Securities Act Registration No. 333-_____
Investment Company Act Reg. No. 811-_____
__________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
__________________________
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. __ [_]
Post-Effective Amendment No. __ [_]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. __ [_]
(Check appropriate box or boxes.)
______________________
THE THURLOW FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
1256 Forest Avenue
Palo Alto, California 94301
(Address of Principal Executive Offices) (Zip Code)
(888) 848-7569
(Registrant's Telephone Number, including Area Code)
Copy to:
Thomas F. Thurlow Richard L. Teigen
The Thurlow Funds, Inc. Foley & Lardner
1256 Forest Avenue 777 East Wisconsin Avenue
Palo Alto, California 94301 Milwaukee, Wisconsin 53202
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable
after the Registration Statement becomes effective.
In accordance with Rule 24f-2(a)(1) under the Investment Company Act of
1940, the Registrant declares that an indefinite number or amount of
shares of its common stock, $0.0001 par value, is being registered by this
Registration Statement.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission acting
pursuant to said Section 8(a) may determine.
<PAGE>
THE THURLOW FUNDS, INC.
CROSS REFERENCE SHEET
(Pursuant to Rule 481 showing the location in the Prospectus and
the Statement of Additional Information of the responses to the Items of
Parts A and B of Form N-1A.)
Caption or Subheading in
Prospectus or Statement of
Item No. on Form N-1A Additional Information
PART A - INFORMATION REQUIRED IN PROSPECTUS
1. Cover Page Cover Page
2. Synopsis Expense Summary
3. Condensed Financial Information Performance Information
4. General Description of Registrant The Fund; Investment Objectives
and Strategy; Investment
Policies and Risks; Investment
Restrictions
5. Management of the Fund Management of the Fund;
Brokerage Transactions
5A. Management's Discussion of Fund *
Performance
6. Capital Stock and Other Dividends, Distributions and
Securities Taxes; Dividend Reinvestment;
Capital Structure; Account
Statements
7. Purchase of Securities Being How to Purchase Shares;
Offered Dividend Reinvestment;
Retirement Plans
8. Redemption or Repurchase How to Redeem Shares
9. Legal Proceedings *
PART B - INFORMATION REQUIRED IN STATEMENT
OF ADDITIONAL INFORMATION
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History *
13. Investment Objectives and Investment Restrictions;
Policies Investment Considerations
14. Management of the Fund Directors and Officers of the
Corporation
15. Control Persons and Principal Principal Stockholders
Holders of Securities
16. Investment Advisory and Other Investment Adviser,
Services Administrator, Custodian,
Transfer Agent and Accounting
Services Agent; Distribution of
Shares; Independent Accountants
17. Brokerage Allocation Allocation of Portfolio
Brokerage
18. Capital Stock and Other Included in Prospectus under
Securities "CAPITAL STRUCTURE"
19. Purchase, Redemption and Pricing Included in Prospectus under
of Securities Being Offered "DETERMINATION OF NET ASSET
VALUE"; "HOW TO PURCHASE
SHARES"; "DIVIDEND
REINVESTMENT"; "HOW TO REDEEM
SHARES"; "RETIREMENT PLANS";
Determination of Net Asset
Value and Performance;
Distribution of Shares
20. Tax Status Taxes
21. Underwriters *
22. Calculations of Performance Data Determination of Net Asset
Value and Performance
23. Financial Statements Financial Statements
_______________________
* Answer negative or inapplicable
<PAGE>
P R O S P E C T U S
July 1, 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 July 1, 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.
<PAGE>
TABLE OF CONTENTS
Expense Summary . . . . . . . . 1 How to Redeem Shares . . . . . . 10
The Fund . . . . . . . . . . . 2 Retirement Plans . . . . . . . . 12
Investment Objectives and Dividends, Distributions and
Strategy . . . . . . . . . . . 2 Taxes . . . . . . . . . . . . . . 13
Investment Policies and Risks . 2 Dividend Reinvestment . . . . . . 14
Investment Restrictions . . . . 6 Capital Structure . . . . . . . . 14
Management of the Fund . . . . 6 Brokerage Transactions . . . . . 15
Determination of Net Asset Account Statements . . . . . . . 15
Value . . . . . . . . . . . . . 7 Performance Information . . . . . 15
How to Purchase Shares . . . . 8
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 waive its management fee and/or 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. The Fund estimates that absent the limitation
Other Expenses and Total Fund Operating Expenses would be 1.25% and
2.75%, respectively, for the fiscal year ending June 30, 1998.
Example:
1 Year 3 Years
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: $20 $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 or 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.
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 advisor. 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-down" 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.
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 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 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.
Defensive Strategies
If the Adviser believes that 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 to
achieve its secondary investment objective of current income and in 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 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. 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 security, no matter for how long
or short a period it has been held in the 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 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.
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.
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 an application in proper form. A purchase application is
included with this Prospectus. Additional purchase applications may be
obtained from the Company.
Initial Investment
The Board of Directors of the Company has established $1,000 as the
minimum initial purchase for the Fund and $100 as the minimum for any
subsequent purchase (except for the Automatic Investment Plan and 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
Purchase 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 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 (other than a cashier's or certified
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. (It will normally take up to 3 days to clear local personal or
corporate checks and up to 7 days to clear other personal and corporate
checks.) 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 1-800-773-9665 or 1-414-765-4124 to obtain such forms.
To Purchase by Overnight or Express Mail
Purchase 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 1-800-773-9665 or 1-414-765-
4124 to provide information for the setting up of the account. A
completed purchase 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: _______________________
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 1-800-773-9665 or 1-414-765-4124 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 purchase application.
Shareholders may change the date or amount of investments at any time by
writing to or calling Firstar Trust Company at 1-800-773-9665. 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 they reserve the right to reject applications in
whole or in part. The Funds 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 Funds or the
Adviser.
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 must 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.
Type of Registration Requirements
Individual, Joint Tenants, Redemption request signed by all
Sole Proprietor, Custodial person(s) required to sign for
(Uniform Gift to Minors Act) the account, exactly as it is
General Partners registered.
Corporations, Associations 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 1-800-773-9665
or 1-414-765-4124 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
all required documentation 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
request in proper form with all required documentation. The amount
received will depend on the market value of the investments in the Fund's
portfolio 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 in proper form and all
required documentation except as indicated in "HOW TO PURCHASE SHARES" for
certain redemptions of shares purchased by check.
Telephone Redemption
Shares of the Fund may also be redeemed by calling the transfer agent,
Firstar Trust Company, at 1-800-773-9665 or 1-414-765-4124. 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.
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 Revue 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.
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 share
purchase 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 purchase 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' notice to participants.
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 classify or reclassify any unissued shares with respect to
such series. Currently the shares of the Fund are the only class of
shares being offered by the Company. 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.
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 1-800-773-9665 or 1-414-765-4124.
Investors 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.
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>
STATEMENT OF ADDITIONAL INFORMATION July 1, 1997
THE THURLOW FUNDS, INC.
1256 Forest Avenue
Palo Alto, California 94301
This Statement of Additional Information is not a prospectus and
should be read in conjunction with the prospectus of The Thurlow Funds,
Inc., dated July 1, 1997 (the "Prospectus"), for The Thurlow Growth Fund.
Requests for copies of the Prospectus should be made by writing to The
Thurlow Funds, Inc., 1256 Forest Avenue, Palo Alto, California 94301,
Attention: Secretary or by calling 1-888-848-7569.
<PAGE>
THE THURLOW FUNDS, INC.
Table of Contents
Page No.
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . 1
INVESTMENT CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . 3
DIRECTORS AND OFFICERS OF THE CORPORATION . . . . . . . . . . . . . . 8
PRINCIPAL STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . 10
INVESTMENT ADVISER, ADMINISTRATOR, CUSTODIAN,
TRANSFER AGENT AND ACCOUNTING SERVICES AGENT . . . . . . . . . . . . . 10
DETERMINATION OF NET ASSET VALUE AND PERFORMANCE . . . . . . . . . . 12
DISTRIBUTION OF SHARES . . . . . . . . . . . . . . . . . . . . . . . 13
ALLOCATION OF PORTFOLIO BROKERAGE . . . . . . . . . . . . . . . . . . 14
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
STOCKHOLDER MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . 17
DESCRIPTION OF SECURITIES RATINGS . . . . . . . . . . . . . . . . . . 18
INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . 22
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . 22
No person has been authorized to give any information or to make
any representations other than those contained in this Statement of
Additional Information and the Prospectus dated July 1, 1997 and, if given
or made, such information or representations may not be relied upon as
having been authorized by The Thurlow Funds, Inc.
This Statement of Additional Information does not constitute an
offer to sell securities.
<PAGE>
INVESTMENT RESTRICTIONS
As set forth in the Prospectus dated July 1, 1997 of The Thurlow
Funds, Inc. (the "Corporation") under the caption "Investment Objectives
and Strategy," the primary investment objective of The Thurlow Growth Fund
(the "Fund") is capital appreciation, with current income as a secondary
objective. Consistent with its investment objectives, the Fund has
adopted the following investment restrictions which are matters of
fundamental policy and cannot be changed without approval of the holders
of the lesser of: (i) 67% of the Fund's shares present or represented at
a stockholders meeting at which the holders of more than 50% of such
shares are present or represented; or (ii) more than 50% of the
outstanding shares of the Fund.
1. The Fund will not purchase securities on margin (except for
such short term credits as are necessary for the clearance of
transactions); provided, however, that the Fund may borrow money to the
extent set forth in investment restriction no. 4.
2. The Fund may sell securities short to the extent permitted
by the Investment Company Act of 1940 (the "Act").
3. The Fund may write put and call options to the extent
permitted by the Act.
4. The Fund may borrow money or issue senior securities to the
extent permitted by the Act.
5. The Fund may pledge or hypothecate its assets to secure its
borrowings.
6. The Fund will not lend money (except by purchasing publicly
distributed debt securities, purchasing securities of a type normally
acquired by institutional investors or entering into repurchase
agreements) and will not lend its portfolio securities, unless such loans
are secured continuously by collateral at least equal to the market value
of the securities loaned in the form of cash and/or securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities, and
provided that no such loan will be made if upon making of such loan more
than 30% of the value of the Fund's total assets would be subject to such
loans.
7. The Fund will not make investments for the purpose of
exercising control or management of any company.
8. The Fund will not purchase securities of any issuer (other
than the United States or an instrumentality of the United States) if, as
a result of such purchase,the Fund would hold more than 10% of any class
of securities, including voting securities, of such issuer or more than 5%
of the Fund's assets, taken at current value, would be invested in
securities of such issuer, except that up to 75% of the Fund's total
assets may be invested without regard to these limitations.
9. The Fund will not invest 25% or more of the value of its
total assets, determined at the time an investment is made, exclusive of
U.S. government securities, in securities issued by companies primarily
engaged in the same industry. In determining industry classifications the
Fund will use the current Directory of Companies Filing Annual Reports
with the Securities and Exchange Commission except to the extent permitted
by the Act.
10. The Fund will not act as an underwriter or distributor of
securities other than shares of the Fund (except to the extent that the
Fund may be deemed to be an underwriter within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"), in the
disposition of restricted securities).
11. The Fund will not purchase or sell real estate or real
estate mortgage loans or real estate limited partnerships.
12. The Fund will not purchase or sell commodities or commodity
contracts, including futures contracts.
The Fund has adopted certain other investment restrictions which
are not fundamental policies and which may be changed by the Corporation's
Board of Directors without stockholder approval. These additional
restrictions are as follows:
1. The Fund will not invest more than 10% of the value of its
net assets in illiquid securities.
2. The Fund will not purchase the securities of other
investment companies except: (a) as part of a plan of merger,
consolidation or reorganization approved by the stockholders of the Fund;
(b) securities of registered open-end investment companies that invest
exclusively in high quality, short-term debt securities; or (c) securities
of registered closed-end investment companies on the open market where no
commission results, other than the usual and customary broker's
commission. No purchases described in (b) and (c) will be made if as a
result of such purchases (i) the Fund and its affiliated persons would
hold more than 3% of any class of securities, including voting securities,
of any registered investment company; (ii) more than 5% of the Fund's net
assets would be invested in shares of any one registered investment
company; and (iii) more than 10% of the Fund's net assets would be
invested in shares of registered investment companies.
3. The Fund will not acquire or retain any security issued by
a company, an officer or director of which is an officer or director of
the Fund or an officer, director or other affiliated person of its
investment adviser, without authorization of the Corporation's Board of
Directors.
4. The Fund will not purchase any interest in any oil, gas or
other mineral leases or any interest in any oil, gas or any other mineral
exploration or development program.
The aforementioned percentage restrictions on investment or
utilization of assets refer to the percentage at the time an investment is
made. If these restrictions (other than those relating to borrowing of
money or issuing senior securities) are adhered to at the time an
investment is made, and such percentage subsequently changes as a result
of changing market values or some similar event, no violation of the
Fund's fundamental restrictions will be deemed to have occurred. Any
changes in the Fund's investment restrictions made by the Board of
Directors will be communicated to stockholders prior to their
implementation.
INVESTMENT CONSIDERATIONS
Illiquid Securities
The Fund may invest up to 10% of its net assets in securities
for which there is no readily available market ("illiquid securities").
The 10% limitation includes certain securities whose disposition would be
subject to legal restrictions ("restricted securities"). However certain
restricted securities that may be resold pursuant to Rule 144A under the
Securities Act may be considered liquid. The Board of Directors of the
Corporation has delegated to the Adviser the day-to-day determination of
the liquidity of a security although it has retained oversight and
ultimate responsibility for such determinations. Although no definite
quality criteria are used, the Board of Directors has directed the Adviser
to consider such factors as (i) the nature of the market for a security
(including the institutional private resale markets); (ii) the terms of
these securities or other instruments allowing for the disposition to a
third party or the issuer thereof (e.g. certain repurchase obligations and
demand instruments); (iii) the availability of market quotations; and (iv)
other permissible factors.
Restricted securities may be sold in private negotiated or other
exempt transactions or in a public offering with respect to which a
registration statement is in effect under the Securities Act. When
registration is required, the Fund may be obligated to pay all or part of
the registration expenses and a considerable time may elapse between the
decision to sell and the sale date. If, during such period, adverse
market conditions were to develop, the Fund might obtain a less favorable
price than the price which prevailed when it decided to sell. Restricted
securities, if considered to be illiquid, will be priced at fair value as
determined in good faith by the Board of Directors.
Warrants
The Fund also may invest up to 5% of its net assets in warrants,
which are privileges issued by corporations enabling the owners to
subscribe to and purchase a specified number of shares of the corporation
at a specific price during a specified period of time. Warrants have no
dividend or voting rights. The 5% limitation does not include warrants
acquired by the Fund in units or attached to other securities. The Fund
will invest in warrants to participate in an anticipated increase in the
market value of the underlying security without having to purchase the
security to which the warrants relate. The purchase of warrants involves
the risk that the Fund could lose the purchase price of a warrant if the
right to subscribe to additional shares is not exercised prior to the
warrant's expiration. Also, the purchase of warrants involves the risk
that the effective price paid for the warrant added to the subscription
price of the related security may exceed the value of the subscribed
security's market price such as when there is no movement in the level of
the underlying security.
Borrowing to Purchase Securities (Leverage)
The Fund may borrow money, including borrowing for investment
purposes. Borrowing for investment is known as leveraging. Leveraging
investments, by purchasing securities with borrowed money, is a
speculative technique which increases investment risk, but also increases
investment opportunity. Since substantially all of the Fund's assets will
fluctuate in value, whereas the interest obligations on borrowings may be
fixed, the net asset value per share of the Fund when it leverages its
investments will increase more when the Fund's portfolio assets increase
in value and decrease more when the Fund's portfolio assets decrease in
value than would otherwise be the case. Interest costs on borrowings,
which may fluctuate with changing market rates of interest, may partially
offset or exceed the returns on the borrowed funds. Under adverse
conditions, the Fund might have to sell portfolio securities to meet
interest or principal payments at a time investment considerations would
not favor such sales. The Fund intends to use leverage during periods
when the Adviser believes that the Fund's investment objective would be
furthered by increasing the Fund's investments in common stocks, but will
not employ leverage during the fiscal year ending June 30, 1998.
As required by the Act, the Fund may borrow money only from
banks and only if, immediately after the borrowing, the Fund maintains
continuous asset coverage (total assets, including assets acquired with
borrowed funds, less liabilities exclusive of borrowings) of 300% of all
amounts borrowed. If, for any reason, (including adverse market
conditions) the Fund fails to meet the 300% coverage test, the Fund will
be required to reduce the amount of its borrowings within three business
days to the extent necessary to meet this test. This requirement may make
it necessary for the Fund to sell a portion of its portfolio securities at
a time when investment considerations otherwise indicate that it would be
disadvantageous to do so.
In addition to the foregoing, the Fund is authorized to borrow
money from a bank as a temporary measure for extraordinary or emergency
purposes in amounts not in excess of 5% of the value of the Fund's total
assets. This borrowing is not subject to the foregoing 300% asset
coverage requirement. The Fund is authorized to pledge portfolio
securities as the Adviser deems appropriate in connection with any
borrowings.
Short Sales
The Fund may seek to realize additional gains through short sale
transactions in securities listed on one or more national securities
exchanges, or in unlisted securities. Short selling involves the sale of
borrowed securities. At the time a short sale is effected, the Fund
incurs an obligation to replace the security borrowed at whatever its
price may be at the time the Fund purchases it for delivery to the lender.
The price at such time may be more or less than the price at which the
security was sold by the Fund. Until the security is replaced, the Fund
is required to pay the lender amounts equal to any dividend or interest
which accrue during the period of the loan. To borrow the security, the
Fund also may be required to pay a premium, which would increase the cost
of the security sold. The proceeds of the short sale will be retained by
the broker, to the extent necessary to meet margin requirements, until the
short position is closed.
No short sale will be effected which will, at the time of making
such short sale transaction and giving effect thereto, cause the aggregate
market value of all securities sold short to exceed 25% of the value of
the Fund's net assets. Until the Fund closes its short position or
replaces the borrowed security, the Fund will: (a) maintain a segregated
account containing cash or liquid securities at such a level that the
amount deposited in the account plus the amount deposited with the broker
as collateral will equal the current value of the security sold short; or
(b) otherwise cover the Fund's short position.
The Fund may also engage in short sales when, at the time of the
short sale, the Fund owns or has the right to acquire an equal amount of
the security being sold at no additional cost ("selling short against the
box"). The Fund may make a short sale against the box when the Fund wants
to sell the security the Fund owns at a current attractive price, but also
wishes to defer recognition of a gain or loss for Federal income tax
purposes and for purposes of satisfying certain tests applicable to
regulated investment companies under the Internal Revenue Code. The Fund
will not engage in short sales during the fiscal year ending June 30,
1998.
Lending of Portfolio Securities
In order to generate additional income, the Fund may lend
portfolio securities constituting up to 30% of its total assets to
unaffiliated broker-dealers, banks or other recognized institutional
borrowers of securities, provided that the borrower at all times maintains
cash or equivalent collateral or provides an irrevocable letter of credit
in favor of the Fund equal in value to at least 100% of the value of the
securities loaned. During the time portfolio securities are on loan, the
borrower pays the Fund an amount equivalent to any dividends or interest
paid on such securities, and the Fund may receive an agreed-upon amount of
interest income from the borrower who delivered equivalent collateral or
provided a letter of credit. Loans are subject to termination at the
option of the Fund or the borrower. The Fund may pay reasonable
administrative and custodial fees in connection with a loan of portfolio
securities and may pay a negotiated portion of the interest earned on the
cash or equivalent collateral to the borrower or placing broker. The Fund
does not have the right to vote securities on loan, but could terminate
the loan and regain the right to vote if that were considered important
with respect to the investment.
The primary risk in securities lending is a default by the
borrower during a sharp rise in price of the borrowed security resulting
in a deficiency in the collateral posted by the borrower. The Fund will
seek to minimize this risk by requiring that the value of the securities
loaned be computed each day and additional collateral be furnished each
day if required.
High Yield Convertible Securities
The Fund may invest up to 5% of its net assets in high yield,
high risk, lower-rated convertible securities, commonly known as "junk
bonds." Investments in such securities are subject to the risk factors
outlined below.
The market for high yield convertible securities is subject to
substantial volatility. An economic downturn or increase in interest
rates may have a more significant effect on high yield convertible
securities and their markets, as well as on the ability of securities'
issuers to repay principal and interest, than on higher-rated securities
and their issuers. Issuers of high yield convertible securities may be of
low creditworthiness and the high yield convertible securities may be
subordinated to the claims of senior lenders. During periods of economic
downturn or rising interest rates the issuers of high yield convertible
securities may have greater potential for insolvency and a higher
incidence of high yield bond defaults may be experienced.
The prices of high yield convertible securities have been found
to be less sensitive to interest rate changes than higher-rated
investments but are more sensitive to adverse economic changes or
individual corporate developments. During an economic downturn or
substantial period of rising interest rates, highly leveraged issuers may
experience financial stress which would adversely affect their ability to
service their principal and interest payment obligations, to meet
projected business goals, and to obtain additional financing. If the
issuer of a high yield convertible security owned by the Fund defaults,
the Fund may incur additional expenses in seeking recovery. Periods of
economic uncertainty and changes can be expected to result in increased
volatility of market prices of high yield convertible securities and the
Fund's net asset value. Yields on high yield convertible securities will
fluctuate over time. Furthermore, in the case of high yield convertible
securities structured as zero coupon or pay-in-kind securities, their
market prices are affected to a greater extent by interest rate changes
and thereby tend to be more volatile than market prices of securities
which pay interest periodically and in cash.
The secondary market for high yield convertible securities may
at times become less liquid or respond to adverse publicity or investor
perceptions making it more difficult for the Fund to value accurately high
yield convertible securities or dispose of them. To the extent the Fund
owns or may acquire illiquid or restricted high yield convertible
securities, these securities may involve special registration
responsibilities, liabilities and costs, and liquidity difficulties, and
judgment will play a greater role in valuation because there is less
reliable and objective data available.
Special tax considerations are associated with investing in high
yield bonds structured as zero coupon or pay-in-kind securities. The Fund
will report the interest on these securities as income even though it
receives no cash interest until the security's maturity or payment date.
Further, the Fund must distribute substantially all of its income to its
shareholders to qualify for pass-through treatment under the tax law.
Accordingly, the Fund may have to dispose of its portfolio securities
under disadvantageous circumstances to generate cash or may have to borrow
to satisfy distribution requirements.
Credit ratings evaluate the safety of principal and interest
payments, not the market value risk of high yield convertible securities.
Since credit rating agencies may fail to timely change the credit ratings
to reflect subsequent events, the Adviser should monitor the issuers of
high-yield convertible securities in the portfolio to determine if the
issuers will have sufficient cash flow and profits to meet required
principal and interest payments, and to attempt to assure the securities'
liquidity so the Fund can meet redemption requests. To the extent that
the Fund invests in high yield convertible securities, the achievement of
its investment objective may be more dependent, on its own credit analysis
than is the case for higher quality bonds. The Fund may retain a
portfolio security whose rating has been changed.
Options on Securities and Index Option Transactions
The Fund will not write options during the fiscal year ending
June 30, 1998.
When writing call options on securities, the Fund may cover its
position by owning the underlying security on which the option is written.
Alternatively, the Fund may cover its position by owning a call option on
the underlying security, on a share for share basis, which is deliverable
under the option contract at a price no higher than the exercise price of
the call option written by the Fund or, if higher, by owning such call
option and depositing and maintaining in a segregated account cash or
liquid securities equal in value to the difference between the two
exercise prices. In addition, the Fund may cover its position by
depositing and maintaining in a segregated account cash or liquid
securities equal in value to the exercise price of the call option written
by the Fund. The Fund will not enter into an index option position that
exposes the Fund to an obligation to another party, unless the Fund either
(i) owns an offsetting position in securities or other options; and/or
(ii) maintains with the Fund's custodian bank (and marks-to-market, on a
daily basis) a segregated account consisting of cash or liquid securities
that, when added to the premiums deposited with respect to the option, are
equal to the market value of the underlying stock index not otherwise
covered.
When the Fund wishes to terminate the Fund's obligation with
respect to an option it has written, the Fund may effect a "closing
purchase transaction." The Fund accomplishes this by buying an option of
the same series as the option previously written by the Fund. The effect
of the purchase is that the writer's position will be canceled. However,
a writer may not effect a closing purchase transaction after the writer
has been notified of the exercise of an option. When the Fund is the
holder of an option, it may liquidate its position by effecting a "closing
sale transaction." The Fund accomplishes this by selling an option of the
same series as the option previously purchased by the Fund. There is no
guarantee that either a closing purchase or a closing sale transaction can
be effected. If any call or put option is not exercised or sold, the
option will become worthless on its expiration date.
Exchanges generally have established limitations governing the
maximum number of call or put options on the same index which may be
bought or written (sold) by a single investor, whether acting alone or in
concert with others (regardless of whether such options are written on the
same or different exchanges or are held or written on one or more accounts
or through one or more brokers). Under these limitations, options
positions of certain other accounts advised by the same investment adviser
are combined for purposes of these limits. Pursuant to these limitations,
an exchange may order the liquidation of positions and may impose other
sanctions or restrictions. These position limits may restrict the number
of listed options which the Fund may buy or sell; however, the Adviser
intends to comply with all limitations.
Because option premiums paid or received by the Fund are small
in relation to the market value of the investments underlying the options,
buying and selling put and call options can be more speculative than
investing directly in common stocks. Additionally, trading in index
options requires different skills and techniques than those required for
predicting changes in individual stocks.
DIRECTORS AND OFFICERS OF THE CORPORATION
The name, address principal occupations during the past five
years and other information with respect to each of the directors and
offices of the Corporation are as follows:
MARTINA HEARN* Age 41
101 Metro Drive, Suite 260
San Jose, California 95110
(VICE PRESIDENT, SECRETARY AND A DIRECTOR OF THE CORPORATION)
Ms. Hearn is an associate of the law firm of Thurlow & Hearn, an
association of attorneys. Ms. Hearn has been practicing law since 1989.
Ms. Hearn is the wife of Thomas F. Thurlow.
NATASHA L. MCREE Age 26
6000 Shepherd Mountain Cove #1604
Austin, Texas 78730
(A DIRECTOR OF THE CORPORATION)
Ms. McRee is a marketing consultant with the firm of GSDNM
Advertising and has been employed with them since September 1996. From
August 1995 to August 1996, Ms. McRee was employed with Rives Carlberg
Advertising as a marketing consultant. From September 1993 to August
1995, Ms. McRee was employed in the Marketing Department of Slick 50, a
producer of automotive oils. Prior to September 1993, Ms. McRee was a
college student.
STEPHANIE E. ROSENDAHL* Age 31
4101 Coleridge Street
Houston, Texas 77005
(A DIRECTOR OF THE CORPORATION)
Ms. Rosendahl is an independent management consultant and has
been self-employed since 1993. From 1991 to 1993, Ms. Rosendahl was
employed by the Texas Children's Hospital as a computer network manager.
Ms. Rosendahl is the sister of Thomas F. Thurlow.
BASIL S. SHIBER Age 33
1801 Alameda Avenue, Apt. A
Alameda, California 94501
(A DIRECTOR OF THE CORPORATION)
Mr. Shiber is an attorney and associate of the law firm of
Miller, Starr & Regalia, a professional law corporation. Miller, Starr
& Regalia is not affiliated with the Company or the Advisor. Mr. Shiber
has been practicing law since 1989.
THOMAS F. THURLOW* Age 34
101 Metro Drive, Suite 260
San Jose, California 95110
(PRESIDENT, TREASURER AND A DIRECTOR OF THE CORPORATION)
Mr. Thurlow is an attorney and founder and associate of the law
firm Thurlow & Hearn, an association of attorneys. Mr. Thurlow has been
practicing law since 1989. Mr. Thurlow is also the sole officer, director
and shareholder of Thurlow Capital Management, Inc., an investment
advisory firm, which he founded in 1997. Mr. Thurlow is the husband of
Martina Hearn and the brother of Stephanie Rosendahl.
The Fund will not pay any fees to directors for meetings of the
Board of Directors attended during the fiscal year ending June 30, 1998.
After this date, the Fund plans to pay each director who is not an officer
of the Corporation a fee of $500 for each meeting of the Board of
Directors attended.
____________________
* Mr. Thurlow, Ms. Hearn and Ms. Rosendahl are directors who are
"interested persons" of the Fund as that term is defined in the Investment
Company Act of 1940.
The Corporation was organized on April 10, 1997. The table
below sets forth the compensation anticipated to be paid by the
Corporation to each of the directors of the Corporation during the fiscal
year ending June 30, 1998:
<TABLE>
COMPENSATION TABLE
<CAPTION>
Pension or Total
Aggregate Retirement Benefits Estimated Annual Compensation
Name of Compensation Accrued as Part of Benefits Upon from Corporation
Person from Corporation Fund Expenses Retirement Paid to Directors
<S> <C> <C> <C> <C>
Martina Hearn 0 0 0 0
Natasha G. McRee 0 0 0 0
Stephanie E. Rosendahl 0 0 0 0
Basil S. Shiber 0 0 0 0
Thomas F. Thurlow 0 0 0 0
</TABLE>
PRINCIPAL STOCKHOLDERS
As of the date hereof, Thomas F. Thurlow and Thomas N. Thurlow,
father of Thomas F. Thurlow, each own 50% of the Fund's outstanding
shares. As of such date they control the Fund and the Corporation and own
sufficient shares of the Fund to approve or disapprove all matters brought
before stockholders of the Corporation, including the election of
directors of the Corporation and the approval of auditors. The
Corporation does not control any person.
INVESTMENT ADVISER, ADMINISTRATOR, CUSTODIAN,
TRANSFER AGENT AND ACCOUNTING SERVICES AGENT
As set forth in the Prospectus under the caption "Management of
the Fund," the investment adviser to the Fund is Thurlow Capital
Management, Inc. (the "Adviser"). Pursuant to the investment advisory
agreement entered into between the Corporation and the Adviser with
respect to the Fund (the "Advisory Agreement"), the Adviser furnishes
continuous investment advisory services to the Fund. The Adviser is
controlled by Thomas F. Thurlow, its sole officer, director and
shareholder.
Pursuant to the Advisory Agreement, the Adviser has undertaken
to reimburse the Fund to the extent that the aggregate annual operating
expenses, including the investment advisory fee and the administration fee
but excluding interest, taxes, brokerage commissions and other costs
incurred in connection with the purchase or sale of portfolio securities,
and extraordinary items, exceed 3.00% of the average net assets of the
Fund for such year, as determined by valuations made as of the close of
each business day of the year. Additionally, for the fiscal year ended
June 30, 1998, the Adviser has agreed to reimburse the Fund for annual
operating expenses in excess of 1.95% of the average net assets for such
year. The Fund monitors its expense ratio on a monthly basis. If the
accrued amount of the expenses of the Fund exceeds the expense limitation,
the Fund creates an account receivable from the Adviser for the amount of
such excess. In such a situation the monthly payment of the Adviser's fee
will be reduced by the amount of such excess, subject to adjustment month
by month during the balance of the Fund's fiscal year if accrued expenses
thereafter fall below this limit.
The Advisory Agreement will remain in effect as long as its
continuance is specifically approved at least annually (i) by the Board of
Directors of the Corporation or by the vote of a majority (as defined in
the Act) of the outstanding shares of the Fund, and (ii) by the vote of a
majority of the directors of the Fund who are not parties to the Advisory
Agreement or interested persons of the Adviser, cast in person at a
meeting called for the purpose of voting on such approval. The Advisory
Agreement provides that it may be terminated at any time without the
payment of any penalty, by the Board of Directors of the Corporation or by
vote of the majority of the Fund's stockholders of sixty (60) days'
written notice to the Adviser, and by the Adviser on the same notice to
the Corporation, and that it shall be automatically terminated if it is
assigned.
The Advisory Agreement provides that the Adviser shall not be
liable to the Corporation or its stockholders for anything other than
willful misfeasance, bad faith, gross negligence or reckless disregard of
its obligations or duties. The Advisory Agreement also provides that the
Adviser and its officers, directors and employees may engage in other
businesses, devote time and attention to any other business whether of a
similar or dissimilar nature, and render services to others.
As set forth in the Prospectus under the caption "Management of
the Fund," the administrator to the Corporation is Firstar Trust Company,
615 East Michigan Street, Milwaukee, Wisconsin 53202 (the
"Administrator"). The Fund Administration Servicing Agreement entered
into between the Corporation and the Administrator relating to the Fund
(the "Administration Agreement") will remain in effect until terminated by
either party. The Administration Agreement may be terminated at any time,
without the payment of any penalty, by the Board of Directors of the
Corporation upon the giving of ninety (90) days' written notice to the
Administrator, or by the Administrator upon the giving of ninety (90)
days' written notice to the Corporation.
Under the Administration Agreement, the Administrator shall
exercise reasonable care and is not liable for any error or judgment or
mistake of law or for any loss suffered by the Corporation in connection
with the performance of the Administration Agreement, except a loss
resulting from willful misfeasance, bad faith or negligence on the party
of the Administrator in the performance of its duties under the
Administration Agreement.
Firstar Trust Company also serves as custodian of the
Corporation's assets pursuant to a Custody Agreement. Under the Custody
Agreement, Firstar Trust Company has agreed to (i) maintain a separate
account in the name of the Fund, (ii) make receipts and disbursements of
money on behalf of the Fund, (iii) collect and receive all income and
other payments and distributions on account of the Fund's portfolio
investments, (iv) respond to correspondence from shareholders, security
brokers and others relating to its duties; and (v) make periodic reports
to the Fund concerning the Fund's operations. Firstar Trust Company does
not exercise any supervisory function over the purchase and sale of
securities. Firstar Trust Company also serves as transfer agent and
dividend disbursing agent for the Fund under a Shareholder Servicing Agent
Agreement. As transfer and dividend disbursing agent, Firstar Trust
Company has agreed to (i) issue and redeem shares of the Fund, (ii) make
dividend and other distributions to shareholders of the Fund, (iii)
respond to correspondence by Fund shareholders and others relating to its
duties, (iv) maintain shareholder accounts, and (v) make periodic reports
to the Fund.
In addition, the Corporation has entered into a Fund Accounting
Servicing Agreement with Firstar Trust Company pursuant to which Firstar
Trust Company has agreed to maintain the financial accounts and records of
the Fund and provide other accounting services to the Fund. For its
accounting services, Firstar Trust Company is entitled to receive fees,
payable monthly, based on the total annual rate of $25,000 for the first
$40 million in average net assets of the Fund, .02% on the next $200
million of average net assets, and .01% on average net assets exceeding
$240 million. Firstar Trust Company is also entitled to certain out of
pocket expenses, including pricing expenses.
DETERMINATION OF NET ASSET VALUE AND PERFORMANCE
As set forth in the Prospectus under the caption "Determination
of Net Asset Value," the net asset value of the Fund will be determined as
of the close of regular trading (4:00 P.M. Eastern Time) on each day the
New York Stock Exchange is open for trading. The New York Stock Exchange
is open for trading Monday through Friday except New Year's Day,
Washington's Birthday, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. Additionally, if any of the
aforementioned holidays falls on a Saturday, the New York Stock Exchange
will not be open for trading on the preceding Friday and when any such
holiday falls on a Sunday, the New York Stock Exchange will not be open
for trading on the succeeding Monday, unless unusual business conditions
exist, such as the ending of a monthly or the yearly accounting period.
Any total rate of return quotation for the Fund will be for a period
of three or more months and will assume the reinvestment of all dividends
and capital gains distributions which were made by the Fund during that
period. Any period total rate of return quotation of the Fund will be
calculated by dividing the net change in value of a hypothetical
shareholder account established by an initial payment of $1,000 at the
beginning of the period by 1,000. The net change in the value of a
shareholder account is determined by subtracting $1,000 from the product
obtained by multiplying the net asset value per share at the end of the
period by the sum obtained by adding (A) the number of shares purchased at
the beginning of the period plus (B) the number of shares purchased during
the period with reinvested dividends and distributions. Any average
annual compounded total rate of return quotation of the Fund will be
calculated by dividing the redeemable value at the end of the period
(i.e., the product referred to in the preceding sentence) by $1,000. A
root equal to the period, measured in years, in question is then
determined and 1 is subtracted from such root to determine the average
annual compounded total rate of return.
The foregoing computation may also be expressed by the following
formula:
P(1 + T)n = ERV
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a
hypothetical $1,000 payment made
at the beginning of the stated
periods at the end of the stated
periods
DISTRIBUTION OF SHARES
The Fund has adopted a Service and Distribution Plan (the
"Plan") in anticipation that the Fund will benefit from the Plan through
increased sales of shares, thereby reducing the Fund's expense ratio and
providing the Adviser with greater flexibility in management. The Plan
may be terminated by the Fund at any time by a vote of the directors of
the Corporation who are not interested persons of the Corporation and who
have no direct or indirect financial interest in the Plan or any agreement
related thereto (the "Rule 12b-1 Directors") or by a vote of a majority of
the outstanding shares of the Fund. Ms. McRee and Mr. Shiber are
currently the Rule 12b-1 Directors. Any change in the Plan that would
materially increase the distribution expenses of the Fund provided for in
the Plan requires approval of the stockholders of the Fund and the Board
of Directors, including the Rule 12b-1 Directors.
While the Plan is in effect, the selection and nomination of
directors who are not interested persons of the Corporation will be
committed to the discretion of the directors of the Corporation who are
not interested persons of the Corporation. The Board of Directors of the
Corporation must review the amount and purposes of expenditures pursuant
to the Plan quarterly as reported to it by a Distributor, if any, or
officers of the Corporation. The Plan will continue in effect for as long
as its continuance is specifically approved at least annually by the Board
of Directors, including the Rule 12b-1 Directors. The Fund did not begin
operations until July 1, 1997, and thus, the Fund had not incurred any
distribution costs as of that date.
ALLOCATION OF PORTFOLIO BROKERAGE
Decisions to buy and sell securities for the Fund are made by
the Adviser subject to review by the Corporation's Board of Directors. In
placing purchase and sale orders for portfolio securities 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, as described in this and the following
paragraph. In selecting brokers to effect portfolio transactions, the
determination of what is expected to result in best execution at the most
favorable price involves a number of largely judgmental considerations.
Among these are the Adviser's evaluation of the broker's efficiency in
executing and clearing transactions, block trading capability (including
the broker's willingness to position securities and the broker's financial
strength and stability). The most favorable price to the Fund means the
best net price without regard to the mix between purchase or sale price
and commission, if any. Over-the-counter securities are generally
purchased and sold directly with principal market makers who retain the
difference in their cost in the security and its selling price. In some
instances, the Adviser feels that better prices are available from
non-principal market makers who are paid commissions directly. The Fund
may place portfolio orders with broker-dealers who recommend the purchase
of Fund 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.
In allocating brokerage business for the Fund, the Adviser also
takes into consideration the research, analytical, statistical and other
information and services provided by the broker, such as general economic
reports and information, reports or analyses of particular companies or
industry groups, market timing and technical information, and the
availability of the brokerage firm's analysts for consultation. While the
Adviser believes these services have substantial value, they are
considered supplemental to the Adviser's own efforts in the performance of
its duties under the Advisory Agreement. Other clients of the Adviser may
indirectly benefit from the availability of these services to the Adviser,
and the Fund may indirectly benefit from services available to the Adviser
as a result of transactions for other clients. The Advisory Agreement
provides that the Adviser may cause the Fund to pay a broker which
provides brokerage and research services to the Adviser a commission for
effecting a securities transaction in excess of the amount another broker
would have charged for effecting the transaction, if the Adviser
determines in good faith that such amount of commission is reasonable in
relation to the value of brokerage and research services provided by the
executing broker viewed in terms of either the particular transaction or
the Adviser's overall responsibilities with respect to the Fund and the
other accounts as to which it exercises investment discretion. The Fund
did not commence operations until July 1, 1997.
TAXES
As set forth in the Prospectus under the caption "Dividends,
Distributions and Taxes," the Fund will endeavor to qualify annually for
and elect tax treatment applicable to a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code").
Under the Code, the Fund will not qualify as a regulated
investment company for any taxable year if more than 30% of the Fund's
gross income for that year is derived from gains on the sale of securities
held less than three months (the "30% Test"). Specifically, the 30% Test
will limit the extent to which the Fund may: (i) sell securities held for
less than three months; (ii) write options which expire in less than three
months; (iii) effect closing transactions with respect to call or put
options that have been written or purchased within the preceding three
months; and (iv) effect short sales.
If a call option written by the Fund expires, the amount of the
premium received by the Fund for the option will be short-term capital
gain. If the Fund enters into a closing transaction with respect to the
option, any gain or loss realized by the Fund as a result of the
transaction will be short-term capital gain or loss. If the holder of a
call option exercises the holder's right under the option, any gain or
loss realized by the Fund upon the sale of the underlying security
pursuant to such exercise will be short-term or long-term capital gain or
loss to the Fund depending on the Fund's holding period for the underlying
security.
With respect to call options purchased by the Fund, the Fund
will realize short-term or long-term capital gain or loss if such option
is sold and will realize short-term or long-term capital loss if the
option is allowed to expire depending on the Fund's holding period for the
call option. If such a call option is exercised, the amount paid by the
Fund for the option will be added to the basis of the stock so acquired.
The Fund may purchase or write options on stock indexes.
Options on "broadbased" stock indexes are generally classified as
"nonequity options" under the Code. Gains and losses resulting from the
expiration, exercise or closing of such nonequity options will be treated
as long-term capital gain or loss to the extent of 60% thereof and short-
term capital gain or loss to the extent of 40% thereof (hereinafter
"blended gain or loss") for determining the character of distributions.
In addition, nonequity options held by the Fund on the last day of a
fiscal year will be treated as sold for market value ("marked to market")
on that date, and gain or loss recognized as a result of such deemed sale
will be blended gain or loss. The marked to market gain will not be
considered a gain on the sale of options held less than three months. The
realized gain or loss on the ultimate disposition of the option will be
increased or decreased to take into consideration the prior marked to
market gains and losses. These tax considerations may have an impact on
investment decisions made by the Fund.
The trading strategies of the Fund involving nonequity options
on stock indexes may constitute "straddle" transactions. "Straddles" may
affect the short-term or long-term holding period of such instruments for
distributions characterization, but not for purposes of the 30% Test and
may cause the postponement of recognition of losses incurred in certain
closing transactions.
The Fund may acquire put options. Put options on stocks are
generally viewed as short sales. If the Fund exercises or fails to
exercise a put option The Yacktman Focused Fund will be considered to have
closed a short sale. If the Fund owns the underlying stock or acquires
the underlying stock before closing the short sale, the Straddle Rules may
apply and the option positions may be subject to certain modified short
sale rules. The Fund will generally have a short-term gain or loss on the
closing of a short sale. The determination of the length of the holding
period is dependent on the holding period of the stock used to exercise
that put option. If the Fund sells the put option without exercising it,
the holding period will be determined by looking at the holding period of
the option.
Dividends from the Fund's net investment income (including any
excess of net short-term capital gain over net long-term capital loss) are
taxable to stockholders as ordinary income, while distributions of net
capital gain (the excess of net long-term capital gain over net short-term
capital loss) are taxable as long-term capital gain regardless of the
stockholder's holding period for the shares. Such dividends and
distributions are taxable to stockholders whether received in cash or in
additional shares. The 70% dividends-received deduction for corporations
will apply to such dividends and distributions, subject to proportionate
reductions if the aggregate dividends received by the Fund from domestic
corporations in any year are less than 100% of the net investment company
income taxable distributions made by the Fund.
Any dividend or capital gain distribution paid shortly after a
purchase of shares of the Fund, will have the effect of reducing the per
share net asset value of such shares by the amount of the dividend or
distribution. Furthermore, if the net asset value of the shares of the
Fund immediately after a dividend or distribution is less than the cost of
such shares to the stockholder, the dividend or distribution will be
taxable to the stockholder even though it results in a return of capital
to him.
Redemption of shares will generally result in a capital gain or
loss for income tax purposes. Such capital gain or loss will be long term
or short term, depending upon the holding period. However, if a loss is
realized on shares held for six months or less, and the investor received
a capital gain distribution during that period, then such loss is treated
as a long-term capital loss to the extent of the capital gain distribution
received.
This section is not intended to be a full discussion of present
or proposed federal income tax laws and the effect of such laws on an
investor. Investors are urged to consult with their respective tax
advisers for a complete review of the tax ramifications of an investment
in the Fund.
STOCKHOLDER MEETINGS
The Maryland Business Corporation Law permits registered
investment companies, such as the Fund, to operate without an annual
meeting of stockholders under specified circumstances if an annual meeting
is not required by the Act. The Corporation has adopted the appropriate
provisions in its bylaws and may, at its discretion, not hold an annual
meeting in any year in which the election of directors is not required to
be acted upon by the stockholders under the Act.
The Corporation's bylaws also contain procedures for the removal
of directors by its stockholders. At any meeting of stockholders, duly
called and at which a quorum is present, the stockholders may, by the
affirmative vote of the holders of a majority of the votes entitled to be
cast thereon, remove any director or directors from office and may elect a
successor or successors to fill any resulting vacancies for the unexpired
terms of removed directors.
Upon the written request of the holders of shares entitled to
not less than ten percent (10%) of all the votes entitled to be cast at
such meeting, the Secretary of the Corporation shall promptly call a
special meeting of stockholders for the purpose of voting upon the
question of removal of any director. Whenever ten or more stockholders of
record who have been such for at least six months preceding the date of
application, and who hold in the aggregate either shares having a net
asset value of at least $25,000 or at least one percent (1%) of the total
outstanding shares, whichever is less, shall apply to the Corporation's
Secretary in writing, stating that they wish to communicate with other
stockholders with a view to obtaining signatures to a request for a
meeting as described above and accompanied by a form of communication and
request which they wish to transmit, the Secretary shall within five
business days after such application either: (1) afford to such
applicants access to a list of the names and addresses of all stockholders
as recorded on the books of the Corporation; or (2) inform such applicants
as to the approximate number of stockholders of record and the approximate
cost of mailing to them the proposed communication and form of request.
If the Secretary elects to follow the course specified in
clause (2) of the last sentence of the preceding paragraph, the Secretary,
upon the written request of such applicants, accompanied by a tender of
the material to be mailed and of the reasonable expenses of mailing,
shall, with reasonable promptness, mail such material to all stockholders
of record at their addresses as recorded on the books unless within five
business days after such tender the Secretary shall mail to such
applicants and file with the Securities and Exchange Commission, together
with a copy of the material to be mailed, a written statement signed by at
least a majority of the Board of Directors to the effect that in their
opinion either such material contains untrue statements of fact or omits
to state facts necessary to make the statements contained therein not
misleading, or would be in violation of applicable law, and specifying the
basis of such opinion.
After opportunity for hearing upon the objections specified in
the written statement so filed, the Securities and Exchange Commission
may, and if demanded by the Board of Directors or by such applicants
shall, enter an order either sustaining one or more of such objections or
refusing to sustain any of them. If the Securities and Exchange
Commission shall enter an order refusing to sustain any of such
objections, or if, after the entry of an order sustaining one or more of
such objections, the Securities and Exchange Commission shall find, after
notice and opportunity for hearing, that all objections so sustained have
been met, and shall enter an order so declaring, the Secretary shall mail
copies of such material to all stockholders with reasonable promptness
after the entry of such order and the renewal of such tender.
DESCRIPTION OF SECURITIES RATINGS
As set forth in the Prospectus under the caption "Investment
Policies and Risk," the Fund may invest in commercial paper master notes
assigned one of the two highest ratings of either Standard & Poor's
Corporation ("Standard & Poor's") or Moody's Investors Services, Inc.
("Moody's"). As also set forth therein, the Fund may invest in
convertible securities assigned at least an investment grade by Standard &
Poor's or Moody's (or unrated but deemed by the Adviser to be of
comparable quality), and up to 5% of the Fund's assets may be invested in
convertible securities rated below investment grade but rated at least B
by Standard & Poor's or Moody's.
Commercial Paper Ratings
A Standard and Poor's commercial paper rating is a current
assessment of the likelihood of timely payment of debt having an original
maturity of no more than 365 days. The following summarizes the rating
categories used by Standard & Poor's for commercial paper in which the
Funds may invest:
"A-1" - Issue's degree of safety regarding timely payment is
strong. Those issues determines to possess extremely strong safety
characteristics are denoted "A-1+."
"A-2" - Issue's capacity for timely payment is satisfactory.
However, the relative degree of safety is not as high as for issues
designated "A-1."
Moody's commercial paper ratings are opinions of the ability of
issues to repay punctually promissory obligations not having an original
maturity in excess of nine months. The following summarizes the rating
categories used by Moody's for commercial paper in which the Funds may
invest:
"Prime-1" - Issuer or related supporting institutions are
considered to have a superior capacity for repayment of short-term
promissory obligations. Prime-1 repayment capacity will normally be
evidenced by the following capacities: leading market positions in well-
established industries; high rates of return on funds employed;
conservative capitalization structures with moderate reliance on debt and
ample asset protection; broad margins in earning coverage of fixed
financial charges and high internal cash generation; and well-established
access to a range of financial markets and assured sources of alternate
liquidity.
"Prime-2" - Issuer or related supporting institutions are
considered to have a strong capacity for repayment of short-term
promissory obligations. This will normally be evidenced by many of the
characteristics cited above but to a lesser degree. Earnings trends and
coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternative liquidity is
maintained.
Corporate Long-Term Debt Ratings
Standard & Poor's Debt Ratings
A Standard & Poor's corporate or municipal debt rating is a
current assessment of the creditworthiness of an obligor with respect to a
specific obligation. This assessment may take into consideration obligors
such as guarantors, insurers, or lessees. The debt rating is not a
recommendation to purchase, sell, or hold a security, inasmuch as it does
not comment as to market price or suitability for a particular investor.
The ratings are based on current information furnished by the
issuer or obtained by Standard & Poor's from other sources it considers
reliable. Standard & Poor's does not perform an audit in connection with
any rating and may, on occasion, rely on unaudited financial information.
The ratings may be changed, suspended, or withdrawn as a result of changes
in, or unavailability of, such information, or for other circumstances.
The ratings are based, in varying degrees, on the following
considerations:
1. Likelihood of default - capacity and willingness of the
obligor as to the timely payment of interest and repayment
of principal in accordance with the terms of the
obligation.
2. Nature of and provisions of the obligation.
3. Protection afforded by, and relative position of, the
obligation in the event of bankruptcy, reorganization, or
other arrangement under the laws of bankruptcy and other
laws affecting creditors' rights.
Investment Grade
AAA - Debt rated "AAA" has the highest rating assigned by
Standard & Poor's. Capacity to pay interest an repay principal is
extremely strong.
AA - Debt rated "AA" has a very strong capacity to pay interest
and repay principal and differs from the highest rated issues only in
small degree.
A - Debt rated "A" has a strong capacity to pay interest and
repay principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt in
higher rated categories.
BBB - Debt rated "BBB" is regard as having an adequate capacity
to pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.
Speculative Grade
Debt rated "BB," "B," "CCC," "CC" and "C" is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. "BB" indicates the least degree of
speculation and "C" the highest. While such debt will likely have some
quality and protective characteristic, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
"BB" - Debt rated "BB" has less near-term vulnerability to
default than other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or economic
conditions which could lead to inadequate capacity to meet timely interest
and principal payments. The "BB" rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied "BBB-
"rating.
"B" - Debt rated "B" has a greater vulnerability to default but
currently has the capacity to meet interest payments and principal
repayments. Adverse business, financial, or economic conditions will
likely impair capacity or willingness to pay interest and repay principal.
The "B" rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied "BB" or "BB-"rating.
"CCC" - Debt rated "CCC" has a current identifiable
vulnerability to default, and is dependent upon favorable business,
financial, and economic conditions to meet timely payment of interest and
repayment of principal. In the event of adverse business, financial, or
economic conditions, it is not likely to have the capacity to pay interest
an repay principal. The "CCC" rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied "B" or
"B-" rating.
"CC" - Debt rated "CC" typically is applied to debt subordinated
to senior debt that is assigned an actual or implied "CCC" rating.
"C" - Debt rated "C" typically is applied to debt subordinated
to senior debt which is assigned an actual or implied "CCC-" debt rating.
The "C" rating may be used to cover a situation where a bankruptcy
petition has been filed, but debt service payments are continued.
"CI" - The rating "CI" is reserved for income bonds on which no
interest is being paid.
"D" - Debt rated "D" is in payment default. The "D" rating
category is used when interest payments or principal payments are not made
on the date due even if the applicable grace period has not expired,
unless Standard & Poor's believes that such payments will be made during
such period. The "D" rating also will be used upon the filing of a
bankruptcy petition if debt service payments are jeopardized.
Moody's Long-Term Debt Ratings.
"Aaa" - Bonds which are rated "Aaa" are judged to be of the best
quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edged." Interest payments are protected by
a large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
position of such issues.
"Aa" - Bonds which are rated "Aa" are judged to be of high
quality by all standards. Together with the "Aaa" group, they comprise
what are generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large as in
"Aaa" securities or fluctuation or protective elements may be of greater
amplitude or there may be other elements present which make the long-term
risk appear somewhat larger than in "Aaa" securities.
"A" - Bonds which are rated "A" possess many favorable
investment attributes and are to be considered as upper-medium grade
obligations. Factors giving security to principal and interest are
considered adequate, but elements may be present which suggest a
susceptibility to impairment some time in the future.
"Baa" - Bonds which are rated "Baa" are considered as medium-
grade obligations (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear adequate for
the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds
lack outstanding investment characteristics and in fact have speculative
characteristics as well.
"Ba" - Bonds which are rated "Ba" are judged to have speculative
elements; their future cannot be considered as well-assured. Often the
protection of interest and principal payments may be very moderate, and
thereby not well safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in this class.
"B" - Bonds which are rated "B" generally lack characteristics
of the desirable investment. Assurance of interest and principal payments
or of maintenance of other terms of the contract over any long period of
time may be small.
"Caa" - Bonds which are rated "Caa" are of poor standing. Such
issues may be in default or there may be present elements of danger with
respect to principal or interest.
"Ca" - Bonds which are rated "Ca" represent obligations which
are speculative in a high degree. Such issues are often in default or
have other marked shortcomings.
"C" - Bonds which are rated "C" are the lowest rated class of
bonds, and issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
INDEPENDENT ACCOUNTANTS
Arthur Andersen LLP, 100 East Wisconsin Avenue, Milwaukee,
Wisconsin 53201-1215 has been selected as the independent accountants for
the Fund. As such Arthur Andersen LLP performs an audit of the Fund's
financial statement and considers the Fund's internal control structure.
FINANCIAL STATEMENTS
The following financial statements for the Fund are attached
hereto:
- Report of Independent Accountants
- Statement of Assets and Liabilities
- Notes to the Financial Statement
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of
Directors of The Thurlow Funds, Inc.:
In our opinion, the accompanying statement of assets and liabilities
presents fairly, in all material respects, the financial position of The
Thurlow Growth Fund (the "Fund"), a series of The Thurlow Funds, Inc. at
__________, 1997, in conformity with generally accepted accounting
principles. This financial statement is the responsibility of the Fund's
management; our responsibility is to express an opinion on this financial
statement based on our audit. We conducted our audit of this financial
statement in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statement is free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statement, assessing the
accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for the opinion express above.
Arthur Andersen
Milwaukee, Wisconsin
________________, 1997
<PAGE>
THE THURLOW FUNDS, INC.
THE THURLOW GROWTH FUND
Statement of Assets and Liabilities
__________, 1997
The Thurlow
Growth Fund
ASSETS
Cash $100,000.00
Unamortized organizational costs __________
Total Assets __________
LIABILITIES
Accounts payable __________
Total Liabilities __________
NET ASSETS $100,000.00
===========
Capital Shares, $0.0001 par value, 500,000,000
shares authorized; 10,000 shares outstanding
Net asset value, offering and redemption price per
share (net assets/shares outstanding) $ 10.00
============
The accompanying notes to the financial statement
are an integral part of this statement.
<PAGE>
THE THURLOW FUNDS, INC.
NOTES TO FINANCIAL STATEMENT
__________, 1997
1. Organization
The Thurlow Funds, Inc. (the "Company") was incorporated under the
laws of the state of Maryland on April 30, 1997 and is in the process
of registering under the Investment Company Act of 1940, as amended
(the "1940 Act"), as an open-end, non-diversified management
investment company. The Thurlow Growth Fund (the "Fund") is the
single portfolio of the series of the Company. The Company has had
no operations other than those relating to organizational matters and
the sale of 5,000 shares of its common stock to each of its original
stockholders, Thomas F. Thurlow and Thomas N. Thurlow, for cash in an
aggregate amount of $100,000.
2. Significant Accounting Policies
(a) Organization costs
Organizational costs and initial registration expenses incurred
by the Fund are being deferred and amortized over the period of
benefit, but not to exceed sixty months from the Fund's
commencement of operations. These costs were advanced by the
Thurlow Capital Management, Inc. (the "Adviser") and will be
reimbursed by the Fund. The proceeds of any redemption of the
initial shares by the original stockholder or any transferee
will be reduced by a pro-rata portion of any then unamortized
organizational expenses in the same proportion as the number of
initial shares being redeemed bears to the number of initial
shares outstanding at the time of such redemption.
(b) Federal Income Taxes
The Fund intends to comply with the requirements of the Internal
Revenue Code necessary to qualify as a regulated investment
company and to make the requisite distributions of income and
capital gains to its shareholders sufficient to relieve it from
all or substantially all Federal income taxes.
3. Investment Adviser
The Thurlow Funds, Inc. has an agreement with the Adviser, with whom
certain officers and directors of Thurlow Funds, Inc. are affiliated,
to furnish investment advisory services to the Fund. Under the terms
of this agreement, the Fund will pay the Adviser a monthly fee of
1/12 of 1.25% (1.25% per annum) on the average daily net assets of
the Fund. The Adviser has committed to reimburse expenses of the
Fund to the extent necessary to ensure that the total operating
expenses of the Fund during the period ending June 30, 1998 do not
exceed 1.95% of such Fund's average net assets.
4. Distribution Plan
Pursuant to Rule 12b-1 under the 1940 Act, the Fund has adopted a
Service and Distribution Plan (the "Plan"). Under the Plan, the Fund
is authorized to pay expenses incurred for the purpose of financing
activities intended to result in the sale of shares of the Fund at an
annual rate of up to 0.25% of the Fund's average daily net assets.
<PAGE>
PART C
OTHER INFORMATION
Item24. Financial Statements and Exhibits
(a.) Financial Statement (included in Part B)
Report of Independent Accountants
Statement of Assets and Liabilities
Notes to Financial Statement
(b.) Exhibits
(1) Registrant's Articles of Incorporation.
(2) Registrant's Bylaws.
(3) None
(4) None
(5) Investment Advisory Agreement with Thurlow Capital
Management, Inc. relating to The Thurlow Growth Fund.
(6) None
(7) None
(8) Custody Agreement with Firstar Trust Company.
(9.1) Fund Administration Servicing Agreement with Firstar
Trust Company relating to The Thurlow Growth Fund.
(9.2) Shareholder Servicing Agent Agreement with Firstar Trust
Company relating to The Thurlow Growth Fund.
(9.3) Fund Accounting Servicing Agreement with Firstar Trust
Company.
(10) Opinion of Foley & Lardner, counsel for Registrant (to
be filed by amendment).
(11) Consent of Arthur Andersen LLP (to be filed by
amendment).
(12) None
(13) Subscription Agreement.
(14.1) Individual Retirement Account.
(14.2) Simplified Employee Pension Plan.
(15) Service and Distribution Plan.
(16) None
(17) Financial Data Schedule (to be filed by amendment).
(18) None
Item 25. Persons Controlled by or under Common Control with Registrant
Registrant is controlled by Thomas F. Thurlow and Thomas N.
Thurlow, each of which owns 50% of Registrant's voting securities as of
_______________, 1997. Registrant neither controls any person nor is
under common control with any other person.
Item 26. Number of Holders of Securities
Number of Record Holders
Title of Class as of _________________, 1997
Class A Common Stock, $0.0001 par 2
value (The Thurlow Growth Fund)
Item 27. Indemnification
Pursuant to the authority of the Maryland General Corporation
Law, particularly Section 2-418 thereof, Registrant's Board of Directors
has adopted the following bylaw which is in full force and effect and has
not been modified or cancelled:
Article VII
GENERAL PROVISIONS
Section 7. Indemnification.
A. The Corporation shall indemnify all of its corporate
representatives against expenses, including attorneys fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred by
them in connection with the defense of any action, suit or proceeding, or
threat or claim of such action, suit or proceeding, whether civil,
criminal, administrative, or legislative, no matter by whom brought, or in
any appeal in which they or any of them are made parties or a party by
reason of being or having been a corporate representative, if the
corporate representative acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the corporation
and with respect to any criminal proceeding, if he had no reasonable cause
to believe his conduct was unlawful provided that the corporation shall
not indemnify corporate representatives in relation to matters as to which
any such corporate representative shall be adjudged in such action, suit
or proceeding to be liable for gross negligence, willful misfeasance, bad
faith, reckless disregard of the duties and obligations involved in the
conduct of his office, or when indemnification is otherwise not permitted
by the Maryland General Corporation Law.
B. In the absence of an adjudication which expressly absolves the
corporate representative, or in the event of a settlement, each corporate
representative shall be indemnified hereunder only if there has been a
reasonable determination based on a review of the facts that
indemnification of the corporate representative is proper because he has
met the applicable standard of conduct set forth in paragraph A. Such
determination shall be made: (i) by the board of directors, by a majority
vote of a quorum which consists of directors who were not parties to the
action, suit or proceeding, or if such a quorum cannot be obtained, then
by a majority vote of a committee of the board consisting solely of two or
more directors, not, at the time, parties to the action, suit or
proceeding and who were duly designated to act in the matter by the full
board in which the designated directors who are parties to the action,
suit or proceeding may participate; or (ii) by special legal counsel
selected by the board of directors or a committee of the board by vote as
set forth in (i) of this paragraph, or, if the requisite quorum of the
full board cannot be obtained therefor and the committee cannot be
established, by a majority vote of the full board in which directors who
are parties to the action, suit or proceeding may participate.
C. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall create a rebuttable presumption that the person was
guilty of willful misfeasance, bad faith, gross negligence or reckless
disregard to the duties and obligations involved in the conduct of his or
her office, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his or her conduct was unlawful.
D. Expenses, including attorneys' fees, incurred in the preparation
of and/or presentation of the defense of a civil or criminal action, suit
or proceeding may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding as authorized in the manner
provided in Section 2-418(F) of the Maryland General Corporation Law upon
receipt of: (i) an undertaking by or on behalf of the corporate
representative to repay such amount unless it shall ultimately be
determined that he or she is entitled to be indemnified by the corporation
as authorized in this bylaw; and (ii) a written affirmation by the
corporate representative of the corporate representative's good faith
belief that the standard of conduct necessary for indemnification by the
corporation has been met.
E. The indemnification provided by this bylaw shall not be deemed
exclusive of any other rights to which those indemnified may be entitled
under these bylaws, any agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his or her official capacity
and as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director, officer, employee
or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person subject to the limitations imposed from
time to time by the Investment Company Act of 1940, as amended.
F. This corporation shall have power to purchase and maintain
insurance on behalf of any corporate representative against any liability
asserted against him or her and incurred by him or her in such capacity or
arising out of his or her status as such, whether or not the corporation
would have the power to indemnify him or her against such liability under
this bylaw provided that no insurance may be purchased or maintained to
protect any corporate representative against liability for gross
negligence, willful misfeasance, bad faith or reckless disregard of the
duties and obligations involved in the conduct of his or her office.
G. "Corporate Representative" means an individual who is or was a
director, officer, agent or employee of the corporation or who serves or
served another corporation, partnership, joint venture, trust or other
enterprise in one of these capacities at the request of the corporation
and who, by reason of his or her position, is, was, or is threatened to be
made, a party to a proceeding described herein.
Insofar as indemnification for and with respect to liabilities
arising under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of Registrant pursuant to the foregoing
provisions or otherwise, Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by Registrant of expenses incurred or paid by a
director, officer or controlling person or Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
Incorporated by reference to pages 8 through 11 of the Statement
of Additional Information pursuant to Rule 411 under the Securities Act of
1933.
Item 29. Principal Underwriters
Not Applicable.
Item 30. Location of Accounts and Records
The accounts, books and other documents required to be
maintained by Registrant pursuant to Section 31(a) of the Investment
Company Act of 1940 and the rules promulgated thereunder are in the
physical possession of Registrant's Treasurer, Thomas F. Thurlow, at
Registrant's corporate offices, 1256 Forest Avenue, Palo Alto, California
94301.
Item 31. Management Services
All management-related service contracts entered into by
Registrant are discussed in Parts A and B of this Registration Statement.
Item 32. Undertakings
Registrant undertakes to file a post-effective amendment to this
Registration Statement within four to six months of the effective date of
this Registration Statement which will contain financial statements (which
need not be certified) as of and for the time period reasonably close or
as soon as practicable to the date of such post-effective amendment.
With respect to stockholder meetings, Registrant undertakes to
call stockholder meetings in accordance with the provisions of Article I
of its Bylaws, which are discussed in Parts A and B of this Registration
Statement.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Palo Alto and State of
California on the 3rd day of May, 1997.
THE THURLOW FUNDS, INC.
(Registrant)
By: /s/ Thomas F. Thurlow
Thomas F. Thurlow, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the date(s) indicated.
Name Title Date
/s/ Thomas F. Thurlow President (Principal May 3, 1997
Thomas F. Thurlow Executive, Financial
and Accounting Officer)
and a Director
/s/ Martina Hearn Director May 3, 1997
Martina Hearn
/s/ Natasha L. McRee Director May 3, 1997
Natasha L. McRee
/s/ Stephanie E. Rosendahl Director May 3, 1997
Stephanie E.Rosendahl
/s/ Basil S. Shiber Director May 3, 1997
Basil S. Shiber
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit Page No.
(1) Registrant's Articles of Incorporation
(2) Registrant's Bylaws
(3) None
(4) None
(5) Investment Advisory Agreement with Thurlow
Capital Management, Inc. relating to The
Thurlow Growth Fund
(6) None
(7) None
(8) Custody Agreement with Firstar Trust Company
(9.1) Fund Administration Servicing Agreement with
Firstar Trust Company relating to The Thurlow
Growth Fund
(9.2) Shareholder Servicing Agent Agreement with
Firstar Trust Company
(9.3) Fund Accounting Servicing Agreement with
Firstar Trust Company
(10) Opinion of Foley & Lardner, counsel for
Registrant (to be filed by amendment)
(11) Consent of Arthur Andersen LLP (to be filed
by amendment)
(12) None
(13) Subscription Agreement
(14.1) Individual Retirement Account
(14.2) Simplified Employee Pension Plan
(15) Service and Distribution Plan
(16) None
(17) Financial Data Schedule (to be filed by
amendment)
(18) None
EXHIBIT 1
ARTICLES OF INCORPORATION
OF
THE THURLOW FUNDS, INC.
The undersigned sole incorporator, being at least eighteen years
of age, hereby adopts the following Articles of Incorporation for the
purpose of forming a Maryland corporation under the general laws of the
State of Maryland:
ARTICLE I
The name of the corporation (hereinafter called "Corporation")
is:
THE THURLOW FUNDS, INC.
ARTICLE II
The period of existence shall be perpetual.
ARTICLE III
The purposes for which the Corporation is formed are to engage
in any lawful business for which corporations may be organized under the
Maryland General Corporation Law.
ARTICLE IV
A. The aggregate number of shares of capital stock which the
Corporation shall have authority to issue is Five Hundred Million
(500,000,000) shares, all with a par value of One Hundredth of a Cent
($0.0001) per share, to be known and designated as "Common Stock." The
aggregate par value of the authorized shares of the Corporation is Fifty
Thousand Dollars ($50,000). The Board of Directors of the Corporation may
increase or decrease the aggregate number of authorized shares of Common
Stock pursuant to Section 2-105 of the Maryland General Corporation Law or
any successor provision thereto. The Board of Directors of the
Corporation may classify or reclassify any unissued shares of Common Stock
and may designate or redesignate the name of any class of outstanding
Common Stock. The Board of Directors may fix the number of shares of
Common Stock in any such class and, except as specifically set forth in
these Articles of Incorporation, may set or change the preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms or conditions of redemption of any
class of unissued shares of Common Stock. A total of One Hundred Million
(100,000,000) shares of Common Stock shall initially be classified as
"Class A Common Stock" (the "The Thurlow Growth Fund" or such other name
designated by the Corporation's Board of Directors).
B. Notwithstanding the authority granted to the Board of
Directors of the Corporation with respect to the designation,
classification and reclassification of the unissued shares of Common Stock
of the Corporation, each class of Common Stock shall have the following
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms or conditions of
redemption:
1. Each holder of shares of Common Stock of the
Corporation, irrespective of the class, shall be entitled to one
(1) vote for each full share (and a fractional vote for each
fractional share) then standing in his or her name on the books
of the Corporation; provided, however, that shares of any class
of Common Stock owned, other than in a fiduciary capacity, by
the Corporation or by another corporation in which the
Corporation owns shares entitled to cast a majority of all the
votes entitled to be cast by all shares outstanding and entitled
to vote of such corporation, shall not be voted at any meeting
of stockholders. On any matter submitted to a vote of
stockholders all shares of the Corporation's Common Stock then
issued and outstanding and entitled to vote, irrespective of the
class, shall be voted in the aggregate and not by class, except
that: (a) when otherwise expressly provided by the Maryland
General Corporation Law, the Investment Company Act of 1940 and
the regulations thereunder, or other applicable law, shares
shall be voted by individual class; and (b) when the matter to
be acted upon does not affect any interest of a particular class
of the Corporation's Common Stock, then only shares of the
affected class shall be entitled to vote thereon. At all
elections of directors of the Corporation, each stockholder
shall be entitled to vote the shares owned of record by him for
as many persons as there are directors to be elected, but shall
not be entitled to exercise any right of cumulative voting.
2. All consideration received by the Corporation for the
issue or sale of shares of any class of the Corporation's Common
Stock, together with all assets in which such consideration is
invested and reinvested, income, earnings, profits and proceeds
thereof, including any proceeds derived from the sale, exchange
or liquidation thereof, and any such funds or payments derived
from any reinvestment of such proceeds in whatever form the same
may be, shall irrevocably belong to the class of the
Corporation's Common Stock with respect to which such assets,
payments or funds were received by the Corporation for all
purposes, subject only to the rights of creditors, and shall be
so handled upon the books of account of the Corporation. Such
consideration, assets, income, earnings, profits and proceeds
thereof, including any proceeds derived from the sale, exchange
or liquidation thereof, and any assets derived from any
reinvestment of such proceeds in whatever form, are herein
referred to as "assets belonging to" such class. Any assets,
income, earnings, profits and proceeds thereof, funds or
payments which are not readily attributable to any particular
class of the Corporation's Common Stock shall be allocable among
any one or more of the classes of the Corporation's Common Stock
in such manner and on such basis as the Board of Directors, in
its sole discretion, shall deem fair and equitable. The power
to make such allocations may be delegated by the Board of
Directors from time to time to one or more of the officers of
the Corporation.
3. The assets belonging to any class of the Corporation's
Common Stock shall be charged with the liabilities in respect of
such class of the Corporation's Common Stock, and shall also be
charged with the share of the general liabilities of the
Corporation allocated to such class determined as hereinafter
provided. The determination of the Board of Directors shall be
conclusive as to: (a) the amount of such liabilities, including
the amount of accrued expenses and reserves; (b) any allocation
of the same to a given class; and (c) whether the same are
allocable to one or more classes. The liabilities so allocated
to a class are herein referred to as "liabilities belonging to"
such class. Any liabilities which are not readily attributable
to any particular class of the Corporation's Common Stock shall
be allocable among any one or more of the classes of the
Corporation's Common Stock in such manner and on such basis as
the Board of Directors, in its sole discretion, shall deem fair
and equitable. The power to make such allocations may be
delegated by the Board of Directors from time to time to one or
more of the officers of the Corporation.
4. Shares of a class of the Corporation's Common Stock
shall be entitled to such dividends and distributions, in stock
or in cash or both, as may be declared from time to time by the
Board of Directors, acting in its sole discretion, with respect
to such class; provided, however, that dividends and
distributions on shares of a class of the Corporation's Common
Stock shall be paid only out of the lawfully available "assets
belonging to" such class as such phrase is defined in this
Article IV.
5. In the event of the liquidation or dissolution of the
Corporation, stockholders of a class of the Corporation's Common
Stock shall be entitled to receive, as a class, out of the
assets of the Corporation available for distribution to
stockholders, but other than general assets not belonging to any
particular class, the assets belonging to such class, and the
assets so distributable to the holders of any class of the
Corporation's Common Stock shall be distributed among such
holders in proportion to the number of shares of such class of
the Corporation's Common Stock held by them and recorded on the
books of the Corporation. In the event that there are any
general assets not belonging to any particular class of the
Corporation's Common Stock and available for distribution, such
distribution shall be made to the holders of all classes of the
Corporation's Common Stock in proportion to the net asset values
of the respective classes of the Corporation's Common Stock
determined as set forth in the Bylaws of the Corporation.
6. Each share of each class of Common Stock of the
Corporation now or hereafter issued shall be subject to
redemption by the stockholders of the Corporation and, subject
to the suspension of such right of redemption as provided in the
Bylaws, each holder of shares of any class of Common Stock of
the Corporation, upon request to the Corporation accompanied by
surrender of the appropriate stock certificate or certificates,
if any, in proper form for transfer and after complying with any
other redemption procedures established by the Board of
Directors, shall be entitled to require the Corporation to
redeem all or any part of the shares of such class of Common
Stock standing in the name of such holder on the books of the
Corporation at the net asset value of such shares. In the event
that no certificates have been issued to the holder, the Board
of Directors may require the submission of a stock power with an
appropriate signature guarantee. All shares of any class of its
Common Stock redeemed by the Corporation shall be deemed to be
cancelled and restored to the status of authorized but unissued
shares. The method of computing the net asset value of shares
of each class of Common Stock of the Corporation for purposes of
the issuance and sale, or redemption, thereof, as well as the
time as of which such net asset value shall be computed, shall
be as set forth in the Bylaws. Payment of the net asset value
of each share of each class of Common Stock of the Corporation
surrendered to it for redemption shall be made by the
Corporation within seven (7) days after surrender of such stock
to the Corporation for such purpose, or within such other
reasonable period as may be determined from time to time by the
Board of Directors. The Board of Directors of the Corporation
may, upon reasonable notice to the stockholders of the
Corporation, impose a fee for the privilege of redeeming shares,
such fee to be not in excess of two percent (2.0%) of the
proceeds of any such redemption. The Board shall have
discretionary authority to rescind the imposition of any such
fee and to reimpose the redemption fee from time to time upon
reasonable notice. Any fee so imposed shall be uniform as to
all stockholders to the extent required by the Investment
Company Act of 1940.
7. If, at any time when a request for transfer or
redemption of the shares of any class of Common Stock is
received by the Corporation or its agent, the value (computed as
set forth in the Bylaws) of the shares of such class in a
stockholder's account is less than One Thousand Dollars
($1,000.00), after giving effect to such transfer or redemption,
the Corporation may cause the remaining shares of such class in
such stockholder's account to be redeemed in accordance with
such procedures as the Board of Directors shall adopt.
8. Each holder of shares of the Corporation's Common
Stock, irrespective of the class, may, upon request to the
Corporation accompanied by surrender of the appropriate stock
certificate or certificates, if any, in proper form for transfer
and after complying with any other conversion procedures
established by the Board of Directors, convert such shares into
shares of any other class of the Corporation's Common Stock on
the basis of their relative net asset values (determined in
accordance with the Bylaws of the Corporation) less a conversion
charge or discount determined by the Board of Directors. Any
fee so imposed shall be uniform as to all stockholders to the
extent required by the Investment Company Act of 1940.
9. No holder of shares of any class of Common Stock of
the Corporation shall, as such holder, have any right to
purchase or subscribe for any shares of any class of the Common
Stock of the Corporation which it may issue or sell (whether out
of the number of shares authorized by these Articles of
Incorporation, or out of any shares of any class of Common Stock
of the Corporation acquired by it after the issue thereof, or
otherwise) other than such right, if any, as the Board of
Directors, in its discretion, may determine.
ARTICLE V
The number of directors constituting the Board of Directors
shall initially be five (5), and the names of the initial directors are
Thomas F. Thurlow, Martina Hearn, Basil S. Shiber, Natasha G. McRee and
Stephanie E. Rosendahl. Thereafter, the number of directors shall be such
number as is fixed from time to time by the Bylaws.
ARTICLE VI
The Corporation reserves the right to enter into, from time to
time, investment advisory and administration agreements providing for the
management and supervision of the investments of the Corporation, the
furnishing of advice to the Corporation with respect to the desirability
of investing in, purchasing or selling securities or other property and
the furnishing of clerical and administrative services to the Corporation.
Such agreements shall contain such other terms, provisions and conditions
as the Board of Directors of the Corporation may deem advisable and as are
permitted by the Investment Company Act of 1940.
The Corporation may designate custodians, transfer agents,
registrars and/or disbursing agents for the stock and assets of the
Corporation and employ and fix the powers, rights, duties,
responsibilities and compensation of each such custodian, transfer agent,
registrar and/or disbursing agent.
ARTICLE VII
The following provisions define, limit and regulate the powers
of the Corporation, the Board of Directors and the stockholders:
A. The Corporation may issue and sell shares of any class of
its own Common Stock in such amounts and on such terms and conditions, for
such purposes and for such amount or kind of consideration now or
hereafter permitted by the laws of the State of Maryland, the Bylaws and
these Articles of Incorporation, as its Board of Directors may determine;
provided, however, that the consideration per share to be received by the
Corporation upon the sale of any shares of any class of its Common Stock
shall not be less than the net asset value per share of such class of
Common Stock outstanding at the time as of which the computation of said
net asset value shall be made.
B. The Board of Directors may, in its sole and absolute
discretion, reject in whole or in part orders for the purchase of shares
of any class of Common Stock and may, in addition, require such orders to
be in such minimum amounts as it shall determine.
C. The holders of any fractional shares of any class Common
Stock shall be entitled to the payment of dividends on such fractional
shares, to receive the net asset value thereof upon redemption, to share
in the assets of the Corporation upon liquidation and to exercise voting
rights with respect thereto.
D. The Board of Directors shall have full power in accordance
with good accounting practice: (a) to determine what receipts of the
Corporation shall constitute income available for payment of dividends and
what receipts shall constitute principal and to make such allocation of
any particular receipt between principal and income as it may deem proper;
and (b) from time to time, in its discretion (i) to determine whether any
and all expenses and other outlays paid or incurred (including any and all
taxes, assessments or governmental charges which the Corporation may be
required to pay or hold under any present or future law of the United
States of America or of any other taxing authority therein) shall be
charged to or paid from principal or income or both, and (ii) to apportion
any and all of said expenses and outlays, including taxes, between
principal and income.
E. The Board of Directors shall have the power to determine
from time to time whether and to what extent and at what time and places
and under what conditions and regulations the books, accounts and
documents of the Corporation or any of them, shall be open to the
inspection of stockholders, except as otherwise provided by applicable
law; and except as so provided, no stockholder shall have any right to
inspect any book, account or document of the Corporation unless authorized
to do so by resolution of the Board of Directors.
ARTICLE VIII
The address of the principal office of the Corporation in
Maryland is c/o The Corporation Trust Incorporated, 32 South Street,
Baltimore, Maryland 21202.
ARTICLE IX
The address of the initial registered office is c/o The
Corporation Trust Incorporated, 32 South Street, Baltimore, Maryland
21202.
ARTICLE X
The name of the initial registered agent at such address is The
Corporation Trust Incorporated, a Maryland corporation.
ARTICLE XI
The name and address of the sole incorporator is:
Name Address
Richard L. Teigen c/o Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, WI 53202
IN WITNESS WHEREOF, the undersigned incorporator who executed
the foregoing Articles of Incorporation hereby acknowledges the same to be
his act and further acknowledges that, to the best of his knowledge, the
matters and facts set forth therein are true in all material respects
under the penalties of perjury.
Dated this 29th day of April, 1997.
/s/ Richard L. Teigen
Richard L. Teigen
Sole Incorporator
EXHIBIT 2
BYLAWS
OF
THE THURLOW FUNDS, INC.
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. Place of Meetings. All meetings of stockholders shall be
held at such location as the Board of Directors shall direct.
Section 2. Annual Meeting.
(a) The annual meeting of stockholders for the election of
directors and the transaction of such other business as may properly come
before it, if the annual meeting shall be held, shall be held during the
month of September of each year (or during such other month as the Board
of Directors shall determine), commencing in 1998, at such date and time
as shall be fixed by the Board of Directors and stated in the notice of
such meeting, but in no event more than one hundred twenty (120) days
after the occurrence of the event requiring the meeting to elect
directors. Any business of the corporation may be transacted at the
annual meeting without being specifically designated in the notice, except
such business as is specifically required by statute to be stated in the
notice.
(b) The corporation shall not be required to hold an annual
meeting in any year in which the election of directors is not required to
be acted on by stockholders under the Investment Company Act of 1940.
Section 3. Special Meeting. Special meetings of the stockholders may
be called by the board of directors, the president, any vice president, or
the secretary, and shall be called by the secretary upon the written
request of the holders of shares entitled to not less than ten percent
(10%) of all the votes entitled to be cast at such meeting; provided that
such holders prepay the costs to the corporation of preparing and mailing
the notice of the meeting. The business transacted at any special meeting
of stockholders shall be limited to the purposes stated in the notice.
Section 4. Notice of Meeting. Not less than ten (10) days nor more
than ninety (90) days before the date of every stockholders' meeting, the
secretary shall give to each stockholder entitled to vote at such meeting
and to each other stockholder entitled to notice of such meeting under
applicable law, written or printed notice stating the time and place of
the meeting, and in the case of a special meeting (or where required by
applicable law) the purpose or purposes for which the meeting is called,
either by mail, by presenting it to him personally or by leaving it at his
residence or usual place of business. If mailed, such notice shall be
deemed to be given when deposited in the United States mail addressed to
the stockholder at his post office address as it appears on the records of
the corporation, with postage thereon prepaid.
Section 5. Quorum. At any meeting of stockholders the presence in
person or by proxy of stockholders entitled to cast a majority of the
votes thereat shall constitute a quorum; but this section shall not affect
any requirement under statute or under the charter for the vote necessary
for the adoption of any measure. If at any meeting a quorum is not
present or represented, the chairman of the meeting or the holders of a
majority of the stock present or represented may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until
a quorum is present or represented. At such adjourned meeting at which a
quorum is present or represented, any business may be transacted which
might have been transacted at the meeting as originally called.
Section 6. Stock Entitled to Vote. Each issued share of each class of
stock shall be entitled to vote at any meeting of stockholders except
shares owned, other than in a fiduciary capacity, by the corporation or by
another corporation in which the corporation owns shares entitled to cast
a majority of all the votes entitled to be cast by all shares outstanding
and entitled to vote of such corporation.
Section 7. Voting. Each outstanding share of each class of stock
entitled to vote at a meeting of stockholders shall be entitled to one
vote on each matter submitted to a vote. In all elections for directors
every stockholder shall have the right to vote the shares of each class
owned of record by him for as many persons as there are directors to be
elected, but shall not be entitled to exercise any right of cumulative
voting. A stockholder may vote the shares owned of record by him either
in person or by proxy executed in writing by the stockholder or by his
authorized attorney-in-fact. No proxy shall be valid after eleven (11)
months from its date unless otherwise provided in the proxy. At all
meetings of stockholders, unless the voting is conducted by inspectors,
all questions relating to the qualification of voters, the validity of
proxies and the acceptance or rejection of votes shall be decided by the
chairman of the meeting. A majority of the votes cast at a meeting of
stockholders, duly called and at which a quorum is present, shall be
sufficient to take or authorize any action which may properly come before
the meeting, unless a greater number is required by statute or by the
charter.
Section 8. Informal Action. Any action required or permitted to be
taken at any meeting of stockholders may be taken without a meeting, if a
consent in writing, setting forth such action, is signed by all the
stockholders entitled to vote on the subject matter thereof and such
consent is filed with the records of the corporation.
ARTICLE II
DIRECTORS
Section 1. Number. The number of directors of the corporation shall
be five (5). By vote of a majority of the entire board of directors, the
number of directors fixed by the charter or by these bylaws may be
increased or decreased from time to time to not more than fifteen nor less
than three, but the tenure of office of a director shall not be affected
by any decrease in the number of directors so made by the board.
Section 2. Election and Qualification. Until the first annual meeting
of stockholders and until successors are duly elected and qualify, the
board of directors shall consist of the persons named as such in the
charter. At the first annual meeting of stockholders, the stockholders
shall elect directors to hold office until their successors are elected
and qualify. A director need not be a stockholder of the corporation, but
must be eligible to serve as a director of a registered investment company
under the Investment Company Act of 1940.
Section 3. Vacancies. Any vacancy on the board of directors occurring
between stockholders' meetings called for the purpose of electing
directors may be filled, if immediately after filling any such vacancy at
least two-thirds of the directors then holding office shall have been
elected to such office at an annual or special meeting of stockholders, in
the following manner: (i) for a vacancy occurring other than by reason of
an increase in directors, by a majority of the remaining members of the
board, although such majority is less than a quorum; and (ii) for a
vacancy occurring by reason of an increase in the number of directors, by
action of a majority of the entire board. A director elected by the board
to fill a vacancy shall be elected to hold office until the next annual
meeting of stockholders or until his successor is elected and qualified.
If by reason of the death, disqualification or bona fide resignation of
any director or directors, more than sixty percent (60%) of the members of
the board of directors are interested persons of the corporation, as
defined in the Investment Company Act of 1940, such vacancy shall be
filled within thirty (30) days if it may be filled by the board, or within
sixty (60) days if a vote of stockholders is required to fill such
vacancy; provided that such vacancy may be filled within such longer
period as the Securities and Exchange Commission may prescribe by rules
and regulations, upon its own motion or by order upon application. In the
event that at any time less than a majority of the directors were elected
by the stockholders, the board or proper officer shall forthwith cause to
be held as promptly as possible, and in any event within sixty (60) days,
a meeting of the stockholders for the purpose of electing directors to
fill any existing vacancies in the board, unless the Securities and
Exchange Commission shall by order extend such period.
Section 4. Powers. The business and affairs of the corporation shall
be managed under the direction of the board of directors, which may
exercise all of the powers of the corporation, except such as are by law
or by the charter or by these bylaws conferred upon or reserved to the
stockholders.
Section 5. Removal.
(a) At any meeting of stockholders, duly called and at which a
quorum is present, the stockholders may, by the affirmative vote of the
holders of a majority of the votes entitled to be cast thereon, remove any
director or directors from office and may elect a successor or successors
to fill any resulting vacancies for the unexpired terms of removed
directors.
(b) Notwithstanding any other provisions of these bylaws, the
secretary of the corporation shall promptly call a special meeting of
stockholders for the purpose of voting upon the question of removal of any
director upon the written request of the holders of shares entitled to not
less than ten percent (10%) of all the votes entitled to be cast at such
meeting.
(c) Whenever ten or more stockholders of record who have been
such for at least six months preceding the date of application, and who
hold in the aggregate either shares having a net asset value of at least
$25,000 or at least one percent (1%) of the total outstanding shares,
whichever is less, shall apply to the corporation's secretary in writing,
stating that they wish to communicate with other stockholders with a view
to obtaining signatures to a request for a meeting pursuant to subsection
(b) above and accompanied by a form of communication and request which
they wish to transmit, the secretary shall within five business days after
such application either: (1) afford to such applicants access to a list
of the names and addresses of all stockholders as recorded on the books of
the corporation; or (2) inform such applicants as to the approximate
number of stockholders of record and the approximate cost of mailing to
them the proposed communication and form of request.
(d) If the secretary elects to follow the course specified in
clause (2) of subsection (c) above, the secretary, upon the written
request of such applicants, accompanied by a tender of the material to be
mailed and of the reasonable expenses of mailing, shall, with reasonable
promptness, mail such material to all stockholders of record at their
addresses as recorded on the books, unless within five (5) business days
after such tender the secretary shall mail to such applicants and file
with the Securities and Exchange Commission, together with a copy of the
material to be mailed, a written statement signed by at least a majority
of the board of directors to the effect that in their opinion either such
material contains untrue statements of fact or omits to state facts
necessary to make the statements contained therein not misleading, or
would be in violation of applicable law, and specifying the basis of such
opinion.
(e) After opportunity for hearing upon the objections specified
in the written statement so filed, the Securities and Exchange Commission
may, and if demanded by the board of directors or by such applicants
shall, enter an order either sustaining one or more of such objections or
refusing to sustain any of them. If the Securities and Exchange
Commission shall enter an order refusing to sustain any of such
objections, or if, after the entry of an order sustaining one or more of
such objections, the Securities and Exchange Commission shall find, after
notice and opportunity for hearing, that all objections so sustained have
been met, and shall enter an order so declaring, the secretary shall mail
copies of such material to all shareholders with reasonable promptness
after the entry of such order and the renewal of such tender.
Section 6. Place of Meetings. Meetings of the board of directors,
regular or special, may be held at any place in or out of the State of
Maryland as the board may from time to time determine or as may be
specified in the notice of meeting.
Section 7. First Meeting of Newly Elected Board. The first meeting of
each newly elected board of directors shall be held without notice
immediately after and at the same general place as the annual meeting of
the stockholders, for the purpose of organizing the board, electing
officers and transacting any other business that may properly come before
the meeting.
Section 8. Regular Meetings. Regular meetings of the board of
directors may be held without notice at such time and place as shall from
time to time be determined by the board.
Section 9. Special Meetings. Special meetings of the board of
directors may be called at any time either by the board, the president, a
vice president or a majority of the directors in writing with or without a
meeting. Notice of special meetings shall either be mailed by the
secretary to each director at least three (3) days before the meeting or
shall be given personally or telegraphed to each director at least one (1)
day before the meeting. Such notice shall set forth the time and place of
such meeting but need not, unless otherwise required by law, state the
purposes of the meeting.
Section 10. Quorum and Vote Required for Action. At all meetings of
the board of directors a majority of the entire board shall constitute a
quorum for the transaction of business, and the action of a majority of
the directors present at any meetings at which a quorum is present shall
be the action of the board of directors unless the concurrence of a
greater proportion is required for such action by statute, the articles of
incorporation or these bylaws. If at any meeting a quorum is not present,
a majority of the directors present may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a
quorum is present. Members of the board of directors or a committee of
the board may participate in a meeting by means of a conference telephone
or similar communications equipment if all persons participating in the
meeting can hear each other at the same time; provided, however, that a
director may not participate in a meeting by means of a conference
telephone or similar communications equipment if the purpose of the
meeting is to approve the corporation's investment advisory agreement
and/or to approve the selection of the corporation's auditors, or if
participation in such a manner would otherwise violate the Investment
Company Act of 1940 or other applicable laws. Except as set forth in the
preceding sentence, participation in a meeting by these means constitutes
presence in person at the meeting.
Section 11. Executive and Other Committees. The board of directors may
appoint from among its members an executive and other committees composed
of two (2) or more directors. The board may delegate to such committees in
the intervals between meetings of the board any of the powers of the board
to manage the business and affairs of the corporation, except the power
to: (i) declare dividends or distributions upon the stock of the
corporation; (ii) issue stock of the corporation; (iii) recommend to the
stockholders any action which requires stockholder approval; (iv) amend
the bylaws; (v) approve any merger or share exchange which does not
require stockholder approval; or (vi) take any action required by the
Investment Company Act of 1940 to be taken by the independent directors of
the corporation or by the full board of directors.
Section 12. Informal Action. Except as set forth in the following
sentence, any action required or permitted to be taken at any meeting of
the board of directors or of a committee of the board may be taken without
a meeting, if a written consent to such action is signed by all members of
the board or the committee, as the case may be, and such written consent
is filed with the minutes of proceedings of the board or committee.
Notwithstanding the preceding sentence, no action may be taken by the
board of directors pursuant to a written consent with respect to the
approval of the corporation's investment advisory agreement, the approval
of the selection of the corporation's auditors, or any action required by
the Investment Company Act of 1940 or other applicable law to be taken at
a meeting of the board of directors to be held in person.
ARTICLE III
OFFICERS AND EMPLOYEES
Section 1. Election and Qualification. At the first meeting of each
newly elected board of directors there shall be elected a president, one
or more vice presidents, a secretary and a treasurer. The board may also
elect one or more assistant secretaries and assistant treasurers. No
officer need be a director. Any two or more offices, except the offices
of president and vice president, may be held by the same person but no
officer shall execute, acknowledge or verify any instrument in more than
one capacity, if such instrument is required by law, charter or these
bylaws to be executed, acknowledged or verified by two or more officers.
Each officer must be eligible to serve as an officer of a registered
investment company under the Investment Company Act of 1940. Nothing
herein shall preclude the employment of other employees or agents by the
corporation from time to time without action by the board.
Section 2. Term, Removal and Vacancies. The officers shall be elected
to serve until the next first meeting of a newly elected board of
directors and until their successors are elected and qualified. Any
officer may be removed by the board, with or without cause, whenever in
its judgment the best interests of the corporation will be served thereby,
but such removal shall be without prejudice to the contractual rights, if
any, of the person so removed. A vacancy in any office shall be filled by
the board for the unexpired term.
Section 3. Bonding. Each officer and employee of the corporation who
singly or jointly with others has access to securities or funds of the
corporation, either directly or through authority to draw upon such funds,
or to direct generally the disposition of such securities shall be bonded
against larceny and embezzlement by a reputable fidelity insurance
company. Each such bond, which may be in the form of an individual bond,
a schedule or blanket bond covering the corporation's officers and
employees and the officers and employees of the investment adviser to the
corporation and other corporations to which said investment adviser also
acts as investment adviser, shall be in such form and for such amount
(determined at least annually) as the board of directors shall determine
in compliance with the requirements of Section 17(g) of the Investment
Company Act of 1940, as amended from time to time, and the rules,
regulations or orders of the Securities and Exchange Commission
thereunder.
Section 4. President. The president shall be the principal executive
officer of the corporation. He shall preside at all meetings of the
stockholders and directors, have general and active management of the
business of the corporation, see that all orders and resolutions of the
board of directors are carried into effect, and execute in the name of the
corporation all authorized instruments of the corporation, except where
the signing shall be expressly delegated by the board to some other
officer or agent of the corporation.
Section 5. Vice Presidents. The vice president, or if there be more
than one, the vice presidents in the order determined by the board of
directors, shall, in the absence or disability of the president, perform
the duties and exercise the powers of the president, and shall have such
other duties and powers as the board may from time to time prescribe or
the president delegate.
Section 6. Secretary and Assistant Secretaries. The secretary shall
give notice of, attend and record the minutes of meetings of stockholders
and directors, keep the corporate seal and, when authorized by the board,
affix the same to any instrument requiring it, attesting to the same by
his signature, and shall have such further duties and powers as are
incident to his office or as the board may from time to time prescribe.
The assistant secretary, if any, or, if there be more than one, the
assistant secretaries in the order determined by the board, shall in the
absence or disability of the secretary, perform the duties and exercise
the powers of the secretary, and shall have such other duties and powers
as the board may from time to time prescribe or the secretary delegate.
Section 7. Treasurer and Assistant Treasurers. The treasurer shall be
the principal financial and accounting officer of the corporation. He
shall be responsible for the custody and supervision of the corporation's
books of account and subsidiary accounting records, and shall have such
further duties and powers as are incident to his office or as the board of
directors may from time to time prescribe. The assistant treasurer, if
any, or, if there be more than one, the assistant treasurers in the order
determined by the board, shall in the absence or disability of the
treasurer, perform all duties and exercise the powers of the treasurer,
and shall have such other duties and powers as the board may from time to
time prescribe or the treasurer delegate.
ARTICLE IV
RESTRICTIONS ON COMPENSATION
TRANSACTIONS AND INVESTMENTS
Section 1. Salary and Expenses. Directors and executive officers as
such shall not receive any salary for their services or reimbursement for
expenses from the corporation; provided that the corporation may pay fees
in such amounts and at such times as the board of directors shall
determine to directors who are not interested persons of the corporation
for attendance at meetings of the board of directors. Clerical employees
shall receive compensation for their services from the corporation in such
amounts as are determined by the board of directors.
Section 2. Compensation and Profit from Purchase and Sales. No
affiliated person of the corporation, as defined in the Investment Company
Act of 1940, or affiliated person of such person, shall, except as
permitted by Section 17(e) of the Act, or the rules, regulations or orders
of the Securities and Exchange Commission thereunder, (i) acting as agent,
accept from any source any compensation for the purchase or sale of any
property or securities to or for the corporation or any controlled company
of the corporation, as defined in such Act, or (ii) acting as a broker, in
connection with the sale of securities to or by the corporation or any
controlled company of the corporation, receive from any source a
commission, fee or other remuneration for effecting such transaction.
Section 3. Transactions with Affiliated Person. No affiliated person
of the corporation, as defined in the Investment Company Act of 1940, or
affiliated person of such person shall knowingly (i) sell any security or
other property to the corporation or to any company controlled by the
corporation, as defined in the Act, except shares of stock of the
corporation or securities of which such person is the issuer and which are
part of a general offering to the holders of a class of its securities,
(ii) purchase from the corporation or any such controlled company any
security or property except shares of stock of the corporation or
securities of which such person is the issuer, (iii) borrow money or other
property from the corporation or any such controlled company, or (iv)
acting as a principal effect any transaction in which the corporation or
controlled company is a joint or joint and several participant with such
person; provided, however, that this section shall not apply to any
transaction permitted by Sections 17(a), (b), (c), (d) or 21(b) of the
Investment Company Act of 1940 or the rules, regulations or orders of the
Securities and Exchange Commission thereunder, and shall not prohibit the
joint participation by the corporation and an affiliate in a fidelity bond
arrangement.
Section 4. Investment Adviser. The corporation shall employ one or
more investment advisers, the employment of which shall be pursuant to
written agreements in accordance with Section 15 of the Investment Company
Act of 1940, as amended from time to time.
ARTICLE V
STOCK CERTIFICATES AND TRANSFER BOOKS
Section 1. Certificates. Each holder of shares of any class of stock
of the corporation shall be entitled to a certificate or certificates, in
such form as the board of directors shall from time to time approve,
representing and certifying the number of shares of such class of stock
owned by him in the corporation. Each certificate shall be signed,
manually or by facsimile signature, by the president or a vice president,
countersigned, manually or by facsimile signature, by the secretary, an
assistant secretary, the treasurer or an assistant treasurer and sealed
with the corporate seal or facsimile thereof. In case any officer who has
signed any certificate, or whose facsimile signature appears thereon,
ceases to be an officer of the corporation before the certificate is
issued, the certificate may nevertheless be issued with the same effect as
if the officer had not ceased to be such officer as of the date of its
issue. Each certificate shall contain on its face or back a full
statement or summary of the designations and any preferences, conversion
and other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms of each class of stock of the
corporation or shall state that the corporation will furnish such
information to the stockholder on request and without charge. Any
certificate representing stock which is restricted or limited as to
transferability also shall have a full statement of such restriction or
limitation plainly stated thereon or shall state that the corporation will
furnish such information to the stockholder on request and without charge.
Section 2. Lost Certificates. The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been
lost, stolen, destroyed or mutilated (or may delegate such authority to
one or more officers of the corporation) upon the making of an affidavit
of that fact by the person claiming the certificate to be lost, stolen,
destroyed or mutilated. The board or such officer may, in its or his
discretion, require the owner of such certificate or his legal
representative to give bond with sufficient surety to the corporation to
indemnify it against any loss or claim which may arise or expense which
may be incurred by reason of the issuance of a new certificate.
Section 3. Stock Ledger. The corporation shall maintain at its office
or at the office of its principal transfer agent, if any, an original or
duplicate stock ledger containing the names and addresses of all
stockholders and the number of shares of each class of stock held by each
stockholder.
Section 4. Registered Stockholders. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as
such, as the owner of shares for all purposes, and shall not be bound to
recognize any equitable or other claim to or interest in such shares on
the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of
Maryland.
Section 5. Transfer Agent and Registrar. The corporation may maintain
one or more transfer offices or agencies, each in charge of a transfer
agent designated by the board of directors, where the shares of each class
of stock of the corporation shall be transferable. The corporation may
also maintain one or more registry offices, each in charge of a registrar
designated by the board, where the shares of such classes of stock shall
be registered.
Section 6. Transfers of Stock. Upon surrender to the corporation or a
transfer agent of a certificate for shares of any class duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation to issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books.
Section 7. Fixing of Record Dates and Closing of Transfer Books. The
board of directors may fix, in advance, a date as the record date for the
purpose of determining stockholders entitled to notice of, or to vote at,
any meeting of stockholders, or stockholders entitled to receive payment
of any dividend or the allotment of any rights, or in order to make a
determination of stockholders for any other proper purpose. Such date, in
any case, shall be not more than ninety (90) days, and in case of a
meeting of stockholders not less than ten (10) days, prior to the date on
which the particular action requiring such determination of stockholders
is to be taken. In lieu of fixing a record date, the board may provide
that the stock transfer books shall be closed for a stated period but not
to exceed, in any case, twenty (20) days. If the stock transfer books are
closed or a record date is fixed for the purpose of determining
stockholders entitled to vote at a meeting of stockholders, such books
shall be closed for at least ten (10) days immediately preceding such
action.
ARTICLE VI
ACCOUNTS, REPORTS, CUSTODIAN AND INVESTMENT ADVISER
Section 1. Inspection of Books. The board of directors shall
determine from time to time whether, and, if allowed, when and under what
conditions and regulations the accounts and books of the corporation
(except such as may by statute be specifically open to inspection) or any
of them, shall be open to the inspection of the stockholders, and the
stockholders' rights in this respect are and shall be limited accordingly.
Section 2. Reliance on Records. Each director and officer shall, in
the performance of his duties, be fully protected in relying in good faith
on the books of account or reports made to the corporation by any of its
officials or by an independent public accountant.
Section 3. Preparation and Maintenance of Accounts, Records and
Statements. The president, a vice president or the treasurer shall
prepare or cause to be prepared annually, a full and correct statement of
the affairs of the corporation, including a balance sheet or statement of
financial condition and a financial statement of operations for the
preceding fiscal year, which shall be submitted at the annual meeting of
the stockholders and filed within twenty (20) days thereafter at the
principal office of the corporation. If the corporation is not required
to hold an annual meeting of stockholders, the statement of affairs shall
be placed on file at the corporation's principal office within one hundred
twenty (120) days after the end of the fiscal year. The proper officers
of the corporation shall also prepare, maintain and preserve or cause to
be prepared, maintained and preserved the accounts, books and other
documents required by Section 2-111 of the Maryland General Corporation
Law and Section 31 of the Investment Company Act of 1940 and shall prepare
and file or cause to be prepared and filed the reports required by Section
30 of such Act. No financial statement shall be filed with the Securities
and Exchange Commission unless the officers or employees who prepared or
participated in the preparation of such financial statement have been
specifically designated for such purpose by the board of directors.
Section 4. Auditors. No independent public accountant shall be
retained or employed by the corporation to examine, certify or report on
its financial statements for any fiscal year unless such selection: (i)
shall have been approved by a majority of the entire board of directors
within thirty (30) days before or after the beginning of such fiscal year
or before the annual ratification by the stockholders; (ii) shall have
been ratified by the stockholders, provided that any vacancy occurring
between such annual ratification due to the death or resignation of such
accountant may be filled by the board of directors; and (iii) shall
otherwise meet the requirements of Section 32 of the Investment Company
Act of 1940.
Section 5. Custodianship. All securities owned by the corporation and
all cash, including, without limiting the generality of the foregoing, the
proceeds from sales of securities owned by the corporation and from the
issuance of shares of the capital stock of the corporation, payments of
principal upon securities owned by the corporation, and distributions in
respect of securities owned by the corporation which at the time of
payment are represented by the distributing corporation to be capital
distributions, shall be held by a custodian or custodians which shall be a
bank, as that term is defined in the Investment Company Act of 1940,
having capital, surplus and undivided profits aggregating not less than
$2,000,000. The terms of custody of such securities and cash shall
include provisions to the effect that the custodian shall deliver
securities owned by the corporation only (a) upon sales of such securities
for the account of the corporation and receipt by the custodian of payment
therefor, (b) when such securities are called, redeemed or retired or
otherwise become payable, (c) for examination by any broker selling any
such securities in accordance with "street delivery" custom, (d) in
exchange for or upon conversion into other securities alone or other
securities and cash whether pursuant to any plan of merger, consolidation,
reorganization, recapitalization or readjustment, or otherwise, (e) upon
conversion of such securities pursuant to their terms into other
securities, (f) upon exercise of subscription, purchase or other similar
rights represented by such securities, (g) for the purpose of exchanging
interim receipts or temporary securities for definitive securities, (h)
for the purpose of redeeming in kind shares of the capital stock of the
corporation, or (i) for other proper corporate purposes. Such terms of
custody shall also include provisions to the effect that the custodian
shall hold the securities and funds of the corporation in a separate
account or accounts and shall have sole power to release and deliver any
such securities and draw upon any such account, any of the securities or
funds of the corporation only on receipt by such custodian of written
instruction from one or more persons authorized by the board of directors
to give such instructions on behalf of the corporation, and that the
custodian shall deliver cash of the corporation required by this Section 5
to be deposited with the custodian only upon the purchase of securities
for the portfolio of the corporation and the delivery of such securities
to the custodian, for the purchase or redemption of shares of the capital
stock of the corporation, for the payment of interest, dividends, taxes,
management or supervisory fees or operating expenses, for payments in
connection with the conversion, exchange or surrender of securities owned
by the corporation, or for other proper corporate purposes. Upon the
resignation or inability to serve of any such custodian the corporation
shall (a) use its best efforts to obtain a successor custodian, (b)
require the cash and securities of the corporation held by the custodian
to be delivered directly to the successor custodian, and (c) in the event
that no successor custodian can be found, submit to the stockholders of
the corporation, before permitting delivery of such cash and securities to
anyone other than a successor custodian, the question whether the
corporation shall be dissolved or shall function without a custodian;
provided, however, that nothing herein contained shall prevent the
termination of any agreement between the corporation and any such
custodian by the affirmative vote of the holders of a majority of all the
shares of the capital stock of the corporation at the time outstanding and
entitled to vote. Upon its resignation or inability to serve, the
custodian may deliver any assets of the corporation held by it to a
qualified bank or trust company selected by it, such assets to be held
subject to the terms of custody which governed such retiring custodian,
pending action by the corporation as set forth in this Section 5.
Section 6. Termination of Custodian Agreement. Any employment
agreement with a custodian shall be terminable on not more than sixty (60)
days' notice in writing by the board of directors or the custodian and
upon any such termination the custodian shall turn over only to the
succeeding custodian designated by the board of directors all funds,
securities and property and documents of the corporation in its
possession.
Section 7. Checks and Requisitions. Except as otherwise authorized by
the board of directors, all checks and drafts for the payment of money
shall be signed in the name of the corporation by a custodian, and all
requisitions or orders for the payment of money by a custodian or for the
issue of checks and drafts therefore, all promissory notes, all
assignments of stock or securities standing in the name of the
corporation, and all requisitions or orders for the assignment of stock or
securities standing in the name of a custodian or its nominee, or for the
execution of powers to transfer the same, shall be signed in the name of
the corporation by not less than two persons (who shall be among those
persons, not in excess of five, designated for this purpose by the board
of directors) at least one of which shall be an officer. Promissory
notes, checks or drafts payable to the corporation may be endorsed only to
the order of a custodian or its nominee by the treasurer or president or
by such other person or persons as shall be thereto authorized by the
board of directors.
Section 8. Investment Advisory Contract. Any investment advisory
contract in effect after the first annual meeting of stockholders of the
corporation, to which the corporation is or shall become a party, whereby,
subject to the control of the board of directors of the corporation, the
investment portfolio with respect to any class of Common Stock of the
corporation shall be managed or supervised by the other party to such
contract, shall be effective and binding only upon the affirmative vote of
a majority of the outstanding voting securities of such class of Common
Stock of the corporation (as defined in the Investment Company Act of
1940), and the investment advisory contract currently in effect with
respect to any class of Common Stock shall be submitted to the holders of
shares of such class of Common Stock for ratification by the affirmative
vote of such majority. Any investment advisory contract to which the
corporation shall be a party whereby, subject to the control of the board
of directors of the corporation, the investment portfolio with respect to
any class of Common Stock of the corporation shall be managed or
supervised by the other party to such contract, shall provide, among other
things, that such contract cannot be assigned. Such investment advisory
contract shall prohibit the other party thereto from making short sales of
shares of capital stock of the corporation; and such investment advisory
contract shall prohibit such other party from purchasing shares otherwise
than for investment, and shall require such other party to advise the
corporation of any sales of shares of the capital stock of the corporation
made by such person or organization less than two months after the date of
any purchase by him or it of shares of the capital stock of the
corporation. Unless any such contract shall expressly otherwise provide,
any provisions therein for the termination thereof by action of the board
of directors of the corporation shall be construed to require that such
termination can be accomplished only upon the vote of a majority of the
entire board.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Offices. The registered office of the corporation in the
State of Maryland shall be in the City of Baltimore. The corporation may
also have offices at such other places within and without the State of
Maryland as the board of directors may from time to time determine. Except
as otherwise required by statute, the books and records of the corporation
may be kept outside the State of Maryland.
Section 2. Seal. The corporate seal shall have inscribed thereon the
name of the corporation, and the words "Corporate Seal" and "Maryland".
The seal may be used by causing it or a facsimile thereof to be impressed,
affixed, reproduced or otherwise.
Section 3. Fiscal Year. The fiscal year of the corporation shall be
fixed by the board of directors.
Section 4. Notice of Waiver of Notice. Whenever any notice of the
time, place or purpose of any meeting of stockholders or directors is
required to be given under the statute, the charter or these bylaws, a
waiver thereof in writing, signed by the person or persons entitled to
such notice and filed with the records of the meeting, either before or
after the holding thereof, or actual attendance at the meeting of
stockholders in person or by proxy or at the meeting of directors in
person, shall be deemed equivalent to the giving of such notice to such
person. No notice need be given to any person with whom communication is
made unlawful by any law of the United States or any rule, regulation,
proclamation or executive order issued by any such law.
Section 5. Voting of Stock. Unless otherwise ordered by the board of
directors, the president shall have full power and authority, in the name
and on behalf of the corporation, (i) to attend, act and vote at any
meeting of stockholders of any company in which the corporation may own
shares of stock of record, beneficially (as the proxy or attorney-in-fact
of the record holder) or of record and beneficially, and (ii) to give
voting directions to the record stockholder of any such stock beneficially
owned. At any such meeting, he shall possess and may exercise any and all
rights and powers incident to the ownership of such shares which, as the
holder or beneficial owner and proxy of the holder thereof, the
corporation might possess and exercise if personally present, and may
delegate such power and authority to any officer, agent or employee of the
corporation.
Section 6. Dividends. Dividends upon any class of stock of the
corporation, subject to the provisions of the charter, if any, may be
declared by the board of directors in any lawful manner. The source of
each dividend payment shall be disclosed to the stockholders receiving
such dividend, to the extent required by the laws of the State of Maryland
and by Section 19 of the Investment Company Act of 1940 and the rules and
regulations of the Securities and Exchange Commission thereunder.
Section 7. Indemnification.
A. The corporation shall indemnify all of its corporate
representatives against expenses, including attorneys' fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred by
them in connection with the defense of any action, suit or proceeding, or
threat or claim of such action, suit or proceeding, whether civil,
criminal, administrative, or legislative, no matter by whom brought, or in
any appeal in which they or any of them are made parties or a party by
reason of being or having been a corporate representative, if the
corporate representative acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the corporation
and with respect to any criminal proceeding, if he had no reasonable cause
to believe his conduct was unlawful provided that the corporation shall
not indemnify corporate representatives in relation to matters as to which
any such corporate representative shall be adjudged in such action, suit
or proceeding to be liable for gross negligence, willful misfeasance, bad
faith, reckless disregard of the duties and obligations involved in the
conduct of his office, or when indemnification is otherwise not permitted
by the Maryland General Corporation Law.
B. In the absence of an adjudication which expressly absolves the
corporate representative, or in the event of a settlement, each corporate
representative shall be indemnified hereunder only if there has been a
reasonable determination based on a review of the facts that
indemnification of the corporate representative is proper because he has
met the applicable standard of conduct set forth in paragraph A. Such
determination shall be made: (i) by the board of directors, by a majority
vote of a quorum which consists of directors who were not parties to the
action, suit or proceeding, or if such a quorum cannot be obtained, then
by a majority vote of a committee of the board consisting solely of two or
more directors, not, at the time, parties to the action, suit or
proceeding and who were duly designated to act in the matter by the full
board in which the designated directors who are parties to the action,
suit or proceeding may participate; or (ii) by special legal counsel
selected by the board of directors or a committee of the board by vote as
set forth in (i) of this paragraph, or, if the requisite quorum of the
full board cannot be obtained therefor and the committee cannot be
established, by a majority vote of the full board in which directors who
are parties to the action, suit or proceeding may participate.
C. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall create a rebuttable presumption that the person was
guilty of willful misfeasance, bad faith, gross negligence or reckless
disregard to the duties and obligations involved in the conduct of his or
her office, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his or her conduct was unlawful.
D. Expenses, including attorneys' fees, incurred in the preparation
of and/or presentation of the defense of a civil or criminal action, suit
or proceeding may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding as authorized in the manner
provided in Section 2-418(F) of the Maryland General Corporation Law upon
receipt of: (i) an undertaking by or on behalf of the corporate
representative to repay such amount unless it shall ultimately be
determined that he or she is entitled to be indemnified by the corporation
as authorized in this bylaw; and (ii) a written affirmation by the
corporate representative of the corporate representative's good faith
belief that the standard of conduct necessary for indemnification by the
corporation has been met.
E. The indemnification provided by this bylaw shall not be deemed
exclusive of any other rights to which those indemnified may be entitled
under these bylaws, any agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his or her official capacity
and as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director, officer, employee
or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person subject to the limitations imposed from
time to time by the Investment Company Act of 1940, as amended.
F. This corporation shall have power to purchase and maintain
insurance on behalf of any corporate representative against any liability
asserted against him or her and incurred by him or her in such capacity or
arising out of his or her status as such, whether or not the corporation
would have the power to indemnify him or her against such liability under
this bylaw provided that no insurance may be purchased or maintained to
protect any corporate representative against liability for gross
negligence, willful misfeasance, bad faith or reckless disregard of the
duties and obligations involved in the conduct of his or her office.
G. "Corporate Representative" means an individual who is or was a
director, officer, agent or employee of the corporation or who serves or
served another corporation, partnership, joint venture, trust or other
enterprise in one of these capacities at the request of the corporation
and who, by reason of his or her position, is, was, or is threatened to be
made, a party to a proceeding described herein.
Section 8. Amendments.
A. These bylaws may be altered, amended or repealed and new
bylaws may be adopted by the stockholders by affirmative vote of not less
than a majority of the shares of all classes of stock present or
represented at any annual or special meeting of the stockholders at which
a quorum is in attendance.
B. These bylaws may also be altered, amended or repealed and
new bylaws may be adopted by the Board of Directors by affirmative vote of
a majority of the number of directors present at any meeting at which a
quorum is in attendance; but no bylaw adopted by the stockholders shall be
amended or repealed by the Board of Directors if the bylaws so adopted so
provides.
C. Any action taken or authorized by the stockholders or by
the Board of Directors, which would be inconsistent with the bylaws then
in effect but is taken or authorized by affirmative vote of not less than
the number of shares or the number of directors required to amend the
bylaws so that the bylaws would be consistent with such action, shall be
given the same effect as though the bylaws had been temporarily amended or
suspended so far, but only so far, as was necessary to permit the specific
action so taken or authorized.
Section 9. Reports to Stockholders. The books of account of the
corporation shall be examined by an independent firm of public accountants
at the close of each annual fiscal period of the corporation and at such
other times, if any, as may be directed by the Board of Directors of the
corporation. A report to the stockholders based upon each such
examination shall be mailed to each stockholder of the corporation of
record on such date with respect to each report as may be determined by
the Board of Directors at his address as the same appears on the books of
the corporation. Each such report shall include the financial information
required to be transmitted to stockholders by rules or regulations of the
Securities and Exchange Commission under the Investment Company Act of
1940 and shall be in such form as the Board of Directors shall determine
pursuant to rules and regulations of the Securities and Exchange
Commission.
Section 10. Information to Accompany Dividends. At the time of the
payment by the corporation of any dividend to the holders of any class of
stock of the corporation, each stockholder to whom such dividend is paid
shall be notified of the account or accounts from which it is paid and the
amount thereof paid from each such account.
ARTICLE VIII
SALES, REDEMPTION AND
NET ASSET VALUE OF SHARES
Section 1. Sales of Shares. Shares of any class of Common Stock of
the corporation shall be sold by it for the net asset value per share of
such class of Common Stock outstanding at the time as of which the
computation of said net asset value shall be made as hereinafter provided
in these bylaws.
Section 2. Periodic Investment and Dividend Reinvestment Plans. The
corporation acting by and through the Board of Directors shall have the
right to adopt and to offer to the holders of each class of stock and to
the public a periodic investment plan and an automatic reinvestment of
dividend plan subject to the limitations and restrictions imposed thereon
and as set forth in the Investment Company Act of 1940 and any rule or
regulation adopted or issued thereunder.
Section 3. Shares Issued for Securities. In the case of shares of any
class of stock of the corporation issued in whole or in part in exchange
for securities, there may, at the discretion of the board of directors of
the corporation, be included in the value of said securities, for the
purpose of determining the number of shares of such class stock of the
corporation issuable in exchange therefor, the amount, if any, of
brokerage commissions (not exceeding an amount equal to the rates payable
in connection with the purchase of comparable securities on the New York
Stock Exchange) or other similar costs of acquisition of such securities
paid by the holder of said securities in acquiring the same.
Section 4. Redemption of Shares. Each share of each class of Common
Stock of the corporation now or hereafter issued shall be subject to
redemption, as provided in the Articles of Incorporation of the
corporation.
Section 5. Suspension of Right of Redemption. The Board of Directors
of the corporation may suspend the right of the holders of any class of
Common Stock of the corporation to require the corporation to redeem
shares of such class:
(1) for any period (a) during which the New York Stock
Exchange is closed other than customary weekend and holiday
closings, or (b) during which trading on the New York Stock
Exchange is restricted;
(2) for any period during which an emergency, as defined
by rules of the Securities and Exchange Commission or any
successor thereto, exists as a result of which (a) disposal by
the corporation of securities owned by it is not reasonably
practicable, or (b) it is not reasonably practicable for the
corporation fairly to determine the value of its net assets; or
(3) for such other periods as the Securities and Exchange
Commission or any successor thereto may by order permit for the
protection of security holders of the corporation.
Section 6. Computation of Net Asset Value. For purposes of these
bylaws, the following rules shall apply:
A. The net asset value of each share of each class of
Common Stock of the corporation shall be determined at such time
or times as may be disclosed in the then currently effective
Prospectus relating to such class of Common Stock of this
corporation. The Board of Directors may also, from time to time
by resolution, designate a time or times intermediate of the
opening and closing of trading on the New York Stock Exchange on
each day that said Exchange is open for trading as of which the
net asset value of each share of each class of Common Stock of
the corporation shall be determined or estimated.
Any determination or estimation of net asset value as
provided in this subparagraph A shall be effective at the time
as of which such determination or estimation is made.
The net asset value of each share of each class of Common
Stock of the corporation for purposes of the issue of such class
of Common Stock shall be the net asset value which becomes
effective as provided in this Subparagraph A, next succeeding
receipt of the subscription to such share of such class Common
Stock. The net asset value of each share of each class of
Common Stock of the corporation tendered for redemption shall be
the net asset value which becomes effective as provided in this
Subparagraph A, next succeeding the tender of such share of such
class of Common Stock for redemption.
B. The net asset value of each share of each class of
Common Stock of the corporation, as of the close of business on
any day, shall be the quotient obtained by dividing the value at
such close of the net assets belonging to such class (meaning
the assets belonging to such class and any other assets
allocated to such class less the liabilities belonging to such
class and any other liabilities allocated to such class
excluding capital and surplus) of the corporation by the total
number of shares of such class outstanding at such close.
(i) The assets belonging to any class of Common
Stock shall be that portion of the total assets of the
corporation as determined in accordance with the
provisions of Article IV of the Articles of
Incorporation of the corporation. The assets of the
corporation shall be deemed to include (a) all cash on
hand, on deposit, or on call, (b) all bills and notes
and accounts receivable, (c) all shares of stock and
subscription rights and other securities owned or
contracted for by the corporation, other than its own
common stock, (d) all stock and cash dividends and
cash distributions, to be received by the corporation,
and not yet received by it but declared to
stockholders of record on a date on or before the date
as of which the net asset value is being determined,
(e) all interest accrued on any interest-bearing
securities owned by the corporation, and (f) all other
property of every kind and nature including prepaid
expenses; the value of such assets to be determined in
accordance with the corporation's registration
statement filed with the Securities and Exchange
Commission.
(ii) The liabilities belonging to any class of
Common Stock shall be that portion of the total
liabilities of the corporation as determined in
accordance with the provisions of Article IV of the
Articles of Incorporation of the corporation. The
liabilities of the corporation shall be deemed to
include (a) all bills and notes and accounts payable,
(b) all administration expenses payable and/or accrued
(including investment advisory fees), (c) all
contractual obligations for the payment of money or
property including the amount of any unpaid dividend
declared upon the corporation's stock and payable to
stockholders of record on or before the day as of
which the value of the corporation's stock is being
determined, (d) all reserves, if any, authorized or
approved by the Board of Directors for taxes,
including reserves for taxes at current rates based on
any unrealized appreciation in the value of the assets
of the corporation, and (e) all other liabilities of
the corporation of whatever kind and nature except
liabilities represented by outstanding capital stock
and surplus of the corporation.
(iii) For the purposes hereof: (a) shares of
each class of Common Stock subscribed for shall be
deemed to be outstanding as of the time of acceptance
of any subscription and the entry thereof on the books
of the corporation and the net price thereof shall be
deemed to be an asset belonging to such class; and (b)
shares of each class of Common Stock surrendered for
redemption by the corporation shall be deemed to be
outstanding until the time as of which the net asset
value for purposes of such redemption is determined or
estimated.
C. The net asset value of each share of each class of
Common Stock of the corporation, as of any time other than the
close of business on any day, may be determined by applying to
the net asset value as of the close of business on the preceding
business day, computed as provided in Paragraph B of this
Section of these bylaws, such adjustments as are authorized by
or pursuant to the direction of the Board of Directors and
designed reasonably to reflect any material changes in the
market value of securities and other assets held and any other
material changes in the assets or liabilities of the corporation
and in the number of its outstanding shares which shall have
taken place since the close of business on such preceding
business day.
D. In addition to the foregoing, the Board of Directors
is empowered, in its absolute discretion, to establish other
bases or times, or both, for determining the net asset value of
each share of each class of the Common Stock of the corporation.
EXHIBIT 5
INVESTMENT ADVISORY AGREEMENT
Agreement made this ____ day of __________________, 1997 between
The Thurlow Funds, Inc., a Maryland corporation (the "Company"), and
Thurlow Capital Management, Inc., a Delaware corporation (the "Adviser").
W I T N E S S E T H:
WHEREAS, the Company is in the process of registering with the
Securities and Exchange Commission under the Investment Company Act of
1940 (the "Act") as an open-end management investment company consisting
initially of one series The Thurlow Growth (the "Fund"); and
WHEREAS, the Company desires to retain the Adviser, which is an
investment adviser registered under the Investment Advisers Act of 1940,
as the investment adviser for the Fund.
NOW, THEREFORE, the Company and the Adviser do mutually promise
and agree as follows:
1. Employment. The Company hereby employs the Adviser to
manage the investment and reinvestment of the assets of the Fund for the
period and on the terms set forth in this Agreement. The Adviser hereby
accepts such employment for the compensation herein provided and agrees
during such period to render the services and to assume the obligations
herein set forth.
2. Authority of the Adviser. The Adviser shall supervise and
manage the investment portfolio of the Fund, and, subject to such policies
as the directors of the Company may determine, direct the purchase and
sale of investment securities in the day-to-day management of the Fund.
The Adviser shall for all purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided or authorized,
have no authority to act for or represent the Company or the Fund in any
way or otherwise be deemed an agent of the Company or the Fund. However,
one or more shareholders, officers, directors or employees of the Adviser
may serve as directors and/or officers of the Company, but without
compensation or reimbursement of expenses for such services from the
Company. Nothing herein contained shall be deemed to require the Company
to take any action contrary to its Articles of Incorporation or By-Laws or
any applicable statute or regulation, or to relieve or deprive the
directors of the Company of their responsibility for, and control of, the
affairs of the Fund.
3. Expenses. The Adviser, at its own expense and without
reimbursement from the Company or the Fund, shall furnish office space,
and all necessary office facilities, equipment and executive personnel for
managing the investments of the Fund. The Fund shall bear all expenses
initially incurred by it, provided that the total expenses borne by the
Fund, including the Adviser's fee but excluding all federal, state and
local taxes, interest, brokerage commissions and extraordinary items,
shall not in any year exceed that percentage of the average net assets of
the Fund for such year, as determined by valuations made as of the close
of each business day, which is the most restrictive percentage provided by
the state laws of the various states in which the Fund's shares are
qualified for sale or, if the states in which the Fund's shares are
qualified for sale impose no such restrictions, 3.00%. The expenses of
the Fund's operations borne by the Fund include by way of illustration and
not limitation, director's fees paid to those directors who are not
officers of the Company, the costs of preparing and printing its
registration statements required under the Securities Act of 1933 and the
Act (and amendments thereto), the expense of registering its shares with
the Securities and Exchange Commission and in the various states, payments
made pursuant to the Service and Distribution Plan, the printing and
distribution cost of prospectuses mailed to existing shareholders, the
cost of share certificates (if any), director and officer liability
insurance, reports to shareholders, reports to government authorities and
proxy statements, interest charges, taxes, legal expenses, salaries of
administrative and clerical personnel, association membership dues,
auditing and accounting services, insurance premiums, brokerage and other
expenses connected with the execution of portfolio securities
transactions, fees and expenses of the custodian of the Fund's assets,
expenses of calculating the net asset value and repurchasing and redeeming
shares, charges and expenses of dividend disbursing agents, registrars and
stock transfer agents and the cost of keeping all necessary shareholder
records and accounts.
The Company shall monitor the expense ratio of the Fund on a
monthly basis. If the accrued amount of the expenses of the Fund exceeds
the expense limitation established herein, the Company shall create an
account receivable from the Adviser for the amount of such excess. In
such a situation the monthly payment of the Adviser's fee will be reduced
by the amount of such excess, subject to adjustment month by month during
the balance of the Company's fiscal year if accrued expenses thereafter
fall below the expense limitation.
4. Compensation of the Adviser. For the services and
facilities to be rendered and the charges and expenses to be assumed by
the Adviser hereunder, the Company, through and on behalf of the Fund
shall pay to the Adviser an advisory fee, paid monthly, based on the
average net assets of the Fund, as determined by valuations made as of the
close of each business day of the month. The advisory fee shall be 1/12
of 1.25% (1.25% per annum) of such average net assets. For any month in
which this Agreement is not in effect for the entire month, such fee shall
be reduced proportionately on the basis of the number of calendar days
during which it is in effect and the fee computed upon the average net
assets of the business days during which it is so in effect.
5. Ownership of Shares of the Fund. Except in connection with
the initial capitalization of the Fund, the Adviser shall not take, and
shall not permit any of its shareholders, officers, directors or employees
to take, a long or short position in the shares of the Fund, except for
the purchase of shares of the Fund for investment purposes at the same
price as that available to the public at the time of purchase.
6. Exclusivity. The services of the Adviser to the Fund
hereunder are not to be deemed exclusive and the Adviser shall be free to
furnish similar services to others as long as the services hereunder are
not impaired thereby. Although the Adviser has permitted and is
permitting the Fund and the Company to use the name "Thurlow," it is
understood and agreed that the Adviser reserves the right to use and to
permit other persons, firms or corporations, including investment
companies, to use such name, and that the Fund and the Company will not
use such name if the Adviser ceases to be the Fund's sole investment
adviser. During the period that this Agreement is in effect, the Adviser
shall be the Fund's sole investment adviser.
7. Liability. In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Adviser, the Adviser shall not be subject to
liability to the Fund or to any shareholder of the Fund for any act or
omission in the course of, or connected with, rendering services
hereunder, or for any losses that may be sustained in the purchase,
holding or sale of any security.
8. Brokerage Commissions. The Adviser may cause the Fund to
pay a broker-dealer which provides brokerage and research services, as
such services are defined in Section 28(e) of the Securities Exchange Act
of 1934 (the "Exchange Act"), to the Adviser a commission for effecting a
securities transaction in excess of the amount another broker-dealer would
have charged for effecting such transaction, if the Adviser determines in
good faith that such amount of commission is reasonable in relation to the
value of brokerage and research services provided by the executing
broker-dealer viewed in terms of either that particular transaction or his
overall responsibilities with respect to the accounts as to which he
exercises investment discretion (as defined in Section 3(a)(35) of the
Exchange Act).
9. Amendments. This Agreement may be amended by the mutual
consent of the parties; provided, however, that in no event may it be
amended without the approval of the directors of the Company in the manner
required by the Act, and, if required by the Act, by the vote of the
majority of the outstanding voting securities of the Fund, as defined in
the Act.
10. Termination. This Agreement may be terminated at any time,
without the payment of any penalty, by the directors of the Company or by
a vote of the majority of the outstanding voting securities of the Fund,
as defined in the Act, upon giving sixty (60) days' written notice to the
Adviser. This Agreement may be terminated by the Adviser at any time upon
the giving of sixty (60) days' written notice to the Company. This
Agreement shall terminate automatically in the event of its assignment (as
defined in Section 2(a)(4) of the Act). Subject to prior termination as
hereinbefore provided, this Agreement shall continue in effect for two (2)
years from the date hereof and indefinitely thereafter, but only so long
as the continuance after such two (2) year period is specifically approved
annually by (i) the directors of the Company or by the vote of the
majority of the outstanding voting securities of the Fund, as defined in
the Act, and (ii) the directors of the Company in the manner required by
the Act, provided that any such approval may be made effective not more
than sixty (60) days thereafter.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on the day first above written.
THURLOW CAPITAL MANAGEMENT, INC. THE THURLOW FUNDS, INC.
(the "Adviser") (the "Company")
By:____________________________ By: ____________________________
Thomas F. Thurlow, President Thomas F. Thurlow, President
EXHIBIT 8
CUSTODIAN AGREEMENT
THIS AGREEMENT made on ________________, 1997, between THURLOW
FUNDS, INC., presently consisting of one portfolio, THE THURLOW GROWTH
FUND, a Maryland corporation (hereinafter called the ("Fund"), and FIRSTAR
TRUST COMPANY, a corporation organized under the laws of the State of
Wisconsin (hereinafter called "Custodian"),
WHEREAS, the Fund desires that its securities and cash shall be
hereafter held and administered by Custodian pursuant to the terms of this
Agreement;
NOW, THEREFORE, in consideration of the mutual agreements herein
made, the Fund and Custodian agree as follows:
1. DEFINITIONS
The word "securities" as used herein includes stocks, shares,
bonds, debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments representing rights
to receive, purchase or subscribe for the same, or evidencing or
representing any other rights or interests therein, or in any property or
assets.
The words "officers' certificate" shall mean a request or
direction or certification in writing signed in the name of the Fund by
any two of the President, a Vice President, the Secretary and the
Treasurer of the Fund, or any other persons duly authorized to sign by the
Board of Directors.
The word "Board" shall mean Board of Directors of the of the
Fund.
2. NAMES, TITLES, AND SIGNATURES OF THE FUND'S OFFICERS
An officer of the Fund will certify to Custodian the names and
signatures of those persons authorized to sign the officers' certificates
described in Section 1 hereof, and the names of the members of the Board
of Directors, together with any changes which may occur from time to time.
3. RECEIPT AND DISBURSEMENT OF MONEY
A. Custodian shall open and maintain a separate account or
accounts in the name of the Fund, subject only to draft or order by
Custodian acting pursuant to the terms of this Agreement. Custodian shall
hold in such account or accounts, subject to the provisions hereof, all
cash received by it from or for the account of the Fund. Custodian shall
make payments of cash to, or for the account of, the Fund from such cash
only:
(a) for the purchase of securities for the portfolio of
the Fund upon the delivery of such securities to Custodian,
registered in the name of the Fund or of the nominee of
Custodian referred to in Section 7 or in proper form for
transfer;
(b) for the purchase or redemption of shares of the common
stock of the Fund upon delivery thereof to Custodian, or upon
proper instructions from The Thurlow Funds, Inc., presently
consisting of one portfolio, The Thurlow Growth Fund;
(c) for the payment of interest, dividends, taxes,
investment adviser's fees or operating expenses (including,
without limitation thereto, fees for legal, accounting, auditing
and custodian services and expenses for printing and postage);
(d) for payments in connection with the conversion,
exchange or surrender of securities owned or subscribed to by
the Fund held by or to be delivered to Custodian; or
(e) for other proper corporate purposes certified by
resolution of the Board of Directors of the Fund.
Before making any such payment, Custodian shall receive (and may
rely upon) an officers' certificate requesting such payment and stating
that it is for a purpose permitted under the terms of items (a), (b), (c),
or (d) of this Subsection A, and also, in respect of item (e), upon
receipt of an officers' certificate specifying the amount of such payment,
setting forth the purpose for which such payment is to be made, declaring
such purpose to be a proper corporate purpose, and naming the person or
persons to whom such payment is to be made, provided, however, that an
officers' certificate need not precede the disbursement of cash for the
purpose of purchasing a money market instrument, or any other security
with same or next-day settlement, if the President, a Vice President, the
Secretary or the Treasurer of the Fund issues appropriate oral or
facsimile instructions to Custodian and an appropriate officers'
certificate is received by Custodian within two business days thereafter.
B. Custodian is hereby authorized to endorse and collect all
checks, drafts or other orders for the payment of money received by
Custodian for the account of the Fund.
C. Custodian shall, upon receipt of proper instructions, make
federal funds available to the Fund as of specified times agreed upon from
time to time by the Fund and the custodian in the amount of checks
received in payment for shares of the Fund which are deposited into the
Fund's account.
4. SEGREGATED ACCOUNTS
Upon receipt of proper instructions, the Custodian shall
establish and maintain a segregated account(s) for and on behalf of the
portfolio, into which account(s) may be transferred cash and/or
securities.
5. TRANSFER, EXCHANGE, REDELIVERY, ETC. OF SECURITIES
Custodian shall have sole power to release or deliver any
securities of the Fund held by it pursuant to this Agreement. Custodian
agrees to transfer, exchange or deliver securities held by it hereunder
only:
(a) for sales of such securities for the account of the
Fund upon receipt by Custodian of payment therefore;
(b) when such securities are called, redeemed or retired
or otherwise become payable;
(c) for examination by any broker selling any such
securities in accordance with "street delivery" custom;
(d) in exchange for, or upon conversion into, other
securities alone or other securities and cash whether pursuant
to any plan of merger, consolidation, reorganization,
recapitalization or readjustment, or otherwise;
(e) upon conversion of such securities pursuant to their
terms into other securities;
(f) upon exercise of subscription, purchase or other
similar rights represented by such securities;
(g) for the purpose of exchanging interim receipts or
temporary securities for definitive securities;
(h) for the purpose of redeeming in kind shares of common
stock of the Fund upon delivery thereof to Custodian; or
(i) for other proper corporate purposes.
As to any deliveries made by Custodian pursuant to items (a),
(b), (d), (e), (f), and (g), securities or cash receivable in exchange
therefore shall be deliverable to Custodian.
Before making any such transfer, exchange or delivery, Custodian
shall receive (and may rely upon) an officers' certificate requesting such
transfer, exchange or delivery, and stating that it is for a purpose
permitted under the terms of items (a), (b), (c), (d), (e), (f), (g), or
(h) of this Section 5 and also, in respect of item (i), upon receipt of an
officers' certificate specifying the securities to be delivered, setting
forth the purpose for which such delivery is to be made, declaring such
purpose to be a proper corporate purpose, and naming the person or persons
to whom delivery of such securities shall be made, provided, however, that
an officers' certificate need not precede any such transfer, exchange or
delivery of a money market instrument, or any other security with same or
next-day settlement, if the President, a Vice President, the Secretary or
the Treasurer of the Fund issues appropriate oral or facsimile
instructions to Custodian and an appropriate officers' certificate is
received by Custodian within two business days thereafter.
6. CUSTODIAN'S ACTS WITHOUT INSTRUCTIONS
Unless and until Custodian receives an officers' certificate to
the contrary, Custodian shall: (a) present for payment all coupons and
other income items held by it for the account of the Fund, which call for
payment upon presentation and hold the cash received by it upon such
payment for the account of the Fund; (b) collect interest and cash
dividends received, with notice to the Fund, for the account of the Fund;
(c) hold for the account of the Fund hereunder all stock dividends, rights
and similar securities issued with respect to any securities held by it
hereunder; and (d) execute, as agent on behalf of the Fund, all necessary
ownership certificates required by the Internal Revenue Code or the Income
Tax Regulations of the United States Treasury Department or under the laws
of any state now or hereafter in effect, inserting the Fund's name on such
certificates as the owner of the securities covered thereby, to the extent
it may lawfully do so.
7. REGISTRATION OF SECURITIES
Except as otherwise directed by an officers' certificate,
Custodian shall register all securities, except such as are in bearer
form, in the name of a registered nominee of Custodian as defined in the
Internal Revenue Code and any Regulations of the Treasury Department
issued hereunder or in any provision of any subsequent federal tax law
exempting such transaction from liability for stock transfer taxes, and
shall execute and deliver all such certificates in connection therewith as
may be required by such laws or regulations or under the laws of any
state. Custodian shall use its best efforts to the end that the specific
securities held by it hereunder shall be at all times identifiable in its
records.
The Fund shall from time to time furnish to Custodian
appropriate instruments to enable Custodian to hold or deliver in proper
form for transfer, or to register in the name of its registered nominee,
any securities which it may hold for the account of the Fund and which may
from time to time be registered in the name of the Fund.
8. VOTING AND OTHER ACTION
Neither Custodian nor any nominee of Custodian shall vote any of
the securities held hereunder by or for the account of the Fund, except in
accordance with the instructions contained in an officers' certificate.
Custodian shall deliver, or cause to be executed and delivered, to the
Corporation all notices, proxies and proxy soliciting materials with
relation to such securities, such proxies to be executed by the registered
holder of such securities (if registered otherwise than in the name of the
Fund), but without indicating the manner in which such proxies are to be
voted.
9. TRANSFER TAX AND OTHER DISBURSEMENTS
The Fund shall pay or reimburse Custodian from time to time for
any transfer taxes payable upon transfers of securities made hereunder,
and for all other necessary and proper disbursements and expenses made or
incurred by Custodian in the performance of this Agreement.
Custodian shall execute and deliver such certificates in
connection with securities delivered to it or by it under this Agreement
as may be required under the provisions of the Internal Revenue Code and
any Regulations of the Treasury Department issued thereunder, or under the
laws of any state, to exempt from taxation any exemptable transfers and/or
deliveries of any such securities.
10. CONCERNING CUSTODIAN
Custodian shall be paid as compensation for its services
pursuant to this Agreement such compensation as may from time to time be
agreed upon in writing between the two parties. Until modified in
writing, such compensation shall be as set forth in Exhibit A attached
hereto.
Custodian shall not be liable for any action taken in good faith
upon any certificate herein described or certified copy of any resolution
of the Board, and may rely on the genuineness of any such document which
it may in good faith believe to have been validly executed.
The Fund agrees to indemnify and hold harmless Custodian and its
nominee from all taxes, charges, expenses, assessments, claims and
liabilities (including counsel fees) incurred or assessed against it or by
its nominee in connection with the performance of this Agreement, except
such as may arise from its or its nominee's own negligent action,
negligent failure to act or willful misconduct. Custodian is authorized
to charge any account of the Fund for such items.
In the event of any advance of cash for any purpose made by
Custodian resulting from orders or instructions of the Fund, or in the
event that Custodian or its nominee shall incur or be assessed any taxes,
charges, expenses, assessments, claims or liabilities in connection with
the performance of this Agreement, except such as may arise from its or
its nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the Fund
shall be security therefore.
Custodian agrees to indemnify and hold harmless Fund from all
charges, expenses, assessments, and claims/liabilities (including counsel
fees) incurred or assessed against it in connection with the performance
of this agreement, except such as may arise from the Fund's own negligent
action, negligent failure to act, or willful misconduct.
11. SUBCUSTODIANS
Custodian is hereby authorized to engage another bank or trust
company as a Subcustodian for all or any part of the Fund's assets, so
long as any such bank or trust company is a bank or trust company
organized under the laws of any state of the United States, having an
aggregate capital, surplus and undivided profit, as shown by its last
published report, of not less than Two Million Dollars ($2,000,000) and
provided further that, if the Custodian utilizes the services of a
Subcustodian, the Custodian shall remain fully liable and responsible for
any losses caused to the Fund by the Subcustodian as fully as if the
Custodian was directly responsible for any such losses under the terms of
the Custodian Agreement.
Notwithstanding anything contained herein, if the Fund requires
the Custodian to engage specific Subcustodians for the safekeeping and/or
clearing of assets, the Fund agrees to indemnify and hold harmless
Custodian from all claims, expenses and liabilities incurred or assessed
against it in connection with the use of such Subcustodian in regard to
the Fund's assets, except as may arise from its own negligent action,
negligent failure to act or willful misconduct.
12. REPORTS BY CUSTODIAN
Custodian shall furnish the Fund periodically as agreed upon
with a statement summarizing all transactions and entries for the account
of Fund. Custodian shall furnish to the Fund, at the end of every month,
a list of the portfolio securities showing the aggregate cost of each
issue. The books and records of Custodian pertaining to its actions under
this Agreement shall be open to inspection and audit at reasonable times
by officers of, and of auditors employed by, the Fund.
13. TERMINATION OR ASSIGNMENT
This Agreement may be terminated by the Fund, or by Custodian,
on ninety (90) days notice, given in writing and sent by registered mail
to Custodian at P.O. Box 2054, Milwaukee, Wisconsin 53201, or to the Fund
at 1256 Forest Avenue, Palo Alto, California 94301, as the case may be.
Upon any termination of this Agreement, pending appointment of a successor
to Custodian or a vote of the shareholders of the Fund to dissolve or to
function without a custodian of its cash, securities and other property,
Custodian shall not deliver cash, securities or other property of the Fund
to the Fund, but may deliver them to a bank or trust company of its own
selection, having an aggregate capital, surplus and undivided profits, as
shown by its last published report of not less than Two Million Dollars
($2,000,000) as a Custodian for the Fund to be held under terms similar to
those of this Agreement, provided, however, that Custodian shall not be
required to make any such delivery or payment until full payment shall
have been made by the Fund of all liabilities constituting a charge on or
against the properties then held by Custodian or on or against Custodian,
and until full payment shall have been made to Custodian of all its fees,
compensation, costs and expenses, subject to the provisions of Section 10
of this Agreement.
This Agreement may not be assigned by Custodian without the
consent of the Fund, authorized or approved by a resolution of its Board
of Directors.
14. DEPOSITS OF SECURITIES IN SECURITIES DEPOSITORIES
No provision of this Agreement shall be deemed to prevent the
use by Custodian of a central securities clearing agency or securities
depository, provided, however, that Custodian and the central securities
clearing agency or securities depository meet all applicable federal and
state laws and regulations, and the Board of Directors of the Fund
approves by resolution the use of such central securities clearing agency
or securities depository.
15. RECORDS
To the extent that Custodian in any capacity prepares or
maintains any records required to be maintained and preserved by the Fund
pursuant to the provisions of the Investment Company Act of 1940, as
amended, or the rules and regulations promulgated thereunder, Custodian
agrees to make any such records available to the Fund upon request and to
preserve such records for the periods prescribed in Rule 31a-2 under the
Investment Company Act of 1940, as amended.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and their respective corporate seals to be
affixed hereto as of the date first above-written by their respective
officers thereunto duly authorized.
Executed in several counterparts, each of which is an original.
Attest: FIRSTAR TRUST COMPANY
__________________________________ By _________________________________
Assistant Secretary Vice President
Attest: THE THURLOW FUNDS, INC.
_________________________________ By _________________________________
EXHIBIT 9.1
FUND ADMINISTRATION SERVICING AGREEMENT
THIS AGREEMENT is made and entered into on this ____ day of
_________, 1997, by and between THURLOW FUNDS, INC., presently consisting
of one portfolio, THE THURLOW GROWTH FUND (hereinafter referred to as the
"Fund"), and FIRSTAR TRUST COMPANY, a corporation organized under the laws
of the State of Wisconsin (hereinafter referred to as "FTC").
WHEREAS, The Fund is an open-ended management investment company
which is registered under the Investment Company Act of 1940;
WHEREAS, FTC is a trust company and, among other things, is in
the business of providing fund administration services for the benefit of
its customers;
NOW, THEREFORE, the Fund and FTC do mutually promise and agree
as follows:
I. APPOINTMENT OF ADMINISTRATOR
The Fund hereby appoints FTC as Administrator of the Fund on the
terms and conditions set forth in this Agreement, and FTC hereby accepts
such appointment and agrees to perform the services and duties set forth
in this Agreement in consideration of the compensation provided for
herein.
II. DUTIES AND RESPONSIBILITIES OF FTC
A. General Fund Management
1. Act as liaison among all fund service providers
2. Coordinate board communication by:
a. Assisting fund counsel in establishing meeting agendas
b. Preparing board reports based on financial and
administrative data
c. Evaluating independent auditor
d. Securing and monitoring fidelity bond and director and
officers liability coverage, and making the necessary
SEC filings relating thereto
3. Audits
a. Prepare appropriate schedules and assist independent
auditors
b. Provide information to SEC and facilitate audit
process
c. Provide office facilities
4. Assist in overall operations of the Fund
B. Compliance
1. Regulatory Compliance
a. Periodically monitor compliance with Investment
Company Act of 1940 requirements
1) Asset diversification tests
2) Total return and SEC yield calculations
3) Maintenance of books and records under Rule 31a-3
4) Code of ethics
b. Periodically monitor Fund's compliance with the
policies and investment limitations of the Fund as set
forth in its prospectus and statement of additional
information
2. Blue Sky Compliance
a. Prepare and file with the appropriate state securities
authorities any and all required compliance filings
relating to the registration of the securities of the
Fund so as to enable the Fund to make a continuous
offering of its shares
b. Monitor status and maintain registrations in each
state
3. SEC Registration and Reporting
a. Assisting Fund's counsel in updating prospectus and
statement of additional information; and in preparing
proxy statements, and Rule 24f-2 notice,
b. Annual and semiannual reports
4. IRS Compliance
a. Periodically monitor Fund's status as a regulated
investment company under Subchapter M through review
of the following:
1) Asset diversification requirements
2) Qualifying income requirements
3) Distribution requirements
b. Monitor short short testing
c. Calculate required distributions (including excise tax
distributions)
C. Financial Reporting
1. Provide financial data required by fund prospectus and
statement of additional information
2. Prepare financial reports for shareholders, the board, the
SEC, and independent auditors
3. Supervise the Fund's Custodian and Fund Accountants in the
maintenance of the Fund's general ledger and in the
preparation of the Fund's financial statements including
oversight of expense accruals and payments, of the
determination of net asset value of the Fund's net assets
and of the Fund's shares, and of the declaration and
payment of dividends and other distributions to
shareholders
D. Tax Reporting
1. Prepare and file on a timely basis appropriate federal and
state tax returns including forms 1120/8610 with any
necessary schedules
2. Prepare state income breakdowns where relevant
3. File 1099 Miscellaneous for payments to directors and other
service providers
4. Monitor wash losses
5. Calculate eligible dividend income for corporate
shareholders
III. COMPENSATION
The Fund agrees to pay FTC for performance of the duties listed in
this Agreement and the fees and out-of-pocket expenses as set forth
in the attached Schedule A.
These fees may be changed from time to time, subject to mutual
written Agreement between the Fund and FTC.
The Fund agrees to pay all fees and reimbursable expenses within ten
(10) business days following the mailing of the billing notice.
IV. PERFORMANCE OF SERVICE; LIMITATION OF LIABILITY
A. FTC shall exercise reasonable care in the performance of its
duties under this Agreement. FTC shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in
connection with matters to which this Agreement relates, including losses
resulting from mechanical breakdowns or the failure of communication or
power supplies beyond FTC's control, except a loss resulting from FTC's
refusal or failure to comply with the terms of this Agreement or from bad
faith, negligence, or willful misconduct on its part in the performance of
its duties under this Agreement. Notwithstanding any other provision of
this Agreement, the Fund shall indemnify and hold harmless FTC from and
against any and all claims, demands, losses, expenses, and liabilities
(whether with or without basis in fact or law) of any and every nature
(including reasonable attorneys' fees) which FTC may sustain or incur or
which may be asserted against FTC by any person arising out of any action
taken or omitted to be taken by it in performing the services hereunder
(i) in accordance with the foregoing standards, or (ii) in reliance upon
any written or oral instruction provided to FTC by any duly authorized
officer of the Fund, such duly authorized officer to be included in a list
of authorized officers furnished to FTC and as amended from time to time
in writing by resolution of the Board of Directors of the Fund.
In the event of a mechanical breakdown or failure of communication or
power supplies beyond its control, FTC shall take all reasonable steps to
minimize service interruptions for any period that such interruption
continues beyond FTC's control. FTC will make every reasonable effort to
restore any lost or damaged data and correct any errors resulting from
such a breakdown at the expense of FTC. FTC agrees that it shall, at all
times, have reasonable contingency plans with appropriate parties, making
reasonable provision for emergency use of electrical data processing
equipment to the extent appropriate equipment is available.
Representatives of the Fund shall be entitled to inspect FTC's premises
and operating capabilities at any time during regular business hours of
FTC, upon reasonable notice to FTC.
Regardless of the above, FTC reserves the right to reprocess and
correct administrative errors at its own expense.
B. In order that the indemnification provisions contained in this
section shall apply, it is understood that if in any case the Fund may be
asked to indemnify or hold FTC harmless, the Fund shall be fully and
promptly advised of all pertinent facts concerning the situation in
question, and it is further understood that FTC will use all reasonable
care to notify the Fund promptly concerning any situation which presents
or appears likely to present the probability of such a claim for
indemnification against the Fund. The Fund shall have the option to
defend FTC against any claim which may be the subject of this
indemnification. In the event that the Fund so elects, it will so notify
FTC and thereupon the Fund shall take over complete defense of the claim,
and FTC shall in such situation initiate no further legal or other
expenses for which it shall seek indemnification under this section. FTC
shall in no case confess any claim or make any compromise in any case in
which the Fund will be asked to indemnify FTC except with the Fund's prior
written consent.
C. FTC shall indemnify and hold the Fund harmless from and against
any and all claims, demands, losses, expenses, and liabilities (whether
with or without basis in fact or law) of any and every nature (including
reasonable attorneys' fees) which may be asserted against the Fund by any
person arising out of any action taken or omitted to be taken by FTC as a
result of FTC's refusal or failure to comply with the terms of this
Agreement, its bad faith, negligence, or willful misconduct.
V. CONFIDENTIALITY
FTC shall handle, in confidence, all information relating to the
Fund's business which is received by FTC during the course of rendering
any service hereunder.
VI. DATA NECESSARY TO PERFORM SERVICE
The Fund or its agent, which may be FTC, shall furnish to FTC the
data necessary to perform the services described herein at times and in
such form as mutually agreed upon.
VII. TERMS OF AGREEMENT
This Agreement shall become effective as of the date hereof and,
unless sooner terminated as provided herein, shall continue automatically
in effect for successive annual periods. The Agreement may be terminated
by either party upon giving ninety (90) days prior written notice to the
other party or such shorter period as is mutually agreed upon by the
parties.
VIII. DUTIES IN THE EVENT OF TERMINATION
In the event that, in connection with termination, a successor to any
of FTC's duties or responsibilities hereunder is designated by the Fund by
written notice to FTC, FTC will promptly, upon such termination and at the
expense of the Fund, transfer to such successor all relevant books,
records, correspondence, and other data established or maintained by FTC
under this Agreement in a form reasonably acceptable to the Fund (if such
form differs from the form in which FTC has maintained, the Fund shall pay
any expenses associated with transferring the data to such form), and will
cooperate in the transfer of such duties and responsibilities, including
provision for assistance from FTC's personnel in the establishment of
books, records, and other data by such successor.
IX. CHOICE OF LAW
This Agreement shall be construed in accordance with the laws of the
State of Wisconsin.
X. NOTICES
Notices of any kind to be given by either party to the other party
shall be in writing and shall be duly given if mailed or delivered as
follows: Notice to FTC shall be sent to P.O. Box 2054, Milwaukee,
Wisconsin 53201, and notice to Fund shall be sent to 1256 Forest Avenue,
Palo Alto, California 94301.
XI. RECORDS
FTC shall keep records relating to the services to be performed
hereunder, in the form and manner, and for such period as it may deem
advisable and is agreeable to the Fund but not inconsistent with the rules
and regulations of appropriate government authorities, in particular,
Section 31 of the Investment Company Act of 1940 as amended (the
"Investment Company Act"), and the rules thereunder. FTC agrees that all
such records prepared or maintained by FTC relating to the services to be
performed by FTC hereunder are the property of the Fund and will be
preserved, maintained, and made available with such section and rules of
the Investment Company Act and will be promptly surrendered to the Fund on
and in accordance with its request.
THE THURLOW FUNDS, INC. FIRSTAR TRUST COMPANY
By: ______________________________ By:_______________________
Attest: ____________________________ Attest:___________________
EXHIBIT 9.2
FULFILLMENT SERVICING AGREEMENT
THIS AGREEMENT between Firstar Trust Company ("FTC") and THE
THURLOW FUNDS, INC. (hereinafter referred to as "TTFI") is entered into on
this ____ day of _________, 1997.
WHEREAS, TTFI provides investment opportunities to prospective
shareholders through The Thurlow Growth Fund; and
WHEREAS, FTC provides fulfillment services to mutual funds;
NOW THEREFORE, the parties agree as follows:
Duties and responsibilities of FTC
1. Answer all prospective shareholder calls concerning The Thurlow
Growth Fund.
2. Send all available Fund materials requested by the prospect within 24
hours from time of call.
3. Receive and update all TTFI fulfillment literature so that most
current information is sent and quoted.
4. Provide 24 hour answering service to record prospect calls made after
hours (7 p.m. to 8 a.m. CT).
5. Maintain and store TTFI fulfillment inventory.
6. Send periodic fulfillment reports to TTFI as agreed upon between the
parties.
Duties and responsibilities of "TTFI"
1. Provide TTFI fulfillment literature updates to FTC as necessary.
2. File with the NASD, SEC and State Regulatory Agencies, as
appropriate, all fulfillment literature that TTFI requests FTC send
to prospective shareholders.
3. Supply FTC with sufficient inventory of fulfillment materials as
requested from time to time by FTC.
4. Provide FTC with any sundry information about TTFI in order to answer
prospect questions.
Indemnification
TTFI agrees to indemnify FTC from any liability arising out of the
distribution of fulfillment literature which has not been approved by the
appropriate Federal and State Regulatory Agencies.
Compensation
TTFI agrees to compensate FTC for the services performed under this
agreement in accordance with the attached Schedule B; TTFI agrees to pay
all invoices within ten days of receipt.
Proprietary and Confidential Information
FTC agrees on behalf of itself and its directors, officers, and employees
to keep confidential and treat as proprietary information of the TTFI all
records and other information relative to TTFI and prior, present, or
potential shareholders of TTFI, and not to use such records and
information for any purpose other than performance of its responsibilities
and duties thereunder, except after prior notification to and approval in
writing by TTFI, which approval shall not be unreasonably withheld and may
not be withheld where FTC may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such
information by duly constituted authorities, or when so requested by TTFI.
Termination
This agreement may be terminated by either party upon 30 days written
notice.
Dated this ____ day of _________, 1997.
FIRSTAR TRUST COMPANY THE THURLOW FUNDS, INC.
By: ______________________________ By:____________________________
Attest: ____________________________ Attest:_______________________
EXHIBIT 9.3
FUND ACCOUNTING SERVICING AGREEMENT
THIS CONTRACT between THURLOW FUNDS, INC., presently consisting
of one portfolio, the THURLOW GROWTH FUND (hereinafter called the "Fund")
and FIRSTAR TRUST COMPANY, a Wisconsin corporation (hereinafter called
"FTC") is entered into on this ____ day of _________________, 1997,
WHEREAS, The Thurlow Funds, Inc., is an open-ended management
investment company registered under the Investment Company Act of 1940;
and
WHEREAS, Firstar Trust Company ("FTC") is in the business of
providing, among other things, mutual fund accounting services to
investment companies;
NOW, THEREFORE, the parties do mutually promise and agree as
follows:
1. Services. FTC agrees to provide the following mutual fund
accounting services to the Fund:
A. Portfolio Accounting Services:
(1) Maintain portfolio records on a trade date +1 basis using
security trade information communicated from the investment manager on a
timely basis.
(2) For each valuation date, obtain prices from a pricing
source approved by the Board of Directors of the Fund and apply those
prices to the portfolio positions. For those securities where market
quotations are not readily available, the Board of Directors shall
approve, in good faith, the method for determining the fair value for such
securities.
(3) Identify interest and dividend accrual balances as of each
valuation date and calculate gross earnings on investments for the
accounting period.
(4) Determine gain/loss on security sales and identify them as
to short-short, short- or long-term status; account for periodic
distributions of gains or losses to shareholders and maintain
undistributed gain or loss balances as of each valuation date.
B. Expense Accrual and Payment Services:
(1) For each valuation date, calculate the expense accrual
amounts as directed by the Fund as to methodology, rate or dollar amount.
(2) Record payments for Fund expenses upon receipt of written
authorization from the Fund.
(3) Account for fund expenditures and maintain expense accrual
balances at the level of accounting detail, as agreed upon by FTC and the
Fund.
(4) Provide expense accrual and payment reporting.
C. Fund Valuation and Financial Reporting Services:
(1) Account for fund share purchases, sales, exchanges,
transfers, dividend reinvestments, and other fund share activity as
reported by the transfer agent on a timely basis.
(2) Apply equalization accounting as directed by the Fund.
(3) Determine net investment income (earnings) for the Fund as
of each valuation date. Account for periodic distributions of earnings to
shareholders and maintain undistributed net investment income balances as
of each valuation date.
(4) Maintain a general ledger for the Fund in the form as
agreed upon.
(5) For each day the Fund is open as defined in the prospectus,
determine the net asset value of the according to the accounting policies
and procedures set forth in the prospectus.
(6) Calculate per share net asset value, per share net
earnings, and other per share amounts reflective of fund operation at such
time as required by the nature and characteristics of the Fund.
(7) Communicate, at an agreed upon time, the per share price
for each valuation date to parties as agreed upon from time to time.
(8) Prepare monthly reports which document the adequacy of
accounting detail to support month-end ledger balances.
D. Tax Accounting Services:
(1) Maintain accounting records for the investment portfolio of
the Fund to support the tax reporting required for IRS-defined regulated
investment companies.
(2) Maintain tax lot detail for the investment portfolio.
(3) Calculate taxable gain/loss on security sales using the tax
lot relief method designated by the Fund.
(4) Provide the necessary financial information to support the
taxable components of income and capital gains distributions to the
transfer agent to support tax reporting to the shareholders.
E. Compliance Control Services:
(1) Support reporting to regulatory bodies and support
financial statement preparation by making the fund accounting records
available to The Thurlow Funds, Inc., the Securities and Exchange
Commission, and the outside auditors.
(2) Maintain accounting records according to the Investment
Company Act of 1940 and regulations provided thereunder.
2. Pricing of Securities. For each valuation date, obtain
prices from a pricing source selected by FTC but approved by the Fund's
Board and apply those prices to the portfolio positions. For those
securities where market quotations are not readily available, the Fund's
Board shall approve, in good faith, the method for determining the fair
value for such securities.
If the Fund desires to provide a price which varies from the
pricing source, the Fund shall promptly notify and supply FTC with the
valuation of any such security on each valuation date. All pricing
changes made by the Fund will be in writing and must specifically identify
the securities to be changed by CUSIP, name of security, new price or rate
to be applied, and, if applicable, the time period for which the new
price(s) is/are effective.
3. Changes in Accounting Procedures. Any resolution passed by
the Board of Directors that affects accounting practices and procedures
under this agreement shall be effective upon written receipt and
acceptance by the FTC.
4. Changes in Equipment, Systems, Service, Etc. FTC reserves
the right to make changes from time to time, as it deems advisable,
relating to its services, systems, programs, rules, operating schedules
and equipment, so long as such changes do not adversely affect the service
provided to the Fund under this Agreement.
5. Compensation. FTC shall be compensated for providing the
services set forth in this Agreement in accordance with the Fee Schedule
attached hereto as Exhibit A and as mutually agreed upon and amended from
time to time.
6. Performance of Service.
A. FTC shall exercise reasonable care in the performance of
its duties under this Agreement. FTC shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in
connection with matters to which this Agreement relates, including losses
resulting from mechanical breakdowns or the failure of communication or
power supplies beyond FTC's control, except a loss resulting from FTC's
refusal or failure to comply with the terms of this Agreement or from bad
faith, negligence, or willful misconduct on its part in the performance of
its duties under this Agreement. Notwithstanding any other provision of
this Agreement, the Fund shall indemnify and hold harmless FTC from and
against any and all claims, demands, losses, expenses, and liabilities
(whether with or without basis in fact or law) of any and every nature
(including reasonable attorneys' fees) which FTC may sustain or incur or
which may be asserted against FTC by any person arising out of any action
taken or omitted to be taken by it in performing the services hereunder
(i) in accordance with the foregoing standards, or (ii) in reliance upon
any written or oral instruction provided to FTC by any duly authorized
officer of the Fund, such duly authorized officer to be included in a list
of authorized officers furnished to FTC and as amended from time to time
in writing by resolution of the Board of Directors of the Fund.
In the event of a mechanical breakdown or failure of
communication or power supplies beyond its control, FTC shall take all
reasonable steps to minimize service interruptions for any period that
such interruption continues beyond FTC's control. FTC will make every
reasonable effort to restore any lost or damaged data and correct any
errors resulting from such a breakdown at the expense of FTC. FTC agrees
that it shall, at all times, have reasonable contingency plans with
appropriate parties, making reasonable provision for emergency use of
electrical data processing equipment to the extent appropriate equipment
is available. Representatives of the Fund shall be entitled to inspect
FTC's premises and operating capabilities at any time during regular
business hours of FTC, upon reasonable notice to FTC.
Regardless of the above, FTC reserves the right to reprocess and
correct administrative errors at its own expense.
B. In order that the indemnification provisions contained in
this section shall apply, it is understood that if in any case the Fund
may be asked to indemnify or hold FTC harmless, the Fund shall be fully
and promptly advised of all pertinent facts concerning the situation in
question, and it is further understood that FTC will use all reasonable
care to notify the Fund promptly concerning any situation which presents
or appears likely to present the probability of such a claim for
indemnification against the Fund. The Fund shall have the option to
defend FTC against any claim which may be the subject of this
indemnification. In the event that the Fund so elects, it will so notify
FTC and thereupon the Fund shall take over complete defense of the claim,
and FTC shall in such situation initiate no further legal or other
expenses for which it shall seek indemnification under this section. FTC
shall in no case confess any claim or make any compromise in any case in
which the Fund will be asked to indemnify FTC except with the Fund's prior
written consent.
C. FTC shall indemnify and hold the Fund harmless from and
against any and all claims, demands, losses, expenses, and liabilities
(whether with or without basis in fact or law) of any and every nature
(including reasonable attorneys' fees) which may be asserted against the
Fund by any person arising out of any action taken or omitted to be taken
by FTC as a result of FTC's refusal or failure to comply with the terms of
this Agreement, its bad faith, negligence, or willful misconduct.
7. Records. FTC shall keep records relating to the services
to be performed hereunder, in the form and manner, and for such period as
it may deem advisable and is agreeable to the Fund but not inconsistent
with the rules and regulations of appropriate government authorities, in
particular, Section 31 of The Investment Company Act of 1940 as amended
(the "Investment Company Act"), and the rules thereunder. FTC agrees that
all such records prepared or maintained by FTC relating to the services to
be performed by FTC hereunder are the property of the Fund and will be
preserved, maintained, and made available with such section and rules of
the Investment Company Act and will be promptly surrendered to the Fund on
and in accordance with its request.
8. Confidentiality. FTC shall handle in confidence all
information relating to the Fund's business, which is received by FTC
during the course of rendering any service hereunder.
9. Data Necessary to Perform Services. The Fund or its agent,
which may be FTC, shall furnish to FTC the data necessary to perform the
services described herein at times and in such form as mutually agreed
upon.
10. Notification of Error. The Fund will notify FTC of any
balancing or control error caused by FTC within three (3) business days
after receipt of any reports rendered by FTC to the Fund, or within three
(3) business days after discovery of any error or omission not covered in
the balancing or control procedure, or within three (3) business days of
receiving notice from any shareholder.
11. Term of Agreement. This Agreement may be terminated by
either party upon giving ninety (90) days prior written notice to the
other party or such shorter period as is mutually agreed upon by the
parties. However, this Agreement may be replaced or modified by a
subsequent agreement between the parties.
12. Duties in the Event of Termination. In the event that in
connection with termination a Successor to any of FTC's duties or
responsibilities hereunder is designated by The Thurlow Funds, Inc. by
written notice to FTC, FTC will promptly, upon such termination and at the
expense of The Thurlow Funds, Inc., transfer to such Successor all
relevant books, records, correspondence and other data established or
maintained by FTC under this Agreement in a form reasonably acceptable to
The Thurlow Funds, Inc. (if such form differs from the form in which FTC
has maintained the same, The Thurlow Funds, Inc. shall pay any expenses
associated with transferring the same to such form), and will cooperate in
the transfer of such duties and responsibilities, including provision for
assistance from FTC's personnel in the establishment of books, records and
other data by such successor.
13. Notices. Notices of any kind to be given by either party
to the other party shall be in writing and shall be duly given if mailed
or delivered as follows: Notice to FTC shall be sent to P.O. Box 2054,
Milwaukee, Wisconsin 53201, and notice to Fund shall be sent to 1256
Forest Avenue, Palo Alto, California 94301.
14. Choice of Law. This Agreement shall be construed in
accordance with the laws of the State of Wisconsin.
IN WITNESS WHEREOF, the due execution hereof on the date first
above written.
ATTEST: FIRSTAR TRUST COMPANY
_____________________________ By _________________________________
ATTEST: THE THURLOW FUNDS, INC.
_____________________________ By ________________________________
EXHIBIT 13
SUBSCRIPTION AGREEMENT
The Thurlow Funds, Inc.
101 Metro Drive, Suite 260
San Jose, California 95110
Gentlemen:
The undersigned hereby subscribes to 10,000 shares of the Class
A Common Stock, $0.0001 par value of The Thurlow Funds, Inc., and agrees
to pay to said corporation the sum of $100,000 in cash.
It is understood that upon acceptance hereof by said corporation
the shares subscribed for shall be issued to the undersigned and that said
shares shall be deemed to be fully paid and nonassessable.
The undersigned agrees that the shares are being purchased for
investment with no present intention of reselling or redeeming said
shares.
Dated and effective as of this ___ day of __________________,
1997.
THURLOW CAPITAL MANAGEMENT, INC.
By: ________________________________
Thomas F. Thurlow, President
The foregoing subscription is hereby accepted. Dated and
effective as of this ____ day of ________________, 1997.
THE THURLOW FUNDS, INC.
By: ______________________________________
Thomas F. Thurlow, President
THE THURLOW FUNDS, INC.
INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT
The following constitutes an agreement establishing an
Individual Retirement Account (under Section 408(a) of the Internal
Revenue Code) between the Depositor and the Custodian.
ARTICLE I
The Custodian may accept additional cash contributions on behalf
of the Depositor for a tax year of the Depositor. The total cash
contributions are limited to $2,000 for the tax year unless the
contribution is a rollover contribution described in Section 402(c) (but
only after December 31, 1992), 403(a)(4), 403(b)(8), 408(d)(3), or an
employer contribution to a simplified employee pension plan as described
in Section 408(k). Rollover contributions before January 1, 1993, include
rollovers described in Section 402(a)(5), 402(a)(6), 402(a)(7), 403(a)(4),
403(b)(8), 408(d)(3), or an employer contribution to a simplified employee
pension plan as described in Section 408(k).
ARTICLE II
The Depositor's interest in the balance in the custodial account
is nonforfeitable.
ARTICLE III
1. No part of the custodial funds may be invested in life
insurance contracts, nor may the assets of the custodial account be
commingled with other property except in a common trust fund or common
investment fund (within the meaning of Section 408(a)(5)).
2. No part of the custodial funds may be invested in
collectibles (within the meaning of Section 408(m)) except as otherwise
permitted by Section 408(m)(3) which provides an exception for certain
gold and silver coins and coins issued under the laws of any state.
ARTICLE IV
1. Notwithstanding any provision of this agreement to the
contrary, the distribution of the Depositor's interest in the custodial
account shall be made in accordance with the following requirements and
shall otherwise comply with Section 408(a)(6) and Proposed Regulations
Section 1.408-8, including the incidental death benefit provisions of
Proposed Regulations Section 1.401(a)(9)-2, the provisions of which are
herein incorporated by reference.
2. Unless otherwise elected by the time distributions are
required to begin to the Depositor under Paragraph 3, or to the surviving
spouse under Paragraph 4, other than in the case of a life annuity, life
expectancies shall be recalculated annually. Such election shall be
irrevocable as to the Depositor and the surviving spouse and shall apply
to all subsequent years. The life expectancy of a nonspouse beneficiary
may not be recalculated.
3. The Depositor's entire interest in the custodial account
must be, or begin to be, distributed by the Depositor's required beginning
date, April 1 following the calendar year end in which the Depositor
reaches age 70 1/2. By that date, the Depositor may elect, in a manner
acceptable to the Custodian, to have the balance in the custodial account
distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially
equal monthly, quarterly, or annual payments over the life of the
Depositor.
(c) An annuity contract that provides equal or substantially
equal monthly, quarterly, or annual payments over the joint and last
survivor lives of the Depositor and his or her designated beneficiary.
(d) Equal or substantially equal annual payments over a
specified period that may not be longer than the Depositor's life
expectancy.
(e) Equal or substantially equal annual payments over a
specified period that may not be longer than the joint life and last
survivor expectancy of the Depositor and his or her designated
beneficiary.
4. If the Depositor dies before his or her entire interest is
distributed to him or her, the entire remaining interest will be
distributed as follows:
(a) If the Depositor dies on or after distribution of his or
her interest has begun, distribution must continue to be made in
accordance with Paragraph 3.
(b) If the Depositor dies before distribution of his or her
interest has begun, the entire remaining interest will, at the election of
the Depositor or, if the Depositor has not so elected, at the election of
the beneficiary or beneficiaries, either
(i) Be distributed by the December 31 of the year
containing the fifth anniversary of the Depositor's
death, or
(ii) Be distributed in equal or substantially equal
payments over the life or life expectancy of the
designated beneficiary or beneficiaries starting by
December 31 of the year following the year of the
Depositor's death. If, however, the beneficiary is
the Depositor's surviving spouse, then this
distribution is not required to begin before December
31 of the year in which the Depositor would have
turned age 70 1/2.
(c) Except where distribution in the form of an annuity meeting
the requirements of Section 408(b)(3) and its related regulations has
irrevocably commenced, distributions are treated as having begun on the
Depositor's required beginning date, even though payments may actually
have been made before that date.
(d) If the Depositor dies before his or her entire interest has
been distributed and if the beneficiary is other than the surviving
spouse, no additional cash contributions or rollover contributions may be
accepted in the account.
5. In the case of a distribution over life expectancy in equal
or substantially equal annual payments, to determine the minimum annual
payment for each year, divide the Depositor's entire interest in the
custodial account as of the close of business on December 31 of the
preceding year by the life expectancy of the Depositor (or the joint life
and last survivor expectancy of the Depositor and the Depositor's
designated beneficiary, or the life expectancy of the designated
beneficiary, whichever applies). In the case of distributions under
Paragraph 3, determine the initial life expectancy (or joint life and last
survivor expectancy) using the attained ages of the Depositor and designed
beneficiary as of their birthdays in the year the Depositor reaches age 70
1/2. In the case of a distribution in accordance with Paragraph 4(b)(ii),
determine life expectancy using the attained age of the designated
beneficiary as of the beneficiary's birthday in the year distributions are
required to commence.
6. The owner of two or more individual retirement accounts may
use the "alternative method" described in Notice 88-38, 1988-1 C.B. 524,
to satisfy the minimum distribution requirements described above. This
method permits an individual to satisfy these requirements by taking from
one individual retirement account the amount required to satisfy the
requirement for another.
ARTICLE V
1. The Depositor agrees to provide the Custodian with
information necessary for the Custodian to prepare any reports required
under Section 408(i) and Regulations Section 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal
Revenue Service and the Depositor prescribed by the Internal Revenue
Service.
ARTICLE VI
Notwithstanding any other articles which may be added or
incorporated, the provisions of Articles I through III and this sentence
will be controlling. Any additional articles that are not consistent with
Section 408(a) and related regulations will be invalid.
ARTICLE VII
This agreement will be amended from time to time to comply with
the provisions of the Code and related regulations. Other amendments may
be made with the consent of the persons whose signatures appear below.
ARTICLE VIII
1. Investment of Account Assets. (a) All contributions to the
custodial account shall be invested in shares of The Thurlow Growth Fund
or, if available, any other series of The Thurlow Funds, Inc. or other
regulated investment companies for which Thurlow Capital Management, Inc.
serves as investment advisor or designates as being eligible for
investment ("Investment Company"). Shares of stock of an Investment
Company shall be referred to as "Investment Company Shares." To the
extent that two or more funds are available for investment, contributions
shall be invested in accordance with the Depositor's investment election.
(b) Each contribution to the custodial account shall identify
the Depositor's account number and be accompanied by a signed statement
directing the investment of that contribution. The Custodian may return
to the Depositor, without liability for interest thereon, any contribution
which is not accompanied by adequate account identification or an
appropriate signed statement directing investment of that contribution.
(c) Contributions shall be invested in whole and fractional
Investment Company Shares at the price and in the manner such shares are
offered to the public. All distributions received on Investment Company
Shares, including both dividends and capital gains distributions, held in
the custodial account shall be reinvested in like shares. If any
distribution of Investment Company Shares may be received in additional
like shares or in cash or other property, the Custodian shall elect to
receive such distribution in additional like Investment Company Shares.
(d) All Investment Company Shares acquired by the Custodian
shall be registered in the name of the Custodian or its nominee. The
Depositor shall be the beneficial owner of all Investment Company Shares
held in the custodial account and the Custodian shall not vote any such
shares, except upon written direction of the Depositor, timely received,
in a form acceptable to the Custodian. The Custodian agrees to forward to
the Depositor each prospectus, report, notice, proxy and related proxy
soliciting materials applicable to Investment Company Shares held in the
custodial account received by the Custodian.
(e) The Depositor may, at any time, by written notice to the
Custodian, in a form acceptable to the Custodian, redeem any number of
shares held in the custodial account and reinvest the proceeds in the
shares of any other Investment Company upon the terms and within the
limitations imposed by the then current prospectus of such other
Investment Company in which the Depositor elects to invest. By giving
such instructions, the Depositor will be deemed to have acknowledged
receipt of such prospectus. Such redemptions and reinvestments shall be
done at the price and in the manner such shares are then being redeemed or
offered by the respective Investment Company.
2. Amendment and Termination. (a) Thurlow Capital
Management, Inc., the investment advisor for The Thurlow Funds, Inc., may
amend the Custodial Account (including retroactive amendments) by
delivering to the Custodian and to the Depositor written notice of such
amendment setting forth the substance and effective date of the amendment.
The Custodian and the Depositor shall be deemed to have consented to any
such amendment not objected to in writing by the Custodian or Depositor,
as applicable, within thirty (30) days of receipt of the notice, provided
that no amendment shall cause or permit any part of the assets of the
custodial account to be diverted to purposes other than for the exclusive
benefit of the Depositor or his or her beneficiaries.
(b) The Depositor may terminate the custodial account at any
time by delivering to the Custodian a written notice of such termination.
(c) The custodial account shall automatically terminate upon
distribution to the Depositor or his or her beneficiaries of its entire
balance.
(d) The provisions of this Section 2 of Article VIII control
over the provisions of Article VII.
3. Taxes and Custodial Fees. Any income taxes or other taxes
levied or assessed upon or in respect of the assets or income of the
custodial account and any transfer taxes incurred shall be paid from the
custodial account. All administrative expenses incurred by the Custodian
in the performance of its duties, including fees for legal services
rendered to the Custodian in connection with the custodial account, and
the Custodian's compensation shall be paid from the custodial account,
unless otherwise paid by the Depositor or his or her beneficiaries.
Sufficient shares shall be liquidated from the custodial account to pay
such fees and expenses.
The Custodian's fees are set forth in a schedule provided to the
Depositor. Extraordinary charges resulting from unusual administrative
responsibilities not contemplated by the schedule will be subject to such
additional charges as will reasonably compensate the Custodian. Fees for
refund of excess contributions, transferring to a successor trustee or
custodian, or redemption/reinvestment of Investment Company Shares will be
deducted from the refund or redemption proceeds and the remaining balance
will be remitted to the Depositor, or reinvested or transferred in
accordance with the Depositor's instructions.
4. Reports and Notices. (a) The Custodian shall keep
adequate records of transactions it is required to perform hereunder.
After the close of each calendar year, the Custodian shall provide to the
Depositor or his or her legal representative a written report or reports
reflecting the transactions effected by it during such year and the assets
and liabilities of the Custodial Account at the close of the year.
(b) All communications or notices shall be deemed to be given
upon receipt by the Custodian at Post Office Box 701, Milwaukee, Wisconsin
53201-0701 or the Depositor at his most recent address shown in the
Custodian's records. The Depositor agrees to advise the Custodian
promptly, in writing, of any change of address.
5. Designation of Beneficiary. The Depositor may designate a
beneficiary or beneficiaries to receive benefits from the custodial
account in the event of the Depositor's death. In the event the Depositor
has not designated a beneficiary, or if all beneficiaries shall predecease
the Depositor, the following persons shall take in the order named:
(a) The spouse of the Depositor;
(b) If the spouse shall predecease the Depositor or if the
Depositor does not have a spouse, then to the Depositor's estate.
The Depositor may also change or revoke any previously made
designation of beneficiary. Any designation or change or revocation of a
designation shall be made by written notice in a form acceptable to and
filed with the Custodian, prior to the complete distribution of the
balance in the custodial account. The last such designation on file at
the time of the Depositor's death shall govern. If a beneficiary dies
after the Depositor, but prior to receiving his or her entire interest in
the custodial account, the remaining interest in the custodial account
shall be paid to the beneficiary's estate.
6. Multiple Individual Retirement Accounts. In the event the
Depositor maintains more than one individual retirement account (as
defined in Section 408(a)) and elects to satisfy his or her minimum
distribution requirements described in Article IV above by making a
distribution for another individual retirement account in accordance with
Paragraph 6 thereof, the Depositor shall be deemed to have elected to
calculate the amount of his or her minimum distribution under this
custodial account in the same manner as under the individual retirement
account from which the distribution is made.
7. Inalienability of Benefits. Neither the benefits provided
under this custodial account nor the assets held therein shall be subject
to alienation, assignment, garnishment, attachment, execution or levy of
any kind and any attempt to cause such benefits or assets to be so
subjected shall not be recognized except to the extent as may be required
by law.
8. Rollover Contributions and Transfers. The Custodian shall
have the right to receive rollover contributions and to receive direct
transfers from other custodians or trustees. All contributions must be
made in cash or check.
9. Conflict in Provisions. To the extent that any provisions
of this Article VIII shall conflict with the provisions of Articles IV, V
and/or VII, the provisions of this Article VIII shall govern.
10. Applicable State Law. This custodial account shall be
construed, administered and enforced according to the laws of the State of
Wisconsin.
11. Resignation or Removal of Custodian. The Custodian may
resign at any time upon thirty (30) days notice in writing to the
Investment Company. Upon such resignation, the Investment Company shall
notify the Depositor, and shall appoint a successor custodian under this
Agreement. The Depositor or the Investment Company at any time may remove
the Custodian upon 30 days written notice to that effect in a form
acceptable to and filed with the Custodian. Such notice must include
designation of a successor custodian. The successor custodian shall
satisfy the requirements of section 408(h) of the Code. Upon receipt by
the Custodian of written acceptance of such appointment by the successor
custodian, the Custodian shall transfer and pay over to such successor the
assets of and records relating to the Custodial Account. The Custodian is
authorized, however, to reserve such sum of money as it may deem advisable
for payment of all its fees, compensation, costs and expenses, or for
payment of any other liability constituting a charge on or against the
assets of the Custodial Account or on or against the Custodian, and where
necessary may liquidate shares in the Custodial Account for such payments.
Any balance of such reserve remaining after the payment of all such items
shall be paid over to the successor Custodian. The Custodian shall not be
liable for the acts or omissions of any predecessor or successor custodian
or trustee.
12. Limitation on Custodian Responsibility. The Custodian will
not under any circumstances be responsible for the timing, purpose or
propriety of any contribution or of any distribution made hereunder, nor
shall the Custodian incur any liability or responsibility for any tax
imposed on account of any such contribution or distribution. Further, the
Custodian shall not incur any liability or responsibility in taking or
omitting to take any action based on any notice, election, or instruction
or any written instrument believed by the Custodian to be genuine and to
have been properly executed. The Custodian shall be under no duty of
inquiry with respect to any such notice, election, instruction, or written
instrument, but in its discretion may request any tax waivers, proof of
signatures or other evidence which it reasonably deems necessary for its
protection. The Depositor and the successors of the Depositor including
any executor or administrator of the Depositor shall, to the extent
permitted by law, indemnify the Custodian and its successors and assigns
against any and all claims, actions or liabilities of the Custodian to the
Depositor or the successors or beneficiaries of the Depositor whatsoever
(including without limitation all reasonable expenses incurred in
defending against or settlement of such claims, actions or liabilities)
which may arise in connection with this Agreement or the Custodial
Account, except those due to the Custodian's own bad faith, gross
negligence or willful misconduct. The Custodian shall not be under any
duty to take any action not specified in this Agreement, unless the
Depositor shall furnish it with instructions in proper form and such
instructions shall have been specifically agreed to by the Custodian, or
to defend or engage in any suit with respect hereto unless it shall have
first agreed in writing to do so and shall have been fully indemnified to
its satisfaction.
<PAGE>
THE THURLOW FUNDS, INC.
INDIVIDUAL RETIREMENT ACCOUNT
DISCLOSURE STATEMENT
Please read the following information together with the
Individual Retirement Account Custodial Agreement and the Prospectus(es)
for the fund(s) you select for investment of your IRA contributions.
You may revoke this account any time within seven calendar days
after it is established by mailing or delivering a written request for
revocation to: The Thurlow Funds, Inc., c/o Firstar Trust Company, 615
East Michigan Street, 3rd Floor, P. O. Box 701, Milwaukee, Wisconsin
53201-0781, Attention: Mutual Fund Department. If your revocation is
mailed, the date of the postmark (or the date of certification if sent by
certified or registered mail) will be considered your revocation date.
Upon proper revocation, you will receive a full refund of your initial
contribution, without any adjustments for items such as administrative
fees or fluctuations in market value.
(a) General. Your IRA is a custodial account created for your
exclusive benefit, and Firstar Trust Company serves as custodian. Your
interest in the account is nonforfeitable.
(b) Investments. Contributions made to your IRA will be
invested in one or more of the regulated investment companies for which
Thurlow Capital Management, Inc. serves as investment advisor or any other
regulated investment company designated by Thurlow Capital Management,
Inc. No part of your account may be invested in life insurance contracts;
further, the assets of your account may not be commingled with other
property.
(c) Eligibility. Employees and self-employed individuals are
eligible to contribute to an IRA. Employers may also contribute to
employer-sponsored IRAs established for the benefit of their employees.
You may also establish an IRA to receive rollover contributions and
transfers from another IRA custodian or trustee or from certain other
retirement plans.
(d) Time of Contribution. You may make regular contributions
to your IRA any time up to and including the due date for filing your tax
return for the year, not including extensions. You may continue to make
regular contributions to your IRA up to (but not including) the calendar
year in which you reach 70-1/2. Employer contributions to a SEP - IRA
plan may be continued after you attain age 70-1/2. Rollover contributions
and transfers may be made at any time, including after you reach age 70-
1/2.
(e) Amount of Contribution. You may make annual regular
contributions to an IRA in any amount up to 100% of your compensation for
the year or $2,000, whichever is less. Qualifying rollover contributions
and transfers are not subject to this limitation. In addition, if you are
married and file a joint return, you may make contributions to your
spouse's IRA. However, the maximum amount contributed to both your own
and to your spouse's IRA may not exceed 100% of your combined compensation
or $4,000, whichever is less. Moreover, the annual contribution to either
your account or your spouse's account may not exceed $2,000. Note that a
different rule for spousal IRAs applied for tax years beginning before
January 1, 1997.
(f) Rollovers and Transfers. You are allowed to "roll over" a
distribution or transfer your assets from one individual retirement
account to another without any tax liability. Rollovers between IRAs may
be made once per year and must be accomplished within 60 days after the
distribution. Also, under certain conditions, you may roll over (tax
free) all or a portion of a distribution received from a qualified plan or
tax-sheltered annuity in which you participate or in which your deceased
spouse participated. However, strict limitations apply to such rollovers,
and you should seek competent advice in order to comply with all of the
rules governing rollovers.
Most distributions from qualified retirement plans will be
subject to a 20% withholding requirement. The 20% withholding can be
avoided by directly transferring the amount of the distribution to an
individual retirement account or to certain other types of retirement
plans. You should receive more information regarding these new
withholding rules and whether your distribution can be transferred to an
IRA from the plan administrator prior to receiving your distribution.
(g) Tax Deductibility of Annual Contributions. Although you
may make an IRA contribution within the limitations described above, all
or a portion of your contribution may be nondeductible. No deduction is
allowed for a rollover contribution or transfer. If you are not married
and are not an "active participant" in an employer-sponsored retirement
plan, you may make a fully deductible IRA contribution in any amount up to
$2,000 or 100% of your compensation for the year, whichever is less. The
same limits apply if you are married and file a joint return with your
spouse and neither you nor your spouse is an "active participant" in an
employer-sponsored retirement plan.
An employer-sponsored retirement plan includes any of the
following types of retirement plans:
-- a qualified pension, profit-sharing, or
stock bonus plan established in accordance
with IRC 401(a) or 401(k),
-- a Simplified Employee Pension Plan (SEP)
(IRC 408(k)),
-- a deferred compensation plan maintained by a
governmental unit or agency,
-- tax-sheltered annuities and custodial
accounts (IRC 403(b) and 403(b)(7)),
-- a qualified annuity plan under IRC Section
403(a).
-- a Savings Incentive Match Plan for Employees
of Small Employers (SIMPLE Plan).
Generally, you are considered an "active participant" in a
defined contribution plan if an employer contribution or forfeiture was
credited to your account during the year. You are considered an "active
participant" in a defined benefit plan if you are eligible to participate
in a plan, even though you elect not to participate. You are also treated
as an "active participant" if you make a voluntary or mandatory
contribution to any type of plan, even if your employer makes no
contribution to the plan.
If you (or your spouse, if filing a joint tax return) are
covered by an employer-sponsored retirement plan, your IRA contribution is
fully deductible if your adjusted gross income (or combined income if you
file a joint tax return) does not exceed certain limits. For this
purpose, your adjusted gross income (1) is determined without regard to
the exclusions from income arising under Sections 135 (exclusion of
certain savings bond interest), 137 (exclusion of certain employer
provided adoption expenses) and 911 (certain exclusions applicable to U.S.
citizens or residents living abroad) of the Code, (2) is not reduced for
any deduction that you may be entitled to for IRA contributions, and (3)
takes into account the passive loss limitations under Section 469 of the
Code and any taxable benefits under the Social Security Act and Railroad
Retirement Act as determined in accordance with Section 86 of the Code.
If you (or your spouse, if filing a joint tax return) are
covered by an employer-sponsored retirement plan, the deduction for your
IRA contribution is reduced proportionately for adjusted gross income
which exceeds the applicable dollar amount. The applicable dollar amount
for an individual is $25,000 and $40,000 for married couples filing a
joint tax return. The applicable dollar limit for married individuals
filing separate returns if $0. If your adjusted gross income exceeds the
applicable dollar amount by $10,000 or less, you may make a deductible IRA
contribution. The deductible amount, however, will be less than $2,000.
To determine the amount of your deductible contribution, use the
following calculations:
1) Subtract the applicable dollar amount from
your adjusted gross income. If the result
is $10,000 or more, you can only make a
nondeductible contribution to your IRA.
2) Divide the above figure by $10,000, and
multiply that percentage by $2,000.
3) Subtract the dollar amount (result from #2
above) from $2,000 to determine the amount
which is deductible.
If the deduction limit is not a multiple of $10 then it should
be rounded up to the next $10. There is a $200 minimum floor on the
deduction limit if your adjusted gross income does not exceed $35,000 (for
a single taxpayer), $50,000 (for married taxpayers filing jointly) or
$10,000 (for a married taxpayer filing separately).
Even if your income exceeds the limits described above, you may
make a contribution to your IRA up to the contribution limitations
described in Section 5 above. To the extent that your contribution
exceeds the deductible limits, it will be nondeductible. However,
earnings on all IRA contributions are tax deferred until distribution.
(h) Excess Contributions. Contributions which exceed the
allowable maximum for federal income tax purposes are treated as excess
contributions. A nondeductible penalty tax of 6% of the excess amount
contributed will be added to your income tax for each year in which the
excess contribution remains in your account.
(i) Correction of Excess Contribution. If you make a
contribution in excess of your allowable maximum, you may correct the
excess contribution and avoid the 6% penalty tax for that year by
withdrawing the excess contribution and its earnings on or before the
date, including extensions, for filing your tax return for the tax year
for which the contribution was made. Any earnings on the withdrawn excess
contribution will be taxable in the year the excess contribution was made
and may be subject to a 10% early distribution penalty tax if you are
under age 59 1/2. In addition, in certain cases an excess contribution
may be withdrawn after the time for filing your tax return. Finally,
excess contributions for one year may be carried forward and applied
against the contribution limitation in succeeding years.
(j) Simplified Employee Pension Plan. An IRA may also be used
in connection with a Simplified Employee Pension Plan established by your
employer (or by you if you are self-employed). In addition, if your SEP
Plan as in effect on December 31, 1996 permitted salary reduction
contributions, you may elect to have your employer make salary reduction
contributions. Several limitations on the amount that may be contributed
apply. First, salary reduction contributions (for plans that are
eligible) may not exceed $9,500 per year (certain lower limits may apply
for highly compensated employees). The $9,500 limit applies for 1997 and
is adjusted periodically for cost of living increases. Second, the
combination of all contributions for any year (including employer
contributions and, if your SEP Plan is eligible, salary reduction
contributions) cannot exceed 15 percent of compensation (disregarding for
this purpose compensation in excess of $160,000 per year). The $160,000
compensation limit applies for 1997 and is adjusted periodically for cost
of living increases. A number of special rules apply to SEP Plans,
including a requirement that contributions generally be made on behalf of
all employees of the employer (including for this purpose a sole
proprietorship or partnership) who satisfy certain minimum participation
requirements. It is your responsibility and that of your employer to see
that contributions in excess of normal IRA limits are made under and in
accordance with a valid SEP Plan.
(k) Savings and Incentive Match Plan for Employees of Small
Employers ("SIMPLE"). An IRA may also be used in connection with a SIMPLE
Plan established by your employer (or by you if you are self-employed).
Under a SIMPLE Plan, you may elect to have your employer make salary
reduction contributions of up to $6,000 per year to your SIMPLE IRA. The
$6,000 limit applies for 1997 and is adjusted periodically for cost of
living increases. In addition, your employer will contribute certain
amounts to your SIMPLE IRA, either as a matching contribution to those
participants who make salary reduction contributions or as a non-elective
contribution to all eligible participants whether or not making salary
reduction contributions. A number of special rules apply to SIMPLE Plans,
including (1) a SIMPLE Plan generally is available only to employers with
fewer than 100 employees, (2) contributions must be made on behalf of all
employees of the employer (other than bargaining unit employees) who
satisfy certain minimum participation requirements, (3) contributions are
made to a special SIMPLE IRA that is separate and apart from your other
IRAs, (4) if you withdraw from your SIMPLE IRA during the 2 year period
during which you first began participation in the SIMPLE Plan, the early
distribution excise tax (if otherwise applicable) is increased to 25
percent; and (5) during this two year period, any amount withdrawn may be
rolled over tax-free only into another SIMPLE IRA (and not to a "regular"
IRA). It is your responsibility and that of your employer to see that
contributions in excess of normal IRA limits are made under and in
accordance with a valid SIMPLE Plan.
(l) Form of Distributions. Distributions may be made in any
one of three methods:
(a) a lump-sum distribution,
(b) installments over a period not extending beyond your life
expectancy (as determined by actuarial tables), or
(c) installments over a period not extending beyond the joint
life expectancy of you and your designated beneficiary (as determined
by actuarial tables).
You may also use your account balance to purchase an annuity
contract, in which case your custodial account will terminate.
(m) Latest Time to Withdraw. You must begin receiving the
assets in your account no later than April 1 following the calendar year
in which you reach age 70-1/2 (your "required beginning date"). In
general, the minimum amount that must be distributed each year is equal to
the amount obtained by dividing the balance in your IRA on the last day of
the prior year (or the last day of the year prior to the year in which you
attain age 70-1/2) by your life expectancy, the joint life expectancy of
you and your beneficiary, or the specified payment term, whichever is
applicable. A federal tax penalty may be imposed against you if the
required minimum distribution is not made for the year you reach age 70-
1/2 and for each year thereafter. The penalty is equal to 50% of the
amount by which the actual distribution is less than the required minimum.
Unless you or your spouse elects otherwise, your life expectancy
and/or the life expectancy of your spouse will be recalculated annually.
An election not to recalculate life expectancy(ies) is irrevocable and
will apply to all subsequent years. The life expectancy of a nonspouse
beneficiary may not be recalculated.
If you have two or more IRAs, you may satisfy the minimum
distribution requirements by receiving a distribution from one of your
IRAs in an amount sufficient to satisfy the minimum distribution
requirements for your other IRAs. You must still calculate the required
minimum distribution separately for each IRA, but then such amounts may be
totalled and the total distribution taken from one or more of your
individual IRAs.
Distribution from your IRA must satisfy the special "incidental
death benefit" rules of the Internal Revenue Code. These provisions set
forth certain limitations on the joint life expectancy of you and your
beneficiary. If your beneficiary is not your spouse, your beneficiary
will be generally considered to be no more than 10 years younger than you
for the purpose of calculating the minimum amount that must be
distributed.
(n) Distribution of Account Assets After Death. If you die
before receiving the balance of your account, distribution of your
remaining account balance is subject to several special rules. If you die
on or after your required beginning date, distribution must continue in a
method at least as rapid as under the method of distribution in effect at
your death. If you die before your required beginning date, your
remaining interest will, at the election of your beneficiary or
beneficiaries, (i) be distributed by December 31 of the year in which
occurs the fifth anniversary of your death, or (ii) commence to be
distributed by December 31 of the year following your death over a period
not exceeding the life or life expectancy of your designated beneficiary
or beneficiaries.
Two additional distribution options are available if your spouse
is the beneficiary: (i) payments to your spouse may commence as late as
December 31 of the year you would have attained age 70-1/2 and be
distributed over a period not exceeding the life or life expectancy of
your spouse, or (ii) your spouse can simply elect to treat your IRA as his
or her own, in which case distributions will be required to commence by
April 1 following the calendar year in which your spouse attains age 70-
1/2.
(o) Tax Treatment of Distributions. Amounts distributed to you
are generally includable in your gross income in the taxable year you
receive them and are taxable as ordinary income. To the extent, however,
that any part of a distribution constitutes a return of your nondeductible
contributions, it will not be included in your income. The amount of any
distribution excludable from income is the portion that bears the same
ratio as your aggregate nondeductible contributions bear to the balance of
your IRA at the end of the year (calculated after adding back
distributions during the year). For this purpose, all of your IRAs are
treated as single IRA. Furthermore, all distributions from an IRA during
a taxable year are to be treated as one distribution. The aggregate
amount of distributions excludable from income for all years cannot exceed
the aggregate nondeductible contributions for all calendar years.
No distribution to you or anyone else from your account can
qualify for capital gains treatment under the federal income tax laws.
Similarly, you are not entitled to the special five- or ten-year averaging
rule for lump-sum distributions available to persons receiving
distributions from certain other types of retirement plans. All
distributions are taxed to the recipient as ordinary income except the
portion of a distribution which represents a return of nondeductible
contributions. The tax on excess distributions (but not the additional
estate tax payable with respect to excess accumulations) under Section
4980A of the Code does not apply with respect to distributions made in
1997, 1998 and 1999.
Any distribution which is properly rolled over will not be
includable in your gross income.
(p) Early Distributions. Distributions from your IRA made
before age 59-1/2 will be subject to a 10% nondeductible penalty tax
unless the distribution is a return of nondeductible contributions or is
made because of your death, disability, as part of a series of
substantially equal periodic payments over your life expectancy or the
joint life expectancy of you and your beneficiary, or the distribution is
made for medical expenses in excess of 7.5% of adjusted gross income, is
made for reimbursement of medical premiums while you are unemployed, or is
an exempt withdrawal of an excess contribution. The penalty tax may also
be avoided if the distribution is rolled over to another individual
retirement account. See paragraph 11 above for special rules applicable
to distributions from a SIMPLE IRA.
(q) Qualification of Plan. Your Individual Retirement Account
Plan has been approved as to form by the Internal Revenue Service. The
Internal Revenue Service approval is a determination only as to the form
of the Plan and does not represent a determination of the merits of the
Plan as adopted by you. You may obtain further information with respect
to your Individual Retirement Account from any district office of the
Internal Revenue Service.
(r) Prohibited Transactions. If you engage in a "prohibited
transaction," as defined in section 4975 of the Internal Revenue Code,
your account will be disqualified, and the entire balance in your account
will be treated as if distributed to you and will be taxable to you as
ordinary income. Examples of prohibited transactions are:
(a) the sale, exchange, or leasing of any property between
you and your account,
(b) the lending of money or other extensions of credit
between you and your account,
(c) the furnishing of goods, services, or facilities
between you and your account.
If you are under age 59-1/2, you may also be subject to the 10% penalty
tax on early distributions.
(s) Penalty for Pledging Account. If you use (pledge) all or
part of your IRA as security for a loan, then the portion so pledged will
be treated as if distributed to you and will be taxable to you as ordinary
income during the year in which you make such pledge. The 10% penalty tax
on early distributions may also apply.
(t) Reporting for Tax Purposes. Deductible contributions to
your IRA may be claimed as a deduction on your IRS Form 1040 for the
taxable year contributed. If any nondeductible contributions are made by
you during a tax year, such amounts must be reported on Form 8606 and
attached to your Federal Income Tax Return for the year contributed. If
you report a nondeductible contribution to your IRA and do not make the
contribution, you will be subject to a $100 penalty for each overstatement
unless a reasonable cause is shown for not contributing. Other reporting
will be required by you in the event that special taxes or penalties
described herein are due. You must also file IRS Form 5329 with the IRS
for each taxable year in which the contribution limits are exceeded, a
premature distribution takes place, or less than the required minimum
amount is distributed from your IRA.
(u) Allocation of Earnings. The method of computing and
allocating annual earnings is set forth in Article VIII, Section 1 of the
Individual Retirement Account Custodial Agreement. The growth in value of
your IRA is neither guaranteed or projected.
(v) Income Tax Withholding. You must indicate on distribution
requests whether or not federal income taxes should be withheld.
Redemption request not indicating an election not to have federal income
tax withheld will be subject to withholding.
(w) Other Information. Information about the shares of each
mutual fund available for investment by your IRA must be furnished to you
in the form of a prospectus governed by rules of the Securities and
Exchange Commission. Please refer to the prospectus for detailed
information concerning your mutual fund. You may obtain further
information concerning IRAs from any District Office of the Internal
Revenue Service.
Fees and other expenses of maintaining your account may be
charged to you or your account. The Custodian's current fee schedule is
included as part of these materials.
<PAGE>
The Thurlow Funds, Inc.
IRA Application
Mail completed Application to:
The Thurlow Funds, Inc.
Firstar Trust Company
615 East Michigan Street, 3rd Floor
P.O. Box 701
Milwaukee, WI 53201-0781
Attention: Mutual Fund Department
1. Account Name Daytime Phone Number ( )
Holder
Address
City/State/Zip
Birthdate Social Security Number
2. Beneficiary Name Daytime Phone Number ( )
Designation*
Address
City/State/Zip
Birthdate Social Security Number
* If no beneficiary is named, in the event of your death your IRA
will be payable to your estate.
3. Type of IRA [ ] Individual Retirement
(Check One) Account
For Tax Year 19___.
[ ] Spousal Account. (If
electing this option be sure to
complete Section 1 showing your
spouse as the account holder.)
For Tax Year 19___.
[ ] SEP Account (IRS Form 5305-
SEP is required with your
Application).
For Tax Year 19___.
[ ] SIMPLE Account (IRS Form
5304 SIMPLE is required with
your application.)
[ ] Rollover Account (You had
physical receipt of assets for
less than 60 days or you have
authorized a direct rollover
from a qualified plan). If
Rollover Account, please specify
the type of account held by
previous custodian below.
[ ] IRA to IRA
[ ] Employer Sponsored Plan
to IRA
[ ] Transfer Account - Check
this box if assets are a
direct transfer from current
IRA custodian (you will not
have personal receipt of
assets) and complete an IRA
Transfer Form.
4. Your Investment Instructions I understand that my account
will be invested in The Thurlow
Growth Fund.
5. Acknowledgement I adopt The Thurlow Funds, Inc.
and Signature IRA, appointing Firstar Trust
Company to act as Custodian and
to perform administrative
services. I have received and
read the prospectus(es) for the
Fund(s) in which I am making my
contribution, and have read and
understand the IRA Custodial
Agreement and Disclosure
Statement. I certify under
penalties of perjury that my
Social Security Number (above)
is correct and that I am of
legal age. I understand that
the Custodian will charge fees
that are shown in the Disclosure
Statement (or any update
thereto) and they may be
separately billed or collected
by redeeming sufficient shares
from my Fund(s) account balance.
I will supply the Internal
Revenue Service with information
as to any taxable year as
required unless filed by the
Custodian.
I have read, accept and
incorporate the Custodial
Agreement and Disclosure
Statement herein, by reference.
I appoint Firstar Trust Company
or its successors, as Custodian
of the account(s).
Your Signature Date
Firstar Trust Company
Authorized Signature Date
Appointment of Custodian accepted:
FIRSTAR TRUST COMPANY
EXHIBIT 14.2
THE THURLOW FUNDS, INC.
SIMPLIFIED EMPLOYEE PENSION-INDIVIDUAL
RETIREMENT ACCOUNTS CONTRIBUTION AGREEMENT
(Under Section 408(k) of the Internal Revenue Code)
______________________________ makes the following agreement under
(Name of employer)
Section 408(k) of the Internal Revenue Code and the instructions to this
form.
Article I--Eligibility Requirements (Check appropriate boxes--see
Instructions.)
The employer agrees to provide for discretionary contributions in each
calendar year to the individual retirement account or individual
retirement annuity (IRA) of all employees who are at least ______ years
old (not to exceed 21 years old) and have performed services for the
employer in at least ______ years (not to exceed 3 years) of the
immediately preceding 5 years. This simplified employee pension (SEP) [_]
includes [_] does not include employees covered under a collective
bargaining agreement, [_] includes [_] does not include certain
nonresident aliens, and [_] includes [_] does not include employees whose
total compensation during the year is less than $400*.
* This amount reflects the cost-of-living increase effective January
1, 1997. The amount is adjusted annually. The IRS announces the
increase, if any, in a news release and in the Internal Revenue Bulletin.
Article II--SEP Requirements (See Instructions.)
The employer agrees that contributions made on behalf of each eligible
employee will be:
A. Based only on the first $160,000* of compensation.
B. Made in an amount that is the same percentage of compensation for
every employee.
C. Limited annually to the smaller of $30,000* or 15% of
compensation.
D. Paid to the employee's IRA trustee, custodian, or insurance company
(for an annuity contract).
Employer's Signature and date Name and title
SERVICE AND DISTRIBUTION PLAN
OF
THE THURLOW FUNDS, INC.
WHEREAS, The Thurlow Funds, Inc. (the "Fund") is registered with
the Securities and Exchange Commission as an open-end management
investment company under the Investment Company Act of 1940, as amended
(the "Act");
WHEREAS, the Fund intends to act as a distributor of shares of
its Common Stock, $.0001 par value ("Common Stock"), as defined in Rule
12b-1 under the Act, and desires to adopt a distribution plan pursuant to
such Rule, and the Board of Directors has determined that there is a
reasonable likelihood that adoption of this Service and Distribution Plan
will benefit the Fund and its shareholders; and
WHEREAS, the Fund may enter into agreements with dealers and
other financial service organizations to obtain various distribution-
related and/or shareholder services for the Fund, all as permitted and
contemplated by Rule 12b-1 under the Act; it being understood that to the
extent any activity is one in which the Fund may finance without a Rule
12b-1 plan, the Fund may also make payments to finance such activity
outside such a plan and not subject to its limitations.
NOW, THEREFORE, the Fund hereby adopts this Service and
Distribution Plan (the "Plan") in accordance with Rule 12b-1 under the Act
on the following terms and conditions:
1. Distribution and Service Fee. The Fund may charge a
distribution expense and service fee on an annualized basis of 0.25% of
the Fund's average daily net assets. Such fee shall be calculated and
accrued daily and paid at such intervals as the Board of Directors of the
Fund shall determine, subject to any applicable restriction imposed by
rules of the National Association of Securities Dealers, Inc.
2. Permitted Expenditures. The amount set forth in paragraph
1 of this Plan shall be paid for services or expenses primarily intended
to result in the sale of the Fund's shares. The Fund may pay all or a
portion of this fee to any securities dealer, financial institution or any
other person (the "Shareholder Organization(s)") who renders personal
service to shareholders, assists in the maintenance of shareholder
accounts or who renders assistance in distributing or promoting the sale
of the Fund's shares pursuant to a written agreement approved by the
Board of Directors (the "Related Agreement"). To the extent such fee is
not paid to such persons, the Fund may use the fee to pay expenses of
distribution of its shares including, but not limited to, payment by the
Fund of the cost of preparing, printing and distributing Prospectuses and
Statements of Additional Information to prospective investors and of
implementing and operating the Plan as well as payment of capital or other
expenses of associated equipment, rent, salaries, bonuses, interest and
other overhead costs.
3. Effective Date of Plan. This Plan shall not take effect
until it has been approved (together with any related agreements) by votes
of a majority of both (i) the Board of Directors of the Fund and (ii)
those Directors of the Fund who are not "interested persons" of the Fund
(as defined in the Act) and have no direct or indirect financial interest
in the operation of this Plan or any agreements related to it (the "Rule
12b-1 Directors"), cast in person at a meeting (or meetings) called for
the purpose of voting on this Plan and such related agreements.
4. Continuance. Unless otherwise terminated pursuant to
paragraph 6 below, this Plan shall continue in effect for as long as such
continuance is specifically approved at least annually in the manner
provided for approval of this Plan in paragraph 3(b).
5. Reports. Any person authorized to direct the disposition
of monies paid or payable by the Fund pursuant to this Plan or any related
agreement shall provide to the Fund's Board of Directors and the Board
shall review, at least quarterly, a written report of the amounts so
expended and the purposes for which such expenditures were made.
6. Termination. This Plan may be terminated at any time by
vote of a majority of the Rule 12b-1 Directors, or by a vote of a majority
(as defined in the Act) of the outstanding shares of Common Stock.
7. Amendments. This Plan may not be amended to increase
materially the amount of payments provided for in paragraph 1 hereof
unless such amendment is approved in the manner provided for initial
approval in paragraph 3 hereof and by a vote of at least a majority (as
defined in the Act) of the outstanding shares of Common Stock. No other
amendment to the Plan may be made unless approved in the manner provided
for approval of this Plan in paragraph 3 hereof.
8. Selection of Directors. While this Plan is in effect, the
selection and nomination of Directors who are not interested persons (as
defined in the Act) of the Fund shall be committed to the discretion of
the Directors who are not interested persons.
9. Records. The Fund shall preserve copies of this Plan and
any related agreements and all reports made pursuant to paragraph 5
hereof, for a period of not less than six years from the date of this
Plan, or the agreements or such report, as the case may be, the first two
years in an easily accessible place.
