OCTOBER 31, 1997
ANNUAL
REPORT
PORTICO
FUNDS
INSTITUTIONAL
MONEY MARKET FUND
NOTICE TO INVESTORS
- -- Shares of Portico Funds:
- ARE NOT INSURED BY THE FDIC, the US Government or any other governmental
agency;
- are not bank deposits or obligations of or guaranteed by Firstar Bank, its
parent company or its affiliates;
- are subject to investment risks, including possible loss of principal; and
- are offered by B.C. Ziegler and Company, member NASD, SIPC, and an
independent third-party distributor.
- -- Firstar Bank affiliates serve as investment adviser, custodian, transfer
agent, administrator, and accounting services agent and receive compensation
for such services as disclosed in the current prospectus.
- -- There can be no assurance that the money market fund will be able to
maintain a stable net asset value of $1.00 per share.
TABLE OF CONTENTS
Page(s)
SHAREOWNER LETTER....................................................1
PORTICO INSTITUTIONAL MONEY MARKET FUND YIELD COMPARISONS............2
LOOKING AHEAD - THE FORECAST.........................................2
STATEMENT OF ASSETS AND LIABILITIES..................................3
STATEMENT OF OPERATIONS..............................................4
STATEMENT OF CHANGES IN NET ASSETS...................................4
FINANCIAL HIGHLIGHTS.................................................5
SCHEDULE OF INVESTMENTS.............................................6-7
NOTES TO THE FINANCIAL STATEMENTS....................................8
REPORT OF INDEPENDENT ACCOUNTANTS....................................9
December 1997
DEAR SHAREOWNER:
INVESTMENT REVIEW
As volatility continued in the financial markets over the past fiscal year,
Portico Institutional Money Market Fund offered a safe haven of principal
stability, superior credit quality and attractive inflation-adjusted returns.
Despite falling interest rates on long-term fixed-income securities over the
last half of the fiscal year, short-term interest rates remained remarkably
stable. After adjusting upward to reflect the Federal Reserve's 0.25% increase
in the Fed Funds rate to 5.5% in March, 30-day commercial paper rates remained
virtually unchanged between May 31 and October 31, 1997. With continuing
moderate growth in the economy and low levels of inflation, the Fed has kept
interest rates steady. Higher corporate profits driven by productivity gains
have also led to a general improvement in credit quality.
Portico Institutional Money Market Fund is managed with quality and safety of
principal as our primary goals. All securities purchased by the Funds must meet
our own internal high standards for representing minimal credit risk as well as
the strict guidelines set by the SEC. Our credit research team closely monitors
all investments to ensure quality standards are met.
7-DAY YIELD*
PERIOD ENDED OCTOBER 31, 1997
INSTITUTIONAL MONEY MARKET FUND
--------------------------------------
CURRENT EFFECTIVE
5.31% 5.45%
* After fee waivers. Had fees not been waived, the current and effective yields
would have been 4.98% and 5.12%, respectively. Reflects past performance; yields
will vary. An investment in Portico Institutional Money Market Fund is neither
insured nor guaranteed by the U.S. Government nor is there any assurance the
Fund will be able to maintain a stable net asset value of $1.00 per share.
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.
YIELD COMPARISONS*
AVERAGE
MONTHLY PORTICO INSTITUTIONAL IBC'S INSTITUTIONAL
RATES MONEY MARKET FUND AVERAGE/TM / ALL TAXABLE
1997
October 5.29% 5.20%
September 5.28% 5.21%
August 5.31% 5.23%
July 5.35% 5.21%
June 5.36% 5.20%
May 5.29% 5.17%
April 5.17% 5.14%
March 5.08% 5.04%
February 5.09% 5.01%
January 5.12% 5.03%
1996
December 5.13% 5.04%
November 5.14% 5.04%
We compare the Portico Institutional Money Market Fund to the IBC's
Institutional AverageTM/All Taxable, which is a composite of professionally
managed money market investment funds with similar objectives.
* After fee waivers. Had fees not been waived, performance would have been
reduced. Reflects past performance; yields will vary. An investment in Portico
Institutional Money Market Fund is neither insured nor guaranteed by the U.S.
government nor is there any assurance the Fund will be able to maintain a stable
net asset value of $1.00 per share.
LOOKING AHEAD - THE FORECAST
Looking ahead, we expect continued above-average market volatility in both the
stock and bond markets, moderate economic growth, low levels of inflation in the
2% range, and attractive real, or inflation-adjusted, rates of returns. We
anticipate maintaining at least an average maturity in the Portico money market
funds comparable to their respective industry benchmarks. As always, our goal
is to maintain the high credit quality of the Fund -- as such, we will continue
to monitor corporate activity closely.
We continue to pride ourselves on meeting three important objectives for our
money market shareowners: PRESERVATION OF PRINCIPAL, LIQUIDITY AND COMPETITIVE
INVESTMENT INCOME. We believe these principles, combined with a disciplined
approach to quality, continue to be appropriate for our money market investors.
We appreciate your continued confidence in the Portico Institutional Money
Market Fund and look forward to working with you in the future.
Jane T. Keelan
Carl J. Smith
Margaret Radske
Portfolio Managers
Firstar Investment Research & Management Company, LLC
INSTITUTIONAL MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
OCTOBER 31, 1997
ASSETS:
Investments, at amortized cost $1,205,693
Interest receivable 1,591
Other 3
----------
Total Assets 1,207,287
----------
LIABILITIES:
Dividends payable 5,384
Payable to affiliates 420
Accrued expenses and other liabilities 142
----------
Total Liabilities 5,946
----------
NET ASSETS $1,201,341
==========
CAPITAL STOCK, $.0001 par value
Authorized 5,000,000
Issued and outstanding 1,201,341
NET ASSET VALUE,
REDEMPTION PRICE AND
OFFERING PRICE PER SHARE $1.00
=====
See notes to the financial statements.
INSTITUTIONAL MONEY MARKET FUND
STATEMENT OF OPERATIONS
(AMOUNTS IN THOUSANDS)
YEAR ENDED OCTOBER 31, 1997
INVESTMENT INCOME:
Interest income $53,601
----------
EXPENSES:
Investment advisory fees 4,804
Administration fees 1,069
Custody fees 171
Federal and state registration fees 104
Shareowner servicing and accounting costs 80
Professional fees 13
Reports to shareowners 14
Directors' fees and expenses 5
Other 19
----------
Total expenses before waiver 6,279
Less: Waiver of expenses (2,916)
----------
Net Expenses 3,363
----------
NET INVESTMENT INCOME $50,238
==========
See notes to the financial statements.
STATEMENT OF CHANGES IN NET ASSETS
(AMOUNTS IN THOUSANDS)
Year ended October 31,
----------------------
1997 1996
---- ----
OPERATIONS:
Net investment income $ 50,238 $ 40,269
---------- ----------
Increase in net assets resulting
from operations 50,238 40,269
---------- ----------
CAPITAL SHARE
TRANSACTIONS:
Shares sold 2,907,787 2,484,810
Shares issued to owners in
reinvestment of dividends 6,088 6,595
Shares redeemed (2,462,585) (2,457,920)
---------- ----------
Net increase 451,290 33,485
---------- ----------
DIVIDENDS PAID FROM:
Net investment income (50,238) (40,269)
---------- ----------
TOTAL INCREASE
IN NET ASSETS 451,290 33,485
NET ASSETS:
Beginning of year 750,051 716,566
---------- ----------
End of year $1,201,341 $ 750,051
========== ==========
See notes to the financial statements.
INSTITUTIONAL MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
Year ended October 31,
--------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Per Share Data:
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment
operations:
Net investment income 0.05 0.05 0.06 0.04 0.03
------ ------ ------ ------ ------
Total from investment
operations 0.05 0.05 0.06 0.04 0.03
------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income (0.05) (0.05) (0.06) (0.04) (0.03)
------ ------ ------ ------ ------
Total distributions (0.05) (0.05) (0.06) (0.04) (0.03)
------ ------ ------ ------ ------
Net asset value, end
of period $1.00 $1.00 $1.00 $1.00 $1.00
====== ====== ====== ====== ======
Total Return 5.38% 5.32% 5.77% 3.65% 2.92%
Supplemental data and ratios:
Net assets, in thousands,
end of period $1,201,341 $750,051 $716,566 $754,636 $588,301
Ratio of net expenses
to average
net assets 0.35% 0.35% 0.35% 0.37% 0.38%
Ratio of net investment
income to average
net assets 5.23% 5.19% 5.63% 3.64% 2.87%
See notes to the financial statements.
INSTITUTIONAL MONEY MARKET FUND
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1997
Principal Amortized
Amount Cost
(in thousands) (in thousands)
------------- -------------
COMMERCIAL PAPER 84.8%
ASSET BACKED 4.1%
Ciesco L.P.,
$15,000 5.51%, 11/19/97 $14,959
Corporate Asset Funding Co., Inc.,
34,495 5.70%, 11/03/97 34,484
----------
49,443
----------
AUTO & TRUCKS 4.8%
Ford Credit Europe PLC,
15,000 5.54%, 11/06/97 14,988
13,500 5.61%, 1/09/98 13,355
15,000 5.61%, 1/20/98 14,813
15,000 5.51%, 1/22/98 14,812
----------
57,968
----------
BANKING - DOMESTIC 2.5%
Barclays US Funding Corporation,
15,000 5.51%, 11/12/97 14,975
15,000 5.52%, 12/26/97 14,873
----------
29,848
----------
BANKING - FOREIGN 5.0%
Deutsche Bank Financial, Inc.,
25,000 5.57%, 11/05/97 24,985
Dresdner US Financial,
15,000 5.51%, 11/26/97 14,943
20,000 5.51%, 12/12/97 19,874
----------
59,802
----------
BASIC INDUSTRY 5.1%
Monsanto Company,
20,000 5.51%, 11/14/97 19,960
15,500 5.50%, 12/11/97 15,405
16,000 5.55%, 2/11/98 15,749
RTZ America, Inc.,
10,400 5.50%, 11/04/97 10,395
----------
61,509
----------
CAPITAL GOODS 1.3%
Johnson Controls, Inc.,
15,000 5.52%, 11/19/97 14,959
----------
COMMUNICATION 8.9%
GTE Funding, Inc.,
15,000 5.52%, 11/05/97 14,991
19,000 5.57%, 11/10/97 18,974
10,000 5.60%, 11/24/97 9,964
15,000 5.62%, 12/03/97 14,925
MCI Communications Corporation,
7,000 5.57%, 11/07/97 6,993
10,000 5.52%, 11/13/97 9,982
Principal Amortized
Amount Cost
(in thousands) (in thousands)
-------------- --------------
COMMUNICATION 8.9% (CONT.)
MCI Communications Corporation (cont.),
$17,000 5.60%, 12/15/97 $ 16,884
15,000 5.69%, 1/14/98 14,824
----------
107,537
----------
CONGLOMERATE 4.6%
Mitsubishi International Corporation,
25,000 5.65%, 11/03/97 24,992
15,000 5.52%, 11/04/97 14,993
15,000 5.50%, 11/07/97 14,986
----------
54,971
----------
CONSUMER CYCLICAL 1.7%
General Electric Company,
20,000 5.53%, 11/04/97 19,991
----------
CONSUMER STAPLES 2.7%
Hitachi America, Ltd.,
10,000 5.52%, 12/22/97 9,922
8,000 5.60%, 1/29/98 7,889
15,000 5.57%, 3/18/98 14,682
----------
32,493
----------
ELECTRONICS 2.3%
Panasonic Finance, Inc.,
12,585 5.68%, 11/03/97 12,581
15,000 5.55%, 3/06/98 14,711
----------
27,292
----------
ENERGY 2.1%
Petrofina Delaware, Inc.,
10,000 5.50%, 11/06/97 9,992
15,000 5.53%, 12/09/97 14,913
----------
24,905
----------
FINANCE 12.2%
ABB Treasury Center (U.S.A.), Inc.,
15,000 5.51%, 11/24/97 14,947
Avco Financial Services, Inc.,
9,500 5.67%, 11/03/97 9,497
Beneficial Corporation,
15,000 5.60%, 1/16/98 14,823
CIT Group Holdings, Inc.,
15,000 5.50%, 11/17/97 14,963
15,000 5.51%, 12/16/97 14,897
10,000 5.53%, 12/18/97 9,928
Household Finance Corporation,
15,000 5.50%, 11/03/97 14,995
National Rural Utilities CFC,
10,000 5.51%, 11/06/97 9,992
10,000 5.51%, 12/10/97 9,940
10,000 5.54%, 2/19/98 9,831
See notes to the financial statements.
INSTITUTIONAL MONEY MARKET FUND
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1997
Principal Amortized
Amount Cost
(in thousands) (in thousands)
-------------- --------------
FINANCE 12.2% (CONT.)
PACCAR Financial Corporation,
$ 8,000 5.50%, 11/07/97 $ 7,993
Swedish Export Credit Corporation,
15,000 5.55%, 1/15/98 14,827
----------
146,633
----------
FINANCE - SERVICES 8.8%
Goldman Sachs Group, L.P.,
20,000 5.60%, 11/07/97 19,981
15,000 5.50%, 11/25/97 14,945
Merrill Lynch & Company, Inc.,
15,000 5.53%, 11/18/97 14,961
15,000 5.57%, 1/12/98 14,833
15,000 5.61%, 1/27/98 14,796
15,000 5.53%, 2/24/98 14,735
Morgan Stanley, Dean Witter, Discover & Co.,
12,000 5.50%, 12/17/97 11,916
----------
106,167
----------
INSURANCE 8.3%
American Family Financial Services, Inc.,
14,000 5.50%, 11/05/97 13,991
9,400 5.51%, 11/21/97 9,371
15,615 5.52%, 12/05/97 15,534
Hartford Financial Services,
9,293 5.58%, 11/13/97 9,276
9,762 5.57%, 11/14/97 9,742
John Hancock Capital Corporation,
12,500 5.52%, 12/30/97 12,387
Prudential Funding Corporation,
15,000 5.53%, 11/06/97 14,989
15,000 5.54%, 1/23/98 14,808
----------
100,098
----------
MISCELLANEOUS 1.6%
International Lease Finance Corporation,
18,860 5.50%, 11/20/97 18,805
----------
PRINTING AND PUBLISHING 2.5%
McGraw-Hill, Cos., Inc.,
15,000 5.51%, 12/23/97 14,881
Reed Elsevier, Inc.,
15,000 5.50%, 12/02/97 14,929
----------
29,810
----------
RETAIL 3.3%
J.C. Penney Funding Corporation,
15,000 5.52%, 11/10/97 14,979
10,000 5.50%, 12/01/97 9,954
15,000 5.50%, 12/04/97 14,924
----------
39,857
----------
Principal Amortized
Amount Cost
(in thousands) (in thousands)
--------------- ---------------
UTILITIES - ELECTRIC 1.0%
Pacific Gas & Electric Company,
$11,836 5.60%, 11/20/97 $ 11,801
-----------
UTILITIES - GAS 2.0%
Southern California Gas Company,
15,000 5.50%, 12/08/97 14,915
10,000 5.50%, 12/10/97 9,941
-----------
24,856
-----------
Total Commercial Paper 1,018,745
-----------
Funding Agreements 1.9%
Travelers Insurance Company*
23,000 5.77%, 6/30/98 23,000
-----------
Total Funding Agreements 23,000
-----------
U.S. Treasury Notes 1.7%
20,000 9.00%, 5/15/98 20,349
-----------
Total U.S. Treasuries 20,349
-----------
VARIABLE RATE DEMAND NOTES 3.7%
44,000 WPL Holdings Demand Note 44,000
-----------
Total Variable Rate Demand Notes 44,000
-----------
Number
of Shares
(in thousands)
---------------
INVESTMENT COMPANIES 8.3%
40,864 Financial Square Prime Obligation Fund 40,864
58,735 Short-Term Investments Co.
Liquid Assets Portfolio 58,735
-----------
Total Investment Companies 99,599
-----------
Total Investments 100.4% 1,205,693
-----------
Liabilities, less Other Assets (0.4)% (4,352)
-----------
NET ASSETS 100.0% $1,201,341
==========
* Variable rate security
See notes to the financial statements.
INSTITUTIONAL MONEY MARKET FUND
NOTES TO THE FINANCIAL STATEMENTS
1. ORGANIZATION
Portico Funds, Inc. (the "Company") was incorporated on February 15, 1988,
as a Wisconsin Corporation and is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended. The
Institutional Money Market Fund (the "Fund") which commenced operations on
April 26, 1991, is a separate, diversified investment portfolio of the Company.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in preparation of its financial statements. These policies
are in conformity with generally accepted accounting principles.
a) Investment Valuation - The securities are valued on the basis of amortized
cost for financial reporting purposes and federal income tax purposes, which
approximates market value. Variable rate demand notes and funding agreements are
valued at cost which approximates market value.
b) Federal Income Taxes - No provision for federal income taxes has been made
since the Fund has complied with the provisions of the Internal Revenue Code
available to regulated investment companies and intends to continue to so comply
in future years.
c) Expenses - The Fund is charged for those expenses that are directly
attributable to it, such as advisory, administration, service organization fees
and certain shareowner service fees. Expenses that are not directly attributable
to a portfolio are typically allocated among the Company's portfolios in
proportion to their respective net assets, number of shareowner accounts or net
sales, where applicable.
d) Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
e) Distributions to Shareowners - Dividends from net investment income are
declared daily and paid monthly. Distributions of net realized capital gains, if
any, will be declared at least annually.
f) Other - The Fund recognizes interest income on the accrual basis. Discounts
and premiums are amortized over the life of the respective security. Investment
and shareowner transactions are recorded on trade date. Realized gains and
losses from investment transactions are reported on an identified cost basis
which is the same basis the Fund uses for federal income tax purposes.
Transactions in capital shares at $1.00 per share are shown in the Statement of
Changes in Net Assets. Generally accepted accounting principles require that
permanent financial reporting and tax differences be reclassified to capital
stock.
3. INVESTMENT ADVISORY AND OTHER AGREEMENTS
The Fund has entered into an Investment Advisory Agreement with Firstar
Investment Research & Management Company, LLC ("FIRMCO"). FIRMCO is a
subsidiary of Firstar Corporation, a publicly held bank holding company.
Pursuant to its Advisory Agreement with the Fund, FIRMCO is entitled to receive
a fee, calculated daily and payable monthly, at the annual rate of 0.50% of the
Fund's first $2 billion of average daily net assets, and 0.40% of the Fund's
average daily net assets in excess of $2 billion. For the year ended October 31,
1997, FIRMCO voluntarily waived $2,046 of its advisory fees, in thousands, for
the Fund.
Firstar Trust Company, an affiliate of FIRMCO, serves as custodian, transfer
agent and accounting services agent for the Fund.
The Company has entered into a Co-Administration Agreement with B.C. Ziegler
and Company and Firstar Trust Company (the "Co-Administrators") for certain
administrative services. Pursuant to the Co-Administration Agreement with the
Company, the Co-Administrators are entitled to receive a fee, computed daily and
payable monthly, at the annual rate of 0.125% of the Company's first $2 billion
of average aggregate daily net assets, plus 0.10% of the Company's average
aggregate daily net assets in excess of $2 billion. For the year ended October
31, 1997, $870 of administration fees, in thousands, were voluntarily waived for
the Fund.
Each Director of the Company who is not affiliated with FIRMCO receives an
annual fee from the Company for service as a Director and is eligible to
participate in a deferred compensation plan with respect to these fees.
Participants in the plan may designate their deferred Director's fees as if
invested in any one of the Portico Funds (with the exception of the MicroCap
Fund) or in 90-day U.S. Treasury bills. The value of each Director's deferred
compensation account will increase or decrease as if it were invested in shares
of the selected Portico Funds or 90-day U.S. Treasury bills. The Fund maintains
its proportionate share of the Company's liability for deferred fees.
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF THE
PORTICO INSTITUTIONAL MONEY MARKET FUND
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Portico Institutional Money
Market Fund (one of the portfolios of Portico Funds, Inc. (the "Fund")) at
October 31, 1997, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended and
the financial highlights for each of the five years in the period then ended,
all in conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at October
31, 1997 by correspondence with the custodian, provide a reasonable basis for
the opinion expressed above.
/s/Price Waterhouse LLP
Milwaukee, Wisconsin
December 9, 1997
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- --PORTICO FUNDS ARE AVAILABLE THROUGH:
-- the Portico Funds Center,
-- Investment Specialists who are registered representatives of Firstar
Investment Services, Inc., a registered broker/dealer, NASD and SIPC
member,
-- and through selected shareholder organizations.
This report is authorized for distribution only when preceded or accompanied by
a current prospectus.
TO OPEN AN ACCOUNT OR
REQUEST INFORMATION
1-800-982-8909
1-414-287-3710
FOR ACCOUNT BALANCES AND
INVESTOR SERVICES
1-800-228-1024
1-414-287-3808
PORTICO FUNDS CENTER
615 East Michigan Street
P.O. Box 3011
Milwaukee, WI 53201-3011
Form #40-0195 12/97
OCTOBER 31, 1997
ANNUAL
REPORT
PORTICO
FUNDS
MONEY MARKET
FUND
U.S. TREASURY
MONEY MARKET FUND
U.S. GOVERNMENT
MONEY MARKET FUND
TAX-EXEMPT
MONEY MARKET FUND
NOTICE TO INVESTORS
- -- Shares of Portico Funds:
- ARE NOT INSURED BY THE FDIC, the US Government or any other governmental
agency;
- are not bank deposits or obligations of or guaranteed by Firstar Bank,
its parent company or its affiliates;
- are subject to investment risks, including possible loss of principal;
and
- are offered by B.C. Ziegler and Company, member NASD, SIPC, and an
independent third-party distributor.
- -- There can be no assurance that the money market funds will be able to
maintain a stable net asset value of $1.00 per share.
- -- Firstar Bank affiliates serve as investment adviser, custodian, transfer
agent, administrator, and accounting services agent and receive
compensation for such services as disclosed in the current prospectus.
TABLE OF CONTENTS
Page(s)
SHAREOWNER LETTER...................................................1
PORTICO MONEY MARKET FUNDS YIELD COMPARISONS........................2
LOOKING AHEAD - THE FORECAST........................................2
STATEMENT OF ASSETS AND LIABILITIES.................................3
STATEMENT OF OPERATIONS.............................................4
STATEMENT OF CHANGES IN NET ASSETS..................................5
FINANCIAL HIGHLIGHTS...............................................6-7
SCHEDULE OF INVESTMENTS............................................8-13
NOTES TO THE FINANCIAL STATEMENTS.................................14-15
REPORT OF INDEPENDENT ACCOUNTANTS...................................16
December 1997
DEAR SHAREOWNER:
INVESTMENT REVIEW
As volatility continued in the financial markets over the past fiscal year, the
money market funds offered a safe haven of principal stability, superior credit
quality and attractive inflation-adjusted returns. Despite falling interest
rates on long-term fixed-income securities over the last half of the fiscal
year, short-term interest rates remained remarkably stable. After adjusting
upward to reflect the Federal Reserve's 0.25% increase in the Fed Funds rate to
5.5% in March, 30-day commercial paper rates remained virtually unchanged
between May 31 and October 31, 1997. With continuing moderate growth in the
economy and low levels of inflation, the Fed has kept interest rates steady.
Higher corporate profits driven by productivity gains have also led to a general
improvement in credit quality.
Portico money market funds are managed with quality and safety of principal as
our primary goals. All securities purchased by the Funds must meet our own
internal high standards for representing minimal credit risk as well as the
strict guidelines set by the SEC. Our credit research team closely monitors all
investments to ensure quality standards are met.
PORTICO MONEY MARKET FUNDS 7-DAY YIELDS*
PERIOD ENDED OCTOBER 31, 1997
MONEY MARKET FUND
-----------------------------
CURRENT EFFECTIVE
5.07% 5.19%
U.S. TREASURY
MONEY MARKET FUND
-----------------------------
CURRENT EFFECTIVE
4.68% 4.79%
U.S. GOVERNMENT
MONEY MARKET FUND
-----------------------------
CURRENT EFFECTIVE
4.94% 5.07%
TAX-EXEMPT
MONEY MARKET FUND
-----------------------------
CURRENT EFFECTIVE
3.07% 3.12%
* After fee waivers. Had fees not been waived, current and effective yields
would have been 4.70% and 4.82% for the Money Market Fund; 4.54% and 4.65% for
the U.S. Treasury Money Market Fund; 4.85% and 4.98% for the U.S. Government
Money Market Fund; and 2.92% and 2.97% for the Tax-Exempt Money Market Fund,
respectively. Reflects past performance; yields will vary. 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.
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.
PORTICO MONEY MARKET FUNDS YIELD COMPARISONS*
AVERAGE
MONTHLY IBC'S PORTICO IBC'S Portico
RATES PORTICO MONEY FUND U.S. TREASURY MONEY FUND U.S. GOV'T.
MONEY AVERAGE TM/ MONEY AVERAGE TM/ MONEY
MARKET ALL TAXABLE MARKET U.S. TREASURY MARKET
- -----------------------------------------------------------------------------
1997
October 5.06% 5.01% 4.64% 4.68% 4.95%
September 5.06% 5.02% 4.75% 4.74% 4.91%
August 5.07% 5.04% 4.80% 4.76% 4.91%
July 5.10% 5.02% 4.68% 4.72% 4.94%
June 5.11% 5.02% 4.68% 4.71% 4.94%
May 5.05% 4.98% 4.67% 4.73% 4.91%
April 4.94% 4.94% 4.60% 4.70% 4.85%
March 4.84% 4.84% 4.60% 4.61% 4.76%
February 4.84% 4.82% 4.55% 4.57% 4.75%
January 4.87% 4.84% 4.62% 4.56% 4.75%
1996
December 4.86% 4.85% 4.65% 4.58% 4.76%
November 4.87% 4.84% 4.69% 4.61% 4.81%
PORTICO MONEY MARKET FUNDS YIELD COMPARISONS* (CONTINUED)
AVERAGE IBC'S
MONTHLY MONEY
RATES PORTICO FUND
PORTICO TAX-EXEMPT AVERAGE TIM/
IBC'S TAX- IBC'S MONEY ALL TAX-FREE
MONEY FUND EXEMPT MONEY FUND MARKET TAX TAX
AVERAGE TM/ MONEY AVERAGE TM/ EQUIVALENT EQUIVALENT
GOV'T. MARKET ALL TAX-FREE YIELD YIELD**
- ------------------------------------------------------------------------------
1997
October 4.83% 3.08% 3.14% 4.81% 4.91%
September 4.84% 3.12% 3.15% 4.88% 4.92%
August 4.85% 2.90% 2.96% 4.53% 4.63%
July 4.82% 3.12% 3.08% 4.88% 4.81%
June 4.82% 3.30% 3.28% 5.16% 5.13%
May 4.78% 3.35% 3.37% 5.23% 5.27%
April 4.75% 3.12% 3.17% 4.88% 4.95%
March 4.68% 2.76% 2.76% 4.31% 4.31%
February 4.64% 2.87% 2.87% 4.48% 4.48%
January 4.66% 2.89% 2.90% 4.52% 4.53%
1996
December 4.67% 3.14% 3.07% 4.91% 4.80%
November 4.68% 3.02% 2.98% 4.72% 4.66%
We compare our Funds to the IBC's Money Fund Averages, which are composites of
professionally managed money market investment funds with similar objectives.
* After fee waivers. Had fees not been waived, performance would be reduced.
Reflects past performance; yields will vary. 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.
** Assumes a 36% tax bracket.
LOOKING AHEAD - THE FORECAST
Looking ahead, we expect continued above-average market volatility in both the
stock and bond markets, moderate economic growth, low levels of inflation in the
2% range, and attractive real, or inflation-adjusted, rates of returns. We
anticipate maintaining at least an average maturity in the Portico money market
funds comparable to their respective industry benchmarks. As always, our goal is
to maintain the high credit quality of our money market funds -- as such, we
will continue to monitor corporate activity closely.
We continue to pride ourselves on meeting three important objectives for our
money market shareowners: PRESERVATION OF PRINCIPAL, LIQUIDITY AND COMPETITIVE
INVESTMENT INCOME. We believe these principles, combined with a disciplined
approach to quality, continue to be appropriate for our money market investors.
We appreciate your continued confidence in the Portico money market funds and
look forward to working with you in the future.
Jane T. Keelan
Carl J. Smith
Margaret Radske
Portfolio Managers
Firstar Investment Research & Management Company, LLC
STATEMENT OF ASSETS AND LIABILITIES
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
OCTOBER 31, 1997
U.S. U.S.
TREASURY GOVERNMENT TAX-EXEMPT
MONEY MONEY MONEY MONEY
MARKET FUND MARKET FUND MARKET FUND MARKET FUND
----------- ----------- ----------- -----------
ASSETS:
Investments, at
amortized cost $262,187 $77,955 $199,141 $108,069
Interest receivable 94 947 454 940
Capital shares sold 1,425 - - -
Other 11 7 1 10
--------- --------- --------- ---------
Total Assets 263,717 78,909 199,596 109,019
--------- --------- --------- ---------
LIABILITIES:
Capital shares
redeemed 1,446 - - -
Dividends payable 1,106 335 835 281
Payable to affiliates 126 64 148 70
Accrued expenses and
other liabilities 22 32 21 29
--------- --------- --------- ---------
Total Liabilities 2,700 431 1,004 380
--------- --------- --------- ---------
NET ASSETS $261,017 $78,478 $198,592 $108,639
========= ========= ========= =========
CAPITAL STOCK, $.0001
par value
Authorized 5,000,000 5,000,000 5,000,000 5,000,000
Issued and
outstanding 261,017 78,478 198,592 108,639
NET ASSET VALUE,
REDEMPTION PRICE
AND OFFERING PRICE
PER SHARE $1.00 $1.00 $1.00 $1.00
===== ===== ===== =====
See notes to the financial statements.
STATEMENT OF OPERATIONS
(AMOUNTS IN THOUSANDS)
YEAR ENDED OCTOBER 31, 1997 U.S. U.S.
TREASURY GOVERNMENT TAX-EXEMPT
MONEY MONEY MONEY MONEY
MARKET FUND MARKET FUND MARKET FUND MARKET FUND
----------- ----------- ----------- ----------
INVESTMENT INCOME:
Interest income $13,078 $3,514 $10,687 $3,343
--------- --------- --------- ---------
EXPENSES:
Investment advisory
fees 1,171 333 984 457
Administration fees 261 74 219 102
Service organization
fees 61 - - -
Custody fees 47 15 44 20
Shareowner servicing
and accounting costs 266 47 71 54
Professional fees 18 21 19 19
Reports to shareowners 89 7 15 7
Federal and state
registration fees 41 13 11 22
Directors' fees and
expenses 5 5 5 5
Other 8 2 6 -
--------- --------- --------- ---------
Total expenses
before waiver 1,967 517 1,374 686
Less: Waiver of
expenses (559) (117) (192) (138)
--------- --------- --------- ---------
Net Expenses 1,408 400 1,182 548
--------- --------- --------- ---------
NET INVESTMENT INCOME $11,670 $3,114 $ 9,505 $2,795
========= ========= ========= =========
See notes to the financial statements.
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
(AMOUNTS IN THOUSANDS)
U.S. TREASURY U.S. GOVERNMENT TAX-EXEMPT
MONEY MARKET FUND MONEY MARKET FUND MONEY MARKET FUND MONEY MARKET FUND
----------------- ------------------ ----------------- -----------------
Year ended October 31, Year ended October 31, Year ended October 31, Year ended October 31,
---------------------- ---------------------- ---------------------- ----------------------
1997 1996 1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 11,670 $ 9,564 $ 3,114 $ 2,946 $ 9,505 $ 9,302 $ 2,795 $ 2,445
-------- -------- -------- -------- -------- -------- -------- --------
Increase in net assets
resulting from
operations 11,670 9,564 3,114 2,946 9,505 9,302 2,795 2,445
-------- -------- -------- -------- -------- -------- -------- --------
CAPITAL SHARE
TRANSACTIONS:
Shares sold 592,970 537,145 297,822 187,850 881,303 945,438 171,346 156,757
Shares issued to
owners in
reinvestment
of dividends 11,726 8,880 415 315 2,881 2,681 1,152 990
Shares redeemed (567,715) (494,250) (273,189) (199,390) (883,864) (912,853) (143,187) (162,503)
-------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease) 36,981 51,775 25,048 (11,225) 320 35,266 29,311 (4,756)
-------- -------- -------- -------- -------- -------- -------- --------
DIVIDENDS PAID FROM:
Net investment income (11,670) (9,564) (3,114) (2,946) (9,567) (9,302) (2,795) (2,445)
-------- -------- -------- -------- -------- -------- -------- --------
TOTAL INCREASE
(DECREASE) IN
NET ASSETS 36,981 51,775 25,048 (11,225) 258 35,266 29,311 (4,756)
NET ASSETS:
Beginning of year 224,036 172,261 53,430 64,655 198,334 163,068 79,328 84,084
-------- -------- -------- -------- -------- -------- -------- --------
End of year $261,017 $224,036 $ 78,478 $ 53,430 $198,592 $198,334 $108,639 $ 79,328
======== ======== ======== ======== ======== ======== ======== ========
See notes to the financial statements.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
U.S. TREASURY
MONEY MARKET FUND MONEY MARKET FUND
--------------------- ----------------------
Year ended October 31, Year ended October 31,
----------------------------------------------- ----------------------------------------------
1997 1996 1995 1994 1993 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data:
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment
operations:
Net investment income<F1> 0.05 0.05 0.05 0.03 0.03 0.05 0.05 0.05 0.03 0.03
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations 0.05 0.05 0.05 0.03 0.03 0.05 0.05 0.05 0.03 0.03
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income (0.05) (0.05) (0.05) (0.03) (0.03) (0.05) (0.05) (0.05) (0.03) (0.03)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions (0.05) (0.05) (0.05) (0.03) (0.03) (0.05) (0.05) (0.05) (0.03) (0.03)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total Return 5.12% 5.06% 5.51% 3.42% 2.71% 4.80% 4.80% 5.16% 3.20% 2.59%
Supplemental data
and ratios:
Net assets, in
thousands,
end of period $261,017 $224,036 $172,261 $165,018 $132,568 $78,478 $53,430 $64,655 $56,020 $40,744
Ratio of net expenses
to average net assets 0.60% 0.60% 0.60% 0.60% 0.60% 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment
income to average
net assets 4.98% 4.94% 5.36% 3.44% 2.67% 4.67% 4.70% 5.04% 3.14% 2.55%
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (continued)
U.S. GOVERNMENT TAX-EXEMPT
MONEY MARKET FUND MONEY MARKET FUND
--------------------- ----------------------
Year ended October 31, Year ended October 31,
----------------------------------------------- ----------------------------------------------
1997 1996 1995 1994 1993 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data:
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment
operations:
Net investment income<F1> 0.05 0.05 0.05 0.03 0.03 0.03 0.03 0.03 0.02 0.02
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations 0.05 0.05 0.05 0.03 0.03 0.03 0.03 0.03 0.02 0.02
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income (0.05) (0.05) (0.05) (0.03) (0.03) (0.03) (0.03) (0.03) (0.02) (0.02)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions (0.05) (0.05) (0.05) (0.03) (0.03) (0.03) (0.03) (0.03) (0.02) (0.02)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total Return 4.99% 4.96% 5.37% 3.35% 2.63% 3.12% 3.13% 3.42% 2.25% 2.17%
Supplemental data
and ratios:
Net assets, in
thousands,
end of period $198,592 $198,334 $163,068 $183,591 $203,165 $108,639 $79,328 $84,084 $70,436 $73,621
Ratio of net expenses
to average net assets 0.60% 0.60% 0.60% 0.60% 0.60% 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment
income to average
net assets 4.83% 4.84% 5.24% 3.29% 2.59% 3.06% 3.09% 3.36% 2.23% 2.12%
<FN>
<F1> For the Tax-Exempt Money Market Fund, substantially all investment income is exempt from Federal income tax.
See notes to the financial statements.
</TABLE>
MONEY MARKET FUND
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1997
Principal Amortized
Amount Cost
(in thousands) (in thousands)
- -------------- --------------
COMMERCIAL PAPER 93.5%
AGRICULTURAL PRODUCTS 1.2%
Golden Peanut Company,
$3,000 5.53%,12/16/97 $ 2,979
---------
ASSET BACKED SECURITY 1.9%
Ciesco L.P.,
5,000 5.50%, 12/04/97 4,975
---------
AUTOS & TRUCKS 3.8%
Ford Credit Europe PLC,
5,000 5.62%, 1/13/98 4,943
5,000 5.51%, 1/22/98 4,937
---------
9,880
---------
BANKING - DOMESTIC 3.8%
Barclays US Funding Corporation,
5,000 5.50%, 12/11/97 4,969
5,000 5.52%, 12/26/97 4,958
---------
9,927
---------
BANKING - FOREIGN 5.7%
Deutsche Bank Financial, Inc.,
5,000 5.52%, 12/23/97 4,960
Dresdner US Financial,
5,000 5.51%, 11/26/97 4,981
5,000 5.51%, 12/12/97 4,969
---------
14,910
---------
BASIC INDUSTRY 5.7%
Monsanto Company,
5,000 5.55%, 2/11/98 4,921
RTZ America, Inc.,
5,000 5.50%, 11/04/97 4,998
U.S. Borax & Chemical Corporation,
5,000 5.50%, 11/03/97 4,999
---------
14,918
---------
CAPITAL GOODS 1.9%
Johnson Controls, Inc.,
5,000 5.52%, 11/19/97 4,986
---------
COMMUNICATION 7.2%
GTE Funding, Inc.,
5,000 5.60%, 11/18/97 4,987
4,000 5.60%, 11/21/97 3,988
MCI Communications Corporation,
5,000 5.60%, 12/05/97 4,974
5,000 5.53%, 1/20/98 4,938
---------
18,887
---------
Principal Amortized
Amount Cost
(in thousands) (in thousands)
- -------------- --------------
CONGLOMERATE 1.9%
Mitsubishi International Corporation,
$5,000 5.51%, 11/17/97 $ 4,988
---------
CONSUMER STAPLES 3.8%
Hitachi America, Ltd.,
5,000 5.52%, 12/22/97 4,961
5,000 5.57%, 3/18/98 4,894
---------
9,855
---------
ELECTRONICS 1.9%
Panasonic Finance, Inc.,
5,000 5.55%, 3/06/98 4,904
---------
ENERGY 3.6%
BP America, Inc.,
4,500 5.73%, 11/03/97 4,498
Petrofina Delaware,
5,000 5.53%, 12/09/97 4,971
---------
9,469
---------
FINANCE - MISCELLANEOUS 20.9%
ABB Treasury Center (U.S.A.), Inc.,
5,000 5.51%, 11/24/97 4,982
American Express Co.,
5,000 5.51%, 12/29/97 4,956
American General Finance Corporation,
5,000 5.51%, 11/21/97 4,985
5,000 5.52%, 12/05/97 4,974
Avco Financial Services, Inc.,
5,000 5.51%, 12/19/97 4,963
Beneficial Corporation,
5,000 5.58%, 1/21/98 4,937
CIT Group Holdings, Inc.,
5,000 5.51%, 12/16/97 4,966
General Electric Capital Corporation,
5,000 5.50%, 11/07/97 4,995
5,000 5.60%, 02/25/98 4,910
National Rural Utilities CFC,
5,000 5.51%, 11/06/97 4,996
Swedish Export Credit Corporation,
5,000 5.50%, 11/25/97 4,982
---------
54,646
---------
FINANCE - SERVICES 5.7%
Merrill Lynch and Co., Inc.,
5,000 5.52%, 12/15/97 4,966
5,000 5.53%, 5/15/98 4,850
Morgan Stanley, Dean Witter, Discover & Co.,
5,000 5.52%, 11/14/97 4,990
---------
14,806
---------
See notes to the financial statements.
MONEY MARKET FUND
SCHEDULE OF INVESTMENTS
October 31, 1997
Principal Amortized
Amount Cost
(in thousands) (in thousands)
- -------------- --------------
INSURANCE 7.5%
American Family Financial Services, Inc.,
$5,000 5.50%, 11/05/97 $ 4,997
4,600 5.50%, 11/12/97 4,592
Metlife Funding, Inc.,
5,000 5.50%, 12/17/97 4,965
Prudential Funding Corporation,
5,000 5.54%, 1/23/98 4,936
---------
19,490
---------
MACHINERY - AGRICULTURE & CONSTRUCTION 2.4%
Caterpillar Inc.,
6,390 5.60%, 2/04/98 6,296
---------
MISCELLANEOUS 1.9%
International Lease Finance Corporation:
5,000 5.50%, 11/20/97 4,985
---------
PRINTING & PUBLISHING 3.9%
McGraw-Hill Cos., Inc.,
5,300 5.50%, 11/18/97 5,286
5,000 5.51%, 12/23/97 4,960
---------
10,246
---------
RETAIL 3.8%
J.C. Penney Funding Corporation,
5,000 5.52%, 11/10/97 4,993
5,000 5.50%, 12/01/97 4,977
---------
9,970
---------
UTILITIES - ELECTRIC 1.2%
Pacific Gas & Electric Company,
3,200 5.50%, 12/02/97 3,185
---------
UTILITIES - GAS 3.8%
Southern California Gas Company,
5,000 5.50%, 12/08/97 4,972
5,000 5.55%, 3/09/98 4,901
---------
9,873
---------
Total Commercial Paper 244,175
---------
FUNDING AGREEMENTS 2.7%
Travelers Insurance Company,*
7,000 5.77%, 6/30/98 7,000
---------
Total Funding Agreements 7,000
---------
Number Amortized
of Shares Cost
(in thousands) (in thousands)
- -------------- --------------
INVESTMENT COMPANIES 4.2%
10 Financial Square Prime Obligation Fund $ 10
11,002 Short-Term Investments Co. -
Liquid Assets Portfolio 11,002
---------
Total Investment Companies 11,012
---------
Total Investments 100.4% 262,187
---------
Liabilities, less Other Assets (0.4)% (1,170)
---------
NET ASSETS 100.0% $261,017
========
* Variable rate security
See notes to the financial statements.
U.S. TREASURY MONEY MARKET FUND
SCHEDULE OF INVESTMENTS
October 31, 1997
Principal Amortized
Amount Cost
(in thousands) (in thousands)
- -------------- --------------
U.S. TREASURIES 89.8%
U.S. TREASURY NOTES 48.5%
$ 2,000 7.38%, 11/15/97 $ 2,001
10,000 8.88%, 11/15/97 10,012
5,500 6.00%, 12/31/97 5,505
11,000 5.25%, 12/31/97 10,999
2,500 7.88%, 1/15/98 2,510
3,000 5.88%, 4/30/98 3,007
2,000 9.00%, 5/15/98 2,034
2,000 4.75%, 10/31/98 1,984
---------
38,052
---------
U.S. TREASURY BILLS 41.3%
20,500 4.59%, 11/13/97 20,466
9,000 4.71%, 11/28/97 8,967
3,000 5.06%, 1/22/98 2,965
---------
32,398
---------
Total U.S. Treasuries 70,450
---------
Number
of Shares
(in thousands)
- --------------
INVESTMENT COMPANIES 9.5%
3,595 Financial Square
Treasury Obligation Portfolio 3,595
3,910 Short-Term Investments Co.
Treasury Tax Advantage Portfolio 3,910
---------
Total Investment Companies 7,505
---------
Total Investments 99.3% 77,955
---------
Other Assets, less Liabilities 0.7% 523
---------
NET ASSETS 100.0% $78,478
========
See notes to the financial statements.
U.S. GOVERNMENT MONEY MARKET FUND
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1997
Principal Amortized
Amount Cost
(in thousands) (in thousands)
- -------------- --------------
U.S. GOVERNMENT AGENCIES 88.8%
FEDERAL FARM CREDIT BANK 19.1%
Federal Farm Credit Bank Discount Notes:
$ 5,000 5.36%, 11/03/97 $ 4,999
5,000 5.33%, 11/05/97 4,997
10,000 5.41%, 11/14/97 9,980
5,000 5.37%, 11/20/97 4,986
5,000 5.37%, 11/24/97 4,983
5,000 5.44%, 1/15/98 4,943
3,000 5.45%, 1/21/98 2,963
---------
37,851
---------
FEDERAL HOME LOAN BANK 2.5%
Federal Home Loan Bank Discount Notes:
5,000 5.47%, 12/10/97 4,971
---------
FEDERAL HOME LOAN MORTGAGE CORPORATION 22.1%
Federal Home Loan Mortgage Corporation Discount Notes:
5,000 5.40%, 11/05/97 4,997
4,000 5.40%, 11/06/97 3,997
7,000 5.41%, 11/10/97 6,990
3,000 5.38%, 11/13/97 2,995
6,000 5.40%, 11/17/97 5,986
5,000 5.47%, 12/04/97 4,975
6,000 5.47%, 12/11/97 5,963
5,000 5.48%, 12/17/97 4,965
3,000 5.48%, 12/18/97 2,979
---------
43,847
---------
FEDERAL NATIONAL MORTGAGE ASSN. 23.5%
Federal National Mortgage Assn. Discount Notes:
5,000 5.50%, 11/06/97 4,996
4,000 5.35%, 11/07/97 3,996
8,000 5.37%, 11/18/97 7,980
5,000 5.39%, 11/25/97 4,982
5,000 5.44%, 12/23/97 4,961
5,000 5.42%, 12/30/97 4,956
5,000 5.49%, 1/20/98 4,939
5,000 5.49%, 1/23/98 4,937
5,000 5.47%, 1/28/98 4,933
---------
46,680
---------
OTHER 15.1%
Tennessee Valley Authority Discount Notes:
5,000 5.36%, 11/12/97 4,992
5,000 5.36%, 11/17/97 4,988
5,000 5.36%, 11/19/97 4,987
5,000 5.38%, 12/02/97 4,977
5,000 5.38%, 12/03/97 4,976
5,000 5.40%, 12/09/97 4,971
---------
29,891
---------
Principal Amortized
Amount Cost
(in thousands) (in thousands)
- -------------- --------------
STUDENT LOAN MARKETING ASSN. 6.5%
Student Loan Marketing Assn. Floating Rate Notes:
$5,000 5.45%, 11/20/97* $ 5,000
8,000 5.35%, 4/21/98* 7,998
---------
12,998
---------
Total U.S. Government Agencies 176,238
---------
U.S. TREASURIES 3.6%
U.S. TREASURY NOTES,
7,000 9.00%, 5/15/98 7,122
---------
Number
of Shares
(in thousands)
- --------------
INVESTMENT COMPANIES 7.9%
6,180 Financial Square Government Obligation Fund 6,180
9,601 Short-Term Investments Co. Treasury Portfolio 9,601
---------
Total Investment Companies 15,781
---------
Total Investments 100.3% 199,141
---------
Liabilities, less Other Assets (0.3)% (549)
---------
NET ASSETS 100.0% $198,592
========
* Stated maturity with weekly interest rate reset
See notes to the financial statements.
TAX-EXEMPT MONEY MARKET FUND
SCHEDULE OF INVESTMENTS
October 31, 1997
Principal Amortized
Amount Cost
(in thousands) (in thousands)
- -------------- --------------
GENERAL OBLIGATION 1.1%
Northwestern Mutual Life,
$ 231 4.50%, 2/15/09*# $ 231
Will County, Illinois, School District,
1,000 6.00%, 12/01/97 1,002
---------
Total General Obligation 1,233
---------
NOTES AND BONDS 3.2%
INDUSTRIAL DEVELOPMENT/POLLUTION
CONTROL REVENUE 1.8%
Illinois Development Finance Authority,
2,000 Enterprise Office, 3.90%, 12/01/17*# 2,000
---------
MISCELLANEOUS 1.4%
Iowa State School,
1,500 4.25%, 1/30/98 1,502
---------
Total Notes and Bonds 3,502
---------
PREREFUNDED AND ESCROWED
TO MATURITY 21.2%
Austin, Texas, Electric Waterworks
1,565 6.60%, 10/01/01, Prerefunded 10/01/98 1,603
Chicago, Illinois, Public Building
2,150 7.70%, 1/01/08, Prerefunded 1/01/98 2,207
Cook County, Illinois, Community College District,
500 7.10%, 1/01/98, Escrowed to Maturity 503
Detroit, Michigan Water Supply System
1,000 7.88%, 7/01/08, Prerefunded 7/01/98 1,045
Hawaii State,
510 7.10%, 6/01/09, Prerefunded 6/01/98 527
Indianapolis, Indiana Local Public Improvement,
2,525 8.40%, 2/01/07, Prerefunded 2/01/98 2,605
Lake County, Illinois, Lake Forest Preservation
1,500 District, 6.95%, 2/01/03, Prerefunded 2/01/98 1,519
Mississippi Hospital Equipment and Facilities Authority,
3,165 9.00%, 5/01/05, Prerefunded 5/01/98 3,326
Montgomery County, Texas
1,000 7.40%, 9/01/01, Prerefunded 9/01/98 1,028
New Jersey Health Care Facilities,
1,000 8.38%, 8/01/20, Prerefunded 2/01/98 1,025
New York State Housing Finance Agency
1,000 6.35%, 5/01/98, Escrowed to Maturity 1,012
Pennsylvania State Turnpike, Common Turnpike
1,000 Revenue, 7.15%, 12/01/97, Escrowed to Maturity 1,003
Summit County, Colorado, School District
500 9.80%, 12/01/97, Escrowed to Maturity 501
Tucson, Arizona, Water Revenue
4,000 6.00%, 7/01/98, Escrowed to Maturity 4,056
University of Arizona
1,000 6.00%, 6/01/98, Escrowed to Maturity 1,013
---------
Total Prerefunded and Escrowed to Maturity 22,973
---------
Principal Amortized
Amount Cost
(in thousands) (in thousands)
- -------------- --------------
REVENUE BONDS 72.2%
(DAILY/WEEKLY/MONTHLY PUT BONDS)
ELECTRIC REVENUE 5.5%
County of Mason, Kentucky, Series 1984B,
$2,050 3.70%, 10/15/14* $ 2,050
Putnam County, Florida Development Authority -
3,935 Seminole Electric, 3.70%, 3/15/14* 3,935
---------
5,985
---------
HOSPITAL REVENUE 20.5%
Hawaii Department of Budget,
1,075 Kuakini Medical Center, 3.65%, 7/01/05* 1,075
Illinois Development Finance Authority,
3,000 Council for Jewish Elderly, 3.65%, 3/01/15* 3,000
Illinois Development Finance Authority,
1,930 Uhlich Children's Center, 3.65%, 6/01/15* 1,930
Illinois Development Finance Authority,
1,200 Uhlich Children's Center, 3.65%, 4/01/07* 1,200
Indiana Health Facilities Finance Authority,
3,500 3.65%, 1/01/12* 3,500
Indiana Hospital Equipment Finance Authority,
3,000 3.65%, 12/01/15* 3,000
Jefferson Parish, Louisiana, Hospital,
2,600 3.65%, 12/01/15* 2,600
Louisiana PFA Hospital Equipment,
1,300 3.95%, 12/01/05* 1,300
Wisconsin State Health & Educational Facilities -
1,900 Blood Center, 3.65%, 6/01/19* 1,900
Wisconsin State Health & Educational Facilities -
2,800 Marshfield Clinic, 3.60%, 6/01/10* 2,800
---------
22,305
---------
HOUSING REVENUE 13.3%
Broward County, Florida, Housing Finance Authority-
3,000 Quiet Creek Apartments, 3.75%, 12/01/29* 3,000
Clayton County, Georgia, Housing Authority,
1,400 3.65%, 1/01/21* 1,400
Cook County Illinois Catholic Charities,
2,000 3.65%, 1/01/28* 2,000
Dade County, Florida, Housing Finance Authority,
1,600 Waterside Project, 3.70%, 8/01/05* 1,600
Dade County, Florida, Housing Finance Authority,
1,800 Nob Hill Project Series 1, 3.70%, 12/01/29* 1,800
Illinois Development Finance Authority -
1,625 St. Paul's House, 3.65%, 2/01/25* 1,625
Orland Hills, Illinois, Multi-Family,
2,470 3.65%, 12/01/04* 2,470
Washington State Housing Finance - Community
555 Multifamily Mortgage, 3.80%, 10/01/20* 555
---------
14,450
---------
See notes to the financial statements.
TAX-EXEMPT MONEY MARKET FUND
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1997
Principal Amortized
Amount Cost
(in thousands) (in thousands)
- -------------- --------------
INDUSTRIAL DEVELOPMENT/POLLUTION
CONTROL REVENUE 9.4%
Moffat County, Colorado, Pollution Control,
$3,500 3.70%, 7/01/10* $ 3,500
Oakbrook Terrace, Illinois, Industrial Development,
4,100 3.90%, 12/01/25* 4,100
Oklahoma County, Oklahoma Finance Authority -
2,600 Perrine Office Project, 3.65%, 12/01/14* 2,600
---------
10,200
---------
MISCELLANEOUS 13.4%
Cook County, Illinois,
3,955 3.65%, 5/1/20* 3,955
Glendale, California, Reliance Development
1,000 Public Parking, 3.55%, 12/01/14* 1,000
Illinois Development Finance Authority
2,000 Rest Haven, 3.65%, 1/01/27* 2,000
Illinois Development Finance Authority,
1,500 Presbyterian Home Lake-A, 3.65%, 9/01/31* 1,500
Indianapolis Economic Development
3,085 Jewish Federation, 3.65%, 4/01/05* 3,085
Wisconsin State Health & Education
3,000 Facility Authority, 3.60%, 8/15/16* 3,000
---------
14,540
---------
POOLED GOVERNMENT AUTHORITY REVENUE 2.6%
Indiana Health Facility - Finance Authority,
2,800 3.65%, 8/01/06* 2,800
---------
UNIVERSITY REVENUE 7.5%
Illinois Development Finance Authority -
3,000 St. Ignatius College Prep, 3.65%, 6/01/24* 3,000
Texas Higher Education Authority,
1,605 3.65%, 12/01/25* 1,605
University of North Carolina -
3,500 Chapel Hill, 3.60%, 10/01/09* 3,500
---------
8,105
---------
Total Revenue Bonds 78,385
---------
Number Amortized
of Shares Cost
(in thousands) (in thousands)
- -------------- --------------
INVESTMENT COMPANIES 1.8%
1,966 Financial Square Tax-Exempt Money Market Fund $ 1,966
10 Tax Free Cash Reserves 10
---------
Total Investment Companies 1,976
---------
Total Investments 99.5% 108,069
---------
Other Assets, less Liabilities 0.5% 570
---------
NET ASSETS 100.0% $108,639
========
* Variable rate security
# Stated maturity with option to put
See notes to the financial statements.
MONEY MARKET FUND
U.S. TREASURY MONEY MARKET FUND
U.S. GOVERNMENT MONEY MARKET FUND
TAX-EXEMPT MONEY MARKET FUND
NOTES TO THE FINANCIAL STATEMENTS
1. ORGANIZATION
Portico Funds, Inc. (the "Company") was incorporated on February 15, 1988, as
a Wisconsin Corporation and is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended. The Money Market,
U.S. Treasury Money Market (formerly the U.S. Federal Money Market Fund), U.S.
Government Money Market and Tax-Exempt Money Market Funds (the "Funds") are
separate, diversified investment portfolios of the Company. The Money Market,
U.S. Treasury Money Market, U.S. Government Money Market and Tax-Exempt Money
Market Funds commenced operations on March 16, 1988, April 29, 1991, August 1,
1988 and June 27, 1988, respectively.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in preparation of their financial statements. These
policies are in conformity with generally accepted accounting principles.
a) Investment Valuation - The securities are valued on the basis of amortized
cost for financial reporting purposes and federal income tax purposes, which
approximates market value. Variable rate demand notes and funding agreements are
valued at cost which approximates market value.
b) Federal Income Taxes - No provision for federal income taxes has been made
since the Funds have complied with the provisions of the Internal Revenue Code
available to regulated investment companies and intend to continue to so comply
in future years.
c) Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
d) Expenses - The Funds are charged for those expenses that are directly
attributable to each portfolio such as advisory, administration, service
organization fees and certain shareowner service fees. Expenses that are not
directly attributable to a portfolio are typically allocated among the Company's
portfolios in proportion to their respective net assets, number of shareowner
accounts or net sales, where applicable.
e) Distributions to Shareowners - Dividends from net investment income are
declared daily and paid monthly. Distributions of net realized capital gains, if
any, will be declared at least annually.
f) Other - The Funds recognize interest income on the accrual basis. For
securities with put provisions, discounts and premiums are amortized to the
earlier of the put date or maturity. For the remainder of securities, discounts
and premiums are amortized over the life of the respective securities.
Investment and shareowner transactions are recorded on trade date. Realized
gains and losses from investment transactions are reported on an identified cost
basis which is the same basis the Funds use for federal income tax purposes. The
U.S. Government Money Market Fund has investments in floating rate government
agency notes. The notes have weekly interest rate reset provisions which are
tied to the 90-day Treasury bill rate. The Fund values the securities at
amortized cost, which approximates market. Transactions in capital shares at
$1.00 per share are shown in the Statement of Changes in Net Assets. Generally
accepted accounting principles require that permanent financial reporting and
tax differences be reclassified to capital stock.
3. INVESTMENT ADVISORY AND OTHER AGREEMENTS
The Funds have entered into an Investment Advisory Agreement with Firstar
Investment Research & Management Company, LLC ("FIRMCO"). FIRMCO is a subsidiary
of Firstar Corporation, a publicly held bank holding company. Pursuant to its
Advisory Agreement with the Funds, FIRMCO is entitled to receive a fee,
calculated daily and payable monthly, at the annual rate of 0.50% on the first
$2 billion of each Fund's average daily net assets, and 0.40% of each Fund's
average daily net assets in excess of $2 billion. For the year ended October 31,
1997, FIRMCO voluntarily waived $401, $69, $51 and $72 of its advisory fees, in
thousands, for the Money Market, U.S. Treasury Money Market, U.S. Government
Money Market and Tax-Exempt Money Market Funds, respectively.
Firstar Trust Company, an affiliate of FIRMCO, serves as custodian, transfer
agent and accounting services agent for the Funds.
The Company has entered into a Co-Administration Agreement with B.C. Ziegler
and Company and Firstar Trust Company (the "Co-Administrators") for certain
administrative services. Pursuant to the Co-Administration Agreement with the
Company, the Co-Administrators are entitled to receive a fee, computed daily and
payable monthly, at the annual rate of 0.125% of the Company's first $2 billion
of average aggregate daily net assets plus 0.10% of the Company's average
aggregate daily net assets in excess of $2 billion. For the year ended October
31, 1997, $158, $48, $141 and $66 of administration fees, in thousands, were
voluntarily waived for the Money Market, U.S. Treasury Money Market, U.S.
Government Money Market and Tax-Exempt Money Market Funds, respectively.
The Funds have adopted a Service and Distribution Plan pursuant to Rule 12b-1
of the Investment Company Act of 1940 and incurred expenses of $61, in
thousands, for the Money Market Fund, for the year ended October 31, 1997. No
expenses were incurred for the U.S. Government Money Market, U.S. Treasury Money
Market or Tax-Exempt Money Market Funds for the year ended October 31, 1997.
Each Director of the Company who is not affiliated with FIRMCO receives an
annual fee from the Company for service as a Director and is eligible to
participate in a deferred compensation plan with respect to these fees.
Participants in the plan may designate their deferred Director's fees as if
invested in any one of the Portico Funds (with the exception of the MicroCap
Fund)or in 90-day U.S. Treasury bills. The value of each Director's deferred
compensation account will increase or decrease as if it were invested in shares
of the selected Portico Funds or 90-day U.S. Treasury bills. The Funds maintain
their proportionate share of the Company's liability for deferred fees.
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF THE PORTICO MONEY MARKET FUND,
THE PORTICO U.S. TREASURY MONEY MARKET FUND, THE PORTICO U.S. GOVERNMENT MONEY
MARKET FUND AND THE PORTICO TAX-EXEMPT MONEY MARKET FUND
In our opinion, the accompanying statement of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial positions of the Portico Money Market Fund, the
Portico U.S. Treasury Money Market Fund, the Portico U.S. Government Money
Market Fund and the Portico Tax-Exempt Money Market Fund (four of the portfolios
of Portico Funds, Inc. (the "Funds")) at October 31, 1997, the results of each
of their operations for the year then ended, the changes in each of their net
assets for each of the two years in the period then ended and the financial
highlights for each of the five years in the period then ended, all in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at October
31, 1997 by correspondence with the custodian, provide a reasonable basis for
the opinion expressed above.
/s/Price Waterhouse LLP
Milwaukee, Wisconsin
December 9, 1997
- -- PORTICO FUNDS ARE AVAILABLE THROUGH:
- the Portico Funds Center,
- Investment Specialists who are registered representatives of Firstar
Investment Services, Inc., a registered broker/dealer, NASD and SIPC
member,
- and through selected shareholder organizations.
This report is authorized for distribution only when preceded or accompanied by
a current prospectus.
TO OPEN AN ACCOUNT OR
REQUEST INFORMATION
1-800-982-8909
1-414-287-3710
FOR ACCOUNT BALANCES AND
INVESTOR SERVICES
1-800-228-1024
1-414-287-3808
PORTICO FUNDS CENTER
615 East Michigan Street
P.O. Box 3011
Milwaukee, WI 53201-3011
Form #40-0196 12/97
