<PAGE> 1
As filed with the Securities and Exchange Commission on March 31, 1998.
Registration No. 33-6418
1940 Act File No. 811-4946
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
===============
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No.___ [_]
Post-Effective Amendment No. 13 [X]
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [_]
Amendment No. 15 [X]
(Check Appropriate box or boxes)
===============
THOMPSON PLUMB FUNDS, INC.
(Exact name of registrant as specified in charter)
8201 EXCELSIOR DRIVE, SUITE 200
MADISON, WISCONSIN 53717
(Address of Principal Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (608) 831-1300
THOMAS G. PLUMB
8201 EXCELSIOR DRIVE, SUITE 200
MADISON, WISCONSIN 53717
(name and Address of Agent for Service)
Copy to:
CONRAD G. GOODKIND, ESQ.
Quarles & Brady
411 East Wisconsin Avenue
Milwaukee, WI 53202
It is proposed that this filing will become effective (check
appropriate box):
[X] immediately upon filing pursuant to paragraph (b)
[_] on (date) pursuant to paragraph (b)
[_] 60 days after filing pursuant to paragraph (a)(1)
[_] on (date) pursuant to paragraph (a)(1)
[_] 75 days after filing pursuant to paragraph (a)(2)
[_] on (date) pursuant to paragraph (a)(2)of rule 485
If appropriate, check the following box:
[_] this post-effective amendment designates a new effective
date for a previously filed post-effective amendment
Registrant has registered an indefinite number of shares of Common
Stock, par value $0.01, under the Securities Act of 1933 pursuant to Rule 24f-2
under the Investment Company Act of 1940. On January 27, 1998, the Registrant
filed a Rule 24f-2 Notice for the fiscal year ended November 30, 1997.
===============
<PAGE> 2
THOMPSON PLUMB FUNDS, INC.
-----------------------------
CROSS REFERENCE SHEET
-----------------------------
FORM N-1A
PART A
ITEM NUMBERS PROSPECTUS CAPTION
- ------------ ------------------
1. .................................. Outside Front Cover Page
2. .................................. Expense Information
3. .................................. Financial Highlights; Other
Information - Performance
Information
4. .................................. Outside Front Cover Page;
General Information
5. .................................. General Information; Management
of the Funds
5A. .................................. Not applicable. See Annual
Report to Shareholders
6. .................................. Dividends, Distributions and
Taxes; Description of Shares;
Other Information - Shareholder
Statements, Reports and In-
quiries
7. .................................. Purchase and Redemption of
Shares; Determination of Net
Asset Value; Other
Information - Retirement Plans
8. .................................. Purchase and Redemption of
Shares; Determination of Net
Asset Value
9. .................................. Not applicable.
<PAGE> 3
FORM N-1A
PART B STATEMENT OF ADDITIONAL
ITEM NUMBERS INFORMATION CAPTION
- ------------ -------------------
10. ............................. Cover Page
11. ............................. Cover Page
12. ............................. Cover Page
13. ............................. Description of Certain Investments
and Transactions; Investment
Restrictions
14. ............................. Management
15. ............................. Management; Other Information
16. ............................. Management; Advisory and
Administrative Services
17. ............................. Portfolio Transactions and Brokerage
18. ............................. Determination of Net Asset Value and
Pricing Considerations; Taxes
19. ............................. Determination of Net Asset Value and
Pricing Considerations
20. ............................. Taxes
21. ............................. Not Applicable
22. ............................. Fund Performance
23. ............................. Financial Statements
- 3 -
<PAGE> 4
PROSPECTUS
MARCH 31, 1998
------------------------------
THOMPSON PLUMB FUNDS, INC.
8201 EXCELSIOR DRIVE, SUITE 200
MADISON, WISCONSIN 53717
TELEPHONE: (608) 831-1300
(800) 999-0887
THOMPSON PLUMB FUNDS, INC. offers a series of separate mutual funds, each
with its own investment objective:
THOMPSON PLUMB BALANCED FUND
This Fund (the "Balanced Fund") seeks to realize a combination of income
and capital appreciation, which will result in the highest total return while
assuming reasonable risk. The Balanced Fund invests in a diversified portfolio
of common stocks and fixed income securities.
THOMPSON PLUMB BOND FUND
This Fund (the "Bond Fund") seeks a high level of current income while at
the same time preserving investment capital. The Bond Fund invests primarily
in a diversified portfolio of investment-grade debt securities.
THOMPSON PLUMB GROWTH FUND
This Fund (the "Growth Fund") seeks a high level of long-term growth
primarily through capital appreciation, while at the same time assuming
reasonable risk. The Growth Fund invests primarily in a diversified portfolio
of common stocks and securities convertible into common stocks. Although
current income is not a primary objective of the Growth Fund, the Fund
anticipates that capital growth will be accompanied by growth through dividend
income.
The Funds are managed by Thompson, Plumb & Associates, Inc. (the
"Advisor"). See "Management of the Funds." They are offered directly to
investors, without a sales charge. See "Purchase and Redemption of Shares."
This Prospectus sets forth concisely the information about each of the
Funds that a prospective investor should know before investing. Investors
should read and retain this Prospectus for future reference. Additional
information about the Funds has been filed with the Securities and Exchange
Commission in the form of a Statement of Additional Information, dated March
31, 1998. Copies of the Statement of Additional Information, which is
incorporated herein by reference in its entirety, will be provided without
charge upon written request to the attention of the Corporate Secretary of the
Advisor at 8201 Excelsior Drive, Suite 200, Madison, Wisconsin 53717, or by
calling the Advisor's offices at (608) 831-1300 or (800) 999-0887.
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> 5
PROSPECTUS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
EXPENSE INFORMATION ........................................ 3
FINANCIAL HIGHLIGHTS ....................................... 4
Thompson Plumb Balanced Fund ............................. 4
Thompson Plumb Bond Fund ................................. 5
Thompson Plumb Growth Fund ............................... 6
GENERAL INFORMATION ........................................ 7
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS ............ 7
Thompson Plumb Balanced Fund ............................. 7
Thompson Plumb Bond Fund ................................. 8
Thompson Plumb Growth Fund ............................... 8
OTHER INVESTMENT FACTORS REGARDING THE FUNDS ............... 9
Common Stocks ............................................ 9
Fixed Income Securities .................................. 9
Short-Term Instruments ................................... 10
Portfolio Turnover ....................................... 10
Investment Restrictions .................................. 10
Other Factors ............................................ 11
MANAGEMENT OF THE FUNDS .................................... 11
PURCHASE AND REDEMPTION OF SHARES .......................... 12
General .................................................. 12
Purchases ................................................ 12
Automatic Investment Plan................................. 13
Systematic Withdrawal Plan................................ 14
Exchange Privilege ....................................... 14
Automatic Exchange Plan .................................. 14
Exchange by Telephone .................................... 14
Availability of Money Market Fund ........................ 15
Redemptions .............................................. 15
DETERMINATION OF NET ASSET VALUE ........................... 16
DIVIDENDS, DISTRIBUTIONS AND TAXES ......................... 17
General .................................................. 17
Other Information ........................................ 17
DESCRIPTION OF SHARES ...................................... 17
OTHER INFORMATION .......................................... 18
Transfer and Dividend Disbursing Agent and Custodian...... 18
Shareholder Statements, Reports and Inquiries ............ 18
Retirement Plans ......................................... 18
Performance Information .................................. 18
Portfolio Transactions and Brokerage ..................... 19
Year 2000 Compliance ..................................... 19
</TABLE>
2
<PAGE> 6
EXPENSE INFORMATION
<TABLE>
<CAPTION>
BALANCED BOND GROWTH
FUND FUND FUND
-------- ---- ------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
- ---------------------------------
Sales Load Imposed on Purchases None None None
Sales Load Imposed on Reinvested Dividends None None None
Redemption Fees(1) None None None
Exchange Fee (between the Funds)(1) None None None
ANNUAL FUND OPERATING EXPENSES:
- -------------------------------
(As a percentage of average net assets)(2)
Management Fees .85% .65% 1.00%
12b-1 Fees None None None
Other Expenses (after reimbursement by the Advisor)(3) .55% .35% .52%
TOTAL FUND OPERATING EXPENSES 1.40% 1.00% 1.52%
(after reimbursement by the Advisor)(3)
</TABLE>
(1) The Funds' transfer agent charges a wire fee for the return of redemption
proceeds requested by wire transfer. The fee is currently $12.00. The
Funds' transfer agent charges a fee for telephone exchanges. That fee is
currently $5.00. The Funds' Advisor may absorb the fee for broker-dealer
accounts.
(2) Annual fund operating expenses for the Balanced Fund and Growth Fund are
based on amounts incurred during the fiscal year ended November 30, 1997.
Annual fund operating expenses for the Bond Fund have been restated to
reflect current fees (net of reimbursements). See note (3) below.
(3) The Advisor currently intends to voluntarily reimburse the Bond Fund for
all expenses it incurs on an annual basis in excess of 1.00% of average
daily net assets. Other Expenses of the Bond Fund for the fiscal year
ended November 30, 1997 were 0.49% of average net assets, resulting in
Total Fund Operating Expenses of 1.14% of average net assets. Voluntary
reimbursement may be modified or discontinued by the Advisor at any time.
EXAMPLE: A $1,000 investment would result in the incurrence of
the following Fund expenses, assuming a 5% annual return and
redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Balanced Fund $14 $44 $77 $168
Bond Fund $10 $32 $55 $122
Growth Fund $15 $48 $83 $181
</TABLE>
The purpose of this expense information is to assist the investor in
understanding the various costs and expenses that the investor will bear
directly or indirectly in any of the Funds. For more detailed information
concerning these expenses, see "Management of the Funds." THE ABOVE EXAMPLES
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
3
<PAGE> 7
FINANCIAL HIGHLIGHTS
The following financial information for the Funds for the periods
indicated has been examined by Price Waterhouse LLP, independent accountants,
as indicated in their report incorporated by reference into the Statement of
Additional Information from the annual report to shareholders for the fiscal
year ended November 30, 1997. This information should be read in conjunction
with the financial statements and related notes appearing in the annual report.
The annual report contains additional performance information and may be
obtained upon request and without charge by writing or calling the Advisor.
<TABLE>
<CAPTION>
Year Ended November 30,
--------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCED FUND
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.54 $ 14.23 $ 13.55 $ 14.17 $ 14.57 $ 13.50 $ 11.69 $ 11.87
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.18 0.19 0.24 0.27 0.28 0.30 0.27 0.27
Net realized and unrealized gains (losses)
on investments 3.01 3.21 2.26 0.04 0.15 1.16 1.83 (0.14)
------- ------- ------- ------- ------- ------- ------- -------
Total from Investment Operations 3.19 3.40 2.50 0.31 0.43 1.46 2.10 0.13
LESS DISTRIBUTIONS
Distributions from net investment income (0.23) (0.23) (0.28) (0.27) (0.28) (0.28) (0.29) (0.31)
Distributions from capital gains (1.34) (0.86) (1.54) (0.66) (0.55) (0.11) - -
------- ------- ------- ------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS (1.57) (1.09) (1.82) (0.93) (0.83) (0.39) (0.29) (0.31)
NET ASSET VALUE, END OF PERIOD $ 18.16 $ 16.54 $ 14.23 $ 13.55 $ 14.17 $ 14.57 $ 13.50 $ 11.69
======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN 21.39% 25.80% 21.02% 2.15% 3.02% 10.91% 18.35% 1.18%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions) $ 36.3 $ 20.8 $ 18.1 $ 17.2 $ 21.5 $ 20.9 $ 18.1 $ 11.4
Ratio of expenses to average net assets 1.40% 1.45% 1.49% 1.42% 1.40% 1.48% 1.64% 1.84%
Ratio of expenses to average net assets
without reimbursement - - - - - - - -
Ratio of net income to average net assets 1.04% 1.32% 1.71% 1.84% 1.89% 2.14% 2.46% 2.49%
Ratio of net income to average net assets
without reimbursement - - - - - - - -
Portfolio turnover rate 76.66% 134.82% 111.16% 110.01% 91.77% 52.75% 48.46% 56.86%
Average commission rate paid $0.0693 $0.0745 - - - - - -
<CAPTION>
Year Ended November 30,
-----------------------
1989 1988
---- ----
<S> <C> <C>
BALANCED FUND
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.06 $ 8.45
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.30 0.19
Net realized and unrealized gains (losses)
on investments 1.72 1.51
------- -------
Total from Investment Operations 2.02 1.70
LESS DISTRIBUTIONS
Distributions from net investment income (0.21) (0.09)
Distributions from capital gains - -
------ -------
TOTAL DISTRIBUTIONS (0.21) (0.09)
NET ASSET VALUE, END OF PERIOD $ 11.87 $ 10.06
======= =======
TOTAL RETURN 20.46% 20.28%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions) $ 9.0 $ 6.4
Ratio of expenses to average net assets 2.00% 2.00%
Ratio of expenses to average net assets
without reimbursement - 2.20%
Ratio of net income to average net assets 2.95% 2.15%
Ratio of net income to average net assets
without reimbursement - 1.90%
Portfolio turnover rate 55.69% 80.96%
Average commission rate paid - -
</TABLE>
4
<PAGE> 8
FINANCIAL HIGHLIGHTS
(Continued)
<TABLE>
<CAPTION>
Year Ended November 30,
--------------------------------------------
1997 1996 1995 1994 1993 1992(c)
- ----------------------------------------------------------------------------------------------------------------------------
BOND FUND
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Data:
Net Asset Value, Beginning of Period $ 10.59 $ 10.67 $ 9.88 $ 10.78 $ 10.33 $ 10.00
Income from Investment Operations
Net investment income 0.54 0.52 0.57 0.48 0.45 0.20
Net realized and unrealized gains (losses) on investments (0.06) (0.07) 0.78 (0.78) 0.44 0.28
------- ------- ------- ------- ------- -------
Total from Investment Operations 0.48 0.45 1.35 (0.30) 0.89 0.48
Less Distributions
Distributions from net investment income (0.53) (0.53) (0.56) (0.47) (0.42) (0.15)
Distributions from capital gains - - - (0.13) (0.02) -
------- ------- ------- ------- ------- -------
Total Distributions (0.53) (0.53) (0.56) (0.60) (0.44) (0.15)
======= ======= ======= ======= ======= =======
Net Asset Value, End of Period $ 10.54 $ 10.59 $ 10.67 $ 9.88 $ 10.78 $ 10.33
Total Return 4.74% 4.51% 14.06% (2.96%) 8.74% 4.80%(a)
Ratios/Supplemental Data:
Net assets, end of period (millions) $ 32.1 $ 22.2 $ 14.9 $ 10.2 $ 6.2 $ 3.9
Ratio of expenses to average net assets 1.14% 1.13% 1.13% 1.00% 1.00% 1.15%(b)
Ratio of expenses to average net assets
without reimbursement - - 1.34% 1.48% 1.76% 2.36%(b)
Ratio of net income to average net assets 5.42% 5.48% 5.70% 4.83% 4.44% 4.36%(b)
Ratio of net income to average net assets
without reimbursement - - 5.49% 4.34% 3.68% 3.13%(b)
Portfolio turnover rate 52.61% 104.43% 111.95% 165.74% 111.18% 227.03%
</TABLE>
(a) Calculated on a non-annualized basis.
(b) Calculated on an annualized basis.
(c) For the period February 10, 1992 (commencement of operations) through
November 30, 1992.
5
<PAGE> 9
FINANCIAL HIGHLIGHTS
(CONTINUED)
<TABLE>
<CAPTION>
Year Ended November 30,
-----------------------------------------------
1997 1996 1995 1994 1993 1992(c)
- ------------------------------------------------------------------------------------------------------------------
GROWTH FUND
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF PERIOD $ 32.79 $ 24.74 $ 20.43 $ 20.47 $ 20.37 $ 20.00
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (0.12) (0.06) (0.05) (0.20) (0.12) (0.05)
Net realized and unrealized gains on investments 9.16 8.66 6.22 0.16 0.22 0.42
------- ------- ------- ------- ------- -------
Total from Investment Operations 9.04 8.60 6.17 (0.04) 0.10 0.37
LESS DISTRIBUTIONS
Distributions from net investment income - - - - - -
Distributions from capital gains (2.47) (0.55) (1.86) - - -
------- ------- ------- ------- ------- -------
Total Distributions (2.47) (0.55) (1.86) - - -
NET ASSET VALUE, END OF PERIOD $ 39.36 $ 32.79 $ 24.74 $ 20.43 $ 20.47 $ 20.37
======= ======= ======= ======= ======= =======
TOTAL RETURN 29.90% 35.52% 32.87% (0.19%) 0.49% 1.85%(a)
Ratios/Supplemental Data:
Net assets, end of period (millions) $ 45.4 $ 24.1 $ 12.6 $ 4.7 $ 7.1 $ 7.4
Ratio of expenses to average net assets 1.52% 1.58% 2.00% 2.00% 1.93% 2.00%(b)
Ratio of expenses to average net assets
without reimbursement - - - 2.31% - 2.05%(b)
Ratio of net income to average net assets (0.41%) (0.27%) (0.31%) (0.49%) (0.54%) (0.40%)(b)
Ratio of net income to average net assets
without reimbursement - - - (0.80%) - (0.46%)(b)
Portfolio turnover rate 77.66% 101.91% 86.68% 116.69% 98.93% 43.23%
Average commission rate paid $0.0734 $0.0858 - - - -
</TABLE>
(a) Calculated on a non-annualized basis.
(b) Calculated on an annualized basis.
(c) For the period February 10, 1992 (commencement of operations) through
November 30, 1992.
6
<PAGE> 10
GENERAL INFORMATION
Thompson Plumb Funds, Inc. is a Wisconsin corporation incorporated in 1986
and registered as an open-end, diversified management investment company under
the Investment Company Act of 1940 (the "1940 Act"). This prospectus relates
to the following three separate Funds:
Thompson Plumb Balanced Fund
Thompson Plumb Bond Fund
Thompson Plumb Growth Fund
Each Fund obtains its assets by continuously offering and selling its
shares to the public. Proceeds from such sales are invested by the Fund in
securities of different companies or governmental entities. Each Fund provides
its investors with diversification by investing in the securities of many
different companies in a variety of industries or governmental entities, and
furnishes its investors with experienced management to select and watch over
the Fund's investments. As open-end mutual funds, each Fund will redeem any of
its outstanding shares on demand of the owner at their net asset value. See
"Purchase and Redemption of Shares." Because the Funds invest in stocks and
bonds, the value of shares in the Funds will rise and fall according to market
conditions and over time may be more or less than the price initially paid by
the investor.
As the Advisor, Thompson, Plumb & Associates, Inc. is responsible for
evaluating and selecting the securities held by the Funds and will use its
professional expertise and experience in an effort to ensure that the Funds'
objectives will be met, although there can be no assurance of their success.
See "Management of the Funds."
Each of the Funds is 100% no-load. This means that investors pay no fees
to purchase, exchange or redeem shares, nor any 12b-1 distribution expenses.
Lower asset based charges benefit investors by increasing each Fund's
investment return.
INVESTMENT OBJECTIVES AND POLICIES
OF THE FUNDS
THOMPSON PLUMB BALANCED FUND
The Balanced Fund seeks to realize a combination of income and capital
appreciation which will result in highest total return, while assuming
reasonable risk. The Balanced Fund invests in a diversified portfolio of
common stocks and fixed income securities.
The Advisor will invest in securities that, in its judgment, will result
in the highest total return consistent with preservation of principal, and will
vary the mix of common stocks and bonds from time to time in accordance with
its assessment of economic conditions and investment opportunities. It is
anticipated that a major portion of the Balanced Fund's assets will be invested
at all times in common stocks. As of November 30, 1997, approximately 70% of
the total market value of the Balanced Fund's securities portfolio consisted of
common stocks. The Advisor invests in common stocks that it believes are
undervalued relative to the company's future growth prospects. The Advisor
believes characteristics that typify corporations with such future growth
prospects include quality balance sheets, strong management, high return on
assets and potential for earnings growth.
The Balanced Fund will also invest a significant portion of its assets in
fixed income securities, including corporate notes, bonds and debentures,
short-term debt instruments, debt securities issued or guaranteed by the United
States Government or by its agencies or instrumentalities, convertible debt
securities and preferred stock that is convertible into common stocks.
Ordinarily at least 25% of the total assets of the Balanced Fund will be
invested in such fixed income senior securities. For purposes of this
calculation, only that portion of the market value of the Balanced Fund's
convertible fixed income securities which is attributable to their fixed income
characteristics will be used in determining whether the Fund has maintained
this 25% minimum. Should the Advisor determine, based on its assessment of
prevailing market conditions, that fixed income securities provide the most
effective means for achieving the Balanced Fund's investment objective, it may
elect to temporarily invest all of the Fund's assets in such fixed income
securities. In determining whether the Balanced Fund should shift its emphasis
from common stocks to fixed income securities, the Advisor will assess
anticipated future changes in interest rates and the outlook for common stocks
generally.
The debt securities in which the Balanced Fund invests are generally the
same as those in which the Bond Fund invests. For a more detailed description
of the various kinds and characteristics of such debt securities, see "Thompson
Plumb Bond Fund" below. For a description of quality limitations and other
policies of the Balanced Fund with respect to investing in debt securities, see
"Other Investment Factors Regarding the Funds - Fixed Income Securities."
7
<PAGE> 11
Under market conditions that, in the judgment of the Advisor, expose the
Balanced Fund to a decline in net asset value, the Balanced Fund may
temporarily invest in short-term debt instruments for defensive purposes. Such
conditions may include declines, or anticipated declines, in stock prices which
are generally accompanied with marked increases in interest rates (thereby
causing longer term fixed income securities to decline substantially in value).
There is no limit on the portion of the assets of the Balanced Fund which may
be invested in short-term debt instruments for such defensive purposes. The
Balanced Fund may also purchase such short-term debt instruments for investment
of idle cash balances. For a description of such short-term instruments and
quality limitations and other policies of the Balanced Fund with respect to
investing in such instruments, see "Other Investment Factors Regarding the
Funds - Short-Term Instruments."
THOMPSON PLUMB BOND FUND
The Bond Fund seeks a high level of current income, while at the same time
preserving investment capital. The Bond Fund invests primarily in a
diversified portfolio of investment-grade debt securities. Such securities
include the following types:
(1) Debt securities of domestic issuers, and of foreign issuers payable in
United States dollars, rated at the time of purchase within the four
highest grades by either Standard & Poor's ("S&P") or Moody's Investors
Service, Inc. ("Moody's") (a description of these ratings is contained
in the Statement of Additional Information);
(2) Securities issued or guaranteed by the United States Government or its
agencies or instrumentalities, including mortgage-related securities
issued or guaranteed by the United States Government, its agencies or
instrumentalities, such as GNMA certificates;
(3) Mortgage-related securities issued or guaranteed by private issuers
and guarantors equivalent to the quality standards of item (1);
(4) Commercial paper rated within the two highest categories for
commercial paper or short-term debt securities by either S&P or Moody's
at the time of purchase;
(5) Obligations of banks and thrifts whose deposits are insured by the
FDIC; and
(6) Short-term corporate obligations, including variable rate demand notes
if the issuer has commercial paper or short-term debt securities rated
within the two highest categories by either S&P or Moody's at the time
of purchase. For a description of variable rate demand notes and an
explanation of how they differ from commercial paper, see "Other
Investment Factors Regarding the Funds - Short-Term Instruments."
Under normal circumstances, at least 65% of the Bond Fund's total assets
will be invested in the bonds described in (1) and (2) above. Although there
are no restrictions on the maturity of securities in which the Bond Fund may
invest, it is anticipated that during normal market conditions, the
dollar-weighted average portfolio maturity of the Fund will not exceed 10
years. In calculating average maturity, the stated final maturity date of a
security is used, unless it is probable that the issuer will shorten the
maturity, in which case the date on which it is probable that the issuer will
call, refund or redeem the security is used. The Bond Fund will not purchase
securities with a view to rapid turnover.
Securities issued by the U.S. Government, its agencies or
instrumentalities, may vary in terms of the degree of support afforded by the
Government. Some of such securities may be supported by the full faith and
credit of the U.S. Treasury, such as U.S. Treasury bills, notes and bonds and
GNMA certificates. Some agency securities are supported by the agency's right
to borrow from the U.S. Treasury under certain circumstances, such as those
issued by the Federal Farm Credit Bank. Still others are supported by the
credit of the agency that issued them, such as those issued by the Student Loan
Marketing Association. It is anticipated that the Bond Fund's investments in
Government securities will primarily consist of those supported by the full
faith and credit of the United States Treasury.
The value of the Bond Fund's securities is subject to the effects of
changes in prevailing interest rates. See "Other Investment Factors Regarding
the Funds - Fixed Income Securities."
THOMPSON PLUMB GROWTH FUND
The Growth Fund seeks a high level of long-term growth primarily through
capital appreciation, while at the same time assuming reasonable risk. The
Growth Fund invests primarily in a diversified portfolio of common stocks and
securities convertible into common stocks. Although current income is not a
primary objec-
8
<PAGE> 12
tive of the Growth Fund, the Fund anticipates that capital growth will be
accompanied by growth through dividend income. The term "reasonable risk"
refers to the Advisor's judgment that investments in certain common stocks
would not present a greater than normal risk of loss in light of current and
reasonably anticipated future general market and economic conditions, trends in
dividend yields and interest rates, and fiscal and monetary policies.
Any assets not invested in common stocks and securities convertible into
common stocks will be invested in income producing short-term debt instruments
as a reserve for future purchases of securities. The Advisor will seek to
identify investment opportunities in equity securities of companies which it
believes have above average potential for earnings and dividend growth.
Generally, the Advisor's analysis will consider a company's financial history
and condition, strength of management and position within its industry.
The Growth Fund may also invest in convertible preferred and convertible
fixed income securities. The Advisor intends generally to limit the Growth
Fund's purchase of these securities to those which are rated in one of the top
four rating categories by S&P or Moody's. A description of the ratings used by
the rating services noted above is contained in the Statement of Additional
Information.
The Growth Fund may also, from time to time, invest in short-term, fixed
income securities. Under ordinary circumstances, it is not anticipated that
more than 10% of the Growth Fund's total assets will be invested in such
short-term, fixed income securities. However, if deemed desirable for
defensive purposes, the Growth Fund may invest up to 25% of its assets in such
securities. For a discussion of special considerations with respect to
investing in short-term instruments, see "Other Investment Factors Regarding
the Funds - Short-Term Instruments."
OTHER INVESTMENT FACTORS REGARDING THE FUNDS
COMMON STOCKS
Both the Balanced Fund and Growth Fund invest in common stocks and
securities convertible into common stocks. A portion of those investments may
be in companies that have market capitalizations of under $200 million and
which may be traded only in the over-the-counter market. The Advisor believes
that such smaller companies often may be undervalued in the marketplace and
therefore carry a greater potential for capital appreciation. The market for
common stocks tends to be cyclical, with periods when stock prices generally
rise and periods when stock prices generally decline. The market values of
stocks of smaller companies may be subject to greater fluctuation than the
market in general and may have less market liquidity than equity securities of
larger companies. The Advisor does not intend to purchase smaller company
securities for the Balanced or Growth Funds if, at the time of purchase, the
aggregate investment in all such securities would exceed one-third of the total
market value of the respective Fund's portfolio. The Advisor believes that its
policies of issuer and industry diversification, together with its strategic
investment in short-term debt instruments and other fixed income securities,
can limit the volatility of investments in these smaller companies. Investors
in the Balanced and Growth Funds should consider their holdings in those Funds
to be long-term investments.
FIXED INCOME SECURITIES
The total return realized on the Bond Fund and the fixed income portion of
the securities portfolio of the Balanced Fund will consist of the change in the
net asset value per share of those Funds attributable to the fixed income
securities, together with the per share income generated by those securities.
The net asset value of the fixed income securities held by those Funds will be
affected primarily by changes in interest rates, average maturities and the
investment and credit quality of the fixed income securities.
A bond's yield reflects the fixed annual interest as a percent of its
current price. This price (the bond's market value) must increase or decrease
in order to adjust the bond's yield to current interest rate levels.
Therefore, bond prices generally move in the opposite direction of interest
rates. As a result, interest rate fluctuations will affect the net asset
values of the Balanced and Bond Funds, but will not affect the income received
by those Funds from their existing portfolio of fixed income securities.
However, changes in prevailing interest rates will affect the yield on shares
subsequently issued by those Funds. Such fluctuations also affect the income
received on any variable rate demand notes or other variable rate securities
held in the Funds' portfolios. Because yields on fixed income securities
available for purchase by these Funds will vary over time, no specific yield on
the fixed income portion of the portfolios of those Funds can be assured.
Total returns on fixed income securities tend to fluctuate in a wider range
than the fluctuation in interest rates since gain or loss in the market value
of those secu-
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<PAGE> 13
rities is combined with interest derived from those securities to calculate
total return.
Movements in interest rates typically have a greater effect on the prices
of longer term bonds than on those with shorter maturities. The Advisor will
actively manage the portfolio maturity of the Balanced and Bond Funds,
consistent with their respective investment objectives, according to the
Advisor's assessment of the interest rate outlook. During periods of rising
interest rates, the Advisor will likely attempt to shorten the average maturity
of the portfolio to cushion the effect of falling bond prices on the Funds'
share prices. When interest rates are falling and bond prices are increasing,
on the other hand, the Advisor will likely seek to lengthen the average
maturity.
In order to protect against loss, each Fund has adopted policies with
respect to the quality of fixed income securities in which it may invest.
Those policies rely in part on ratings assigned to such securities, or to other
debt securities of the issuer, by S&P or Moody's, two of the most widely known
national securities rating services. A description of the rating systems used
by S&P and Moody's is included in the Statement of Additional Information under
"Description of Ratings of Certain Fixed Income Securities." The minimal
rating standards adopted by each Fund with respect to specific fixed income
securities are described above under the discussion of the particular Fund's
investment objectives and policies. See "Investment Objectives and Policies of
the Funds." Securities rated in the fourth highest rating category may have
speculative characteristics and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with securities rated in a higher
category. In the event a debt security held in a Fund's portfolio is
downgraded to a rating below the lowest category permitted by the Fund's
policy, the Advisor will consider this fact together with other relevant
factors in determining whether to continue to hold the security. However,
downgrading alone will not require the sale of the security.
SHORT-TERM INSTRUMENTS
Short-term instruments in which the Funds may invest include United States
Treasury Bills, short-term instruments issued by agencies or instrumentalities
of the United States, commercial paper, variable rate demand notes, bank
certificates of deposit, and units of money market mutual funds. A variable
rate demand note differs from ordinary commercial paper in that it is issued
pursuant to a written agreement between the issuer and the holder, its amount
may from time to time be increased by the holder (subject to an agreed
maximum), or decreased by the holder or the issuer, and the rate of interest
payable on the security varies with an agreed formula. Transfer of such notes
is usually restricted by the issuer, and there is no secondary trading market
for such notes. The Funds will purchase such variable rate demand notes only
if, at the time of purchase, the issuer has commercial paper or short-term debt
securities rated within the two highest categories by either S&P or Moody's.
To the extent the Funds invest in units of money market mutual funds,
administrative fees and other operating expenses incurred by those funds would
be duplicative of those incurred by the Funds, and would reduce the return
received by the Funds on assets so invested. Minimum rating standards adopted
by each of the Funds with respect to investing in other short-term instruments
are described under "Investment Objectives and Policies of the Funds."
PORTFOLIO TURNOVER
Generally, the Funds do not intend to purchase securities for short-term
trading, however, when circumstances warrant, securities may be sold without
regard to the length of time held. A high turnover rate may increase
transaction costs and may affect taxes paid by shareholders to the extent gains
are distributed. The portfolio turnover rates for the fiscal years ended
November 30, 1997 and 1996 were 76.66% and 134.82%, respectively, for the
Balanced Fund, 52.61% and 104.43%, respectively, for the Bond Fund, and 77.66%
and 101.91%, respectively, for the Growth Fund.
INVESTMENT RESTRICTIONS
Except as discussed below, the investment objectives, policies and
programs of the Funds discussed in this Prospectus may be changed by the Board
of Directors without shareholder approval. Although the Directors have no
present plans to change the investment objective of any of the Funds, if the
investment objective of any Fund were to be changed it may be different from
that which was deemed appropriate by the shareholder at the time of the
investment.
The Funds are subject to additional investment restrictions which may not
be changed without the vote of a majority of the outstanding shares of the
affected Fund. Among other things, these restrictions prohibit the Funds from
concentrating investments in a single industry or purchasing securities of an
issuer if, as a result, more than 5% of the Fund's total assets would be
invested in that issuer, except that up to 25% of a Fund's assets may be
10
<PAGE> 14
invested without regard to this limitation and provided that this limitation
does not apply to securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities. No Fund may purchase the securities of issuers
conducting their principal business activity in the same industry if,
immediately following such purchase, the value of the Fund's investments in
such industry would exceed 25% of the value of its total assets, provided that
there is no limitation with respect to or arising out of investments in
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
Each Fund may borrow money, but only: (a) as a temporary measure, and
then only in amounts not exceeding 5% of the value of the Fund's total assets;
or (b) from banks, provided that, immediately after any such borrowing, the
total of all borrowings of the Fund does not exceed one-third of the Fund's
total assets. The Funds may not employ this borrowing authority for investment
leverage purposes, but may use it only for extraordinary or emergency purposes
and to facilitate management of the Funds' portfolios by enabling them to meet
redemption requests when the liquidation of portfolio securities is deemed to
be disadvantageous or impossible. While each Fund may borrow an aggregate
amount in excess of 5% of its total assets, no Fund may make any purchases of
portfolio securities at a time when the aggregate of its borrowings exceeds
that amount. If, due to market fluctuations or other reasons, the net assets
of a Fund fall below 300% of its borrowings, the Fund will promptly reduce its
borrowings in accordance with the requirements and procedures set forth in the
1940 Act. This may require the Fund to sell a portion of its portfolio
securities at a time when it may be disadvantageous to do so. Interest
incurred on borrowings will be an expense of the Fund. Each Fund may also
mortgage or pledge its assets to secure permitted borrowings.
In addition to the foregoing powers and restrictions, the Funds have
adopted other restrictions in order to comply with the securities laws of
various states. For a more complete description of the investment restrictions
summarized above and other investment restrictions to which the Funds are
subject, see "Investment Restrictions" in the Statement of Additional
Information.
OTHER FACTORS
Additional information regarding repurchase agreements, when-issued
transactions and lending of portfolio securities is contained in the Statement
of Additional Information.
MANAGEMENT OF THE FUNDS
The business and affairs of the Funds are managed by the Board of
Directors of Thompson Plumb Funds, Inc. Thompson, Plumb & Associates, Inc.,
8201 Excelsior Drive, Suite 200, Madison, Wisconsin, acts as the investment
advisor to, and administrator of, each of the Funds. Since commencing
operations in 1984, the Advisor has been the investment advisor to individuals
and institutional clients with substantial investment portfolios, with
approximately $674 million in assets under management as of December 31, 1997.
John W. Thompson and Thomas G. Plumb, who have considerable investment
management experience, each own 50% of the outstanding shares of the Advisor.
For biographical information on these individuals, see "Management" in the
Statement of Additional Information. The Advisor does not currently serve as
an investment advisor to any investment companies other than Thompson Plumb
Funds, Inc.
Pursuant to an Investment Advisory Agreement between the Advisor and the
Funds, the Advisor manages the investment and reinvestment of the Funds'
assets, provides the Funds with personnel, facilities and administrative
services, and supervises the Funds' daily business affairs, all subject to the
supervision of the Board of Directors. The Advisor formulates and implements a
continuous investment program for each Fund consistent with its investment
objective, policies and restrictions.
The Advisor provides office space and executive and other personnel to the
Funds. In addition to the investment advisory fees, each Fund incurs the
following expenses: legal, auditing and accounting expenses, directors' fees
and expenses, insurance premiums, brokers' commissions, taxes and governmental
fees, expenses of issuing and redeeming shares, organizational expenses,
expenses of registering or qualifying shares for sale, postage and printing for
reports and notices to shareholders, fees and disbursements of the custodian,
transfer agent, certain expenses with respect to membership fees of industry
associations and any extraordinary expenses, such as litigation expenses.
As compensation for the services rendered to the Fund and the assumption
by the Advisor of certain related expenses, each Fund pays to the Advisor an
investment advisory fee computed daily and payable monthly at an annual rate as
follows: (i) for the Balanced Fund, 0.85 of 1% of the first $50 million of
average daily net assets and 0.80 of 1% of average daily net assets in excess
of $50 million; (ii) for the Bond Fund, 0.65 of 1% of the first $50 million of
average daily net assets and 0.60 of 1% of aver-
11
<PAGE> 15
age daily net assets in excess of $50 million; and (iii) for the Growth Fund,
1.00% of the first $50 million of average daily net assets and 0.90 of 1% of
average daily net assets in excess of $50 million. For the fiscal year ended
November 30, 1997, the Balanced, Bond and Growth Funds paid the Advisor
investment advisory fees at the annual rate of 0.85%, 0.65%, and 1.00%,
respectively, of average daily net assets. The investment advisory fees paid
by the Balanced Fund and the Growth Fund are higher than those paid by most
other investment companies. The expenses assumed by the Advisor exclude the
cost(s) (including taxes and brokerage commissions, if any) of securities
purchased for the Funds and the cost of preparation of tax returns, the
preparation and submission of reports to shareholders, the periodic updating of
this Prospectus and the Statement of Additional Information and the preparation
of reports filed with the Securities and Exchange Commission and other
regulatory authorities.
The Advisor also provides accounting services to the Funds pursuant to its
Accounting Services Agreement with Thompson Plumb Funds, Inc. Pursuant to the
Accounting Services Agreement, the Advisor provides each Fund with accounting
and bookkeeping services and performs per share net asset value calculations.
For these services and the Advisor's assumption of certain related expenses,
each Fund pays the Advisor a fee computed daily and payable monthly at the
annual rate of 0.20 of 1% of net assets up to $30 million and 0.125 of 1% of
net assets in excess of $30 million, with a minimum fee of $30,000 per year.
For the fiscal year ended November 30, 1997, this fee for the Balanced Fund,
Bond Fund and Growth Fund amounted to $56,797, $56,007 and $63,099,
respectively. In calculating the net asset value per share, the Advisor may
use an independent pricing service to determine the value of some or all of a
Fund's portfolio securities, and, if such a service is used, the cost of such
service is borne by the Fund. See "Determination of Net Asset Value."
The Advisor intends to voluntarily reimburse the Bond Fund for all
expenses it incurs on an annual basis in excess of 1.00% of average daily net
assets, if necessary. Voluntary reimbursement may be modified or discontinued
by the Advisor at any time.
Thomas G. Plumb serves as portfolio manager for the Balanced Fund. He was
a co-manager of the Funds' portfolios from commencement of each Fund's
operations through mid-August 1993, when he became sole portfolio manager of
the Balanced Fund. Mr. Plumb is President, Treasurer and a Director of the
Funds and has been Vice President of the Advisor since he co-founded it in June
1984.
John W. Thompson serves as portfolio manager for the Bond and Growth
Funds. He was a co-manager of the Funds' portfolios from commencement of each
Fund's operations through mid-August 1993, when he became sole portfolio
manager of the Bond and Growth Funds. Mr. Thompson is the Chairman, Secretary
and a Director of the Funds and has been President of the Advisor since he
co-founded it in June 1984 and Treasurer of the Advisor since October 1993.
Messrs. Plumb and Thompson are both Chartered Financial Analysts.
PURCHASE AND REDEMPTION OF SHARES
GENERAL
Applications for the purchase of shares should be submitted on the
accompanying Account Application form, should identify the appropriate Fund(s),
and should be directed to Thompson Plumb Funds, Inc., c/o Firstar Trust
Company, Mutual Funds Services, P.O. Box 701, Milwaukee, Wisconsin 53201-0701.
If the application is transmitted by an overnight delivery service or express
mail, it should be addressed to Thompson Plumb Funds, Inc., c/o Firstar Trust
Company, Mutual Funds Services, 615 East Michigan Street, Milwaukee, Wisconsin
53202. The Funds and Firstar do not consider the U.S. Postal Service or other
independent delivery services to be their agents. Therefore, deposit in the
mail or with such services, or receipt at Firstar's post office box does not
constitute receipt by Firstar or the Funds. All purchases of shares, including
reinvestments of dividends and distributions, and all redemptions of shares
will be made in full and fractional shares rounded to the nearest thousandth
(the third decimal place).
PURCHASES
The Funds offer and sell their shares without a sales charge at the net
asset value per share next determined after the purchase order has been
received by Firstar Trust Company ("Firstar"), which serves as the transfer and
dividend disbursing agent and custodian for the Funds. See "Determination of
Net Asset Value." The Board of Directors has established $1,000 as the
minimum initial purchase in any Fund, other than for an IRA, and $100 as the
minimum for any subsequent purchase, except through dividend reinvestment or
purchases through the Funds' Automatic Investment Plan or Automatic Exchange
Plan described below.
All applications to purchase shares are subject to acceptance or rejection
by authorized officers of the Funds and are not binding until accepted.
Applications may be made by mail, overnight delivery, or wire transfer.
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<PAGE> 16
If by mail or overnight delivery, the application must be accompanied by a
check or money order drawn on a U.S. bank, money market fund, credit union or
savings association. Checks are accepted subject to collection at full face
value in U.S. funds. Firstar will charge a $20 fee against a shareholder's
account for any check written by a shareholder that is returned for
insufficient funds.
Fund shares may also be purchased through a broker-dealer, institution or
other service provider (a "service provider") which may charge a commission or
other transaction fee. Investors should read the program materials provided by
the service provider, including information relating to fees, in conjunction
with this Prospectus. Certain features of a Fund may not be available or may
be modified in connection with the program of services provided. When shares
are purchased in this way, the service provider, rather than its customer, may
be the shareholder of record of the Fund shares, and the service provider may
be responsible for delivering fund reports and other communications to its
customers. Certain service providers may receive compensation from the Funds
or the Advisor for shareholder recordkeeping and similar services.
Investors wishing to make an initial purchase by wire transfer must take
the following three steps: (1) complete and mail the accompanying Account
Application form to Thompson Plumb Funds, Inc., c/o Firstar Trust Company,
Mutual Fund Services, P.O. Box 701, Milwaukee, Wisconsin 53201-0701; (2)
telephone Firstar at 1-800-499-0079 or 414-765-4124 and provide his or her
account registration, address, social security or tax identification number,
the amount being wired, the name of the wiring bank and the name and telephone
number of the person to be contacted at his or her bank in connection with the
purchase; and (3) instruct his or her bank (which must be a member of, or have
a correspondent relationship with, a member of the Federal Reserve System) to
wire federal funds as follows:
Wire to: Firstar Bank Milwaukee, N.A.
ABA 075000022
Credit: Firstar Trust Company
Account 112-952-137
Further Credit: Name of Fund
(investor account number)
(name of investor)
Please call Firstar at 1-800-499-0079 or 1-414-765-4124 prior to sending the
wire in order to obtain a confirmation number and to ensure prompt and accurate
handling of funds. Wire order funds must be received in the office of Firstar
prior to 3 P.M. Central Time, in order to purchase shares on that day. Funds
received after 3 P.M. Central Time will purchase shares on the following day.
Shareholders who wish to purchase additional shares by wire may do so by
following steps 2 and 3 of these wire transfer instructions and, in addition,
by providing his or her existing fund account number. Shareholders may also
purchase additional Fund shares by electronic funds transfers from your
designated bank (which must be an Automated Clearing House member) to Firstar.
In order to purchase additional Fund shares by electronic funds transfers,
shareholders need to call Firstar and provide the information required in step
2 above. Telephone purchase orders must be received by Firstar before the close
of regular session trading on the New York Stock Exchange (3 P.M.
Central Time) to receive the net asset value calculated for that day.
Shareholders are responsible for charges imposed by their bank for effecting
wire or electronic funds transfers. The Funds and Firstar are not responsible
for the consequences of any delays resulting from the banking, Federal Reserve
wiring or electronic funds transfer system, or from incomplete wiring or
electronic funds transfer instructions. Firstar will charge a $20 service fee
for wire or electronic funds transfers that do not clear the system as a result
of insufficient or unavailable funds or shareholder negligence.
Certificates representing shares of the Funds will not be issued unless
the shareholder specifically so requests in writing. Where certificates are
not requested, Firstar will credit the shareholder's account in the appropriate
Fund with the number of shares purchased. Written confirmations are issued for
all purchases, except that transactions pursuant to Fund plans for automatic
reinvestment of dividends, monthly automatic investment or systematic
withdrawal may be confirmed quarterly. The Funds reserve the right to reject
any purchase orders.
AUTOMATIC INVESTMENT PLAN
Shareholders who wish to make regular additional investments (monthly,
bimonthly, quarterly or yearly) in amounts of $50 or more to an existing Fund
account may do so through the Funds' Automatic Investment Plan. Under this
Plan, your designated bank or other financial institution debits a
preauthorized amount to your checking or NOW account on a business day of your
choosing and applies the amount to the purchase of Fund shares. The Funds can
accommodate up to four investments per month as long as there are seven days
between investments. The Funds do not charge a fee for participating in the
Automatic Investment Plan. However, Firstar will charge a $20 service fee
against your Fund account for any purchase under this Plan that does not clear
due to
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<PAGE> 17
insufficient funds or, if prior to notifying the Fund or Firstar in writing or
by telephone of your intention to terminate your participation in this Plan,
you close your bank account or in any manner prevent withdrawal of funds from
your designated bank account. To use this service, you must authorize the
transfer of funds by completing the Automatic Investment Plan Application,
which may be obtained from either the Advisor or Firstar. The Funds reserve
the right to suspend, modify or terminate the Automatic Investment Plan without
notice. Shareholders who wish to make a change to their Automatic Investment
Plan may call Firstar at 1-800-499-0079.
SYSTEMATIC WITHDRAWAL PLAN
Shareholders may elect to participate in the Funds' Systematic Withdrawal
Plan. By making this election, you can arrange for automatic withdrawals from
your Fund account into a pre-authorized bank account according to the schedule
you select which may be on a monthly basis or in certain designated months.
The Funds do not charge a fee for participating in the Systematic Withdrawal
Plan. The Systematic Withdrawal option may be in any amount you select,
subject to a $50 minimum. To begin distributions, a shareholder must have a
Fund account valued at $10,000 or more. You may elect this option by
completing the Systematic Withdrawal Plan Application which is available from
Firstar or the Advisor. Shareholders who wish to make a change to their
Systematic Withdrawal option may call Firstar or the Advisor. Normally,
shareholders should not make automatic investments in a Fund at the same time
they are receiving systematic withdrawals from that Fund because such
shareholders could realize capital gains on the systematic withdrawals from
that Fund while they are automatically investing in that Fund. The Systematic
Withdrawal Plan may be terminated at any time by written notice.
EXCHANGE PRIVILEGE
Shares of any Fund registered in the name of a shareholder for at least 15
days may be exchanged for shares of any other Fund, provided the shares of both
Funds are qualified for sale in the shareholder's state of residence. Under
the exchange privilege, each Fund offers to exchange its shares for shares of
any other Fund on the basis of relative net asset value per share. In order to
qualify for the exchange privilege without further approval of the Fund, the
shares being exchanged must have a net asset value of at least $1,000, and may
not have a net asset value in excess of $100,000. In addition, if the
shareholder holds a certificate(s) for the shares being exchanged, the
shareholder must surrender such certificate(s) in the same manner as though the
shares were being redeemed. See "Redemptions" below.
An exchange between Funds pursuant to this exchange privilege is treated
as a sale for federal income tax purposes and, depending upon the
circumstances, a short or long-term capital gain or loss may be realized.
This exchange privilege may be modified or terminated at any time upon 60
days' prior written notice. The Funds reserve the right to limit the number of
times an investor may exercise the exchange privilege. To exercise the
exchange privilege, you must either authorize telephone exchanges as described
below or obtain, complete and return an Exchange Application available from
Firstar or the Advisor.
AUTOMATIC EXCHANGE PLAN
The Funds offer an Automatic Exchange Plan pursuant to which a shareholder
may elect to make regular monthly exchanges of shares from one Fund to another
Fund. Shareholders may elect to participate by completing the Automatic
Exchange Plan Application which may be obtained from the Advisor or Firstar.
Accounts for each Fund must be established with at least $1,000 before
automatic exchanges from or to such Funds can be made. Each exchange will be
made in a fixed amount designated by the shareholder, which must be at least
$50. Exchanges will be made on the same day designated by the shareholder of
each month at each Fund's respective net asset value per share. Exchanges may
only be made with respect to Fund accounts with identical registrations. Like
other types of exchanges, automatic exchanges constitute a sale and purchase of
shares for federal income tax purposes and, depending on the circumstances, a
short or long-term capital gain or loss may be realized.
EXCHANGE BY TELEPHONE
If you have elected on your Account Application, you can exchange shares
by phone. By doing so you assume some risks for unauthorized transactions.
The Funds and Firstar have implemented procedures designed to reasonably assure
that the telephone instructions are genuine. These procedures include
recording telephone conversations, requesting verification of information
regarding your account (social security number, account number and/or street
address) and sending a written confirmation of the transaction. If Firstar or
the Funds fail to abide by
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<PAGE> 18
these procedures, the Funds may be liable to a shareholder for losses he or she
suffers from any resulting unauthorized transaction(s). However, none of the
Funds, the Advisor, Firstar or any of their employees will be liable for losses
suffered by a shareholder which result from following telephone instructions
reasonably believed to be authentic after verification pursuant to these
procedures. A $5.00 transaction fee will be charged for each telephone
exchange. Telephone exchanges may only be made between identically registered
accounts.
AVAILABILITY OF MONEY MARKET FUND
Shareholders may withdraw all or a portion of their investments in any
Fund and reinvest the proceeds the same day in the Firstar Money Market Fund.
A shareholder who has moved an investment from any Fund to the Firstar Money
Market Fund, may, at any time, move the investment back into any of the Funds.
However, use of this exchange privilege is subject to the minimum purchase and
redemption amounts set forth in the prospectus for the Firstar Money Market
Fund, and is available only in states where shares of the Firstar Money Market
Fund are qualified for sale. Shareholders may obtain a copy of that prospectus
from Firstar or directly from the Advisor, and are advised to read it carefully
before authorizing any investment in shares of the Firstar Money Market Fund.
No charge to shareholders is imposed in connection with the use of this
exchange privilege. However, the Funds are entitled to receive a fee from the
Firstar Money Market Fund for certain distribution and support services at the
annual rate of 0.20 of 1% of the average daily net asset value of the shares in
the Firstar Money Market Fund that are a result of exchanges of shares of the
Funds.
The withdrawal of an investment from any of the Funds, even if the
proceeds are reinvested in the Firstar Money Market Fund, is treated as a sale
for federal income tax purposes and, depending on the circumstances, a short or
long-term capital gain or loss may be realized. Therefore, before using this
exchange service, shareholders may wish to consult their own tax or other
financial consultant to determine the tax consequences of a particular
transaction. This exchange privilege may be modified or terminated at any time
upon 60 days' prior written notice.
REDEMPTIONS
The price at which shares of any Fund may be redeemed is the net asset
value per share next determined after the redemption request is received by
Firstar in proper form. See "Determination of Net Asset Value." A shareholder
may require a Fund to redeem his or her shares in whole or in part. Investors
redeeming any Fund shares through a service provider may be charged a
commission or other transaction fee.
In order to effect a redemption of shares represented by a certificate(s),
the shareholder must mail the certificate(s) to the appropriate Fund at the
appropriate address shown below. The certificate(s) must be properly endorsed
or accompanied by an instrument of transfer.
Shareholders holding shares of any Fund not represented by certificates
may redeem such shares by mailing a signed written request for redemption to
the appropriate Fund at the address shown below. A Redemption Request Form
that may be used for this purpose can be obtained from the Advisor. Any such
written request must be signed exactly as the account is registered. If the
account is owned jointly, both owners must sign.
Signatures on surrendered stock certificates and Redemption Request Forms
must be guaranteed by a commercial bank, a federally chartered savings and loan
association, trust company, a member firm of a national securities exchange or
other eligible signature guarantor institution, unless the redemption is for
shares with an aggregate net asset value of $25,000 or less and the proceeds
are to be sent to the registered owner(s) of the shares at the current address
for such owner(s), as reflected on Firstar's records. In addition, a signature
guarantee of each owner is required to redeem shares in the following
situations: (i) if you change ownership registration on your account; (ii)
when you want the redemption proceeds sent to a different address from that
registered on the account; (iii) if the proceeds are to be made payable to
someone other than the accounts owner(s); (iv) any redemption transmitted by
federal wire or electronic funds transfer to your bank; and (v) if a change of
address request has been received by the Funds or Firstar within the last 30
days. If there is doubt as to what documents or instructions are necessary in
order to redeem shares, please write or call Firstar (telephone no.
1-800-499-0079) prior to submitting the redemption request. No redemption will
become effective until all documents have been received in proper form by
Firstar.
Redemption requests should be addressed to:
IF TRANSMITTED BY REGULAR MAIL:
Thompson Plumb Funds, Inc.
c/o Firstar Trust Company
Mutual Funds Services
P.O. Box 701
Milwaukee WI 53201-0701
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<PAGE> 19
IF TRANSMITTED BY OVERNIGHT SERVICE OR EXPRESS MAIL:
Thompson Plumb Funds, Inc.
c/o Firstar Trust Company
Mutual Funds Services
615 East Michigan Street
Milwaukee WI 53202
All redemptions will be processed promptly upon receipt by Firstar. The
Funds and Firstar do not consider the U.S. Postal Service or other independent
delivery services to be their agents. Therefore, deposit in the mail or with
such services, or receipt at Firstar's post office box of redemption requests
does not constitute receipt by Firstar or the Funds. Firstar will return
redemption requests that contain restrictions as to the time or date
redemptions are to be effected. Firstar will normally delay sending redemption
proceeds until the earlier of: (a) the day on which all payments for the
shares being redeemed have cleared; or (b) 15 days after payment for the shares
has been received by Firstar. Firstar will charge $20 for having to stop
payment on any redemption check if requested by the shareholder sooner than
seven business days after being mailed. The redemption price will depend on
the market value of the securities in the particular Fund's investment
portfolio at the time of redemption, and may be more or less than the cost of
the shares so redeemed. Payment for shares redeemed will be made by mail
unless the shareholder indicates on the Redemption Request Form or otherwise
that payment should be made by wire or electronic funds transfer to a
designated bank account. Redemption payments sent by wire will ordinarily be
made the business day immediately after the day Firstar receives a completed
redemption request and all necessary instructions and documentation. Redemption
payments sent by electronic funds transfer will ordinarily be made within two
or three days after Firstar has received a completed redemption request and all
necessary instructions and documentation. Firstar currently imposes a $12 wire
charge for each wire transfer of redemption proceeds. This charge is subject to
change. No charge is imposed by Firstar on electronic funds transfers.
Shareholders will be responsible for any charges which their bank may impose
for receiving wires or electronic funds transfers.
A shareholder's account in any Fund may be terminated by the Fund if, as a
result of any transfer, exchange or redemption of shares in the account, the
aggregate net asset value per share of the remaining shares in the account
falls below $750. The Fund will notify the shareholder at least 30 days in
advance of the Fund's intention to terminate the account to allow the
shareholder an opportunity to restore the account balance to at least $750.
Upon any such termination, a check for the proceeds of redemption will be sent
to the shareholder.
The right of a shareholder to redeem shares in any Fund and the date of
payment by the Fund may be suspended for any period during which the New York
Stock Exchange is closed, other than customary weekends or holidays, or trading
on such Exchange is restricted as determined by the Securities and Exchange
Commission, or during any emergency, as determined by the Securities and
Exchange Commission, as a result of which it is not reasonably practicable for
the Fund to dispose of securities owned by it or fairly to determine the value
of its net assets; or for such other period as the Securities and Exchange
Commission may by order permit for the protection of shareholders of the Fund.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of each Fund for purposes of both purchases
and redemptions of shares is calculated as of the close of trading on the New
York Stock Exchange (generally 4:00 P.M. Eastern Time) on each business day.
Net asset value per share is calculated by adding the value of all securities
and other assets of the particular Fund, subtracting the liabilities of the
Fund (including accrued expenses and dividends payable), and dividing the
remainder by the number of outstanding shares.
Portfolio securities which are traded on an exchange or in the
over-the-counter market are valued at the last sale price reported by the
exchange on which the securities are primarily traded on the day of valuation.
Securities for which there are no transactions on a given day or securities not
traded on an exchange or in the over-the-counter market are valued at the
average of the most recent bid and asked prices. Debt securities for which
market quotations are not readily available may be valued based on information
supplied by independent pricing services, including services using matrix
pricing formulas and/or independent broker bid quotations. Debt securities with
remaining maturities of 60 days or less may be valued on an amortized cost
basis, which involves valuing an instrument at its cost and thereafter assuming
a constant amortization to maturity of any discount or premium, regardless of
the impact of fluctuating rates on the market value of the instrument. Any
securities or other assets for which market quotations are not readily
available are valued at fair market value as determined in good faith by the
Advisor pursuant to procedures established under the general supervision and
responsibility of the Board of
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<PAGE> 20
Directors of Thompson Plumb Funds, Inc. Expenses and fees, including advisory
fees, are accrued daily and taken into account for the purpose of determining
net asset value per share.
DIVIDENDS, DISTRIBUTIONS AND TAXES
GENERAL
The Funds file their federal income tax returns based on a November 30
fiscal year. Each Fund intends to qualify as a "regulated investment company"
under the Internal Revenue Code of 1986, as amended (the "Code"), and to take
all other action required so that no federal income tax will be payable by the
Fund itself. Each Fund will be treated as a separate regulated investment
company under the Code. Shareholders are provided annually with full
information on dividends and capital gains distributions for tax purposes.
Shareholders should consult their tax advisers regarding the applicability of
state and local taxes to dividends and distributions.
All income, dividends and capital gains distributions are reinvested in
full and fractional shares of a Fund at net asset value, without a sales
charge, on a payment date, unless a shareholder has requested payment in cash
on the Account Application or by separate written request. Firstar will charge
a $20 service fee against your Fund account if you request stop payment on the
dividends or capital gains check sooner than seven business days after the
check has been mailed or if the dividend or capital gains payment cannot be
deposited into your designated bank account because you have closed your bank
account without first notifying the Funds or Firstar or in any manner prevent
deposit of such payment into your bank account. A shareholder may at any time
change his or her election as to whether to receive distributions in cash or
have them reinvested by giving written notice of such change of election to the
appropriate Fund, or by calling Firstar at 1-800-499-0079.
The Balanced and Growth Funds intend annually to distribute substantially
all of their net investment income and any net realized capital gains. The
Bond Fund expects to distribute to shareholders all of its net investment
income in quarterly dividends and net realized capital gains, if any, annually.
The dividends from net investment income and short-term capital gains of each
of these Funds are taxable as ordinary income to shareholders whether paid in
additional shares or in cash. Any long-term capital gains distributed to
shareholders are treated as such by the shareholders, whether received in cash
or in additional shares, regardless of the length of time a shareholder has
owned the shares. A portion of each Fund's dividends may qualify for the
dividends received deduction for corporations.
OTHER INFORMATION
The Funds are required by federal law to withhold 31% of the reportable
payments (which include dividends, capital gain distributions and redemption
proceeds) paid to certain shareholders who have not properly certified that the
Social Security or other taxpayer identification number provided by the
shareholder is correct and that he or she is not otherwise subject to backup
withholding. The Funds' Account Application includes the required
certification.
The foregoing tax discussion is general in nature and each investor is
advised to consult his or her tax advisor for additional information.
DESCRIPTION OF SHARES
The authorized common stock of Thompson Plumb Funds, Inc. consists of 100
million shares of common stock, $.001 par value per share ("Common Stock").
The shares of Common Stock are presently divided into three series: the
Balanced, Bond, and Growth Funds. Each such series consists of 10 million
shares of Common Stock. The Board of Directors may authorize the issuance of
additional series of Common Stock (funds) and may increase or decrease the
number of shares in each series.
Each share of Common Stock has one vote and, when issued and paid for in
accordance with the terms of this Prospectus, will be fully paid and
nonassessable, except that shareholders are subject to personal liability under
Section 180.0622(2)(b) of the Wisconsin Business Corporation Law, as judicially
interpreted, for debts owing to employees of the Funds for services performed,
but not exceeding six months' service in any one case. The Funds currently
have no employees and do not intend to have employees in the future. Shares of
Common Stock are redeemable at net asset value, at the option of the
shareholder. Shares of Common Stock have no preemptive, subscription,
conversion or cumulative voting rights and are freely transferable. Shares of
Common Stock can be issued as full shares or fractions of shares. A fraction
of a share has the same kind of rights and privileges as a full share.
Shareholders have the right to vote on the election of Directors at each
meeting of shareholders at which directors are to be elected and on other
matters as provided by law or the Fund's Articles of Incorporation or By-Laws.
Shareholders of each Fund vote together to elect a single
17
<PAGE> 21
Board of Directors of the Funds and on other matters affecting the entire
investment company, with each share entitled to a single vote. On matters
affecting only one Fund, only the shareholders of that Fund are entitled to
vote. On matters relating to all Funds, but affecting individual Funds
differently (such as a new Investment Advisory Agreement), separate votes by
shareholders of each Fund are required. The Funds' Articles of Incorporation
do not require the holding of annual meetings of shareholders. However,
special meetings of shareholders may be called (and, at the request of
shareholders holding 10% or more of the Funds' outstanding shares must be
called) for purposes such as electing or removing directors, changing
fundamental policies or approving investment advisory contracts.
OTHER INFORMATION
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN
Firstar serves as the transfer and dividend disbursing agent for each of
the Funds and also serves as the custodian of the assets of each of the Funds.
SHAREHOLDER STATEMENTS, REPORTS AND INQUIRIES
Shareholders will receive confirmations at least quarterly regarding their
transactions in shares of the Funds, and will also receive reports at least
semiannually setting forth various financial and other information with respect
to the Funds in which they hold shares. The annual financial statements will
be audited by the Funds' independent accountants, Price Waterhouse LLP.
Shareholder inquiries may be directed to Thompson Plumb Funds, Inc. at, 8201
Excelsior Drive, Suite 200, Madison, Wisconsin 53717, Attention: Corporate
Secretary; or by telephone at 608-831-1300. Shareholders who wish to change
their address of record can either send a written request to Firstar or call
1-800-499-0079.
RETIREMENT PLANS
The Funds sponsor Individual Retirement Accounts ("IRAs") through which an
individual may invest annual IRA contributions and roll-over IRA contributions
in shares of any of the Funds. The IRAs available through the Funds include
traditional IRAs, Roth IRAs and Education IRAs. Firstar will serve as custodian
for all these types of IRA accounts sponsored by the Funds. Firstar will
charge a $12.50 annual maintenance fee for each Traditional or Roth IRA account
and $5.00 for each Education IRA. Shareholders with two or more IRAs using the
same tax ID number will be charged a total of $25 annually. Please refer to
the IRA Disclosure Statement for a detailed listing of other fees. The
Individual Retirement Account Custodial Agreement, the IRA Disclosure Statement
and the Custodial Account Application are available from the Advisor.
Purchases and redemptions of shares of any Fund by IRAs and retirement
plans are treated in the same manner as any other account. See "Purchase and
Redemption of Shares." IRAs must meet a minimum initial investment
requirement of $250 and a minimum subsequent investment requirement of $100.
Redemption requests on behalf of IRA owners or retirement plans must indicate
whether or not to withhold federal income tax.
Purchases may also be made by SEP plans (Simplified Employee Benefit
Plan), SIMPLE plans (Savings Incentive Match Plan for Employees of Small
Employers) and other retirement plans. Forms of SEP and SIMPLE plans are
available from the Advisor.
Because a retirement program involves commitments covering future years,
it is important that the investment objectives of the Funds be consistent with
the participant's retirement objectives. Premature withdrawals from a
retirement plan may result in adverse tax consequences. Consultation with an
individual's own tax or financial advisor is recommended.
PERFORMANCE INFORMATION
From time to time the Funds may advertise their "yield" and "total
return." Yield is based on historical earnings and total return is based on
historical distributions; neither is intended to indicate future performance.
The "yield" of a Fund refers to the income generated by an investment in that
Fund over a one-month period (which period will be stated in the
advertisement). This income is then "annualized." That is, the amount of
income generated by the investment during the month is assumed to be generated
each month over a 12-month period and is shown as a percentage of the
investment. "Total return" of a Fund refers to the average annual return for
one, five and ten-year periods (or so much thereof as a Fund has been in
operation). Total return is the change in redemption value of shares purchased
with an initial $1,000 investment, assuming the reinvestment of dividends and
capital gain distributions, after giving effect to the maximum applicable sales
charge. The Funds may also from time to time advertise total return on a
cumulative, average, year-by-year or other basis for various specified periods
by means of quotations, charts, graphs or schedules. In addition, the Funds
may from time to time advertise their performance relative to certain
performance rankings and indices.
18
<PAGE> 22
Performance information should be considered in light of the Funds'
investment objectives and policies, characteristics and quality of their
securities portfolios and the market conditions during the time period, and
should not be considered as a representation of what may be achieved in the
future. Further information is contained in the Statement of Additional
Information.
PORTFOLIO TRANSACTIONS AND BROKERAGE
As provided in the Investment Advisory Agreement, the Advisor is
responsible for each Fund's portfolio decisions and the placing of portfolio
transactions. Purchase and sale orders for a Fund's portfolio securities may
be effected through brokers who charge a commission for their services,
although it is expected that transactions in debt securities will generally be
conducted with dealers acting as principals. In executing such transactions,
the Advisor seeks to obtain the best net results for the respective Fund,
taking into account such factors as price (including the brokerage commission
or dealer spread), size of order, competitive commissions on similar
transactions, difficulty of execution and operational facilities of the firm
involved and the firm's risk in positioning a block of securities. While the
Advisor seeks reasonably competitive rates, it does not necessarily pay the
lowest commission or spreads available. Transactions in small companies in
which the Balanced and Growth Funds invest may involve specialized services on
the part of the broker and thereby entail higher commissions or spreads than
would be paid in transactions involving more widely traded securities.
Allocation of transactions, including their frequency, to various brokers
and dealers is determined by the Advisor in its best judgment and in a manner
deemed fair and reasonable to shareholders. The primary consideration is
prompt and efficient execution of orders in an effective manner at the most
favorable price. Subject to this primary consideration, the Advisor may also
consider sales of shares of the Funds as a factor in the selection of brokers
and dealers to execute portfolio transactions.
The Funds may place orders for portfolio transactions with a broker who
recommends the purchase of a Fund's shares to clients if the Advisor believes
that such brokers' commissions or dealer spreads, quality of execution and
overall quality of brokerage and research services are comparable to those of
other brokers.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products used by
businesses worldwide will need to be upgraded to accept four-digit entries to
distinguish 21st century dates from 20th century dates. Significant uncertainty
exists concerning the potential costs and effectiveness of efforts to achieve
"Year 2000" compliance, and the possible consequences of failure.
The Funds have begun to assess their exposure with regard to Year 2000
issues. The Funds have received assurances that the custodial and transfer
agency services provided by Firstar will not be disrupted or otherwise affected
by Year 2000 issues, and that Firstar will not find it necessary to increase
fees for its custodial or transfer agent services solely to recover costs
incurred in order to become Year 2000 compliant. The Advisor has established a
committee to consider how Year 2000 issues will affect its ability to render
investment advisory and accounting services to the Funds. While management is
optimistic it will be able to achieve compliance and provide uninterrupted
services to the Funds across the millennium, it is too soon to provide
definitive assurance on this point. The Funds are carefully monitoring the
situation, and will receive periodic updates from the Advisor on its progress.
19
<PAGE> 23
DIRECTORS OF THE FUNDS
George H. Austin
Mary Ann Deibele
John W. Feldt
Donald A. Nichols
Thomas G. Plumb, CFA: Vice President
Thompson, Plumb & Associates, Inc.
John W. Thompson, CFA: President
Thompson, Plumb & Associates, Inc.
OFFICERS OF THE FUNDS
John W. Thompson, CFA
Chairman & Secretary
Thomas G. Plumb, CFA
President & Treasurer
David B. Duchow
Assistant Vice President
John C. Thompson, CFA
Assistant Vice President
CUSTODIAN, TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Firstar Trust Company
P.O. Box 701
Milwaukee, Wisconsin 53201
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
33 South Sixth Street
Minneapolis, Minnesota 55402
LEGAL COUNSEL
Quarles & Brady
411 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
INVESTMENT ADVISOR
Thompson, Plumb & Associates, Inc.
8201 Excelsior Drive, Suite 200
Madison, Wisconsin 53717
Telephone: (608) 831-1300
Thompson Plumb
Funds, Inc.
PROSPECTUS
Thompson Plumb Balanced Fund
Thompson Plumb Bond Fund
Thompson Plumb Growth Fund
8201 Excelsior Drive, Suite 200
Madison, Wisconsin 53717
Telephone: (608) 831-1300
(800) 999-0887
www.thompsonplumb.com
March 31, 1998
---------------------------------
<PAGE> 24
PART B
Statement Of Additional Information
-----------------
Thompson Plumb Funds, Inc.
8201 Excelsior Drive, Suite 200
Madison, Wisconsin 53717
Telephone: (608) 831-1300
This Statement of Additional Information is not a prospectus and should
be read in conjunction with the Thompson Plumb Funds, Inc. Prospectus (the
"Prospectus") dated March 31, 1998. Requests for copies of the prospectus should
be made by writing to Thompson, Plumb & Associates, Inc., 8201 Excelsior Drive,
Madison, Wisconsin 53717, Attention: Corporate Secretary, or by calling the
number listed above.
In this Statement of Additional Information, Thompson Plumb Funds, Inc.
may be referred to as the "Investment Company," and its three separate series,
the Thompson Plumb Balanced Fund, the Thompson Plumb Bond Fund and the Thompson
Plumb Growth Fund may be referred to individually as the Balanced Fund, the Bond
Fund and the Growth Fund, respectively, or simply as a Fund or the Fund, and may
be referred to collectively as the "Funds."
TABLE OF CONTENTS
PAGE
----
DESCRIPTION OF CERTAIN INVESTMENTS AND TRANSACTIONS .................. B-2
INVESTMENT RESTRICTIONS .............................................. B-5
DETERMINATION OF NET ASSET VALUE AND PRICING CONSIDERATIONS .......... B-8
MANAGEMENT ........................................................... B-9
ADVISORY AND ADMINISTRATIVE SERVICES ................................. B-11
PORTFOLIO TRANSACTIONS AND BROKERAGE ................................. B-14
FUND PERFORMANCE...................................................... B-16
TAXES ................................................................ B-19
DESCRIPTION OF RATINGS OF CERTAIN FIXED INCOME SECURITIES ............ B-20
OTHER INFORMATION..................................................... B-24
FINANCIAL STATEMENTS ................................................. B-25
The date of this Statement of Additional Information is March 31, 1998.
B-1
<PAGE> 25
DESCRIPTION OF CERTAIN INVESTMENTS AND TRANSACTIONS
LENDING PORTFOLIO SECURITIES
A Fund may lend its portfolio securities to broker-dealers and
financial institutions, such as banks and trust companies, however, absent
unforeseen market and economic conditions, the Funds have no present intention
to do so. In the event any Fund engages in this activity, Thompson, Plumb &
Associates, Inc. (the "Advisor") will monitor the creditworthiness of firms to
which the Fund lends its securities. Any such loan must be continuously secured
by collateral in cash or cash equivalents maintained on a current basis in an
amount at least equal to the market value of the securities loaned by the Fund.
The Fund would continue to receive the equivalent of the interest or dividends
paid by the issuer on the securities loaned, and would also receive an
additional return which may be in the form of a fixed fee or a percentage of the
collateral. The Fund would have the right to call the loan and obtain the
securities loaned at any time on notice of not more than five business days. The
Fund would not have the right to vote the securities during the existence of the
loan, but would call the loan to permit voting of securities during the
existence of the loan if, in the Advisor's judgment, a material event requiring
a shareholder vote would otherwise occur before the loan was repaid. In the
event of bankruptcy or other default of the borrower, the Fund could experience
both delays in liquidating the loan collateral or recovering the loaned
securities and losses including (a) possible decline in the value of the
collateral or in the value of the securities loaned during the period while the
Fund seeks to enforce its rights thereto, (b) possible subnormal levels of
income and lack of access to income during this period and (c) expenses of
enforcing its rights.
REPURCHASE AGREEMENTS
The Funds may from time to time enter into repurchase agreements,
although, absent unforeseen market and economic conditions, the Funds have no
present intention to do so. Repurchase agreements involve the sale of securities
to a Fund with the concurrent agreement of the seller (a bank or securities
dealer) to repurchase the securities at the same price plus an amount equal to
an agreed-upon interest rate within a specified time, usually less than one
week, but on occasion for a longer period. The Funds may enter into repurchase
agreements with broker-dealers who are recognized by the Federal Reserve Bank of
New York as primary dealers in United States Government securities and with
banks. At the time a Fund enters into a repurchase agreement, the value of the
underlying security, including accrued interest, will be equal to or exceed the
value of the repurchase agreement and, in the case of repurchase agreements
exceeding one day, the seller will agree that the value of the underlying
security, including accrued interest, will at all times be equal to or exceed
the value of the repurchase agreement. In the event the seller of the repurchase
agreement enters a bankruptcy or insolvency proceeding, or in the event of the
failure of the seller to repurchase the underlying security as agreed, the Fund
could experience losses that include (a) possible decline in the value of the
underlying security during the period that the Fund seeks to enforce its rights
with
B-2
<PAGE> 26
respect thereto, and possible delay in the enforcement of such rights, (b)
possible loss of all or a part of the income or proceeds of the repurchase, (c)
additional expenses to the Fund in connection with enforcing those rights, and
(d) possible delay in the disposition of the underlying security pending court
action or possible loss of rights in such securities. The Advisor intends to
cause the Funds to invest in repurchase agreements only when the Advisor
determines that the Funds should invest in short-term money market instruments
and the rates available on repurchase agreements are favorable as compared to
the rates available on other short-term money market instruments or money market
mutual funds, circumstances that the Advisor does not anticipate will occur in
the near future. The Advisor does not currently intend to invest the assets of
any Fund in repurchase agreements if, after doing so, more than 5% of the Fund's
net assets would be invested in repurchase agreements.
WHEN-ISSUED TRANSACTIONS
A Fund may purchase or sell portfolio securities in when-issued
transactions, although, absent unforeseen market and economic conditions, the
Funds have no present intention to do so. In such transactions, instruments are
bought or sold with payment and delivery taking place in the future in order to
secure what is considered to be an advantageous yield or price to the Fund at
the time of entering into the transactions. In such transactions, the payment
obligations and the interest rate are fixed at the time the buyer enters into
the commitment, although no interest accrues to the purchaser prior to
settlement of the transaction. Consistent with the requirements of the
Investment Company Act of 1940, securities purchased on a when-issued basis are
recorded as an asset (with the purchase price being recorded as a liability) and
are subject to changes in value based upon changes in the general level of
interest rates. At the time of delivery of the security, the value may be more
or less than the transaction price. To the extent that the Fund remains
substantially fully invested at the same time that it has entered into such
transactions, which all of the Funds would normally expect to do, there will be
greater fluctuations in the market value of the Fund's assets than if the Fund
set aside cash to satisfy the purchase commitment. However, each Fund will
maintain designated liquid assets with a market value, determined daily, at
least equal to the amount of commitments for when-issued securities, such assets
to be ear-marked specifically for the settlement of such commitments. Each Fund
will only make commitments to purchase portfolio securities on a when-issued
basis with the intention of actually acquiring the securities, and not for the
purpose of investment leverage, but the Funds reserve the right to sell the
securities before the settlement date if it is deemed advisable. None of the
Funds currently intend to purchase securities in when-issued transactions if,
after such purchase, more than 5% of the Fund's net assets would consist of
when-issued securities.
ILLIQUID SECURITIES
No Fund will invest more than 10% of the value of its net assets in
securities which are illiquid, including restricted securities, securities for
which there are no readily available market quotations and repurchase agreements
providing for settlement in more than seven
B-3
<PAGE> 27
days after notice. For the purposes of this restriction, the Funds do not
consider variable rate demand notes to be restricted securities. See "Variable
Rate Demand Notes" below.
VARIABLE RATE DEMAND NOTES
The Funds may purchase variable rate master demand notes, which are
unsecured instruments that permit the indebtedness thereunder to vary and
provide for periodic adjustments in the interest rate. Although the notes are
not normally traded and there may be no secondary market in the notes, the Funds
may demand payment of principal and accrued interest at any time. The investment
policy of each Fund is to purchase variable rate demand notes only if, at the
time of purchase, the issuer has unsecured debt securities outstanding that are
rated within the two highest rating categories by either Standard & Poor's or
Moody's Investors Service, Inc.
MORTGAGE-BACKED SECURITIES
The Balanced and Bond Funds may invest in mortgage-related securities,
which include securities that represent interests in pools of mortgage loans
made by lenders such as savings and loan institutions, mortgage bankers,
commercial banks and others. These pools are combined for sale to investors
(such as the Balanced and Bond Funds) by various governmental and
government-related entities, as well as commercial banks, savings and loan
institutions, private mortgage insurance companies, mortgage bankers and other
private issuers. Mortgage-related securities generally provide for a
"pass-through" of monthly payments made by individual borrowers on their
residential mortgage loans, net of any fees paid to the issuer or guarantor of
the securities.
GNMA is the principal government guarantor of mortgage-related
securities. GNMA is authorized to guaranty, with the full faith and credit of
the United States Government, timely payment of principal and interest on
securities it approves that are backed by pools of FHA-insured or VA-guaranteed
mortgages. GNMA securities are described as "modified pass-through" in that they
provide a monthly payment of interest and principal payments owed on the
mortgage pool, net of certain fees, regardless of whether the mortgagor actually
makes the payment. Other government related guarantors of these securities
include the Federal National Mortgage Association ("FNMA") and the Federal Home
Loan Mortgage Corporation ("FHLMC"). FNMA and FHLMC securities are guaranteed as
to payment of principal and interest by those agencies, but are not backed by
the full faith and credit of the United States Government. With respect to
private mortgage-backed securities, timely payment of principal and interest of
these pools is supported by various forms of insurance or guarantees, including
individual loan, title, pool and hazard insurance. There can be no assurance
that private insurers or guarantors can meet their obligations under such
policies.
Certain mortgage-backed securities purchased by the Balanced and Bond
Funds provide for a prepayment privilege and for amortized payments of both
interest and principal over the
B-4
<PAGE> 28
term of the security. The yield on the original investment in such securities
applies only to the unpaid principal balance, as the Fund must reinvest the
periodic payments of principal at prevailing market interest rates which may be
higher or lower then the rate on the original security. In addition, the
prepayment privilege may require the Fund to reinvest at lower yields than were
received from the original investment. If these instruments are purchased at a
premium in the market, and if prepayment occurs, such prepayments will be at par
or stated value, which will result in reduced return on such transactions.
During periods of declining interest rates, prepayment of mortgages
from underlying mortgage-backed securities can be expected to accelerate.
Accordingly, the Balanced and Bond Fund's ability to maintain positions in
high-yielding mortgage-backed securities will be affected by reductions in the
principal amount of such securities resulting from such prepayments, and its
ability to reinvest the returns of principal at comparable yields will depend on
prevailing interest rates at that time. Neither the Balanced Fund nor the Bond
Fund currently intends to purchase mortgage-backed securities if, after such
purchase, more than 5% of the respective Fund's net assets would consist of
mortgage-backed securities.
INVESTMENTS IN OTHER INVESTMENT COMPANIES
An investment by a Fund in another investment company may cause the
Fund to increase payments of administration and distribution expenses. Such
investments are limited by investment restriction (7). See "Investment
Restrictions" in this Statement of Additional Information.
INVESTMENT RESTRICTIONS
Each Fund has adopted the following investment restrictions, none of
which -- except for the matters described in the second sentence of item (5) and
in the second sentence of item (7) -- may be changed without the approval of the
holders of a majority of the outstanding shares (as defined in the Investment
Company Act of 1940) of the Fund. A Fund may not:
(1) Purchase the securities of issuers conducting their
principal business activity in the same industry if immediately after such
purchase the value of the Fund's investments in such industry would exceed 25%
of the value of its total assets, provided that there is no limitation with
respect to or arising out of investments in obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities.
(2) Purchase a security if, as a result, with respect to 75%
of the value of the Fund's total assets, more than 5% of its total assets would
be invested in the securities of any one issuer, other than obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities.
B-5
<PAGE> 29
(3) Make loans, except through the purchase of debt
obligations in accordance with the Fund's investment objective and policies and
through repurchase agreements with banks, brokers, dealers and other financial
institutions.
(4) Issue senior securities in violation of the Investment
Company Act of 1940 or borrow money, except (a) as a temporary measure, and then
only in amounts not exceeding 5% of the value of the Fund's total assets or
(b) from banks, provided that immediately after any such borrowing all
borrowings of the Fund do not exceed one-third of the Fund's net assets. The
exceptions to this restriction are not for investment leverage purposes but are
solely for extraordinary or emergency purposes and to facilitate management of
each Fund's portfolio by enabling the Fund to meet redemption requests when the
liquidation of portfolio instruments is deemed to be disadvantageous or not
possible. While a Fund has borrowings in excess of 5% of the value of the Fund's
total assets outstanding, it will not make any purchases of portfolio
instruments. If due to market fluctuations or other reasons the net assets of a
Fund fall below 300% of its borrowings, the Fund will promptly reduce its
borrowings in accordance with the Investment Company Act of 1940. To do this,
the Fund may have to sell a portion of its investments at a time when it may be
disadvantageous to do so.
(5) Mortgage or pledge any assets except to secure permitted
borrowings, and then only in an amount up to 15% of the value of the Fund's net
assets, taken at cost at the time of such borrowings. Notwithstanding the prior
sentence, each Fund's current intention is not to mortgage, pledge or
hypothecate more than 5% of the value of the Fund's net assets.
(6) Purchase or sell real estate or commodities, except that a
Fund may purchase and sell (a) securities issued by real estate investment
trusts or other companies which invest in or own real estate, and (b) securities
secured by interests in real estate, provided in each case that such securities
are marketable.
(7) Purchase securities of other investment companies, except
to the extent permitted by the Investment Company Act of 1940. Subject to
certain exceptions, the Investment Company Act of 1940 prohibits a Fund from
investing more than 5% of its total assets in securities of another investment
company, investing more than 10% of its total assets in securities of such
investment company and all other investment companies, or purchasing more than
3% of the total outstanding voting stock of another investment company.
(8) Purchase more than 10% of the outstanding voting
securities of any one issuer or invest in companies for the purpose of
exercising control or management.
(9) Act as an underwriter of securities issued by others,
except in instances where the Fund has acquired portfolio securities which it
may not be free to sell publicly
B-6
<PAGE> 30
without registration under the Securities Act of 1933 (if the Fund sells such
securities, it may technically be deemed an "underwriter" for purposes of such
Act).
For purposes of the restriction in item (2) above, a guarantee of an
instrument will be considered a security separate from such instrument (subject
to certain exclusions allowed pursuant to Rule 5b-2 under the Investment Company
Act of 1940). Such Rule provides that a guarantee of a security will not be
deemed to be a security issued by the guarantor, provided that the value of all
securities issued or guaranteed by the guarantor, and owned by the Fund, does
not exceed 10% of the value of the total assets of the Fund.
In addition to the foregoing restrictions, the Investment Company's
Board of Directors has adopted the following restrictions, which may be changed
without shareholder approval. A Fund may not:
(a) Purchase the equity securities of companies which have a
record of less than three years continuous operation if any such purchase at the
time thereof would cause more than 5% of the value of the total assets of the
Fund to be invested in securities of such companies. Such period of three years
includes the operation of any predecessor company or companies, partnership or
individual enterprise if the company whose securities are proposed as an
investment has come into existence as the result of a merger, consolidation,
reorganization or the purchase of substantially all of the assets of such
predecessor company or companies, partnership or individual enterprise.
(b) Purchase or retain the securities of an issuer if, to the
Fund's knowledge, those officers or directors of the Fund or its investment
adviser who individually own beneficially more than 0.5 of 1% of the outstanding
securities of such issuer together own beneficially more than 5% of such
outstanding securities.
(c) Purchase securities on margin, but a Fund may obtain such
short-term credits as may be necessary for the clearance of purchase and sales
of securities.
(d) Make short sales of securities.
(e) Participate on a joint or joint-and-several basis in any
securities trading account.
(f) Invest in puts, calls, straddles or spreads, or
combinations thereof.
(g) Invest in oil, gas or other mineral exploration or
development programs, but this shall not prohibit a Fund from investing in
securities of companies engaged in oil, gas or mineral activities.
B-7
<PAGE> 31
(h) Invest in warrants, valued at the lower of cost or market,
in an amount in excess of 5% of the value of the Fund's net assets. Included
within such amount, but not to exceed 2% of the value of the Fund's net assets,
may be warrants which are not listed on the New York or American Stock Exchange.
Warrants acquired by a Fund in units or attached to securities may be deemed to
be without value for purposes of this restriction.
(i) Buy or sell real estate or invest in the securities of
real estate investment trusts or real estate limited partnerships, provided the
Funds may invest in the securities of other companies whose business involves
the purchase and sale of real estate.
For purposes of the foregoing limitations -- except for the limitation
referred to in the fourth sentence of item (4) above -- any limitation which
involves a maximum percentage shall not be considered violated unless an excess
over the percentage occurs immediately after, and is caused by, an acquisition
or encumbrance of securities or assets of, or borrowings by, a Fund.
During the year ended November 30, 1997, each of the Balanced Fund,
Bond Fund and Growth Fund did not borrow money or mortgage or pledge its assets
pursuant to the authority contained in items (4) and (5) above. During such year
each Fund also did not: (i) purchase securities issued by real estate investment
trusts; (ii) purchase securities issued by other investment companies;
(iii) purchase any warrants; (iv) purchase any securities guaranteed by a third
party; or (v) enter into any repurchase agreements. Whether any of the Funds
will engage in the types of transactions or make the types of investments
described in the preceding two sentences will depend on market conditions and
the Advisor's judgment as to whether engaging in such transactions or making
such investments is appropriate. In February 1998, the Investment Company
obtained from a commercial bank a revolving line of credit up to an aggregate
maximum amount of $3,000,000, which will be used by the Funds to meet
significant redemption requests without having to liquidate a securities
position on short notice, and for emergency purposes. Loans drawn on the line of
credit mature in seven days and bear interest at the lending bank's prime rate.
The line of credit terminates in February 1999 subject to automatic one-year
extensions. The line of credit satisfies the requirements of items (4) and (5)
above.
DETERMINATION OF NET ASSET VALUE AND PRICING CONSIDERATIONS
The Funds' net asset value is determined only on the days on which the
New York Stock Exchange is open for trading. That Exchange is regularly closed
on Saturdays and Sundays and on New Years' Day, Martin Luther King, Jr. Day,
Presidents Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. If one of those holidays falls on a Saturday
or Sunday, the Exchange will be closed on the preceding Friday or the following
Monday, respectively.
B-8
<PAGE> 32
Reliable market quotations are not considered to be readily available
for many long-term corporate bonds and notes and certain preferred stocks in
which the Funds may invest. As authorized by the Board of Directors, these
investments are stated at fair market value on the basis of valuations furnished
by independent broker bid quotations and/or independent pricing services.
Independent pricing services approved by the Board of Directors determine
valuations for normal, institutional-sized trading units of such securities
using methods based on market transactions for comparable securities and various
relationships between securities which are generally recognized by institutional
traders.
Generally, trading in U.S. Government securities and other fixed income
securities is substantially completed each day at various times prior to the
close of the New York Stock Exchange. The values of such securities used in
determining the net asset value of a Fund's shares are computed as of such
times. Occasionally, events affecting the value of such securities may occur
between such times and the close of the New York Stock Exchange, which events
will not be reflected in the computation of the Fund's net asset value for that
day. If events materially affecting the value of the Fund's securities occur
during such a period, then the securities will be valued at their fair value as
determined in good faith by the Board of Directors.
The Funds intend to pay all redemptions in cash and are obligated to
redeem shares solely in cash. Redemption proceeds ordinarily will be sent within
seven days after receipt of the redemption request and all necessary documents.
Each Fund reserves the right to suspend or postpone redemptions during any
period when: (a) trading on the New York Stock Exchange is restricted, as
determined by the Securities and Exchange Commission or that Exchange is closed
for other than customary weekend and holiday closing; (b) the Securities and
Exchange Commission has by order permitted such suspension; or (c) an emergency,
as determined by the Securities and Exchange Commission, exists, making disposal
of portfolio securities or valuation of net assets of the Funds not reasonably
practicable.
MANAGEMENT
Information pertaining to the Directors and officers of the Investment
Company is set forth below. Directors deemed to be "interested persons" of the
Funds for purposes of the Investment Company Act of 1940 are so indicated.
GEORGE H. AUSTIN (interested person), 8201 Excelsior Drive,
Suite 200, Madison, Wisconsin 53717. DIRECTOR. Mr. Austin has been the Director
of Research and Portfolio Manager of the Advisor since March 1994 and, prior
thereto, was the Director of Investments of the Wisconsin Alumni Research
Foundation from 1976 to 1994.
MARY ANN DEIBELE, 20029 Reichardt Road, Kiel, Wisconsin 53042.
DIRECTOR. Ms. Deibele has been retired since September 1994 and, prior thereto,
was a Director and a
B-9
<PAGE> 33
member of the executive committee of Household Utilities, Inc., a high tech
sheet metal fabricating facility.
DAVID B. DUCHOW, 8201 Excelsior Drive, Suite 200, Madison,
Wisconsin 53717. ASSISTANT VICE PRESIDENT. Mr. Duchow has been Portfolio
Manager of the Advisor since December 1996, Associate Portfolio Manager
of the Advisor from January 1994 to December 1996. He has also been an
Investment Analyst and Marketing Manager of the Advisor since September of
1992. From December 1991 to September 1992 he was a Marketing Representative
for the Prudential Co.
JOHN W. FELDT, 150 East Gilman Street, Madison, Wisconsin 53703.
DIRECTOR. Mr. Feldt has been the Senior Vice President of Finance of the
University of Wisconsin Foundation since 1984 and, prior thereto, was the Vice
President of Finance for the University of Wisconsin Foundation, a
not-for-profit corporation.
DONALD A. NICHOLS, 1180 Observatory Drive, Madison, Wisconsin 53706.
DIRECTOR. Mr. Nichols has been Professor of Economics of the University of
Wisconsin since 1966 and was Chairman, Department of Economics from 1983 to 1986
and from 1988 to 1990. He now serves as Director of the Center for Research on
the Wisconsin economy. He has been a member of the Board of Advisors of the
American Players Theatre since 1993, economic adviser to the Governor of the
State of Wisconsin from 1982 through 1986 and a consultant to National Economic
Research Associates during 1985. In addition, Mr. Nichols has appeared as an
expert witness in numerous court proceedings involving the estimation of
damages, both corporate and individual.
THOMAS G. PLUMB (interested person), 8201 Excelsior Drive, Suite 200,
Madison, Wisconsin 53717. PRESIDENT, TREASURER AND DIRECTOR. Mr. Plumb has been
Vice President of the Advisor since he co-founded it in June 1984. He was Vice
President of Firstar Bank Madison, N.A., Investment Management Division, from
December 1983 to June 1984. He had various officer and management
responsibilities at Firstar Bank Madison, N.A. from November 1979 to December
1983. He has been in the investment management business since 1975. He is a
Chartered Financial Analyst.
JOHN C. THOMPSON, 8201 Excelsior Drive, Suite 200, Madison, Wisconsin
53717. ASSISTANT VICE PRESIDENT. Mr. Thompson has been Portfolio Manager of the
Advisor since December 1996, Associate Portfolio Manager of the Advisor from
January 1994 to December 1996 and an Investment Analyst from March 1993 to the
present. From June 1991 to March 1993 he was a Quality Control Consultant for
ABS Industrial Verification, Inc. He is a Chartered Financial Analyst.
JOHN W. THOMPSON (interested person), 8201 Excelsior Drive, Suite 200,
Madison, Wisconsin 53717. CHAIRMAN, SECRETARY AND DIRECTOR. Mr. Thompson has
been President of the Advisor since he co-founded it in June 1984 and has been
Treasurer of the Advisor since
B-10
<PAGE> 34
October 1993. From September 1979 until his resignation in June 1984, Mr.
Thompson was First Vice President and Division Manager of the Investment
Management Division of Firstar Bank Madison, N.A. He has been in the investment
management business since 1971. He is a Chartered Financial Analyst.
Directors and officers of the Investment Company who are officers,
directors, employees or shareholders of the Advisor do not receive any
remuneration from the Funds for serving as directors or officers. Those
directors who are not so affiliated with the Advisor received $8,900 in fiscal
year 1997, as set forth in the table below.
<TABLE>
<CAPTION>
AGGREGATE ESTIMATED TOTAL
COMPENSATION PENSION OR ANNUAL COMPENSATION FROM
FROM INVESTMENT RETIREMENT BENEFITS UPON INVESTMENT COMPANY
DIRECTOR COMPANY BENEFITS RETIREMENT AND FUND COMPLEX
-------- ------- -------- ---------- ----------------
<S> <C> <C> <C> <C>
Mary Ann Deibele $8,900 None None $8,900
John W. Feldt $8,900 None None $8,900
Donald A. Nichols $8,900 None None $8,900
</TABLE>
For fiscal year 1998, those directors who are not so affiliated with
the Advisor will each receive $9,800.
John W. Thompson and Thomas G. Plumb each own 50% of the outstanding
shares of the Advisor.
As of February 28, 1998, the Investment Company's Directors and
officers as a group owned 75,368 shares (3.19% of the outstanding shares) of the
Balanced Fund, 20,348 shares (0.71% of the outstanding shares) of the Bond Fund,
and 40,580 shares (2.83% of the outstanding shares) of the Growth Fund.
ADVISORY AND ADMINISTRATIVE SERVICES
As stated in the Prospectus, Thompson, Plumb & Associates, Inc. acts as
the investment advisor and administrator for each of the Funds. See "Management
of the Funds" in the Prospectus for a description of the duties of Thompson,
Plumb & Associates, Inc. as investment advisor. The administrative obligations
of the Advisor include: (a) providing supervision of all aspects of each Fund's
non-investment operations, such as custody of the Fund's assets, shareholder
servicing and legal and audit services (the parties giving due recognition to
the fact that certain of such operations are performed by others pursuant to the
Funds' agreements with their custodian and shareholder servicing agent),
(b) providing each Fund, to the extent not provided pursuant to such agreements
or the agreement with the Funds' accounting services agent, with personnel to
perform such executive, administrative and clerical services as are reasonably
necessary to provide effective administration of the Fund, such as preparing
B-11
<PAGE> 35
budgets, supplying information for the Prospectus, this Statement of Additional
Information and various reports, and handling meetings of shareholders,
(c) arranging, to the extent not provided pursuant to such agreements, for the
preparation of each Fund's tax returns, reports to shareholders, periodic
updating of the Prospectus and this Statement of Additional Information, and
reports filed with the SEC and other regulatory authorities, all at the expense
of the Fund, (d) providing each Fund, to the extent not provided pursuant to
such agreements, with adequate office space and certain related office equipment
and services in Madison, Wisconsin, and (e) maintaining all of the records of
each Fund other than those maintained pursuant to such agreements.
For the fiscal years ended November 30, 1997, 1996 and 1995, in return
for serving as the Funds' investment advisor and administrator, the Advisor
earned fees for the Balanced Fund in the amounts of $247,662, $163,437 and
$147,812, respectively, for the Bond Fund in the amounts of $183,746, $115,203
and $81,158, respectively, and for the Growth Fund in the amounts of $333,296,
$171,264 and $78,969, respectively.
The Advisory Agreement provides that the Advisor may render similar
services to others so long as its services under the Agreement are not impaired
thereby. The Advisory Agreement also provides that the Funds will indemnify the
Advisor against certain liabilities, including liabilities under the federal
securities laws, or, in lieu thereof, contribute to resulting losses. The
Advisory Agreement further provides that, subject to Section 36 of the
Investment Company Act of 1940, the Advisor will not be liable for any error of
judgment or mistake of law or for any loss suffered by the Funds in connection
with the matters to which the Agreement relates, except liability to a Fund or
its shareholders to which the Advisor would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence, in the performance of its
duties, or by reason of its reckless disregard of its obligations and duties
under the Agreement.
The Advisory Agreement between the Advisor and the Funds was approved
pursuant to the vote of a majority of the outstanding shares (as defined in the
Investment Company Act of 1940) of the Balanced Fund on March 9, 1988 and of the
Bond and Growth Funds on December 22, 1992. The Advisory Agreement will continue
from year to year with respect to each Fund provided such continuance is
specifically approved at least annually, (a) by the vote of the outstanding
shares of the Fund or by the Directors of the Funds, and (b) by the vote of a
majority of the Directors of the Funds who are not parties to the Advisory
Agreement or "interested persons" (as such term is defined in the Investment
Company Act of 1940) of any party thereto, cast in person at a meeting called
for the purpose of voting on such approval. The Advisory Agreement will
terminate automatically if assigned (as defined in the Investment Company Act of
1940) and is terminable at any time without penalty by the Directors of the
Funds or, with respect to any Fund, by vote of a majority of the outstanding
shares of the Fund (as defined in the Investment Company Act of 1940) on
60 days' written notice to the Advisor and by the Advisor on 60 days' written
notice to the Funds.
B-12
<PAGE> 36
ACCOUNTING SERVICES AGENT
Under its Accounting Services Agreement with the Funds, the Advisor
maintains and keeps current certain accounts and financial records of each Fund,
prepares the financial statements of each Fund as required by the Investment
Company Act of 1940 and calculates the net asset value per share of each Fund on
a daily basis.
For the fiscal years ended November 30, 1997, 1996 and 1995, the
Advisor earned fees for the services it provided to, and the expenses it assumed
for, the Funds under the Accounting Services Agreement in the amounts of
$56,797, $38,456 and $31,168, respectively, for the Balanced Fund; $56,007,
$35,457 and $30,217, respectively, for the Bond Fund; and $63,099, $34,990 and
$30,214, respectively, for the Growth Fund.
EXPENSES
Except as set forth in the Prospectus under "Management of the Funds,"
the Funds are responsible for the payment of their own expenses. Such expenses
include, without limitation: the fees payable to the Advisor; the fees and
expenses of the Funds' custodian and transfer and dividend disbursing agent; the
cost of stock certificates; association membership dues; any portfolio losses;
filing fees for the registration or qualification of Fund shares under federal
or state securities laws; expenses of the organization of the Funds; taxes;
interest; costs of liability insurance, fidelity bonds, indemnification or
contribution; any costs, expenses or losses arising out of any liability of, or
claim for damages or other relief asserted against, the Funds for violation of
any law; legal and auditing fees and expenses; expenses of preparing and setting
in type prospectuses, statements of additional information, proxy material,
reports and notices and the printing and distributing of the same to the Funds'
existing shareholders and regulatory authorities; compensation and expenses of
the Funds' Directors; and extraordinary expenses incurred by the Funds. The
Advisor will bear the expense of printing and distributing prospectuses to
prospective shareholders.
The Advisor intends to voluntarily reimburse the Bond Fund for all
expenses it incurs on an annual basis in excess of 1.00% of average daily net
assets. Voluntary reimbursement may be initiated, modified or discontinued by
the Advisor at any time.
CUSTODIAN
Firstar Trust Company, P.O. Box 701, Milwaukee, Wisconsin 53201, is the
custodian of the Funds' portfolio securities and cash.
COUNSEL AND INDEPENDENT ACCOUNTANTS
Quarles & Brady, 411 East Wisconsin Avenue, Milwaukee, Wisconsin 53202,
serves as general counsel to the Funds, and passes on the validity of the shares
of each Fund.
B-13
<PAGE> 37
Price Waterhouse LLP, independent accountants, 33 South Sixth Street,
Minneapolis, Minnesota 55402, serves as independent accountants for the Funds.
The financial statements of the Funds incorporated by reference into this
Statement of Additional Information (under "Financial Statements") from the
annual report to shareholders for the fiscal year ended November 30, 1997 (the
"Annual Report") and the data set forth under "Financial Highlights" in the
Prospectus have been so incorporated or included in reliance upon the authority
of said firm as experts in auditing and accounting.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Advisor is responsible for decisions to buy and sell securities for
each Fund, the selection of brokers and dealers to effect the transactions and
the negotiation of brokerage commissions, where applicable. Purchases and sales
of securities on a national securities exchange are effected through brokers who
charge a negotiated commission for their services. In the over-the-counter
market, securities are generally traded on a "net" basis with dealers acting as
principal for their own accounts without a stated commission, although the price
of the security usually includes a profit to the dealer. In underwritten
offerings, securities are purchased at a fixed price which includes an amount of
compensation to the underwriter, generally referred to as the underwriter's
concession or discount. On occasion, certain money market instruments may be
purchased directly from an issuer, in which case no commissions or discounts are
paid.
In placing purchase and sale orders for portfolio securities for the
Fund, it is the policy of the Advisor to seek the best net price and the most
favorable execution in light of the overall quality of brokerage and research
services provided. In addition, the Advisor may place orders for portfolio
transactions with brokers who recommend the purchase of shares of the Funds to
clients if the Advisor believes that such brokers' commissions or dealer
spreads, quality of execution and the overall quality of brokerage and research
services are comparable to those of other brokers. In selecting brokers to
effect portfolio transactions, the determination of what is expected to result
in best net price and the most favorable execution involves a number of largely
judgmental considerations. Among these are the Advisor's evaluation of the
broker's efficiency in executing and clearing transactions and the broker's
financial strength and stability. The best net price takes into account the
brokerage commission or dealer spread involved in purchasing the securities.
Transactions in the securities of small companies may involve specialized
services on the part of the broker and thereby entail higher commissions or
spreads than would be paid in transactions involving more widely traded
securities.
In selecting brokers to effect portfolio transactions for the Funds,
the Advisor 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, access
B-14
<PAGE> 38
to computerized data bases and the software for analyzing such data bases, and
the availability of the brokerage firm's analysts for consultation. Where
computer software serves other functions than assisting the Advisor in the
investment decision-making process (e.g., recordkeeping), the Advisor makes a
reasonable allocation of the cost of the software to such other functions and
bears such part of the cost itself. While the Advisor believes such information
and services have substantial value, the Advisor considers them supplemental to
its own efforts in the performance of its duties under the Advisory Agreement.
Other clients of the Advisor may benefit from the availability of these services
to the Advisor, and the Funds may benefit from services available to the Advisor
as a result of transactions for other clients. The Advisory Agreement provides
that the Advisor, in placing orders for portfolio securities, is entitled to
rely upon Section 28(e) of the Securities Exchange Act of 1934. Such section
generally permits the Advisor to cause the Funds to pay a broker or dealer, who
provides brokerage and research services to the Advisor, an amount of commission
for effecting a securities transaction in excess of the amount another broker or
dealer would have charged for effecting the transaction; provided the Advisor
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 or dealer viewed in terms of either the particular transaction
or the Advisor's overall responsibilities with respect to the Funds and the
other accounts as to which the Advisor exercises investment discretion.
On occasions when the Advisor deems the purchase or sale of a security
to be in the best interest of a Fund as well as the Advisor's other customers
(including any other fund or other investment company or advisory account for
which the Advisor acts as investment advisor), the Advisory Agreement provides
that the Advisor, to the extent permitted by applicable laws and regulations,
may aggregate the securities to be sold or purchased for the Fund with those to
be sold or purchased for such other customers in order to obtain the best net
price and most favorable execution. In such event, allocation of the securities
so purchased or sold, as well as the expenses incurred in the transaction, will
be made by the Advisor in the manner it considers to be most equitable and
consistent with its fiduciary obligations to the Fund and such other customers.
In some instances, this procedure may adversely affect the size of the position
obtainable for a Fund.
During the fiscal year ended November 30, 1997, the Balanced Fund, Bond
Fund and Growth Fund paid brokerage commissions aggregating $56,729, $7,906 and
$75,213, respectively, in connection with their portfolio transactions. The
entire amount of such commissions was paid to brokers or dealers who provided
research services to the Advisor in transactions amounting to $36,321,427,
$24,969,005 and $39,214,783, respectively, other than brokerage commissions of
$1,390 paid to brokers or dealers by the Growth Fund for executing transactions
totaling $666,154.
B-15
<PAGE> 39
During the fiscal years ended November 30, 1996 and 1995, the Funds
paid brokerage commissions in connection with their portfolio transactions
aggregating $52,603 and $57,196, respectively, for the Balanced Fund; $6,647 and
$6,066, respectively, for the Bond Fund; and $58,839 and $46,307, respectively,
for the Growth Fund.
FUND PERFORMANCE
GENERAL
From time to time the Funds may advertise yield and total return for
various periods of investment. Such information will always include uniform
performance calculations based on standardized methods established by the
Securities and Exchange Commission, and may also include other total return
information. Yield is based on historical earnings and total return is based on
historical calculated earnings; neither is intended to indicate future
performance. Performance information should be considered in light of the
particular Fund's investment objectives and policies, characteristics and
quality of its portfolio securities in the market conditions during the
applicable period, and should not be considered as a representation of what may
be achieved in the future. Investors should consider these factors, in addition
to differences in the methods used in calculating performance information, when
comparing a particular Fund's performance to the performance data established
for alternative investments.
AVERAGE ANNUAL TOTAL RETURN
For each of the Funds, standardized annual total return is computed by
finding the average annual compounded rates of return over the one, five and
ten-year periods (or the portion thereof during which the Fund has been in
existence) that would equate the initial amount invested to the ending
redeemable value according to the following formula:
n
P(1 + T) = ERV
WHERE:
T = average annual total return;
n = number of years and portion of a year;
ERV = ending redeemable value (of the hypothetical $1,000
payment) at the end of the 1, 5 and 10-year periods,
or fractional portion thereof, after deduction of all
non-recurring charges to be deducted, assuming
redemption at the end of the period; and
P = $1,000 (the hypothetical initial payment).
B-16
<PAGE> 40
The average annual total returns for the Balanced Fund for the
one-year, five-year and ten-year periods ended November 30, 1997, and the
average annual total returns for the Bond and Growth Funds for the one-year and
five-year periods ended November 30, 1997 and for the period from February 10,
1992 (commencement of operations) through November 30, 1997, are as follows:
<TABLE>
<CAPTION>
FROM
COMMENCEMENT
OF
1 YEAR 5 YEARS 10 YEARS OPERATIONS
------ ------- -------- ----------
<S> <C> <C> <C> <C>
Balanced Fund 21.39% 14.23% 14.10%(1) --
Bond Fund 4.74% 5.67%(2) -- 5.71%(2)
Growth Fund 29.90% 18.59%(3) -- 16.18%(3)
</TABLE>
- ------------------
(1) Without expense reimbursements by the Advisor in 1988, the Balanced
Fund's average annual total return for the ten-year period ended
November 30, 1997 would have been 14.08%.
(2) Without expense reimbursements by the Advisor in 1995, 1994, 1993 and
1992, the Bond Fund's average annual return for the five-year period
ended November 30, 1997 and for the period from commencement of
operations through November 30, 1997 would have been 5.36% and 5.26%,
respectively.
(3) Without expense reimbursements by the Advisor in 1994 and 1992, the
Growth Fund's average annual return for the five-year period ended
November 30, 1997 and for the period from commencement of operations
through November 30, 1997 would have been 18.53% and 16.11%,
respectively.
CURRENT YIELD
Current yield quotations for the Funds are based on a 30-day (or
one-month) period, and are computed by dividing the net investment income per
share earned during the period by the maximum offering price per share on the
last day of the period, according to the following formula:
B-17
<PAGE> 41
6
Yield = 2 [( {a-b} + 1) -1]
---
cd
WHERE:
a = dividends and interest earned during the period;
b = expenses accrued for the period (net of
reimbursements);
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends; and
d = the maximum offering price per share on the last day
of the period.
For purposes of this calculation, income earned on debt obligations is
determined by applying a calculated yield-to-maturity percentage to the
obligations held during the period. Interest earned on mortgage backed
securities will be calculated using the coupon rate and principal amount after
adjustment for a monthly paydown. Income earned on equity securities is
determined by using the stated annual dividend rate applied over the performance
period. Because the investment objectives of the Balanced and Growth Funds do
not relate solely to current income, these Funds will not typically advertise
yield. The yield for the Bond Fund for the 30-day period ended November 30, 1997
was 5.21%. When advertising yield, the Bond Fund will not advertise a one-month
or a 30-day period which ends more than 45 days before the date on which the
advertisement is published.
The performance data for the Funds is based on historical results and
is not intended to indicate future performance. Each Fund's total return will
vary based on market conditions, Fund expenses, portfolio investments and other
factors. The value of a Fund's shares will fluctuate and an investor's shares
may be worth more or less than their original cost upon redemption.
OTHER PERFORMANCE INFORMATION
Each Fund may from time to time advertise its comparative performance
as measured by various independent sources, including, without limitation,
Lipper Analytical Services, Inc., Barron's, The Wall Street Journal, The New
York Times, U.S.A. Today, Weisenberger Investment Companies Service, Consumer
Reports, Time, Newsweek, U.S. News and World Report, Business Week, Financial
World, U.S. News and World Reports, Milwaukee Journal Sentinel, Wisconsin State
Journal, Forbes, Fortune, Money, Morningstar Publications, Standard &
Poors/Lipper Mutual Fund Profiles and The Individual Investor's Guide to No-Load
Mutual Funds. A Fund may also note its mention in, or inclusion in lists or
rankings prepared or published by, such independent sources and other
newspapers, magazines and media from time to time. However, the investment
company assumes no responsibility for the accuracy of such information. In
addition, each Fund may from time to time advertise its performance relative to
certain other mutual funds or groups of funds, indices and benchmark
investments, including, without limitation, the Value Line Index, Lipper Capital
Appreciation Fund Average,
B-18
<PAGE> 42
Lipper Growth Funds Average, Lipper General Equity Funds Average, Lipper Equity
Funds Average, Morningstar Growth Average, Morningstar Equity Fund Average,
Morningstar Hybrid Average, Morningstar All Equity Funds Average, Lipper
Balanced Funds Index, Lipper Balanced Funds Average, Morningstar General Equity
Average, Dow Jones Industrial Average, New York Stock Exchange Composite Index,
American Stock Exchange Composite Index, Standard & Poor's 500 Stock Index,
Russell 2000 Small Stock Index, Russell Mid-Cap Stock Index, Russell 2500 Index,
Standard & Poor's 400 Industrials, Standard & Poor's 100, Wilsure 5000, Wilsure
4500, Wilsure 4000, Lehman Brothers Intermediate Corporate/Government Bond
Index, Nasdaq Industrials, Nasdaq-OTC Price Index and Consumer Price Index.
Each Fund may advertise its rankings as published by Lipper Analytical
Services, Inc. in its categories or sub-categories, as well as its rating by
Morningstar, Inc. The Lipper and Morningstar averages are unweighted averages of
total return performance of mutual funds as classified, calculated and published
by Lipper and Morningstar. Morningstar's rating system is based on risk-adjusted
total return performance and is expressed in a star-rating format. The
risk-adjusted number is computed by subtracting a Fund's risk (which is a
function of the Fund's monthly returns less the three-month Treasury bill
return) from the Fund's load-adjusted total return score. This numerical score
is then translated into rating categories, with the top 10% labeled five star,
the next 22.5% labeled four star, then next 35% labeled three star, the next
22.5% labeled two star and bottom 10% rated one star. A high rating reflects
either above-average returns or below-average risks, or both.
TAXES
The dividends received deduction available to a corporate shareholder
with respect to certain ordinary income distributions from a Fund may be reduced
below 70% if the shareholder has incurred any indebtedness directly attributable
to its investment in Fund shares.
Any ordinary income or capital gain distribution will reduce the net
asset value of Fund shares by the amount of the distribution. Although such a
distribution thus resembles a return of capital if received shortly after the
purchase of shares, it generally will be taxable to shareholders.
All or part of any loss that a shareholder realizes on a redemption of
shares will be disallowed if the shareholder purchases other shares of the same
Fund (including by the automatic reinvestment of Fund distributions in
additional Fund shares) within 30 days before or after the redemption.
In years when a Fund distributes to shareholders amounts exceeding the
Fund's earnings and profits as determined for tax purposes, such excess will not
be taxed to the shareholders as a dividend, but rather will be treated first as
a tax-free return of each
B-19
<PAGE> 43
shareholder's tax basis in its shares until such basis is reduced to zero, and
thereafter as gain from the sale or exchange of such shares.
Each Fund will be subject to a nondeductible 4% excise tax if it fails
to meet certain requirements with respect to distributions of net ordinary
income and capital gain net income. It is anticipated that this provision will
not materially affect the Funds or their shareholders. Dividends declared in
October, November or December to shareholders on a date in any such month and
paid during January of the following year will be treated as received by the
shareholders on December 31 of the year declared.
The foregoing discussion of tax consequences is based on federal tax
laws and regulations in effect on the date of this Statement of Additional
Information, which are subject to change by legislative or administrative
action.
DESCRIPTION OF RATINGS OF CERTAIN FIXED INCOME SECURITIES
As set forth in the Prospectus under the caption "Investment Objectives
and Policies of the Funds," each Fund may invest in corporate notes, bonds,
debentures, convertible debt securities and convertible preferred stocks that
are assigned specified ratings of either Standard & Poor's ("S&P") or Moody's
Investors Service, Inc. ("Moody's"). A brief description of the ratings symbols
and their meanings follows.
DEBT SECURITIES
STANDARD & POOR'S. An S&P corporate 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 ratings are based, in varying degrees, on the following
considerations:
I. 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;
II. Nature of and provisions of the obligation; and
III. 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.
S&P's highest four rating categories are as follows:
B-20
<PAGE> 44
AAA. Debt rated "AAA" has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely
strong.
AA. Debt rated "AA" has a very strong capacity to pay interest
and repay principal and differs from the higher 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 the higher rated categories.
BBB. Debt rated "BBB" is regarded 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.
MOODY'S INVESTORS SERVICE, INC. The purpose of Moody's Ratings is to
provide investors with a simple system of gradation by which the relative
investment qualities of bonds may be noted. Moody's highest four rating
categories are as follows:
Aaa. Bonds which are rated Aaa are judged to be the best quality.
They carry the smallest degree of investment risk and are
generally referred to as "gilt edge." 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 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 of protective
elements may be of greater amplitude or there may be other
elements present which make the long term risks appear
somewhat larger than in Aaa securities.
A. Bonds 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 sometime 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
B-21
<PAGE> 45
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.
PREFERRED STOCK
STANDARD & POOR'S. An S&P preferred stock rating is an assessment of
the capacity and willingness of an issuer to pay preferred stock dividends and
any applicable sinking fund obligations. A preferred stock rating differs from a
bond rating inasmuch as it is assigned to an equity issue, which issue is
intrinsically different from, and subordinated to, a debt issue. Therefore, to
reflect this difference, the preferred stock rating symbol will normally not be
higher than the bond rating symbol assigned to, or that would be assigned to,
the senior debt of the same issuer.
The preferred stock ratings are based on the following considerations:
I. Likelihood of payment - capacity and willingness of the issuer
to meet the timely payment of preferred stock dividends and
any applicable sinking fund requirements in accordance with
the terms of the obligation.
II. Nature of, and provisions of, the issue.
III. Relative position of the issue in the event of bankruptcy,
reorganization, or other arrangements affecting creditors'
rights.
S&P's highest four rating categories for preferred stock are as
follows:
AAA. This is the highest rating that may be assigned by S&P to a
preferred stock issue and indicates an extremely strong
capacity to pay the preferred stock obligations.
AA. A preferred stock issue rated "AA" also qualifies as a
high-quality fixed income security. The capacity to pay
preferred stock obligations is very strong, although not as
overwhelming as for issues rated "AAA."
A. An issue rated "A" is backed by a sound capacity to pay the
preferred stock obligations, although it is somewhat more
susceptible to the adverse effects of changes in circumstances
and economic conditions.
BBB. An issue rated "BBB" is regarded as backed by an adequate
capacity to pay the preferred stock obligations. Whereas it
normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more
B-22
<PAGE> 46
likely to lead to a weakened capacity to make payments for a
preferred stock in this category than for issues in the "A"
category.
MOODY'S INVESTORS SERVICE, INC. Because of the fundamental differences
between preferred stocks and bonds, Moody's uses a variation of its bond rating
symbols in the quality ranking of preferred stock. The symbols, presented below,
are designed by Moody's to avoid comparison with bond quality in absolute terms.
It should always be borne in mind that preferred stock occupies a junior
position to bonds within a particular capital structure and that these
securities are rated by Moody's within the universe of preferred stocks.
Moody's highest four ratings for preferred stock are as follows:
aaa. An issue which is rated "aaa" is considered to be a
top-quality preferred stock. This rating indicates good asset
protection and the least risk of dividend impairment within
the universe of preferred stocks.
aa. An issue which is rated "aa" is considered a high-grade
preferred stock. This rating indicates that there is a
reasonable assurance that earnings and asset protection will
remain relatively well maintained in the foreseeable future.
a. An issue which is rated "a" is considered to be an
upper-medium grade preferred stock. While risks are judged to
be somewhat greater than in the "aaa" and "aa" classification,
earnings and asset protection are, nevertheless, expected to
be maintained at adequate levels.
baa. An issue which is rated "baa" is considered to be a medium
grade preferred stock, neither highly protected nor poorly
secured. Earnings and asset protection appear adequate at
present but may be questionable over any great length of time.
GENERAL
The S&P ratings, other than "AAA," may be modified by the addition of a
plus or minus sign to show relative standing within the major rating categories.
Moody's security rating symbols, other than "Aaa," may contain
numerical modifiers of a generic rating classification. The modifier 1 indicates
that the security ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the
issue ranks in the lower end of its generic rating category.
The ratings of S&P and Moody's represent their opinions as to the
quality of the instruments rated by them. It should be emphasized that such
ratings, which are subject to revision or withdrawal, are general and are not
absolute standards of quality.
B-23
<PAGE> 47
OTHER INFORMATION
As of February 28, 1998, the only persons known to management to
beneficially own 5% or more of the outstanding shares of the Balanced Fund were:
CAPINCO (7.58%), c/o Firstar Trust Company, P.O. Box 1787, Milwaukee, Wisconsin
53201-1787; and Anchorbank S.S.B. Retirement Balanced (9.72%), c/o Old Kent
Bank, One Vandenberg Center, Grand Rapids, Michigan 49503. Old Kent Bank, One
Vandenberg Center, Grand Rapids, Michigan 49503, was the holder of record of
12.10% of the outstanding shares of the Balanced Fund as of that date.
As of February 28, 1998, the only persons known to management to
beneficially own 5% or more of the outstanding shares of the Bond Fund were:
CAPINCO (57.94%), c/o Firstar Trust Company, P.O. Box 1787, Milwaukee, Wisconsin
53201-1787; and Wisconsin Auto & Truck Dealers Association Trust (6.67%), 150
East Gilman Street, Madison, Wisconsin 53703. Old Kent Bank, One Vandenberg
Center, Grand Rapids, Michigan 49503, was the holder of record of 13.47% of the
outstanding shares of the Bond Fund as of that date.
As of February 28, 1998, the only persons known to management to
beneficially own 5% or more of the outstanding shares of the Growth Fund were:
Anchorbank S.S.B. Retirement Growth (8.07%), c/o Old Kent Bank, One Vandenberg
Center, Grand Rapids, Michigan 49503; and Wisconsin Auto & Truck Dealers
Association Trust (6.27%), 150 East Gilman Street, Madison, Wisconsin 53703. Old
Kent Bank, One Vandenberg Center, Grand Rapids, Michigan 49503, was the holder
of record of 19.81% of the outstanding shares of the Growth Fund as of that
date.
As of February 28, 1998, no person, other than those named in the
preceding three paragraphs, was known to the Funds to hold of record 5% or more
of the outstanding shares of any of the Funds.
The Prospectus and this Statement of Additional Information do not
contain all the information included in the Registration Statement filed with
the Securities and Exchange Commission under the Securities Act of 1933 with
respect to the securities offered by the Prospectus. Certain portions of the
Registration Statement have been omitted from the Prospectus and this Statement
of Additional Information pursuant to the rules and regulations of the
Securities and Exchange Commission. The Registration Statement, including the
exhibits filed therewith, may be examined at the office of the Securities and
Exchange Commission in Washington D.C.
Statements contained in the Prospectus or in this Statement of
Additional Information as to the contents of any contract or other document
referred to are not necessarily complete, and, in each instance, reference is
made to the copy of such contract or other document filed as an exhibit to the
Registration Statement of which the Prospectus and this Statement of
B-24
<PAGE> 48
Additional Information form a part, each such statement being qualified in all
respects by such reference.
FINANCIAL STATEMENTS
The financial statements and related report of Price Waterhouse LLP,
independent accountants, contained in the Annual Report for the fiscal year
ended November 30, 1997 are hereby incorporated by reference. A copy of the
Annual Report may be obtained without charge by writing to Thompson, Plumb &
Associates, Inc., 8201 Excelsior Drive, Suite 200, Madison, Wisconsin 53717, or
by calling Thompson, Plumb & Associates, Inc. at (608) 831-1300.
B-25
<PAGE> 49
PART C
OTHER INFORMATION
-----------------
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS.
The following financial statements of the Thompson Plumb
Funds, Inc. are included in the Prospectus dated March 31, 1998:
(1) Financial Highlights for the Thompson Plumb Balanced
Fund for the fiscal years ended November 30, 1988,
1989, 1990, 1991, 1992, 1993, 1994, 1995, 1996 and
1997.
(2) Financial Highlights for the Thompson Plumb Bond Fund
and the Thompson Plumb Growth Fund for the period
from February 10, 1992 (commencement of operations)
through November 30, 1992 and for the fiscal years
ended November 30, 1993, 1994, 1995, 1996 and 1997.
The following financial statements of the Thompson Plumb
Balanced Fund, the Thompson Plumb Bond Fund and the Thompson Plumb Growth Fund
are incorporated by reference into the Statement of Additional Information dated
March 31, 1998:
(1) Report of Independent Accountants.
(2) Statements of Assets and Liabilities.
(3) Schedules of Investments.
(4) Statements of Operations.
(5) Statements of Changes in Net Assets.
(6) Notes to Financial Statements.
(7) Financial Highlights.
All other financial statements, schedules and historical
financial information have been omitted as the subject matter is not required,
not present, or not present in amounts sufficient to require submission.
(b) EXHIBITS.
See Exhibit Index following Signature Page to this
Registration Statement, which Exhibit Index is incorporated herein by this
reference.
C-1
<PAGE> 50
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
The following table shows the number of shareholders of record for each
of the Funds as of December 31, 1997:
SERIES NUMBER OF SHAREHOLDERS OF RECORD
------ --------------------------------
Balanced Fund 684
Bond Fund 96
Growth Fund 914
ITEM 27. INDEMNIFICATION.
Article V, Section 4 of the Registrant's Bylaws provides for
indemnification under certain circumstances of any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or officer of
the Registrant. However, no person shall be indemnified by the Registrant
against any liability to any of the Funds or its shareholders to which such
person would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
such person's office. A copy of such Bylaws, as amended and restated as of
January 21, 1991, is included as Exhibit 2 to Post-Effective Amendment No. 6 to
the Registrant's Registration Statement on Form N-1A (Registration No. 33-6418).
Paragraph 7 of the Investment Advisory Agreement between the Registrant
and Thompson, Plumb & Associates, Inc. (formerly Thompson, Unger & Plumb, Inc.)
provides for indemnification of Thompson, Plumb & Associates, Inc. by the Funds
or, in lieu thereof, contribution by the Funds under certain circumstances. A
copy of such Agreement, as amended and restated as of February 7, 1992, is
included as Exhibit 5 to Post-Effective Amendment No. 7 to the Registrant's
Registration Statement on Form N-1A.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
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
C-2
<PAGE> 51
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the 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, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR.
Thompson, Plumb & Associates, Inc., the Registrant's investment
advisor, is engaged in the investment advisory business. Set forth below is a
list of the directors and officers of Thompson, Plumb & Associates, Inc. and,
with respect to each such person, the name and business address of each other
company (if any) with which such person has been connected during the two years
ended November 30, 1996 and 1997, as well as the capacity in which such person
was connected.
NAME POSITION WITH ADVISOR OTHER AFFILIATIONS
- ---- --------------------- ------------------
John W. Thompson President and Director Chairman, Secretary and
Director of the Registrant
Thomas G. Plumb Vice President and Director President, Treasurer and Di-
rector of the Registrant
Connie M. Redman Corporate Secretary None
Penny M. Hubbard Assistant Vice President None
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
The Amended and Restated Articles of Incorporation, Bylaws and minute
book of the Registrant are in the physical possession of Quarles & Brady, 411
East Wisconsin Avenue, Milwaukee, Wisconsin 53202. Accounts, books, records and
other documents required to be maintained under Section 31(a) relating to the
number of shares of the Registrant's common
C-3
<PAGE> 52
stock held by each shareholder of record are in the physical possession of
Firstar Trust Company, P.O. Box 701, Milwaukee, Wisconsin 53201. All other
accounts, books and other documents required to be maintained under Section
31(a) of the Investment Company Act of 1940 and the Rules promulgated thereunder
are in the physical possession of Thompson, Plumb & Associates, Inc., 8201
Excelsior Drive, Suite 200, Madison, Wisconsin 53717.
ITEM 31. MANAGEMENT SERVICES.
Not applicable.
ITEM 32. UNDERTAKINGS.
The Registrant hereby undertakes to furnish each person to whom a
Prospectus is delivered a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
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<PAGE> 53
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Amendment pursuant to Rule 485(b)
under the Securities Act of 1933 and has duly caused this Amendment to its
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, all in the City of Madison, State of Wisconsin, on the 31st day
of March, 1998.
THOMPSON PLUMB FUNDS, INC
By /s/ John W. Thompson
------------------------
JOHN W. THOMPSON
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed on this 31st day of
March, 1998, by the following persons in the capacities indicated.
/s/ John W. Thompson Mary Ann Deibele+
- ---------------------------------------- ------------------------------
JOHN W. THOMPSON MARY ANN DEIBELE
Director, Chairman and Secretary Director
(Principal Executive Officer)
/s/ Thomas G. Plumb John W. Feldt*
- ---------------------------------------- ------------------------------
THOMAS G. PLUMB JOHN W. FELDT
Director, President and Treasurer Director
(Principal Financial and Accounting Officer)
/s/ George H. Austin Donald A. Nichols*
- ---------------------------------------- ------------------------------
GEORGE H. AUSTIN DONALD A. NICHOLS
Director Director
+*By: /s/ John W. Thompson
--------------------------------------
JOHN W. THOMPSON
+ Pursuant to Power of Attorney
dated January 26, 1995
* Pursuant to Power of Attorney
dated December 6, 1991
C-5
<PAGE> 54
THOMPSON PLUMB FUNDS, INC.
---------------------------------------------
EXHIBIT INDEX
TO
REGISTRATION STATEMENT ON FORM N-1A
<TABLE>
<CAPTION>
EXHIBIT INCORPORATED HEREIN FILED
NUMBER DESCRIPTION BY REFERENCE TO HEREWITH
- ------- ----------- --------------- --------
<S> <C> <C> <C>
1 Registrant's Amended and Post-Effective Amendment No.
Restated Articles of 12 to the Registrant's
Incorporation. Registration Statement on
Form N-1A (Reg. No. 33-6418)
(the "Registration Statement").
2 Registrant's Bylaws, as X
amended and restated and
presently in effect.
3 Not applicable.
4(a) Specimen stock certificate for Post-Effective Amendment No. 6
shares of Growth Fund. to the Registration Statement.
4(b) Specimen stock certificate for Post-Effective Amendment No. 6
shares of Balanced Fund. to the Registration Statement.
4(c) Specimen stock certificate for Post-Effective Amendment No. 6
shares of Bond Fund. to the Registration Statement.
5 Investment Advisory Post-Effective Amendment No.
Agreement between 12 to the Registration Statement.
Registrant and Thompson, Unger &
Plumb, Inc., as amended and
restated as of February 7, 1992.
6 Not applicable.
7 Not applicable.
</TABLE>
C-6
<PAGE> 55
<TABLE>
<CAPTION>
EXHIBIT INCORPORATED HEREIN FILED
NUMBER DESCRIPTION BY REFERENCE TO HEREWITH
- ------- ----------- --------------- --------
<S> <C> <C> <C>
8 Custodian Agreement with Post-Effective Amendment No.
Bank between Registrant and 12 to the Registration Statement.
First Wisconsin Trust
Company, as amended and
restated as of February 7,
1992.
9(a) Accounting Services Agree- Post-Effective Amendment No.
ment between Registrant and 12 to the Registration Statement.
Thompson, Unger & Plumb, Inc.,
as amended and restated as of
February 7, 1992.
9(b) Shareholder Services Agree- Post-Effective Amendment No.
ment between Registrant and 12 to the Registration Statement.
Thompson, Unger & Plumb, Inc.,
as amended and restated as of
February 7, 1992.
9(c) Operating Agreement be Post-Effective Amendment No.
tween Registrant and Charles 12 to the Registration Statement.
Schwab & Co., Inc. dated as
of January 15, 1997.
9(d) Confidentiality Agreement Post-Effective Amendment No.
between Registrant and 12 to the Registration Statement.
Charles Schwab & Co., Inc.
dated as of January 15, 1997.
9(e) Services Agreement between Post-Effective Amendment No.
Registrant and Charles 12 to the Registration Statement.
Schwab & Co., Inc. dated as
of January 15, 1997.
9(f) Distribution and Servicing Post-Effective Amendment No.
Agreement between 12 to the Registration Statement.
Registrant and Portico Funds,
Inc.
9(g) Servicing Agreement between X
Registrant and Portico Funds,
Inc.
</TABLE>
C-7
<PAGE> 56
<TABLE>
<CAPTION>
EXHIBIT INCORPORATED HEREIN FILED
NUMBER DESCRIPTION BY REFERENCE TO HEREWITH
- ------- ----------- --------------- --------
<S> <C> <C> <C>
9(h) Revolving Credit Agreement X
dated as of February 6, 1998
between Registrant and M&I
Bank of Southern Wisconsin
10 Consent of Quarles & Brady. Post-Effective Amendment No. 6
to the Registration Statement.
11 Consent of Price Waterhouse. X
12 Not applicable.
13 Subscription Agreement be- Post-Effective Amendment No. 1
tween Registrant and to the Registration Statement.
Thompson, Unger & Plumb,
Inc. (f/k/a FMI Capital
Management, Inc.).
14(a) Thompson Plumb Funds, Inc. X
Individual Retirement Ac-
count Disclosure Statements
and Custodial Account Agree-
ments for Traditional IRAs,
Roth IRAs and Educational
IRAs.
14(b) IRS Model 5305-SEP and X
related documents.
14(c) IRS Model 5305-SA and X
related documents.
15 Not applicable.
16(a) Schedule of computation of X
performance data for the
Balanced Fund.
16(b) Schedule of computation of X
performance data for the
Growth Fund.
16(c) Schedule of computation of X
performance data for the
Bond Fund.
</TABLE>
C-8
<PAGE> 57
<TABLE>
<CAPTION>
EXHIBIT INCORPORATED HEREIN FILED
NUMBER DESCRIPTION BY REFERENCE TO HEREWITH
- ------- ----------- --------------- --------
<S> <C> <C> <C>
17(a) Financial Data Schedule for X
the Balanced Fund
17(b) Financial Data Schedule for X
the Growth Fund
17(c) Financial Data Schedule for X
the Bond Fund
</TABLE>
C-9
<PAGE> 1
EXHIBIT 2
BY-LAWS OF
THOMPSON PLUMB FUNDS, INC.
ARTICLE I
SHAREHOLDERS' MEETINGS
Section 1. Place of Meetings. The Board of Directors may designate any
place, either within or without the State of Wisconsin, as the place of meeting
for any meeting of shareholders. If no designation is made, the place of
meeting shall be the principal business office of the Corporation.
Section 2. Annual Meeting. For so long as the Corporation is registered
under the federal Investment Company Act of 1940, as amended (the "1940 Act"),
the Corporation shall not be required to hold an annual meeting of shareholders
in any year in which none of the following matters is required to be acted on
by shareholders under the 1940 Act:
a. Election of Directors.
b. Approval of the investment advisory agreement.
c. Ratification of the selection of independent public accountants.
d. Approval of a distribution agreement.
Section 3. Special Meeting. Special meetings of the shareholders may be
called by the board of directors, the chairman, president, and 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 10% of all the votes entitled
to be cast at such meeting.
Section 4. Absence of Quorum. 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 5. Conduct of Meeting. At all meetings of shareholders, 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.
Section 6. Proxies. At all meetings of shareholders a shareholder entitled
to vote may vote in person or by proxy appointed in writing by the shareholder
or by his duly authorized attorney-in-fact. Such proxy shall be filed with the
secretary of the corporation before or at the time of the meeting. Unless
otherwise provided in the proxy, the proxy may be revoked at any time before it
is voted, either by written notice filed with the secretary or the acting
<PAGE> 2
secretary of the meeting or by oral notice given by the shareholder to the
chairman of the meeting during the meeting. The presence of a shareholder who
has filed his proxy shall not of itself constitute a revocation.
ARTICLE II
DIRECTORS
Section 1. Number. The number of directors of the corporation shall be six
(6). Directors shall serve until their successors have been elected, or until
his or her prior death, resignation or removal.
Section 2. 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 meeting of the shareholders at which the
election was held, for the purpose of electing officers and transacting any
other business that may properly come before the meeting.
Section 3. 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 4. Special Meetings. Special meetings of the board of directors may
be called at any time either by the board, the chairman, 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 days before the meeting or shall be given personally or
telegraphed to each director at least one 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 5. Absence of Quorum. 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.
Section 6. Executive and Other Committees. The board of directors may
appoint from among its members and executive and other committees composed of
three or more directors. The board may delegate to such committees in the
intervals between meetings of the board any or all of the powers of the board to
manage the business and affairs of the corporation except to the extent limited
by statute.
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ARTICLE III
OFFICERS
Section 1. Election and Qualification. At the first meeting of each newly
elected board of directors there shall be elected a chairman of the board and
chief executive officer, president and chief operating officer, one or more vice
presidents, a secretary and a treasurer. The chairman of the board and chief
executive officer is sometimes referred to in these bylaws, in resolutions
adopted by the board of directors and in other documents pertaining to the
corporation as the "chairman," the "chairman of the board," or the "chief
executive officer," and the president and chief operating officer, as the
"president" or the "chief operating officer." 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 and the offices of president and secretary, may be held by the same
person.
Section 2. Term and Vacancies. The officers shall be elected to serve until
the first meeting of the next newly elected board of directors and until their
successors are elected and qualify. Election or appointment to office shall not
of itself create contract rights. A vacancy in any office may be filled by the
board for the unexpired term.
Section 3. Chairman. The chairman of the board shall be the chief executive
officer of the corporation, shall preside at all meetings of the board of
directors and all meetings of the shareholders and shall have such other powers
and perform such duties as are specified in these bylaws and as may from time to
time be assigned to him by the board of directors.
The chairman of the board shall have general and active management of
the business of the corporation and shall see that all orders and resolutions of
the board of directors are carried into effect. The chairman of the board shall
execute bonds, mortgages and other contracts requiring a seal, under the seal of
the corporation, except where required or permitted by law to be otherwise
signed and executed and except where the signing and execution thereof shall be
expressly delegated by the board of directors to some other officer or agent of
the corporation. The chairman of the board shall have general powers of
supervision and shall be the final arbiter of all differences between officers
of the corporation, and such decision as to any matter affecting the corporation
shall be final and binding as between the officers of the corporation subject
only to its board of directors.
Section 4. President. The president shall be the chief operating officer of
the corporation, and shall in the absence of the chairman of the board perform
the duties and exercise the powers of the chief executive officer. The president
shall have concurrent power with the chairman of the board to sign bonds,
mortgages, certificates for shares and other contracts and documents requiring a
seal, under the seal of the corporation, except where required or permitted by
law to be otherwise signed and executed and except where signing and execution
thereof shall be expressly delegated by the board of directors to some other
officer
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or agent of the corporation. In general, the president shall perform all duties
incident to the office of president and such other duties as the chairman of the
board or the board of directors may from time to time prescribe.
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 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 the meetings of shareholders and
directors, keep the corporate seal and affix the same to any instrument
requiring it, 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 in the absence or disability of the secretary,
perform the duties and exercise the powers of the secretary, and shall have such
other duties 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 the 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
STOCK CERTIFICATES AND TRANSFER BOOKS
Section 1. Lost Certificates. The board of directors may direct a new stock
certificate to be issued in place of any stock 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
of 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.
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Section 2. Stock Ledger. The corporation shall maintain at its office in
Madison, Wisconsin, or at the office of its principal transfer agent, if any, a
stock ledger containing the names and addresses of all shareholders and the
number of shares held by each shareholder.
Section 3. Registered Shareholders. 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 Wisconsin.
Section 4. 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 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 such shares of
stock shall be registered.
Section 5. Small Accounts. The corporations may pursuant to and in
accordance with Article 4C of the Articles of Incorporation redeem all of the
shares of the common stock of the corporation held by any holder if the value of
such shares held by such holder is less than $1,000.
ARTICLE V
GENERAL PROVISIONS
Section 1. Seal. The corporate seal shall have inscribed thereon the name
of the corporation, and the words "Corporate Seal" and "Wisconsin". The seal may
be used by causing it or a facsimile thereof to be impressed, affixed,
reproduced or otherwise.
Section 2. Fiscal Year. The fiscal year of the corporation shall be fixed
by the board of directors.
Section 3. Voting of Stock. Unless otherwise approved by the board of
directors, the chairman 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
shareholders 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
shareholder 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 owners 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. The chairman or any duly
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authorized officer, agent or employee of the corporation may appoint one or more
proxies to vote any such shares.
Section 4. Indemnification.
A. The corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending, or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director or officer of the corporation,
or is or was serving at the request of the corporation as a director or officer
of another corporation, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of no contest or its equivalent, shall not, of itself, create a presumption
that the person did not act in good faith and in a manner which he reasonably
believed to be in, or not opposed to, the best interests of the corporation,
and, with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful;
B. The corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment or
decree in its favor by reason of the fact that he is or was a director or
officer of the corporation, or is or was serving at the request of the
corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees),
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
corporation and except that no indemnification shall be made in respect to any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
corporation unless and only to the extent that the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the court
shall deem proper;
C. To the extent that a director or officer of the corporation has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in clauses A or B, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorney's
fees) actually and reasonably incurred by him in conjunction therewith;
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D. Notwithstanding clauses A and B, no person shall be indemnified
or insured by the corporation against any liability to the corporation or its
shareholders to which such person would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such person's office. The standards referred
to in this clause D and in clauses A and B above that must be met in order to
entitle a person to indemnification are referred to herein as the "Required
Standards";
E. Any indemnification under clauses A or B, unless ordered by a
court, shall be made by the corporation only as authorized in the specific case
upon a determination that indemnification of the director or officer is proper
in the circumstances because he has met the Required Standards. Such
determination shall be deemed to have been made if (1) the court or body before
home the action, suit or proceeding is brought with respect to which
indemnification is sought determines, in a final decision on the merits, that
the person was not liable by reason of failure to have met the Required
Standards or (2) in the absence of a determination referred to in subclause (1)
above, a majority of a quorum of disinterested, non-party directors or
independent legal counsel in a written opinion make a reasonable determination,
based upon a review of the facts, that such person was not liable by reason of
failure to have met the Required Standards;
F. Expenses (including attorneys' fees) incurred in defending 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 specific case by a determination by a majority of a quorum of
disinterested, non-party directors, or independent legal counsel in a written
opinion, based on a review of readily available facts, that there is reason to
believe that such person ultimately will be found entitled to indemnification
and upon receipt of an undertaking by or on behalf of the director or officer to
repay such amount unless it shall ultimately be determined that he is entitled
to be indemnified by the corporation as authorized in this Article;
G. The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any by-law, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in any capacity while holding such office, and shall continue as to a
person who has ceased to be a director or officer and shall inure to the benefit
of the heirs, executors and administrators of such a person;
H. The corporation may purchase and maintain insurance on behalf of
any person who is or was a director or officer of the corporation, or is or was
serving at the request of the corporation as a director or officer of another
corporation, joint venture, trust or other enterprise, against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the corporation would have the power to
indemnify him against such liability under the provisions of this Article.
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ARTICLE VI
AMENDMENT OF BY-LAWS
Section 1. By Shareholders. These By-laws may be altered, amended or
repealed and new By-laws may be adopted by the shareholders.
Section 2. By Directors. These By-laws may also be altered, amended or
repealed and new Bylaws may be adopted by the board of directors; but no by-law
adopted by the shareholders shall be amended or repealed by the board of
directors if the by-law so adopted so provides.
Section 3. Implied Amendments. Any action taken or authorized by the
shareholders or by the board of directors, which would be inconsistent with the
By-laws then in effect but is taken or authorized by the affirmative vote of not
less than the number of shares or the number of directors required to amend the
By-laws so that the By-laws would be consistent with such action, shall be given
the same effect as though the By-laws had been amended or suspended so far, but
only so far, as is necessary to permit the specific action so taken or
authorized.
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EXHIBIT 9(g)
SERVICING AGREEMENT
THOMPSON PLUMB FUNDS
Gentlemen:
We wish to enter into this Servicing Agreement with you concerning the
provision of support services to your shareholders ("Shareholders") who may from
time to time beneficially own shares of the Series A Common Stock of the Portico
Money Market Fund.
The terms and conditions of this Servicing Agreement are as follows:
Section 1. You agree to provide, either directly or through your
agents, including your transfer agent, the following support services to
Shareholders who may from time to time beneficially own Series A Shares:(1) (i)
processing dividend and distribution payments from us on behalf of Shareholders;
(ii) providing information periodically to Shareholders showing their positions
in Series A Shares; (iii) arranging for bank wires; (iv) responding to
Shareholder inquiries relating to the services performed by you; (v) providing
subaccounting with respect to Series A Shares beneficially owned by Shareholders
or the information to us necessary for subaccounting; (vi) if required by law,
forwarding shareholder communications from us (such as proxies, shareholder
reports, annual and semi-annual financial statements and dividend, distribution
and tax notices) to Shareholders; (vii) processing exchange and redemption
requests from Shareholders and placing net exchange and redemption orders with
our service contractors; (viii) assisting Shareholders in changing dividend
options, account designations and addresses; (ix) developing, monitoring and
providing ongoing consulting services regarding expedited purchase, redemption
and exchange programs (the "Program") relating to the purchase of Series A
Shares by Shareholders who also own shares of other unaffiliated investment
companies; (x) reviewing the description of the Program in the materials
prepared by us and such other investment companies for distribution to
Shareholders; (xi) responding to telephone inquiries from Shareholders regarding
the Programs and their investment in Series A Shares; (xii) acting as a liaison
between Shareholders and us, including assistance in correcting errors and
resolving problems; (xiii) providing such statistical and other information as
we may reasonably request or may be necessary for us to comply with applicable
federal and state laws; and (xiv) providing such other similar services as we
may reasonably request to the extent you are permitted to do so under applicable
statutes, rules and regulations.
Section 2. You will provide such office space and equipment,
telephone facilities and personnel (which may be any part of the space,
equipment and facilities currently used in your business, or any personnel
employed by you) as may be reasonably necessary or beneficially in order to
provide the aforementioned services and assistance to Shareholders.
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(1)Services may be modified or omitted in the particular case and items
renumbered.
<PAGE> 2
Section 3. Neither you nor any of your officers, employees or
agents are authorized to make an representations concerning us or the Series A
Shares except those contained in our then current prospectuses and statements of
additional information for Series A Shares, copies of which will be supplied by
us to you, or in such supplemental literature or advertising as may be
authorized by us in writing.
Section 4. For all purposes of this Agreement you will be deemed
to be an independent contractor, and will have no authority to act as agent for
us in any matter or in any respect. By your written acceptance of this
Agreement, you agree to and do release, indemnify and hold us harmless from and
against any and all direct or indirect liabilities or losses resulting from
requests, directions, actions or inactions of or by you or your officers,
employees or agents regarding your responsibilities hereunder or the purchase,
redemption, transfer or registration of Series A Shares (or orders relating to
the same) by or on behalf of Shareholders. You and your employees will, upon
request, be available during normal business hours to consult with us or our
designees concerning the performance of your responsibilities under this
Agreement.
Section 5. In consideration of the services and facilities
provided by you hereunder, we will pay to you, and you will accept as full
payment therefor, a fee at the annual rate of .20 of 1% of the average daily net
asset value of the Series A Shares beneficially owned by your Shareholders (the
"Shareholders' Series A Shares"), which fee will be computed daily and payable
monthly. for purposes of determining the fees payable under this Section 5, the
average daily net asset value of the Shareholders' Series A Shares will be
computed in the manner specified in our Registration Statement (as the same is
in effect from time to time) in connection with the computation of the net asset
value of Series A Shares for purposes of purchases and redemptions. The fee rate
stated above may be prospectively increased or decreased by us, in our sole
discretion, at any time upon notice to you. Further, we may, in our discretion
and without notice, suspend or withdraw the sale of Series A Shares, including
the sale of Series A Shares to you for the account of any Shareholder or
Shareholders. All fees payable by Portico Funds under this Agreement with
respect to the Series A Shares of a particular Fund shall be borne by, and be
payable entirely out of the assets allocable to, said Series A Shares; and no
other Fund or series of Shares offered by Portico Funds shall be responsible for
such fees.
Section 6. Any person authorized to direct the disposition of
monies paid or payable by us pursuant to this Agreement will provide to our
Board of Directors, and our Directors will review, at least quarterly, a written
report of the amounts so expended and the purposes for which such expenditures
were made. In addition, you will furnish us or our designees with such
information as we or they may reasonably request (including, without limitation,
periodic certifications confirming the provision to Shareholders of the services
described herein), and will otherwise cooperate with us and our designees
(including, without limitation, any auditors designated by us), in connection
with the preparation of reports to our Board of Directors concerning this
Agreement and the monies paid or payable by us pursuant hereto, as well as any
other reports or filings that may be required by law.
Section 7. We may enter into other similar Agreements with any
other person or person without your consent.
<PAGE> 3
Section 8. By your written acceptance of this Agreement, you
represent, warrant and agree that the services provided by you under this
Agreement will in no event be primarily intended to result in the sale of Series
A Shares.
Section 9. This Agreement will become effective on the date a
fully executed copy of this Agreement is received by us or our designee. Unless
sooner terminated, this Agreement will continue until February 28, 1998, and
thereafter will continue automatically for successive annual periods provided
such continuance is specifically approved at least annually by us in the manner
described in Section 12. This Agreement is terminable with respect to the Series
A Shares of any Fund, without penalty, at any time by us (which termination may
be by a vote of a majority of the Disinterested Directors as defined in Section
12) or by you upon notice to the other party hereto. This Agreement will also
terminate automatically in the event of its assignment (as defined in the Act).
Section 10. All notices and other communications to either you or
us will be duly given if mailed, telegraphed, telexed or transmitted by similar
telecommunications device to the appropriate address stated herein.
Section 11. This Agreement will be construed in accordance with the
laws of the State of Wisconsin.
Section 12. This Agreement has been approved by a vote of a
majority of (i) our Board of Directors and (ii) those Directors who are not
"interested persons" (as defined in the Investment Company Act of 1940) of us
and have no direct or indirect financial interest in the operation of the
Service Plan adopted by us or in any agreement related thereto case in person at
a meeting called for the purpose of voting on such approval ("Disinterested
Directors").
If you agree to be legally bound by the provisions of this Agreement,
please sign a copy of this letter where indicated below and promptly return it
to us.
Very truly yours,
PORTICO FUNDS, INC.
By:_____________________________
Date:________________________ (Authorized Officer)
Accepted and Agreed to:
THOMPSON PLUMB FUNDS
By:_____________________________
Date:________________________ (Authorized Officer)
<PAGE> 1
EXHIBIT 9(h)
REVOLVING CREDIT AGREEMENT
THOMPSON PLUMB FUNDS, INC., a Wisconsin corporation ("Customer"), on
behalf of each of THOMPSON PLUMB GROWTH FUND, THOMPSON PLUMB BALANCED FUND and
THOMPSON PLUMB BOND FUND (each, a "Fund" and collectively, the "Funds") hereby
agrees with M&I BANK OF SOUTHERN WISCONSIN, a Wisconsin banking corporation
("Lender") as follows:
1. Definitions. As used in this Agreement, the following terms have the
following meanings:
"Affiliated Person" shall have the meaning provided in the Investment
Company Act.
"Agreement" means this Revolving Credit Agreement, as amended,
modified, supplemented or extended from time to time.
"Business Day" means any day except a Saturday, a Sunday or a day on
which commercial banks in Madison, Wisconsin are authorized or required by law
to close.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute, together with the regulations and published interpretations
thereunder, in each case as in effect from time to time.
"Credit Limit" shall have the meaning set forth in Section 2(a) hereof.
"Custodian" means the entity which acts as a Fund's custodian for
purposes of Section 17(f) of the Investment Company Act.
"Default" means an Event of Default or an event or condition, the
occurrence of which would, with the giving of notice or the passage of time or
both, constitute an Event of Default.
"Event of Default" shall have the meaning assigned in Section 7 hereof.
"GAAP" means those generally accepted accounting principles and
practices which are recognized as such by the American Institute of Certified
Public Accountants acting through appropriate boards or committees thereof and
which are consistently applied for all periods so as to properly reflect the
financial condition, results of operations and cash flows of Customer and the
Funds.
"Indebtedness" shall mean the liabilities and obligations of the Funds
as determined in the calculation of net asset value in the Funds' Prospectus.
"Investment Company Act" means the Investment Company Act of 1940, as
amended, including the rules and regulations promulgated thereunder.
<PAGE> 2
"Lien" means, with respect to any asset: (a) any mortgage, pledge,
hypothecation, assignment, deposit arrangement, pledge, lien, charge, security
interest, encumbrance or preference arrangement of any kind or nature
whatsoever; and (b) the interest of a vendor or lessor under any conditional
sale agreement, financing lease or other title retention agreement relating to
such asset."Loan" and "Loans" shall have the meaning set forth in Section 2(a)
hereof.
"Loan Account" means an account on the books of Lender in which Lender
will record, pursuant to Section 2(d) hereof, Obligations of Customer, on behalf
of each of the Funds, to Lender, payments made upon such Obligations and other
advances, debits and credits pertaining to the Obligations. Lender shall
establish a separate Loan Account for each Fund.
"Net Asset Value" shall mean the net asset value of a Fund as described
in the Funds' Prospectus.
"Note" means the Revolving Credit Note from Customer, on behalf of each
Fund, to Lender in the form of EXHIBIT A evidencing the Loans, as amended,
supplemented, modified or extended from time to time and any note issued in
substitution, replacement or renewal thereof.
"Obligations" means the Loans, all mandatory prepayments and all costs
and expenses payable by Customer on behalf of each of the Funds, to Lender and
all other Indebtedness and liabilities of Customer, on behalf of each of the
Funds, to Lender pursuant to this Agreement and the Related Documents.
"Permitted Liens" means: (a) Liens in favor of a Fund's Custodian
granted pursuant to the custody agreement with such Custodian to secure
obligations arising under such custody agreement; (b) encumbrances created in
connection with a Fund's portfolio investments to the extent permitted by the
provisions of the Funds' Prospectus and Statement of Additional Information; (c)
Liens in favor of Lender; and (d) Liens existing as of the date of this
Agreement as described on SCHEDULE 1 hereto.
"Person" means an individual, partnership, corporation, firm,
enterprise, business trust, joint stock company, trust, unincorporated
association, joint venture, governmental authority or other entity of whatever
nature.
"Prime Rate" means the interest rate publicly announced by M&I Marshall
& Ilsley Bank from time to time in Milwaukee, Wisconsin as its prime rate for
interest rate determinations, which is solely a reference rate and may be at,
above or below the rate or rates at which Lender lends to other Persons. Any
change in the Prime Rate shall become effective as of the opening of business on
the day on which the change is publicly announced by M&I Marshall & Ilsley Bank.
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"Prospectus" shall mean the prospectus required to be delivered by
Customer to offerees of the securities of any of the Funds, pursuant to the
Securities Act of 1933, as amended.
"Related Documents" means the Note and all other certificates,
resolutions or other documents required or contemplated hereunder.
"Requirement of Law" means, as to any matter or Person, any law,
ordinance, treaty, rule, regulation, order, decree, determination or other
requirement having the force of law relating to such matter or Person and, where
applicable, any interpretation thereof by any governmental authority.
"Statement of Additional Information" means the Statement of Additional
Information which must be provided by Customer to recipients of the Funds'
Prospectus upon request pursuant to the rules and regulations adopted by the
Securities and Exchange Commission.
"Subsidiary" or "Subsidiaries" means a corporation of which shares of
stock having voting power sufficient to elect a majority of the board of
directors or other managers of such corporation are at the time owned, or the
management of which is otherwise controlled, directly or indirectly, through one
or more intermediaries, or both, by Customer.
"Termination Date" means February 5, 1999, or (i) if the term of this
Agreement is extended, such later date on which the term of this Agreement shall
be scheduled to end, or (ii) such earlier date on which the Obligations shall
terminate as provided in Section 8 hereof.
2. Loans.
(a) Loans. Subject to the terms and conditions set forth in
this Agreement, Lender agrees to lend to Customer, for the several use of each
of the Funds, and Customer may borrow, repay and reborrow from time to time,
such sums as are requested by Customer (a "Loan" or the "Loans") up to a maximum
aggregate amount outstanding at any one time equal to the lesser of (i) Three
Million Dollars ($3,000,000.00) (the "Credit Limit"); and (ii) the maximum
amount Customer is permitted to borrow for a Fund (A) at such time under
applicable laws and regulations, (B) under the provisions of Section 6(b)
hereof, (C) under the limitations on borrowing adopted by such Fund in the
Funds' Prospectus, Statement of Additional Information or elsewhere, or (D)
pursuant to any agreements with federal, state, local or foreign governmental
authorities or regulators as in effect from time to time. The Loans made by
Lender shall be evidenced by the Note.
(b) Interest. Each Loan shall bear interest on the outstanding
principal amount thereof, for the period commencing with the date such Loan is
made through and including the date such Loan is repaid in full, at an annual
rate equal to the Prime Rate. Such interest shall be payable monthly in arrears
on the last Business Day of each calendar month, and at the maturity of such
Loan. After an Event of Default, each of the Obligations shall bear interest at
a rate per annum equal to the Prime Rate plus three percent (3.0 %), with the
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<PAGE> 4
interest rate to change on each day that the Prime Rate changes. In no event
shall the interest rate under the Note exceed the highest rate permitted by law.
Interest shall be computed and adjusted daily based on the actual number of days
elapsed in a year of three hundred sixty (360) days.
(c) Loan Procedures. Customer may obtain Loans on behalf of the
Funds under this Agreement in writing or by telephone request, specifying the
date and the amount of the Loan. Upon receipt of a certificate of an officer of
Customer certifying Customer's and the applicable Fund's compliance with the
provisions of Sections 5 and 6 hereof, Lender will make a Loan available to
Customer by crediting the amount of such Loan to the account of the Fund on
behalf of which Customer requested such Loan on the same day as requested
provided notice is received by 4:00 p.m. on a Business Day. Lender's obligation
to make each Loan is subject to the further conditions that (i) the
representations and warranties in Section 4 hereof are true and correct as of
the date of the request except for changes disclosed in writing by Customer to
Lender prior to the date of any such request and Lender has agreed to make Loans
notwithstanding such disclosures; provided, however, that Customer agrees that
even if Lender has so agreed to make Loans, Lender shall not have waived any
Event of Default that may arise in connection with or relating to such
disclosure, and (ii) no Default or Event of Default has occurred and is
continuing or would result from such Loan, and each Loan request by Customer
shall be deemed a warranty and representation by Customer, on behalf of the Fund
on whose behalf such Loan is to be made, that the foregoing is true and correct.
(d) Loan Accounts. Lender will enter as a debit to a Fund's Loan
Account the aggregate principal amount of each Loan as disbursed or issued from
time to time by Lender to such Fund. Lender shall also record in the Loan
Accounts, in accordance with Lender's customary accounting practices: accrued
interest and all other charges, expenses, fees and other items properly
chargeable to the appropriate Fund hereunder or under the Related Documents; all
payments made by Customer on behalf of the appropriate Fund with respect to the
Obligations; and all other appropriate debits and credits. Not more frequently
than once each month, Lender shall render a statement of account of the Loan
Accounts including, with respect to Loans, a statement of the outstanding
principal balance, which statement shall be considered correct and accepted by
Customer unless it notifies Lender to the contrary within thirty (30) days of
the mailing of such statement or in the event of a manifest error therein;
provided, however, that the failure of Lender to record any of the foregoing
items in the Loan Accounts shall not limit or otherwise affect Customer's
obligation to repay, on behalf of the appropriate Fund, the Obligations.
(e) Maturity of Loans. Each Loan shall mature, and the principal
amount thereof shall be due and payable, on the day which is seven (7) days
after the date such Loan was made, together with any and all accrued and unpaid
interest thereon.
(f) Recourse to Assets. Loans made to Customer hereunder for use
by a Fund shall be paid solely to the account of that Fund, and used by that
Fund, solely in accordance with Section 4(i) hereof. The obligations of Customer
on behalf of each of the
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<PAGE> 5
Funds under this Agreement and the Related Documents are several and not joint.
The principal amount of the Loans made for use by a particular Fund and accrued
interest thereon and any fees or additional amounts payable in connection with
or relating to such Loans pursuant to this Agreement, shall be paid or repaid
solely from the assets of such Fund, and Lender shall have no right of recourse
or offset against the assets of any other Fund with respect to such Loans or
such other obligations or amounts, or any default in respect thereto.
(g) Increased Costs. If Regulation D of the Board of Governors
of the Federal Reserve System, or the adoption of any applicable law, rule or
regulation of general application, or any change therein, or any interpretation
or administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
compliance by Lender with any request or directive of general application
(whether or not having the force of law) of any such authority, central bank or
comparable agency shall, subsequent to the date hereof:
(i) Subject Lender to any tax, duty or other charge with
respect to the Loans, the Note or its obligation to make Loans, or shall change
the basis of taxation of payments to Lender of the principal of or interest on
the Loans or any other amounts due under this Agreement in respect of the Loans
or its obligation to make Loans (except for changes in the rate of tax on the
overall net income of Lender); or
(ii) Impose, modify or deem applicable any reserve
(including, without limitation, any reserve imposed by the Board of Governors of
the Federal Reserve System, but excluding any reserve included in the
determination of interest rates pursuant to this Agreement), special deposit or
similar requirement against assets of, deposits with or for the account of, or
credit extended by, Lender; or
(iii) Affect the amount of capital required or expected to
be maintained by Lender or any corporation controlling Lender; or
(iv) Impose on Lender any other condition affecting the
Loans, the Note or its obligation to make Loans;
and the result of any of the foregoing is to increase the cost to (or in the
case of Regulation D referred to above, to impose a cost on) Lender of making or
maintaining any Loans, or to reduce the amount of any sum received or receivable
by Lender under this Agreement with respect thereto, then within ten (10) days
after demand by Lender (which demand shall be accompanied by a statement setting
forth the basis of such demand), Customer shall pay directly to Lender such
additional amount or amounts as will compensate Lender for such increased cost
or such reduction. Determinations by Lender for purposes of this section of the
effect of any change in applicable laws or regulations or of any
interpretations, directives or requests thereunder on its costs of making or
maintaining Loans or sums receivable by it in respect of Loans, and of the
additional amounts required to compensate Lender in respect thereof, shall be
conclusive, absent manifest error.
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<PAGE> 6
3. Conditions for Loans. This Agreement shall become effective upon
the satisfaction of the following conditions:
(a) Loan Documents. Lender shall have received an executed copy
of this Agreement and the executed Note.
(b) Authority to Act. Lender shall have received copies
certified by the Secretary of Customer of (i) the Articles of Incorporation and
Bylaws of Customer, (ii) resolutions of the Board of Directors of Customer
authorizing the issuance, execution and delivery of this Agreement and the
Related Documents, and (iii) a certification of the names and titles of the
representatives of Customer authorized to sign this Agreement and the Related
Documents and to request Loans under this Agreement, together with true
signatures of such representatives.
(c) Status Certificate. A certificate of status for Customer
from the Department of Financial Institutions of the State of Wisconsin dated
no more than ten (10) days prior to the date hereof.
(d) Opinion of Counsel. Lender shall have received from counsel
for Customer an opinion in the form of EXHIBIT B attached hereto.
(e) Custodian Agreements. Receipt by Lender of copies of the
Funds' fully executed agreements with their Custodians concerning the custody of
the Funds' portfolio securities, along with amendments in form and substance
satisfactory to Lender which amendments are in full force and effect.
(f) Proceedings. All proceedings taken by Customer in connection
with the Loans shall be satisfactory to Lender and Lender shall have received
copies of all documents reasonably required by it.
4. Representations and Warranties. Customer represents and warrants
to Lender that:
(a) Organization. Customer is a Wisconsin corporation validly
existing and in good standing (meaning it has filed its most recent annual
report and has not filed articles of dissolution) under the laws of the State of
Wisconsin and is duly qualified as a foreign corporation to do business and is
in good standing in every jurisdiction in which the nature of its business or
the ownership of its properties requires such qualification. Customer has all
necessary power and authority to own its assets and to conduct its business as
presently conducted. Customer has no Subsidiaries.
(b) Authority. The execution and delivery of this Agreement and
the Related Documents, and the performance by Customer of its obligations on
behalf of the Funds under this Agreement and the Related Documents, are within
its power, have been duly authorized by proper action on the part of Customer,
are not in violation of any Requirement of Law, any
6
<PAGE> 7
order or decision of any court or other governmental authority, the Articles of
Incorporation, Bylaws or other governing documents of Customer, the terms of any
agreement or instrument to which Customer or any Fund is a party or by which it
is bound, or the Funds' most recent Prospectus or Statement of Additional
Information, will not result in the creation or imposition of any Lien on any
asset of Customer or any Fund, and do not require the approval or consent of any
Person. This Agreement and the Related Documents, when executed and delivered by
Customer on behalf of the Funds, will constitute the valid and binding
obligations of Customer and the Funds, enforceable against Customer and each of
the Funds in accordance with their terms.
(c) Financial Statements. All financial statements and other
documents with respect to the financial condition of Customer and each of the
Funds presented to Lender were prepared in accordance with GAAP consistently
applied throughout the periods involved and fairly present the financial
condition and results of operations of Customer and each of the Funds for the
periods and as of the relevant dates thereof (subject to audit and normal
year-end adjustments), and there has been no subsequent material adverse change
in the business, properties or condition, financial or otherwise, of Customer or
any of the Funds since the date of the latest of such financial statements.
Customer has no knowledge of any material liabilities of any nature not
disclosed in writing to Lender.
(d) Litigation. Except as set forth in SCHEDULE 4(d), there is
no litigation or administrative proceeding pending or, to the knowledge of
Customer, threatened against Customer or any Fund which could, if adversely
determined, result in a judgment for the payment of amounts aggregating $100,000
or greater. Except as set forth in SCHEDULE 4(d), Customer and each of the
Funds are not operating under or subject to, nor in default with respect to, any
order, writ, injunction or decree of any court or federal, state, municipal or
other governmental authority and Customer and each of the Funds have not been
charged or threatened with a charge or violation, or under investigation with
respect to possible violation, of any provision of any federal, state, municipal
or local law or administrative ruling or regulation relating to its business,
affairs, assets, prospects, operations, employee relations or condition,
financial or otherwise.
(e) Accuracy of Information. All information, certificates or
statements given by Customer to Lender in connection with this Agreement were
accurate, true and complete in all material respects when given, continue to be
accurate, true and complete as of the date hereof and do not contain any untrue
statement or omission of a material fact necessary to make the statements
hereunder or therein not misleading.
(f) Ownership of Property. Customer and each of the Funds have
good and marketable title to all of their respective assets and there are no
Liens of any nature on any asset of Customer or any of the Funds except
Permitted Liens.
(g) No Defaults. Neither Customer nor any of the Funds are in
default under or in violation of (i) any Requirement of Law, or (ii) any
indenture, deed, lease of real property or other material lease, material
agreement, mortgage, deed of trust, note or other material
7
<PAGE> 8
instrument to which Customer or a Fund is a party or by which Customer or a Fund
is bound or to which any of its property is subject, or (iii) any Indebtedness.
(h) Taxes. Each Fund qualifies as a "regulated investment
company" within the meaning of the Code and, as such, because it intends to
timely distribute all its income (including capital gains) to its shareholders,
its income will not be subject to tax at the corporate level under the Code.
Customer, on behalf of each of the Funds, has filed all federal, state, foreign
and local tax returns which were required to be filed prior to the date hereof,
except those returns for which the due date has been validly extended. Customer,
on behalf of each of the Funds, has paid or made provision for the payment of
all taxes, assessments, fees and other governmental charges owed and there is no
pending or, to the best of Customer's knowledge, threatened tax controversy,
claim or dispute as of the date hereof.
(i) Purpose of Loans. All Loans are and will be used solely for
the purpose of funding redemption requests by shareholders of the Funds and will
not be used for any other purpose, including, without limitation, investments or
to repay other Loans.
(j) Regulation U. Customer, on behalf of the Funds, will not use
any part of the proceeds of Loans to purchase or carry any margin stock within
the meaning of Regulation U of the Board of Governors of the Federal Reserve
System.
(k) Investment Company. Customer is duly registered as an
open-end management investment company under the Investment Company Act, and
such registration has not been revoked or rescinded and is in full force and
effect. The outstanding shares of each class of stock of Customer (i) have been
duly issued and are fully paid and non-assessable (except to the extent provided
in Section 180.0622(b) of the Wisconsin Business Corporation Law), (ii) have
been duly registered under the Securities Act of 1933, as amended, and (iii)
have been registered or exempt from registration under all applicable state
securities or so-called "Blue Sky" laws. Each Fund has been duly established as
a separate series of Customer, and its assets and liabilities are segregated
from the assets and liabilities of each other Fund. No Fund is subject to any
liability of any other Fund.
(l) Affiliation With Lender. Neither Customer, any Fund nor any
Affiliated Person of Customer or a Fund is an Affiliated Person of Lender.
(m) Compliance.
(i) Customer and each of the Funds are in compliance with
all applicable laws and regulations (including, without limitation, the
Investment Company Act and all regulations thereunder), all applicable
ordinances, decrees, requirements, orders and judgments of, and all of the terms
of any applicable licenses and permits issued by, any governmental body, agency
or official, and all agreements and instruments to which they may be subject or
any of their respective properties may be bound, the noncompliance with which
would have a material adverse effect on Customer, any of the Funds, or any of
Customer's or a Fund's assets, business, prospects or conditions, financial or
otherwise. Each of the Funds
8
<PAGE> 9
is in compliance in all material respects with all investment policies and
restrictions set forth in the Funds' most recent Prospectus and Statement of
Additional Information.
(ii) No Default or Event of Default has occurred and is
continuing.
5. Affirmative Covenants. Customer, on behalf of each of the Funds,
agrees that, from and after the date of this Agreement and until the Termination
Date and until the entire amount of all Obligations to Lender are paid in full,
it shall:
(a) Information. Maintain a standard and modern system of
accounting in accordance with GAAP and furnish to Lender such information
respecting Customer and each of the Funds as Lender from time to time reasonably
requests, and without request furnish to Lender:
(i) As soon as available and in any event within one
hundred twenty (120) days after the end of each fiscal year of Customer and
each Fund, a statement of assets and liabilities of each such Person,
including the portfolio of investments, as of the end of such fiscal year and
the related statements of operations and changes in net assets for such fiscal
year, all reported on in a manner acceptable to the Securities and Exchange
Commission, together with an audit report thereon issued by independent public
accountants of nationally recognized standing;
(ii) As soon as available and in any event within
thirty (30) days after the end of each month, a statement of assets and
liabilities of Customer and each Fund, including the portfolio of investments,
as of the end of such month and the related statements of operations and changes
in net assets for such period, all certified (subject to audit and normal
year-end adjustments) as to fairness of presentation, GAAP and consistency by
the chief financial officer of Customer;
(iii) If no Loan is outstanding to any Fund, within
thirty (30) days after the end of each calendar quarter, a report setting forth
the portfolio of investments and a copy of the listing and valuation report, in
each case concerning the assets of Customer and each Fund, and in each case as
of the end of such calendar quarter;
(iv) Simultaneously with the delivery of each set of
financial statements referred to in clauses (ii) and (iii) above, a certificate
of the chief financial officer of Customer stating whether any Default or Event
of Default exists on the date of such certificate and, if any Default or Event
of Default then exists, setting forth the details thereof and the action which
Customer is taking or proposes to take with respect thereto;
(v) Simultaneously with the delivery of each set of
financial statements referred to in clause (i) above, a statement of the firm of
independent accountants which reported on such statements whether anything has
come to their attention to cause them to believe that any Default or Event of
Default existed on the date of such statements;
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<PAGE> 10
(vi) Within one (1) Business Day, or within ten (10)
Business Days if no Loan is outstanding to any Fund, after any of the executive
officers of Customer obtains knowledge of any Default or Event of Default, if
such Default or Event of Default is then continuing, a certificate of any of
such officers of Customer setting forth the details thereof and the action which
Customer is taking or proposes to take with respect thereto;
(vii) Within ten (10) Business Days after the filing
thereof with the Securities and Exchange Commission or the mailing thereof to
shareholders of Customer or any Fund, copies of all reports to shareholders,
amendments and supplements to Customer's registration statement, including the
Funds' Prospectus and Statement of Additional Information, and proxy statements;
and
(viii) From time to time such additional information
regarding the financial position or business of Customer or any of the Funds as
Lender may reasonably request.
(b) Payment of Obligations. On behalf of each of the Funds, duly
and punctually pay or cause to be paid the principal and interest on the Loans
made to it on behalf of any of the Funds, and all other amounts payable by it
provided for in this Agreement and the Related Documents. Customer will pay and
discharge, at or before maturity, each of the Funds' material obligations and
liabilities, including, without limitation, tax liabilities, except where the
same may be contested in good faith by appropriate proceedings, and will
maintain, in accordance with GAAP, appropriate reserves for the accrual of any
of the same.
(c) Maintenance of Insurance. Maintain fidelity bond insurance
in accordance with Rule 17g-1 under the Investment Company Act.
(d) Conduct of Business and Maintenance of Existence. Continue
to engage in business of the same general type as now conducted by it, will
preserve, renew and keep in full force and effect its existence as a Wisconsin
corporation and its rights, privileges and franchises necessary in the normal
conduct of business of Customer. Customer will keep in full force and effect the
existence of each of the Funds as a separate series of Customer.
(e) Compliance with Laws. Cause each of the Funds to comply in
all material respects with all applicable laws, ordinances, rules, regulations
and requirements of governmental authorities (including, without limitation, the
Investment Company Act and the rules and regulations thereunder) except where
the necessity of compliance therewith is contested in good faith by appropriate
proceedings or exemptive relief has been obtained therefrom and remains in
effect. Customer, on behalf of each of the Funds, will file all federal and
other tax returns, reports and declarations required by all relevant
jurisdictions on or before the due dates for such returns, reports and
declarations and will pay all taxes and other governmental assessments and
charges as and when they become due (except those that are being contested in
good faith by Customer and as to which Customer has established appropriate
reserves on its books and records).
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<PAGE> 11
(f) Inspection of Property, Books and Records. Keep proper books
of record and account in which full, true and correct entries shall be made of
all dealings and transactions in relation to its and each Fund's business and
activities, and will permit representatives of Lender, at Lender's expense, to
visit and inspect any of its offices, to examine and make abstracts from any of
its books and records and to discuss its affairs, finances and accounts with its
officers, employees and independent public accountants, all at such reasonable
times and as often as may reasonably be desired.
(g) Compliance with Prospectus. Cause each of the Funds to at
all times comply in all material respects with the investment objectives,
limitations and policies set forth in the Funds' Prospectus and Statement of
Additional Information. Customer will not permit the investment objective or any
fundamental policy or the diversified or non-diversified status of any of the
Funds to be changed from those in effect on the date hereof and reflected in the
Funds' Prospectus and Statement of Additional Information delivered to Lender on
the date hereof.
(h) Regulated Investment Company. Cause each of the Funds to
maintain its status as a "regulated investment company" under the Code at all
times.
(i) Fees and Costs.
(i) Pay Lender on the date hereof and on each
anniversary date of the date hereof for so long as this Agreement shall remain
in effect, a commitment fee for the revolving credit line equal to 0.23% of the
Credit Limit. All unpaid commitment fees shall be due and payable on the
Termination Date.
(ii) Pay immediately upon receipt of an invoice, all
reasonable fees and expenses incurred by Lender with respect to this Agreement,
the Related Documents and the Obligations, and any amendments thereof and
supplements thereto and the reasonable fees of outside counsel in connection
with the preparation and negotiation of this Agreement, the Related Documents
and all amendments thereto and any waivers of the terms and provisions thereof
and the consummation of the transactions contemplated herein.
(iii) Pay immediately upon receipt of an invoice all
reasonable fees and expenses incurred by Lender with respect to protection or
enforcement of Lender's rights under this Agreement and the Related Documents
and with respect to the Obligations and all costs and expenses which may be
incurred by Lender as provided in Sections 8 and 10 hereof.
6. Negative Covenants. Customer covenants and agrees that, from and
after the date of this Agreement and until the Termination Date and until the
entire amount of all Obligations to Lender are paid in full, neither Customer
nor any of the Funds, as applicable, shall, directly or indirectly:
(a) Consolidations, Mergers and Sales of Assets. (i) Consolidate
or merge with or into any other Person, nor will Customer sell, lease or
otherwise transfer, directly or
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<PAGE> 12
indirectly, all or any substantial part of its assets or the assets of any of
the Funds to any other Person except that Customer may sell its assets, or the
assets of any of the Funds, in the ordinary course of business as described in
the Funds' Prospectus, or (ii) Invest all of its investable assets in any other
open-end management investment company or otherwise employ a two-tier,
master-feeder investment structure.
(b) Restriction on Indebtedness. Issue, incur, create, assume or
permit to exist any Indebtedness except: (i) the Obligations or any other
Indebtedness to Lender, (ii) Indebtedness in favor of a Fund's Custodian
consisting of extensions of credit from the Custodian in the ordinary course of
business to cover securities trades, (iii) Indebtedness arising from transfer
agency float and share redemption payables, (iv) Indebtedness arising in
connection with any other transaction permissible under the Investment Company
Act and a Fund's investment objectives and fundamental investment restrictions,
including, but not limited to, reverse repurchase agreements, mortgage dollar
rolls, delayed delivery transactions (provided that the assets with respect
thereto are segregated), when-issued securities (provided that the assets with
respect thereto are segregated) and loans from other Funds, and (v) existing
Indebtedness described on SCHEDULE 6(b). In addition and as a further
limitation, Customer will not create, assume or suffer to exist any Loans to any
Fund to the extent that the principal amount of Loans of that Fund at any time
exceeds twenty percent (20%) of the Net Asset Value of that Fund.
(c) Liens. Create or allow to exist any Liens upon any of the
assets of Customer or any of the Funds except Permitted Liens.
(d) Guaranty. Guaranty or otherwise in any way become or be
responsible for obligations of any other Person, whether by an agreement to
purchase the Indebtedness of any other Person or agreement for the furnishing of
funds to any other Person through the purchase of goods, supplies or services
for the purpose of paying or discharging the Indebtedness of any Person, or
otherwise, except for the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business.
(e) Non-Affiliation with Lender. Directly or indirectly,
individually or in the aggregate, own, control or hold with power to vote, five
percent (5%) or more of the voting securities of Lender or any Affiliated Person
of Lender known to Customer, and Customer will use its best efforts to ensure
that none of Customer, any of the Funds, or any of its officers, directors,
trustees or employees is or becomes an Affiliated Person of Lender or any
Affiliated Person of Lender known to Customer.
(f) Advisor/Accountant Relationship. Change or permit to change
the Funds' advisor from Thompson, Plumb & Associates, Inc. or Customer's
accountant from Price Waterhouse LLP.
(g) No Subsidiary. Customer will not have at any time any
Subsidiary.
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<PAGE> 13
7. Events of Default. Any one or more of the following shall
constitute an "Event of Default:"
(a) Customer, on behalf of any of the Funds, shall fail to pay
any Obligation when and as the same shall become due and payable, whether upon
demand, at maturity, by acceleration or otherwise;
(b) Customer, or any of the Funds, shall fail to observe or
perform any of the covenants, agreements or conditions contained in Sections
5(b), 5(i) or any provision of Section 6;
(c) Customer, or any of the Funds, shall fail to observe or
perform any of the other covenants, agreements or conditions contained in this
Agreement or the Related Documents and such failure shall continue for ten (10)
days after written notice thereof is given to Customer;
(d) Customer, or any of the Funds, shall (i) fail to pay any
amount of principal or interest when due (whether by scheduled maturity,
required prepayment, acceleration or otherwise) under any Indebtedness (other
than this Agreement) in an aggregate amount of $100,000 or more and such failure
shall continue through the applicable grace period, if any, specified in any
agreement or instrument relating to such Indebtedness, or (ii) fail to perform
or observe any term, covenant or condition on its part to be performed or
observed under any agreement or instrument relating to any such Indebtedness in
an aggregate amount of $100,000 or more which is required to be performed or
observed, and such failure shall not be waived and shall continue after the
applicable grace period, if any, specified in such agreement or instrument, if
the effect of such failure to perform or observe is to accelerate or to permit
acceleration of, the maturity of such Indebtedness;
(e) Any representation or warranty made herein or in any of the
Related Documents or in any certificate, document or financial statement
delivered to Lender shall prove to have been incorrect in any material respect
as of the time when made or given;
(f) A final judgment (or judgments) for the payment of amounts
aggregating in excess of $100,000 shall be entered against Customer or any of
the Funds, and such judgment (or judgments) shall remain outstanding and
unsatisfied, unbonded or unstayed after sixty (60) days from the date of entry
thereof;
(g) Customer or any of the Funds shall (i) become insolvent or
take or fail to take any action which constitutes an admission of inability to
pay its debts as they mature; (ii) make an assignment for the benefit of
creditors; (iii) petition or apply to any tribunal for the appointment of a
custodian, receiver or any trustee for it or a substantial portion of its
assets; (iv) suffer any such custodianship, receivership or trusteeship to
continue undischarged for a period of sixty (60) days or more; (v) commence any
proceeding under any bankruptcy, reorganization, arrangement, readjustment of
debt, dissolution or liquidation law or statute of any jurisdiction, whether now
or hereafter in effect; (vi) by any act or omission indicate its
13
<PAGE> 14
consent to, approval of, or acquiescence in any such petition, application or
proceeding or order for relief or the appointment of a custodian, receiver or
any trustee for it or any substantial portion of any of its properties; or (vii)
adopt a plan of liquidation of its assets;
(h) If any Person shall: (i) petition or apply to any tribunal
for the appointment of a custodian, receiver or any trustee for Customer or any
of the Funds or a substantial portion of their respective assets which continues
undischarged for a period of sixty (60) days or more; or (ii) commence any
proceeding under any bankruptcy, reorganization, arrangement, readjustment of
debt, dissolution or liquidation law or statute of any jurisdiction, whether now
or hereafter in effect, in which an order for relief is entered or which remains
undismissed for a period of sixty (60) days or more; or
(i) This Agreement or any of the Related Documents shall at any
time cease to be in full force and effect or Customer or any of the Funds shall
contest or deny any liability or obligation under, or attempt to revoke or
terminate, this Agreement or any of such Related Documents.
8. Remedies Upon an Event of Default. Upon the occurrence of an
Event of Default:
(a) Specified in Section 7(g) or (h) then, without presentment,
notice, demand or action of any kind by Lender, all of which are hereby waived:
(i) the commitment and the obligations of Lender to make or incur any Loans or
Obligations shall automatically and immediately terminate; and (ii) the entire
amount of the Obligations shall automatically be accelerated and immediately due
and payable.
(b) Specified in Sections 7(a), (b), (c), (d), (e), (f) or (i),
Lender may, without presentment, notice, demand or action of any kind, all of
which are hereby waived: (i) immediately terminate Lender's obligation to make
or incur any Obligations, and the same shall immediately terminate; and (ii)
upon notice to Customer, on behalf of the defaulting Fund, declare the entire
amount of the Obligations immediately accelerated, due and payable.
(c) During the continuance of any Event of Default as to a
particular Fund, any deposits or other sums credited by or due from Lender
solely to that Fund, and any securities or other property solely of that Fund,
in the possession of Lender may be applied to or set off by Lender against the
payment of Customer's Obligations, on behalf of such Fund, and any and all other
liabilities, direct or indirect, absolute or contingent, due or to become due,
now existing or hereafter arising of that Fund to Lender.
(d) Lender shall have all of the rights and remedies provided to
Lender by the Related Documents, at law and in equity, by statute or otherwise,
and no remedy herein conferred upon Lender is intended to be exclusive of any
other remedy and each remedy shall be cumulative and in addition to every other
remedy given hereunder or now or hereafter existing at law, in equity, by
statute or otherwise.
14
<PAGE> 15
In addition to and not in lieu of any other right or remedy Lender
might have, Lender at any time and from time to time at its election may (but
shall not be required to) do or perform or comply with or cause to be done or
performed or complied with anything which Customer, on behalf of a Fund, may be
required to do, perform or comply with and Customer shall reimburse Lender upon
demand for any cost or expense which Lender may incur in such respect, together
with interest thereon at the rate equal to the rate payable under the Note
following an Event of Default from the date of such demand until paid in full.
Notwithstanding any provision of this Agreement to the contrary, if
there occurs any Default or Event of Default solely with respect to a particular
Fund, such Default or Event of Default shall not constitute, in and of itself, a
Default or an Event of Default with respect to any other Fund.
9. Term and Termination. Lender may terminate this Agreement upon
the occurrence of an Event of Default as provided in Section 8 hereof. In the
absence of such termination by Lender, this Agreement shall continue in effect
until February 5, 1999. This Agreement shall continue in effect from year to
year thereafter unless Lender or Customer notifies the other party of its desire
to terminate this Agreement on its anniversary date in any year by giving not
less than ninety (90) days' prior written notice thereof to such other party.
Notwithstanding Lender's or Customer's termination, by reason of default or
otherwise, or right of termination hereunder, Customer's (and each of the
Funds') duties and liabilities under this Agreement and the Related Documents
shall continue until all Obligations to Lender are paid in full.
10. Indemnification; Expenses. Customer, on behalf of each Fund
severally, agrees to defend, indemnify and hold harmless Lender, its directors,
officers, employees and agents, from and against any and all loss, cost,
expense, damage or liability (including reasonable attorneys' fees) incurred in
connection with any claim, counterclaim or proceeding brought as a result of,
arising out of, or relating to, any transaction financed or to be financed, in
whole or in part, directly or indirectly, with the proceeds of any Loan or the
entering into and performance of this Agreement, the Related Documents or any
document or instrument relating to this Agreement by Lender except for any
liability caused by Lender's gross negligence or willful misconduct. This
indemnity will survive termination of this Agreement, the repayment of all Loans
and the discharge and release of any Related Documents. If a Default or an Event
of Default occurs, Customer agrees to pay all reasonable out-of-pocket expenses
incurred by Lender, including fees and disbursements of counsel (including
reasonable allocated costs of in-house counsel), in connection with such Default
or Event of Default and collection, bankruptcy, insolvency and other enforcement
proceedings resulting therefrom; provided, however, that any such amounts
payable in connection with a Default or Event of Default by a particular Fund or
arising out of or relating to the Loans made to a particular Fund, shall only be
payable out of the assets of such Fund and no other Fund.
11. Venue. To the extent not prohibited by law, venue for any legal
proceeding relating to enforcement of this Agreement shall be, at Lender's
option, the county in which
15
<PAGE> 16
Lender has its principal office in this state, the county in which Customer
resides, or the county in which this Agreement was executed by Customer.
12. WAIVER OF JURY TRIAL. EACH OF CUSTOMER, ON BEHALF OF THE
FUNDS, AND LENDER HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
13. Amendment. No amendment, modification, termination or waiver of
any provision of this Agreement, nor consent to any departure by Customer, on
behalf of the Funds, from any provision of this Agreement shall in any event be
effective unless it is in writing and signed by Lender, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purposes for which given.
14. Entire Agreement. This Agreement, including the Exhibits and
Schedules attached to it and the Related Documents, is intended by Customer, on
behalf of the Funds, and Lender as a final expression of their agreement and as
a complete and exclusive statement of its terms, there being no conditions to
the full effectiveness of this Agreement except as set forth in this Agreement.
15. No Waiver; Remedies. No failure on the part of Lender to
exercise, and no delay in exercising, any right, power or remedy under this
Agreement shall operate as a waiver of such right, power or remedy, nor shall
any single or partial exercise of any right under this Agreement preclude any
other or further exercise of the right or the exercise of any other right. The
remedies provided in this Agreement are cumulative and not exclusive of any
remedies provided by law.
16. Notice. Except as otherwise provided in this Agreement, all
notices required or provided for under this Agreement shall be in writing and
mailed, sent or delivered, if to Customer, on behalf of the Funds, at its
address as shown below, and if to Lender, at its address shown below, or, as to
each party, at such other address as shall be designated by such party in a
written notice to the other party. All such notices shall be deemed duly given
(i) when delivered by hand, or (ii) three (3) business days after being
deposited in the mail, certified mail postage prepaid, or (iii) when delivered
via overnight courier service.
17. Places of Business. The principal place of business and chief
executive office of Customer is located at the address specified below its
signature on the signature page hereof and the books and records of Customer and
all records of account are located and hereafter shall continue to be located at
such principal place of business and chief executive office. The businesses
conducted by Customer are not being conducted under any corporate, trade or
fictitious name and following the date hereof Customer will not conduct its
business under any other corporate, trade or fictitious name unless Customer
shall deliver at least thirty (30) days prior written notice to Lender of such
name change.
16
<PAGE> 17
18. Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of Lender and Customer, on behalf of the Funds, and
their respective successors and assigns except that Customer may not assign or
transfer any of Customer's (or the Funds') rights under this Agreement without
the prior written consent of Lender.
19. Interpretation. The validity, construction and enforcement of
this Agreement are governed by the laws of the State of Wisconsin. Invalidity of
any provision of this Agreement shall not affect the validity of any other
provision of this Agreement.
20. Ambiguity. In the case of any ambiguity or conflict between this
Agreement and any Related Document, this Agreement will govern.
21. Survival. All agreements, covenants, representations and
warranties made herein and in the Related Documents shall survive the execution
and delivery of this Agreement and the Related Documents, the making of the
Obligations and the termination of this Agreement and the Related Documents.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of February 6, 1998 by their respective officers thereunto duly
authorized.
M&I BANK OF SOUTHERN WISCONSIN THOMPSON PLUMB FUNDS, INC.
on behalf of each of Thompson Plumb
Growth Fund, Thompson Plumb Balanced
Fund and Thompson Plumb Bond Fund
By:_________________________________ By:_________________________________
Michael J. Losenegger Thomas G. Plumb
Title: Senior Vice President Title: President and Treasurer
By:_________________________________
Robert A. Schlicht
Title: President
Address: One West Main Street Address: 8201 Excelsior Drive
P.O. Box 8998 Suite 200
Madison, WI 53708-8998 Madison, WI 53717
17
<PAGE> 18
EXHIBIT A
FORM OF
REVOLVING CREDIT NOTE
$3,000,000.00 February 6, 1998
FOR VALUE RECEIVED, THOMPSON PLUMB FUNDS, INC., a Wisconsin corporation
("Customer"), on behalf of each of THOMPSON PLUMB GROWTH FUND, THOMPSON PLUMB
BALANCED FUND and THOMPSON PLUMB BOND FUND (each, a "Fund" and collectively, the
"Funds") hereby promises to pay to the order of M&I BANK OF SOUTHERN WISCONSIN,
a Wisconsin banking association ("Lender") at Lender's office at One West Main
Street, Madison, Wisconsin 53703, in lawful money of the United States of
America and in immediately available funds:
(a) Prior to or on the Termination Date (as defined in the Credit
Agreement referred to below) the principal amount of Three Million Dollars
($3,000,000.00) or, if less, the aggregate unpaid principal amount of Loans
advanced by Lender to each of the Funds, pursuant to the Revolving Credit
Agreement dated February 6, 1998 (as amended and in effect from time to time,
the "Credit Agreement"), among Customer, on behalf of each of the Funds, and
Lender;
(b) The principal amount outstanding hereunder from time to time at the
times provided in the Credit Agreement; and
(c) Interest on the unpaid principal balance hereof from time to time
outstanding from the date of the Credit Agreement through and including the
maturity date hereof at times and at the rates provided in the Credit Agreement.
This Revolving Credit Note evidences borrowings under and has been issued
by Customer on behalf of each of the Funds in accordance with the terms of the
Credit Agreement. Lender and any holder hereof is entitled to the benefits of
the Credit Agreement and the Related Documents, and may enforce the agreements
of Customer on behalf of each of the Funds contained therein, and any holder
hereof may exercise the respective remedies provided for thereby or otherwise
available in respect thereof, all in accordance with the respective terms
thereof. All capitalized terms used in this Revolving Credit Note and not
otherwise defined herein shall have the same meanings herein as in the Credit
Agreement.
Customer, on behalf of each Fund, irrevocably authorizes Lender to make or
cause to be made, at or about the date of any Loan or at the time of receipt of
any payment of principal of this Revolving Credit Note, an appropriate notation
in the Loan Account for the applicable Fund, reflecting the making of such Loan
or (as the case may be) the receipt of such payment.
A-1
<PAGE> 19
The outstanding amount of the Loans set forth in the Loan Accounts maintained by
Lender with respect to any Loans shall be prima facie evidence of the principal
amount thereof owing and unpaid to Lender, but the failure to record, or any
error in so recording, any such amount on any Loan Account shall not limit or
otherwise affect the obligation of Customer, on behalf of each of the Funds,
hereunder or under the Credit Agreement to make payments of principal of and
interest on this Revolving Credit Note when due.
If any one or more of the Events of Default shall occur, the entire unpaid
principal amount of this Revolving Credit Note and all of the unpaid interest
accrued thereon may become or be declared due and payable in the manner and with
the effect provided in the Credit Agreement.
No delay or omission on the part of Lender or any holder hereof in
exercising any right hereunder shall operate as a waiver of such right or of any
other rights of Lender or such holder, nor shall any delay, omission or waiver
on any one occasion be deemed a bar or waiver of the same or any other right on
any further occasion.
Customer, on behalf of each of the Funds, waives presentment, demand,
notice, protest and all other demands and notices in connection with the
delivery, acceptance, performance, default or enforcement of this Revolving
Credit Note, and assents to any extension or postponement of the time of payment
or any other indulgence, to any substitution, exchange or release of collateral
and to the addition or release of any other party or person primarily or
secondarily liable.
THIS REVOLVING CREDIT NOTE AND THE OBLIGATIONS OF CUSTOMER, ON BEHALF OF
EACH OF THE FUNDS, HEREUNDER SHALL FOR ALL PURPOSES BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF WISCONSIN (EXCLUDING THE LAWS
APPLICABLE TO CONFLICTS OR CHOICE OF LAW). CUSTOMER, ON BEHALF OF EACH OF THE
FUNDS, AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS REVOLVING CREDIT NOTE
MAY BE BROUGHT IN THE COUNTY IN WHICH LENDER HAS ITS PRINCIPAL OFFICE, THE
COUNTY IN WHICH CUSTOMER HAS ITS PRINCIPAL OFFICE, OR THE COUNTY IN WHICH THE
CREDIT AGREEMENT WAS EXECUTED BY CUSTOMER AND THE CONSENT TO THE NONEXCLUSIVE
JURISDICTION OF SUCH COURT AND THE SERVICE OF PROCESS IN ANY SUCH SUIT BEING
MADE UPON THE CUSTOMER BY MAIL AT THE ADDRESS SPECIFIED IN THE CREDIT AGREEMENT.
CUSTOMER, ON BEHALF OF EACH OF THE FUNDS, HEREBY WAIVES ANY OBJECTION THAT IT
MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR
THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT.
The obligations of Customer, on behalf of each of the Funds, under this
Revolving Credit Note are several and not joint. The principal amount of Loans
made for use by a particular Fund, and interest thereon shall be paid or repaid
solely from the assets of such
A-2
<PAGE> 20
Fund, and Lender shall have no right of recourse or offset against the assets of
any other Fund with respect to such Loans or any default in respect thereto.
IN WITNESS WHEREOF, the undersigned has caused this Revolving Credit
Note to be signed in its name by its duly authorized officer as of the day and
year first above written.
THOMPSON PLUMB FUNDS, INC.
on behalf of each of Thompson Plumb
Growth Fund, Thompson Plumb Balanced
Fund and Thompson Plumb Bond Fund
By:____________________________________
Thomas G. Plumb, President and
Treasurer
A-3
<PAGE> 1
EXHIBIT 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
and Statement of Additional Information constituting parts of this
Post-Effective Amendment No. 13 to the Registration Statement on Form N-1A (the
"Registration Statement") of our report dated January 22, 1998, relating to the
financial statements and financial highlights appearing in the November 30, 1997
Annual Report to Shareholders of Thompson Plumb Funds, Inc., which are also
incorporated by reference into the Registration Statement. We also consent to
the references to us under the headings "Financial Highlights" and "Shareholder
Reports, Statements and Inquiries" in the Prospectus and under the headings
"Counsel and Independent Accountants" and "Financial Statements" in the
Statement of Additional Information.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Minneapolis, Minnesota
March 30, 1998
<PAGE> 1
EXHIBIT 14(a)
THOMPSON PLUMB FUNDS, INC.
INDIVIDUAL RETIREMENT ACCOUNT
HOW TO ESTABLISH YOUR IRA
Read the Disclosure Statement, the Custodial Agreement for the type of IRA
you wish to establish (i.e. Traditional, Roth, and/or Education IRA) and the
prospectus(es) for the fund(s) you select to invest your IRA contributions.
For each IRA being established (each spouse must establish a separate IRA),
complete the application contained in this IRA kit. Make sure you provide all
the information requested including your investment instructions and sign where
indicated. If you require extra forms, you may make photostatic copies or
request them by calling Thompson Plumb Funds.
You must send your check (minimum $250 investment) along with your IRA
Application and investment instructions to:
Firstar Trust Company, Custodian
Thompson Plumb Funds IRA
P.O. Box 701
Milwaukee, Wisconsin 53201-0701
Subsequent IRA contributions are also sent to the Custodian at this address.
To transfer from an existing IRA to a Thompson Plumb Funds IRA, request an
IRA transfer form from the Custodian by calling toll free at 1-800-499-0079, or
Thompson Plumb Funds at 1- 800-999-0887.
The Firstar Trust Company will establish an individual retirement account
for you which will be registered under your name and social security number. IRA
contributions will be invested by the Custodian in accordance with the
instructions contained in your Application. You will receive statements for each
transaction you make.
Refer to the prospectus for the mutual fund shares you intend to purchase
for detailed information concerning the mutual fund. The growth in value of the
mutual fund shares held in your account can neither be guaranteed nor projected.
For further information call Thompson Plumb Funds at 1-800-999-0887, or the
Custodian at 1-800-499-0079.
<PAGE> 2
THOMPSON PLUMB FUNDS, INC.
INDIVIDUAL RETIREMENT ACCOUNT
DISCLOSURE STATEMENT
GENERAL INFORMATION
Please read the following information together with the Individual Retirement
Account Custodial Agreement(s) and the Prospectus(es) for the fund(s) you select
for investment of IRA contributions.
GENERAL PRINCIPLES
1. ARE THERE DIFFERENT TYPES OF IRAS?
Yes. Upon creation of an IRA, you must designate whether the IRA will be a
Traditional IRA, a Roth IRA, or an Education IRA. (In addition, there are
SEP-IRAs and SIMPLE IRAs, which are discussed in the Disclosure Statement for
Traditional IRAs).
- In a Traditional IRA, amounts contributed to the IRA may be tax
deductible at the time of contribution. Distributions from the IRA
will be taxed at distribution except to the extent that the
distribution represents a return of your own contributions for which
you did not claim (or where not eligible to claim) a deduction.
- In a Roth IRA, amounts contributed to your IRA are taxed at the time
of contribution, but distributions from the IRA generally are not
subject to tax if you have held the IRA for certain minimum periods
of time (generally, until age 59-1/2 but in some cases longer).
- In an Education IRA, you contribute to an IRA maintained on behalf of
a beneficiary and do not receive a current deduction. However, if
amounts are used for certain educational purposes, neither you nor
the beneficiary of the IRA are taxed upon distribution.
Each type of IRA is a custodial account created for the exclusive benefit of the
beneficiary you (or your spouse) in the case of the Traditional IRA and Roth
IRA, and a named beneficiary in the case of an Education IRA. Firstar Trust
Company serves as custodian of the IRA. Your, your spouse's or your
beneficiary's (as applicable) interest in the account is nonforfeitable.
2. CAN I REVOKE MY ACCOUNT?
This account may be revoked any time within seven calendar days after it is
established by mailing or delivering a written request for revocation to:
Thompson Plumb Funds, Inc., c/o Firstar Trust Company, 615 East Michigan Street,
3rd Floor, Milwaukee, Wisconsin 53202, Attention: Mutual Fund Department. If the
revocation is mailed, the date of the postmark (or the date of certification if
sent by certified or registered mail) will be considered the revocation date.
Upon proper revocation, a full refund of the initial contribution will be
issued, without any adjustments for items such as administrative fees or
fluctuations in market value. You may always revoke your account after this
time, but the amounts distributed to you will be subject to the tax rules
applicable upon distribution from an IRA account as discussed below. (While
current regulations technically only extend the right to revoke to Traditional
IRAs, it has been assumed that that right applies to all Roth and Education IRAs
as well and such IRAs will thus be administered consistent with that
interpretation until the IRS issues guidance to the contrary.)
3. HOW WILL MY ACCOUNT BE INVESTED?
Contributions made to an IRA will be invested, at your election, in one or more
of the regulated investment companies for which Thompson, Plumb & Associates,
Inc. serves as Investment Advisor or any other regulated investment company
designated by Thompson, Plumb & Associates, Inc.. No part of the IRA may be
invested in life insurance contracts; further, the assets of the IRA may not be
commingled with other property.
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 the account may be charged to you or the
account. The Custodian's current fee schedule follows. The fee schedule may be
changed from time to time.
Transfer to successor trustee $15.00
2
<PAGE> 3
Distribution to a participant 15.00
(exclusive of systematic withdrawal plans)
Refund of excess contribution 15.00
Federal wire fee 12.00
Traditional & Roth IRA annual maintenance fee
per account 12.50*
Education IRA annual maintenance fee
per account 5 00*
*capped at $25.00 per social security number.
INDIVIDUAL RETIREMENT ACCOUNT DISCLOSURE
STATEMENT
FOR TRADITIONAL IRAS
1. AM I ELIGIBLE TO CONTRIBUTE TO A TRADITIONAL
IRA?
Employees with compensation income and self-employed individuals with earned
income are eligible to contribute to a Traditional IRA. (For convenience, all
future references to compensation are deemed to mean "earned income" in the case
of a self-employed individual.) Employers may also contribute to Traditional
IRAs established for the benefit of their employees. In addition, you may
establish a Traditional IRA to receive rollover contributions and transfers from
the trustee or custodian of another Traditional IRA or the custodian or trustee
of certain other retirement plans.
2. WHEN CAN I MAKE CONTRIBUTIONS?
You may make regular contributions to your Traditional 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 Traditional
IRA up to (but not including) the calendar year in which you reach age 70-1/2.
(If you are over age 70-1/2 but your spouse has not yet attained that age,
contributions to your spouse's Traditional IRA may continue so long as you and
your spouse, based on a joint tax return, have sufficient compensation income.)
Employer contributions to a Simplified Employee Pension Plan or a SIMPLE Plan
may be continued after you attain age 70-1/2. Eligible rollover contributions
and transfers may be made at any time, including after you reach age 70-1/2.
3. HOW MUCH MAY I CONTRIBUTE TO A TRADITIONAL
IRA?
You may make annual contributions to a Traditional IRA in any amount up to 100%
of your compensation for the year or $2,000, whichever is less. The $2,000
limitation is reduced by contributions you make to a Roth IRA, but is not
reduced by contributions to an Educational IRA for the benefit of another
taxpayer. Qualifying rollover contributions and transfers are not subject to
these limitations.
In addition, if you are married and file a joint return, you may make
contributions to your spouse's Traditional IRA. However, the maximum amount
contributed to both your own and to your spouse's Traditional IRA may not exceed
100% of your combined compensation or $4,000, whichever is less. The maximum
amount that may be contributed to either your Traditional IRA or your spouse's
Traditional IRA is $2,000. Again, these dollar limits are reduced by any
contributions you or your spouse make to a Roth IRA, but are not affected by
contributions either of you make to an Education IRA for the benefit of another
taxpayer.
If you are the beneficiary of an Education IRA, certain additional limits may
apply to you. Please contact your tax advisor for more information.
4. CAN I ROLL OVER OR TRANSFER AMOUNTS FROM
OTHER IRAS OR EMPLOYER PLANS?
You are allowed to "roll over" a distribution or transfer your assets from one
Traditional IRA to another without any tax liability. Rollovers between
Traditional 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.
3
<PAGE> 4
Most distributions from qualified retirement plans will be subject to a 20%
withholding requirement. The 20% withholding can be avoided by electing a
"direct rollover" of the distribution to a Traditional IRA or to certain other
types of retirement plans. You should receive more information regarding these
withholding rules and whether your distribution can be transferred to a
Traditional IRA from the plan administrator prior to receiving your
distribution. (Note that legislation pending as of this printing would deny your
ability to roll over a hardship distribution from an employer's plan to your
IRA.)
5. ARE MY CONTRIBUTIONS TO A TRADITIONAL IRA TAX
DEDUCTIBLE?
Although you may make a contribution to a Traditional IRA within the limitations
described above, all or a portion of your contribution may be nondeductible. No
deduction is allowed for a rollover contribution (including a "direct rollover")
or transfer. For "regular" contributions, the taxability of your contribution
depends upon your tax filing status, whether you (and in some cases your spouse)
are an "active participant" in an employer-sponsored retirement plan, and your
income level.
If you are not married (including a taxpayer filing under the "head of
household" status), the following rules apply:
- If you are not an "active participant" in an employer-sponsored
retirement plan, you may make a fully deductible contribution to a
Traditional IRA (up to the contribution limits described above).
- If you are an "active participant" in an employer-sponsored
retirement plan, you may make a fully deductible contribution to a
Traditional IRA (up to the contribution limits described above) if
your adjusted gross income (as defined below) does not exceed $30,000
for 1998. If your 1998 adjusted gross income is between $30,000 and
$40,000, your deduction will be limited as described below. If your
adjusted gross income exceeds $40,000, your contribution will not be
deductible. After 1998, the deductibility of a contribution is as
follows:
<TABLE>
<CAPTION>
Eligible to Make A Eligible To Make A Not Eligible
Deductible Partially Deductible To Make A
Year Contribution If AGI Contribution If AGI Deductible
Less Than Or Equal Between Contribution If
To AGI Over
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1999 $31,000 $31,001 - $40,999 $41,000
2000 $32,000 $32,001 - $41,999 $42,000
2001 $33,000 $33,001 - $42,999 $43,000
2002 $34,000 $34,001 - $43,999 $44,000
2003 $40,000 $40,001 - $49,999 $50,000
2004 $45,000 $45,001 - $54,999 $55,000
2005 and $50,000 $50,001 - $59,999 $60,000
thereafter
</TABLE>
If you are married, the following rules apply:
- If you and your spouse file a joint tax return and neither you nor
your spouse is an "active participant" in an employer-sponsored
retirement plan, you and your spouse may make a fully deductible
contribution to a Traditional IRA (up to the contribution limits
described above).
- If you and your spouse file a joint tax return and both you and your
spouse are "active participants" in employer-sponsored retirement
plans, you and your spouse may make fully deductible contributions to
a Traditional IRA (up to the contribution limits described above, if
your 1998 combined adjusted gross income (as defined below) does not
exceed $50,000. If your 1998 adjusted gross income is between $50,000
and $60,000, your deduction will be limited as described below. If
your adjusted gross income exceeds $60,000, your contribution will
not be deductible. After 1998, the deductibility of a contribution is
as follows:
4
<PAGE> 5
<TABLE>
<CAPTION>
Eligible to Make A Eligible To Make A Not Eligible
Deductible Partially Deductible To Make A
Year Contribution If AGI Contribution If AGI Deductible
Less Than Or Equal Between Contribution If
To AGI Over
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1999 $51,000 $51,001 - $60,999 $61,000
2000 $52,000 $52,001 - $61,999 $62,000
2001 $53,000 $53,001 - $62,999 $63,000
2002 $54,000 $54,001 - $63,999 $64,000
2003 $60,000 $60,001 - $69,999 $70,000
2004 $65,000 $65,001 - $74,999 $75,000
2005 $70,000 $71,001 - $79,999 $80,000
2006 $75,000 $75,001 - $84,999 $85,000
2007 and $80,000 $80,001 - $99,999 $100,000
thereafter
</TABLE>
- If you and your spouse file a joint tax return and only one of you is
an "active participant" in an employer-sponsored retirement plan,
special rules apply. If your spouse is the "active participant", a
fully deductible contribution can be made to your IRA (up to the
contribution limits described above) if your combined adjusted gross
income does not exceed $150,000. If your combined adjusted gross
income is between $150,000 and $160,000, your deduction will be
limited as described below. If your combined adjusted gross income
exceeds $160,000, your contribution will not be deductible. Your
spouse, as an active participant in an employer-sponsored retirement
plan, may make a fully deductible contribution to a Traditional IRA
if your 1998 combined adjusted gross income does not exceed $50,000
(with a partial deduction being available if 1998 combined adjusted
gross income is between $50,000 and $60,000). Conversely, if you are
an "active participant" and your spouse is not, a contribution to
your Traditional IRA will be deductible if your 1998 combined
adjusted gross income does not exceed $50,000 (with a partial
deduction being available if 1998 combined adjusted
gross income is between $50,000 and $60,000). After 1998, the $50,000 and
$60,000 amounts are adjusted in the manner described in the preceding table; the
$150,000 and $160,000 amounts are not adjusted.
- If you are married and file a separate return and are not an "active
participant" in an employer-sponsored retirement plan, you may make a
fully deductible contribution to a Traditional IRA (up to the
contribution limits described above). If you are married and filing
separately and are an "active participant" in an employer-sponsored
retirement plan, you may not make a fully deductible contribution to
a Traditional IRA. A partial deduction is available if your 1998
adjusted gross income is less than $10,000. This amount is not
adjusted for cost-of-living changes or otherwise.
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); or
- 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.
For purposes of these rules, adjusted gross income (l) is determined without
regard to the exclusions from income arising under Section 135 (exclusion of
certain
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savings bond interest), Section 137 (exclusion of certain employer provided
adoption expenses) and Section 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.
Please note that the deduction limits are not the same as the contribution
limits. You can contribute to your Traditional IRA in any amount up to the
contribution limits described above (the lesser of $2,000 or 100 percent of your
compensation income). The amount of your contribution that is deductible for
federal income tax purposes is based upon the rules described in this section.
If you (or where applicable, your spouse) is an "active participant" in an
employer-sponsored retirement plan, you can use the following steps to
calculate whether your contribution will be fully or partially deductible:
(a) Subtract the applicable income limit from your adjusted gross income as
determined above. (For example, if you are a single taxpayer, your 1998
income limit is $30,000.) If the result is $10,000 or more (after 2006,
$20,000 or more for a married individual filing jointly), you can only
make a nondeductible contribution to your Traditional IRA.
(b) Divide the above figure by $10,000 (after 2006, $20,000 for a married
individual filing jointly), and multiply that percentage by $2,000.
(c) Subtract the dollar amount (result from (b) above) from $2,000 to
determine the amount that is deductible.
If the deduction limit is not a multiple of $10 then it should be rounded up to
the next $10. If you are eligible to make any deductible contribution, you may
make a $200 minimum deductible contribution.
Even if your income exceeds the limits described above, you may make a
contribution to your IRA up to the contribution limitations described in Item 3
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.
6. WHAT IF I MAKE AN EXCESS CONTRIBUTION?
Contributions that 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.
7. HOW DO I CORRECT AN 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 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.
8. CAN A SIMPLIFIED EMPLOYEE PENSION PLAN BE USED IN CONJUNCTION WITH A
TRADITIONAL IRA?
A Traditional 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 $10,000 per year (certain lower limits may apply for
highly compensated employees). The $10,000 limit applies for 1998 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 1998 and is
adjusted periodically for cost of living increases. A number of special rules
apply to SEP Plans, including
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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.
9. CAN A SAVINGS AND INCENTIVE MATCH PLAN FOR EMPLOYEES OF SMALL EMPLOYERS
("SIMPLE") BE USED IN CONJUNCTION WITH A TRADITIONAL IRA?
A Traditional IRA may also be used in connection with a SIMPLE Plan established
by your employer (or by you if you are self-employed). When this is done, the
IRA is known as a SIMPLE IRA, although it is similar to a Traditional IRA with
the exceptions described below. 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 1998 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 (l) 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 two-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 (but not to a
Traditional IRA (that is not a SIMPLE IRA) or to a Roth 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.
10. WHAT FORMS OF DISTRIBUTION ARE AVAILABLE FROM
A TRADITIONAL IRA?
You may at any time request distribution of all or any portion of your account.
However, distributions made prior to your attainment of age 59-1/2 may be
subject to an additional 10 percent penalty tax. Once you reach your "required
beginning date" (see Item 11 below), distribution of your account 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.
11. WHEN MUST DISTRIBUTIONS FROM A TRADITIONAL
IRA BEGIN?
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 Traditional
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.
You should notify the Custodian in writing of how you would like to receive your
distributions prior to December 31 of the year in which you reach age 70-1/2. If
you do not elect a distribution method by April 1 following the year in which
you reach age 70-1/2, a minimum distribution will be made by that date and by
each December 31 thereafter in an amount necessary to satisfy the minimum
distribution rules.
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(See Paragraph 2 of Article VIII of the Traditional IRA Custodial Agreement for
more details.)
Unless you or your spouse elects otherwise, your life expectancy and/or the life
expectancy of your spouse will be recalculated annually. (The election, if you
choose to make it, must be made by your required beginning date.) Once you reach
your required beginning date, 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 Traditional IRAs, you may satisfy the minimum
distribution requirements by receiving a distribution from one of your
Traditional IRAs in an amount sufficient to satisfy the minimum distribution
requirements for your other Traditional IRAs. You must still calculate the
required minimum distribution separately for each Traditional IRA, but then such
amounts may be totaled and the total distribution taken from one or more of your
individual Traditional IRAs.
Distribution from your Traditional 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.
12. ARE THERE DISTRIBUTION RULES THAT APPLY AFTER
MY DEATH?
Yes. If you die before receiving the balance of your Traditional IRA,
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 (except that if your
beneficiary is your spouse, payments must begin by December 31 of the year you
would have attained age 70-1/2, if later).
Your beneficiary must elect to receive distributions under one of the two
options above by December 31 of the year following the year of your death. If
your beneficiary does not make a timely election, option (i) will apply if your
beneficiary is anyone other than your surviving spouse, and option (ii) will
apply if the beneficiary is your surviving spouse. Alternatively, if your
beneficiary is your surviving spouse, he or she may elect to treat the 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 surviving spouse attains age
70-1/2.
13. HOW ARE DISTRIBUTIONS FROM A TRADITIONAL IRA
TAXED FOR FEDERAL INCOME TAX PURPOSES?
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
Traditional IRA at the end of the year (calculated after adding back
distributions during the year). For this purpose, all of your Traditional IRAs
are treated as a single Traditional IRA. Furthermore, all distributions from a
Traditional 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 a Traditional IRA 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 that may be 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 that
represents a return of nondeductible contributions. Historically, so-called
"excess distributions" to you as well as "excess accumulations" remaining in
your account as of your date of death were subject to additional taxes. These
additional taxes no longer apply.
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You must indicate on distribution requests whether or not federal income taxes
should be withheld. Redemption requests not indicating an election not to have
federal income tax withheld will be subject to withholding.
Any distribution that is properly rolled over will not be includable in your
gross income.
14. ARE THERE PENALTIES FOR EARLY DISTRIBUTION FROM
A TRADITIONAL IRA?
Distributions from your Traditional IRA made before age 591/2 will be subject
(in addition to ordinary income tax) to a 10% nondeductible penalty tax unless
(i) the distribution is a return of nondeductible contributions, (ii) the
distribution is made because of your death, disability, or as part of a series
of substantially equal periodic payments over your life expectancy or the joint
life expectancy of you and your beneficiary, (iii) the distribution is made for
medical expenses in excess of 7.5% of adjusted gross income or is made for
reimbursement of medical premiums while you are unemployed, (iv) the
distribution is made to pay for certain higher education expenses for you, your
spouse, your child, your grandchild, or the child or grandchild of your spouse,
(v) subject to various limits, the distribution is used to purchase a first home
or, in limited cases, a second or subsequent home for you, your spouse, or your
or your spouse's child, grandchild or ancestor, or (vi) the distribution 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
Item 9 above for special rules applicable to distributions from a SIMPLE IRA.
15. WHAT IF I ENGAGE IN A PROHIBITED TRANSACTION?
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.
16. WHAT IF I PLEDGE MY ACCOUNT?
If you use (pledge) all or part of your Traditional 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.
17. HOW ARE CONTRIBUTIONS TO A TRADITIONAL IRA
REPORTED FOR FEDERAL TAX PURPOSES?
Deductible contributions to your Traditional 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 Traditional 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 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 Traditional IRA.
18. HOW ARE EARNINGS ON MY ACCOUNT CALCULATED
AND ALLOCATED?
The method of computing and allocating annual earnings is set forth in Article
Vlll, Section 1 of the Individual Retirement Account Custodial Agreement. The
growth in value of your IRA is neither guaranteed nor projected.
19. FORM OF TRADITIONAL CUSTODIAL AGREEMENT.
Your Individual Retirement Account Custodial Agreement is established using the
provisions in IRS Form 5305-A, Individual Retirement Custodial Account, which
has been approved as to form by the
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Internal Revenue Service. The Internal Revenue Service approval is a
determination only as to the form of the IRA and does not represent a
determination of the merits of the IRA as adopted by you or an endorsement of
the investment funds selected. You may obtain further information with respect
to your Individual Retirement Account from any district office of the Internal
Revenue Service.
20. INCOME TAX WITHHOLDING
You must indicate on distribution requests whether or not federal income taxes
should be withheld. Redemption requests not indicating an election not to have
federal income tax withheld will be subject to withholding.
21. 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 and/or from IRS Publication 590, Individual Retirement Arrangements.
TRADITIONAL INDIVIDUAL RETIREMENT CUSTODIAL
ACCOUNT AGREEMENT
IRS FORM 5305-A
(REVISED JANUARY 1998)
By executing the IRA Application, the IRA applicant (the "Depositor") and
Firstar Trust Company (the "Custodian") make the following agreement
establishing an Individual Retirement Account (under Section 408(a) of the
Internal Revenue Code):
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), 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,
silver, and platinum coins, coins issued under the laws of any state,
and certain bullion.
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
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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 reached 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
designated 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
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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 the 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 Depositor and Custodian.
ARTICLE VIII
(Additional provisions agreed to by the Depositor and Custodian to complete this
Agreement.)
1. Investment of Account Assets
(a) All contributions to the custodial account shall be invested in the
shares of the Thompson Plumb Funds, Inc. or, if available, any other
series of Thompson Plumb Funds, Inc. or other regulated investment
companies for which Thompson, Plumb & Associates, 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 dividend and capital gain 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
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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 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 Companies.
(f) Neither the Custodian nor the Investment Company shall have any
liability in connection with investment choices made by the Depositor
or the Depositor's beneficiaries, as applicable.
2. Distributions
(a) The Custodian shall, from time to time, subject to the provisions of
Article IV, make distributions out of the custodial account to the
Depositor, in such manner and amounts as may be specified in written
instructions of the Depositor. All such instructions shall be deemed to
constitute a certification by the Depositor that the distribution so
directed is one that the Depositor is permitted to receive.
(b) If allowable under applicable law, then notwithstanding the foregoing,
upon the Depositor's death the distribution rules set forth in Article
IV will not apply if the Depositor's spouse is the beneficiary and he
or she elects to treat the account as his or her own. In such case the
spouse will be deemed to be the Depositor under this Agreement.
(c) Unless Paragraph 2(b) above is applicable, upon the Depositor's death
the election of either option (i) or option (ii) under Paragraph 4(b)
of Article IV must be made by December 31 of the year following the
year of the Depositor's death. If the beneficiary or beneficiaries do
not elect either of the distribution options described in Paragraph
4(b)(i) and 4(b)(ii) of Article IV by such date, distribution will be
made in accordance with Paragraph 4(b)(ii) of Article IV if beneficiary
is the Depositor's surviving spouse and in accordance with Paragraph
4(b)(i) of Article IV if the beneficiary or beneficiaries include
anyone other than the surviving spouse.
(d) If the Depositor does not choose any of the methods of distribution
described in Paragraphs 3(a) through 3(e) of Article IV by the April 1
following the calendar year in which he or she reaches age 70-1/2, then
by that date, and by each December 31 thereafter, distribution to the
Depositor will be made only in such amounts as will satisfy the
requirements of the minimum distribution rules in Paragraph 1 of
Article IV above, based on the joint life expectancy of the Depositor
and his or her designated beneficiary (or based on the Depositor's sole
life expectancy if the Depositor has no designated beneficiary, or is
treated as having no designated beneficiary for purposes of the above
described rules).
(e) Neither the Custodian nor the Investment Company shall have any
liability with respect to any contribution to the custodial account,
any investment of assets in the custodial account, or any distribution
therefrom pursuant to instructions received from the Depositor (or
beneficiary) or in accordance with this Agreement, or for any
consequences to the Depositor or beneficiary arising from such
contribution, investments or distributions including, but not limited
to, excise and other taxes and penalties which might accrue or be
assessed by reason thereof, nor shall the Custodian or Investment
Company be under any duty to make any inquiry or investigation with
respect thereto.
3. Amendment and Termination
(a) Thompson, Plumb & Associates, Inc., the Investment Advisor for the
Investment Company, may amend the custodial account Agreement
(including retroactive amendments) by delivering to 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
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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.
4. 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
will 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.
5. 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: Firstar Trust Company, P.O. Box 701, Milwaukee,
Wisconsin 53201-0701 or the Depositor at his or her most recent address
shown in the Custodian's records. The Depositor agrees to advise the
Custodian promptly, in writing, of any change of address.
6. 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. A 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.
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The Depositor accepts sole responsibility for any payment made pursuant
to the Depositor's beneficiary designation, the provisions of the
Custodial Agreement absent any such designation, and/or the provisions
of any applicable community or marital property law.
7. 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 Item 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.
8. Inalienability of Benefits
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.
9. 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.
10. 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. If any provision of this Article VIII shall be determined to be
invalid or unenforceable, the remaining provisions shall be unaffected and shall
continue in full force and effect.
11. Applicable State Law
This custodial account shall be construed, administered and enforced
according to the laws of the State of Wisconsin.
12. 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.
13. Limitation on Custodian and Investment Company
Responsibilities
Neither the Custodian, nor the Investment Company, will under any circumstances
be responsible for the timing, purpose or propriety of any contribution or of
any distribution made hereunder, nor shall the Custodian or Investment Company
incur any liability or responsibility for any tax imposed on account of any such
contribution or distribution. Further, neither the Custodian nor the Investment
Company shall 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 or Investment Company to be genuine and to
have been properly executed. The Custodian and Investment
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Company shall be under no duty of inquiry with respect to any such notice,
election, instruction or written instrument, but in their discretion may request
any tax waivers, proof of signatures or other evidence which is reasonably
deemed necessary for their protection. The Custodian and the Investment Company,
and their agents, affiliates, employees and assigns, shall have no
responsibilities other than those provided for in the Custodial Agreement and
shall not be liable for any mistake in judgement, or any action taken in good
faith, or for any loss that is not a result of gross negligence or willful
misconduct. To the fullest extent permitted by law, the Depositor, and the
Depositor's successors (including the Depositor's beneficiary(ies) or estate, as
the case may be) agree to at all times indemnify and hold harmless the Custodian
and Investment Company, and their agents, affiliates, employees and assigns,
from and against any and all liability that may be incurred in connection with
the Depositor's account (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 indemnified person's own bad faith, gross neg
ligence 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.
INDIVIDUAL RETIREMENT ACCOUNT DISCLOSURE
STATEMENT FOR ROTH (AMERICAN DREAM) IRAS
1. AM I ELIGIBLE TO CONTRIBUTE TO A ROTH IRA?
Anyone with compensation income whose adjusted gross income does not exceed the
limits described below is eligible to contribute to a Roth IRA. You may also
establish a Roth IRA to receive rollover contributions or transfers from another
Roth IRA or, in some cases, from a Traditional IRA. You may not roll amounts
into a Roth IRA from other retirement plans such as an employer-sponsored
qualified plan. However, current law does not appear to prohibit a rollover from
a qualified plan into a Traditional IRA and then from the Traditional IRA into a
Roth IRA.
2. WHEN CAN I MAKE CONTRIBUTIONS?
You may make annual contributions to your Roth IRA any time up to and including
the due date for filing your tax return for the year, not including extensions.
Unlike a Traditional IRA, you may continue to make regular contributions to your
Roth IRA even after you attain age 70-1/2. In addition, rollover contributions
and transfers (to the extent permitted as discussed below) may be made at any
time, regardless of your age.
3. HOW MUCH MAY I CONTRIBUTE TO A ROTH IRA?
You may make annual contributions to a Roth IRA in any amount up to 100% of your
compensation for the year or $2,000, whichever is less. The $2,000 limitation is
reduced by any contributions made by you or on your behalf to any other
individual retirement plan (such as a Traditional IRA). (Legislation pending as
of this printing clarifies that, for this purpose, the term individual
retirement plan does not include SEP IRAs or SIMPLE IRAs.) However, your annual
contribution limitation is not reduced by contributions you make to an Education
IRA that covers someone other than yourself. Qualifying rollover contributions
and transfers are not subject to these limitations.
In addition, if you are married and file a joint return, you may make
contributions to your spouse's Roth IRA. However, the maximum amount contributed
to both your own and to your spouse's Roth IRA may not exceed 100% of your
combined compensation or $4,000, whichever is less. The maximum amount that may
be contributed to either your Roth IRA or your spouse's Roth IRA is $2,000.
Again, these dollar limits are reduced by any contributions made by or on behalf
of you or your spouse to any other individual retirement plan (such as a
Traditional IRA), except that the limit is not reduced for contributions either
of you make to an Education IRA for someone other than yourselves.
As noted in Item 1, your eligibility to contribute to a Roth IRA depends on your
adjusted gross income (as defined below). The amount that you may contribute to
a Roth IRA is reduced proportionately for adjusted gross income as calculated
above which exceeds the applicable dollar amount. The applicable dollar amount
is $95,000 for a taxpayer filing as an individual or head of household and
$150,000 for a taxpayer filing as a married individual filing a joint tax
return. The applicable dollar limit for a taxpayer filing as a married
individual filing a separate return is $0. If your adjusted
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gross income as calculated above exceeds the applicable dollar amount by $15,000
or less ($10,000 or less in the case of a married individual filing jointly),
you may make a contribution to a Roth IRA. The amount you may contribute,
however, will be less than $2,000. (Legislation pending as of this printing
would change the phaseout range for a married individual filing separately from
$0 to $10,000.) Note that the amount you may contribute to a Roth IRA is not
affected by your participation in an employer-sponsored retirement plan.
For this purpose, your adjusted gross income (l) is determined without regard to
the exclusions from income arising under Section 135 (exclusion of certain
savings bond interest), Section 137 (exclusion of certain employer provided
adoption expenses) and Section 911 (certain exclusions applicable to U.S.
citizens or residents living abroad) of the Code, (2) is reduced by the amount
paid under an endowment con tract described in Section 408(b) of the Code which
is properly allocated to the cost of life insurance, (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, (4) does not take into account income
from rollovers of Traditional IRAs, and (5) does take into account the deduction
for a Traditional IRA. (Legislation pending as of this printing indicates that
the deduction for a contribution to a Traditional IRA would not be taken into
account for determining your adjusted gross income.)
To determine the amount you may contribute to a Roth IRA (assuming you have at
least $2,000 of income), use the following calculations:
(a) Subtract the amount contributed on your behalf to all Traditional IRAs
and employer-sponsored individual retirement plans from $2,000. This
amount is known as the "maximum potential contribution."
(b) Subtract the applicable dollar amount from your adjusted gross income
as determined above. If the result is $15,000 or more ($10,000 or more
in the case of a married individual filing jointly), you cannot make a
contribution to a Roth IRA.
(c) Divide the above figure by $15,000 ($10,000 in the case of a married
individual filing jointly), and multiply that percentage by the maximum
possible contribution.
(d) Subtract the dollar amount (result from (c) above) from the maximum
possible contribution to determine the amount you may contribute to a
Roth IRA.
(Legislation pending as of this printing indicates that you are eligible to make
a contribution to a Roth IRA of the lesser of: (i) $2,000 (assuming you have at
least $2,000 of income) less contributions to all other individual retirement
accounts or (ii) $2,000 minus the quantity $2,000 times the fraction determined
in part (c))
If the contribution limit is not a multiple of $10 then it should be rounded up
to the next $10. If you are eligible to make any contribution, you may make a
minimum $200 contribution.
Your contribution to a Roth IRA is not reduced by any amount you contribute to
an Education IRA for the benefit of someone other than yourself. If you are the
beneficiary of an Education IRA, additional limits may apply to you. Please
contact your tax advisor for more information.
4. CAN I ROLL OVER OR TRANSFER AMOUNTS FROM
OTHER IRAS?
You are allowed to "roll over" a distribution or transfer your assets from one
Roth IRA to another without any tax liability. Rollovers between Roth IRAs are
permitted once per year and must be accomplished within 60 days after the
distribution. In addition, if you are a single, head of household or married
filing jointly taxpayer and your adjusted gross income is not more than
$100,000, you may roll over amounts from anoth er individual retirement plan
(such as a Traditional IRA) to a Roth IRA. Such amounts are subject to tax as if
they were additional income to you for the year, but are not subject to the 10%
penalty tax. (However, under legislation pending as of this printing, if the
amount rolled over is distributed before the end of the five-tax-year period
beginning with the beginning of the tax year of the rollover, a 10% penalty tax
will apply to the taxed portion of the rollover.)
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If you roll over amounts from a Traditional IRA to a Roth IRA during 1998, you
may take advantage of special tax treatment. Under the special rules, you may
take your rollover into income as if one quarter of the amount rolled over was
distributed to you in 1998 and one quarter of the amount was distributed to you
in each of the following three years.
(Legislation pending as of this printing indicates that if you die prior to
taking all four amounts into income, the remaining amounts are included in
income for the year of your death unless you have a spouse and your spouse
elects to take those amounts into the spouse's income over the remaining
period.)
Subject to the foregoing limits, you may also directly convert a Traditional IRA
to a Roth IRA with similar tax results.
Furthermore, if you have made contributions to a Traditional IRA during the year
in excess of the deductible limit, you may convert those nondeductible IRA
contributions to contributions to a Roth IRA (subject to the contribution limit
for a Roth IRA).
You may not roll over amounts to a Roth IRA from a qualified retirement plan or
any other retirement plan that is not an individual retirement plan.
5. WHAT IF I MAKE AN EXCESS CONTRIBUTION?
Contributions that 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.
6. HOW DO I CORRECT AN 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 may
also be subject to the 10% early distribution penalty tax if you are under age
59-1/2 or have not satisfied the five-year requirement described below. In
addition, although you will still owe penalty taxes for one or more years,
excess contributions 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.
(Legislation pending as of this printing would permit an individual who is
partially or entirely ineligible for a Roth IRA to transfer amounts of up to
$2,000 to a nondeductible Traditional IRA (subject to reduction for amounts
remaining in the Roth IRA and for other Traditional IRA contributions).)
7. WHAT FORMS OF DISTRIBUTION ARE AVAILABLE FROM
A ROTH IRA?
You may at any time request distribution of all or any portion of your account.
However, distributions made prior to your attainment of age 59-1/2 (or in some
cases within five years of establishing your account) may produce adverse tax
consequences.
8. WHEN MUST DISTRIBUTIONS FROM A ROTH IRA
BEGIN?
Unlike Traditional IRAs, there is no requirement that you begin distribution of
your account at any particular age.
9. ARE THERE DISTRIBUTION RULES THAT APPLY AFTER
MY DEATH?
Your account must be distributed after your death in accordance with rules
similar to those that apply to distributions from a Traditional IRA. Thus,
although the IRS has not issued guidance, the Roth Custodial Agreement requires
that your remaining interest in your Roth IRA will, at the election of you or
your beneficiary, (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 expectancy of your designated beneficiary. If distributions do not commence
by the December 31 following the year of your death, distributions will be made
in accordance with option (i). Notwithstanding the foregoing, if your sole
beneficiary is your surviving spouse, he or she will be treated as the
depositor.
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10. HOW ARE DISTRIBUTIONS FROM A ROTH IRA TAXED
FOR FEDERAL INCOME TAX PURPOSES?
Amounts distributed to you are generally excludable from your gross income if
they (i) are paid after you attain age 59-1/2, (ii) are made to your beneficiary
after your death, (iii) are attributable to your becoming disabled, (iv) subject
to various limits, are made for the purchase of a first home (or for a second or
subsequent home in certain limited cases) for you, your spouse, or your or your
spouse's children, grandchildren, or parents, or (v) are rolled over to another
Roth IRA.
Regardless of the foregoing, if you or your beneficiary receive a distribution
within the five-taxable-year period starting with the beginning of the year to
which your initial contribution to your Roth IRA applies, the earnings on your
account are includable in taxable income. In addition, if you roll over funds to
your Roth IRA from another individual retirement plan (such as a Traditional IRA
or another Roth IRA into which amounts were rolled from a Traditional IRA), the
portion of a distribution attributable to rolled-over amounts which exceeds the
amounts taxed in connection with the conversion to a Roth IRA is includable in
income (and subject to penalty tax) if it is distributed prior to the end of the
five-tax-year period beginning with the start of the tax year during which the
rollover occurred. (Under legislation pending at the date of this printing, an
amount taxed in connection with a rollover would be subject to a 10% penalty tax
if it is distributed before the end of the five-tax-year period. The pending
legislation also suggests that if an individual makes multiple taxable rollovers
to the same Roth IRA, the five-year period runs from the date of the most recent
rollover.)
In any event, any part of a distribution to you that constitutes a return of
your contributions will not be included in your taxable income. Amounts
distributed to you are treated as coming first from your nondeductible
contributions. (Legislation pending as of this printing clarifies that the next
portion of a distribution is treated as coming from amounts which have been
rolled over from a Traditional IRA and are subject to the four-year recognition
treatment described above. Next, amounts are treated as coming from other
rollovers from a Traditional IRA. Any remaining amounts are treated as
distributed last.) Any portion of your distribution which does not meet the
criteria for exclusion from gross income is also subject to a 10% penalty tax.
Note that to the extent a distribution would be taxable to you, neither you nor
anyone else can qualify for capital gains treatment for amounts distributed from
your account. Similarly, you are not entitled to the special five- or ten-year
averaging rule for lump-sum distributions that may be available to persons
receiving distributions from certain other types of retirement plans. Rather,
the taxable portion of any distribution is taxed to you as ordinary income. Your
Roth IRA is not subject to taxes on excess distributions or on excess amounts
remaining in your account as of your date of death.
You may be required to indicate on distribution requests whether or not federal
income taxes should be withheld on the taxable portion (if any) of a
distribution from a Roth IRA. Redemption requests not indicating an election not
to have federal income tax withheld will be subject to withholding with respect
to the taxable portion (if any) of a distribution to the extent required under
federal law. (Note that legislation pending as of this printing clarifies that,
for federal tax purposes, Roth IRAs are taxed separately from Traditional IRAs,
Roth IRAs with rollovers are taxed separately from Roth IRAs without rollovers,
and Roth IRAs with rollovers with different five-year periods are taxed
separately.)
11. ARE THERE PENALTIES FOR EARLY DISTRIBUTION FROM
A ROTH IRA?
As indicated above, earnings on your contributions that are distributed before
certain events are subject to various taxes.
12. WHAT IF I ENGAGE IN A PROHIBITED TRANSACTION?
If you engage in a "prohibited transaction," as defined in Section 4975 of the
Internal Revenue Code, your account could lose its tax-favored status. 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.
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13. WHAT IF I PLEDGE MY ACCOUNT?
If you use (pledge) all or part of your Roth IRA as security for a loan, your
account may lose its tax-favored status.
14. HOW ARE CONTRIBUTIONS TO A ROTH IRA REPORTED FOR FEDERAL TAX PURPOSES?
As of the date of this printing, the Internal Revenue Service had not issued
forms for reporting information related to contributions to and distributions
from a Roth IRA.
15. HOW ARE EARNINGS ON MY ACCOUNT CALCULATED AND ALLOCATED?
The method of computing and allocating annual earnings is set forth in the Roth
Individual Retirement Account Custodial Agreement. The growth in value of your
IRA is neither guaranteed nor projected.
16. IS THERE ANYTHING ELSE I SHOULD KNOW?
Your Roth Individual Retirement Custodial Account is established using the
provisions of IRS Form 5305-RA, Roth Individual Retirement Custodial Account,
which 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
or an endorsement of the investment funds selected. You may obtain further
information with respect to your Roth Individual Retirement Account from any
district office of the Internal Revenue Service and/or from IRS Publication 590,
Individual Retirement Arrangements. The statute provides that Roth IRAs are to
be treated the same as Traditional IRAs for most purposes. As the IRS clarifies
its interpretation of the statute, revised or updated information will be
provided.
ROTH INDIVIDUAL RETIREMENT CUSTODIAL
ACCOUNT AGREEMENT
IRS FORM 5305-RA
(REVISED JANUARY 1998)
By executing the IRA Application, the IRA applicant (the "Depositor") and
Firstar Trust Company (the "Custodian") make the following agreement
establishing a Roth IRA (under Section 408A of the Internal Revenue Code):
ARTICLE I
1. If this Roth IRA is not designated as a Roth Conversion IRA, then, except
in the case of a rollover contribution described in Section 408A(e), the
Custodian will accept only cash contributions and only up to a maximum
amount of $2,000 for any tax year of the Depositor.
2. If this Roth IRA is designated as a Roth Conversion IRA, no contributions
other than IRA Conversion Contributions made during the same tax year will
be accepted.
ARTICLE II
The $2,000 limit described in Article I is gradually reduced to $0 between
certain levels of adjusted gross income (AGI). For a single depositor, the
$2,000 annual contribution is phased out between AGI of $95,000 and $110,000;
for a married Depositor who files jointly, between AGI of $150,000 and $160,000;
and for a married Depositor who files separately, between $0 and $10,000. In the
case of a conversion, the Custodian will not accept IRA Conversion Contributions
in a tax year if the Depositor's AGI for that tax year exceeds $100,000 or if
the depositor is married and files a separate return. Adjusted gross income is
defined in Section 408A(c)(3) and does not include IRA Conversion Contributions.
ARTICLE III
The Depositor's interest in the balance in the custodial account is
nonforfeitable.
ARTICLE IV
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, silver, and
platinum coins, coins issued under the laws of any state, and certain
bullion.
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ARTICLE V
1. If the Depositor dies before his or her entire interest is distributed to
him or her and the grantor's surviving spouse is not the sole beneficiary,
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:
(a) Be distributed by December 31 of the year containing the fifth
anniversary of the Depositor's death, or
(b) Be distributed over the life expectancy of the designated beneficiary
starting no later than December 31 of the year following the year of
the Depositor's death.
If distributions do not begin by the date described in (b), distribution method
(a) will apply.
2. In the case of distribution method l.(b) above, to determine the minimum
annual payment for each year, divide the grantor's entire interest in the
trust as of the close of business on December 31 of the preceding year by
the life expectancy of the designated beneficiary using the attained age of
the designated beneficiary as of the beneficiary's birthday in the year
distributions are required to commence and subtract 1 for each subsequent
year.
3. If the Depositor's spouse is the sole beneficiary on the Depositor's date
of death, such spouse will then be treated as the Depositor.
ARTICLE VI
1. The Depositor agrees to provide the Custodian with information necessary
for the Custodian to prepare any reports required under Section 408(i) and
408A(d)(3)(E), regulations Sections 1.408-5 and 1.408-6, and under guidance
published by the Internal Revenue Service.
2. The Custodian agrees to submit reports to the Internal Revenue Service and
the Depositor prescribed by the Internal Revenue Service.
ARTICLE VII
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through IV and this sentence will be controlling. Any
additional articles that are not consistent with Section 408A, the related
regulations, and other published guidance will be invalid.
ARTICLE VIII
This Agreement will be amended from time to time to comply with the provisions
of the Code, related regulations, and other published guidance. Other amendments
may be made with the consent of the persons whose signatures appear below.
ARTICLE IX
(Additional provisions agreed to by the Depositor and Custodian to complete this
Agreement.)
1. Investment of Account Assets.
(a) All contributions to the custodial account shall be invested in the
shares of any regulated investment company ("Investment Company") for
which Thompson, Plumb & Associates, Inc. serves as Investment Advisor,
or any other regulated investment company designated by the Investment
Advisor. Shares of stock of an Investment Company shall be referred to
as "Investment Company Shares."
(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
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
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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. 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,
redeem any number of shares held in the custodial account and reinvest
the proceeds in the shares of any other Investment Company. 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 Companies.
(f) Neither the Custodian nor the Investment Company shall have any
liability in connection with investment choices made by the Depositor
or the Depositor's beneficiaries, as applicable.
2. Distributions
(a) The Custodian shall, from time to time, subject to the provisions of
Article IV, make distributions out of the custodial account to the
Depositor, in such manner and amounts as may be specified in written
instructions of the Depositor. All such instructions shall be deemed to
constitute a certification by the Depositor that the distribution so
directed is one that the Depositor is permitted to receive.
(b) Neither the Custodian nor the Investment Company shall have any
liability with respect to any contribution to the custodial account,
any investment of assets in the custodial account, or any distribution
therefrom pursuant to instructions received from the Depositor (or
beneficiary) or in accordance with this Agreement, or (or any
consequences to the Depositor or beneficiary arising from such
contribution, investments or distributions including, but not limited
to, excise and other taxes and penalties which might accrue or be
assessed by reason thereof, nor shall the Custodian or Investment
Company be under any duty to make any inquiry or investigation with
respect thereto.
3. Amendment and Termination.
(a) Thompson, Plumb & Associates, Inc., the Investment Advisor for the
Investment Company, may amend the custodial account Agreement
(including retroactive amendments) by delivering to the Custodian and
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 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.
4. 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, and the Custodian's compensation shall be paid from
the custodial account, unless otherwise paid by the Depositor or his or her
beneficiaries.
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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.
5. 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 Firstar Trust Company, P.O. 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.
6. 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 personal representative of the
Depositor's estate.
The Depositor may also change or revoke any previously made designation of
beneficiary. A 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.
The Depositor accepts sole responsibility for any payment made pursuant to the
Depositor's beneficiary designation, the provisions of the Custodial Agreement
absent any such designation, and/or the provisions of any applicable community
or marital property law.
7. Inalienability of Benefits.
The benefits provided under this custodial account shall not be subject to
alienation, assignment, garnishment, attachment, execution or levy of any kind
and any attempt to cause such benefits to be so subjected shall not be
recognized except to the extent as may be required by law.
8. Rollover Contributions and Transfers.
Subject to the restrictions in Article I, 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 IX shall conflict with the
provisions of Articles V, VI and/or VIII, the provisions of this Article IX
shall govern. If any provision of this Article IX shall be determined to be
invalid or unenforceable, the remaining provisions shall be unaffected and shall
continue in full force and effect.
10. Applicable State Law.
This custodial account shall be construed, administered and enforced according
to the laws of the State of Wisconsin.
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11. Limitation on Custodian and Investment Company Responsibility
Neither the Custodian, nor the Investment Company, will under any circumstances
be responsible for the timing, purpose or propriety of any contribution or of
any distribution made hereunder, nor shall the Custodian or Investment Company
incur any liability or responsibility for any tax imposed on account of any such
contribution or distribution. Further, neither the Custodian nor the Investment
Company shall 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 or Investment Company to be genuine and to
have been properly executed. The Custodian and Investment Company shall be under
no duty of inquiry with respect to any such notice, election, instruction or
written instrument, but in their discretion may request any tax waivers, proof
of signatures or other evidence which is reasonably deemed necessary for their
protection. The Custodian and the Investment Company, and their agents,
affiliates, employees and assigns, shall have no responsibilities other than
those provided for in the Custodial Agreement and shall not be liable for any
mistake in judgement, or any action taken in good faith, or for any loss that is
not a result of gross negligence or willful misconduct. To the fullest extent
permitted by law, the Depositor, and the Depositor's successors (including the
Depositor's beneficiary(ies) or estate, as the case may be) agree to at all
times indemnify and hold harmless the Custodian and Investment Company, and
their agents, affiliates, employees and assigns, from and against any and all
liability that may be incurred in connection with the Depositor's account
(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
indemnified person'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.
INDIVIDUAL RETIREMENT ACCOUNT DISCLOSURE
STATEMENT FOR EDUCATION IRAS
1. WHO IS ELIGIBLE FOR AN EDUCATION IRA?
Anyone may contribute to an Education IRA regardless of his or her relationship
to the beneficiary. The beneficiary of an Education IRA must be under age 18 at
the time a contribution is made to an Education IRA on his or her behalf. An
Education IRA may also be established to receive rollover contributions or
transfers from another Education IRA.
Education IRAs are subject to limitations based on the status of the contributor
as well as the status of the beneficiary. For purposes of this discussion,
except as noted, the term "beneficiary" is used to refer to an individual whose
education is to be financed, in part or in whole, through an Education IRA.
2. WHEN CAN I MAKE CONTRIBUTIONS TO AN EDUCATION IRA?
You may make contributions to an Education IRA for the calendar year regardless
of your age; however, you may not make a contribution to an Education IRA after
the beneficiary attains age 18. In addition, rollover contributions and
transfers (as discussed below) may be made at any time, regardless of the age of
the beneficiary.
3. HOW MUCH MAY I CONTRIBUTE TO AN EDUCATION IRA?
The total of all contributions made to all Education IRAs that cover a
particular beneficiary may not exceed $500 in a taxable year. It is the joint
responsibility of the contributor and the beneficiary to verify that excess
contributions are not made on behalf of a particular beneficiary. Qualifying
rollover contributions and transfers are not subject to these limitations. Note
that special rules apply to contributions to Education IRAs for purposes of gift
and estate taxes.
In addition, if your adjusted gross income (or combined income if you file a
joint tax return) as modified below exceeds certain limits, you are not eligible
to make a contribution to an Education IRA. For this purpose your adjusted gross
income is increased by amounts excluded under Section 911 (certain exclusions
applicable to U.S. citizens or residents living abroad), Section 931 (certain
exclusions applicable to U.S. citizens or residents living in Guam, American
Samoa, or the Northern Mariana Islands), and Section 933
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(certain exclusions applicable to U.S. citizens and residents living in Puerto
Rico) of the Code.
The amount you may contribute to an Education IRA for a particular beneficiary
is reduced proportionately for adjusted gross income (as modified above) which
exceeds the applicable dollar amount. The applicable dollar amount is $95,000
for an individual, a married individual filing a separate tax return, or a head
of household and $150,000 for a married individual filing a joint tax return.
(These amounts are not adjusted for cost-of-living changes or otherwise.) If
your adjusted gross income as modified above exceeds the applicable dollar
amount by $15,000 or less ($10,000 or less in the case of a married individual
filing jointly), you may make a contribution to an Education IRA. The amount you
may contribute, however, will be less than $500.
To determine the amount you may contribute to an
Education IRA, use the following calculations:
(a) Subtract the applicable dollar amount from your adjusted gross income
as modified above. If the result is $15,000 or more ($10,000 or more in
the case of a married individual filing jointly), you may not make a
contribution to an Education IRA.
(b) Divide the above figure by $15,000 ($10,000 in the case of a married
individual filing jointly), and multiply that percentage by $500.
(c) Subtract the dollar amount (result from (b) above) from $500 to
determine the amount that you may contribute to an Education IRA.
In addition to the limitations described above, the $500 may be reduced by other
amounts contributed to an individual retirement plan for the benefit of a
particular beneficiary, but is not affected by the adjusted gross income of the
beneficiary.
If the beneficiary of the Education IRA also maintains a Traditional or Roth
IRA, his or her overall contributions to other individual retirement plans may
be limited. Please contact your tax advisor for more information.
4. CAN I ROLL OVER OR TRANSFER AMOUNTS FROM
ANOTHER EDUCATION IRA?
Amounts may be "rolled over" from one Education IRA to another Education IRA
benefiting the same beneficiary. In addition, amounts may be rolled over without
any tax liability to benefit (i) the spouse of the beneficiary, (ii) an ancestor
of the beneficiary, (iii) a descendant of the beneficiary, of the beneficiary's
parents, or of the beneficiary's spouse, or (iv) the spouse of a lineal
descendant of an individual described in (iii). Rollovers between Education IRAs
may be made once per year and must be accomplished within 60 days after the
distribution.
5. WHAT IF I MAKE AN EXCESS CONTRIBUTION?
Contributions that 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 must be paid for each year in which the excess
contribution remains in the beneficiary's account.
6. HOW DO I CORRECT AN EXCESS CONTRIBUTION?
If a contribution in excess of the allowable maximum is made, it may be
corrected to 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 the tax return for the contributor's tax year for which the contribution
was made. (Legislation pending as of this printing would use the beneficiary's
tax year rather than the contributor's.) Any earnings on the withdrawn excess
contribution will be taxable in the year the excess contribution was made and
will be subject to a 10% tax penalty.
7. WHAT FORMS OF DISTRIBUTION ARE AVAILABLE FROM
AN EDUCATION IRA?
Distributions may be made as a lump sum of the entire account, or distributions
of a portion of the account may be as requested.
8. WHEN MUST DISTRIBUTIONS FROM AN EDUCATION
IRA BEGIN?
There is no requirement that a beneficiary begin distribution of an Education
IRA account at any particular age. (Legislation pending as of the date of this
printing would in general require distribution within 30 days of the earlier of
the beneficiary's death or attainment of age 30 and would deem distribution to
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occur for any amounts not distributed within such time.)
9. ARE THERE DISTRIBUTION RULES THAT APPLY AFTER
DEATH?
Special rules apply in the case of the divorce or death of a beneficiary of an
Education IRA. (In particular, under legislation pending as of this printing,
any balances to the credit of a beneficiary must be distributed to his or her
beneficiary within 30 days of death.)
10. HOW ARE DISTRIBUTIONS FROM AN EDUCATION IRA
TAXED FOR FEDERAL INCOME TAX PURPOSES?
Amounts distributed are generally excludable from gross income if they do not
exceed the beneficiary's "qualified higher education expenses" for the year or
are rolled over to another Education IRA. "Qualified higher education expenses"
generally include the cost of tuition, fees, books, supplies, and equipment for
enrollment at (i) accredited post-secondary educational institutions offering
credit toward a bachelor's degree, an associate's degree, a graduate-level or
professional degree or another recognized post-secondary credential and (ii)
certain vocational schools. In addition, room and board may be covered if the
beneficiary is at least a "half-time" student. This amount may be reduced by
certain scholarships, qualified state tuition programs, HOPE, Lifetime Learning
tax credits, and other amounts paid on the beneficiary's behalf. To the extent
payments during the year exceed such amounts, they are partially taxable and
partially nontaxable similar to payments received from an annuity. Any taxable
portion of a distribution is subject to a 10% penalty tax in addition to income
tax unless the distribution is due to the death or disability of the beneficiary
or made on account of scholarship received by the beneficiary. A beneficiary may
elect to waive the exclusion from gross income for qualified higher education
expenses and treat the entire distribution as if it were a payment from an
annuity.
To the extent a distribution is taxable, capital gains treatment does not apply
to amounts distributed from the account. Similarly, the special five- and
ten-year averaging rules for lump-sum distributions do not apply to
distributions from an Education IRA. The taxable portion of any distribution is
taxed as ordinary income except the portion of a distribution that represents a
return of nondeductible contributions.
The recipient of a distribution may need to indicate on certain distribution
requests whether or not federal income taxes should be withheld. Redemption
requests not indicating an election not to have federal income tax withheld
will be subject to withholding with respect to the taxable portion (if any) of
the distribution to the extent required under federal law.
11. WHAT IF A PROHIBITED TRANSACTION OCCURS?
If a "prohibited transaction," as defined in Section 4975 of the Internal
Revenue Code, occurs, the Education IRA could be disqualified. Rules similar to
those that apply to Traditional IRAs will apply.
12. WHAT IF THE EDUCATION IRA IS PLEDGED?
If all or part of the Education IRA is pledged as security for a loan, rules
similar to those that apply to Traditional IRAs will apply. In general, those
rules provide that the amount pledged is treated as distributed.
13. HOW ARE CONTRIBUTIONS TO AN EDUCATION IRA
REPORTED FOR FEDERAL TAX PURPOSES?
As of the date of this Disclosure Statement, the Internal Revenue Service had
not issued forms for reporting information related to contributions to and
distributions from an Education IRA.
14. HOW ARE EARNINGS ON AN EDUCATION IRA
CALCULATED AND ALLOCATED?
The method of computing and allocating annual earnings is expected to be set
forth in an IRS pre-approved Education Individual Retirement Account Custodial
Agreement. The growth in value of the IRA is neither guaranteed nor projected.
15. IS THERE ANYTHING ELSE I SHOULD KNOW?
As the IRS clarifies its interpretation of the Education IRA provisions of the
Code, revised or updated information will be provided to you.
EDUCATION INDIVIDUAL RETIREMENT CUSTODIAL
ACCOUNT AGREEMENT
The depositor whose name appears above is establishing an education individual
retirement custodial account under Section 530 for the benefit of
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the designated beneficiary whose name appears above exclusively to pay for the
qualified higher education expenses, within the meaning of Section 530(b)(2), of
such designated beneficiary.
The custodian named above has provided the depositor with a concise statement
disclosing the provisions governing Section 530. This disclosure statement must
include an explanation of the statutory requirements applicable to, and the
income tax consequences of establishing and maintaining an account under,
Section 530. Providing the depositor with a copy of Notice 97-60, 1997-46
I.R.B. 8 (November 17, 1997) is considered a sufficient disclosure statement.
The custodian also will provide a copy of this form and the disclosure statement
to the responsible individual, as defined in Article VI below, if the
responsible individual is not the same person as the depositor.
The depositor and the custodian make the following agreement:
ARTICLE I
The custodian may accept additional cash contributions. These contributions may
be from the depositor, or from any other individual, for the benefit of the
designated beneficiary, provided the designated beneficiary has not attained the
age of 18 as of the date such contributions are made. Total contributions that
are not rollover contributions described in Section 530(d)(5) are limited to a
maximum amount of $500 for the taxable year.
ARTICLE II
The maximum aggregate contribution that an individual may make to the custodial
account in any year may not exceed the $500 in total contributions that the
custodial account can receive. In addition, the maximum aggregate contribution
that an individual may make to the custodial account in any year is phased out
for unmarried individuals who have modified adjusted gross income (AGI) between
$95,000 and $110,000 for the year of the contribution and for married
individuals who file joint returns with modified AGI between $150,000 and
$160,000 for the year of the contribution. Unmarried individuals with modified
AGI above $110,000 for the year and married individuals who file joint returns
and have modified AGI above $160,000 for the year may not make a contribution
for that year. Modified AGI is defined in Section 530(c)(2).
ARTICLE III
No part of the custodial account 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 investment fund (within the meaning of Section
530(b)(1)(D)).
ARTICLE IV
1. Any balance to the credit of the designated beneficiary on the date on
which such designated beneficiary attains age 30 shall be distributed to
the designated beneficiary within 30 days of such date.
2. Any balance to the credit of the designated beneficiary shall be
distributed to the estate of the designated beneficiary within 30 days of
the date of such designated beneficiary's death.
ARTICLE V
The depositor shall have the power to direct the custodian regarding the
investment of the above-listed amount assigned to the custodial account
(including earnings thereon) in the investment choices offered by the custodian.
The responsible individual, however, shall have the power to redirect the
custodian regarding the investment of such amounts, as well as the power to
direct the custodian regarding the investment of all additional contributions
(including earnings thereon) to the custodial account. In the event that the
responsible individual does not direct the custodian regarding the investment of
additional contributions (including earnings thereon), the initial investment
direction of the depositor also will govern all additional contributions made to
the custodial account until such time as the responsible individual otherwise
directs the custodian. Unless otherwise provided in this agreement, the
responsible individual also shall have the power to direct the custodian
regarding the administration, management, and distribution of the account.
ARTICLE VI
The "responsible individual" named by the depositor shall be a parent or
guardian of the designated beneficiary. The custodial account shall have only
one
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responsible individual at any time. If the responsible individual becomes
incapacitated or dies while the designated beneficiary is a minor under state
law, the successor responsible individual shall be the person named to succeed
in that capacity by the preceding responsible individual in a witnessed writing
or, if no successor is so named, the successor responsible individual shall be
the designated beneficiary's other parent or successor guardian. Unless
otherwise directed by checking the option below, at the time that the designated
beneficiary attains the age of majority under state law, the designated
beneficiary becomes the responsible individual.
[ ] Option (This provision is effective only if checked): The responsible
individual shall continue to serve as the responsible individual for the
custodial account after the designated beneficiary attains the age of majority
under state law and until such time as all assets have been distributed from the
custodial account and the custodial account terminates. If the responsible
individual becomes incapacitated or dies after the designated beneficiary
reaches the age of majority under state law, the responsible individual shall be
the designated beneficiary.
ARTICLE VII
The responsible individual may or may not change the beneficiary designated
under this agreement to another member of the designated beneficiary's family
described in Section 529(e)(2) in accordance with the custodian's procedures.
ARTICLE VIII
1. The depositor agrees to provide the custodian with the information
necessary for the custodian to prepare any reports required under Section
530(h).
2. The custodian agrees to submit reports to the Internal Revenue Service and
the responsible individual as prescribed by the Internal Revenue
Service.
ARTICLE IX
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through IV will be controlling. Any additional articles
that are not consistent with Section 530 and related regulations will be
invalid.
ARTICLE X
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 depositor and the custodian whose signatures appear below.
ARTICLE XI
1. Investment of Account Assets.
(a) All contributions to the custodial account shall be invested in the
shares of any regulated investment company ("Investment Company") for
which Thompson, Plumb & Associates, Inc. serves as Investment Advisor,
or any other regulated investment company designated by the Investment
Advisor. Shares of stock of an Investment Company shall be referred to
as "Investment Company Shares."
(b) Each contribution to the custodial account shall identify the
designated beneficiary's account number and shall be accompanied by a
signed statement directing the investment of that contribution into the
designated beneficiary's account. The custodian may return to the
contributor, without liability for interest thereon, any contribution
which is not accompanied by such information and such 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
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, 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 designated
beneficiary shall be the beneficial owner of all Investment Company
Shares held in the custodial account and the custodian
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shall not vote any such shares, except upon written direction of the
responsible individual. The custodian agrees to forward to the
responsible individual 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 responsible individual may, at any time, by written notice 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. 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 Companies.
(f) To the extent a responsible individual for the designated beneficiary
makes or has power to make decisions as to the investment of the
designated beneficiary's account, that party acknowledges that such
decisions are binding and nonvoidable.
(g) Neither the custodian nor the Investment Company shall have any
liability in connection with investment choices made by the depositor
or the depositor's beneficiaries, as applicable.
2. Amendment and Termination
(a) The custodian or Investment Company may amend the Custodial Account
(including retroactive amendments) by delivering to the responsible
individual written notice of such amendment setting forth the substance
and effective date of the amendment. The responsible individual shall
be deemed to have consented to any such amendment not objected to in
writing by the responsible individual 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 designated
beneficiary.
(b) The responsible individual 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 designated beneficiary or his or her estate of its entire
balance.
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, and the custodian's compensation shall be paid from
the custodial account, unless otherwise paid by the beneficiary or his or her
estate.
The custodian's fees are set forth in a schedule provided to the responsible
individual. 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
designated beneficiary, or reinvested or transferred in accordance with the
responsible individual'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 responsible individual 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 Firstar Trust Company, P.O. box 701, Milwaukee,
Wisconsin 53201-0701 or the responsible individual at his most recent
address shown in the custodian's records. The
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responsible individual agrees to advise the custodian promptly, in
writing, of any change of address.
5. Monitoring of Contribution Limitations
Information
Neither the custodian nor the Investment Company shall not be responsible for
monitoring the amount of contributions made to the designated beneficiary's
account or the income levels of any depositor or contributor for purposes of
assuring compliance with applicable state or federal tax laws.
6. Inalienability of Benefits
The benefits provided under this custodial account shall not be subject to
alienation, assignment, garnishment, attachment, execution or levy of any kind
and any attempt to cause such benefits to be so subjected shall not be
recognized except to the extent as may be required by law. However, the
responsible individual may change the designated beneficiary under the agreement
to another member of the designated beneficiary's family described in Internal
Revenue Code Section 529(e)(2) in accordance with the custodian's procedures.
7. 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.
8. Conflict in Provisions
To the extent that any provisions of this Article XI on the Education IRA
Application shall conflict with the provisions of Articles V through VIII or X,
the provisions of this Article XI shall govern. If any provision of this Article
IX shall be determined to be invalid or unenforceable, the remaining provisions
shall be unaffected and shall continue in full force and effect.
9 Applicable State Law
This custodial account shall be construed, administered and enforced according
to the laws of the State of Wisconsin.
10. Limitation on Custodian and Investment Company
Responsibility
Neither the Custodian, nor the Investment Company, will under any circumstances
be responsible for the timing, purpose or propriety of any contribution or of
any distribution made hereunder, nor shall the Custodian or Investment Company
incur any liability or responsibility for any tax imposed on account of any such
contribution or distribution. Further, neither the Custodian nor the Investment
Company shall 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 or Investment Company to be genuine and to
have been properly executed. The Custodian and Investment Company shall be under
no duty of inquiry with respect to any such notice, election, instruction or
written instrument, but in their discretion may request any tax waivers, proof
of signatures or other evidence which is reasonably deemed necessary for their
protection. The Custodian and the Investment Company, and their agents,
affiliates, employees and assigns, shall have no responsibilities other than
those provided for in the Custodial Agreement and shall not be liable for any
mistake in judgement, or any action taken in good faith, or for any loss that is
not a result of gross negligence or willful misconduct. To the fullest extent
permitted by law, the Depositor, and the Depositor's successors (including the
Depositor's beneficiary(ies) or estate, as the case may be) agree to at all
times indemnify and hold harmless the Custodian and Investment Company, and
their agents, affiliates, employees and assigns, from and against any and all
liability that may be incurred in connection with the Depositor's account
(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
indemnified person's own bad faith, gross neg ligence or willful misconduct.
30
<PAGE> 1
<TABLE>
<CAPTION>
<S><C>
Form 5305-SEP SIMPLIFIED EMPLOYEE PENSION-INDIVIDUAL OMB No. 1545-049
(Rev. January 1997) RETIREMENT ACCOUNTS CONTRIBUTION AGREEMENT DO NOT FILE WITH
THE INTERNAL
Department of Treasury (UNDER SECTION 408(K) OF THE INTERNAL REVENUE CODE) REVENUE SERVICE
Internal Revenue Service
</TABLE>
______________________________________________ makes the following agreement
(Name of employer)
under 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*.
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 of 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
________________________________________________________________________________
PAPERWORK REDUCTION ACT NOTICE
You are not required to provide the information requested on a form that is
subject to the Paperwork Reduction Act unless the form displays a valid OMB
control number. Books or records relating to a form or its instructions must be
retained as long as their contents may become material in the administration of
any Internal Revenue law. Generally, tax returns and return information are
confidential, as required by Code section 6103.
The time needed to complete this form will vary depending on individual
circumstances.
The estimated average time is:
RECORDKEEPING ..................................... 1 hr., 40 min.
LEARNING ABOUT THE LAW OR THE FORM ................ 1 hr., 35 min.
PREPARING THE FORM ................................ 1 hr., 41 min.
If you have comments concerning the accuracy of these time estimates or
suggestions for making this form simpler, we would be happy to hear from you.
You can write to the Tax Forms Committee, Western Area Distribution Center,
Rancho Cordova, CA 95743-0001. DO NOT send this form to this address. Instead,
keep it for your records.
INSTRUCTIONS
Section references are to the Internal Revenue Code unless otherwise noted.
PURPOSE OF FORM
Form 5305-SEP (Model SEP) is used by an employer to make an agreement to provide
benefits to all eligible employees under a SEP described in section 408(k). DO
NOT file this form with the IRS. See PUB. 560, Retirement Plans for the
Self-Employed, and PUB 590, Individual Retirement Arrangements (IRAs).
INSTRUCTIONS TO THE EMPLOYER
SIMPLIFIED EMPLOYEE PENSION. -- A SEP is a written arrangement (a plan) that
provides you with a simplified way to make contributions toward your employees'
retirement income. Under a SEP, you can contribute to an employee's individual
retirement account or annuity (IRA). You make contributions directly to an IRA
set up by or for each employee with a bank, insurance company, or other
qualified financial institution. When using Form 5305-SEP to establish a SEP,
the IRA must be a Model IRA established on an IRS form or a master or
prototype IRA for which the IRS has issued a favorable opinion letter. Making
the agreement on Form 5305-SEP does not establish an employer IRA described in
section 408(c).
WHEN NOT TO USE FORM 5305-SEP.-- Do not use this form if you:
1. Currently maintain any other qualified retirement plan. This does
not prevent you from maintaining another SEP.
2. Previously maintained a defined benefit plan that is now
terminated.
3. Have any eligible employees for whom IRAs have not been
established.
4. Use the services of leased employees (described in section 414(n)).
5. Are a member of an affiliated service group (described in section
414(m)), a controlled group of corporations (described in section 414(b)), or
trades or businesses under common control (described in sections 414(c) and
414(o)), unless all eligible employees of all the members of such groups,
trades, or businesses, participate in the SEP.
6. Will not pay the cost of the SEP contributions. Do not use Form
5305-SEP for a SEP that provides for elective employee contributions even if
the contributions are made under a salary reduction agreement.
Use Form 5305A-SEP, or a nonmodel SEP if you permit elective deferrals
to a SEP.
NOTE: SEPs permitting elective deferrals cannot be established after 1996.
ELIGIBLE EMPLOYEES. -- All eligible employees must be allowed to participate in
the SEP. An eligible employee is any employee who: (1) is at least 21 years
old, and (2) has performed "service" for you in at least 3 of the immediately
preceding 5 years.
NOTE: You can establish less restrictive eligibility requirements, but not more
restrictive ones.
Service is any work performed for you for any period of time, however
short. If you are a member of an affiliated service group, a controlled group of
corporations, or trades or businesses under common control, service includes
any work performed for any period of time for any other member of such group,
trades, or businesses.
EXCLUDABLE EMPLOYEES. -- The following employees do not have to be covered by
the SEP: (1) employees covered by a collective bargaining agreement whose
retirement benefits were bargained for in good faith by you and their union,
(2) nonresident alien employees who did not earn U.S. source income from you,
and (3) employees who received less than $400* in compensation during the year.
CONTRIBUTION LIMITS. -- The SEP rules permit you to make an annual contribution
of up to 15% of the employee's compensation or $30,000*, whichever is less.
Compensation, for this purpose, does not include employer contributions to the
SEP or the employee's compensation in excess of $160,000*. If you also maintain
a Model Elective SEP or any
* 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.
Cat. No. 11825J Form 5305-SEP (Rev. 1-97)
<PAGE> 2
Form 5305-SEP (Rev. 1-97) Page 2
other SEP that permits employees to make elective deferrals, contributions to
the two SEPs together may not exceed the smaller of $30,000(1) or 15% of
compensation for any employee.
Contributions cannot discriminate in favor of highly compensated
employees. You are not required to make contributions every year. But you must
contribute to the SEP-IRAs of all of the eligible employees who actually
performed services during the year of the contribution. This includes eligible
employees who die or quit working before the contribution is made.
You may also not integrate your SEP contributions with, or offset them
by, contributions made under the Federal Insurance Contributions Act (FICA).
If this SEP is intended to meet the top-heavy minimum contribution
rules of section 416, but it does not cover all your employees who participate
in your elective SEP, then you must make minimum contributions to IRAs
established on behalf of those employees.
DEDUCTING CONTRIBUTIONS. -- You may deduct contributions to a SEP subject to the
limits of section 404(h). This SEP is maintained on a calendar year basis and
contributions to the SEP are deductible for your tax year with or within which
the calendar year ends. Contributions made for a particular tax year must be
made by the due date of your income tax return (including extensions) for that
tax year.
COMPLETING THE AGREEMENT. -- This agreement is considered adopted when;
* IRAs have been established for all your eligible employees;
* You have completed all blanks on the agreement form without modification;
and
* You have given all your eligible employees the following information:
1. A copy of Form 5305-SEP.
2. A statement that IRAs other than the IRAs into which employer SEP
contributions will be made may provide different rates of return and different
terms concerning, among other things, transfers and withdrawals of funds from
the IRAs.
3. A statement that, in addition to the information provided to an
employee at the time the employee becomes eligible to participate, the
administrator of the SEP must furnish each participant within 30 days of
the effective date of any amendment to the SEP, a copy of the amendment and
a written explanation of its effects.
4. A statement that the administrator will give written notification
to each participant of any employer contributions made under the SEP to that
participant's IRA by the later of January 31 of the year following the year for
which a contribution is made or 30 days after the contribution is made.
Employers who have established a SEP using Form 5305-SEP and have
furnished each eligible employee with a copy of the completed Form 5305-SEP and
provided the other documents and disclosures described in INSTRUCTIONS TO THE
EMPLOYER and INFORMATION FOR THE EMPLOYEE, are not required to file the annual
information returns, Forms 5500, 5550-C/R, or 5500-EZ for the SEP. However,
under Title I of ERISA, this relief from the annual reporting requirements may
not be available to an employer who selects, recommends, or influences its
employees to choose IRAs into which contributions will be made under the SEP,
if those IRAs are subject to provisions that impose any limits on a
participant's ability to withdraw funds (other than restrictions imposed by the
Code that apply to all IRAs). For additional information on Title I
requirements, see the Department of Labor regulation at 29 CFR 2520.104-48.
INFORMATION FOR THE EMPLOYEE
The information below explains what a SEP is, how contributions are made, and
how to treat your employer's contributions for tax purposes. For more
information, see Pub. 590.
SIMPLIFIED EMPLOYEE PENSION. -- A SEP is a written arrangement (a plan) that
allows an employer to make contributions toward your retirement. Contributions
are made to an individual retirement account/annuity (IRA). Contributions must
be made to either a Model IRA executed on an IRS form or a master or prototype
IRA for which the IRS has issued a favorable opinion letter.
An employer is not required to make SEP contributions. If a
contribution is made, it must be allocated to all the eligible employees
according to the SEP agreement. The Model SEP (Form 5305-SEP) specifies that
the contribution for each eligible employee will be the same percentage of
compensation (excluding compensation higher than $160,000(1)) for all employees.
Your employer will provide you with a copy of the agreement containing
participation rules and a description of how employer contributions may be made
to your IRA. Your employer must also provide you with a copy of the completed
Form 5305-SEP and a yearly statement showing any contributions to your IRA.
All amounts contributed to your IRA by your employer belong to you even
after you stop working for that employer.
CONTRIBUTION LIMITS. -- Your employer will determine the amount to be
contributed to your IRA each year. However, the amount for any year is limited
to the smaller of $30,000(1) or 15% of your compensation for that year.
Compensation does not include any amount that is contributed by your employer to
your IRA under the SEP. Your employer is not required to make contributions
every year or to maintain a particular level of contributions.
TAX TREATMENT OF CONTRIBUTIONS. -- Employer contributions to your SEP-IRA are
excluded from your income unless there are contributions in excess of the
applicable limit. Employer contributions within these limits will not be
included on your Form W-2.
EMPLOYEE CONTRIBUTIONS. -- You may contribute the smaller of $2,000 or 100% of
your compensation to an IRA. However, the amount you can deduct may be reduced
or eliminated because, as a participant in a SEP, you are covered by an
employer retirement plan.
SEP PARTICIPATION. -- If your employer does not require you to participate in a
SEP as a condition of employment, and you elect not to participate, all other
employees of your employer may be prohibited from participating. If one or more
eligible employees do not participate and the employer tries to establish a SEP
for the remaining employees, it could cause adverse tax consequences for the
participating employees.
An employer may not adopt this IRS Model SEP if the employer maintains
another qualified retirement plan or has ever maintained a qualified defined
benefit plan. This does not prevent your employer from adopting this IRS Model
SEP and also maintaining an IRS Model Elective SEP or other SEP. However, if you
work for several employers, you may be covered by a SEP of one employer and a
different SEP or pension or profit-sharing plan of another employer.
SEP-IRA AMOUNTS--ROLLOVER OR TRANSFER TO ANOTHER IRA. -- You can withdraw or
receive funds from your SEP-IRA if within 60 days of receipt, you place those
funds in another IRA or SEP-IRA. This is called a "rollover" and can be done
without penalty only once in any 1-year period. However, there are no
restrictions on the number of times you may make "transfers" if you arrange to
have these funds transferred between the trustees or the custodians so that
you never have possession of the funds.
WITHDRAWALS. -- You may withdraw your employer's contribution at any time, but
any amount withdrawn is includible in your income unless rolled over. Also, if
withdrawals occur before you reach age 59 1/2, you may be subject to a tax on
early withdrawal.
EXCESS SEP CONTRIBUTIONS. -- Contributions exceeding the yearly limitations may
be withdrawn without penalty by the due date (plus extensions) for filing your
tax return (normally April 15), but is includible in your gross income. Excess
contributions left in your SEP-IRA account after that time may have adverse tax
consequences. Withdrawals of those contributions may be taxed as premature
withdrawals.
FINANCIAL INSTITUTION REQUIREMENTS. -- The financial institution where your IRA
is maintained must provide you with a disclosure statement that contains the
following information in plain, nontechnical language:
1. The law that relates to your IRA.
2. The tax consequences of various options concerning your IRA.
3. Participation eligibilty rules, and rules on the deductibility of
retirement savings.
4. Situations and procedures for revoking your IRA, including the
name, address, and telephone number of the person designated to receive notice
of revocation. (This information must be clearly displayed at the beginning of
the disclosure statement.)
5. A discussion of the penalties that may be assessed because of
prohibited activities concerning your IRA.
6. Financial disclosure that provides the following information:
A. Projects value growth rates of your IRA under various contribution
and retirement schedules, or describes the method of determining annual
earnings and charges that may be assessed.
B. Describes whether, and for when, the growth projections are
guaranteed, or a statement of the earnings rate and the terms on which the
projections are based.
C. States the sales commission for each year expressed as a percentage
of $1,000.
In addition, the financial institution must provide you with a
financial statement each year. You may want to keep these statements to
evaluate your IRA's investment performance.
(1) 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.
[RECYCLE LOGO]
<PAGE> 1
EXHIBIT 14(C)
TAXATION, BUDGET AND ACCOUNTING TEXT
(NO. 249) L-3
DO NOT FILE
Form 5305-SA SIMPLE INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT WITH THE
(Rev. January 1998) INTERNAL
(UNDER SECTION 408(p) OF THE INTERNAL REVENUE CODE) REVENUE SERVICE
Department of the Treasury
Internal Revenue Service
- -------------------------------------------------------------------------------
Name of participant | Date of birth of participant | Social security number
| | | |
- -------------------------------------------------------------------------------
Address of participant |Check if transfer SIMPLE IRA . . . > [ ]
|Check if amendment . . . . . . . . > [ ]
- -------------------------------------------------------------------------------
Name of custodian | Address or principal place of business of custodian
|
- -------------------------------------------------------------------------------
The participant whose name appears above is establishing a savings incentive
match plan for employees of small employers individual retirement account
(SIMPLE IRA) under sections 408(a) and 408(p) to provide for his or her
retirement and for the support of his or her beneficiaries after death.
The custodian named above has given the participant the disclosure statement
required under Regulations section 1.408-6.
The participant and the custodian make the following agreement:
Article I
The custodian will accept cash contributions made on behalf of the participant
by the participant's employer under the terms of a SIMPLE plan described in
section 408(p). In addition, the custodian will accept transfers or rollovers
from other SIMPLE IRAs of the participant. No other contributions will be
accepted by the custodian.
Article II
The participant'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, silver, and
platinum coins, coins issued under the laws of any state, and certain
bullion.
ARTICLE IV
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the participant'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 incorporated
by reference.
2. Unless otherwise elected by the time distributions are required to begin
to the participant 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 participant and the surviving spouse and shall apply to all subsequent
years. The life expectancy of a nonspouse beneficiary may not be
recalculated.
3. The participant's entire interest in the custodial account must be, or
begin to be, distributed by the participant's required beginning date
(April 1 following the calendar year end in which the participant reaches
age 70 1/2). By that date, the participant 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
participant.
(c) An annuity contract that provides equal or substantially
equal monthly, quarterly, or annual payments over the joint and last
survivor lives of the participant and his or her designated
beneficiary.
(d) Equal or substantially equal annual payments over a specified
period that may not be longer than the participant'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 participant and his or her designated beneficiary.
4. If the participant 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 participant 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 participant dies before distribution of his or her interest has
begun, the entire remaining interest will, at the election of the
participant or, if the participant 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 participant'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 participant's death. If, however, the beneficiary
is the participant's surviving spouse, then this distribution is
not required to begin before December 31 of the year in which
the participant would have reached 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 participant's required beginning date, even though payments may
actually have been made before that date.
(d) If the participant 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.
Cat. No. 23698C Form 5305-SA (Rev. 1-98)
Copyright(c) 1996 by THE BUREAU OF NATIONAL AFFAIRS, INC.,
Washington, D.C. 20037
0092-6884/96/$0+$1.00
<PAGE> 2
Form 5305-SA (Rev. 1-98) Page 2
- -------------------------------------------------------------------------------
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 participant'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 participant (or the joint life and last survivor
expectancy of the participant and the participant'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
participant and designated beneficiary as of their birthdays in the year the
participant 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 participant agrees to provide the custodian with information
necessary for the custodian to prepare any reports required under sections
408(1) and 408(1)(2) and Regulations sections 1.408-5 and 1.408-6.
2. The custodian agrees to submit reports to the Internal Revenue
Service and the participant as prescribed by the Internal Revenue Service.
3. The custodian also agrees to provide the participant's employer
the summary description described in section 408(1)(2) unless this SIMPLE IRA
is a transfer SIMPLE IRA.
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 sections 408(a) and 408(p)
and the 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.
- -------------------------------------------------------------------------------
NOTE: The following space (Article VIII) may be used for any other provisions
you want to add. If you do not want to add any other provisions, draw a line
through this space. If you do add provisions, they must comply with applicable
requirements of state law and the Internal Revenue Code.
- -------------------------------------------------------------------------------
ARTICLE VIII
- -------------------------------------------------------------------------------
Participant's signature Date
------------------------------ ------------------
(If an individual other than the participant signs this form for the
participant, indicate the individual's relationship to the participant.)
Custodian's signature Date
------------------------------ ------------------
Witness signature
------------------------------------------------------------
(Use only if signature of the participant or the custodian
is required to be witnessed.)
- -------------------------------------------------------------------------------
GENERAL INSTRUCTIONS
Section references are to the Internal Revenue Code unless otherwise noted.
PURPOSE OF FORM
NOTE: Users of the December 1996 version of Form 5305-SA are not required to use
the January 1998 revision of this form.
Form 5305-SA is a model custodial account agreement that meets the
requirements of sections 408(a) and 408(p) and has been automatically approved
by the IRS. An individual retirement account (IRA) is established after the
form is fully executed by both the individual (participant) and the custodian.
This account must be created in the United States for the exclusive benefit of
the participant or his or her beneficiaries.
Individuals may rely on regulations for the Tax Reform Act of 1986 to the
extent specified in those regulations.
Do not file Form 5305-SA with the IRS. Instead, keep it for your records.
For more information on IRAs, including the required disclosures the custodian
must give the participant, see PUB. 590, Individual Retirement Arrangements
(IRAs).
DEFINITIONS
PARTICIPANT. The participant is the person who establishes the custodial
account.
CUSTODIAN. The custodian must be a bank or savings and loan association, as
defined in section 408(n), or any person who has the approval of the IRS to act
as custodian.
TRANSFER SIMPLE IRA
This SIMPLE IRA is a "transfer SIMPLE IRA" if it is not the original recipient
of contributions under any SIMPLE plan. The summary description requirements
of section 408(1)(2) do not apply to transfer SIMPLE IRAs.
SPECIFIC INSTRUCTIONS
ARTICLE IV. Distributions made under this article may be made in a single sum,
periodic payment, or a combination of both. The distribution option should be
reviewed in the year the participant reaches age 70 1/2 to ensure that the
requirements of section 408(a)(6) have been met.
ARTICLE VIII. Article VIII and any that follow it may incorporate additional
provisions that are agreed to by the participant and custodian to complete the
agreement. They may include, for example, definitions, investment powers,
voting rights, exculpatory provisions, amendment and termination, removal of
the custodian, custodian's fees, state law requirements, beginning date of
distributions, accepting only cash, treatment of excess contributions,
prohibited transactions with the participant, etc. Use additional pages if
necessary and attach them to this form.
NOTE: Form 5305-SA may be reproduced and reduced in size.
- --------------------------------------------------------------------------------
[RECYCLED LOGO]
<PAGE> 3
THOMPSON PLUMB FUNDS SIMPLE IRA
ATTACHMENT TO IRS FORM 5305-SA
ARTICLE VIII
(Additional provisions agreed to by the Participant and Custodian to complete
this Agreement.)
1. Definitions: "Investment Company" shall mean Thompson Plumb Funds,
Inc. and any other investment company as defined in section 851(a) of
the Code for which Thompson, Plumb & Associates, Inc. serves as
investment advisor and which has agreed to offer shares for an IRA.
"Investment Company Shares" or "Shares" shall mean shares of capital
stock of the Investment Company or shares of another investment
company, as defined in section 851(a) of the Code, which the
Investment Company chooses to make available for IRA investment
through a servicing agreement. "Custodian" shall mean Firstar Trust
Company. "Participant" shall mean the individual who establishes this
custodial account.
2. Investment of Account: (a) Contributions will be invested in
accordance with the Participant's written instructions in the
Application and with subsequent instructions given by the Participant
or the Participant's employer (as applicable) (or the Participant's
beneficiary following the Participant's death) to the Custodian in a
manner acceptable to the Custodian. The Custodian shall invest any
contributions which are not accompanied by adequate account
identification or investment instructions in the Portico Money Market
Fund until adequate identification or investment instruction is
received.
(b) Contributions shall be invested in whole and fractional
Investment Company Shares at the price and in the manner in
which such shares are then being publicly offered by the
Investment Company. All distributions received on Investment
Company Shares held in the custodial account, including
capital gains and dividends (unless received in additional
shares), shall be reinvested, in accordance with the
Investment Company's then current prospectus, and credited to
the Participant's custodial account. If any distribution of
Investment Company Shares may be received at the election of
the shareholder in additional Shares or in cash or other
property, the Custodian shall elect to receive such
distribution in additional Investment Company Shares.
-1-
<PAGE> 4
(c) All Investment Company Shares acquired by the Custodian shall
be registered in the name of the Custodian or its registered
nominee. The Participant shall be the beneficial owner of all
Investment Company Shares held in the custodial account and
the Custodian shall not vote any of such shares, except upon
written direction by the Participant. The Custodian agrees to
forward to every Participant a then current prospectus,
reports and financial statements, notices, proxies and related
proxy soliciting materials applicable to Investment Company
Shares received by the Custodian.
(d) Neither the Custodian nor the Investment Company shall have
any liability in connection with investment choices made by
the Participant or the Participant's employer or
beneficiaries, as applicable.
3. Distributions: (a) The Custodian shall, from time to time, subject to
the provisions of Article IV, make distributions out of the custodial
account to the Participant, in such manner and amounts as may be
specified in written instructions of the Participant. All such
instructions shall be deemed to constitute a certification by the
Participant that the distribution so directed is one that the
Participant is permitted to receive.
(b) If allowable under applicable law, then notwithstanding the
foregoing, upon the Participant's death the distribution rules
set forth in Article IV will not apply if the Participant's
spouse is the beneficiary and he or she elects to treat the
account as his or her own. In such case the spouse will be
deemed to be the Participant under this agreement.
(c) Unless paragraph 3(b) above is applicable, upon the
Participant's death the election of either option (i) or
option (ii) under paragraph 4(b) of Article IV must be made by
December 31 of the year following the year of the
Participant's death. If the beneficiary or beneficiaries do
not elect either of the distribution options described in
paragraph 4(b)(i) and 4(b)(ii) of Article IV by such date,
distribution will be made in accordance with paragraph
4(b)(ii) of Article IV if the beneficiary is the Participant's
surviving spouse and in accordance with paragraph 4(b)(i) of
Article IV if the beneficiary or beneficiaries include anyone
other than the surviving spouse.
(d) If the Participant does not choose any of the methods of
distribution described in paragraphs 3(a) through 3(e) of
Article IV by the April 1 following the
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<PAGE> 5
calendar year in which he or she reaches age 70, then by that
date and by each December 31 thereafter, distribution to the
Participant will be made only in such amounts as will satisfy
the requirements of the minimum distribution rules in
paragraph 1 of Article IV above, based on the joint life
expectancy of the Participant and his or her designated
beneficiary (or based on the Participant's sole life
expectancy if the Participant has no designated beneficiary,
or is treated as having no designated beneficiary for purposes
of the above described rules).
(e) Distributions from this SIMPLE IRA shall be subject to a 25%
excise tax on early distributions in accordance with Code
Section 72(t)(6) if made during the two year period commencing
on the date the Participant first participates in the
employer's SIMPLE retirement plan.
(f) If a Participant fails to elect federal income tax withholding
treatment in connection with a distribution, the Custodian
shall automatically withhold 10% of the taxable amount of the
distribution.
(g) Neither the Custodian nor the Investment Company shall have
any liability with respect to any contribution to the
custodial account, any investment of assets in the custodial
account, or any distribution therefrom pursuant to
instructions received from the Participant (or beneficiary) or
in accordance with this Agreement, or for any consequences to
the Participant or beneficiary arising from such contribution,
investments or distributions including, but not limited to,
excise and other taxes and penalties which might accrue or be
assessed by reason thereof, nor shall the Custodian or
Investment Company be under any duty to make any inquiry or
investigation with respect thereto.
4. Amendment and Termination: (a) This custodial account is intended to
be a qualified individual retirement custodial account used with a
SIMPLE retirement plan and is intended to comply with the requirements
of Sections 408(a) and 408(p) of the Internal Revenue Code.
Participant hereby delegates to the Investment Company the power to
amend this Custodial Account Agreement as necessary to comply with
applicable provisions of the Code and related regulations.
Participant also delegates to the Investment Company the power to
amend the Custodial Account Agreement in any other manner not
inconsistent with the provisions of applicable law, such amendments to
be binding upon the Participant upon written notification unless
within 30 days after such notification, the Participant provides
written objection to
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<PAGE> 6
any such amendment. Notwithstanding the above, 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
Participant or his beneficiaries, nor shall any amendment increase the
duties of the Custodian without the Custodian's consent.
(b) The Participant may at any time terminate the custodial
account by delivering to the Custodian a written notice of
such termination setting forth the effective date thereof.
Upon such termination, all assets remaining in the custodial
account, reduced by the amount of any unpaid fees or expenses,
shall be distributed to the Participant, in cash or in kind,
as directed, in writing, by the Participant, or transferred to
such successor custodian as the Participant may direct in
writing.
(c) The Custodian may be removed by the Participant at any time
upon thirty (30) days written notice to the Custodian, which
notice shall also designate a successor custodian, which 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 removal shall be
effective and the Custodian shall, as soon as practicable, but
in no event later than 30 days following the effective date of
the removal, transfer and deliver to such successor custodian
the assets of the custodial account and such records
pertaining thereto as may be requested in writing by the
successor custodian.
(d) At any time after three years from the effective date of this
Agreement, the Custodian may elect to resign as custodian upon
thirty (30) days written notice to the Participant and the
Investment Company. The Investment Company may remove the
Custodian at any time upon thirty (30) days written notice to
the Custodian. Upon such resignation or removal, the
Participant or the Investment Company shall appoint a
successor custodian which shall satisfy the requirements of
section 408(h) of the Code. Upon receipt by the Custodian of
written acceptance by the successor custodian of such
appointment, the Custodian is authorized to act in the same
manner as provided for in subsection (c) of this Section. In
the event a successor custodian is not appointed within thirty
(30) days after receipt of the Custodian's notice of
resignation, the Custodian shall terminate the custodial
account and distribute the balance to the Participant.
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<PAGE> 7
(e) The custodial account created by this Agreement shall
automatically terminate upon distribution to the Participant
or any beneficiary designated under Section 7 of Article VIII
hereof of the entire balance in the custodial account.
5. Taxes and Custodial Fees: Any income taxes or other taxes of any kind
whatsoever that may be levied or assessed upon or in respect of the
assets of the custodial account, or the income arising therefrom, any
transfer taxes incurred, all other reasonable administrative expenses
incurred by the Custodian in the performance of its duties, including
fees for legal services rendered to the custodian, and such reasonable
compensation to the Custodian for its services may be paid from the
custodial account. The Custodian's fees are as follows:
(a) Annual Maintenance Fee - $12.50
(b) Transfer to Successor Custodian - $15.00
(c) Outgoing Wire Fee - $10.00
(d) Distribution to a Participant (Rollover) - $15.00
(e) Refund of Excess Contribution - $15.00
Extraordinary charges resulting from unusual administrative responsibilities
not contemplated by this schedule will be subject to such additional charges as
will reasonably compensate the Custodian for the services performed.
The annual maintenance fee will be deducted in October of each year and enough
Investment Company Shares will be redeemed to cover this fee. Fees for refund
of excess contributions or Investment Company Shares redemption/reinvestment
will be deducted from the refund or redemption proceeds at the time of refund
or redemption and the remaining balance will be remitted to the Participant in
the case of refund, or will be reinvested in accordance with the Participant's
instructions. The Custodian may change the fees payable in connection with the
custodial account at any time, and shall notify the Participant in writing of
any such change.
6. Reports and Notices: (a) The Custodian shall keep adequate records of
transactions it is required to perform hereunder. not later than the
January 31 following the close of each calendar year, and not later
than sixty (60) days after the Custodian's resignation or removal
pursuant to Section 5 of this Article VIII, the Custodian shall render
to the
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<PAGE> 8
Participant or the Participant's legal representative a written report
or reports reflecting the transactions effected by it during such
period and the assets and liabilities of the custodial account at the
close of the period.
(b) All communications or notices required or permitted to be
given herein shall be deemed to be given upon receipt by the
Custodian at Post Office Box 701 at Milwaukee, Wisconsin
53201-0701, the Investment Company and Thompson, Plumb &
Associates, Inc. at 8201 Excelsior Drive, Madison, Wisconsin
53717, or the Participant at his most recent address shown in
the Custodian's records. The Participant agrees to advise the
Custodian promptly, in writing, of any change of address.
7. Designation of Beneficiary: The Participant shall have the right, by
written notice to the Custodian, to designate and redesignate a
beneficiary or beneficiaries, primary and contingent, to receive any
benefit to which such Participant may be entitled in the event of his
death prior to the complete distribution of such benefit. To be
effective, such designation must be received by the Custodian prior to
the death of the Participant. The most recent designation received by
the Custodian prior to the Participant's death shall be controlling
and shall apply to all the Participant's Thompson Plumb Funds IRAs.
In the event the Participant has not designated any beneficiaries, or
if all beneficiaries shall predecease the Participant, the balance in
the custodial account shall be paid to the personal representative of
the Participant's estate. The beneficiary may choose the method of
distribution from among those permitted by Article IV. The
Participant accepts sole responsibility for any payment made pursuant
to the Participant's beneficiary designation, the provisions of the
Custodial Agreement absent any such designation, and/or the provisions
of any applicable community or marital property law.
8. Inalienability of Benefits: No interest, right or claim in or to any
part of the custodial account nor any assets held therein or benefits
provided hereunder shall be subject to alienation, assignment,
transfer, sale, mortgage, pledge, garnishment, attachment, execution
or levy of any kind and any attempt to cause such interest, right
claim, assets or benefits to be so subjected shall not be recognized
except to the extent as may be required by law.
9. Liability of Custodian and Investment Company: The Custodian and the
Investment Company, and their agents,
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<PAGE> 9
affiliates, employees, and assigns, shall have no responsibilities
other than those provided for in the Custodial Agreement and shall not
be liable for any mistake in judgement, or any action taken in good
faith, or for any loss that is not a result of gross negligence or
willful misconduct. To the fullest extent permitted by law, the
Participant, and the Participant's beneficiary(ies) or estate, as the
case may be, agree to at all times indemnify and hold the Custodian
and Investment Company, and their agents, affiliates, employees and
assigns, harmless from and against any and all liability that may be
incurred in connection with the Participant's account (including, but
not limited to, distribution in accordance with the Participant's
written instructions or the most recent beneficiary designation on
file), unless arising from the gross negligence of willful misconduct
on the part of the indemnified person.
10. Conflict in Provision: To the extent that any provisions of Article
VIII shall conflict with the provisions of Articles IV, V or VII, the
provisions of Article VIII shall prevail. If any provision of this
Article VIII shall be determined to be invalid or unenforceable, the
remaining provisions shall be unaffected and shall continue in full
force and effect.
11. Applicable State Law: This custodial account shall be construed,
administered and enforced according to the laws of the State of
Wisconsin with respect to all matters that are determined by reference
to state law as distinguished from federal law. All contributions
shall be deemed to take place in the State of Wisconsin.
-7-
<PAGE> 1
EXHIBIT 16(a)
Schedule for Computation of Performance Quotation
Thompson Plumb Balanced Fund
One Year Ended November 30, 1997
1. Initial (November 30, 1996) Offering Price = $16.54
2. Number of hypothetical shares purchased =
$1,000 divided by $16.54 = 60.459 shares
3. Amount of dividends and distributions =
12/24/96 - $0.22810 per share x 60.459 = $13.79 / $14.81 = 0.931 shares
12/24/96 - $0.43998 per share x 60.459 = $26.60 / $14.81 = 1.796 shares
12/24/96 - $0.89622 per share x 60.459 = $54.18 / $14.81 = 3.658 shares
Total = 6.385 shares
4. Fees charged to shareholder accounts = 0
5. Ending (November 30, 1997) Net Asset Value = $18.16
6. Ending Redeemable value of hypothetical investment =
60.459 + 6.385 = 66.844 x $18.16 = $1,213.89
7. Total Return = ($1,213.89 - $1,000) divided by $1,000 = 21.39 %
8. Annualized Compounded Return = 21.39 %
Number of years = 1
<PAGE> 2
Schedule for Computation of Performance Quotation
Thompson Plumb Balanced Fund
Five Years Ended November 30, 1997
1. Initial (November 30, 1992) Offering Price = $14.57
2. Number of hypothetical shares purchased =
$1,000 divided by $14.57 = 68.634 shares
3. Amount of dividends and distributions =
12/23/92 - $0.27531 per share x 68.634 = $18.90 / $13.89 = 1.361 shares
12/23/92 - $0.54876 per share x 68.634 = $37.66 / $13.89 = 2.711 shares
12/28/93 - $0.26731 per share x 72.706 = $19.44 / $13.61 = 1.428 shares
12/28/93 - $0.07657 per share x 72.706 = $5.57 / $13.61 = 0.409 shares
12/28/93 - $0.58472 per share x 72.706 = $42.51 / $13.61 = 3.123 shares
12/28/94 - $0.28105 per share x 77.666 = $21.83 / $11.98 = 1.822 shares
12/28/94 - $0.26239 per share x 77.666 = $20.38 / $11.98 = 1.701 shares
12/28/94 - $1.28165 per share x 77.666 = $99.54 / $11.98 = 8.309 shares
12/26/95 - $0.22976 per share x 89.498 = $20.56 / $13.19 = 1.559 shares
12/26/95 - $0.43720 per share x 89.498 = $39.13 / $13.19 = 2.967 shares
12/26/95 - $0.41906 per share x 89.498 = $37.51 / $13.19 = 2.844 shares
12/24/96 - $0.22810 per share x 96.868 = $22.10 / $14.81 = 1.492 shares
12/24/96 - $0.43998 per share x 96.868 = $42.62 / $14.81 = 2.878 shares
12/24/96 - $0.89622 per share x 96.868 = $86.82 / $14.81 = 5.862 shares
Total = 38.466 shares
4. Fees charged to shareholder accounts = 0
5. Ending (November 30, 1997) Net Asset Value = $18.16
6. Ending Redeemable value of hypothetical investment =
68.634 + 38.466 = 107.100 x $18.16 = $1,944.94
7. Total Return = ($1,944.94 - $1,000) divided by $1,000 = 94.49%
8. Annualized Compounded Return = 14.23%
Number of years = 5
<PAGE> 3
Schedule for Computation of Performance Quotation
Thompson Plumb Balanced Fund
Ten Years Ended November 30, 1997
1. Initial (November 30, 1987) Offering Price = $ 8.45
2. Number of hypothetical shares purchased =
$1,000 divided by $ 8.45 = 118.343 shares
3. Amount of dividends and distributions =
12/22/87 - $0.09302 per share x 118.343 = $11.01 / $ 9.02 = 1.221 shares
12/22/88 - $0.20688 per share x 119.564 = $24.74 / $ 9.90 = 2.499 shares
12/26/89 - $0.31496 per share x 122.063 = $38.44 / $11.50 = 3.343 shares
12/27/90 - $0.28954 per share x 125.406 = $36.31 / $11.65 = 3.117 shares
12/27/91 - $0.10075 per share x 128.523 = $12.95 / $14.18 = 0.913 shares
12/27/91 - $0.28166 per share x 128.523 = $36.20 / $14.18 = 2.553 shares
07/01/92 - $0.00869 per share x 131.989 = $ 1.15 / $13.64 = 0.084 shares
12/23/92 - $0.27531 per share x 132.073 = $36.36 / $13.89 = 2.618 shares
12/23/92 - $0.54876 per share x 132.073 = $72.48 / $13.89 = 5.218 shares
12/28/93 - $0.26731 per share x 139.909 = $37.40 / $13.61 = 2.748 shares
12/28/93 - $0.07657 per share x 139.909 = $10.71 / $13.61 = 0.787 shares
12/28/93 - $0.58472 per share x 139.909 = $81.81 / $13.61 = 6.011 shares
12/28/94 - $0.28105 per share x 149.455 = $42.00 / $11.98 = 3.506 shares
12/28/94 - $0.26239 per share x 149.455 = $39.22 / $11.98 = 3.274 shares
12/28/94 - $1.28165 per share x 149.455 = $191.55 / $11.98 = 15.989 shares
12/26/95 - $0.22976 per share x 172.224 = $39.57 / $13.19 = 3.000 shares
12/26/95 - $0.43720 per share x 172.224 = $75.30 / $13.19 = 5.709 shares
12/26/95 - $0.41906 per share x 172.224 = $72.17 / $13.19 = 5.472 shares
12/24/96 - $0.22810 per share x 186.405 = $42.52 / $14.81 = 2.871 shares
12/24/96 - $0.43998 per share x 186.405 = $82.01 / $14.81 = 5.537 shares
12/24/96 - $0.89622 per share x 186.405 = $167.06 / $14.81 = 11.280 shares
Total = 87.750 shares
4. Fees charged to shareholder accounts = 0
5. Ending (November 30, 1997) Net Asset Value = $18.16
6. Ending Redeemable value of hypothetical investment =
118.343 + 87.750 = 206.093 x $18.16 = $3,742.65
7. Total Return = ($3,742.65 - $1,000) divided by $1,000 = 274.27%
8. Annualized Compounded Return = 14.10%
Number of years = 10
<PAGE> 1
EXHIBIT 16(b)
Schedule for Computation of Performance Quotation
Thompson Plumb Growth Fund
One Year Ended November 30, 1997
1. Initial (November 30, 1996) Offering Price = $32.79
2. Number of hypothetical shares purchased =
$1,000 divided by $32.79 = 30.497 shares
3. Amount of dividends and distributions =
12/24/96 - $1.13001 per share x 30.497 = $34.46 / $30.10 = 1.145 shares
12/24/96 - $1.34393 per share x 30.497 = $40.99 / $30.10 = 1.362 shares
Total = 2.507 shares
4. Fees charged to shareholder accounts = 0
5. Ending (November 30, 1997) Net Asset Value = $39.36
6. Ending Redeemable value of hypothetical investment =
30.497 + 2.507 = 33.004 x $39.36 = $1,299.04
7. Total Return = ($1,299.04 - $1,000) divided by $1,000 = 29.90%
8. Annualized Compounded Return = 29.90%
Number of years = 1
<PAGE> 2
Schedule for Computation of Performance Quotation
Thompson Plumb Growth Fund
Five Years Ended November 30, 1997
1. Initial (November 30, 1992) Offering Price = $20.37
2. Number of hypothetical shares purchased =
$1,000 divided by $20.37 = 49.092 shares
3. Amount of dividends and distributions =
12/28/94 - $1.86451 per share x 49.092 = $91.53 / $19.18 = 4.772 shares
12/26/95 - $0.53779 per share x 53.864 = $28.97 / $24.33 = 1.191 shares
12/26/95 - $0.01008 per share x 53.864 = $ 0.54 / $24.33 = 0.022 shares
12/24/96 - $1.13001 per share x 55.077 = $62.24 / $30.10 = 2.068 shares
12/24/96 - $1.34393 per share x 55.077 = $74.02 / $30.10 = 2.459 shares
Total = 10.512 shares
4. Fees charged to shareholder accounts = 0
5. Ending (November 30, 1997) Net Asset Value = $39.36
6. Ending Redeemable value of hypothetical investment =
49.092 + 10.512 = 59.604 x $39.36 = $2,346.01
7. Total Return = ($2,346.01 - $1,000) divided by $1,000 = 134.60%
8. Annualized Compounded Return = 18.59%
Number of years = 5
<PAGE> 3
Schedule for Computation of Performance Quotation
Thompson Plumb Growth Fund
Commencement of Operations through November 30, 1997
1. Initial (February 10, 1992) Offering Price = $20.00
2. Number of hypothetical shares purchased =
$1,000 divided by $20.00 = 50.000 shares
3. Amount of dividends and distributions =
12/28/94 - $1.86451 per share x 50.000 = $93.23 / $19.18 = 4.861 shares
12/26/95 - $0.53779 per share x 54.861 = $29.50 / $24.33 = 1.212 shares
12/26/95 - $0.01008 per share x 54.861 = $ 0.55 / $24.33 = 0.023 shares
12/24/96 - $1.13001 per share x 56.096 = $63.39 / $30.10 = 2.106 shares
12/24/96 - $1.34393 per share x 56.096 = $75.39 / $30.10 = 2.505 shares
Total = 10.707 shares
4. Fees charged to shareholder accounts = 0
5. Ending (November 30, 1997) Net Asset Value = $39.36
6. Ending Redeemable value of hypothetical investment =
50.000 + 10.707 = 60.707 x $39.36 = $2,389.43
7. Total Return = ($2,389.43 - $1,000) divided by $1,000 = 138.94%
8. Annualized Compounded Return = 16.18%
Number of years = 2,120 days / 365 days = 5.8082192
<PAGE> 1
EXHIBIT 16(c)
Schedule for Computation of Performance Quotation
Thompson Plumb Bond Fund
One Year Ended November 30, 1997
1. Initial (November 30, 1996) Offering Price = $10.59
2. Number of hypothetical shares purchased =
$1,000 divided by $10.59 = 94.429 shares
3. Amount of dividends and distributions =
12/24/96 - $0.17852 per share x 94.429 = $16.86 / $10.28 = 1.640 shares
03/17/97 - $0.07000 per share x 96.069 = $ 6.72 / $10.14 = 0.663 shares
06/16/97 - $0.14000 per share x 96.732 = $13.54 / $10.25 = 1.321 shares
09/16/97 - $0.14000 per share x 98.053 = $13.73 / $10.39 = 1.321 shares
Total = 4.945 shares
4. Fees charged to shareholder accounts = 0
5. Ending (November 30, 1997) Net Asset Value = $10.54
6. Ending Redeemable value of hypothetical investment =
94.429 + 4.945 = 99.374 x $10.54 = $1,047.40
7. Total Return = ($1,047.40 - $1,000) divided by $1,000 = 4.74%
8. Annualized Compounded Return = 4.74%
Number of years = 1
<PAGE> 2
Schedule for Computation of Performance Quotation
Thompson Plumb Bond Fund
Five Years Ended November 30, 1997
1. Initial (November 30, 1992) Offering Price = $10.33
2. Number of hypothetical shares purchased =
$1,000 divided by $10.33 = 96.805 shares
3. Amount of dividends and distributions =
12/23/92 - $0.12880 per share x 96.805 = $12.47 / $10.27 = 1.214 shares
12/23/92 - $0.01719 per share x 96.805 = $ 1.66 / $10.27 = 0.162 shares
03/16/93 - $0.08000 per share x 98.181 = $ 7.85 / $10.57 = 0.743 shares
06/15/93 - $0.11000 per share x 98.924 = $10.88 / $10.65 = 1.022 shares
09/15/93 - $0.10000 per share x 99.946 = $ 9.99 / $10.81 = 0.924 shares
12/28/93 - $0.15899 per share x 100.870 = $16.04 / $10.57 = 1.518 shares
12/28/93 - $0.12549 per share x 100.870 = $12.66 / $10.57 = 1.198 shares
03/15/94 - $0.06000 per share x 103.586 = $ 6.22 / $10.31 = 0.603 shares
06/15/94 - $0.12000 per share x 104.189 = $12.50 / $10.09 = 1.239 shares
09/15/94 - $0.13000 per share x 105.428 = $13.71 / $10.00 = 1.371 shares
12/28/94 - $0.17984 per share x 106.799 = $19.21 / $ 9.78 = 1.964 shares
03/15/95 - $0.09000 per share x 108.763 = $ 9.79 / $10.16 = 0.964 shares
06/15/95 - $0.15000 per share x 109.727 = $16.46 / $10.42 = 1.580 shares
09/15/95 - $0.14000 per share x 111.307 = $15.58 / $10.46 = 1.489 shares
12/26/95 - $0.14286 per share x 112.796 = $16.11 / $10.58 = 1.523 shares
03/18/96 - $0.13000 per share x 114.319 = $14.86 / $10.27 = 1.447 shares
06/17/96 - $0.13000 per share x 115.766 = $15.05 / $10.03 = 1.500 shares
09/23/96 - $0.13000 per share x 117.266 = $15.24 / $10.10 = 1.509 shares
12/24/96 - $0.17852 per share x 118.775 = $21.20 / $10.28 = 2.062 shares
03/17/97 - $0.07000 per share x 120.837 = $ 8.46 / $10.14 = 0.834 shares
06/16/97 - $0.14000 per share x 121.671 = $17.03 / $10.25 = 1.661 shares
09/16/97 - $0.14000 per share x 123.332 = $17.27 / $10.39 = 1.662 shares
Total = 28.189 shares
4. Fees charged to shareholder accounts = 0
5. Ending (November 30, 1997) Net Asset Value = $10.54
6. Ending Redeemable value of hypothetical investment =
96.805 + 28.189 = 124.994 x $10.54 = $1,317.44
7. Total Return = ($1,317.44 - $1,000) divided by $1,000 = 31.74%
8. Annualized Compounded Return = 5.67%
Number of years = 5
<PAGE> 3
Schedule for Computation of Performance Quotation
Thompson Plumb Bond Fund
Commencement of Operations through November 30, 1997
1. Initial (February 10, 1992) Offering Price = $10.00
2. Number of hypothetical shares purchased =
$1,000 divided by $10.00 = 100.000 shares
3. Amount of dividends and distributions =
07/01/92 - $0.06000 per share x 100.000 = $ 6.00 / $10.20 = 0.588 shares
09/14/92 - $0.09000 per share x 100.588 = $ 9.05 / $10.52 = 0.860 shares
12/23/92 - $0.12880 per share x 101.448 = $13.07 / $10.27 = 1.273 shares
12/23/92 - $0.01719 per share x 101.448 = $ 1.74 / $10.27 = 0.169 shares
03/16/93 - $0.08000 per share x 102.890 = $ 8.23 / $10.57 = 0.779 shares
06/15/93 - $0.11000 per share x 103.669 = $11.40 / $10.65 = 1.070 shares
09/15/93 - $0.10000 per share x 104.739 = $10.47 / $10.81 = 0.969 shares
12/28/93 - $0.15899 per share x 105.708 = $16.81 / $10.57 = 1.590 shares
12/28/93 - $0.12549 per share x 105.708 = $13.27 / $10.57 = 1.255 shares
03/15/94 - $0.06000 per share x 108.553 = $ 6.51 / $10.31 = 0.631 shares
06/15/94 - $0.12000 per share x 109.184 = $13.10 / $10.09 = 1.298 shares
09/15/94 - $0.13000 per share x 110.482 = $14.36 / $10.00 = 1.436 shares
12/28/94 - $0.17984 per share x 111.918 = $20.13 / $ 9.78 = 2.058 shares
03/15/95 - $0.09000 per share x 113.976 = $10.26 / $10.16 = 1.010 shares
06/15/95 - $0.15000 per share x 114.986 = $17.25 / $10.42 = 1.655 shares
09/15/95 - $0.14000 per share x 116.641 = $16.33 / $10.46 = 1.561 shares
12/26/95 - $0.14286 per share x 118.202 = $16.89 / $10.58 = 1.596 shares
03/18/96 - $0.13000 per share x 119.798 = $15.57 / $10.27 = 1.516 shares
06/17/96 - $0.13000 per share x 121.314 = $15.77 / $10.03 = 1.572 shares
09/23/96 - $0.13000 per share x 122.886 = $15.98 / $10.10 = 1.582 shares
12/24/96 - $0.17852 per share x 124.468 = $22.22 / $10.28 = 2.161 shares
03/17/97 - $0.07000 per share x 126.629 = $ 8.86 / $10.14 = 0.874 shares
06/16/97 - $0.14000 per share x 127.503 = $17.85 / $10.25 = 1.741 shares
09/16/97 - $0.14000 per share x 129.244 = $18.09 / $10.39 = 1.741 shares
Total = 30.985 shares
4. Fees charged to shareholder accounts = 0
5. Ending (November 30, 1997) Net Asset Value = $10.54
6. Ending Redeemable value of hypothetical investment =
100.000 + 30.985 = 130.985 x $10.54 = $1,380.58
7. Total Return = ($1,380.58 - $1,000) divided by $1,000 = 38.06%
8. Annualized Compounded Return = 5.71%
Number of years = 2,120 days / 365 days = 5.8082192
<PAGE> 4
Schedule for Computation of 30-Day Yield Quotation
Thompson Plumb Bond Fund
For the 30-Day Period Ended November 30, 1997
1. Total dividends and interest earned during 11/97 $168,874.08
(item "a" for formula calculation)
2. Expenses accrued for 11/97 (net of reimbursements) 30,711.51
(item "b" for formula calculation)
3. Net income (a - b) 138,162.57
4. Average daily shares outstanding for 11/97 3,051,050.973
(item "c" for formula calculation)
5. Maximum offering price on 11/30/97 10.54
(item "d" for formula calculation)
6. FORMULA
( (a - b / cd) +1 = e 1.00429636
e raised to the 6th power = f 1.02605663
f minus 1 = g 0.02605663
g times 2 = YIELD 0.05211326
7. 30-DAY YIELD FOR PERIOD ENDED 11/30/97 5.21%
<PAGE> 1
[ARTICLE] 6
[CIK] 0000795264
[NAME] THOMPSON PLUMB FUNDS, INC.
[SERIES]
[NUMBER] 001
[NAME] THOMPSON PLUMB BALANCED FUND
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] NOV-30-1997
[PERIOD-START] DEC-01-1996
[PERIOD-END] NOV-30-1997
[INVESTMENTS-AT-COST] 29,086
[INVESTMENTS-AT-VALUE] 36,100
[RECEIVABLES] 1,309
[ASSETS-OTHER] 4
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 37,413
[PAYABLE-FOR-SECURITIES] 1,025
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 51
[TOTAL-LIABILITIES] 1,076
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 25,584
[SHARES-COMMON-STOCK] 2,001
[SHARES-COMMON-PRIOR] 1,255
[ACCUMULATED-NII-CURRENT] 261
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 3,478
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 7,014
[NET-ASSETS] 36,337
[DIVIDEND-INCOME] 187
[INTEREST-INCOME] 523
[OTHER-INCOME] 0
[EXPENSES-NET] (408)
[NET-INVESTMENT-INCOME] 302
[REALIZED-GAINS-CURRENT] 3,492
[APPREC-INCREASE-CURRENT] 1,998
[NET-CHANGE-FROM-OPS] 5,792
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (294)
[DISTRIBUTIONS-OF-GAINS] (1,724)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 940
[NUMBER-OF-SHARES-REDEEMED] (325)
[SHARES-REINVESTED] 131
[NET-CHANGE-IN-ASSETS] 15,568
[ACCUMULATED-NII-PRIOR] 206
[ACCUMULATED-GAINS-PRIOR] 1,757
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 248
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 408
[AVERAGE-NET-ASSETS] 29,086
[PER-SHARE-NAV-BEGIN] 16.54
[PER-SHARE-NII] 0.18
[PER-SHARE-GAIN-APPREC] 3.01
[PER-SHARE-DIVIDEND] (0.23)
[PER-SHARE-DISTRIBUTIONS] (1.34)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 18.16
[EXPENSE-RATIO] 1.40
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE> 1
[ARTICLE] 6
[CIK] 0000795264
[NAME] THOMPSON PLUMB FUNDS, INC.
[SERIES]
[NUMBER] 3
[NAME] THOMPSON PLUMB GROWTH FUND
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] NOV-30-1997
[PERIOD-START] DEC-01-1996
[PERIOD-END] NOV-30-1997
[INVESTMENTS-AT-COST] 33,117
[INVESTMENTS-AT-VALUE] 43,993
[RECEIVABLES] 1,607
[ASSETS-OTHER] 4
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 45,604
[PAYABLE-FOR-SECURITIES] 161
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 67
[TOTAL-LIABILITIES] 228
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 30,541
[SHARES-COMMON-STOCK] 1,153
[SHARES-COMMON-PRIOR] 734
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 3,959
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 10,876
[NET-ASSETS] 45,376
[DIVIDEND-INCOME] 309
[INTEREST-INCOME] 62
[OTHER-INCOME] 0
[EXPENSES-NET] (506)
[NET-INVESTMENT-INCOME] (135)
[REALIZED-GAINS-CURRENT] 4,104
[APPREC-INCREASE-CURRENT] 5,098
[NET-CHANGE-FROM-OPS] 9,067
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] (1,838)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 506
[NUMBER-OF-SHARES-REDEEMED] (141)
[SHARES-REINVESTED] 54
[NET-CHANGE-IN-ASSETS] 21,299
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 1,899
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 333
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 506
[AVERAGE-NET-ASSETS] 33,308
[PER-SHARE-NAV-BEGIN] 32.79
[PER-SHARE-NII] (0.12)
[PER-SHARE-GAIN-APPREC] 9.16
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] (2.47)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 39.36
[EXPENSE-RATIO] 1.52
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE> 1
[ARTICLE] 6
[CIK] 0000795264
[NAME] THOMPSON PLUMB FUNDS, INC.
[SERIES]
[NUMBER] 2
[NAME] THOMPSON PLUMB BOND FUND
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] NOV-30-1997
[PERIOD-START] DEC-01-1996
[PERIOD-END] NOV-30-1997
[INVESTMENTS-AT-COST] 31,165
[INVESTMENTS-AT-VALUE] 31,690
[RECEIVABLES] 482
[ASSETS-OTHER] 4
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 32,176
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 39
[TOTAL-LIABILITIES] 39
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 31,577
[SHARES-COMMON-STOCK] 3,050
[SHARES-COMMON-PRIOR] 2,091
[ACCUMULATED-NII-CURRENT] 416
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (381)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 525
[NET-ASSETS] 32,137
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 1,851
[OTHER-INCOME] 0
[EXPENSES-NET] (321)
[NET-INVESTMENT-INCOME] 1,530
[REALIZED-GAINS-CURRENT] (200)
[APPREC-INCREASE-CURRENT] 120
[NET-CHANGE-FROM-OPS] 1,450
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (1,393)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1,357
[NUMBER-OF-SHARES-REDEEMED] (527)
[SHARES-REINVESTED] 129
[NET-CHANGE-IN-ASSETS] 9,984
[ACCUMULATED-NII-PRIOR] 277
[ACCUMULATED-GAINS-PRIOR] (181)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 184
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 321
[AVERAGE-NET-ASSETS] 28,235
[PER-SHARE-NAV-BEGIN] 10.59
[PER-SHARE-NII] .54
[PER-SHARE-GAIN-APPREC] (0.06)
[PER-SHARE-DIVIDEND] (0.53)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 10.54
[EXPENSE-RATIO] 1.14
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
