Custodian
Agreement with respect to the Balanced Fund is incorporated
by reference to Exhibit (8)(f) to Post-Effective Amendment
No. 28.
(g) Letter dated December 27, 1992 with respect to the Custodian
Agreement with respect to the Intermediate Bond Market Fund
and MidCore Growth Fund is incorporated by reference to
Exhibit (8)(g) to Post-Effective Amendment No. 28.
(h) Letter dated February 5, 1993 with respect to the Custodian
Agreement with respect to the Tax-Exempt Intermediate Bond
Fund is incorporated by reference to Exhibit (8)(h) to Post-
Effective Amendment No. 28.
(i) Custodian Arrangement between Registrant and State Street
Bank and Trust Company dated April 26, 1994 is incorporated
by reference to Exhibit (8)(i) to Post-Effective Amendment
No. 29 to the Registration Statement, filed October 28, 1996
("Post-Effective Amendment No. 29").
(j) Letter Agreement dated August 1, 1995 with respect to the
Custodian Agreement with respect to the MicroCap Fund is
incorporated by reference to Exhibit (8)(j) to Post-
Effective Amendment No. 28.
(k) Form of Letter Agreement with respect to the Custodian
Agreement with respect to the Balanced Income Fund is
incorporated by reference to Exhibit (8)(k) to Post-
Effective Amendment No. 28.
(9) (a) Co-Administration Agreement Among the Registrant, B.C.
Ziegler & Company and Firstar Trust Company dated as of
January 1, 1995 is incorporated by reference to
Exhibit (9)(a) to Post-Effective Amendment No. 28.
(b) Addendum No. 1 to the Co-Administration Agreement among the
Registrant, B.C. Ziegler and Company and Firstar Trust
Company dated as of January 1, 1995 with respect to the
MicroCap Fund is incorporated by reference to Exhibit (9)(b)
to Post-Effective Amendment No. 28.
(c) Form of Addendum No. 2 to the Co-Administration Agreement
among the Registrant, B.C. Ziegler and Company and Firstar
Trust Company dated as of January 1, 1995 with respect to
the Balanced Income Fund is incorporated by reference to
Exhibit (9)(c) to Post-Effective Amendment No. 28.
(d) Fund Accounting Servicing Agreement dated March 23, 1988
between Registrant and First Wisconsin Trust Company is
incorporated by reference to Exhibit (9)(d) to Post-
Effective Amendment No. 28.
(e) Letter dated July 29, 1988 with respect to the Fund
Accounting Servicing Agreement is incorporated by reference
to Exhibit (9)(e) to Post-Effective Amendment No. 28.
(f) Letter dated December 28, 1989 with respect to the Fund
Accounting Servicing Agreement with respect to the Equity
Index Fund is incorporated by reference to Exhibit (9)(f) to
Post-Effective Amendment No. 28.
(g) Letter dated April 19, 1991 with respect to the Fund
Accounting Servicing Agreement with respect to the
Institutional Money Market Fund and U.S. Federal Money
Market Fund is incorporated by reference to Exhibit (9)(g)
to Post-Effective Amendment No. 28.
(h) Letter dated March 27, 1992 with respect to the Fund
Accounting Servicing Agreement with respect to the Balanced
Fund is incorporated by reference to Exhibit (9)(h) to Post-
Effective Amendment No. 28.
(i) Letter dated December 27, 1992 with respect to the Fund
Accounting Servicing Agreement with respect to the
Intermediate Bond Market Fund and MidCore Growth Fund is
incorporated by reference to Exhibit (9)(i) to Post-
Effective Amendment No. 28.
(j) Letter dated February 5, 1993 with respect to the Fund
Accounting Servicing Agreement with respect to the Tax-
Exempt Intermediate Bond Fund is incorporated by reference
to Exhibit (9)(j) to Post-Effective Amendment No. 29.
(k) Revised Fund Valuation and Accounting Fee Schedule dated
February 23, 1990 to the Fund Accounting Servicing Agreement
with respect to the Money Market Fund, Tax-Exempt Money
Market Fund and U.S. Government Money Market Fund is
incorporated by reference to Exhibit (9)(k) to Post-
Effective Amendment No. 28.
(l) Revised Fund Valuation and Accounting Fee Schedule dated
February 23, 1990 to the Fund Accounting Servicing Agreement
with respect to the Equity Index Fund is incorporated by
reference to Exhibit (9)(l) to Post-Effective Amendment No.
28.
(m) Revised Fund Valuation and Accounting Fee Schedule dated
November 1, 1990 to the Fund Accounting and Servicing
Agreement with respect to the Equity Index Fund, Income and
Growth Fund, Special Growth Fund, Short-Intermediate Fixed
Income Fund, and Bond IMMDEX/TM Fund is incorporated by
reference to Exhibit (9)(m) to Post-Effective Amendment No.
28.
(n) Letter Agreement dated August 1, 1995 with respect to the
Fund Accounting Servicing Agreement with respect to the
MicroCap Fund is incorporated by reference to Exhibit (9)(n)
to Post-Effective Amendment No. 28.
(o) Form of Letter Agreement with respect to the Fund Accounting
Servicing Agreement with respect to the Balanced Income Fund
is incorporated by reference to Exhibit (9)(o) to Post-
Effective Amendment No. 28.
(p) Shareholder Servicing Agent Agreement dated March 23, 1988
between Registrant and First Wisconsin Trust Company is
incorporated by reference to Exhibit (9)(p) to Post-
Effective Amendment No. 28.
(q) Letter dated July 29, 1988 with respect to Shareholder
Servicing Agent Agreement is incorporated by reference to
Exhibit (9)(q) to Post-Effective Amendment No. 28
(r) Letter dated December 28, 1989 with respect to the
Shareholder Servicing Agent Agreement with respect to the
Equity Index Fund is incorporated by reference to Exhibit
(9)(r) to Post-Effective Amendment No. 28.
(s) Letter dated April 23, 1991 with respect to the Shareholder
Servicing Agent Agreement with respect to the Institutional
Money Market Fund and U.S. Federal Money Market Fund is
incorporated by reference to Exhibit (9)(s) to Post-
Effective Amendment No. 28.
(t) Letter dated March 27, 1992 with respect to the Shareholder
Servicing Agent Agreement with respect to the Balanced Fund
is incorporated by reference to Exhibit (9)(t) to Post-
Effective Amendment No. 28.
(u) Letter dated December 27, 1992 with respect to the
Shareholder Servicing Agent Agreement with respect to the
Intermediate Bond Market Fund and MidCore Growth Fund is
incorporated by reference to Exhibit (9)(u) to Post-
Effective Amendment No. 28.
(v) Letter dated February 5, 1993 with respect to the
Shareholder Servicing Agent Agreement with respect to the
Tax-Exempt Intermediate Bond Fund is incorporated by
reference to Exhibit (9)(v) to Post-Effective Amendment No.
29.
(w) Letter dated April 26, 1994 with respect to the Shareholder
Servicing Agent Agreement with respect to the International
Equity Fund is incorporated by reference to Exhibit (9)(w)
to Post-Effective Amendment No. 28.
(x) Amendment dated May 1, 1990 to the Shareholder Servicing
Agent Agreement between Registrant and First Wisconsin Trust
Company is incorporated by reference to Exhibit (9)(x) to
Post-Effective Amendment No. 28.
(y) Letter Agreement dated August 1, 1995 with respect to
Shareholder Servicing Agent Agreement with respect to the
MicroCap Fund is incorporated by reference to Exhibit (9)(y)
to Post-Effective Amendment No. 28.
(z) Form of Letter with respect to Shareholder Servicing Agent
Agreement with respect to the Balanced Income Fund is
incorporated by reference to Exhibit (9)(z) to Post-
Effective Amendment No. 28.
(aa) Plan of Reorganization is incorporated by reference to
Exhibit (9)(aa) to Post-Effective Amendment No. 28.
(ab) Purchase and Assumption Agreement dated February 22, 1988 is
incorporated by reference to Exhibit (9)(ab) to Post-
Effective Amendment No. 28.
(ac) Amended and Restated Service Plan and Servicing Agreement.
(10) Opinion and Consent of Counsel.
(11) (a) Consent of Drinker Biddle & Reath.
(b) Consent of Price Waterhouse L.L.P.
(12) None.
(13) (a) Purchase Agreement between Registrant and ALPS Securities,
Inc. is incorporated by reference to Exhibit (13)(a) to
Post-Effective Amendment No. 29.
(b) Purchase Agreement between ALPS Securities, Inc. and
Sunstone Financial Group, Inc. is incorporated by reference
to Exhibit (13)(b) to Post-Effective Amendment No. 29.
(14) Individual Retirement Account Documents is incorporated by
reference to Exhibit (14) to Post-Effective Amendment No. 28.
(14) (a) Amended and Restated Distribution and Service Plan and Form
of Distribution and Servicing Agreement.
(15) (a) Schedule for Computation of Performance Quotations -- Money
Market Fund is incorporated by reference to Exhibit (16)(a)
to Post-Effective Amendment No. 28.
1. Filed with the SEC on December 27, 1996 and August 27, 1996 (with respect to
the MicroCap Fund) under Rule 24f-2 as part of Registrant's Rule 24f-2
Notice.
(b) Schedule for Computation of Performance Quotations -- Tax-
Exempt Money Market Fund is incorporated by reference to
Exhibit (16)(b) to Post-Effective Amendment No. 28.
(c) Schedule for Computation of Performance Quotations -- U.S.
Government Money Market Fund is incorporated by reference to
Exhibit (16)(c) to Post-Effective Amendment No. 28.
(d) Schedule of Computation of Performance Quotations -- Growth
and Income Fund is incorporated by reference to Exhibit
(16)(d) to Post-Effective Amendment No. 28.
(e) Schedule of Computation of Performance Quotations -- Short-
Term Bond Market Fund is incorporated by reference to
Exhibit (16)(e) to Post-Effective Amendment No. 28.
(f) Schedule of Computation of Performance Quotations -- Special
Growth Fund is incorporated by reference to Exhibit (16)(f)
to Post-Effective Amendment No. 28.
(g) Schedule of Computation of Performance Quotations -- Bond
IMMDEX/TM Fund is incorporated by reference to Exhibit
(16)(g) to Post-Effective Amendment No. 28.
(h) Schedule of Computation of Performance Quotations -- Equity
Index Fund is incorporated by reference to Exhibit (16)(h)
to Post-Effective Amendment No. 28.
(i) Schedule of Computation of Performance Quotations --
Institutional Money Market Fund is incorporated by reference
to Exhibit (16)(i) to Post-Effective Amendment No. 28.
(j) Schedule of Computation of Performance Quotations -- U.S.
Treasury Money Market Fund is incorporated by reference to
Exhibit (16)(j) to Post-Effective Amendment No. 28.
(k) Schedule of Computation of Performance Quotations --
Balanced Fund is incorporated by reference to Exhibit
(16)(k) to Post-Effective Amendment No. 28.
(l) Schedule of Computation of Performance Quotations -- MidCore
Growth Fund is incorporated by reference to Exhibit (16)(l)
to Post-Effective Amendment No. 28.
(m) Schedule of Computation of Performance Quotations --
Intermediate Bond Market Fund is incorporated by reference
to Exhibit (16)(m) to Post-Effective Amendment No. 28.
(n) Schedule of Computation of Performance Quotations -- Tax-
Exempt Intermediate Bond Fund is incorporated by reference
to Exhibit (16)(n) to Post-Effective Amendment No. 28.
(o) Schedule of Computation of Performance Quotations --
International Equity Fund is incorporated by reference to
Exhibit (16)(o) to Post-Effective Amendment No. 28.
(p) Schedule of Computation of Performance Quotations --
MicroCap Fund is incorporated by reference to Exhibit
(16)(p) to Post-Effective Amendment No. 29.
(17) Financial Data Schedules.
(18) Amended and Restated Plan Pursuant to Rule 18f-3 for Operation of
a Multi-Series System is incorporated by reference to Exhibit
(18) to Post-Effective Amendment No. 28.
(24) (a) The Audited Financial Statements and related notes thereto
included in the Annual Report for the year ended October 31,
1996 for the Short-Term Bond Market Fund, Intermediate Bond
Market Fund, Tax-Exempt Intermediate Bond Fund and Bond
IMMDEX/TM Fund are incorporated by reference to the Annual
Report filed with the Securities and Exchange Commission on
December 30, 1996 pursuant to Rule 30b2-1 of the Investment
Company Act of 1940 (Nos. 33-18255 and 811-5380).
(b) The Audited Financial Statements and related notes thereto
included in the Annual Report for the year ended October 31,
1996 for the Balanced Fund, Growth and Income Fund, Equity
Index Fund, MidCore Growth Fund, Special Growth Fund and
International Equity Fund are incorporated by reference to
the Annual Report filed with the Securities and Exchange
Commission on December 30, 1996 pursuant to Rule 30b2-1 of
the Investment Company Act of 1940 (Nos. 33-18255 and 811-
5380).
(c) The Audited Financial Statements and related notes thereto
included in the Annual Report for the year ended October 31,
1996 for the Money Market Fund, U.S. Treasury Money Market
Fund, U.S. Government Money Market Fund and Tax-Exempt Money
Market Fund are incorporated by reference to the Annual
Report filed with the Securities and Exchange Commission on
December 30, 1996 pursuant to Rule 30b2-1 of the Investment
Company Act of 1940 (Nos. 33-18255 and 811-5380).
(d) The Audited Financial Statements and related notes thereto
included in the Annual Report for the years ended October
31, 1996 for the Institutional Money Market Fund are
incorporated by reference to the Annual Report filed with
the Securities and Exchange Commission on December 30, 1996
pursuant to Rule 30b2-1 of the Investment Company Act of
1940 (Nos. 33-18255 and 811-5380).
(e) The Audited Financial Statements and related notes thereto
included in the Annual Report for the period ended October
31, 1996 for the MicroCap Fund are incorporated by reference
to the Annual Report filed with the Securities and Exchange
Commission on December 30, 1996 pursuant to Rule 30b2-1 of
the Investment Company Act of 1940 (Nos. 33-18255 and 811-
5380).
Item 25. Persons Controlled By or Under Common Control with Registrant
-------------------------------------------------------------
Registrant is controlled by its Board of Directors.
Item 26. Number of Holders of Securities
-------------------------------
As of January 31, 1997:
Number of
Title of Class Series Record Holders
- --------------------------- ------------ ---------------
Money Market Fund 1-A 5,379
Tax-Exempt Money Market 2-A 399
Fund
U.S. Government Money 3-A 329
Market Fund
Institutional Money Market 4-A 73
Fund
U.S. Treasury Money Market 5-A 116
Fund
Special Growth Fund 6-Institutional 472
6-A 6,568
Bond IMMDEX/TM Fund 7-Institutional 148
7-A 886
Equity Index Fund 8-Institutional 164
8-A 1,560
Growth and Income Fund 9-Institutional 188
9-A 3,172
Short-Term Bond Market Fund 10-Institutional 68
10-A 1,569
Balanced Fund 11-Institutional 175
11-A 1,379
MidCore Growth Fund 12-Institutional 93
12-A 812
Intermediate Bond Market 13-Institutional 37
Fund 13-A 272
Tax-Exempt Intermediate 14-Institutional 15
Bond Fund 14-A 159
International Equity Fund 15-Institutional 46
15-A 318
MicroCap Fund 16-Institutional 23
16-A 169
Item 27. Indemnification
---------------
Indemnification of Registrant's principal underwriter, custodians and
transfer agents against certain losses is provided for, respectively, in Section
1.9 of the Distribution Agreement, incorporated by reference as Exhibit (6)(a)
hereto, Section 11 of the Custodian Agreement, incorporated by reference as
Exhibit (8)(a) hereto, and Section 6(c) of the Shareholder Servicing Agent
Agreement incorporated by reference as Exhibit (9)(p) hereto. Registrant has
obtained from a major insurance carrier a directors' and officers' liability
policy covering certain types of errors and omissions.
Article IX of Registrant's Articles of Incorporation, incorporated by
reference as Exhibit (1)(a) hereto, provides for the indemnification of
Registrant's directors and officers to the full extent permitted by the
Wisconsin Business Corporation Law and the Investment Company Act of 1940.
Article VII of the By-laws of the Registrant, incorporated by
reference as Exhibit (2)(a) hereto, provides that officers and directors of the
Registrant shall be indemnified by the Registrant against judgments, penalties,
fines, excise taxes, settlements and reasonable expenses (including attorney's
fees) incurred in connection with a legal action, suit or proceeding to the full
extent permissible under the Wisconsin Business Corporation Law, the Securities
Act of 1933 and the Investment Company Act of 1940.
In no event will Registrant indemnify any of its directors or officers
against any liability to which such person would otherwise be subject by reason
of his willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his or her office. Registrant will comply
with Rule 484 under the Securities Act of 1933 and Release No. 11330 under the
Investment Company Act of 1940 in connection with any indemnification.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
Registrant pursuant to the foregoing provisions, or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Registrant of expenses incurred or
paid by a director, officer or controlling person of Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------
Firstar Investment Research and Management Company, investment adviser
to the Money Market Fund, Institutional Money Market Fund, U.S. Treasury Money
Market Fund, U.S. Government Money Market Fund, Tax-Exempt Money Market Fund,
Short-Term Bond Market Fund, Growth and Income Fund, Special Growth Fund, Bond
IMMDEX/TM Fund, Equity Index Fund, Balanced Fund, Intermediate Bond Market Fund,
MidCore Growth Fund, Tax-Exempt Intermediate Bond Fund, International Equity
Fund and MicroCap Fund, is a registered investment adviser under the Investment
Advisers Act of 1940.
To Registrant's knowledge, none of the directors or senior executive
officers of Firstar Investment Research and Management Company, except those set
forth below, is, or has been at any time during Registrant's past two fiscal
years, engaged in any other business, profession, vocation or employment of a
substantial nature, except that certain directors and officers of Firstar
Investment Research and Management Company also hold various positions with, and
engage in business for, their respective affiliates. Set forth below are the
names and principal businesses of the directors and certain of the senior
executive officers of Firstar Investment Research and Management Company who are
or have been engaged in any other business, profession, vocation or employment
of a substantial nature.
FIRSTAR INVESTMENT RESEARCH AND MANAGEMENT COMPANY
Position with
Firstar Investment
Research and Other Business Type of
Name Management Company Connections Business
- ---- ------------------ -------------- ---------
John A. Becker Director President, Firstar Bank
Corporation, 777 E. Holding Co.
Wisconsin Avenue,
Milwaukee, WI 53201
J. Scott Harkness Director and None
Chairman
Steven R. Parish Director Executive Vice Bank
President, Firstar Holding Co.
Corporation, 777
E. Wisconsin Avenue,
Suite 800
Milwaukee, WI 53201
Mary Ellen Stanek Director, Chief Vice President, Investment
Operating Officer Portico Funds, Inc. Company
and President Portico Funds
Center, 615 East
Michigan Street,
P.O. Box 3011,
Milwaukee, WI
53201-3011
Matthew Uselman Director Senior Vice Bank
President,
Firstar Bank
Wisconsin
1 South Pinckney,
Suite 401
Madison, WI 53703
Robert L. Webster Director President, Trust Company
Firstar Trust
Company, 777 E.
Wisconsin Avenue,
Milwaukee, WI 53202
State Street Global Advisors serves as sub-investment adviser to the
International Equity Fund. State Street Global Advisors is an area of
State Street Bank and Trust Company, a Massachusetts bank, and currently
manages large institutional accounts and collective investment funds.
To Registrant's knowledge, none of the directors or senior executive
officers of State Street Global Advisors except those set forth below, is, or
has been at any time during Registrant's past two fiscal years, engaged in any
other business, profession, vocation or employment of a substantial nature,
except that certain directors and officers of State Street Global Advisors
also hold various positions with, and engage in business for, their
respective affiliates. Set forth below are the names and principal
businesses of the directors and certain of the senior executive officers
of State Street Global Advisors who are or have been engaged in any
other business, profession, vocation or employment of a substantial nature.
STATE STREET GLOBAL ADVISORS
Position with Other Business
State Street Connections and
Name Global Advisors Address*
- ---- --------------- ----------------
Tenley E. Albright, Director Chairman, Western
M.D. Resources, Inc.
Joseph A. Baute Director Consultant to Markem
Corporation
Former Chairman/CEO
L. MacAlister Booth Director Retired Chairman, President
and CEO, Polaroid Corporation
Marshall N. Carter Chairman Director, Euroclear;
and CEO Director, Orbis Inter-
national
James I. Cash, Jr. Director Professor of Business
Administration, Harvard
Business School
Truman S. Casner Director Partner, Ropes & Gray
Nader F. Darehshori Director Chairman, President and CEO,
Houghton Mifflin Company
Arthur L. Goldstein Director Chairman and CEO, Ionics,
Incorporated
Charles F. Kaye Director President, Transportation
Investments, Inc.
John M. Kucharski Director Chairman and CEO,
EG&G, Inc.
Charles R. LaMantia Director President and CEO,
Arthur D. Little, Inc.
David B. Perini Director Chairman and President,
Perini Corporation
Dennis J. Picard Director Chairman and CEO, Raytheon
Company, Position with State
Street other Business
Alfred Poe Director Former President, Meal
Enhancement Group, Campbell
Soup Company
Bernard W. Reznicek Director National Director - Utility
Marketing Central States
Indemnity Co. of Omaha
David A. Spina President and Chairman, Massachusetts
Chief Oper- Housing Investment
ating Officer Corporation, Director,
Metropolitan Boston Housing
Partnership, Inc., Chairman,
Dana Hall School
Robert E. Weissman Director Chairman and CEO,
Cognizant Corporation
* Address of all individuals: State Street Boston Corporation, 225
Franklin Street, Boston, Massachusetts 02110.
Item 29. Principal Underwriter
---------------------
(a) B.C. Ziegler & Company ("B.C. Ziegler"), the Registrant's current
principal underwriter, serves as principal underwriter of the shares of the
Principal Preservation Funds, American Tax-Exempt Bond Trust, Series 1 (and
subsequent series); Ziegler U.S. Government Securities Trust, Series 1 (and
subsequent series); American Income Trust, Series 1 (and subsequent series);
Ziegler Money Market Trust; and The Insured American Tax-Exempt Bond Trust,
Series 1 (and subsequent series).
(b) To the best of Registrant's knowledge, the directors and
executive officers of B.C. Ziegler & Company are as follows:
Positions and
Name and Principal Position and Offices with Offices with
Business Address B. C. Ziegler Registrant
- ------------------ -------------------- --------------
R. Douglas Ziegler Chairman of the Board and None
Director
Peter D. Ziegler President, Chief Executive None
Officer and Director
S. Charles O'Meara Senior Vice President and None
General Counsel and
Director
D. A. Schlosser Senior Vice President - None
Acquisition
Positions and
Name and Principal Position and Offices with Offices with
Business Address B. C. Ziegler Registrant
- ------------------ -------------------- --------------
Donald A. Carlson, Jr. Senior Vice President None
J.C. Wagner Senior Vice None
President -
Retail Sales
Neil L. Fuerbringer Senior Vice President - None
Administration
Michael P. Doyle Senior Vice President - None
Retail Operations
Lynn R. Van Horn Senior Vice President - None
Finance and Director
Ronald N. Spears Senior Vice President None
Jeffrey C. Vredenbregt Vice President, Treasurer, None
Controller and Director
Charles G. Stevens Vice President - Marketing None
Director
Jack H. Downer Vice President - None
MIS Director
Robert J. Tuszynski Senior Vice President None
Gerry Aman Vice President - Insurance None
Positions and
Name and Principal Position and Offices with Offices with
Business Address B. C. Ziegler Registrant
- ------------------ -------------------- --------------
Sheila K. Hittman Vice President - Personnel None
Robert J. Johnson Vice President - None
Compliance
James M. Bushman Vice President - None
Recruiting and Training
Coordinator
Lay C. Rosenheimer Vice President - Bond None
Sales Control
Darrell P. Frank Vice President - Director None
of Strategic Change
M.L. McBain Vice President - None
Equity Securities
James L. Brendemuehl Vice President - Managed None
Products
Ronald C. Strzok Vice President - None
Administration
Jerome Ferrara, Jr. Assistant Vice President - None
Mutual Funds
Janine R. Yovanovich Corporate Secretary None
Kathleen A. Lochen Assistant Secretary None
Positions and
Name and Principal Position and Offices with Offices with
Business Address B. C. Ziegler Registrant
- ------------------ -------------------- --------------
The address of each of the foregoing is 215 North Main Street, West Bend,
Wisconsin 53095, (414) 334-5521.
(e) None.
Item 30. Location of Accounts and Records
--------------------------------
(1) Firstar Trust Company, 615 E. Michigan Street, Milwaukee, WI 53201
(records relating to its function as custodian, transfer agent, fund
accounting servicing agent, shareholder servicing agent and co-
administrator).
(2) Firstar Investment Research and Management Company, First Wisconsin
Center, 777 E. Wisconsin Avenue, Suite 1800, Milwaukee, WI 53202
(records relating to its function as investment adviser).
(3) State Street Global Advisors, Two International Plaza, Boston, MA
02110, (records relating to its function as sub-investment adviser for
the International Equity Fund).
(4) State Street Bank and Trust Company, Two International Plaza, Boston,
MA 02110, (records relating to its function as custodian and fund
accounting service agent for the International Equity Fund).
(5) B.C. Ziegler & Company, 215 North Main Street, West Bend, Wisconsin
53095-3348 (records relating to its functions as distributor and co-
administrator).
(6) Drinker Biddle & Reath, Philadelphia National Bank Building, 1345
Chestnut Street, Philadelphia, Pennsylvania 19107 (Registrant's
Articles of Incorporation, By-laws and Minute Books).
Item 31. Management Services
-------------------
None.
Item 32. Undertakings
------------
(1) The Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual
report to shareholders upon request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment to its
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment No. 30 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Philadelphia, and Commonwealth of Pennsylvania, on
the 28th day of February, 1997.
PORTICO FUNDS, INC.
Registrant
By *James M. Wade
--------------
President
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No. 30 to the Registration Statement of the Registrant has
been signed by the following persons in the capacities and on the dates
indicated:
Signature Title Date
- ------------ ------ --------
Chairman, President
*James M. Wade and Treasurer February 28, 1997
- ---------------
(James M. Wade)
*Richard Riederer Director February 28, 1997
- -----------------
(Richard Riederer)
*Jerry Remmel Director February 28, 1997
- --------------
(Jerry Remmel)
*Glen R. Bomberger Director February 28, 1997
- ------------------
(Glen R. Bomberger)
*Charles R. Roy Director February 28, 1997
- ----------------
(Charles R. Roy)
*By /s/ W. Bruce McConnel, III February 28, 1997
--------------------------
W. Bruce McConnel, III
Attorney-in-fact
- -------------------------------------------------------------------------------
POWER OF ATTORNEY
Charles R. Roy, whose signature appears below, does hereby constitute
and appoint James M. Wade and W. Bruce McConnel, III, and either of them, his
true and lawful attorneys and agents, with power of substitution or
resubstitution, to do any and all acts and things and to execute any and all
instruments which said attorneys and agents, or either of them, may deem
necessary or advisable or which may be required to enable Portico Funds, Inc.
(the "Company") to comply with the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended (the "Acts"), and any rules,
regulations or requirements of the Securities and Exchange Commission in respect
thereof, in connection with the filing and effectiveness of the Company's
Registration Statement under the said Acts, and any and all amendments
(including post-effective amendments) thereto, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director and/or officer
of the Company said Registration Statement and any and all such amendments
thereto that are filed with the Securities and Exchange Commission under said
Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue hereof.
Date: February 23, 1990 /s/ Charles R. Roy
------------------
Charles R. Roy
POWER OF ATTORNEY
Glen R. Bomberger, whose signature appears below, does hereby
constitute and appoint James M. Wade and W. Bruce McConnel, III, and either of
them, his true and lawful attorneys and agents, with power of substitution or
resubstitution, to do any and all acts and things and to execute any and all
instruments which said attorneys and agents, or either of them, may deem
necessary or advisable or which may be required to enable Portico Funds, Inc.
(the "Company") to comply with the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended (the "Acts"), and any rules,
regulations or requirements of the Securities and Exchange Commission in respect
thereof, in connection with the filing and effectiveness of the Company's
Registration Statement under the said Acts, and any and all amendments
(including post-effective amendments) thereto, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director and/or officer
of the Company said Registration Statement and any and all such amendments
thereto that are filed with the Securities and Exchange Commission under said
Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue hereof.
Date: February 23, 1990 /s/ Glen R. Bomberger
Glen R. Bomberger
POWER OF ATTORNEY
James M. Wade, whose signature appears below, does hereby constitute
and appoint W. Bruce McConnel, III his true and lawful attorney and agent, with
power of substitution or resubstitution, to do any and all acts and things and
to execute any and all instruments which said attorney and agent may deem
necessary or advisable or which may be required to enable Portico Funds, Inc.
(the "Company") to comply with the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended (the "Acts"), and any rules,
regulations or requirements of the Securities and Exchange Commission in respect
thereof, in connection with the filing and effectiveness of the Company's
Registration Statement under the said Acts, and any and all amendments
(including post-effective amendments) thereto, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director and/or officer
of the Company said Registration Statement and any and all such amendments
thereto that are filed with the Securities and Exchange Commission under said
Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney and agent
shall do or cause to be done by virtue hereof.
Date: February 23, 1990 /s/ James M. Wade
James M. Wade
POWER OF ATTORNEY
Richard K. Riederer, whose signature appears below, does hereby
constitute and appoint James M. Wade and W. Bruce McConnel, III, and either of
them, his true and lawful attorneys and agents, with power of substitution or
resubstitution, to do any and all acts and things and to execute any and all
instruments which said attorneys and agents, or either of them, may deem
necessary or advisable or which may be required to enable Portico Funds, Inc.
(the "Company") to comply with the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended (the "Acts"), and any rules,
regulations or requirements of the Securities and Exchange Commission in respect
thereof, in connection with the filing and effectiveness of the Company's
Registration Statement under the said Acts, and any and all amendments
(including post-effective amendments) thereto, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director and/or officer
of the Company said Registration Statement and any and all such amendments
thereto that are filed with the Securities and Exchange Commission under said
Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue hereof.
Date: February 23, 1990 /s/ Richard K. Riederer
Richard K. Riederer
POWER OF ATTORNEY
Jerry Remmel, whose signature appears below, does hereby constitute
and appoint James M. Wade and W. Bruce McConnel, III, and either of them, his
true and lawful attorneys and agents, with power of substitution or
resubstitution, to do any and all acts and things and to execute any and all
instruments which said attorneys and agents, or either of them, may deem
necessary or advisable or which may be required to enable Portico Funds, Inc.
(the "Company") to comply with the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended (the "Acts"), and any rules,
regulations or requirements of the Securities and Exchange Commission in respect
thereof, in connection with the filing and effectiveness of the Company's
Registration Statement under the said Acts, and any and all amendments
(including post-effective amendments) thereto, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director and/or officer
of the Company said Registration Statement and any and all such amendments
thereto that are filed with the Securities and Exchange Commission under said
Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue hereof.
Date: February 23, 1990 /s/ Jerry Remmel
Jerry Remmel
- -------------------------------------------------------------------------------
PORTICO FUNDS, INC.
CERTIFICATE OF SECRETARY
The following resolution was duly adopted by the Board of Directors of
Portico Funds, Inc. on February 21, 1997 and remains in effect on the date
hereof:
FURTHER RESOLVED, that the directors and officers of the Company who
may be required to execute any amendments to the Registration Statement of
the Company be, and each of them hereby is, authorized to execute a Power
of Attorney appointing James M. Wade and W. Bruce McConnel, III, and either
of them, their true and lawful attorney or attorneys, to execute in their
name, place and stead, in their capacity as director or officer, or both,
of the Company any and all amendments to said Registration Statement, and
all instruments necessary or incidental in connection therewith, and to
file the same with the Securities and Exchange Commission; and either of
said attorneys shall have the power to act thereunder with or without the
other said attorney and shall have full power of substitution and
resubstitution; and either of said attorneys shall have full power and
authority to do in the name and on behalf of said directors and officers,
or any or all of them, in any and all capacities, every act whatsoever
requisite or necessary to be done in the premises, as fully and to all
intents and purposes as each of said directors or officers, or any or all
of them, in any and all capacities, every act whatsoever requisite or
necessary to be done in the premises, as fully and to all intents and
purposes as each of said directors or officers, or any or all of them,
might or could do in person, said acts of said attorneys, or either of
them, being hereby ratified and approved.
PORTICO FUNDS, INC.
By: /s/ W. Bruce McConnel, III
--------------------------
W. Bruce McConnel, III
Secretary
Dated: February 28, 1997
- -------------------------------------------------------------------------------
EXHIBIT INDEX
Exhibit No. Item
(9)(ac) Amended and Restated Service Plan and Servicing Agreement.
(11)(a) Consent of Drinker Biddle & Reath.
(11)(b) Consent of Price Waterhouse L.L.P.
(14)(a) Amended and Restated Distribution and Service Plan and Form of
Distribution and Servicing Agreement.
(17) Financial Data Schedules.
- -------------------------------------------------------------------------------
Exhibit (9)(ac)
PORTICO FUNDS, INC.
AMENDED AND RESTATED SERVICE PLAN
Section 1. Any officer of Portico Funds, Inc. ("Portico Funds") is
authorized to execute and deliver, in the name and on behalf of Portico Funds,
written agreements based on the form attached hereto as Appendix A or any other
form duly approved by the Board of Directors ("Agreements") with securities
dealers, financial institutions and other industry professionals ("Shareholder
Organizations") that are shareholders or dealers of record or which have a
servicing relationship with the beneficial owners of Shares of Series A Shares
of any Portico Fund except the Institutional Money Market Fund (each, a "Fund"
and collectively, the "Funds"). Pursuant to such Agreements, Shareholder
Organizations shall provide support services as set forth therein to their
clients who beneficially own Series A Shares of any Fund offered by Portico
Funds in consideration of a fee, computed monthly in the manner set forth in the
Agreements, at an annual rate of up to .25% of the average daily net asset value
of the outstanding Series A Shares beneficially owned by such clients. Firstar
Trust Company ("Firstar") and its affiliates are eligible to become Shareholder
Organizations and to receive fees under this Plan.
Section 2. Firstar shall monitor the arrangements pertaining to
Portico Funds' Agreements with Shareholder Organizations in accordance with the
terms of Firstar's co-administration agreement with Portico Funds. Portico
Funds shall not be obliged to execute any Agreement with any qualifying
Shareholder Organization.
Section 3. So long as this Plan is in effect, Firstar shall provide
to Portico Funds' Board of Directors, and the Directors shall review, at least
quarterly, a written report of the amounts expended pursuant to this Plan and
the purposes for which such expenditures were made.
Section 4. This Plan has previously become effective with respect to
each particular Fund upon the approval of the Plan (and the form of Agreement
attached hereto) by a majority of the Board of Directors, including a majority
of the Directors who are not "interested persons," as defined in the Act, of
Portico Funds and have no direct or indirect financial interest in the operation
of this Plan or in any Agreement related to this Plan (the "Disinterested
Directors"), pursuant to a vote cast in person at a meeting called for the
purpose of voting on the approval of this Plan (and form of Agreement).
Section 5. Unless sooner terminated, this Plan shall continue until
February 29, 1995 and thereafter shall continue automatically for successive
annual periods provided such continuance is approved at least annually in the
manner set forth in Section 4.
Section 6. This Plan may be amended at any time with respect to any
Fund by the Board of Directors, provided that any material amendment of the
terms of this Plan shall become effective only upon the approvals set forth in
Section 4.
Section 7. This Plan is terminable at any time with respect to any
Fund by vote of a majority of the Disinterested Directors.
Section 8. While this Plan is in effect, the selection and nomination
of those Directors who are not "interested persons" (as defined in the Act) of
Portico Funds shall be committed to the discretion of such non-interested
Directors.
Section 9. All expenses incurred by Portico Funds with respect to the
Series A Shares of a particular Fund in connection with Agreements and the
implementation of this Plan shall be borne entirely by Series A Shares of such
Fund.
Section 10. Portico Funds originally adopted this Plan as of
December 16, 1988 and was amended and restated on February 17, 1995.
Appendix A
SERVICING AGREEMENT
Gentlemen:
We wish to enter into this Servicing Agreement with you concerning the
provision of support services to your clients ("Clients") who may from time to
time beneficially own shares of the Series A Common Stock of any Fund except the
Institutional Money Market Fund offered by Portico Funds, Inc.
The terms and conditions of this Servicing Agreement are as follows:
Section 1. You agree to provide the following support services to
Clients who may from time to time beneficially own Series A Shares:2 (i)
processing dividend and distribution payments from us on behalf of Clients; (ii)
providing information periodically to Clients showing their positions in Series
A Shares; (iii) arranging for bank wires; (iv) responding to Client inquiries
relating to the services performed by you; (v) providing subaccounting with
respect to Series A Shares beneficially owned by Clients or the information to
us necessary for subaccounting; (vi) if required by law, forwarding shareholder
communications from us (such as proxies, shareholder reports, annual and semi-
annual financial statements and dividend, distribution and tax notices) to
Clients; (vii) processing exchange and redemption requests from Clients and
placing net exchange and redemption orders with our service contractors; (viii)
assisting Clients in changing dividend options, account designations and
addresses; (ix) developing, monitoring and providing ongoing consulting services
regarding expedited purchase, redemption and exchange programs (the "Program")
relating to the purchase of Series A Shares by Clients who also own shares of
other unaffiliated investment companies; (x) reviewing the description of the
Program in the materials prepared by us and such other investment companies for
distribution to clients; (xi) responding to telephone inquiries from Clients
regarding the Programs and their investments in Series A Shares; (xii) acting as
a liaison between Clients and us, including assistance in correcting errors and
resolving problems; (xiii) providing such statistical and other information as
we may reasonably request or may be necessary for us to comply with applicable
federal and state laws; and (xiv) providing such other similar services as we
may reasonably request to the extent you are permitted to do so under applicable
statutes, rules and regulations.
Section 2. You will provide such office space and equipment,
telephone facilities and personnel (which may be any part of the space,
equipment and facilities currently used in your business, or any personnel
employed by you) as may be reasonably necessary or beneficial in order to
provide the aforementioned services and assistance to Clients.
Section 3. Neither you nor any of your officers, employees or agents
are authorized to make any representations concerning us or the Series A Shares
except those contained in our then current prospectuses and statements of
additional information for Series A Shares, copies of which will be supplied by
us to you, or in such supplemental literature or advertising as may be
authorized by us in writing.
Section 4. For all purposes of this Agreement you will be deemed to
be an independent contractor, and will have no authority to act as agent for us
in any matter or in any respect. By your written acceptance of this Agreement,
you agree to and do release, indemnify and hold us harmless from and against any
and all direct or indirect liabilities or losses resulting from requests,
directions, actions or inactions of or by you or your officers, employees or
agents regarding your responsibilities hereunder or the purchase, redemption,
transfer or registration of Series A Shares (or orders relating to the same) by
or on behalf of Clients. You and your employees will, upon request, be
available during normal business hours to consult with us or our designees
concerning the performance of your responsibilities under this Agreement.
Section 5. In consideration of the services and facilities provided
by you hereunder, we will pay to you, and you will accept as full payment
therefor, a fee at the annual rate of .__ of 1% of the average daily net asset
value of the Series A Shares beneficially owned by your Clients for whom you are
the dealer of record or holder of record or with whom you have a servicing
relationship (the "Clients' Series A Shares"), which fee will be computed daily
and payable monthly. For purposes of determining the fees payable under this
Section 5, the average daily net asset value of the Clients' Series A Shares
will be computed in the manner specified in our Registration Statement (as the
same is in effect from time to time) in connection with the computation of the
net asset value of Series A Shares for purposes of purchases and redemptions.
The fee rate stated above may be prospectively increased or decreased by us, in
our sole discretion, at any time upon notice to you. Further, we may, in our
discretion and without notice, suspend or withdraw the sale of Series A Shares,
including the sale of Series A Shares to you for the account of any Client or
Clients. All fees payable by Portico Funds under this Agreement with respect to
the Series A Shares of a particular Fund shall be borne by, and be payable
entirely out of the assets allocable to, said Series A Shares; and no other Fund
or series of Shares offered by Portico Funds shall be responsible for such fees.
Section 6. Any person authorized to direct the disposition of monies
paid or payable by us pursuant to this Agreement will provide to our Board of
Directors, and our Directors will review, at least quarterly, a written report
of the amounts so expended and the purposes for which such expenditures were
made. In addition, you will furnish us or our designees with such information
as we or they may reasonably request (including, without limitation, periodic
certifications confirming the provision to Clients of the services described
herein), and will otherwise cooperate with us and our designees (including,
without limitation, any auditors designated by us), in connection with the
preparation of reports to our Board of Directors concerning this Agreement and
the monies paid or payable by us pursuant hereto, as well as any other reports
or filings that may be required by law.
Section 7. We may enter into other similar Agreements with any other
person or persons without your consent.
Section 8. By your written acceptance of this Agreement, you
represent, warrant and agree that: (i) the compensation payable to you
hereunder, together with any other compensation you receive from Clients for
services contemplated by this Agreement, will not be excessive or unreasonable
under the laws and instruments governing your relationships with Clients; (ii)
you will provide to Clients a schedule of any fees that you may charge to them
relating to the investment of their assets in Series A Shares; and (iii) the
services provided by you under this Agreement will in no event be primarily
intended to result in the sale of Series A Shares.
Section 9. This Agreement will become effective on the date a fully
executed copy of this Agreement is received by us or our designee. Unless
sooner terminated, this Agreement will continue until February 28, 199_, and
thereafter will continue automatically for successive annual periods provided
such continuance is specifically approved at least annually by us in the manner
described in Section 12. This Agreement is terminable with respect to the
Series A Shares of any Fund, without penalty, at any time by us (which
termination may be by a vote of a majority of the Disinterested Directors as
defined in Section 12) or by you upon notice to the other party hereto. This
Agreement will also terminate automatically in the event of its assignment (as
defined in the Act).
Section 10. All notices and other communications to either you or us
will be duly given if mailed, telegraphed, telexed or transmitted by similar
telecommunications device to the appropriate address stated herein.
Section 11. This Agreement will be construed in accordance with the
laws of the State of Wisconsin.
Section 12. This Agreement has been approved by vote of a majority of
(i) our Board of Directors and (ii) those Directors who are not "interested
persons" (as defined in the Investment Company Act of 1940) of us and have no
direct or indirect financial interest in the operation of the Service Plan
adopted by us or in any agreement related thereto cast in person at a meeting
called for the purpose of voting on such approval ("Disinterested Directors").
If you agree to be legally bound by the provisions of this Agreement,
please sign a copy of this letter where indicated below and promptly return it
to us.
Very truly yours,
PORTICO FUNDS, INC.
By:______________________
Date:_______________ (Authorized Officer)
Accepted and Agreed to:
[Service Organization]
By:______________________
Date:_______________ (Authorized Officer)
- -------------------------------------------------------------------------------
Exhibit (11)(a)
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the reference to
our Firm under the caption "Counsel" in the Statement of Additional Information
that is included in Post-Effective Amendment No. 30 to the Registration
Statement (No. 33-18255) on Form N-1A under the Securities Act of 1933 and the
Investment Company Act of 1940, as amended, of Portico Funds, Inc. This consent
does not constitute a consent under section 7 of the Securities Act of 1933, and
in consenting to the use of our name and the references to our Firm under such
caption we have not certified any part of the Registration Statement and do not
otherwise come within the categories of persons whose consent is required under
said section 7 or the rules and regulations of the Securities and Exchange
Commission thereunder.
/s/ Drinker Biddle & Reath
---------------------------
DRINKER BIDDLE & REATH
Philadelphia, Pennsylvania
February 28, 1997
- -------------------------------------------------------------------------------
CONSTENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses and
Statements of Additional Information constituting parts of this Post-Effective
Amendment No. 30 to the registration statement on Form N-1A (the "Registration
Statement") of our reports dated December 6, 1996, relating to the financial
statements and financial highlights appearing in the in the October 31, 1996
Annual Reports to Shareholders of Portico Money Market Fund, Portico U.S.
Treasury Money Market Fund, Portico U.S. Government Money Market Fund, Portico
Tax-Exempt Money Market Fund, Portico Institutional Money Market Fund, Portico
Short-Term Bond Market Fund, Portico Intermediate Bond Market Fund, Portico Tax-
Exempt Intermediate Bond Fund, Portico Bond IMMDEX Fund, Portico Balanced Fund,
Portico Growth and Income Fund, Portico Equity Index Fund, Portico MidCore
Growth Fund, Portico Special Growth Fund, Portico International Equity Fund and
Portico MicroCap Fund (portfolios of Portico Funds, Inc.) which are also
incorporated by reference into the Registration Statement. We also consent to
the references to us under the headings "Financial Highlights" in each
Prospectus and under the headings "Independent Accountants" in each Statement of
Additional Information.
Price Waterhouse LLP
Milwaukee, Wisconsin
February 28, 1997
- -------------------------------------------------------------------------------
Exhibit (14)(a)
PORTICO FUNDS, INC.
AMENDED AND RESTATED DISTRIBUTION AND SERVICE PLAN
This Distribution and Service Plan (the "Plan") has been adopted by the
Board of Directors of Portico Funds, Inc. in accordance with Rule 12b-1 under
the Investment Company Act of 1940 (the "Act").
Section 1. Any officer of Portico Funds, Inc. ("Portico Funds"), is
authorized to execute and deliver, in the name and on behalf of Portico Funds,
written agreements based on the form attached hereto as Appendix A or any other
form duly approved by the Board of Directors ("Agreements") with securities
dealers, financial institutions and other industry professionals ("Shareholder
Organizations") that are shareholders or dealers of record or which have a
servicing relationship with the beneficial owners of Shares of Series A Shares
of any Portico Fund except the Institutional Money Market Fund (each, a "Fund"
and collectively, the "Funds"). Pursuant to such Agreements, Shareholder
Organizations shall provide distribution and support services as set forth
therein to their clients who acquire and beneficially own Series A Shares of any
Fund offered by Portico Funds in consideration of a fee, computed monthly in the
manner set forth in the Agreements, at an annual rate of up to .25% of the
average daily net asset value of the outstanding Series A Shares beneficially
owned by such clients. Firstar Trust Company ("Firstar") and its affiliates are
eligible to become Shareholder Organizations and to receive fees under this
Plan.
Section 2. The distributor shall monitor the arrangements pertaining
to Portico Funds' Agreements with Shareholder Organizations in accordance with
the terms of the distributor's agreement with Portico Funds. Portico Funds
shall not be obliged to execute any Agreement with any qualifying Shareholder
Organization.
Section 3. So long as this Plan is in effect, the distributor shall
provide to Portico Funds' Board of Directors, and the Directors shall review, at
least quarterly, a written report of the amounts expended pursuant to this Plan
and the purposes for which such expenditures were made.
Section 4. This Plan has previously become effective with respect to
each particular Fund upon the approval of the Plan (and the form of Agreement
attached hereto) by (a) a majority of the Board of Directors, including a
majority of the Directors who are not "interested persons," as defined in the
Act, of Portico Funds and have no direct or indirect financial interest in the
operation of this Plan or in any Agreement related to this Plan (the
"Disinterested Directors"), pursuant to a vote cast in person at a meeting
called for the purpose of voting on the approval of this Plan (and form of
Agreement), and (b) a majority (as defined in the Act) of the outstanding Series
A Shares of such Fund.
Section 5. Unless sooner terminated, this Plan shall continue until
February 29, 1995 and thereafter shall continue automatically for successive
annual periods provided such continuance is approved at least annually in the
manner set forth in Section 4(a).
Section 6. This Plan may be amended at any time with respect to any
Fund by the Board of Directors, provided that (a) any amendment to increase
materially the costs (whether for distribution or any other purpose) which such
Fund may bear pursuant to this Plan shall be effective only upon the favorable
vote of a majority (as defined in the Act) of the outstanding Series A Shares of
such Fund, and (b) any material amendment of the terms of this Plan shall become
effective only upon the approvals set forth in Section 4(a).
Section 7. This Plan is terminable at any time with respect to any
Fund by (a) vote of a majority of the Disinterested Directors, or (b) vote of a
majority (as defined in the Act) of the Series A Shares of such Fund.
Section 8. While this Plan is in effect, the selection and
nomination of those Directors who are not "interested persons" (as defined in
the Act) of Portico Funds shall be committed to the discretion of such non-
interested Directors.
Section 9. All expenses incurred by Portico Funds with respect to
the Series A Shares of a particular Fund in connection with Agreements and the
implementation of this Plan shall be borne entirely by Series A Shares of such
Fund.
Section 10. Portico Funds originally adopted this Plan as of February
25, 1988 and was amended and re-adopted on December 16, 1994.
Appendix A
DISTRIBUTION AND SERVICING AGREEMENT
Gentlemen:
We wish to enter into this Distribution and Servicing Agreement
("Agreement") with you concerning the provision of distribution services (and,
to the extent provided below, support services) to your clients ("Clients") who
may from time to time acquire and beneficially own shares of Series A Common
Stock of any Fund except the Institutional Money Market Fund offered by Portico
Funds, Inc.
The terms and conditions of this Agreement are as follows:
Section 1. You will provide reasonable assistance in connection
with the distribution of Series A Shares to Clients as requested from time to
time by our distributor, which assistance may include forwarding sales
literature and advertising provided by our distributor for Clients. In
addition, you agree to provide the following support services to Clients who may
from time to time acquire and beneficially own Series A Shares:3 (i) processing
dividend and distribution payments from us on behalf of Clients; (ii) providing
information periodically to Clients showing their positions in Series A Shares;
(iii) arranging for bank wires; (iv) responding to Client inquiries relating to
the services performed by you; (v) providing subaccounting with respect to
Series A Shares beneficially owned by Clients or the information to us necessary
for subaccounting; (vi) if required by law, forwarding shareholder
communications from us (such as proxies, shareholder reports, annual and semi-
annual financial statements and dividend, distribution and tax notices) to
Clients; (vii) assisting in processing purchase, exchange and redemption
requests from Clients and in placing such orders with our service contractors;
(viii) assisting Clients in changing dividend options, account designations and
addresses; (ix) developing, monitoring and providing ongoing consulting services
regarding expedited purchase, redemption and exchange programs (the "Program")
relating to the purchase of Series A Shares by Clients who also own shares of
other unaffiliated investment companies; (x) reviewing the description of the
Program in the materials prepared by us and such other investment companies for
distribution to clients; (xi) responding to telephone inquiries from Clients
regarding the Programs and their investments in Series A Shares; (xii) acting as
a liaison between Clients and us, including assistance in correcting errors and
resolving problems; (xiii) providing such statistical and other information as
we may reasonably request or may be necessary for us to comply with applicable
federal and state laws; and (xiv) providing such other similar services as we
may reasonably request to the extent you are permitted to do so under applicable
statutes, rules and regulations.
Section 2. You will provide such office space and equipment,
telephone facilities and personnel (which may be any part of the space,
equipment and facilities currently used in your business, or any personnel
employed by you) as may be reasonably necessary or beneficial in order to
provide the aforementioned services and assistance to Clients.
Section 3. Neither you nor any of your officers, employees or
agents are authorized to make any representations concerning us or the Series A
Shares except those contained in our then current prospectuses and statements of
additional information for Series A Shares, copies of which will be supplied by
us to you, or in such supplemental literature or advertising as may be
authorized by us in writing.
Section 4. For all purposes of this Agreement you will be deemed to
be an independent contractor, and will have no authority to act as agent for us
in any matter or in any respect. By your written acceptance of this Agreement,
you agree to and do release, indemnify and hold us harmless from and against any
and all direct or indirect liabilities or losses resulting from requests,
directions, actions or inactions of or by you or your officers, employees or
agents regarding your responsibilities hereunder or the purchase, redemption,
transfer or registration of Series A Shares (or orders relating to the same) by
or on behalf of Clients. You and your employees will, upon request, be
available during normal business hours to consult with us or our designees
concerning the performance of your responsibilities under this Agreement.
Section 5. In consideration of the services and facilities provided
by you hereunder, we will pay to you, and you will accept as full payment
therefor, a fee at the annual rate of .___ of 1% of the average daily net asset
value of the Series A Shares beneficially owned by your Clients for whom you are
the dealer of record or holder of record or with whom you have a servicing
relationship (the "Clients' Series A Shares"), which fee will be computed daily
and payable monthly. For purposes of determining the fees payable under this
Section 5, the average daily net asset value of the Clients' Series A Shares
will be computed in the manner specified in our Registration Statement (as the
same is in effect from time to time) in connection with the computation of the
net asset value of Series A Shares for purposes of purchases and redemptions.
The fee rate stated above may be prospectively increased or decreased by us, in
our sole discretion, at any time upon notice to you. Further, we may, in our
discretion and without notice, suspend or withdraw the sale of Series A Shares,
including the sale of Series A Shares to you for the account of any Client or
Clients. All fees payable by Portico Funds under this Agreement with respect to
the Series A Shares of a particular Fund shall be borne by, and be payable
entirely out of the assets allocable to, said Series A Shares; and no other Fund
or series of Shares offered by Portico Funds shall be responsible for such fees.
Section 6. Any person authorized to direct the disposition of
monies paid or payable by us pursuant to this Agreement will provide to our
Board of Directors, and our Directors will review, at least quarterly, a written
report of the amounts so expended and the purposes for which such expenditures
were made. In addition, you will furnish us or our designees with such
information as we or they may reasonably request (including, without limitation,
periodic certifications confirming the provision to Clients of the services
described herein), and will otherwise cooperate with us and our designees
(including, without limitation, any auditors designated by us), in connection
with the preparation of reports to our Board of Directors concerning this
Agreement and the monies paid or payable by us pursuant hereto, as well as any
other reports or filings that may be required by law.
Section 7. We may enter into other similar Agreements with any
other person or persons without your consent.
Section 8. By your written acceptance of this Agreement, you
represent, warrant and agree that: (i) the compensation payable to you
hereunder, together with any other compensation you receive from Clients for
services contemplated by this Agreement, will not be excessive or unreasonable
under the laws and instruments governing your relationships with Clients; and
(ii) you will provide to Clients a schedule of any fees that you may charge to
them relating to the investment of their assets in Series A Shares. In
addition, you understand that this Agreement has been entered into pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (the "Act"), and is subject
to the provisions of said Rule, as well as any other applicable rules or
regulations promulgated by the Securities and Exchange Commission.
Section 9. This Agreement will become effective on the date a fully
executed copy of this Agreement is received by us or our designee. Unless
sooner terminated, this Agreement will continue until February 28, 199_, and
thereafter will continue automatically for successive annual periods provided
such continuance is specifically approved at least annually by us in the manner
described in Section 12. This Agreement is terminable with respect to the
Series A Shares of any Fund, without penalty, at any time by us (which
termination may be by a vote of a majority of the Disinterested Directors as
defined in Section 12 or by vote of the holders of a majority of the outstanding
Series A Shares of such Fund) or by you upon notice to the other party hereto.
This Agreement will also terminate automatically in the event of its assignment
(as defined in the Act).
Section 10. All notices and other communications to either you or us
will be duly given if mailed, telegraphed, telexed or transmitted by similar
telecommunications device to the appropriate address stated herein.
Section 11. This Agreement will be construed in accordance with the
laws of the State of Wisconsin.
Section 12. This Agreement has been approved by vote of a majority
of (i) our Board of Directors and (ii) those Directors who are not "interested
persons" (as defined in the Investment Company Act of 1940) of us and have no
direct or indirect financial interest in the operation of the Distribution and
Service Plan adopted by us or in any agreement related thereto cast in person at
a meeting called for the purpose of voting on such approval ("Disinterested
Directors").
If you agree to be legally bound by the provisions of this Agreement,
please sign a copy of this letter where indicated below and promptly return it
to us.
Very truly yours,
PORTICO FUNDS, INC.
Date: ______________ By:____________________________
(Authorized Officer)
Accepted and Agreed to:
[Shareholder Organization]
Date: ______________ By:____________________________
(Authorized Officer)
- -------------------------------------------------------------------------------
[ARTICLE] 6
[CIK] 0000824612
[NAME] PORTICO MONEY MARKET FUND
[SERIES]
[NUMBER] 1
[NAME] PORTICO MONEY MARKET FUND
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1996
[PERIOD-START] NOV-01-1995
[PERIOD-END] OCT-31-1996
[INVESTMENTS-AT-COST] 224,990
[INVESTMENTS-AT-VALUE] 224,990
[RECEIVABLES] 78
[ASSETS-OTHER] 20
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 225,088
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 1,052
[TOTAL-LIABILITIES] 1,052
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 224,014
[SHARES-COMMON-STOCK] 224,036
[SHARES-COMMON-PRIOR] 172,261
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 224,036
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 10,727
[OTHER-INCOME] 0
[EXPENSES-NET] 1,163
[NET-INVESTMENT-INCOME] 9,564
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 9,564
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 9,564
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 537,145
[NUMBER-OF-SHARES-REDEEMED] 494,250
[SHARES-REINVESTED] 8,880
[NET-CHANGE-IN-ASSETS] 51,775
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 969
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,577
[AVERAGE-NET-ASSETS] 193,788
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] .05
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] .05
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] .60
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[CIK] 0000824612
[NAME] PORTICO U.S. GOVERNMENT MONEY MARKET FUND
[SERIES]
[NUMBER] 2
[NAME] PORTICO U.S. GOVERNMENT MONEY MARKET FUND
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1996
[PERIOD-START] NOV-01-1995
[PERIOD-END] OCT-31-1996
[INVESTMENTS-AT-COST] 198,785
[INVESTMENTS-AT-VALUE] 198,785
[RECEIVABLES] 450
[ASSETS-OTHER] 3
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 199,238
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 904
[TOTAL-LIABILITIES] 904
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 198,314
[SHARES-COMMON-STOCK] 198,334
[SHARES-COMMON-PRIOR] 163,068
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 198,334
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 10,456
[OTHER-INCOME] 0
[EXPENSES-NET] 1,154
[NET-INVESTMENT-INCOME] 9,302
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 9,302
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 9,302
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 945,438
[NUMBER-OF-SHARES-REDEEMED] 912,853
[SHARES-REINVESTED] 2,681
[NET-CHANGE-IN-ASSETS] 35,266
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 962
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,364
[AVERAGE-NET-ASSETS] 192,300
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] .05
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] .05
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] .60
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[CIK] 0000824612
[NAME] PORTICO TAX-EXEMPT MONEY MARKET FUND
[SERIES]
[NUMBER] 3
[NAME] PORTICO TAX-EXEMPT MONEY MARKET FUND
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1996
[PERIOD-START] NOV-01-1995
[PERIOD-END] OCT-31-1996
[INVESTMENTS-AT-COST] 78,948
[INVESTMENTS-AT-VALUE] 78,948
[RECEIVABLES] 640
[ASSETS-OTHER] 5
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 79,593
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 265
[TOTAL-LIABILITIES] 265
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 79,320
[SHARES-COMMON-STOCK] 79,328
[SHARES-COMMON-PRIOR] 84,084
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 79,328
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 2,920
[OTHER-INCOME] 0
[EXPENSES-NET] 475
[NET-INVESTMENT-INCOME] 2,445
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 2,445
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 2,445
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 156,757
[NUMBER-OF-SHARES-REDEEMED] 162,503
[SHARES-REINVESTED] 990
[NET-CHANGE-IN-ASSETS] (4,756)
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 396
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 616
[AVERAGE-NET-ASSETS] 79,161
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] .03
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] .03
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] .60
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[CIK] 0000824612
[NAME] PORTICO SHORT-TERM BOND MARKET FUND
[SERIES]
[NUMBER] 4
[NAME] PORTICO SHORT-TERM BOND MARKET FUND - RETAIL SERIES
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1996
[PERIOD-START] NOV-01-1995
[PERIOD-END] OCT-31-1996
[INVESTMENTS-AT-COST] 203,818
[INVESTMENTS-AT-VALUE] 203,527
[RECEIVABLES] 3,060
[ASSETS-OTHER] 14
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 206,601
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 292
[TOTAL-LIABILITIES] 292
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 208,041
[SHARES-COMMON-STOCK] 5,738
[SHARES-COMMON-PRIOR] 4,641
[ACCUMULATED-NII-CURRENT] 92
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (1,535)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (291)
[NET-ASSETS] 206,309
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 11,888
[OTHER-INCOME] 0
[EXPENSES-NET] 1,058
[NET-INVESTMENT-INCOME] 10,830
[REALIZED-GAINS-CURRENT] 92
[APPREC-INCREASE-CURRENT] (1,102)
[NET-CHANGE-FROM-OPS] 9,820
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 3,056
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 2,697
[NUMBER-OF-SHARES-REDEEMED] 1,863
[SHARES-REINVESTED] 264
[NET-CHANGE-IN-ASSETS] 63,620
[ACCUMULATED-NII-PRIOR] 119
[ACCUMULATED-GAINS-PRIOR] (1,628)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1,109
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,742
[AVERAGE-NET-ASSETS] 185,049
[PER-SHARE-NAV-BEGIN] 10.28
[PER-SHARE-NII] 0.58
[PER-SHARE-GAIN-APPREC] (0.03)
[PER-SHARE-DIVIDEND] 0.58
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 10.25
[EXPENSE-RATIO] 0.75
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[CIK] 0000824612
[NAME] PORTICO SHORT-TERM BOND MARKET FUND
[SERIES]
[NUMBER] 5
[NAME] PORTICO SHORT-TERM BOND MARKET FUND - INSTITUTIONAL SERIES
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1996
[PERIOD-START] NOV-01-1995
[PERIOD-END] OCT-31-1996
[INVESTMENTS-AT-COST] 203,818
[INVESTMENTS-AT-VALUE] 203,527
[RECEIVABLES] 3,060
[ASSETS-OTHER] 14
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 206,601
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 292
[TOTAL-LIABILITIES] 292
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 208,041
[SHARES-COMMON-STOCK] 14,381
[SHARES-COMMON-PRIOR] 9,233
[ACCUMULATED-NII-CURRENT] 92
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (1,535)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (291)
[NET-ASSETS] 206,309
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 11,888
[OTHER-INCOME] 0
[EXPENSES-NET] 1,058
[NET-INVESTMENT-INCOME] 10,830
[REALIZED-GAINS-CURRENT] 92
[APPREC-INCREASE-CURRENT] (1,102)
[NET-CHANGE-FROM-OPS] 9,820
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 7,799
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 7,301
[NUMBER-OF-SHARES-REDEEMED] 2,781
[SHARES-REINVESTED] 627
[NET-CHANGE-IN-ASSETS] 63,620
[ACCUMULATED-NII-PRIOR] 119
[ACCUMULATED-GAINS-PRIOR] (1,628)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1,109
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,742
[AVERAGE-NET-ASSETS] 185,049
[PER-SHARE-NAV-BEGIN] 10.28
[PER-SHARE-NII] 0.61
[PER-SHARE-GAIN-APPREC] (0.03)
[PER-SHARE-DIVIDEND] 0.61
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 10.25
[EXPENSE-RATIO] 0.50
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[CIK] 0000824612
[NAME] PORTICO BOND IMMDEX FUND
[SERIES]
[NUMBER] 5
[NAME] PORTICO BOND IMMDEX FUND - RETAIL SERIES
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1996
[PERIOD-START] NOV-01-1995
[PERIOD-END] OCT-31-1996
[INVESTMENTS-AT-COST] 395,854
[INVESTMENTS-AT-VALUE] 406,499
[RECEIVABLES] 6,992
[ASSETS-OTHER] 13
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 413,504
[PAYABLE-FOR-SECURITIES] 57
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 220
[TOTAL-LIABILITIES] 277
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 403,533
[SHARES-COMMON-STOCK] 1,549
[SHARES-COMMON-PRIOR] 786
[ACCUMULATED-NII-CURRENT] 197
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (1,150)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 10,645
[NET-ASSETS] 413,227
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 23,909
[OTHER-INCOME] 0
[EXPENSES-NET] 1,624
[NET-INVESTMENT-INCOME] 22,285
[REALIZED-GAINS-CURRENT] (167)
[APPREC-INCREASE-CURRENT] (2,584)
[NET-CHANGE-FROM-OPS] 19,534
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 1,987
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1,022
[NUMBER-OF-SHARES-REDEEMED] 319
[SHARES-REINVESTED] 60
[NET-CHANGE-IN-ASSETS] 101,078
[ACCUMULATED-NII-PRIOR] 261
[ACCUMULATED-GAINS-PRIOR] (1,049)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1,077
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,877
[AVERAGE-NET-ASSETS] 359,374
[PER-SHARE-NAV-BEGIN] 27.82
[PER-SHARE-NII] 1.61
[PER-SHARE-GAIN-APPREC] (0.26)
[PER-SHARE-DIVIDEND] 1.63
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 27.54
[EXPENSE-RATIO] 0.68
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[CIK] 0000824612
[NAME] PORTICO BOND IMMDEX FUND
[SERIES]
[NUMBER] 5
[NAME] PORTICO BOND IMMDEX FUND - INSTITUTIONAL SERIES
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1996
[PERIOD-START] NOV-01-1995
[PERIOD-END] OCT-31-1996
[INVESTMENTS-AT-COST] 395,854
[INVESTMENTS-AT-VALUE] 406,499
[RECEIVABLES] 6,992
[ASSETS-OTHER] 13
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 413,504
[PAYABLE-FOR-SECURITIES] 57
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 220
[TOTAL-LIABILITIES] 277
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 403,533
[SHARES-COMMON-STOCK] 13,452
[SHARES-COMMON-PRIOR] 10,433
[ACCUMULATED-NII-CURRENT] 197
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (1,150)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 10,645
[NET-ASSETS] 413,227
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 23,909
[OTHER-INCOME] 0
[EXPENSES-NET] 1,624
[NET-INVESTMENT-INCOME] 22,285
[REALIZED-GAINS-CURRENT] (167)
[APPREC-INCREASE-CURRENT] (2,584)
[NET-CHANGE-FROM-OPS] 19,534
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 20,296
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 4,180
[NUMBER-OF-SHARES-REDEEMED] 1,809
[SHARES-REINVESTED] 648
[NET-CHANGE-IN-ASSETS] 101,078
[ACCUMULATED-NII-PRIOR] 261
[ACCUMULATED-GAINS-PRIOR] (1,049)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1,077
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,877
[AVERAGE-NET-ASSETS] 359,374
[PER-SHARE-NAV-BEGIN] 27.82
[PER-SHARE-NII] 1.70
[PER-SHARE-GAIN-APPREC] (0.27)
[PER-SHARE-DIVIDEND] 1.70
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 27.55
[EXPENSE-RATIO] 0.43
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[CIK] 0000824612
[NAME] PORTICO GROWTH AND INCOME FUND
[SERIES]
[NUMBER] 6
[NAME] PORTICO GROWTH AND INCOME FUND
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1996
[PERIOD-START] NOV-01-1995
[PERIOD-END] OCT-31-1996
[INVESTMENTS-AT-COST] 226,286
[INVESTMENTS-AT-VALUE] 295,035
[RECEIVABLES] 3,967
[ASSETS-OTHER] 8
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 299,010
[PAYABLE-FOR-SECURITIES] 527
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 285
[TOTAL-LIABILITIES] 812
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 203,817
[SHARES-COMMON-STOCK] 2,156
[SHARES-COMMON-PRIOR] 1,536
[ACCUMULATED-NII-CURRENT] 507
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 25,124
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 68,749
[NET-ASSETS] 298,198
[DIVIDEND-INCOME] 5,195
[INTEREST-INCOME] 1,280
[OTHER-INCOME] 0
[EXPENSES-NET] 2,399
[NET-INVESTMENT-INCOME] 4,076
[REALIZED-GAINS-CURRENT] 25,182
[APPREC-INCREASE-CURRENT] 29,232
[NET-CHANGE-FROM-OPS] 58,490
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 724
[DISTRIBUTIONS-OF-GAINS] 1,827
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 751
[NUMBER-OF-SHARES-REDEEMED] 220
[SHARES-REINVESTED] 90
[NET-CHANGE-IN-ASSETS] 93,022
[ACCUMULATED-NII-PRIOR] 175
[ACCUMULATED-GAINS-PRIOR] 8,779
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1,888
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 2,592
[AVERAGE-NET-ASSETS] 252,224
[PER-SHARE-NAV-BEGIN] 27.62
[PER-SHARE-NII] 0.42
[PER-SHARE-GAIN-APPREC] 6.61
[PER-SHARE-DIVIDEND] 0.39
[PER-SHARE-DISTRIBUTIONS] 1.19
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 33.07
[EXPENSE-RATIO] 1.15
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[CIK] 0000824612
[NAME] PORTICO GROWTH AND INCOME FUND
[SERIES]
[NUMBER] 6
[NAME] PORTICO GROWTH AND INCOME FUND - INSTITUTIONAL SERIES
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1996
[PERIOD-START] NOV-01-1995
[PERIOD-END] OCT-31-1996
[INVESTMENTS-AT-COST] 226,286
[INVESTMENTS-AT-VALUE] 295,035
[RECEIVABLES] 3,967
[ASSETS-OTHER] 8
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 299,010
[PAYABLE-FOR-SECURITIES] 527
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 285
[TOTAL-LIABILITIES] 812
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 203,817
[SHARES-COMMON-STOCK] 6,858
[SHARES-COMMON-PRIOR] 5,891
[ACCUMULATED-NII-CURRENT] 507
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 25,124
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 68,749
[NET-ASSETS] 298,198
[DIVIDEND-INCOME] 5,195
[INTEREST-INCOME] 1,280
[OTHER-INCOME] 0
[EXPENSES-NET] 2,399
[NET-INVESTMENT-INCOME] 4,076
[REALIZED-GAINS-CURRENT] 25,182
[APPREC-INCREASE-CURRENT] 29,232
[NET-CHANGE-FROM-OPS] 58,490
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 3,021
[DISTRIBUTIONS-OF-GAINS] 7,010
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 2,000
[NUMBER-OF-SHARES-REDEEMED] 1,359
[SHARES-REINVESTED] 326
[NET-CHANGE-IN-ASSETS] 93,022
[ACCUMULATED-NII-PRIOR] 175
[ACCUMULATED-GAINS-PRIOR] 8,779
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1,888
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 2,592
[AVERAGE-NET-ASSETS] 252,224
[PER-SHARE-NAV-BEGIN] 27.63
[PER-SHARE-NII] 0.50
[PER-SHARE-GAIN-APPREC] 6.61
[PER-SHARE-DIVIDEND] 0.47
[PER-SHARE-DISTRIBUTIONS] 1.19
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 33.08
[EXPENSE-RATIO] 0.90
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[CIK] 0000824612
[NAME] PORTICO EQUITY INDEX FUND
[SERIES]
[NUMBER] 7
[NAME] PORTICO EQUITY INDEX FUND - RETAIL SERIES
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1996
[PERIOD-START] NOV-01-1995
[PERIOD-END] OCT-31-1996
[INVESTMENTS-AT-COST] 167,340
[INVESTMENTS-AT-VALUE] 251,066
[RECEIVABLES] 1,917
[ASSETS-OTHER] 11
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 252,994
[PAYABLE-FOR-SECURITIES] 1,128
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 138
[TOTAL-LIABILITIES] 1,266
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 164,984
[SHARES-COMMON-STOCK] 803
[SHARES-COMMON-PRIOR] 454
[ACCUMULATED-NII-CURRENT] 382
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 2,493
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 83,726
[NET-ASSETS] 251,728
[DIVIDEND-INCOME] 4,762
[INTEREST-INCOME] 640
[OTHER-INCOME] 0
[EXPENSES-NET] 979
[NET-INVESTMENT-INCOME] 4,423
[REALIZED-GAINS-CURRENT] 2,908
[APPREC-INCREASE-CURRENT] 38,137
[NET-CHANGE-FROM-OPS] 45,468
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 495
[DISTRIBUTIONS-OF-GAINS] 165
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 418
[NUMBER-OF-SHARES-REDEEMED] 84
[SHARES-REINVESTED] 14
[NET-CHANGE-IN-ASSETS] 94,959
[ACCUMULATED-NII-PRIOR] 245
[ACCUMULATED-GAINS-PRIOR] 972
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 555
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,139
[AVERAGE-NET-ASSETS] 222,494
[PER-SHARE-NAV-BEGIN] 41.07
[PER-SHARE-NII] 0.77
[PER-SHARE-GAIN-APPREC] 8.69
[PER-SHARE-DIVIDEND] 0.78
[PER-SHARE-DISTRIBUTIONS] 0.35
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 49.40
[EXPENSE-RATIO] 0.66
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[CIK] 0000824612
[NAME] PORTICO EQUITY INDEX FUND
[SERIES]
[NUMBER] 7
[NAME] PORTICO EQUITY INDEX FUND - INSTITUTIONAL SERIES
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1996
[PERIOD-START] NOV-01-1995
[PERIOD-END] OCT-31-1996
[INVESTMENTS-AT-COST] 167,340
[INVESTMENTS-AT-VALUE] 251,066
[RECEIVABLES] 1,917
[ASSETS-OTHER] 11
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 252,994
[PAYABLE-FOR-SECURITIES] 1,128
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 138
[TOTAL-LIABILITIES] 1,266
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 164,984
[SHARES-COMMON-STOCK] 4,291
[SHARES-COMMON-PRIOR] 3,362
[ACCUMULATED-NII-CURRENT] 382
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 2,493
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 83,726
[NET-ASSETS] 251,728
[DIVIDEND-INCOME] 4,762
[INTEREST-INCOME] 640
[OTHER-INCOME] 0
[EXPENSES-NET] 979
[NET-INVESTMENT-INCOME] 4,423
[REALIZED-GAINS-CURRENT] 2,908
[APPREC-INCREASE-CURRENT] 38,137
[NET-CHANGE-FROM-OPS] 45,468
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 3,791
[DISTRIBUTIONS-OF-GAINS] 1,223
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 2,097
[NUMBER-OF-SHARES-REDEEMED] 1,272
[SHARES-REINVESTED] 104
[NET-CHANGE-IN-ASSETS] 94,959
[ACCUMULATED-NII-PRIOR] 245
[ACCUMULATED-GAINS-PRIOR] 972
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 555
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,139
[AVERAGE-NET-ASSETS] 222,494
[PER-SHARE-NAV-BEGIN] 41.08
[PER-SHARE-NII] 0.91
[PER-SHARE-GAIN-APPREC] 8.68
[PER-SHARE-DIVIDEND] 0.89
[PER-SHARE-DISTRIBUTIONS] 0.35
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 49.43
[EXPENSE-RATIO] 0.41
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[CIK] 0000824612
[NAME] PORTICO SPECIAL GROWTH FUND
[SERIES]
[NUMBER] 8
[NAME] PORTICO SPECIAL GROWTH FUND - RETAIL SERIES
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1996
[PERIOD-START] NOV-01-1995
[PERIOD-END] OCT-31-1996
[INVESTMENTS-AT-COST] 488,692
[INVESTMENTS-AT-VALUE] 594,350
[RECEIVABLES] 6,232
[ASSETS-OTHER] 6
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 600,588
[PAYABLE-FOR-SECURITIES] 5,961
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 611
[TOTAL-LIABILITIES] 6,572
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 413,009
[SHARES-COMMON-STOCK] 2,686
[SHARES-COMMON-PRIOR] 2,108
[ACCUMULATED-NII-CURRENT] (1)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 75,349
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 105,658
[NET-ASSETS] 594,016
[DIVIDEND-INCOME] 1,757
[INTEREST-INCOME] 2,513
[OTHER-INCOME] 191
[EXPENSES-NET] 5,302
[NET-INVESTMENT-INCOME] (841)
[REALIZED-GAINS-CURRENT] 77,360
[APPREC-INCREASE-CURRENT] (11,614)
[NET-CHANGE-FROM-OPS] 64,905
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 9,690
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 823
[NUMBER-OF-SHARES-REDEEMED] 501
[SHARES-REINVESTED] 257
[NET-CHANGE-IN-ASSETS] 72,519
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 56,309
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 4,279
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 5,696
[AVERAGE-NET-ASSETS] 571,020
[PER-SHARE-NAV-BEGIN] 41.40
[PER-SHARE-NII] (0.13)
[PER-SHARE-GAIN-APPREC] 4.70
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 4.59
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 41.38
[EXPENSE-RATIO] 1.13
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[CIK] 0000824612
[NAME] PORTICO SPECIAL GROWTH FUND
[SERIES]
[NUMBER] 8
[NAME] PORTICO SPECIAL GROWTH FUND - INSTITUTIONAL SERIES
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1996
[PERIOD-START] NOV-01-1995
[PERIOD-END] OCT-31-1996
[INVESTMENTS-AT-COST] 488,692
[INVESTMENTS-AT-VALUE] 594,350
[RECEIVABLES] 6,232
[ASSETS-OTHER] 6
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 600,588
[PAYABLE-FOR-SECURITIES] 5,961
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 611
[TOTAL-LIABILITIES] 6,572
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 413,009
[SHARES-COMMON-STOCK] 11,613
[SHARES-COMMON-PRIOR] 10,470
[ACCUMULATED-NII-CURRENT] (1)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 75,349
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 105,658
[NET-ASSETS] 594,016
[DIVIDEND-INCOME] 1,757
[INTEREST-INCOME] 2,513
[OTHER-INCOME] 191
[EXPENSES-NET] 5,302
[NET-INVESTMENT-INCOME] (841)
[REALIZED-GAINS-CURRENT] 77,360
[APPREC-INCREASE-CURRENT] (11,614)
[NET-CHANGE-FROM-OPS] 64,905
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 47,791
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 3,375
[NUMBER-OF-SHARES-REDEEMED] 3,376
[SHARES-REINVESTED] 1,144
[NET-CHANGE-IN-ASSETS] 72,519
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 56,309
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 4,276
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 5,696
[AVERAGE-NET-ASSETS] 571,020
[PER-SHARE-NAV-BEGIN] 41.47
[PER-SHARE-NII] (0.04)
[PER-SHARE-GAIN-APPREC] 4.74
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 4.59
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 41.58
[EXPENSE-RATIO] 0.88
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[CIK] 0000824612
[NAME] PORTICO INSTITUTIONAL MONEY MARKET FUND
[SERIES]
[NUMBER] 9
[NAME] PORTICO INSTITUTIONAL MONEY MARKET FUND
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1996
[PERIOD-START] NOV-01-1995
[PERIOD-END] OCT-31-1996
[INVESTMENTS-AT-COST] 753,547
[INVESTMENTS-AT-VALUE] 753,547
[RECEIVABLES] 252
[ASSETS-OTHER] 1
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 753,800
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 3,749
[TOTAL-LIABILITIES] 3,749
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 749,976
[SHARES-COMMON-STOCK] 750,051
[SHARES-COMMON-PRIOR] 716,566
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 750,051
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 42,984
[OTHER-INCOME] 0
[EXPENSES-NET] 2,715
[NET-INVESTMENT-INCOME] 40,269
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 40,269
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 40,269
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 2,484,810
[NUMBER-OF-SHARES-REDEEMED] 2,457,920
[SHARES-REINVESTED] 6,595
[NET-CHANGE-IN-ASSETS] 33,485
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 3,878
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 5,066
[AVERAGE-NET-ASSETS] 775,611
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] .05
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] .05
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] 0.35
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[CIK] 0000824612
[NAME] PORTICO U.S. TREASURY MONEY MARKET FUND
[SERIES]
[NUMBER] 10
[NAME] PORTICO U.S. TREASURY MONEY MARKET FUND
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1996
[PERIOD-START] NOV-01-1995
[PERIOD-END] OCT-31-1996
[INVESTMENTS-AT-COST] 52,829
[INVESTMENTS-AT-VALUE] 52,859
[RECEIVABLES] 851
[ASSETS-OTHER] 2
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 53,682
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 252
[TOTAL-LIABILITIES] 252
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 53,425
[SHARES-COMMON-STOCK] 53,430
[SHARES-COMMON-PRIOR] 64,655
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 53,430
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 3,322
[OTHER-INCOME] 0
[EXPENSES-NET] 376
[NET-INVESTMENT-INCOME] 2,946
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 2,946
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 2,946
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 187,850
[NUMBER-OF-SHARES-REDEEMED] 199,390
[SHARES-REINVESTED] 315
[NET-CHANGE-IN-ASSETS] (11,225)
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 313
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 503
[AVERAGE-NET-ASSETS] 62,650
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] .05
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] .05
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] 0.60
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[CIK] 0000824612
[NAME] PORTICO BALANCED FUND
[SERIES]
[NUMBER] 11
[NAME] PORTICO BALANCED FUND - RETAIL SERIES
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1996
[PERIOD-START] NOV-01-1995
[PERIOD-END] OCT-31-1996
[INVESTMENTS-AT-COST] 132,152
[INVESTMENTS-AT-VALUE] 157,573
[RECEIVABLES] 1,716
[ASSETS-OTHER] 8
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 159,297
[PAYABLE-FOR-SECURITIES] 708
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 140
[TOTAL-LIABILITIES] 848
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 123,551
[SHARES-COMMON-STOCK] 1,038
[SHARES-COMMON-PRIOR] 843
[ACCUMULATED-NII-CURRENT] 367
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 9,109
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 25,421
[NET-ASSETS] 158,449
[DIVIDEND-INCOME] 449
[INTEREST-INCOME] 3,630
[OTHER-INCOME] 24
[EXPENSES-NET] 1,164
[NET-INVESTMENT-INCOME] 2,939
[REALIZED-GAINS-CURRENT] 9,418
[APPREC-INCREASE-CURRENT] 4,478
[NET-CHANGE-FROM-OPS] 16,835
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 449
[DISTRIBUTIONS-OF-GAINS] 485
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 296
[NUMBER-OF-SHARES-REDEEMED] 137
[SHARES-REINVESTED] 35
[NET-CHANGE-IN-ASSETS] 32,065
[ACCUMULATED-NII-PRIOR] 226
[ACCUMULATED-GAINS-PRIOR] 2,346
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1,100
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,577
[AVERAGE-NET-ASSETS] 146,821
[PER-SHARE-NAV-BEGIN] 25.89
[PER-SHARE-NII] 0.47
[PER-SHARE-GAIN-APPREC] 2.64
[PER-SHARE-DIVIDEND] 0.47
[PER-SHARE-DISTRIBUTIONS] 0.55
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 27.98
[EXPENSE-RATIO] 1.00
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[CIK] 0000824612
[NAME] PORTICO BALANCED FUND
[SERIES]
[NUMBER] 11
[NAME] PORTICO BALANCED FUND - INSTITUTIONAL SERIES
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1996
[PERIOD-START] NOV-01-1995
[PERIOD-END] OCT-31-1996
[INVESTMENTS-AT-COST] 132,152
[INVESTMENTS-AT-VALUE] 157,573
[RECEIVABLES] 1,716
[ASSETS-OTHER] 8
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 159,297
[PAYABLE-FOR-SECURITIES] 708
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 140
[TOTAL-LIABILITIES] 848
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 123,551
[SHARES-COMMON-STOCK] 4,623
[SHARES-COMMON-PRIOR] 4,036
[ACCUMULATED-NII-CURRENT] 367
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 9,109
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 25,421
[NET-ASSETS] 158,449
[DIVIDEND-INCOME] 449
[INTEREST-INCOME] 3,630
[OTHER-INCOME] 24
[EXPENSES-NET] 1,164
[NET-INVESTMENT-INCOME] 2,939
[REALIZED-GAINS-CURRENT] 9,418
[APPREC-INCREASE-CURRENT] 4,478
[NET-CHANGE-FROM-OPS] 16,835
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 2,354
[DISTRIBUTIONS-OF-GAINS] 2,169
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 2,169
[NUMBER-OF-SHARES-REDEEMED] 1,749
[SHARES-REINVESTED] 167
[NET-CHANGE-IN-ASSETS] 32,065
[ACCUMULATED-NII-PRIOR] 226
[ACCUMULATED-GAINS-PRIOR] 2,346
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1,100
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,577
[AVERAGE-NET-ASSETS] 146,821
[PER-SHARE-NAV-BEGIN] 25.90
[PER-SHARE-NII] 0.55
[PER-SHARE-GAIN-APPREC] 2.62
[PER-SHARE-DIVIDEND] 0.53
[PER-SHARE-DISTRIBUTIONS] 0.55
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 27.99
[EXPENSE-RATIO] 0.75
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[CIK] 0000824612
[NAME] PORTICO MIDCORE GROWTH FUND
[SERIES]
[NUMBER] 12
[NAME] PORTICO MIDCORE GROWTH FUND - RETAIL SERIES
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1996
[PERIOD-START] NOV-01-1995
[PERIOD-END] OCT-31-1996
[INVESTMENTS-AT-COST] 121,551
[INVESTMENTS-AT-VALUE] 172,110
[RECEIVABLES] 829
[ASSETS-OTHER] 7
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 172,946
[PAYABLE-FOR-SECURITIES] 669
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 348
[TOTAL-LIABILITIES] 1,017
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 113,999
[SHARES-COMMON-STOCK] 549
[SHARES-COMMON-PRIOR] 395
[ACCUMULATED-NII-CURRENT] (2)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 7,372
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 50,559
[NET-ASSETS] 171,929
[DIVIDEND-INCOME] 948
[INTEREST-INCOME] 482
[OTHER-INCOME] 1
[EXPENSES-NET] 1,534
[NET-INVESTMENT-INCOME] (103)
[REALIZED-GAINS-CURRENT] 12,442
[APPREC-INCREASE-CURRENT] 15,736
[NET-CHANGE-FROM-OPS] 28,075
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 223
[NUMBER-OF-SHARES-REDEEMED] 69
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 27,396
[ACCUMULATED-NII-PRIOR] (1)
[ACCUMULATED-GAINS-PRIOR] (5,070)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1,254
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,659
[AVERAGE-NET-ASSETS] 167,298
[PER-SHARE-NAV-BEGIN] 25.58
[PER-SHARE-NII] (0.07)
[PER-SHARE-GAIN-APPREC] 4.81
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 30.32
[EXPENSE-RATIO] 1.15
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[CIK] 0000824612
[NAME] PORTICO MIDCORE GROWTH FUND
[SERIES]
[NUMBER] 12
[NAME] PORTICO MIDCORE GROWTH FUND - INSTITUTIONAL SERIES
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1996
[PERIOD-START] NOV-01-1995
[PERIOD-END] OCT-31-1996
[INVESTMENTS-AT-COST] 121,551
[INVESTMENTS-AT-VALUE] 172,110
[RECEIVABLES] 829
[ASSETS-OTHER] 7
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 172,946
[PAYABLE-FOR-SECURITIES] 669
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 348
[TOTAL-LIABILITIES] 1,017
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 113,999
[SHARES-COMMON-STOCK] 5,104
[SHARES-COMMON-PRIOR] 5,250
[ACCUMULATED-NII-CURRENT] (2)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 7,372
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 50,559
[NET-ASSETS] 171,929
[DIVIDEND-INCOME] 948
[INTEREST-INCOME] 482
[OTHER-INCOME] 1
[EXPENSES-NET] 1,534
[NET-INVESTMENT-INCOME] (103)
[REALIZED-GAINS-CURRENT] 12,442
[APPREC-INCREASE-CURRENT] 15,736
[NET-CHANGE-FROM-OPS] 28,075
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1,555
[NUMBER-OF-SHARES-REDEEMED] 1,701
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 27,396
[ACCUMULATED-NII-PRIOR] (1)
[ACCUMULATED-GAINS-PRIOR] (5,070)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1,254
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,659
[AVERAGE-NET-ASSETS] 167,298
[PER-SHARE-NAV-BEGIN] 25.61
[PER-SHARE-NII] (0.01)
[PER-SHARE-GAIN-APPREC] 4.83
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 30.43
[EXPENSE-RATIO] 0.90
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[CIK] 0000824612
[NAME] PORTICO INTERMEDIATE BOND MARKET FUND
[SERIES]
[NUMBER] 13
[NAME] PORTICO INTERMEDIATE BOND MARKET FUND - RETAIL SERIES
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1996
[PERIOD-START] NOV-01-1995
[PERIOD-END] OCT-31-1996
[INVESTMENTS-AT-COST] 185,963
[INVESTMENTS-AT-VALUE] 187,780
[RECEIVABLES] 3,208
[ASSETS-OTHER] 18
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 191,006
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 146
[TOTAL-LIABILITIES] 146
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 190,013
[SHARES-COMMON-STOCK] 1,707
[SHARES-COMMON-PRIOR] 1,133
[ACCUMULATED-NII-CURRENT] 89
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (1,061)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 1,817
[NET-ASSETS] 190,860
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 10,798
[OTHER-INCOME] 0
[EXPENSES-NET] 886
[NET-INVESTMENT-INCOME] 9,912
[REALIZED-GAINS-CURRENT] 773
[APPREC-INCREASE-CURRENT] (1,245)
[NET-CHANGE-FROM-OPS] 9,440
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 816
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 792
[NUMBER-OF-SHARES-REDEEMED] 268
[SHARES-REINVESTED] 50
[NET-CHANGE-IN-ASSETS] 50,343
[ACCUMULATED-NII-PRIOR] 112
[ACCUMULATED-GAINS-PRIOR] (1,834)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 850
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,290
[AVERAGE-NET-ASSETS] 169,213
[PER-SHARE-NAV-BEGIN] 10.21
[PER-SHARE-NII] 0.56
[PER-SHARE-GAIN-APPREC] (0.02)
[PER-SHARE-DIVIDEND] 0.56
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 10.19
[EXPENSE-RATIO] 0.75
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[CIK] 0000824612
[NAME] PORTICO INTERMEDIATE BOND MARKET FUND
[SERIES]
[NUMBER] 13
[NAME] PORTICO INTERMEDIATE BOND MARKET FUND - INSTITUTIONAL SERIES
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1996
[PERIOD-START] NOV-01-1995
[PERIOD-END] OCT-31-1996
[INVESTMENTS-AT-COST] 185,963
[INVESTMENTS-AT-VALUE] 187,780
[RECEIVABLES] 3,208
[ASSETS-OTHER] 18
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 191,006
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 146
[TOTAL-LIABILITIES] 146
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 190,013
[SHARES-COMMON-STOCK] 17,030
[SHARES-COMMON-PRIOR] 12,625
[ACCUMULATED-NII-CURRENT] 89
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (1,061)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 1,817
[NET-ASSETS] 190,860
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 10,798
[OTHER-INCOME] 0
[EXPENSES-NET] 886
[NET-INVESTMENT-INCOME] 9,912
[REALIZED-GAINS-CURRENT] 773
[APPREC-INCREASE-CURRENT] (1,245)
[NET-CHANGE-FROM-OPS] 9,440
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 9,121
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 7,539
[NUMBER-OF-SHARES-REDEEMED] 3,704
[SHARES-REINVESTED] 572
[NET-CHANGE-IN-ASSETS] 50,343
[ACCUMULATED-NII-PRIOR] 112
[ACCUMULATED-GAINS-PRIOR] (1,834)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 850
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,290
[AVERAGE-NET-ASSETS] 169,213
[PER-SHARE-NAV-BEGIN] 10.21
[PER-SHARE-NII] 0.59
[PER-SHARE-GAIN-APPREC] (0.02)
[PER-SHARE-DIVIDEND] 0.59
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 10.19
[EXPENSE-RATIO] 0.50
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[CIK] 0000824612
[NAME] PORTICO TAX-EXEMPT INTERMEDIATE BOND FUND
[SERIES]
[NUMBER] 14
[NAME] PORTICO TAX-EXEMPT INTERMEDIATE BOND FUND - RETAIL SERIES
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1996
[PERIOD-START] NOV-01-1995
[PERIOD-END] OCT-31-1996
[INVESTMENTS-AT-COST] 46,020
[INVESTMENTS-AT-VALUE] 46,530
[RECEIVABLES] 858
[ASSETS-OTHER] 5
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 47,393
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 51
[TOTAL-LIABILITIES] 51
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 46,916
[SHARES-COMMON-STOCK] 1,047
[SHARES-COMMON-PRIOR] 753
[ACCUMULATED-NII-CURRENT] 15
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (99)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 510
[NET-ASSETS] 47,342
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 1,891
[OTHER-INCOME] 0
[EXPENSES-NET] 223
[NET-INVESTMENT-INCOME] 1,668
[REALIZED-GAINS-CURRENT] 43
[APPREC-INCREASE-CURRENT] (88)
[NET-CHANGE-FROM-OPS] 1,623
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 371
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 573
[NUMBER-OF-SHARES-REDEEMED] 311
[SHARES-REINVESTED] 31
[NET-CHANGE-IN-ASSETS] 12,036
[ACCUMULATED-NII-PRIOR] 20
[ACCUMULATED-GAINS-PRIOR] (142)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 199
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 407
[AVERAGE-NET-ASSETS] 39,822
[PER-SHARE-NAV-BEGIN] 10.23
[PER-SHARE-NII] 0.40
[PER-SHARE-GAIN-APPREC] (0.01)
[PER-SHARE-DIVIDEND] 0.41
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 10.21
[EXPENSE-RATIO] 0.75
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[CIK] 0000824612
[NAME] PORTICO TAX-EXEMPT INTERMEDIATE BOND FUND
[SERIES]
[NUMBER] 14
[NAME] PORTICO TAX-EXEMPT INTERMEDIATE BOND FUND - INSTITUTIONAL
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1996
[PERIOD-START] NOV-01-1995
[PERIOD-END] OCT-31-1996
[INVESTMENTS-AT-COST] 46,020
[INVESTMENTS-AT-VALUE] 46,530
[RECEIVABLES] 858
[ASSETS-OTHER] 5
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 47,393
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 51
[TOTAL-LIABILITIES] 51
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 46,916
[SHARES-COMMON-STOCK] 3,589
[SHARES-COMMON-PRIOR] 2,696
[ACCUMULATED-NII-CURRENT] 15
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (99)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 510
[NET-ASSETS] 47,342
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 1,891
[OTHER-INCOME] 0
[EXPENSES-NET] 223
[NET-INVESTMENT-INCOME] 1,668
[REALIZED-GAINS-CURRENT] 43
[APPREC-INCREASE-CURRENT] (88)
[NET-CHANGE-FROM-OPS] 1,623
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 1,304
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1,800
[NUMBER-OF-SHARES-REDEEMED] 948
[SHARES-REINVESTED] 41
[NET-CHANGE-IN-ASSETS] 12,036
[ACCUMULATED-NII-PRIOR] 20
[ACCUMULATED-GAINS-PRIOR] (142)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 199
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 407
[AVERAGE-NET-ASSETS] 39,822
[PER-SHARE-NAV-BEGIN] 10.24
[PER-SHARE-NII] 0.43
[PER-SHARE-GAIN-APPREC] (0.03)
[PER-SHARE-DIVIDEND] 0.43
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 10.21
[EXPENSE-RATIO] 0.50
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[CIK] 0000824612
[NAME] PORTICO INTERNATIONAL EQUITY FUND
[SERIES]
[NUMBER] 15
[NAME] PORTICO INTERNATIONAL EQUITY FUND - RETAIL SERIES
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1996
[PERIOD-START] NOV-01-1995
[PERIOD-END] OCT-31-1996
[INVESTMENTS-AT-COST] 47,028
[INVESTMENTS-AT-VALUE] 46,765
[RECEIVABLES] 80
[ASSETS-OTHER] 238
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 47,083
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 132
[TOTAL-LIABILITIES] 132
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 46,013
[SHARES-COMMON-STOCK] 186
[SHARES-COMMON-PRIOR] 85
[ACCUMULATED-NII-CURRENT] 207
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 994
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (264)
[NET-ASSETS] 46,951
[DIVIDEND-INCOME] 833
[INTEREST-INCOME] 69
[OTHER-INCOME] 2
[EXPENSES-NET] 645
[NET-INVESTMENT-INCOME] 259
[REALIZED-GAINS-CURRENT] 973
[APPREC-INCREASE-CURRENT] 1,579
[NET-CHANGE-FROM-OPS] 281
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 6
[DISTRIBUTIONS-OF-GAINS] 34
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 118
[NUMBER-OF-SHARES-REDEEMED] 19
[SHARES-REINVESTED] 2
[NET-CHANGE-IN-ASSETS] 14,131
[ACCUMULATED-NII-PRIOR] 156
[ACCUMULATED-GAINS-PRIOR] 666
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 635
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,007
[AVERAGE-NET-ASSETS] 42,483
[PER-SHARE-NAV-BEGIN] 19.15
[PER-SHARE-NII] 0.07
[PER-SHARE-GAIN-APPREC] 1.43
[PER-SHARE-DIVIDEND] 0.07
[PER-SHARE-DISTRIBUTIONS] 0.37
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 20.21
[EXPENSE-RATIO] 1.75
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[CIK] 0000824612
[NAME] PORTICO INTERNATIONAL EQUITY FUND
[SERIES]
[NUMBER] 15
[NAME] PORTICO INTERNATIONAL EQUITY FUND - INSTITUTIONAL SERIES
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1996
[PERIOD-START] NOV-01-1995
[PERIOD-END] OCT-31-1996
[INVESTMENTS-AT-COST] 47,028
[INVESTMENTS-AT-VALUE] 46,765
[RECEIVABLES] 80
[ASSETS-OTHER] 238
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 47,083
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 132
[TOTAL-LIABILITIES] 132
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 46,013
[SHARES-COMMON-STOCK] 2,130
[SHARES-COMMON-PRIOR] 1,625
[ACCUMULATED-NII-CURRENT] 207
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 994
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (264)
[NET-ASSETS] 46,951
[DIVIDEND-INCOME] 833
[INTEREST-INCOME] 69
[OTHER-INCOME] 2
[EXPENSES-NET] 645
[NET-INVESTMENT-INCOME] 259
[REALIZED-GAINS-CURRENT] 973
[APPREC-INCREASE-CURRENT] 1,579
[NET-CHANGE-FROM-OPS] 281
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 174
[DISTRIBUTIONS-OF-GAINS] 637
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 756
[NUMBER-OF-SHARES-REDEEMED] 291
[SHARES-REINVESTED] 37
[NET-CHANGE-IN-ASSETS] 14,131
[ACCUMULATED-NII-PRIOR] 156
[ACCUMULATED-GAINS-PRIOR] 666
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 635
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,007
[AVERAGE-NET-ASSETS] 42,483
[PER-SHARE-NAV-BEGIN] 19.19
[PER-SHARE-NII] 0.11
[PER-SHARE-GAIN-APPREC] 1.44
[PER-SHARE-DIVIDEND] 0.10
[PER-SHARE-DISTRIBUTIONS] 0.37
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 20.27
[EXPENSE-RATIO] 1.50
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[CIK] 0000824612
[NAME] PORTICO MICROCAP FUND
[SERIES]
[NUMBER] 16
[NAME] PORTICO MICROCAP FUND - RETAIL SERIES
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 4-MOS
[FISCAL-YEAR-END] OCT-31-1996
[PERIOD-START] JUL-01-1996
[PERIOD-END] OCT-31-1996
[INVESTMENTS-AT-COST] 63,366
[INVESTMENTS-AT-VALUE] 75,929
[RECEIVABLES] 593
[ASSETS-OTHER] 31
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 76,553
[PAYABLE-FOR-SECURITIES] 780
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 132
[TOTAL-LIABILITIES] 912
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 50,508
[SHARES-COMMON-STOCK] 574
[SHARES-COMMON-PRIOR] 586
[ACCUMULATED-NII-CURRENT] (1)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 12,571
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 12,563
[NET-ASSETS] 75,641
[DIVIDEND-INCOME] 6
[INTEREST-INCOME] 61
[OTHER-INCOME] 0
[EXPENSES-NET] 419
[NET-INVESTMENT-INCOME] (352)
[REALIZED-GAINS-CURRENT] 5,738
[APPREC-INCREASE-CURRENT] (1,894)
[NET-CHANGE-FROM-OPS] 3,492
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 2
[NUMBER-OF-SHARES-REDEEMED] 14
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 3,010
[ACCUMULATED-NII-PRIOR] (262)
[ACCUMULATED-GAINS-PRIOR] 7,446
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 356
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 431
[AVERAGE-NET-ASSETS] 62,987
[PER-SHARE-NAV-BEGIN] 15.42
[PER-SHARE-NII] (0.08)
[PER-SHARE-GAIN-APPREC] 0.82
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 16.16
[EXPENSE-RATIO] 1.97
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[CIK] 0000824612
[NAME] PORTICO MICROCAP FUND
[SERIES]
[NUMBER] 16
[NAME] PORTICO MICROCAP FUND - INSTITUTIONAL SERIES
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 4-MOS
[FISCAL-YEAR-END] OCT-31-1996
[PERIOD-START] JUL-01-1996
[PERIOD-END] OCT-31-1996
[INVESTMENTS-AT-COST] 63,366
[INVESTMENTS-AT-VALUE] 75,929
[RECEIVABLES] 593
[ASSETS-OTHER] 31
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 76,553
[PAYABLE-FOR-SECURITIES] 780
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 132
[TOTAL-LIABILITIES] 912
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 50,508
[SHARES-COMMON-STOCK] 4,096
[SHARES-COMMON-PRIOR] 4,117
[ACCUMULATED-NII-CURRENT] (1)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 12,571
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 12,563
[NET-ASSETS] 75,641
[DIVIDEND-INCOME] 6
[INTEREST-INCOME] 61
[OTHER-INCOME] 0
[EXPENSES-NET] 419
[NET-INVESTMENT-INCOME] (352)
[REALIZED-GAINS-CURRENT] 5,738
[APPREC-INCREASE-CURRENT] (1,894)
[NET-CHANGE-FROM-OPS] 3,492
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 3
[NUMBER-OF-SHARES-REDEEMED] 24
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 3,010
[ACCUMULATED-NII-PRIOR] (262)
[ACCUMULATED-GAINS-PRIOR] 7,446
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 356
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 431
[AVERAGE-NET-ASSETS] 62,987
[PER-SHARE-NAV-BEGIN] 15.45
[PER-SHARE-NII] (0.07)
[PER-SHARE-GAIN-APPREC] 0.82
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 16.20
[EXPENSE-RATIO] 1.72
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
- -------------------------------------------------------------------------------
