THE
THURLOW GROWTH
FUND
INVESTOR KIT
AND PROSPECTUS
Logo THURLOW(tm) FUNDS
Photo of statue on building
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Prospectus August 6, 1997
THE THURLOW FUNDS, INC.
1256 Forest Avenue
Palo Alto, California 94301
1-888-848-7569
THE THURLOW FUNDS, INC. (the "Company") is an open-end, diversified management
investment company, commonly known as a mutual fund. The Company presently
consists of a single portfolio, The Thurlow Growth Fund (the "Fund"). The Fund's
investment objective is capital appreciation, with current income as a secondary
objective. In seeking its investment objective of capital appreciation, the Fund
will invest primarily in common stocks of U.S. companies, but the Fund may also
invest in options on securities and stock indexes, convertible securities,
common stocks of foreign issuers publicly-traded in the U.S. and American
Depository Receipts.
This Prospectus sets forth concisely the information about the Fund that
prospective investors should know before investing. Investors are advised to
read this Prospectus and retain it for future reference. This Prospectus does
not set forth all of the information included in the Registration Statement and
Exhibits thereto which the Fund has filed with the Securities and Exchange
Commission.
A Statement of Additional Information, dated August 6, 1997, which is
a part of such Registration Statement, is incorporated herein by reference. A
copy of the Statement of Additional Information may be obtained, without charge,
by writing to the address, or calling the telephone number, stated above.
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.
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TABLE OF CONTENTS
Expense Summary...............................................................3
The Fund......................................................................4
Investment Objectives and Strategy............................................4
Investment Policies and Risks.................................................5
Investment Restrictions.......................................................9
Management of the Fund........................................................9
Determination of Net Asset Value.............................................11
How to Purchase Shares.......................................................11
How to Redeem Shares.........................................................14
Retirement Plans.............................................................17
Dividends, Distributions and Taxes...........................................17
Dividend Reinvestment........................................................18
Capital Structure............................................................19
Brokerage Transactions.......................................................19
Account Statements...........................................................20
Performance Information......................................................20
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EXPENSE SUMMARY
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load Imposed on Redemptions None
Redemption Fees None(1)
Exchange Fees None(2)
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 1.25%
12b-1 Fees 0.25%(3)
Other Expenses (net of reimbursement) 0.45%(4)
Total Fund Operating Expenses (net of reimbursement) 1.95%(4)
(1) A fee of $12.00 is charged for each wire redemption.
(2) A fee of $5.00 is charged for each telephone exchange.
(3) The maximum level of distribution expenses is 0.25% per annum of the
Fund's average net assets. See "HOW TO PURCHASE SHARES - Service and
Distribution Plan." The distribution expenses for long-term shareholders may
total more than the maximum sales charge that would have been permissible if
imposed entirely as an initial sales charge.
(4) The Fund's investment adviser, Thurlow Capital Management, Inc., has agreed
to reimburse the Fund to limit the total operating expenses of the Fund
(excluding interest, taxes, brokerage and extraordinary expense) to an annual
rate of 1.95% of the Fund's average net assets for the fiscal year ending June
30, 1998. After this date,the expense limitation may be terminated or revised at
any time. Absent the limitation the Fund expects to incur Other Expenses
(estimated) and Total Fund Operating Expenses of 1.25% and 2.75%, respectively,
for the fiscal year ending June 30, 1998.
EXAMPLE:
An investor would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each period:
1 Year ........................................................$20
3 Years........................................................$62
The purpose of the preceding table is to assist investors in understanding the
various costs that an investor in the Fund will bear, directly or indirectly.
THE EXAMPLE SHOWN ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR RATES OF RETURN. ACTUAL OPERATING EXPENSES AND RATE OF RETURN
MAY BE MORE OR LESS THAN THOSE SHOWN. The example assumes a 5% annual rate of
return pursuant to requirements of the Securities and Exchange Commission. This
hypothetical rate of return is not intended to be representative of past or
future performance of the Fund.
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THE FUND
The Thurlow Funds, Inc. (the "Company") was incorporated under the laws of
Maryland on April 30, 1997 and is a no-load, open-end, diversified management
investment company, better known as a mutual fund. The Company is registered
under the Investment Company Act of 1940 (the "Act"). The Company presently
consists of one diversified investment portfolio, the Thurlow Growth Fund (the
"Fund"). Thurlow Capital Management, Inc. (the "Adviser") serves as the Fund's
investment adviser. Thomas F. Thurlow, founder and President of the Adviser,
manages the investment of the Fund. Shares of the Fund are sold at net asset
value. The minimum initial investment is $1,000 and the minimum for additional
investments is $100. As an open-end investment company, the Fund will redeem any
of its outstanding shares on demand of the owner at their net asset value.
INVESTMENT OBJECTIVES AND STRATEGY
The Fund's primary investment objective is capital appreciation, with current
income as a secondary objective. The Fund seeks to achieve its primary
investment objective by investing primarily in common stocks of U.S. companies
but may also invest, subject to specific limitations, in options on securities
and stock indexes, convertible securities, common stocks of foreign issuers
publicly-traded in the U.S. and American Depository Receipts. The Fund seeks to
achieve its secondary objective of current income by investing in dividend
paying common stocks, convertible securities, U.S. government securities and
short-term money market instruments.
The "Adviser" generally utilizes a middle-downTM approach to investing. In
middle-down analysis, the Adviser focuses on a sector of the stock market it
believes is either undervalued or is gaining momentum in the upward share prices
of its components. Within such a sector, the Adviser then focuses on
company-specific variables such as competitive industry dynamics, market
leadership, proprietary products and services, and management expertise, as well
as on financial characteristics, such as return on sales and equity, debt/equity
ratios, earnings and cash flow. In using a "middle-down" approach, the Adviser
seeks attractively-priced companies in undervalued sectors.
The Adviser may, from time to time, also utilize a "top-down" or "bottom-
up" approach. In top-down analysis, the Adviser focuses on macroeconomic factors
such as inflation, interest, currency, and tax rates. In bottom-up analysis, the
Adviser focuses exclusively on company-specific variables such as competitive
industry dynamics, market leadership, proprietary products and services, and
management expertise, as well as on financial characteristics, such as return on
sales and equity, debt/equity ratios, earnings and cash flow.
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INVESTMENT POLICIES AND RISKS
GENERAL RISKS
Investment in any mutual fund has risks. There can be no assurance that the
investment objectives of the Fund will be realized or that the Fund's portfolio
will not decline in value. Many of the investments made by the Fund are subject
to significant volatility. Risks associated with the specific types of
securities in which the Fund may invest and with the investment techniques
employed by the Fund are discussed below. The Fund is intended for investors who
can accept this risk. An investment in the Fund should not be considered as a
complete investment program. The Fund is not an appropriate vehicle for a
short-term investor or for those investors having immediate financial
requirements. Rather, the Fund is designed for those investors who invest for
the long term and have the financial ability to undertake greater risk in
exchange for the opportunity of realizing greater financial gains in the future.
The fact the Fund has no operating history and that the Adviser has no
prior experience advising investment companies should be considered to be risk
factors. The Adviser is solely responsible for the selection of securities for
investment by the Fund. Neither Thomas F. Thurlow, A Professional Corporation,
nor Thurlow & Hearn, an association of attorneys, are responsible for any of the
operations of the Company, the Fund or the Adviser.
COMMON STOCK
The Fund invests primarily in stocks of United States companies. The Fund
generally looks for attractively-priced companies in undervalued sectors. The
Fund may invest in companies with modest capitalization, as well as in start-up
companies. Such companies often involve greater risks than larger companies
because they lack the management experience, financial resources, product
diversification, markets, distribution channels and competitive strengths of
larger companies. Additionally, in many instances, the frequency and volume of
their trading is substantially less than is typical of larger companies.
Therefore, the securities of smaller companies as well as start-up companies may
be subject to wider price fluctuations. The spreads between the bid and asked
prices of the securities of these companies in the U.S. over-the-counter market
typically are larger than the spreads for more actively traded securities. As a
result, the Fund could incur a loss if it determined to sell such a security
shortly after its acquisition. When making large sales, the Fund may have to
sell portfolio holdings at discounts from quoted prices or may have to make a
series of small sales over an extended period of time due to the trading volume
of smaller company securities.
OPTIONS ON SECURITIES AND STOCK INDEXES
The Fund may buy put and call options on securities (including long-term options
or "LEAPs") and stock indexes, provided that immediately after purchase of any
such option the aggregate sum of the premiums paid for such options will not
exceed 20% of the Fund's net assets. The Fund will not sell (write) put or call
options except to enter into closing sale transactions to liquidate options that
it holds. When buying a put option on a security, the Fund has the right, in
return for a premium paid during the term of the option, to sell the securities
underlying the option at the exercise price. When buying a call option on a
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security, the Fund has the right, in return for a premium paid during the term
of the option, to purchase the securities underlying the option at the exercise
price. If a put or a call option which the Fund has purchased expires
unexercised, the option will become worthless on the expiration date, and the
Fund will realize a loss in the amount of the premium paid, plus commission
costs. A stock index fluctuates with changes in the market values of the stocks
included in the index. Options on stock indexes give the holder the right to
receive an amount of cash upon the exercise of the options. Receipt of this cash
amount will depend upon the closing level of the stock index upon which the
option is based being greater than (in the case of a call) or less than (in the
case of a put) the exercise price of the option. The amount of cash received, if
any, will be the difference between the closing price of the index and the
exercise price of the option multiplied by a specified dollar multiple. All
settlements of index option transactions are in cash. No assurance can be given
that a market will exist at all times for all outstanding options purchased by
the Fund. In such event, the Fund would be unable to realize its profits or
limit its losses unless it exercised the options it holds.
FOREIGN SECURITIES
The Fund may invest without limitation in common stocks of foreign issuers which
are publicly traded on U.S. exchanges or in the U.S. over-the-counter market
directly or in the form of American Depository Receipts ("ADRs"). The Fund will
only invest in ADRs that are issuer sponsored. Sponsored ADRs typically are
issued by a U.S. bank or trust company and evidences ownership of underlying
securities issued by a foreign corporation. Such securities involve risks that
are different from those of domestic issuers. Foreign companies are not subject
to the regulatory requirements of U.S. companies and, as such, there may be less
publicly available information about such issuers than is available in the
reports and ratings published about companies in the United States.
Additionally, foreign companies are not subject to uniform accounting, auditing
and financial reporting standards. Dividends and interest on foreign securities
may be subject to foreign withholding taxes. To the extent such taxes are not
offset by credits or deductions allowed to investors under U.S. federal income
tax laws, such taxes may reduce the net return to shareholders. Although the
Fund intends to invest in securities of foreign issuers domiciled in nations
which the Adviser considers as having stable and friendly governments, there is
the possibility of expropriation, confiscation, taxation, currency blockage or
political or social instability which could affect investments of foreign
issuers domiciled in such nations.
CONVERTIBLE SECURITIES
The Fund may invest in convertible securities. A convertible security may be
converted either at a stated price or rate within a specified period of time
into a specified number of shares of common stock. By investing in convertible
securities, the Fund seeks the opportunity, through the conversion feature, to
participate in a portion of the capital appreciation of the common stock into
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which the securities are convertible, while earning higher current income than
is available from the common stock. Typically, the convertible debt securities
in which the Fund will invest will be of a quality less than investment grade
(so-called "junk bonds"). The Fund will, however, limit its investment in
non-investment grade convertible debt securities to no more than 5% of its net
assets at the time of purchase and will not acquire convertible debt securities
rated below B by Moody's Investors Service, Inc. ("Moody's") or Standard &
Poor's Corporation ("S&P"), or unrated securities deemed by the Adviser to be of
comparable quality. Securities rated B are considered predominantly speculative
and generally lack the characteristics of a desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the bond
over any long period of time may be small. 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 expects, however, to sell promptly any convertible debt
securities that fall below a B rating quality as a result of these events. See
the Statement of Additional Information for a description of applicable debt
ratings.
ILLIQUID SECURITIES
The Fund does not anticipate doing so, but it may invest up to 10% of the value
of its net assets in illiquid securities, including restricted securities.
Securities eligible to be resold pursuant to Rule 144A under the Securities Act
of 1933 may be considered liquid. In determining the liquidity of a security,
the Adviser, acting pursuant to procedures adopted by the Board of Directors,
will consider such factors as the frequency of trades and quotes, the number of
dealers and potential purchasers, dealer undertakings to make a market, the
nature of the securities, marketplace trades and other permissible factors.
Investing in Rule 144A securities could have the effect of decreasing the
liquidity of the Fund, to the extent that qualified institutional buyers become,
for a time, uninterested in purchasing these securities.
MONEY MARKET INSTRUMENTS AND U.S. GOVERNMENT SECURITIES
If the Adviser believes that adverse market conditions make pursuing the Fund's
primary investment objective inconsistent with the best interests of the
shareholders, the Adviser may temporarily invest up to 100% of its assets in
money market instruments or U.S. government securities. The Fund may also invest
in money market instruments and U.S. government securities for nondefensive
purposes such as to achieve its secondary investment objective of current income
and with repect to money market instruments in amounts the Adviser believes are
reasonably necessary to satisfy anticipated redemption requests.
MONEY MARKET INSTRUMENTS.The Fund may invest in short-term, high quality money
market instruments and U.S. Treasury securities with a remaining maturity of 13
months or less. The Fund may invest in certificates of deposit of U.S. banks and
commercial paper and commercial paper master notes if the bank or commercial
paper issuer has been rated within the two highest grades assigned by S&P or
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Moody's or has been determined by the Adviser to be of equivalent quality or, in
the case of banks, provided the bank has capital, surplus and undivided profits,
as of the date of its most recently published annual financial statements, with
a value in excess of $100,000,000 at the time of the investment. Commercial
paper master notes are unsecured promissory notes issued by corporations to
finance short-term credit needs. They permit a series of short-term borrowings
under a single note. Borrowings under commercial paper master notes are payable
in whole or in part at any time, may be prepaid in whole or in part at any time,
and bear interest at rates which are fixed to known lending rates and
automatically adjusted when such known lending rates change. Because commercial
paper master notes can be redeemed on demand, commercial paper master notes are
considered to be liquid securities. There is no secondary market for commercial
paper master notes. The Adviser will monitor the credit-worthiness of the issuer
of the commercial paper master notes while any borrowings are outstanding. The
Fund may also invest in securities issued by other investment companies that
invest in high quality, short-term debt securities (i.e., money market
instruments). In addition to the advisory fees and other expenses the Fund bears
directly in connection with its operations as a shareholder of another
investment company, the Fund would bear its pro rata share 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 shareholders.
U.S. GOVERNMENT SECURITIES. The Fund intends to invest only in U.S.
government securities that are backed by the full faith and credit of the U.S.
Treasury. Yields on such securities are dependent on a variety of factors,
including the general conditions of the money and bond markets, the size of a
particular offering and the maturity of the obligation. Debt securities with
longer maturities tend to produce higher yields and are generally subject to
potentially greater capital appreciation and depreciation than obligations with
shorter maturities. The market value of U.S. government securities generally
varies inversely with changes in market interest rates. An increase in interest
rates, therefore, would generally reduce the market value of the Fund's
portfolio of investment in U.S. government securities, while a decline in
interest rates would generally increase the market value of the Fund's portfolio
of investments in these securities.
OTHER INVESTMENT PRACTICES
The Fund's investment restrictions permit it to invest in warrants, borrow money
to purchase securities, effect short sales and lend its portfolio securities.
The Fund does not intend to engage in these investment practices during the
fiscal year ending June 30, 1998. A description of these investment practices is
set forth in the Statement of Additional Information.
PORTFOLIO TURNOVER
The Fund will generally purchase and sell securities without regard to the
length of time the security has been held and, accordingly, it can be expected
that the rate of portfolio turnover may be substantial. In selling a security,
the Adviser will consider that profits from sales of securities held less than
three months must be limited in order to meet the requirement of Subchapter M of
the Internal Revenue Code. Subject to the foregoing, the Fund may sell a given
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security, no matter for how long or short a period it has been held in th
portfolio, and no matter whether the sale is at a gain or loss, if the Adviser
believes that it is not fulfilling its purpose. Since investment decisions are
based on the anticipated contribution of the security in question to the Fund's
investment objectives, the rate of portfolio turnover is irrelevant when the
Adviser believes a change is in order to achieve those objectives, and the
Fund's annual portfolio rate may vary from year to year. The Fund's portfolio
rate will generally not exceed 200%.
High portfolio turnover (100% or more) in any year will result in the
payment by the Fund of above-average transaction costs (including brokerage
commissions) and could result in the payment by shareholders of above-average
amounts of taxes on realized investment gains. Distributions to shareholders of
such investment gains, to the extent they consist of net short-term capital
gains will be considered ordinary income for federal tax purposes. See
"DIVIDENDS, DISTRIBUTIONS AND TAXES."
INVESTMENT RESTRICTIONS
The Fund has adopted certain fundamental investment restrictions that may be
changed only with the approval by a majority of the Fund's outstanding shares.
These restrictions include the following:
(1) The Fund will not purchase the securities of any issuer if the purchase
would cause more than 5% of the value of the Fund's total assets to be
invested in securities of such issuer (except securities of the U.S.
government or any agency or instrumentality thereof), or purchase more than
10% of the outstanding voting securities of any one issuer, except that up
to 25% of the Fund's total assets may be invested without regard to these
limitations.
(2) The Fund will not invest 25% or more of its total assets at the time of
purchase in securities of issuers whose principal business activities are in
the same industry.
A list of the Fund's policies and restrictions, both fundamental and
nonfundamental, is set forth in the Statement of Additional Information. In
order to provide a degree of flexibility, the Fund's investment objectives, as
well as other policies that are not deemed fundamental, may be modified by the
Board of Directors without shareholder approval.
MANAGEMENT OF THE FUND
As a Maryland corporation, the business and affairs of the Fund are managed by
the Board of Directors. The Fund has entered into an investment advisory
agreement (the "Advisory Agreement") with Thurlow Capital Management, Inc. (the
"Adviser"), P.O. Box 50427, Palo Alto, California 94303-0427, under which the
Adviser furnishes continuous investment advisory services and management to the
Fund. The Adviser was organized in 1997 and is wholly owned by Thomas F.
Thurlow, who is the Chief Executive Officer of the Adviser.
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Thomas F. Thurlow, Chief Executive Officer and founder of the Adviser, is
primarily responsible for the day-to-day management of the Fund's portfolio. He
has held this responsibility since the Fund commenced operations. Mr. Thurlow
has also served as President, Treasurer and a director of the Fund since it was
organized. Mr. Thurlow is an attorney, former prosecutor and founder and
associate of the law firm of Thurlow & Hearn, an association of attorneys. He
has been practicing law since 1989.
The Adviser supervises and manages the investment portfolio of the Fund
and, subject to such policies as the Board of Directors may determine, directs
the purchase or sale of investment securities in the day-to-day management of
the Fund. Under the Advisory Agreement, the Adviser, at its own expense and
without separate reimbursement from the Fund, furnishes office space, and all
necessary office facilities, equipment and executive personnel for managing the
Fund's investments, and bears all sales and promotional expenses of the Fund,
other than distribution expenses paid by the Fund pursuant to the Service and
Distribution Plan and expenses incurred in complying with laws regulating the
issue or sale of securities. For the foregoing, the Adviser receives a monthly
fee of 1/12th of 1.25% (1.25% per annum) of the daily net assets of the Fund.
The Fund pays all of its expenses not assumed by the Adviser pursuant to
the Advisory Agreement, including, but not limited to, the professional costs of
preparing and the cost of printing its registration statements required under
the Securities Act of 1933 and the Investment Company Act of 1940 and any
amendments thereto, the expense of registering its shares with the Securities
and Exchange Commission and in the various states, the printing and distribution
cost of prospectuses mailed to existing shareholders, director and officer
liability insurance, reports to shareholders, reports to government authorities
and proxy statements, interest charges, brokerage commissions and expenses in
connection with portfolio transactions. The Fund also pays the fees of directors
who are not interested persons of the Adviser or officers or employees of the
Fund, salaries of administrative and clerical personnel, association membership
dues, auditing and accounting services, fees and expenses of any custodian or
trustees having custody of Fund assets, expenses of repurchasing and redeeming
shares, printing and mailing expenses, charges and expenses of dividend
disbursing agents, registrars and stock transfer agents, including the cost of
keeping all necessary shareholder records and accounts and handling any problems
related thereto. The Fund has also entered into an administration agreement (the
"Administration Agreement") with Firstar Trust Company (the "Administrator"),
615 East Michigan Street, Milwaukee, Wisconsin 53202. Under the Administration
Agreement, the Administrator maintains the books, accounts and other documents
required by the Act, responds to shareholder inquiries, prepares the Fund's
financial statements and tax returns, prepares certain reports and filings with
the Securities and Exchange Commission and with state Blue Sky authorities,
furnishes statistical and research data, clerical, accounting and bookkeeping
services and stationery and office supplies, keeps and maintains the Fund's
financial and accounting records and generally assists in all aspects of the
Fund's operations. The Administrator, at its own expense and without
reimbursement from the Fund or the Company, furnishes office space and all
necessary office facilities, equipment and executive personnel for performing
the services required to be performed by it under the Administration Agreement.
For the foregoing, the Administrator receives from the Fund a fee, paid monthly,
at an annual rate of .06% of the first $200,000,000 of the Fund's average net
assets, .05% of the next $500,000,000 of the Fund's average net assets, and .03%
of the Fund's net assets in excess of $700,000,000. Notwithstanding the
foregoing, the Administrator's minimum annual fee is $30,000.
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Firstar Trust Company also provides custodial and transfer agency services
for the Fund. Information regarding the fees payable by the Fund to Firstar
Trust Company for these services is provided in the Statement of Additional
Information.
DETERMINATION OF NET ASSET VALUE
Shares are purchased at their net asset value per share. The Fund calculates its
net asset value by dividing the total value of its net assets (meaning its
assets less its liabilities) by the total number of its shares outstanding at
that time. Net asset value is determined as of the end of regular trading hours
on the New York Stock Exchange (currently 4:00 p.m. New York City time) on days
that the New York Stock Exchange is open for trading. This determination is
applicable to all transactions in shares of the Fund prior to that time and
after the previous time as of which net asset value was determined. Accordingly,
purchase orders for Fund shares accepted or Fund shares tendered for redemption
prior to the close of regular trading on a day the New York Stock Exchange is
open for trading will be valued as of the close of trading, and purchase orders
for Fund shares accepted or Fund shares tendered for redemption after that time
will be valued as of the close of the next trading day.
Common stocks that are listed on any national stock exchange or quoted on
the NASDAQ Stock Market will be valued at the last sale price on the date
valuation is made. Price information on listed securities is taken from the
exchange where the security is primarily traded. Common stocks which are listed
on any national stock exchange or the NASDAQ Stock Market but which are not
traded on the valuation date will be valued at the current bid prices. Unlisted
equity securities for which market quotations are readily available and options
are valued at the current bid prices. Debt securities which will mature in more
than 60 days will be valued at the latest bid prices furnished by an independent
pricing service. Short-term instruments (those with remaining maturities of 60
days or less) will be valued at amortized cost, which approximates market value.
Other assets and securities for which there are no readily available market
quotations are valued at their fair value as determined by the Adviser in
accordance with procedures approved by the Board of Directors.
HOW TO PURCHASE SHARES
Shares of the Fund may be purchased directly from the Company. The price
per share of the Fund is its next determined per share net asset value after
receipt of a completed account application. An account application is included
with this Prospectus. Additional account applications may be obtained from the
Company.
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INITIAL INVESTMENT
The Board of Directors of the Company has established $1,000 as the minimum
initial purchase for the Fund (except for initial purchases through the
Automatic Investment Plan or an Individual Retirement Account for which the
minimum is $500) and $100 as the minimum for any subsequent purchase (except
through dividend reinvestment), which minimum amounts are subject to change at
any time. Shareholders of the Fund will be advised at least 30 days in advance
of any increases in such minimum amounts.
TO PURCHASE BY MAIL
Account applications should be mailed directly to The Thurlow Funds, c/o Firstar
Trust Company, P.O. Box 701, Milwaukee, WI 53201-0701. All applications must be
accompanied by payment in the form of a check made payable to The Thurlow Growth
Fund. All purchases must be made in U.S. dollars and checks drawn on U.S. banks.
No third party checks or cash will be accepted. Firstar Trust Company will
charge a $20 fee against a shareholder's account for any payment check returned
to the custodian. The shareholder will also be responsible for any losses
suffered by the Fund as a result. When a purchase is made by check and
redemption is made shortly thereafter, the Company may delay the mailing of a
redemption check until it is satisfied that the check has cleared which may take
up to twelve days. To avoid redemption delays, purchases may be made by cashiers
or certified check or by direct wire transfers. Note: Different forms are used
for establishing retirement plans. Please call Firstar Trust Company at
1-888-848-7569 to obtain such forms. The U.S. Postal Service and other
independent delivery services are not agents of the Fund. Therefore, deposit in
the mail or with such services of account applications does not constitute
receipt by Firstar Trust Company or the Fund. DO NOT mail account applications
by overnight courier to the post office box address. Instead please follow the
instructions set forth below.
TO PURCHASE BY OVERNIGHT OR EXPRESS MAIL
Account applications also may be sent by overnight or express mail. Please
use the following address to insure proper delivery: The Thurlow Funds, c/o
Firstar Trust Company, Mutual Fund Services, 3rd Floor, 615 East Michigan
Street, Milwaukee, Wisconsin 53202. DO NOT mail purchase application by
overnight courier to the post office box address.
TO PURCHASE BY WIRE
The establishment of a new account by wire transfer should be preceded by a
telephone call to Firstar Trust Company at 1-888-848-7569 to provide information
for the setting up of the account. A completed account application also must be
sent to the Fund at the above address immediately following the investment. A
purchase request for The Thurlow Growth Fund should be wired through the Federal
Reserve System as follows:
Firstar Bank Milwaukee, N.A.
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
ABA number 0750-00022
For credit to Firstar Trust Company
Account Number 112-952-137
For further credit to The Thurlow Growth Fund
Shareholder name:_________________________________________________________
Shareholder account number:_______________________________________________
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TO MAKE ADDITIONAL INVESTMENTS
Shareholders of the Fund may add to their account at any time by purchasing
shares by mail ($100 minimum) or by wire ($500 minimum) according to the
instructions above. Shareholders should notify Firstar Trust Company at
1-888-848-7569 prior to sending a wire. The remittance form that is attached to
a shareholder's individual account statement should, if possible, accompany any
investment made through the mail. Every purchase request must include a
shareholder's account registration number in order to assure that funds are
credited properly.
AUTOMATIC INVESTMENT PLAN
The Fund offers an Automatic Investment Plan whereby a shareholder may
automatically make purchases of Fund shares on a regular, convenient basis ($100
minimum per transaction). Under the Automatic Investment Plan, a shareholder's
designated bank or other financial institution debits a pre-authorized amount on
the shareholder's account on any date specified by the shareholder each month or
calendar quarter and applies the amount to the purchase of Fund shares. If such
date is a weekend or holiday, such purchase shall be made on the next business
day. The Automatic Investment Plan must be implemented with a financial
institution that is a member of the Automatic Clearing House ("ACH"). The Fund
currently does not charge a fee for participating in the Automatic Investment
Plan. The transfer agent, Firstar Trust Company, will impose a $20 fee if
sufficient funds are not available in the shareholder's account at the time of
the automatic transaction. An application to establish the Automatic Investment
Plan is included as part of the account application. Shareholders may change the
date or amount of investments at any time by writing to or calling Firstar Trust
Company at 1-888-848-7569. In the event an investor discontinues participation
in the Automatic Investment Plan, the Fund reserves the right to redeem the
investor's account involuntarily, upon 60 days notice, if the account value is
$500 or less.
GENERAL INFORMATION
As a no-load mutual fund, the Fund imposes no sales commissions and, therefore,
the entire amount of an investment in the Fund is used to purchase shares in the
Fund. All shares purchased will be credited to the shareholder's account and
confirmed by a statement mailed to the shareholder's address. The Company does
not issue stock certificates for shares purchased. Applications are subject to
acceptance by the Company and are not binding until so accepted. The Fund does
not, except as indicated in the following sentence, accept telephone orders for
the purchase of shares, and it reserves the right to reject applications in
whole or in part. The Fund may accept telephone orders from broker-dealers who
have been previously approved by the Fund. It is the responsibility of such
broker-dealers promptly to forward purchase or redemption orders to the Fund.
Although there is no sales charge levied directly by the Fund, such
broker-dealers may charge the investor a fee for their services at either the
time of purchase or the time of redemption. Such charges may vary among
broker-dealers but in all cases will be retained by the broker-dealer and not
remitted to the Fund or the Adviser.
<PAGE>
SERVICE AND DISTRIBUTION PLAN
The Fund has adopted a Service and Distribution Plan (the "Plan") pursuant to
Rule 12b-1 under the 1940 Act. The Plan authorizes payments by the Fund in
connection with the distribution of their shares at an annual rate, as
determined from time to time by the Board of Directors, of up to 0.25% of the
Fund's average daily net assets. Payments made pursuant to the Plan may only be
used to pay distribution expenses in the year incurred. Amounts paid under the
Plan by the Fund may be spent by the Fund on any activities or expenses
primarily intended to result in the sale of shares of the Fund as determined by
the Board of Directors, including but not limited to, advertising, compensation
for sales and sales marketing activities of financial institutions and others,
such as dealers or other distributors, shareholder account servicing, production
and dissemination of prospectuses and sales and marketing materials, and capital
or other expenses of associated equipment, rent salaries, bonuses, interest and
other overhead. To the extent any activity is one which the Fund may finance
without a Plan, the Fund may also make payments to finance such activity outside
of the Plan and not subject to its limitations.
HOW TO REDEEM SHARES
REGULAR REDEMPTION
A shareholder may require the Company to redeem his or her shares on the Fund in
whole or in part at any time during normal business hours. Redemption requests
may be made in writing and directed to The Thurlow Funds, c/o Firstar Trust
Company, P.O. Box 701, Milwaukee, Wisconsin 53201 0701. Redemption requests sent
by overnight or express mail should be directed to The Thurlow Funds, c/o
Firstar Trust Company, Mutual Fund Services, 3rd Floor, 615 East Michigan
Street, Milwaukee, Wisconsin 53202. DO NOT mail redemption requests by overnight
courier to the post office box address. If a redemption request is inadvertently
sent to the Company at its corporate address, it will be forwarded to Firstar
Trust Company, and the effective date of redemption will be delayed until
Firstar Trust Company receives the request. Requests for redemption which are
subject to any special conditions or which specify an effective date other than
as provided herein cannot be honored by the Fund.
Redemption requests should specify the name of the Fund, the number of
shares or dollar amount to be redeemed, shareholder's name, account number, and
the additional requirements listed below that apply to the particular account.
<PAGE>
TYPE OF REGISTRATION REQUIREMENTS
Individual, Joint Tenants, Proprietor, Redemption request signed by all sole
(Uniform Gift to Minors Act) Custodial person(s) required to sign
General Partners account, exactly as it is registered.
Corporations, Associations for the Redemption request and a
corporate resolution, signed by the
person(s) required to sign for the
account, accompanied by signature
guarantee(s).
Trusts Redemption requests signed by the
Trustee(s) with a signature guarantee
(If the Trustee's name is not
registered on the account, a copy of
the trust document certified within
the last 60 days is also required.)
Redemption requests from shareholders in an Individual Retirement Account
must include instructions regarding federal income tax withholding. Unless
otherwise indicated, these redemptions, as well as redemptions of other
retirement plans not involving a direct rollover to an eligible plan, will be
subject to federal income tax withholding. If a shareholder is not included in
any of the above registration categories (e.g., executors, administrators,
conservators or guardians), the shareholder should call the transfer agent,
Firstar Trust Company, at 1-888-848-7569 for further instructions.
Signatures need not be guaranteed unless otherwise indicated above, the
redemption request exceeds $25,000, or the proceeds of the redemption are
requested to be sent by wire transfer, or to a person other than the registered
holder or holders of the shares to be redeemed, or to be mailed to other than
the address of record, in which cases each signature on the redemption request
must be guaranteed by a commercial bank or trust company in the United States, a
member of the New York Stock Exchange or other eligible guarantor institution.
Redemptions will not be effective or complete until all of the foregoing
conditions, including receipt of the redemption request by Firstar Trust Company
in its capacity as transfer agent, have been satisfied.
The redemption price is the net asset value next determined after receipt
by Firstar Trust Company in its capacity as transfer agent of the written
redemption request. The amount received will depend on the market value of the
investments in the Fund's at the time of determination of net asset value, and
may be more or less than the cost of the shares redeemed. A check in payment for
shares redeemed will be mailed to the shareholder no later than the seventh day
after receipt of the redemption request except as indicated in "HOW TO PURCHASE
SHARES" for certain redemptions of shares purchased by check.
<PAGE>
TELEPHONE REDEMPTION
Shares of the Fund may also be redeemed by calling the transfer agent, Firstar
Trust Company, at 1-888-848-7569. In order to utilize this procedure for
telephone redemption, a shareholder must have previously elected this procedure
in writing, which election will be reflected in the records of Firstar Trust
Company, and the redemption proceeds must be mailed directly to the investor or
transmitted to the investor's pre-designated account at a domestic bank. To
change the designated account or address, the investor should send a written
request with signature(s) guaranteed to Firstar Trust Company. Any written
redemption requests received within 15 days after an address change must be
accompanied by a signature guarantee and no telephone redemptions will be
allowed within 15 days of such a change. Once made, telephone redemption
requests may not be modified or canceled. The selling price of each share being
redeemed will be the Fund's per share net asset value next calculated after
receipt by Firstar Trust Company or the telephone redemption request.
The Fund reserves the right to refuse a telephone redemption if it believes
it is advisable to do so. Procedures for redeeming shares of the Fund by
telephone may be modified or terminated by the Fund at any time. Neither the
Fund nor Firstar Trust Company will be liable for following instructions for
telephone redemption transactions which they reasonably believe to be genuine,
even if such instructions prove to be unauthorized or fraudulent, but may be
liable for unauthorized transactions if they fail to follow such procedures.
These procedures include requiring shareholders to provide some form of personal
identification prior to acting upon telephone instructions and recording all
telephone calls.
During periods of substantial economic or market changes, telephone
redemptions may by difficult to implement. If an investor is unable to contact
Firstar Trust Company by telephone, the investor may then redeem his or her
shares by delivering the redemption request to Firstar Trust Company by mail as
described above.
The Fund reserves the right to redeem the shares held in any account if at
the time of any transfer or redemption of Fund shares in the account, the value
of the remaining shares in the account falls below $1,000. Shareholders will be
notified in writing that the value of your account is less than the minimum and
allowed at least 60 days to make an additional investment. The receipt of
proceeds from the redemption of shares held in an Individual Retirement Account
("IRA") will constitute a taxable distribution of benefits from the IRA unless a
qualifying rollover contribution is made. Involuntary redemptions will not be
made because the value of shares in an account falls below $1,000 solely because
of a decline in the Fund's net asset value.
A shareholder's right to redeem shares of the Fund will be suspended and
the right to payment postponed for more than seven days for any period during
which the New York Stock Exchange is closed because of financial conditions or
any other extraordinary reason and may be suspended for any period during which
(a) trading on the New York Stock Exchange is restricted pursuant to rules and
regulations of the Securities and Exchange Commission, (b) the Securities and
Exchange Commission has by order permitted such suspension or (c) such
emergency, as defined by rules and regulations of the Securities and Exchange
Commission, exists as a result of which it is not reasonably practicable for the
Fund to dispose of its securities or fairly to determine the value of its net
assets.
<PAGE>
RETIREMENT PLANS
The Fund offers the following retirement plans that may be funded with purchases
of Fund shares and may allow investors to shelter or defer some of their income
from taxes.
A description of applicable service fees and certain limitations on
contributions and withdrawals, as well as applications forms, are available from
the Fund upon request. The IRA documents contain a disclosure statement that the
Internal Revenue Service requires to be furnished to individuals who are
considering adopting an IRA. Because a retirement program involves commitments
covering future years, it is important that the investment objective of the Fund
be consistent with the participant's retirement objectives. Premature
withdrawals from a retirement plan will result in adverse tax consequences.
INDIVIDUAL RETIREMENT ACCOUNT ("IRA")
Individuals who receive compensation or earned income, even if they are active
participants in a qualified retirement plan (or certain similar retire plans),
may establish their own tax-sheltered Individual Retirement Account ("IRA"). The
Fund offers a prototype IRA plan that may be adopted by individuals. There is
currently no charge for establishing an IRA account although there is an annual
maintenance fee.
Earnings on amounts held in an IRA are not taxed until withdrawal. The
amount of deduction, if any, allowed for IRA contributions is limited for
individuals who are active participants in an employer maintained retirement
plan and whose income exceeds specific limits.
SIMPLIFIED EMPLOYEE PENSION PLAN ("SEP/IRA")
The Fund also offers a prototype simplified employee pension ("SEP") plan for
employers, including self-employed individuals, who wish to purchase shares of
the Fund with tax-deductible contributions not exceeding annually for any one
participant the lesser of $30,000 or 15% of earned income. Under the SEP plan,
employer contributions are made directly to the IRA accounts of eligible
participants.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund will distribute quarterly in March, June, September and December any
net investment income and annually in December any net realized capital gains to
shareholders. Dividend and capital gains distributions may be automatically
reinvested or received in cash.
The Fund will attempt to qualify annually for taxation as a "regulated
investment company" under the Internal Revenue Code so that the Fund will not be
subject to federal income tax to the extent its income is distributed to
shareholders. Dividends paid by the Fund from net investment income and net
short-term capital gains, whether received in cash or reinvested in additional
shares, will be taxable to shareholders as ordinary income. Distributions paid
by the Fund from long-term capital gains, whether received in cash or reinvested
in additional shares, are taxable as long-term capital gains, regardless of the
length of time the shareholder has owned his or her shares. Capital gains
distributions are made when the Fund realizes net capital gains on sales of
portfolio securities during the year. The Fund does not seek to realize any
particular amount of capital gains during a year; rather, realized gains are a
by-product of portfolio management activities. Consequently, capital gains
distributions may be expected to vary considerably from year to year; there will
be no capital gains distributions in years when the Fund realizes any net
capital loss.
<PAGE>
The Fund will notify the shareholder annually as to the tax status of
dividend and capital gains distributions paid by the Fund. A sale or redemption
of shares in the Fund is a taxable event and may result in a capital gain or
loss. Dividend distributions, capital gains distributions, and capital gains or
losses from redemptions may be subject to state and local taxes.
The Fund may be required to withhold Federal income tax at a rate of 31%
("backup withholding") from dividend payments and redemption proceeds if a
shareholder fails to furnish the Fund with his or her social security or other
tax identification number and certify under penalty of perjury that such number
is correct and that he or she is not subject to backup withholding. The
certification form is included as part of the account application and shall be
completed when the account is opened.
The tax discussion set forth above is included for general information
purposes only. Perspective investors should consult their own tax advisers
concerning the tax consequences of an investment in the Fund.
DIVIDEND REINVESTMENT
The shareholder may elect to have all income dividends and capital gains
distributions reinvested in shares of the Fund, or paid in cash, or elect to
have income dividends reinvested and capital gains distributions reinvested or
paid in cash, or capital gains distributions reinvested and income dividends
paid in cash. Please refer to the account application form accompanying this
Prospectus for further information. If the applicant does not specify an
election, all dividends and capital gains distributions will automatically be
reinvested in full and fractional shares of the Fund calculated at the nearest
1,000th of a share. Shares are purchased at the net asset value in effect on the
business day after the dividend record date and are credited to the
shareholder's account on the dividend payment date. Cash dividends are also paid
on the dividend payment date. The shareholder will be advised of the number of
shares purchased and the price following each such reinvestment. An election to
reinvest or to receive dividends and distributions in cash will apply to all
shares registered to the shareholder, including those previously registered.
The shareholder may change an election at any time by notifying the Fund at
any time in writing. If such a notice is received between a dividend declaration
date and payment date, it will become effective on the day following the payment
date. The Fund may modify or terminate its dividend reinvestment program at any
time on a thirty days' note to participants.
<PAGE>
CAPITAL STRUCTURE
The Company's Articles of Incorporation permit the Board of Directors to issue
500,000,000 shares of common stock. The Board of Directors has the power to
designate one or more classes ("series") of shares of common stock and to
designate or redesignate any unissued shares with respect to such series.
Currently the shares of the Fund are the only series of shares being offered by
the Company. The Company is controlled by Thomas F. Thurlow and Thomas N.
Thurlow, the father of Thomas F. Thurlow, each of whom owns 50% of the shares as
of August 1, 1997. Shareholders are entitled: (i) to one vote per full share;
(ii) to such distributions as may be declared by the Company's Board of
Directors out of funds legally available; and (iii) upon liquidation, to
participate ratably in the assets available for distribution. There are no
conversion or sinking fund provisions applicable to the shares, and the holders
have no preemptive rights and may not cumulate their votes in the election of
directors. Consequently the holders of more than 50% of the shares of the Fund
voting for the election of directors can elect the entire Board of Directors and
in such event the holders of the remaining shares voting for the election of
directors will not be able to elect any person or persons to the Board of
Directors. The shares are redeemable and are transferable. All shares issued and
sold by the Fund will be fully paid and nonassessable. Fractional shares entitle
the holder to the same rights as whole shares. The Fund will not issue
certificates evidencing shares. Instead the shareholder's account will be
credited with the number of shares purchased, relieving shareholders of
responsibility for safekeeping of certificates and the need to deliver them upon
redemption. Written confirmations are issued for all purchases of shares.
Firstar Trust Company, 615 East Michigan Street, Milwaukee, Wisconsin 53202 acts
as the Fund's transfer agent and dividend disbursing agent.
The Maryland Business Corporation Law permits registered investment
companies, such as the Fund, to operate without an annual meeting of
shareholders under specified circumstances if an annual meeting is not required
by the Act. The Fund has adopted the appropriate provisions in its Bylaws and
does not anticipate holding an annual meeting of shareholders to elect directors
unless otherwise required by the Act. The Fund has also adopted provisions in
its Bylaws for the removal of directors by its shareholders.
BROKERAGE TRANSACTIONS
The Advisory Agreement authorizes the Adviser to select the brokers or dealers
that will execute the purchases and sales of the Fund's portfolio securities. In
placing purchase and sale orders for the Fund, it is the policy of the Adviser
to seek the best execution of orders at the most favorable price in light of the
overall quality of brokerage and research services provided. The Advisory
Agreement permits the Adviser to pay a broker which provides brokerage and
research services to the Adviser a commission for effecting securities
transactions in excess of the amount another broker would have charged for
executing the transaction, provided the Adviser believes this to be in the best
interests of the Fund. Although the Fund does not intend to market its shares
through intermediary broker-dealers, the Fund may place portfolio orders with
broker-dealers who recommend the purchase of its shares to clients, if the
Adviser believes the commissions and transaction quality are comparable to that
available from other brokers, and may allocate portfolio brokerage on that
basis.
<PAGE>
ACCOUNT STATEMENTS
Shareholders of the Fund will be provided at least semi-annually with a report
showing the Fund's portfolio and other information. After the close of the
Company's fiscal year, which ends June 30, the Fund will provide the
shareholders with an annual report containing audited financial
statements.Firstar Trust Company will send an individual account statement to
shareholders after each purchase, including reinvestment of dividends, or
redemption of shares of the Fund. Each shareholder will also receive an annual
statement after the end of the calendar year listing all transactions in shares
of the Fund during the year. Shareholders who have questions about their
respective accounts should call Firstar Trust Company at 1-888-848-7569.
Shareholders who have general questions about the Fund or desire additional
information should write to The Thurlow Growth Fund, c/o Firstar Trust Company,
P.O. Box 701, Milwaukee, Wisconsin 53201-0701 or call 1-888-848-7569.
PERFORMANCE INFORMATION
The Fund may provide from time to time in advertisements, reports to
shareholders and other communications with shareholders its average annual total
return. An average annual total return refers to the rate of return which, if
applied to an initial investment in the Fund at the beginning of a stated period
and compounded over the period, would result in the redeemable value of the
investment in the Fund at the end of the stated period assuming reinvestment of
all dividends and distributions and reflecting the effect or all recurring fees.
The Fund may also provide "aggregate" total return information for various
periods, representing the cumulative change in value of an investment in the
Fund for a specific period (again reflecting changes in share price and assuming
reinvestment of dividends and distributions).
Any reported performance results will be based on historical earnings and
should not be considered as representative of the performance of the Fund in the
future. An investment in the Fund will fluctuate in value and at redemption its
value may be more or less than the initial investment. The Fund may compare its
performance to other mutual funds with similar investment objectives and to the
industry as a whole, as reported by Morningstar, Inc., Lipper Analytical
Services, Inc., Money, Forbes, Business Week and Barron's magazines and The Wall
Street Journal. (Morningstar, Inc. and Lipper Analytical Services, Inc. are
independent services that each rank over 1,000 mutual funds based upon total
return performance.) The Fund may also compare its performance to the Dow Jones
Industrial Average, Nasdaq Composite Index, Nasdaq Industrials Index, Value Line
Composite Index, the Standard & Poor's 500 Stock Index and the Consumer Price
Index. Such comparisons may be made in advertisements, shareholder reports or
other communications to shareholders.
<PAGE>
Investment Adviser:
Thurlow Capital Management, Inc.
P.O. Box 50427
Palo Alto, CA 94303-0427
Administrator, Transfer Agent, Dividend Paying Agent,
Shareholder Servicing Agent & Custodian:
Firstar Trust Company
615 East Michigan Street
P.O. Box 701
Milwaukee, WI 53201 0701
800/261-6950
Legal Counsel:
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, WI 53202-5367
Independent Auditors:
Arthur Andersen LLP
100 East Wisconsin Avenue
Milwaukee, WI 53201-1215
<PAGE>
THE THURLOW FUNDS, INC.
c/o Firstar Trust Company
P.O. Box 701
Milwaukee, Wisconsin, 53201-9155
www.thurlowfunds.com
Logo THURLOW(tm) FUNDS
Photo of statue on building
<PAGE>
