Three First National Plaza
70 West Madison Street, Suite 3300
Chicago, Illinois 60602-4207
312 372-1121
Fax 312 372-2098
JANET D. OLSEN
312 807-4311
[email protected]
September 11, 1998
VIA EDGAR
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Fasciano Fund, Inc.
1933 Act Registration No. 33-23997
1940 Act Registration No. 811-5602
Ladies and Gentlemen:
On behalf of Fasciano Fund, Inc. (the "Fund"), we are transmitting for
electronic filing under the Securities Act of 1933 and the Investment Company
Act of 1940 post-effective amendment no. 10 to the Fund's registration statement
under the 1933 Act, which is also amendment no. 12 to its registration statement
under the 1940 Act, including all exhibits thereto.
This filing is being made pursuant to Rule 485(b) under the Securities Act
of 1933, with a designated effective date of September 11, 1998. We have
advised the registrant in connection with the preparation of this amendment, and
in that connection we have reviewed the amendment. In accordance with Rule
485(e), we confirm that in our judgment the amendment does not contain any
disclosure that would render the amendment ineligible to become effective
pursuant to Rule 485(b).
Very truly yours,
BELL, BOYD & LLOYD
By: /s/ Janet D. Olsen
Janet D. Olsen
Securities and Exchange Commission
January 13, 1997
As filed with the Securities and Exchange Commission on September 11, 1998
Securities Act registration no. 33-23997
Investment Company Act file no. 811-5602
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
POST-EFFECTIVE AMENDMENT NO. 10 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 12 [X]
FASCIANO FUND, INC.
(Registrant)
190 S. LaSalle Street, Suite 2800
Chicago, Illinois 60603
Telephone number: 312/444-6050
Michael F. Fasciano Janet D. Olsen
Fasciano Company, Inc. Bell, Boyd & Lloyd
Suite 2800 Suite 3200
190 S. LaSalle Street 70 West Madison Street
Chicago, Illinois 60603 Chicago, Illinois 60602
(Agents for service)
Amending Parts A, B and C and filing exhibits
It is proposed that this filing will become effective:
- ------- immediately upon filing pursuant to paragraph (b) of rule 485
- ---X--- on September 11, 1998 pursuant to paragraph (b) of rule 485
- ------- 60 days after filing pursuant to paragraph (a)(1) rule 485(a)
- ------- on pursuant to paragraph (a)(1) rule 485(a)
- ------- 75 days after filing pursuant to paragraph (a)(2) of rule 485
- ------- on pursuant to paragraph (a)(2) of rule 485
Registrant intends to file its Rule 24f-2 Notice for the fiscal year ending
June 30, 1998 on or before September 28, 1998.
FASCIANO FUND, INC.
Cross-reference sheet pursuant to rule 495(a) of Regulation C
Item Location or caption*
---- --------------------
Part A (prospectus)
-------------------
1(a) & (b) Front cover
2(a) Fund Expenses
(b)-(c) Not applicable
3(a) Financial Highlights
(b) Not applicable
(c)-(d) Performance Information
4(a)(i) Other Information
(a)(ii)&(b) Investment Objectives and Policies;Investment Restrictions
(c) Investment Risks
5(a) Management of the Fund
(b) Management of the Fund; back cover
(c) Management of the Fund
(d) Management of the Fund
(e) Back cover
(f) Management of the Fund
(g) Not applicable
5A The information called for is contained in the
fund's annual report.
6(a) Other Information
(b)-(d) Not applicable
(e) Other Information
(f) Dividends and Distributions
(g) Taxation
7 Purchasing Shares
(a) Not Applicable
(b) Purchasing Shares; Net Asset Value
(c) Purchasing Shares
(d) Purchasing Shares; front cover
(e)-(f) Not Applicable
8(a) Redeeming Shares
(b) Purchasing Shares
(c) & (d) Redeeming Shares
9 Not applicable
Part B (Statement of Additional Information)
--------------------------------------------
10(a) & (b) Front cover
11 Table of Contents
12 History of the Fund
13(a)-(c) Investment Policies; Investment Restrictions
(d) Not applicable
14(a) & (b) Directors and Officers
(c) Not applicable
15(a) Not applicable
(b) Certain Shareholders
(c) Directors and Officers
16(a) & (b) Investment Adviser
(c) Not applicable
(d) Administrator, Custodian and Transfer Agent
(e)-(g) Not applicable
(h) Administrator, Custodian and Transfer Agent,
Independent Public Accountants
(i) Not applicable
17(a) Portfolio Transactions
(b) Not applicable
(c) & (d) Portfolio Transactions
(e) Not applicable
18 Not applicable
19(a) Purchasing and Redeeming Shares
(b) Purchasing and Redeeming Shares;
Financial Statements
(c) Purchasing and Redeeming Shares
20 Additional Tax Information
21(a)-(c) Not applicable
22(a) Not applicable
(b) Performance Information
23 Financial Statements
Part C (Other Information)
--------------------------
24 Financial statements and exhibits
25 Persons controlled by or under common control
with registrant
26 Number of holders of securities
27 Indemnification
28 Business and other connections of
investment adviser
29 Principal underwriters
30 Location of accounts and records
31 Management services
32 Undertakings
PROSPECTUS
FASCIANO FUND, INC.
(FASCIANO FUND LOGO)
Chicago, Illinois
September 11, 1998
PROSPECTUS
FASCIANO FUND, INC.
(A NO-LOAD FUND)
September 11, 1998
[FASCIANO FUND LOGO]
190 SOUTH LASALLE STREET
SUITE 2800
CHICAGO, ILLINOIS 60603
(312) 444-6050
(800) 848-6050
WEB SITE: www.fascianofunds.com
E-MAIL: [email protected]
INVESTMENT OBJECTIVE: LONG-TERM CAPITAL GROWTH
NO SALES OR 12b-1 CHARGES
MINIMUM INVESTMENT PLANS AVAILABLE
------------------ ---------------
REGULAR AND ROTH IRA ACCOUNTS INDIVIDUAL RETIREMENT ACCOUNT (IRA)
Initial investment: $1,000
Subsequent investments: $100 ROTH IRA
AUTOMATIC INVESTMENT PLAN EDUCATION IRA
No initial investment required Initial Investment: $500
Each automatic investment: $50
SEP-IRA
SYSTEMATIC WITHDRAWAL PLAN
SIMPLE-IRA
This prospectus sets forth concisely information you should know before
investing. Please read it carefully and retain it for future reference. A
Statement of Additional Information dated the date of this prospectus and
containing more information about the Fund has been filed with the Securities
and Exchange Commission (SEC) and (together with any supplements thereto) is
incorporated herein by reference. The Statement of Additional Information is
available without charge at the address and telephone number set forth above.
The Statement of Additional Information, material incorporated by reference, and
other information that has been electronically filed, is also available on the
SEC's web site (www.sec.gov).
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 CON TRARY IS
A CRIMINAL OFFENSE.
TABLE OF CONTENTS
Page
FUND EXPENSES 1
Shareholder Transaction Expenses 1
Annual Fund Operating Expenses 1
FINANCIAL HIGHLIGHTS 2
INVESTMENT OBJECTIVES AND POLICIES 3
INVESTMENT RISKS 3
INVESTMENT RESTRICTIONS 4
PERFORMANCE INFORMATION 4
PURCHASING SHARES 5
REDEEMING SHARES 7
ACCOUNT REGISTRATION 9
NET ASSET VALUE 9
IRA PLANS 9
MANAGEMENT OF THE FUND 10
Directors and Investment Adviser 10
Administrator 10
Fees and Expenses 10
Portfolio Transactions 11
DIVIDENDS AND DISTRIBUTIONS 11
TAXATION 11
OTHER INFORMATION 12
FUND EXPENSES
The following table illustrates all expenses and fees that a shareholder of the
Fund will bear.
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees (a)<F1> None
(a)<F1> A shareholder requesting payment of redemption proceeds by wire must
pay the cost of the wire (currently $12). That charge and any similar service
fee may be changed without prior notice to shareholders.
ANNUAL FUND OPERATING
(stated as a percentage of average net assets)
Management Fees 1.0%
12b-1 Fees None
Other Expenses 0.3%
----
Total Fund Operating Expenses 1.3%
EXAMPLE
You would pay the following expenses on a $1,000 investment in the Fund,
assuming (1) a 5% annual rate of return (as required by the Securities and
Exchange Commission for purposes of this example), (2) the same operating
expense percentage that the Fund experienced in the past fiscal year, (3)
reinvestment of all dividends and capital gain distributions and (4) redemption
at the end of each period:
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
$13 $41 $71 $157
The table and example are intended to help you understand the costs and
expenses that an investor in the Fund bears, directly or indirectly. THIS
EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR
PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
Although information such as that shown above is useful in reviewing the
Fund's expenses and in providing a basis for comparison with other mutual funds,
it should not be used for comparison with other investments using different
assumptions or time periods.
FINANCIAL HIGHLIGHTS
The table below reflects the results of the Fund's operations for a share
outstanding throughout the periods shown below and has been audited by Arthur
Andersen LLP, the Fund's independent public accountants. This table should be
read in conjunction with the Fund's financial statements and notes thereto,
which are incorporated by reference into the Statement of Additional Information
and which may be obtained from the Fund upon request without charge.
<TABLE>
YEAR ENDED JUNE 30,
----------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989(A)<F3>
---- ---- ---- ---- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of year $27.53 $24.33 $20.17 $17.34 $17.74 $16.30 $15.67 $14.20 $12.72 $11.22
Income from investment
operations
Net investment income (loss) 0.16 (0.03) (0.05) (0.24) (0.05) (0.05) 0.03 0.11 0.11 0.25
Net realized and unrealized
gain on securities 8.71 3.82 5.55 4.21 0.65 1.95 0.99 1.87 1.57 1.94
------- ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment operations 8.87 3.79 5.50 3.97 0.60 1.90 1.02 1.98 1.68 2.19
Less distributions:
Dividends from net
investment income 0.00 0.00 0.00 0.00 0.00 0.00 (0.02) (0.12) (0.12) (0.12)
Distributions from
realized gains
on securities (1.49) (0.59) (1.34) (1.14) (1.00) (0.46) (0.36) (0.38) (0.03) (0.56)
Provision for income tax on
realized gains 0.00 0.00 0.00 0.00 0.00 0.00 (0.01) (0.01) (0.05) (0.01)
------- ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions
and taxes (1.49) (0.59) (1.34) (1.14) (1.00) (0.46) (0.39) (0.51) (0.20) (0.69)
------- ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value at end of year $34.91 $27.53 $24.33 $20.17 $17.34 $17.74 $16.30 $15.67 $14.20 $12.72
------- ------ ------ ------ ------ ------ ------ ------ ------ ------
------- ------ ------ ------ ------ ------ ------ ------ ------ ------
Total return 33.2% 15.8% 28.3% 24.1% 3.3% 11.8% 6.5% 14.8% 12.9% 30.4%*<F2>
Ratios/Supplemental Data:
Net assets at end
of year
(in thousands) $94,957 $42,121 $28,981 $20,868 $16,582 $15,458 $10,564 $ 7,445 $ 5,196 $ 3,574
Expenses, excluding
provision for taxes, to
average net assets (b)<F4> 1.3% 1.4% 1.5% 1.7% 1.7% 1.7% 1.7% 1.9% 2.0% 0.6%*<F2>
Net investment
income (loss) before taxes
to average net assets (c)<F5> 0.24% (0.4)% (0.3)% (0.6)% (0.3)% (0.3)% 0.2% 0.7% 0.9% 3.3%*<F2>
Portfolio turnover rate 49.8% 41.0% 45.6% 37.9% 99.0% 43.2% 29.0% 7.7% 57.2% 25.1%
*<F2>Annualized.
(a)<F3>From November 10, 1988, the date on which shares were first offered for
sale to the public.
(b)<F4>If the Fund had paid all of its expenses, excluding provision for Federal
income tax, and there had been no reimbursement by the investment adviser, this
ratio would have been 2.7% for the period ended June 30, 1989 and 2.1% for the
year ended June 30, 1990.
(c)<F5>If the Fund had paid all of its expenses, excluding provision for Federal
income tax, and there had been no reimbursement by the investment adviser, this
ratio would have been 1.2% for the period ended June 30, 1989 and 0.8% for the
year ended June 30, 1990.
</TABLE>
INVESTMENT OBJECTIVES AND POLICIES
The primary investment objective of the Fund is long-term capital growth.
Current income is considered in selecting securities, but its importance is
secondary to capital growth. There can be no assurance that the Fund will
achieve its investment objective.
The Fund invests in common stocks based on their potential for capital
appreciation, as determined by the Fund's investment adviser, Fasciano Company,
Inc. (the "Adviser"). The Adviser selects common stocks based on qualitative
and quantitative parameters, including market capitalization, business
opportunities, financial condition, and insider ownership. Ultimately,
investments selected for the Fund are those that are determined by the Adviser
to offer the greatest value in terms of growth potential relative to price.
In the opinion of the Adviser, smaller companies (having market
capitalizations of less than one billion dollars) are more likely to sustain
higher long-term rates of growth, and therefore present better opportunities for
long-term capital growth than larger companies. Furthermore, smaller companies
are not as widely followed by institutional investors and are more likely to be
undervalued. However, the Fund may hold the stocks of small companies which
grow into medium-size companies, and may invest in larger companies that present
attractive opportunities for long-term capital growth.
The Fund invests in companies on a long-term basis and emphasizes long-term
investment performance. The Adviser has an investment time horizon of three to
five years. Prospective investors should invest in the Fund with a time horizon
of three years or longer to be consistent with the Adviser. From time to time,
however, the Fund may invest on a short-term basis or may sell within a few
months securities purchased on a long-term basis.
The Fund is ordinarily substantially fully invested and does not attempt to
invest based on a market timing strategy. The Fund expects that the major
portion of its portfolio will at all times be invested in common stocks and
securities having common stock characteristics, including securities convertible
into common stocks, and rights and warrants to purchase common stocks. The Fund
may invest in corporate or government obligations or hold cash or cash
equivalents if a temporary defensive position is considered advisable.
INVESTMENT RISKS
All investments, including those in mutual funds, have risks and the Fund
is not intended to present a balanced investment program. The Fund invests
mostly in common stocks, which represent an equity (ownership) interest in a
corporation. This ownership interest often gives the Fund the right to vote on
measures affecting that company's organization and operations. Over time,
common stocks have historically provided superior long-term capital growth
potential. However, stock prices may decline over short or extended periods.
Stock markets tend to move in cycles, with periods of rising stock prices and
periods of falling stock prices. As a result, the Fund should be considered a
LONG-TERM investment, designed to provide the best results when held for several
years or more. The Fund may not be a suitable investment if you have a short-
term investment horizon or are unwilling to accept fluctuations in share price,
including significant declines over a given period.
The Fund invests in the common stocks of small companies. The securities
of small companies, as a class, have shown market behavior which has had periods
of favorable results and other periods of less favorable results relative to
larger companies as a class. Stocks of small companies tend to be more volatile
and less liquid than stocks of large companies. Small companies, as compared to
larger companies, may have a shorter history of operations, may not have as
great an ability to raise additional capital, may have a less diversified
product line making them susceptible to market pressure, and may have a smaller
public market for their shares.
The Fund's investment objective may be changed by the board of directors
without shareholder approval. The Fund will notify shareholders at least 30
days prior to a change in the Fund's investment objective. If there is a change
in the Fund's investment objective, you should consider whether the Fund remains
an appropriate investment in light of your then current financial position and
needs. There can be no assurance that the Fund will achieve its objective.
INVESTMENT RESTRICTIONS
The Fund will not:
1. Invest more than 5% of its assets (valued at the time of investment)
in securities of any one issuer, except in U.S. government obligations;
2. Acquire securities of any one issuer which at the time of investment
(a) represent more than 10% of the voting securities of the issuer or (b) have a
value greater than 10% of the value of the outstanding securities of the issuer;
3. Invest more than 10% of its net assets (valued at the time of
investment) in securities for which there is no ready market (including
restricted securities and repurchase agreements maturing in more than seven
days); or
4. Borrow, except in amounts up to 10% of its total assets, provided (i)
that the total of reverse repurchase agreements and such borrowings will not
exceed 5% of the Fund's total assets and (ii) the Fund will not purchase
securities when its borrowings exceed 5% of total assets.
These restrictions cannot be changed without the approval of a "majority of
the outstanding" shares of the Fund as defined in the Investment Company Act of
1940. All of the Fund's investment restrictions are listed in the Statement of
Additional Information.
PERFORMANCE INFORMATION
From time to time, in advertisements or sales literature, the Fund may
present information about its performance, including "total return" and "average
annual total return" on a hypothetical investment in Fund shares.
Total return for a period is the percentage change in value during the
period of an investment in Fund shares, including the value of shares acquired
through reinvestment of all dividends and capital gain distributions. Average
annual total return is the average annual compounded rate of change in value
represented by the total return for the period. The effect of income taxes will
not be taken into account. Performance information supplied by the Fund may not
provide a basis of comparison with other investments using different
reinvestment assumptions or time periods.
The Fund may also compare its performance to various stock indices (groups
of unmanaged common stocks), such as the S&P 500, the NASDAQ Composite (OTC) and
the Russell 2000, or to the Consumer Price Index or groups of comparable mutual
funds, including ranking determined by Lipper Analytical Services, Inc., an
independent service that monitors the performance of over 1,000 mutual funds,
Morningstar, Inc., or another service.
Performance of the Fund will vary from time to time, and past results are
not necessarily indicative of future results. Information about the Fund's
performance is contained in the Fund's annual report which may be obtained free
of charge by calling (800) 848-6050.
PURCHASING SHARES
You may purchase shares of the Fund at net asset value by check, by wire or
through the Fund's Automatic Investment Plan. There are no sales commissions or
underwriting discounts. The minimum initial investment is $1,000 (except for an
Automatic Investment Plan) and minimum subsequent investments are $100
(excluding reinvestments of dividends and capital gain distributions), or $50
under the Automatic Investment Plan described below. The purchase price of Fund
shares is the net asset value per share next determined after your Share
Purchase Application (for a new account) and funds are received in proper order
and accepted by the Fund or its authorized agent. See "Net Asset Value."
Purchasing shares by check. To purchase shares by check, complete and sign
the Share Purchase Application at the back of this prospectus and mail it, with
a check in U.S. dollars drawn on a U.S. bank for the total purchase price, to
the Fund's transfer agent, FIRSTAR TRUST COMPANY, P.O. BOX 701, MILWAUKEE,
WISCONSIN 53201-0701.
Purchasing shares by wire. You may also pay for Fund shares by wire
transfer of the purchase price. Before wiring funds, call Firstar Trust Company
("Firstar") at (800) 982-3533 to ensure prompt and accurate handling of your
investment. Then instruct your bank to wire the purchase price to "Firstar
Bank-Milwaukee N.A., ABA number 075000022, Credit Firstar Trust Company, Account
112-952-137, Further Credit: Fasciano Fund, Inc., Attention: Mutual Fund
Department (shareholder name; account number)". Your bank may charge you a fee
for sending the wire. The Fund is not responsible for the consequences of
delays, including delays in the banking or Federal Reserve wire system.
Purchasing shares by telephone. To purchase shares by telephone, call
Firstar at (800) 982-3533. You may not make an initial purchase by telephone,
but you may make subsequent investments to an existing account. The minimum
telephone purchase amount is $1,000. Only bank accounts held at domestic
financial institutions that are Automated Clearing House (ACH) members can be
used for telephone transactions. Your telephone purchase order must be received
by Firstar before the close of regular session trading on the New York Stock
Exchange (generally 3:00 p.m., Central time) to receive the net asset value
calculated for that day. In an effort to reduce the risk of unauthorized or
fraudulent transactions by telephone, the Fund and Firstar employ procedures
reasonably designed to confirm that such instructions by telephone are genuine.
The procedures used include requiring an investor to provide the account number,
recording all such telephone instructions and confirming all telephone
transactions in writing to the shareholder at the address on Firstar's records.
The Fund may implement other procedures from time to time. If reasonable
procedures are not used, the Fund and/or Firstar may be liable for any loss due
to unauthorized or fraudulent transactions. In all other cases, the shareholder
is liable for any loss for unauthorized transactions.
Automatic Investment Plan. The Automatic Investment Plan allows you to
purchase shares by an electronic transfer of funds at regular monthly intervals
from your bank checking account, money market account, NOW account or savings
account.
There is no minimum initial investment if you enroll in the Automatic
Investment Plan when you open your account. Your account will be debited and
shares will be purchased at regular monthly intervals of your choosing. You may
join the Automatic Investment Plan by completing that portion of the Share
Purchase Application or filling out a separate Automatic Investment Plan
Application which you may obtain from the Fund or the transfer agent. You may
cancel your participation in the Plan or change the amount of purchase or the
day each month on which shares are purchased at any time by calling (800) 982-
3533 or by writing to the Fund, c/o FIRSTAR TRUST COMPANY, P. O. BOX 701,
MILWAUKEE, WISCONSIN 53201-0701. The change or cancellation will be effective
five business days following receipt. For details on how to change your Plan
options or terminate the Plan by telephone, see "Account Registration."
Each investment through the Automatic Investment Plan must be at least $50
and not more than $50,000. For you to participate in the Plan, your bank or
other financial institution must be an Automated Clearing House member. It will
take about 15 days for Firstar to process your Automatic Investment Plan
enrollment. The Fund may modify or terminate the Automatic Investment Plan at
any time or charge a service fee, although no such fee is currently
contemplated.
General. Each investment in shares of the Fund, including dividends and
capital gain distributions reinvested in Fund shares, is acknowledged by a
statement showing the number of shares purchased, the net asset value at which
the shares are purchased, and the new balance of Fund shares owned. Generally
the Fund does not issue stock certificates for the shares, although stock
certificates in full share amounts will be furnished upon your written request.
Fractional shares, if any, will be carried on the books of the Fund without the
issuance of certificates.
The Fund reserves the right not to accept purchase orders under
circumstances or in amounts considered disadvantageous to existing shareholders,
or which do not include properly certified social security or taxpayer
identification numbers. In addition to any loss sustained by the Fund, Firstar
will charge a fee (currently $15) for any check that is returned for
insufficient funds.
The Fund does not consider the U.S. Postal Service or other independent
delivery services to be its agents. Therefore, deposit in the mail or with such
services of purchase applications does not constitute receipt by Firstar Trust
company or the Fund. Do not mail letters by overnight courier to the post
office box address. CORRESPONDENCE SENT BY OVERNIGHT COURIER should be
addressed to Firstar Trust Company, Third Floor, 615 East Michigan Street,
Milwaukee, Wisconsin 53202.
Purchases and redemptions through dealers. You may purchase or redeem
shares of the Fund through some broker-dealers, banks or other institutions that
have made Fund shares available to their customers ("financial services
companies"). Some financial services companies may charge fees to their
customers, including fees on purchases or redemptions of Fund shares. Those
charges, if imposed, could constitute a substantial portion of a smaller account
and may not be in your best interest. Some financial services companies charge
no fees or fewer fees to their customers. However, for accounting and
shareholder services provided by such company with respect to Fund shares held
by that company for its customers, the company may charge a fee (generally a
percentage of the annual average value of those accounts).
The Fund may also enter into an arrangement with some financial services
companies authorizing the company to process purchase orders or redemption
requests on behalf of the Fund on an expedited basis, including requesting share
redemptions by telephone (an "authorized agent"). Receipt of a purchase order
or redemption request by an authorized agent will be deemed to be receipt by the
Fund for purposes of determining the net asset value of Fund shares to be
purchased or redeemed.
For purchase orders placed through an authorized agent, a shareholder will
pay the Fund's net asset value per share next computed after the receipt by the
authorized agent of such purchase order, plus any applicable transaction charge
imposed by the agent. For redemption orders placed through an authorized agent,
a shareholder will receive redemption proceeds which reflect the net asset value
per share next computed after the receipt by the authorized agent of the
redemption order, less any redemption fees imposed by the agent.
REDEEMING SHARES
Redeeming shares in writing. The Fund will redeem all or any part of your
shares upon your written request delivered to the Fund's transfer agent, Firstar
Trust Company, P. O. Box 701, Milwaukee, Wisconsin 53201-0701, or to an
authorized agent of the Fund, as described above.
Your redemption request must:
(1) specify the number of shares or the dollar amount to be redeemed, unless
all shares are to be redeemed;
(2) be signed by all owners exactly as their names appear on the account;
(3) include a signature guarantee if the shares to be redeemed have a value of
more than $25,000, or if the redemption proceeds are to be sent to an
address different from the address in the Fund's records; the guarantor
must be a bank, member firm of a national securities exchange, savings and
loan association, credit union or other entity authorized by state law to
guarantee signatures (a notary public is not an acceptable guarantor); and
---
(4) be accompanied by properly endorsed stock certificates representing the
shares to be redeemed, if they are represented by certificates.
In the case of shares held by a corporation, the redemption request must be
signed in the name of the corporation by an officer whose title must be stated,
and a certified bylaw provision or resolution of the board of directors
authorizing the officer to so act must be furnished. In the case of a trust or
a partnership, the signature must include the name of the registered shareholder
and the title of the person signing on its behalf. Redemption requirements for
shares held under a Fasciano Fund IRA are described in sepa rate disclosure
information for the plan. Under certain circumstances, before the shares can be
redeemed, additional documents may be required in order to verify the authority
of the person seeking to redeem.
The Fund does not consider the U.S. Postal Service or other independent
delivery services to be its agents. Therefore, deposit in the mail or with such
services of redemption requests does not constitute receipt by Firstar Trust
Company or the Fund. Do not mail letters by overnight courier to the post
office box address. CORRESPONDENCE SENT BY OVERNIGHT COURIER should be
addressed to Firstar Trust Company, Third Floor, 615 East Michigan Street,
Milwaukee, Wisconsin 53202.
Redeeming shares by telephone. To request a redemption by telephone, call
Firstar at (800) 982-3533. Your shares will be redeemed at the net asset value
next calculated after receipt of your redemption request. You may have the
proceeds wired to your bank account or mailed to your address of record. Only
one owner of a joint account is required to place a telephone redemption
request. To reduce the risk of fraudulent telephone instructions, the proceeds
of telephone redemptions may be sent only to your address of record or to a bank
or brokerage account designated by you, in writing, on the purchase application
or in a letter with the signature(s) guaranteed. In an effort to reduce the
risk of unauthorized or fraudulent transactions by telephone, the Fund and the
transfer agent employ procedures reasonably designed to confirm that such
instructions by telephone are genuine. The procedures used include requiring an
investor to provide the account number, recording all such telephone
instructions and confirming all telephone transactions in writing to the
shareholder at the address on Firstar's records. The Fund may implement other
procedures from time to time. If reasonable procedures are not used, the Fund
and/or Firstar may be liable for any loss due to unauthorized or fraudulent
transactions. In all other cases, the shareholder is liable for a loss for
unauthorized transactions. You may not redeem shares held in an IRA account by
telephone. During periods of volatile economic and market conditions, you may
have difficulty making a redemption request by telephone, in which case you
should request your redemption in writing. Telephone redemptions will not be
allowed within 15 days of notification of a shareholder address change. In this
case a signature guaranteed letter will be required. If you redeem shares by
telephone and request a wire payment, your redemption proceeds will normally be
paid in federal funds on the next business day provided that your redemption
order is received by Firstar befre 3 p.m. Central time. Firstar will charge a
$12 wire fee for each such payment.
Systematic Withdrawal Plan. The Systematic Withdrawal Plan allows you to
set up automatic redemptions at regular intervals from your account if you have
a $10,000 minimum account balance. You may join the Systematic Withdrawal Plan
by completing that portion of the Share Purchase Application or filling out a
separate Systematic Withdrawal Plan Application which you may obtain from the
Fund or the transfer agent. You may cancel your participation in the Plan or
change the amount of withdrawal at any time by calling (800) 982-3533 or by
writing to the Fund at, c/o FIRSTAR TRUST COMPANY, P. O. BOX 701, MILWAUKEE,
WISCONSIN 53201-0701. The change or cancellation will be effective five
business days following receipt. The Systematic Withdrawal Plan does not apply
to Fund shares held in Individual Retirement Accounts. For details on how to
change your Plan options or terminate the Plan by telephone, see "Account
Registration."
If you need more information on redemption procedures, including redemption
of shares held in IRA and other retirement accounts, please call Firstar, the
Fund's transfer agent, toll-free at (800) 982-3533.
The redemption price per share is the net asset value determined as
described under "Net Asset Value." There is no redemption charge imposed by the
Fund or by Firstar. However, certain financial services companies through which
you redeem your Fund shares may charge you a transaction fee for their services.
See "Purchasing Shares." The redemption value of the shares may be more or less
than your cost depending upon the value of the Fund's portfolio securities at
the time of redemption.
You may not cancel or revoke your redemption order once your instructions
have been received. Payment for shares redeemed is made within seven days after
receipt of a request for redemption in proper form by Firstar or by an
authorized agent of the Fund. However, redemption payments for shares that were
purchased by check may be delayed until the Fund can verify that the payment for
the shares has been collected, which may take several days. The 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 closings, (b) the Commission has by order permitted such
suspension, or (c) an emergency, as determined by the Commission, exists making
disposal of portfolio securities or valuation of net assets of the Fund not
reasonably practicable.
If the Fund sends you a check (as payment of redemption proceeds,
systematic withdrawal payment or a dividend or capital gain distribution you
elected to receive in cash) and the check is returned "undeliverable" or remains
uncashed for six months, the check will be canceled and the proceeds will be
reinvested in the Fund at the net asset value per share on the date of
cancellation. In addition, after that six-month period, your systematic
withdrawal payments will be canceled and future withdrawals will occur only when
requested, or your cash election will automatically be changed and future
dividends and distributions will be reinvested in your account.
ACCOUNT REGISTRATION
ADDRESS CHANGES on your account may be made by calling (800) 982-3533. The
Fund will send you a written statement of the account to both your new and old
addresses. Any written redemptions received within 15 days after the address
change must be accompanied by a signature guarantee.
AUTOMATIC INVESTMENT PLAN AND SYSTEMATIC WITHDRAWAL PLAN CHANGES may be
made by telephone. Plan changes that may be made by telephone include
increasing or decreasing investment (withdrawal) amounts, changing the frequency
of investment (withdrawal) or terminating either Plan.
DIVIDEND AND CAPITAL GAIN DISTRIBUTION CHANGES may also be made by
telephone. A telephone request changing the reinvestment of dividend and
capital gain distributions to the receipt of payment, will be honored only if
the proceeds are to be sent to the address of record on the account. For more
details, see "Dividends and Distributions."
The Fund reserves the right to record all account registration changes made
by telephone.
NET ASSET VALUE
Share purchase and redemption orders will be priced at the Fund's net asset
value next computed after such orders are received by: (i) Firstar, as transfer
agent for the Fund; or (ii) an authorized agent of the Fund. The price per
share for a purchase order or redemption request is the net asset value next
determined after receipt of the order or request in proper form. The net asset
value of a share of common stock of the Fund is determined as of the time of the
close of regular session trading on the New York Stock Exchange on any day on
which that exchange is open for trading. Closing time is generally 3:00 p.m.
Central time, but is sometimes earlier. The net asset value of a share of the
Fund is the value of the Fund's assets, less its liabilities, divided by the
number of shares outstanding.
Securities traded on a stock exchange are ordinarily valued on the basis of
the last sale price on the date of valuation or, in the absence of any sale on
that day, the closing bid price. Other securities are generally valued at the
current bid price. Any securities for which there are no readily available
market quotations and all assets other than securities will be valued at a fair
value, as determined in good faith by the board of directors.
IRA PLANS
The Fund has master individual retirement account (IRA) plans which allow
you to invest in the Fund using a regular IRA, Roth IRA, Education IRA, SEP-IRA
or SIMPLE-IRA. Income and capital gains earned by an IRA are sheltered from
taxation until withdrawal. The initial minimum investment in a Fasciano Fund
IRA is $1,000 (except for an Education IRA, which has an initial minimum
investment of $500). The plan also permits you to "roll over" to a Fasciano
Fund IRA a lump sum distribution from a qualified pension or profit-sharing
plan, including by a direct transfer from the plan trustee, thereby postponing
your federal income tax on the distribution if rolled over within 60 days. Many
distributions from qualified plans are subject to income tax withholding unless
transferred directly from the plan to an IRA or another plan.
--------
Regular IRAs allow anyone of legal age and under 70 1/2 with earned income
to save up to $2,000 per tax year. If your spouse has less than $2,000 in earned
income, he or she may still contribute up to $2,000 to an IRA, as long as you
and your spouse's combined earned income is at least $4,000.
Roth IRAs allow single taxpayers with income up to $95,000 per year, and
married couples with income up to $150,000 per year, to contribute up to $2,000,
or $4,000, respectively, per year. Contributions to Roth IRAs are not tax-
deductible, but withdrawals are tax-free if the Roth IRA has been held at least
five years, and you are at least 59 1/2 or use the proceeds to purchase a first
home.
Education IRAs may be established on behalf of a beneficiary under age 18
to save for his or her education. Distributions from an Education IRA are tax-
free as long as the proceeds are used to pay for "qualified higher education
expenses." Single taxpayers with annual income up to $95,000, and married
couples with annual income up to $150,000, are allowed to contribute up to $500
per year per beneficiary. The $500 annual maximum contribution is subject to
reduction if the contributor's income exceeds those amounts.
Small business owners or those with self-employment income may establish a
Simplified Employee Pension Plan (SEP-IRA), which allows tax-deductible
contributions of up to 15% of the first $160,000 of compensation per year for
themselves and any eligible employees, subject to special rules designed to
avoid discrimination. Savings Incentive Match Plan IRAs (SIMPLE IRAs) may be
established by an employer (including a self-employed person) and enable all
employees of the employer to elect to have up to $6,000 per year deducted from
their paychecks on a before-tax basis and deposited directly into an account
maintained for the individual employee. The employer is also generally required
to make a contribution for each employee who elects to contribute.
More information about regular and Roth IRAs, Education IRAs, SEP-IRAs and
SIMPLE IRAs, including related documents and charges of Firstar, as custodian,
may be obtained from the Fund.
The Fund may also be used as an investment in other kinds of retirement
plans, including Keogh or corporate profit-sharing and money purchase plans,
403(b) plans and 401(k) plans. All of these type of accounts must be
established by the trustee of the plan. The Fund does not offer prototypes of
these plans.
MANAGEMENT OF THE FUND
Directors and Investment Adviser. The board of directors has overall
responsibility for the conduct of the Fund's affairs. Subject to the authority
of the board of directors, the investment adviser, Fasciano Company, Inc. (the
"Adviser"), furnishes continuous investment supervision and management to the
Fund under an investment advisory agreement. The Adviser is a registered
investment adviser wholly-owned by Michael F. Fasciano. As of the date of
this prospectus, the Fund is the Adviser's only investment advisory client.
Mr. Fasciano, who is president of the Fund and the Adviser, has been
responsible for management of the Fund's portfolio since the Fund began
operations. Mr. Fasciano is a Chartered Financial Analyst and has been employed
in the securities industry since 1978. Before organizing the Adviser in 1986,
Mr. Fasciano was a securities analyst and portfolio manager.
Administrator. Firstar Trust Company, Milwaukee, Wisconsin ("Firstar") is the
Fund's administrator, custodian, transfer agent and fund accounting service
provider. Under the supervision of the Adviser and the Fund's board of
directors, Firstar generally assists the Fund in all aspects of its
administration and operations. Firstar receives a monthly fee at the annual
rate of 0.06% of the Fund's average daily net assets, subject to certain
minimum annual fees described in the Statement of Additional Information.
Fees and Expenses. The Adviser manages the investment and reinvestment of the
Fund's assets. At its own expense, the Adviser provides office space to the Fund
and all necessary facilities, equipment and personnel for managing the assets
of the Fund. For these services, the Adviser receives a monthly fee at the
annual rate of 1% of the Fund's average daily net assets. The annual rate of
fee is higher than that paid by most mutual funds. The Fund pays all of its
operating expenses not specifically assumed by the Adviser, which amounted to
1.3% of the Fund's average net assets during the fiscal year ended June 30,
1998, including the advisory fee.
Portfolio Transactions. The Adviser places the orders for the purchase and sale
of the Fund's portfolio securities. In doing so, the Adviser seeks to obtain
the best combination of net price and execution, which involves a number of
judgmental factors. When the Adviser believes that more than one broker or
dealer is capable of providing the best combination of price and execution in
a particular portfolio transaction, the Adviser often selects a broker or
dealer that has furnished it with research services.
DIVIDENDS AND DISTRIBUTIONS
The Fund intends to distribute substantially all its net investment income
and any net capital gain realized from sales of the Fund's portfolio securities
at least annually. Dividends and capital gain distributions, if any, are
reinvested in additional shares of the Fund unless you have requested in writing
or on your Share Purchase Application to have them paid to you by check or by
automatic deposit to your bank account. For details on how to change your
distribution option by telephone, see "Account Registration."
TAXATION
The Fund intends to continue to qualify, as it has since it began offering
its shares to the public, as a regulated investment company under the Internal
Revenue Code of 1986, as amended (the "Code"), in order to avoid payment of
federal income tax on its net investment income and net capital gains to the
extent that it distributes such amounts to shareholders.
Dividends from net investment income and net short-term capital gains are
taxable to you as ordinary income, whether received in cash or reinvested in
additional shares of the Fund. Distributions of net long-term capital gains are
taxable to you as long term capital gains (currently at a maximum rate of 20%)
regardless of the length of time you have held your shares in the Fund.
Classification as long-term capital gain depends on how long the security sold
had been held by the Fund. Long-term gains are those held from securities held
more than one year.
Distributions declared in December and paid in January are taxable as if
they were paid on December 31. Every January, the Fund will send you and the
IRS a Form 1099-DIV showing the amount of each taxable distribution you received
during the year.
If you purchase shares shortly before the record date for a distribution
you will, in effect, receive a return of a portion of your investment, but the
distribution will be taxable to you even if the net asset value of your shares
is reduced below your cost. However, for federal income tax purposes your
original cost would continue as your tax basis. If you realize a loss on the
sale of Fund shares held for six months or less, your short-term loss is
recharacterized as long-term to the extent of any long-term capital gain
distributions you have received with respect to those shares.
Redemptions are subject to capital gains tax. A capital gain or loss is
the difference between the cost of your shares and the price you receive when
you sell them.
If you fail to furnish your social security or other taxpayer
identification number or to certify properly that it is correct, the Fund may be
required to withhold 31% federal income tax ("backup withholding") from
dividend, capital gain and redemption payments to you. Your dividend and
capital gain payments may also be subject to backup withholding if you fail to
certify properly that you are not subject to backup withholding due to the
underreporting of certain income. These certifications are contained in the
Share Purchase Application which you complete and return to the Fund when you
make your initial investment.
OTHER INFORMATION
The Fund was incorporated in Maryland on May 28, 1987, and commenced
operations as a private investment company on August 1, 1987 at $10.00 per
share. On June 30, 1988 the Fund registered as a diversified open-end
management investment company under the Investment Company Act of 1940 and
began offering its shares to the public on November 10, 1988.
Each share of the Fund's capital stock, $.01 par value, is entitled to
share pro rata in any dividends and other distributions on shares declared by
the board of directors, to one vote per share in elections of directors and
other matters presented to shareholders, and to equal rights per share in the
event of liquidation.
As a Maryland corporation registered as an investment company under the
Investment Company Act of 1940, the Fund is not required to hold routine annual
meetings and does not expect to do so. Maryland law permits shareholders to
remove directors under certain circumstances and requires the Fund to assist in
shareholder communications.
Inquiries about purchases and redemptions of Fund shares, or about your
account should be directed to Firstar, the Fund's transfer agent. Other
inquiries regarding the Fund should be directed to the Fund. The addresses and
telephone numbers of the Fund and Firstar are shown on the back cover.
INVESTMENT ADVISER
Fasciano Company, Inc.
ADDRESS OF FUND AND ADVISER
190 South LaSalle Street
Suite 2800
Chicago, Illinois 60603
(312) 444-6050
(800) 848-6050
Web Site: www.fascianofunds.com
E-mail: [email protected]
TRANSFER AGENT, DIVIDEND
DISBURSING AGENT, ADMINSTRATOR AND CUSTODIAN
Firstar Trust Company
P.O. Box 701
Milwaukee, Wisconsin 53201
(414) 765-4124
(800) 982-3533
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
Chicago, Illinois
LEGAL COUNSEL
Bell, Boyd & Lloyd
Chicago, Illinois
(RECYCLE LOGO)
Printed on Recycled Paper
STATEMENT OF ADDITIONAL INFORMATION
September 11, 1998
FASCIANO FUND, INC.
190 S. LaSalle Street
Suite 2800
Chicago, Illinois 60603
(312) 444-6050
(800) 848-6050
Web Site: www.fascianofunds.com
E-mail: [email protected]
This statement of additional information is not a prospectus, but provides
information about Fasciano Fund, Inc. (the "Fund") that should be read in
conjunction with the Fund's prospectus dated September 11, 1998 (and any
supplements thereto) and the Fund's financial statements included in its annual
report to shareholders for the fiscal year ended June 30, 1998, a copy of which
accompanies this statement of additional information.
The prospectus and additional copies of the annual report may be obtained
without charge by writing or telephoning the Fund at the addresses or telephone
numbers set forth above.
TABLE OF CONTENTS
Page
History of the Fund B-2
Investment Policies B-2
Investment Restrictions B-6
Performance Information B-8
Investment Adviser B-10
Directors and Officers B-10
Certain Shareholders B-12
Purchasing and Redeeming Shares B-13
Additional Tax Information B-14
Portfolio Transactions B-15
Administrator, Custodian and Transfer Agent B-16
Independent Public Accountants B-17
Financial Statements B-17
Appendix B-19
HISTORY OF THE FUND
The Fund began operations as a private investment company, not registered
under the Investment Company Act of 1940 (the "1940 Act"), on August 1, 1987.
The Fund registered under the 1940 Act on June 30, 1988 and began offering its
shares to the public on November 10, 1988.
INVESTMENT POLICIES
The primary investment objective of the Fund is long-term capital growth.
Current income is considered in selecting securities for the portfolio, but its
importance is secondary to capital growth. The Fund's investment objective may
be changed by the board of directors without shareholder approval.
DEBT SECURITIES
The Fund may invest in debt securities, including debt securities that are
not rated or are rated below investment grade by the recognized rating agencies
(i.e., BBB or higher by Standard & Poor's Corporation ("S&P") or Baa or higher
by Moody's Investor Services, Inc. ("Moody's")). There are no restrictions as
to the ratings of debt securities acquired by the Fund or the portion of the
Fund's assets that may be invested in debt securities in a particular ratings
category, except that the Fund will not invest more than 5% of its assets in
securities rated below investment grade ("junk bonds"). The Fund has no present
intention of investing in junk bonds.
Securities rated BBB or Baa are considered to be medium grade and to have
speculative characteristics. Lower-rated debt securities are predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal. Investment in medium- or lower-quality debt securities involves
greater investment risk, including the possibility of issuer default or
bankruptcy. An economic downturn could severely disrupt the market for such
securities and adversely affect the value of such securities. In addition,
lower-quality bonds are less sensitive to interest rate changes than higher-
quality instruments and generally are more sensitive to adverse economic changes
or individual corporate developments. During a period of adverse economic
changes, including a period of rising interest rates, issuers of such bonds may
experience difficulty in servicing their principal and interest payment
obligations.
To the extent the Fund invests in lower-rated debt securities, achievement
by the Fund of its investment objective will be more dependent on the Adviser's
credit analysis than would be the case if the Fund were investing in higher-
quality debt securities. Since the ratings of rating services (which evaluate
the safety of principal and interest payments, not market risks) are used only
as preliminary indicators of investment quality, the Adviser employs its own
credit research and analysis. These analyses may take into consideration such
quantitative factors as an issuer's present and potential liquidity,
profitability, internal capability to generate funds, debt/equity ratio and debt
servicing capabilities, and such qualitative factors as an assessment of
management, industry characteristics, accounting methodology, and foreign
business exposure.
Medium- and lower-quality debt securities tend to be less marketable than
higher-quality debt securities because the market for them is less broad. The
market for unrated debt securities is even narrower. During periods of thin
trading in these markets, the spread between bid and asked prices is likely to
increase significantly, and the Fund may have greater difficulty selling its
portfolio securities. The market value of these securities and their liquidity
may be affected by adverse publicity and investor perceptions. At June 30, 1998
the Fund held no debt securities other than short-term demand notes.
A description of the ratings used by S&P and Moody's is included as an
appendix to this statement of additional information.
FOREIGN SECURITIES
The Fund may invest in foreign securities, which may entail a greater
degree of risk (including risks relating to exchange rate fluctuations, exchange
controls, tax provisions, political instability, expropriation of assets, other
governmental restrictions and regulations and less available financial
information) than does investment in securities of domestic issuers.
The Fund will not invest more than 5% of its assets in foreign securities
and will not invest in securities traded only or primarily in emerging markets.
For this purpose, foreign securities do not include American Depository Receipts
(ADRs) or securities guaranteed by a United States person. ADRs are receipts
typically issued by an American bank or trust company evidencing ownership of
the underlying securities. As of June 30, 1998, the Fund held no foreign
securities.
To the extent positions in portfolio securities are denominated in foreign
currencies, the Fund's investment performance is affected by the strength or
weakness of the U.S. dollar against these currencies. For example, if the
dollar falls in value relative to the Japanese yen, the dollar value of a
Japanese stock held in the portfolio will rise even though the price of the
stock remains unchanged. Conversely, if the dollar rises in value relative to
the yen, the dollar value of the Japanese stock will fall. (See discussion of
transaction hedging under "Currency Exchange Transactions.")
Investors should understand and consider carefully the risks involved in
foreign investing. Investing in foreign securities, which are generally
denominated in foreign currencies, and utilization of forward foreign currency
exchange contracts involve both risks and opportunities not typically associated
with investing in U.S. securities. These considerations include: fluctuations
in exchange rates of foreign currencies; possible imposition of exchange control
regulation or currency restrictions that would prevent cash from being brought
back to the United States; less public information with respect to issuers of
securities; less governmental supervision of stock exchanges, securities
brokers, and issuers of securities; lack of uniform accounting, auditing, and
financial reporting standards; lack of uniform settlement periods and trading
practices; less liquidity and frequently greater price volatility in foreign
markets than in the United States; possible imposition of foreign taxes;
possible investment in securities of companies in developing as well as
developed countries; and sometimes less advantageous legal, operational, and
financial protections applicable to foreign sub-custodial arrangements.
Although the Fund intends to invest in companies and governments of
countries having stable political environments, there is the possibility of
expropriation or confiscatory taxation, seizure or nationalization of foreign
bank deposits or other assets, establishment of exchange controls, the adoption
of foreign government restrictions, or other adverse political, social, or
diplomatic developments that could affect investment in these nations.
Currency Exchange Transactions. Currency exchange transactions may be
------------------------------
conducted either on a spot (i.e., cash) basis at the spot rate for purchasing or
selling currency prevailing in the foreign exchange market or through forward
currency exchange contracts ("forward contracts"). Forward contracts are
contractual agreements to purchase or sell a specified currency at a specified
future date (or within a specified time period) and price set at the time of the
contract. Forward contracts are usually entered into with banks and broker-
dealers, are not exchange traded, and are usually for less than one year, but
may be renewed.
Forward currency transactions may involve currencies of the different
countries in which the Fund may invest and serve as hedges against possible
variations in the exchange rate between these currencies. The currency
transactions of the Fund are limited to transaction hedging involving specific
transactions. Transaction hedging is the purchase or sale of forward contracts
with respect to specific receivables or payables of a Fund accruing in
connection with the purchase and sale of its portfolio securities or the receipt
of dividends or interest thereon. The Fund's intention not to invest more than
5% of its assets in foreign securities effectively limits the extent of its
transactions in foreign currencies.
If the Fund enters into a forward contract, the Fund's custodian will
segregate assets of the Fund having a value equal to the Fund's commitment under
such forward contract. At the maturity of the forward contract, the Fund may
either sell the portfolio security related to the contract and deliver the
currency, or it may retain the security and either acquire the currency on the
spot market or terminate its contractual obligation to deliver the currency by
purchasing an offsetting contract with the same currency trader obligating it to
purchase on the same maturity date the same amount of the currency.
It is impossible to forecast with absolute precision the market value of
portfolio securities at the expiration of a forward contract. Accordingly, it
may be necessary for the Fund to purchase additional currency on the spot market
(and bear the expense of such purchase) if the market value of the security is
less than the amount of currency the Fund is obligated to deliver and if a
decision is made to sell the security and make delivery of the currency.
Conversely, it may be necessary to sell on the spot market some of the currency
received upon the sale of the portfolio security if its market value exceeds the
amount of currency the Fund is obligated to deliver.
If the Fund retains the portfolio security and engages in an offsetting
transaction, the Fund will incur a gain or a loss to the extent that there has
been movement in forward contract prices. If the Fund engages in an offsetting
transaction, it may subsequently enter into a new forward contract to sell the
currency. Should forward prices decline during the period between the Fund's
entering into a forward contract for the sale of a currency and the date it
enters into an offsetting contract for the purchase of the currency, the Fund
will realize a gain to the extent the price of the currency it has agreed to
sell exceeds the price of the currency it has agreed to purchase. Should
forward prices increase, the Fund will suffer a loss to the extent the price of
the currency it has agreed to purchase exceeds the price of the currency it has
agreed to sell. A default on the contract would deprive the Fund of unrealized
profits or force the Fund to cover its commitments for purchase or sale of
currency, if any, at the current market price.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the value of a portfolio security traded in that currency or
prevent a loss if the value of the security declines. Hedging transactions also
preclude the opportunity for gain if the value of the hedged currency should
rise. Moreover, it may not be possible for the Fund to hedge against a
devaluation that is so generally anticipated that the Fund is not able to
contract to sell the currency at a price above the devaluation level it
anticipates. The cost to the Fund of engaging in currency exchange transactions
varies with such factors as the currency involved, the length of the contract
period, and prevailing market conditions. Since currency exchange transactions
are usually conducted on a principal basis, no fees or commissions are involved.
UNSEASONED ISSUERS
The Fund has the authority to invest up to 10% of its total assets in the
securities of unseasoned issuers, but has no present intention of investing more
than 5% of its total assets in such securities. An unseasoned issuer is an
issuer that, together with predecessors, has been in operation less than three
years. The Adviser believes that investment in securities of unseasoned issuers
may provide opportunities for long-term capital growth, although the risks of
investing in such securities are greater than with common stocks of more
established companies because unseasoned issuers have only a brief operating
history and may have more limited markets and financial resources. At June 30,
1998, the Fund held no securities of unseasoned issuers.
ILLIQUID SECURITIES
The Fund may invest up to 10% of its net assets, taken at market value, in
securities for which there is no ready market ("illiquid securities"), including
any securities that are not readily marketable either because they are
restricted securities or for other reasons. Restricted securities are
securities that have not been registered under the Securities Act of 1933 and
are thus subject to restrictions on resale. A position in restricted securities
might adversely affect the liquidity and marketability of a portion of the
Fund's portfolio, and the Fund might not be able to dispose of its holdings in
such securities promptly or at reasonable prices. In those instances where the
Fund is required to have restricted securities held by it registered prior to
sale by the Fund and the Fund does not have a contractual commitment from the
issuer or seller to pay the costs of such registration, the gross proceeds from
the sale of securities would be reduced by the registration costs and
underwriting discounts. Any such registration costs are not included in the 10%
limitation on the Fund's investment in restricted securities. The Fund does not
expect to invest in illiquid securities during the next fiscal year.
REPURCHASE AGREEMENTS
The Fund may enter into "repurchase agreements" pertaining to U.S.
Government securities with member banks of the Federal Reserve System or primary
dealers (as designated by the Federal Reserve Bank of New York) in such
securities. A repurchase agreement arises when the Fund purchases a security
and simultaneously agrees to resell it to the vendor at an agreed upon future
date. The resale price is greater than the purchase price, reflecting an agreed
upon market rate of return that is effective for the period of time the Fund
holds the security and that is not related to the coupon rate on the purchased
security. Such agreements generally have maturities of no more than seven days
and could be used to permit the Fund to earn interest on assets awaiting long
term investment. The Fund requires continuous maintenance by the custodian for
the Fund's account in the Federal Reserve/Treasury Book Entry System of
collateral in an amount equal to, or in excess of, the market value of the
securities that are the subject of a repurchase agreement. In the event of a
bankruptcy or other default of a seller of a repurchase agreement, the Fund
could experience both delays in liquidating the underlying securities and
losses, including (i) possible decline in the value of the collateral during the
period while the Fund seeks to enforce its rights thereto, (ii) possible
subnormal levels of income and lack of access to income during this period, and
(iii) expenses of enforcing its rights. The Fund will monitor the
creditworthiness of firms with which it enters into repurchase agreements.
Repurchase agreements maturing in more than seven days are considered illiquid
securities. The Fund does not intend to invest in repurchase agreements during
the next fiscal year.
PORTFOLIO TURNOVER
The Fund normally invests on a long-term basis with an investment time
horizon of three to five years. The Fund's portfolio turnover rates for its
fiscal years ended June 30, 1998 and 1997 were 49.8% and 41.0%, respectively.
INVESTMENT RESTRICTIONS
The Fund has adopted the following fundamental investment restrictions,
which cannot be changed without the approval of the holders of a majority of its
shares, as defined in the Investment Company Act of 1940:
1. The Fund will not invest more than 5% of its assets (valued at the time of
investment) in securities of any one issuer, except in U.S. government
obligations.
2. The Fund will not acquire securities of any one issuer which at the time of
investment (a) represent more than 10% of the voting securities of the
issuer or (b) have a value greater than 10% of the value of the outstanding
securities of the issuer.
3. The Fund will not invest more than 10% of its assets (valued at the time of
investment) in securities of issuers with less than three years' operation
(including predecessors).
4. The Fund will not invest more than 10% of its net assets (valued at the
time of investment) in securities for which there is no ready market
(including restricted securities and repurchase agreements maturing in more
than seven days).
5. The Fund will not participate in a joint trading account, purchase
securities on margin or sell securities short (unless the Fund owns an
equal amount of such securities, or owns securities that are convertible or
exchangeable, without payment of further consideration, into an equal
amount of such securities).1<F7>
6. The Fund will not act as an underwriter or distributor of securities other
than its own capital stock, except insofar as it may be deemed an
underwriter for purposes of the Securities Act of 1933 on disposition of
securities acquired subject to legal or contractual restrictions on resale.
7. The Fund will not lend money, but this restriction shall not prevent the
Fund from investing in (i) a portion of an issue of publicly distributed
debt securities or (ii) repurchase agreements.
8. The Fund will not purchase or sell real estate or interests in real estate,
although it may invest in marketable securities of issuers that invest in
real estate or interests in real estate.
9. The Fund will not borrow, except that the Fund may borrow from banks as a
temporary measure amounts up to 10% of its total assets (at the lower of
cost or market at the time of the borrowing), provided (i) that the total
of reverse repurchase agreements2<F8> and such borrowings will not exceed
10% of the Fund's total assets and (ii) the Fund will not purchase
securities when its borrowings exceed 5% of total assets.
10. The Fund will not pledge any of its assets, except to secure indebtedness
permitted by the Fund's investment restrictions.
11. The Fund will not invest for the purpose of exercising control or
management of any company.
12. Not more than 25% of the value of the Fund's total assets, taken at market
value at the time of the investment, will be concentrated in companies of
any one industry.
13. The Fund will not purchase and sell commodities or commodity contracts,
except that it may enter into forward contracts to hedge securities
transactions made in foreign currencies.
In addition to the fundamental restrictions listed above, the 1940 Act provides
that the Fund may neither purchase more than 3% of the voting securities of any
one investment company nor invest more than 10% of the Fund's assets (valued at
time of investment) in all investment company securities purchased by the Fund.
1<F7> The Fund does not currently intend to sell securities short even under
the conditions described in investment restriction 5.
2<F8> The Fund does not currently intend to enter into reverse repurchase
agreements.
PERFORMANCE INFORMATION
From time to time the Fund may give information about its performance by
quoting total return figures in advertisements and sales literature. "Total
return" for a period is the percentage change in value of an investment in Fund
shares, including the value of shares acquired through reinvestment of all
dividends and capital gains distributions. "Average annual total return" is the
average annual compounded rate of change in value represented by the total
return for the period.
Average annual total return is computed as follows:
n
ERV = P(1+T)
Where:P = the amount of an assumed initial investment in Fund shares
T = average annual total return
N = number of years from initial investment to the end of the period
ERV = ending redeemable value of shares held at the end of the
period
The Fund's Total Return and Average Annual Total Return for various periods
ended June 30, 1998 is shown below:
Average Annual
Total Return Total Return
------------ -------------
1 year 33.19% 33.19%
5 years 153.62% 20.45%
10 years 370.05% 16.73%
Life of Fund3<F9> 431.52% 16.53%
3<F9>From August 1, 1987 (commencement of operations). From its inception as a
private investment company on August 1, 1987 to November 10, 1998, the Fund was
not registered with the Securities and Exchange Commission and therefore was not
subject to the investment restrictions imposed by the 1940 Act, and was not
subject to the diversification requirements for regulated investment companies
under Subchapter M of the Internal Revenue Code. If the Fund had been subject
to those restrictions during that period, its return may have been lower.
The Fund imposes no sales charges and pays no distribution expenses.
Income taxes payable by shareholders are not taken into account. The Fund's
performance is a result of conditions in the securities markets, portfolio
management, and operating expenses. Although information such as that described
above may be useful in reviewing the Fund's past performance and in providing
some basis for comparison with other investment alternatives, it is not
necessarily indicative of future performance and should not be used for
comparison with other investments using different reinvestment assumptions or
time periods.
The Fund may also compare its performance to various stock indices (groups
of unmanaged common stocks), including the New York Stock Exchange Composite
Index, Standard & Poor's 500 Stock Index, the NASDAQ Composite (OTC) Index, the
Russell 2000 Index and the Dow Jones Industrial Average, or to the Consumer
Price Index or groups of comparable mutual funds, including rankings determined
by Lipper Analytical Services, Inc., an independent service that monitors the
performance of mutual funds, or that of another independent service, including
Morningstar, Inc.
The Fund may cite its rating, recognition, or other mention by Morningstar
or any other entity. 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 score (which is a
function of the fund's monthly returns less the 3-month T-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, the next 35% labeled three star, the next 22.5% labeled
two star, and the bottom 10% one star. A high rating reflects either above-
average returns or below-average risk or both.
Statistical Information. The Fund may use the statistical measures beta,
R-squared and standard deviation to quantify aspects of risk or volatility.
Beta is a measure of the Fund's sensitivity to market movements. It measures
the relationship between the Fund's excess return over the risk-free rate (90-
day Treasury bill) and the excess return of the benchmark index. The beta is
calculated regressing the excess return for the Fund against the excess return
for the benchmark index. By definition, the beta of the benchmark index is
1.00. Accordingly, a portfolio with a beta greater than 1.00 displays more
volatility than the market, and a portfolio with a beta less than 1.00 displays
less volatility than the market.
R-squared reflects the percentage of the Fund's movements that are
explained by movements in the benchmark index. An R-squared of 100 indicates
that all movements of the Fund are completely explained by movements in the
index. Conversely, a low R-squared means that very few of the Fund's movements
are explained by movements in the benchmark index. An R-squared of 45, for
example, reveals that only 45% of the Fund's movements can be explained by
movements in its benchmark index. R-squared can also be used to ascertain the
significance of a particular beta. Generally, a higher R-squared will indicate
a more reliable beta figure. If the R-squared is lower, then the beta is less
relevant to the Fund's performance.
Standard deviation is a statistical measure of dispersion about an average,
which, for the Fund, depicts how widely the returns varied over a certain period
of time. The standard deviation of historical performance may be used to try to
predict the range of future returns that are most likely for a given investment.
When a Fund has a high standard deviation, the predicted range of performance is
wide, implying greater volatility. Approximately 68% of the time, the total
return of any given fund will vary from its average total return by no more than
plus or minus the deviation figure. Ninety-five percent of the time a fund's
total return will vary within a range of plus or minus two times the deviation
from the average returns.
Statistics may also be used to discuss the Fund's relative performance.
One such measure is alpha. Alpha is a measure of the difference between the
Fund's actual return and its expected performance, given its level of risk (as
measured by beta). A positive alpha figure indicates that the Fund performed
better than its beta would predict. In contrast, a negative alpha indicates the
Fund has not performed as well as its beta would predict. The alpha may be seen
as a measurement of the value added or subtracted by a fund manager.
As of June 30, 1998 the Fund's beta was 0.70, its R-squared was 0.37,
and its standard deviation for the three, five, and ten year periods were
14.03%, 15.82%, and 13.17%, respectively.
INVESTMENT ADVISER
The Fund's investment adviser, Fasciano Company, Inc. (the "Adviser"),
furnishes continuing investment supervision to the Fund and is responsible for
overall management of the Fund's business affairs. It furnishes office space,
equipment, and personnel to the Fund and assumes the expenses of printing and
distributing the Fund's prospectus and reports to prospective investors. The
Fund pays all of its expenses except those specifically assumed by the Adviser,
including but not limited to printing and postage charges; securities
registration, custodian and transfer agency fees; accounting services fees and
audit and legal fees.
For its services, the Adviser receives a monthly fee at an annual rate of
1% of the average daily net asset value of the Fund. The Investment Advisory
Agreement provides that the Adviser will reimburse the Fund to the extent that
its total annual operating expenses exceed 2%, exclusive of (i) taxes, (ii)
interest charges, (iii) litigation and other extraordinary expenses, and (iv)
brokers' commissions and other charges relating to the purchase and sale of the
Fund's portfolio securities.
The investment advisory fees of the Fund for the fiscal years ended June
30, 1998, 1997, and 1996 were $604,499, $334,647 and $247,479, respectively.
During those fiscal years, the Fund operated within all applicable expense
limitations without reimbursement by the Adviser.
The Adviser is a registered investment adviser organized in November 1986.
Michael F. Fasciano is the sole shareholder of the Adviser.
DIRECTORS AND OFFICERS
The directors and officers of the Fund and their principal business
activities during the past five years are:
Position Held Principal Occupations
Name, Address and Age with Fund and other Affiliations
- --------------------- ------------- ----------------------
Michael F. Fasciano*<F10> Director, President Director, President and
Suite 2800 and Treasurer Treasurer of Fasciano
190 South LaSalle St. Company, Inc. since
Chicago, Illinois 60603 November 1986. Mr.
Age 43 Fasciano is a Chartered
Financial Analyst.
Susan N. Fasciano*<F10> Secretary Private investor.
Suite 2800
190 South LaSalle Street
Chicago, Illinois 60603
Age 39
David R. Long Director Vice President -
The Gallagher Center Investments of Arthur
Two Pierce Place J. Gallagher & Co.,
Itasca, Illinois 60143-3141 Inc., a New York Stock
Age 46 Exchange listed
international insurance
and risk management
services firm, since
May 1989.
Mark B. Mandich Director Executive Vice
PPM America, Inc. President - Finance and
225 West Wacker Administration, and
Suite 1200 Director, PPM America,
Chicago, Illinois 60606 Inc., an investment
Age 38 management firm, since
May 1993; Experienced
Manager, Arthur
Andersen & Co., public
accountants, prior
thereto.
Joseph Neuberger Assistant Secretary Vice President, Firstar
Firstar Trust Company Trust Company, since
615 East Michigan Street 1994; Manager, Arthur
Milwaukee, WI 53202 Andersen LLP, prior
Age 36 thereto.
Michael T. Karbouski Assistant Secretary Trust Officer, Firstar
Firstar Trust Company Trust Company, since
615 East Michigan Street 1995; Business
Milwaukee, WI 53202 Development
Age 33 Representative, Firstar
Funds, prior thereto.
*<F10> Michael F. Fasciano and Susan N. Fasciano are "interested persons"
of the Fund as defined in the 1940 Act. Michael Fasciano and Susan Fasciano are
husband and wife.
The only compensation paid to directors and officers of the Fund for their
services as such consists of $2,000 paid to directors who are not interested
persons of the Fund or the Adviser. The Fund has no retirement or pension
plans.
The following table sets forth compensation paid by the Fund during the
fiscal year ended June 30, 1998 to each of the directors of the Fund. The Fund
is not part of a fund complex and has no retirement or other benefit plans for
directors.
Aggregate
Compensation
Name of Director From the Fund
- ---------------- -------------
Michael F. Fasciano $0
Susan N. Fasciano 0
David R. Long 2,000
Mark B. Mandich 2,000
At August 31, 1998 the directors and officers as a group owned
beneficially 62,743 shares, or 1.9% of the outstanding shares of the Fund.
CERTAIN SHAREHOLDERS
As of August 31, 1998, the only persons known by the Fund to own
beneficially 5% or more of the outstanding shares of the Fund were: Nancy J.
Nicholas, who owned 509,190.959 shares (or 15.1% of the outstanding shares)
and Albert O. Nicholas, who owned 272,006.422 shares (or 8.1% of the outstanding
shares). Both Nancy J. Nicholas and Albert O. Nicholas reside at 6002 Highway
83, Hartland, Wisconsin 53029. In addition, Charles Schwab & Co., Inc., held
979,045.54 shares (or 29.1% of the outstanding shares), and Donaldson Lufkin &
Jenrette held 142,000.45 (or 4.2% of the outstanding shares) as shareholders of
record on behalf of their customers, but not beneficially.
PURCHASING AND REDEEMING SHARES
You may purchase or redeem shares of the Fund through some broker-dealers,
banks or other institutions that have made Fund shares available to their
customers ("financial services companies"). Some financial services companies
may charge fees to their customers, including fees on purchases or redemptions
of Fund shares. Those charges, if imposed, could constitute a substantial
portion of a smaller account and may not be in your best interest.
Some financial services companies charge no fees or fewer fees to their
customers. However, for accounting and shareholder services provided by such
company with respect to Fund shares held by that company for its customers, the
company may charge a fee (currently a percentage of the annual average value of
those accounts).
The Fund may enter into an arrangement with some financial services
companies authorizing the financial services company to process purchase orders
or redemption requests on behalf of the Fund on an expedited basis, including
requesting share redemptions by telephone ("authorized agents"). Receipt of a
purchase order or redemption request by an authorized agent will be deemed to be
receipt by the Fund for purposes of determining the net asset value of Fund
shares to be purchased or redeemed. For purchase orders placed through those
authorized agents, a shareholder will pay the Fund's net asset value per share
next computed after the receipt by the authorized agent of such purchase order,
plus any applicable transaction charge imposed by the agent. For redemption
orders placed through an authorized agent, a shareholder will receive redemption
proceeds which reflect the net asset value per share next computed after the
receipt by the authorized agent of the redemption order, less any redemption
fees imposed by the agent.
Net Asset Value. Share purchase and redemption orders will be priced at
the Fund's net asset value next computed after such orders are received by: (i)
Firstar, as transfer agent for the Fund; (ii) an authorized agent of the Fund.
The net asset value of the shares of the Fund is determined as of the close of
regular session trading on the New York Stock Exchange ("NYSE") (currently 3:00
p.m. Central time) each day the NYSE is open for unrestricted trading. The
Fund's net asset value will not be determined on any day on which the New York
Stock Exchange is not open for trading. That Exchange is regularly closed on
Saturdays and Sundays and on New Year's Day, the third Monday in January, the
third Monday in February, Good Friday, the last Monday in May, Independence Day,
Labor Day, Thanksgiving Day, and Christmas Day. If one of these holidays falls
on a Saturday or Sunday, the Exchange will be closed on the preceding Friday or
the following Monday, respectively.
For purposes of computing the net asset value of a share of the Fund,
securities traded on securities exchanges, or in the over-the-counter market in
which transaction prices are reported, are valued at the last sales prices at
the time of valuation or lacking any reported sales on that day, at the most
recent bid quotations. Other securities traded over-the-counter are also valued
at the most recent bid quotations. Securities for which quotations are not
available and any other assets are valued at a fair value as determined in good
faith by the board of directors. Money market instruments having a maturity of
60 days or less from the valuation date are valued on an amortized cost basis.
Calculations of net asset value are performed by Firstar Trust Company, the
Fund's custodian.
The Fund has elected to be governed by Rule 18f-1 under the 1940 Act,
pursuant to which it is obligated to redeem shares solely in cash up to the
lesser of $250,000 or 1% of the net asset value of the Fund during any 90-day
period for any one shareholder. Redemptions in excess of the above amounts will
normally be paid in cash, but may be paid wholly or partly by a distribution in
kind of securities.
Because it can be more expensive for the Fund to maintain small accounts,
the Fund has reserved the right, on 60 days' written notice to the shareholder,
to redeem shares in any account and send the proceeds to the owner, if the
account has a value of less than a stated minimum. It is the Fund's current
policy not to exercise its right to redeem small accounts. No change in that
policy would be implemented without advance notice having been given to
shareholders.
ADDITIONAL TAX INFORMATION
The Fund intends to continue to qualify, as it has done since it first
offered its shares to the public, as a regulated investment company under
Subchapter M of the Internal Revenue Code and thus not be subject to federal
income taxes on amounts it distributes to shareholders.
The Fund intends to distribute to shareholders annually any capital gains
that have been recognized for federal income tax purposes (including year-end
mark-to-market gains) on Fund investments, to the extent such gains exceed
recognized capital losses and any net capital loss carryovers of the Fund.
Shareholders will be advised of the nature of such capital gain distributions.
Your distributions will be taxable to you, under income tax law, whether
received in cash or reinvested in additional shares. For federal income tax
purposes, any distribution that is paid in January but was declared in
October, November or December of the prior calendar year is deemed paid in the
prior calendar year.
The Internal Revenue Service Restructuring and Reform Act of 1998
eliminated the requirement that capital assets be held for more than 18 months
in order to be taxed at the lowest rate in effect under current law, and instead
permits capital assets to be so taxed if held for more than one year. This
change applies generally to taxable years ending after December 31, 1997. You
will be subject to income tax at ordinary rates on income dividends and
distributions of net short-term capital gain. Distributions net long-term
capital gains are taxable to you as long-term capital gains (currently taxed at
a maximum rate of 20%) regardless of the length of time you have held your
shares. Long-term gains are those from securities held more than one year. You
are urged to consult your tax advisor to assess the impact of the new
legislation on your individual circumstances.
If you realize a loss on the sale of Fund shares held for six months or
less, your short-term loss is recharacterized as long-term to the extent of any
long-term capital gain distributions you have received with respect to those
shares.
The Fund may be required to withhold federal income tax ("backup
withholding") from certain payments to you, generally redemption proceeds.
Backup withholding may be required if:
. You fail to furnish your properly certified social security or other tax
identification number;
. You fail to certify that your tax identification number is correct or
that you are not subject to backup withholding due to the underreporting
of certain income;
. The IRS informs the Fund that your tax identification number is
incorrect.
These certifications are contained in the application that you complete
when you open your Fund account. The Fund must promptly pay the IRS all amounts
withheld. Therefore, it is not usually possible for the Fund to reimburse you
for amounts withheld. You may, however, claim the amount withheld as a credit
on your federal income tax return.
This section is not intended to be a full discussion of present or proposed
federal income tax laws and the effect of such laws on the Fund or an investor.
Investors are urged to consult their own tax advisers for a complete review of
the tax ramifications of an investment in the Fund.
PORTFOLIO TRANSACTIONS
The Adviser has discretion to select brokers and dealers to execute
portfolio transactions initiated by the Adviser and to select the markets in
which such transactions are to be executed. The primary responsibility regarding
portfolio transactions is to seek the best combination of net price and
execution for the Fund. When executing transactions for the Fund, the Adviser
will consider all factors it deems relevant, including the breadth of the market
in the security, the price of the security, the financial condition and
execution capability of the broker or dealer and the reasonableness of the
commission. Transactions of the Fund in the over-the-counter market are
executed with primary market makers acting as principal except where it is
believed that better prices and execution may be obtained otherwise.
In selecting brokers or dealers to execute particular transactions and in
evaluating the best net price and execution available, the Adviser is authorized
to consider "brokerage and research services" (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934), statistical quotations,
specifically the quotations necessary to determine the Fund's asset value, and
other information provided to the Fund or the Adviser. The Adviser is also
authorized to cause the Fund to pay a broker or dealer who provides such
brokerage and research services a commission for executing a portfolio
transaction which is in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction. The Adviser must
determine in good faith, however, that such commission was reasonable in
relation to the value of the brokerage and research services provided, viewed in
terms of that particular transaction or in terms of all the accounts over which
the Adviser exercises investment discretion. It is possible that certain of the
services received by the Adviser attributable to a particular transaction will
benefit one or more other accounts for which investment discretion is exercised
by the Adviser.
In valuing research services, the Adviser makes a judgment of the
usefulness of research and other information provided by a broker to the Adviser
in managing the Fund's investment portfolio. In some cases, the information,
e.g., data or recommendations concerning particular securities, relates to the
specific transaction placed with the broker, but for the greater part the
research consists of a wide variety of information concerning companies,
industries, investment strategy, and economic, financial and political
conditions and prospects, useful to the Adviser in advising the Fund.
The Adviser is the principal source of information and advice to the Fund
and is responsible for making and initiating the execution of investment
decisions by the Fund. However, the board of directors of the Fund recognizes
that it is important for the Adviser, in performing its responsibilities to the
Fund, to continue to receive and evaluate the broad spectrum of economic and
financial information that many securities brokers have customarily furnished in
connection with brokerage transactions, and that in compensating brokers for
their services, it is in the interest of the Fund to take into account the value
of the information received for use in advising the Fund. The extent, if any,
to which the obtaining of such information may reduce the expenses of the
Adviser in providing management services to the Fund is not determinable. In
addition, it is understood by the board of directors that other clients of the
Adviser might also benefit from the information obtained for the Fund, in the
same manner that the Fund might also benefit from the information obtained by
the Adviser in performing services for others.
For the fiscal years ended June 30, 1998, 1997, and 1996, the Fund paid
brokerage commissions, not including the gross underwriting spread on securities
purchased in underwritten public offerings, aggregating $66,326, $20,095, and
$18,363, respectively.
Although investment decisions for the Fund would be made independently from
those for other investment advisory clients of the Adviser, if any, it might
develop that the same investment decision is made for both the Fund and one or
more other advisory clients. If both the Fund and other clients purchase or
sell the same class of securities on the same day, the transactions will be
allocated as to amount and price in a manner considered equitable to each.
ADMINISTRATOR, CUSTODIAN AND TRANSFER AGENT
Administrator. Firstar Trust Company ("Firstar"), 615 East Michigan
-------------
Street, Milwaukee, Wisconsin 53202 serves as the Fund's Administrator. Firstar
is not an affiliate of the Adviser or its affiliates. The Fund Administration
Servicing Agreement entered into between the Fund and Firstar relating to the
Fund (the "Administration Agreement") will remain in effect until terminated by
either party. The Administration Agreement may be terminated at any time,
without the payment of any penalty, by the board of directors of the Fund upon
the giving of ninety (90) days' written notice to Firstar, or by Firstar upon
the giving of ninety (90) days' written notice to the Fund.
Under the Administration Agreement, Firstar shall exercise reasonable care
and is not liable for any error or judgment or mistake of law or for any loss
suffered by the Corporation in connection with the performance of the
Administration Agreement, except a loss resulting from willful misfeasance, bad
faith or negligence on the part of Firstar in the performance of its duties
under the Administration Agreement.
The Fund will pay Firstar a monthly fee at the annual rates of 0.06% of the
Fund's average daily net assets up to $200 million, 0.05% of the next $500
million of average daily net assets, and 0.03% of average daily net assets in
excess of $700 million, subject to the minimum annual fees described herein.
For the fiscal year ending June 30, 1998, the minimum annual fee will be
$24,000, and for the fiscal year ending June 30, 1999, the minimum annual fee
will be $27,000; provided that the minimum annual fee will rise to $30,000 at
the earlier of (i) the time the assets of the Fund reach $50 million and (ii)
July 1, 1999.
Custodian and Fund Accounting Agent. Firstar also acts as custodian of the
-----------------------------------
securities and other assets of the Fund. As custodian, Firstar is responsible
for, among other things, safeguarding and controlling the Fund's cash and
securities, handling the receipt and delivery of securities, and collecting
interest and dividends on the Fund's investments. Firstar also performs
portfolio accounting services for the Fund. The custodian's address is P.O. Box
701, Milwaukee, Wisconsin 53201.
In addition, the Fund has entered into a Fund Accounting Servicing
Agreement with Firstar pursuant to which Firstar has agreed to maintain the
financial accounts and records of the Fund and provide other accounting services
to the Fund.
Transfer Agent. Firstar also serves as transfer agent and dividend
--------------
disbursing agent for the Fund under a Shareholder Servicing Agent Agreement. As
transfer and dividend disbursing agent, Firstar has agreed to (i) issue and
redeem shares of the Fund, (ii) make dividend and other distributions to
shareholders of the Fund, (iii) respond to correspondence by Fund shareholders
and others relating to its duties, (iv) maintain shareholder accounts, and (v)
make periodic reports to the Fund.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, 33 West Monroe Street, Chicago, Illinois 60603, audits
and reports on the Fund's annual financial statements, reviews certain
regulatory reports, prepares the Fund's income tax returns, and performs other
professional accounting, auditing, tax, and advisory services when engaged to do
so by the Fund.
FINANCIAL STATEMENTS
The Fund's annual report for its fiscal year ended June 30, 1998, a copy of
which accompanies this statement of additional information, contains financial
statements, notes thereto and a report of independent public accountants, all of
which (but no other part of the annual report) is incorporated herein by
reference.
Additional copies of the annual report may be obtained without charge by
writing or telephoning the Fund at the address or telephone number shown on the
front cover of this statement of additional information.
APPENDIX
---------
DESCRIPTION OF BOND RATINGS
A rating of a rating service represents the service's opinion as to the credit
quality of the security being rated. However, the ratings are general and are
not absolute standards of quality or guarantees as to the creditworthiness of an
issuer. Consequently, the Fund's investment adviser believes that the quality of
debt securities in which the Fund invests should be continuously reviewed and
that individual analysts give different weightings to the various factors
involved in credit analysis. A rating is not a recommendation to purchase, sell
or hold a security, because it does not take into account market value or
suitability for a particular investor. When a security has received a rating
from more than one service, each rating should be evaluated independently.
Ratings are based on current information furnished by the issuer or obtained by
the ratings services from other sources which they consider reliable. Ratings
may be changed, suspended or withdrawn as a result of changes in or
unavailability of such information, or for other reasons.
The following is a description of the characteristics of rating used by Moody's
Investors Service, Inc. ("Moody's") and Standard & Poor's Corporation ("S&P").
Ratings by Moody's
Aaa--Bonds 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. Although 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 bonds.
Aa--Bonds rated Aa are judged to be 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 bonds or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the long
term risk appear somewhat larger than in Aaa bonds.
A--Bonds 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 rated Baa are considered as medium grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba--Bonds rated Ba are judged to have speculative elements; their future cannot
be considered as well assured. Often the protection of interest and principal
payments may be very moderate and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position characterizes bonds in
this class.
B--Bonds rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Caa--Bonds rated Caa are of poor standing. Such bonds may be in default or
there may be present elements of danger with respect to principal or interest.
Ca--Bonds rated Ca represent obligations which are speculative in a high degree.
Such bonds are often in default or have other marked shortcomings.
S&P Ratings
AAA--Bonds rated AAA have the highest rating. Capacity to pay principal and
interest is extremely strong.
AA--Bonds rated AA have a very strong capacity to pay principal and interest and
differ from AAA bonds only in small degree.
A--Bonds rated A have a strong capacity to pay principal and interest, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this capacity
than for bonds in higher rated categories.
BB--B--CCC--CC--Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation among such bonds and CC the highest
degree of speculation. Although such bonds will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
PART C OTHER INFORMATION
Item 24 Financial Statements and Exhibits
---------------------------------
(a) Financial statements:
---------------------
(i) Financial statements included in Part A of
this registration statement:
Financial Highlights.
(ii) Financial statements included in Part B of
this registration statement -- incorporated by
reference to the following portions of Registrantis
annual report to Shareholders for the fiscal year
ended June 30, 1998, filed with the Commission on
September 2, 1998:
- Report of independent public accountants
- Schedule of Portfolio Investments at
June 30, 1998
- Statement of Assets and Liabilities at
June 30, 1998
- Statement of Operations for the year ended
June 30, 1998
- Statement of Changes in Net Assets for the
years ended June 30, 1998 and 1997
- Financial Highlights
- Notes to financial statements
(iii) Financial statements included in Part C of
this amendment: none
Note: - Schedule I - the required information is presented
in the Schedule of Portfolio Investments at
June 30, 1998
- Schedules II, III, IV, and V have been omitted
as the required information is not present.
(b) Exhibits:
---------
No. EDGAR Exhibit
--- -------- --------
1 Ex 99.B1 Restated articles of incorporation3<F13>
2 Ex 99.B2 Bylaws3<F13>
3 Ex 99.B3 None
4 Ex 99.B4 Form of common stock certificate1<F11>
5 Ex 99.B5 Investment advisory agreement with Fasciano Company,
Inc.3<F13>
6 Ex 99.B6 None
7 Ex 99.B7 None
8 Ex 99.B8 Custody agreement with Firstar Trust Company (formerly
First Wisconsin Trust Company)3<F13>
9 Ex 99.B9A Shareholder servicing agreement with Firstar Trust
Company (formerly First Wisconsin
Trust Company3<F13>)
9.1 Ex 99.B9B Accounting Services Agreement with
Firstar Trust Company3<F13>
10 Ex 99.B10 Consent of Bell, Boyd & Lloyd
11 Ex 99.B11 Consent of independent public accountants
12 Ex 99.B12 None
13.1 Ex 99.B13A Initial 1987 Subscription Agreement for
Individuals2<F12>
13.2 Ex 99.B13B Initial 1987 Subscription Agreement for
Corporations2<F12>, Trusts and Partnerships
13.3 Ex 99.B13C Initial 1988 Subscription Agreement2<F12>
13.4 Ex 99.B13D Second 1988 Subscription Agreement2<F12>
13.5 Ex 99.B13E Third 1988 form of Subscription Agreement2<F12>
14 Ex 99.B14 Individual Retirement Account Prototype Plan,
Disclosure Statement and applications2<F12>
14.1 Ex 99.B14.1 Amended Individual Retirement Account Prototype Plan,
Disclosure Statement and applications
15 Ex 99.B15 None
16 Ex 99.B16 Schedule for computation of performance quotations
17 Ex 27 Financial Data Schedule
- ------
1<F11>Incoporated by reference to the exhibit of the same number filed with
pre-effective amendment No. 2 to registrant's registration statement
on Form N-1A, No. 33-23997 (the "Registration Statement") filed on
November 8, 1988.
2<F12>Incorporated by reference to the exhibit of the same number filed
with post-effective amendment no. 6 to the Registration Statement,
filed on Octoboer 27, 1994.
3<F13>Incorporated by reference to the exhibit of the same number filed
with post-effective amendment no. 8 to the Registration Statement,
filed on Octoboer 31, 1996.
Item 25. Persons Controlled By or Under Common Control with Registrant
-------------------------------------------------------------
The registrant does not consider that there are any persons directly or
indirectly controlling, controlled by, or under common control with, the
registrant within the meaning of this item. The information in the prospectus
under the caption "Management of the Fund" and in the Statement of Additional
Information under the caption "Management" is incorporated by reference.
Item 26. Number of Holders of Securities
-------------------------------
As of July 31, 1998 there were 2,992 record holders of registrant's capital
stock. Registrant has no other class of securities.
Item 27. Indemnification
---------------
Section 2-418 of the General Corporation Law of Maryland authorizes the
registrant to indemnify its directors and officers under specified
circumstances. Article Ninth of the Charter of the registrant (exhibit 1 to
this amendment, which is incorporated herein by reference) provides in effect
that the registrant shall provide certain indemnification of its directors and
officers. In accordance with section 17(h) of the Investment Company Act, this
provision of the charter shall not protect any person against any liability to
the registrant or its shareholders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to trustees, 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 indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a trustee, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
trustee, 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 Adviser
----------------------------------------------------
The information in the prospectus under the caption "Management of the Fund
- - Directors and Investment Adviser" is incorporated by reference. Except as
noted therein, neither Fasciano Company, Inc., nor any of its directors or
officers, has at any time during the past two years been engaged in any other
business, profession, vocation or employment of a substantial nature either for
its or his own account or in the capacity of director, officer, employee,
partner or trustee.
Item 29. Principal Underwriters
----------------------
(a) None
(b) None
(c) None
Item 30. Location of Accounts and Records
--------------------------------
Michael F. Fasciano
President
Fasciano Fund, Inc.
190 S. LaSalle St., Suite 2800
Chicago, Illinois 60603
Item 31. Management Services
-------------------
None
Item 32. Undertakings
------------
(a) Not applicable
(b) Not applicable
(c) The Registrant undertakes to furnish to each person to whom a
prospectus is delivered a copy of the Registrant's latest annual
report to shareholders, upon request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the registrant certifies that it meets all of
the requirements for effectiveness of this registration statement pursuant to
rule 485(b) under the Securities Act of 1933 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Chicago, Illinois on September 11, 1998.
FASCIANO FUND, INC.
By /s/ Michael F. Fasciano
------------------------------
Michael F. Fasciano, President
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed below by the following persons in
the capacities and on the dates indicated.
Name Title Date
---- ----- ----
/s/ Michael F. Fasciano Director, President and )
- ----------------------- Treasurer (principal )
Michael F. Fasciano executive and )
financial officer) )
)
)
/s/ David R. Long Director ) September 11, 1998
- ----------------------- )
David R. Long )
)
)
)
/S/ Mark B. Mandich Director )
- ----------------------- )
Mark B. Mandich )
INDEX OF EXHIBITS FILED WITH THIS AMENDMENT
-------------------------------------------
Exhibit
Number EDGAR Exhibit
- ------ ----- -------
10 Ex. 99.B10 Opinion and Consent of Bell, Boyd & Lloyd
11 Ex 99.B11 Consent of independent public accountants
14.1 Ex 99.B14.1 Amended Individual Retirement Account Prototype Plan,
Disclosure Statement and applications
16 Ex 99.B16 Schedule for computation of performance quotations
17 Ex 27 Financial Data Schedule
Three First National Plaza
70 West Madison Street, Suite 3300
Chicago, Illinois 60602-5046
312 372-1121
Fax 312 372-2098
September 11, 1998
As counsel for Fasciano Fund, Inc. (the "Fund"), we consent to the
incorporation by reference of our opinion dated October 25, 1996 as an
exhibit to post-effective amendment no. 8 to the registration statement of
the Fund, Securities Act file no. 33-23997 on Form N-1A, filed on October 31,
1996. In giving this consent we do not admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act of
1933.
/s/ Bell, Boyd & Lloyd
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report dated August 12, 1998, and to all references to our Firm included in
or made a part of this Registration Statement on Form N-1A of Fasciano Fund,
Inc.
ARTHUR ANDERSEN LLP
Chicago, Illinois
September 11, 1998
(FASCIANO FUND, INC. LOGO)
FASCIANO FUND, INC.
INDIVIDUAL RETIREMENT ACCOUNT
DISCLOSURE STATEMENT &
CUSTODIAL ACCOUNT AGREEMENT
INDIVIDUAL RETIREMENT ACCOUNT DISCLOSURE STATEMENT
GENERAL INFORMATION
Please read the following information together with the Individual Retirement
Account Custodial Agreement and the Prospectus(es) for the fund(s) you select
for investment of 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).
o 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.
o In a Roth IRA, amounts contributed to your IRA are taxed at the time of
contribution, but distributions from the IRA are not subject to tax if you
have held the IRA for certain minimum periods of time (generally, until age
591/2 but in some cases longer).
o 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:
Fasciano Fund, 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 Fasciano Co., Inc. serves as
Investment Advisor or any other regulated investment company designated by
Fasciano Co., 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
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*<F14>**<F15>
Education IRA annual maintenance fee
per account 5.00*<F14>
*<F14> capped at $25.00 per social security number.
**<F15> Annual maintenance fee to be waived for all IRA accounts with a
value of $10,000 or more on day of fee deduction.
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.
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:
o 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).
o 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:
ELIGIBLE TO MAKE ELIGIBLE TO MAKE A NOT ELIGIBLE TO
A DEDUCTIBLE PARTIALLY DEDUCTIBLE MAKE A DEDUCTIBLE
CONTRIBUTION IF AGI CONTRIBUTION IF AGI CONTRIBUTION IF AGI
YEAR LESS THAN OR EQUAL TO BETWEEN OVER
---- -------------------- -------------------- --------------------
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 thereafter 50,000 50,001 - 59,999 60,000
If you are married, the following rules apply:
o 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).
o 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:
ELIGIBLE TO MAKE ELIGIBLE TO MAKE A NOT ELIGIBLE TO
A DEDUCTIBLE PARTIALLY DEDUCTIBLE MAKE A DEDUCTIBLE
CONTRIBUTION IF AGI CONTRIBUTION IF AGI CONTRIBUTION IF AGI
YEAR LESS THAN OR EQUAL TO BETWEEN OVER
---- -------------------- -------------------- --------------------
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 thereafter 80,000 80,001 - 99,999 100,000
o 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.
o 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:
o a qualified pension, profit-sharing, or stock bonus plan established in
accordance with IRC 401(a) or 401(k);
o a Simplified Employee Pension Plan (SEP) (IRC 408(k));
o a deferred compensation plan maintained by a governmental unit or agency;
o tax-sheltered annuities and custodial accounts (IRC 403(b) and 403(b)(7));
o a qualified annuity plan under IRC Section 403(a); or
o 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 (1) 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 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 591/2. 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 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 (1) a
SIMPLE Plan generally is available only to employers with fewer than 100
employees, (2) contributions must be made on behalf of all employees of the
employer (other than bargaining unit employees) who satisfy certain minimum
participation requirements, (3) contributions are made to a special SIMPLE IRA
that is separate and apart from your other IRAs, (4) if you withdraw from your
SIMPLE IRA during the 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 (and 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.
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.
Two additional distribution options are available if your spouse is the
beneficiary: (i) payments to your spouse may commence as late as December 31 of
the year you would have attained age 70 1/2 and be distributed over a period not
exceeding the life or life expectancy of your spouse, or (ii) your spouse can
simply elect to treat your Traditional IRA as his or her own, in which case
distributions will be required to commence by April 1 following the calendar
year in which your spouse attains age 70 1/2.
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.
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
VIII, Section 1 of the Individual Retirement Account Custodial Agreement. The
growth in value of your IRA is neither guaranteed nor projected.
Your Individual Retirement Account Plan has been approved as to form by the
Internal Revenue Service. The Internal Revenue Service approval is a
determination only as to the form of the Plan and does not represent a
determination of the merits of the Plan as adopted by you. You may obtain
further information with respect to your Individual Retirement Account from any
district office of the Internal Revenue Service.
19. 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.
20. 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.
TRADITIONAL INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT
The following constitutes an agreement establishing an Individual Retirement
Account (under Section 408(a) of the Internal Revenue Code) between the
Depositor and the Custodian.
ARTICLE I
The Custodian may accept additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in Section 402(c) (but only after December 31, 1992),
403(a)(4), 403(b)(8), 408(d)(3), or an employer contribution to a simplified
employee pension plan as described in Section 408(k). Rollover contributions
before January 1, 1993, include rollovers described in Section 402(a)(5),
402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8), 408(d)(3), or an employer
contribution to a simplified employee pension plan as described in Section
408(k).
ARTICLE II
The Depositor's interest in the balance in the custodial account is
nonforfeitable.
ARTICLE III
1. No part of the custodial funds may be invested in life insurance contracts,
nor may the assets of the custodial account be commingled with other
property except in a common trust fund or common investment fund (within
the meaning of Section 408(a)(5)).
2. No part of the custodial funds may be invested in collectibles (within the
meaning of Section 408(m)) except as otherwise permitted by Section
408(m)(3) which provides an exception for certain gold and silver coins and
coins issued under the laws of any state.
ARTICLE IV
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Depositor's interest in the custodial account shall be
made in accordance with the following requirements and shall otherwise
comply with Section 408(a)(6) and Proposed Regulations Section 1.408-8,
including the incidental death benefit provisions of Proposed Regulations
Section 1.401(a)(9)-2, the provisions of which are herein incorporated by
reference.
2. Unless otherwise elected by the time distributions are required to begin to
the Depositor under Item 3, or to the surviving spouse under Item 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 701/2.
By that date, the Depositor may elect, in a manner acceptable to the
Custodian, to have the balance in the custodial account distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the life of the Depositor.
(c) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the joint and last survivor
lives of the Depositor and his or her designated beneficiary.
(d) Equal or substantially equal annual payments over a specified period
that may not be longer than the Depositor's life expectancy.
(e) Equal or substantially equal annual payments over a specified period
that may not be longer than the joint life and last survivor expectancy of
the Depositor and his or her designated beneficiary.
4. If the Depositor dies before his or her entire interest is distributed to
him or her, the entire remaining interest will be distributed as follows:
(a) If the Depositor dies on or after distribution of his or her interest
has begun, distribution must continue to be made in accordance with
Item 3.
(b) If the Depositor dies before distribution of his or her interest has
begun, the entire remaining interest will, at the election of the
Depositor or, if the Depositor has not so elected, at the election of
the beneficiary or beneficiaries, either:
(i) Be distributed by the December 31 of the year containing the
fifth anniversary of the Depositor's death, or
(ii) Be distributed in equal or substantially equal payments over the
life or life expectancy of the designated beneficiary or
beneficiaries starting by December 31 of the year following the
year of the Depositor's death. If, however, the beneficiary is
the Depositor's surviving spouse, then this distribution is not
required to begin before December 31 of the year in which the
Depositor would have turned age 70 1/2.
(c) Except where distribution in the form of an annuity meeting the
requirements of Section 408(b)(3) and its related regulations has
irrevocably commenced, distributions are treated as having begun on the
Depositor's required beginning date, even though payments may actually have
been made before that date.
(d) If the Depositor dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving spouse, no
additional cash contributions or rollover contributions may be accepted in
the account.
5. In the case of a distribution over life expectancy in equal or
substantially equal annual payments, to determine the minimum annual
payment for each year, divide the Depositor's entire interest in the
custodial account as of the close of business on December 31 of the
preceding year by the life expectancy of the Depositor (or the joint life
and last survivor expectancy of the Depositor and the Depositor's
designated beneficiary, or the life expectancy of the designated
beneficiary, whichever applies). In the case of distributions under Item 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 Item 4(b)(ii),
determine life expectancy using the attained age of the designated
beneficiary as of the beneficiary's birthday in the year distributions are
required to commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy
the minimum distribution requirements described above. This method permits
an individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for
another.
ARTICLE V
1. The Depositor agrees to provide the Custodian with information necessary
for the Custodian to prepare any reports required under Section 408(i) and
Regulations Section 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal Revenue Service and
the Depositor prescribed by the Internal Revenue Service.
ARTICLE VI
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling. Any
additional articles that are not consistent with Section 408(a) and related
regulations will be invalid.
ARTICLE VII
This agreement will be amended from time to time to comply with the provisions
of the Code and related regulations.
ARTICLE VIII
1. Investment of Account Assets
(a) All contributions to the custodial account shall be invested in the
shares of the Fasciano Fund, Inc. or, if available, any other series
of Fasciano Fund, Inc. or other regulated investment companies for
which Fasciano Co., 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 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.
2. Amendment and Termination
(a) Fasciano Co., Inc., the Investment Advisor for Fasciano Fund, Inc.,
may amend the Custodial Account (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 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.
3. Taxes and Custodial Fees
Any income taxes or other taxes levied or assessed upon or in respect of the
assets or income of the custodial account and any transfer taxes incurred shall
be paid from the custodial account. All administrative expenses incurred by the
Custodian in the performance of its duties, including fees for legal services
rendered to the Custodian, in connection with the custodial account, and the
Custodian's compensation shall be paid from the custodial account, unless
otherwise paid by the Depositor or his or her beneficiaries. Sufficient shares
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.
4. Reports and Notices
(a) The Custodian shall keep adequate records of transactions it is
required to perform hereunder. After the close of each calendar year,
the Custodian shall provide to the Depositor or his or her legal
representative a written report or reports reflecting the transactions
effected by it during such year and the assets and liabilities of the
Custodial Account at the close of the year.
(b) All communications or notices shall be deemed to be given upon receipt
by the Custodian at: 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.
5. Designation of Beneficiary
The Depositor may designate a beneficiary or beneficiaries to receive benefits
from the custodial account in the event of the Depositor's death. In the event
the Depositor has not designated a beneficiary, or if all beneficiaries shall
predecease the Depositor, the following persons shall take in the order named:
(a) The spouse of the Depositor;
(b) If the spouse shall predecease the Depositor or if the Depositor does
not have a spouse, then to the Depositor's estate.
The Depositor may also change or revoke any previously made designation of
beneficiary. 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.
6. Multiple Individual Retirement Accounts
In the event the Depositor maintains more than one individual retirement account
(as defined in Section 408(a)) and elects to satisfy his or her minimum
distribution requirements described in Article IV above by making a distribution
for another individual retirement account in accordance with 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.
7. 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.
8. Rollover Contributions and Transfers
The Custodian shall have the right to receive rollover contributions and to
receive direct transfers from other custodians or trustees. All contributions
must be made in cash or check.
9. Conflict in Provisions
To the extent that any provisions of this Article VIII shall conflict with the
provisions of Articles IV, V and/or VII, the provisions of this Article VIII
shall govern.
10. Applicable State Law
This custodial account shall be construed, administered and enforced according
to the laws of the State of Wisconsin.
11. Resignation or Removal of Custodian
The Custodian may resign at any time upon thirty (30) days notice in writing to
the Investment Company. Upon such resignation, the Investment Company shall
notify the Depositor, and shall appoint a successor custodian under this
Agreement. The Depositor or the Investment Company at any time may remove the
Custodian upon 30 days written notice to that effect in a form acceptable to and
filed with the Custodian. Such notice must include designation of a successor
custodian. The successor custodian shall satisfy the requirements of Section
408(h) of the Code. Upon receipt by the Custodian of written acceptance of such
appointment by the successor custodian, the Custodian shall transfer and pay
over to such successor the assets of and records relating to the Custodial
Account. The Custodian is authorized, however, to reserve such sum of money as
it may deem advisable for payment of all its fees, compensation, costs and
expenses, or for payment of any other liability constituting a charge on or
against the assets of the Custodial Account or on or against the Custodian, and
where necessary may liquidate shares in the Custodial Account for such payments.
Any balance of such reserve remaining after the payment of all such items shall
be paid over to the successor Custodian. The Custodian shall not be liable for
the acts or omissions of any predecessor or successor custodian or trustee.
12. Limitation on Custodian Responsibility
The Custodian will not under any circumstances be responsible for the timing,
purpose or propriety of any contribution or of any distribution made hereunder,
nor shall the Custodian incur any liability or responsibility for any tax
imposed on account of any such contribution or distribution. Further, the
custodian shall not incur any liability or responsibility in taking or omitting
to take any action based on any notice, election, or instruction or any written
instrument believed by the Custodian to be genuine and to have been properly
executed. The Custodian shall be under no duty of inquiry with respect to any
such notice, election, instruction, or written instrument, but in its discretion
may request any tax waivers, proof of signatures or other evidence which it
reasonably deems necessary for its protection. The Depositor and the successors
of the Depositor including any executor or administrator of the Depositor shall,
to the extent permitted by law, indemnify the Custodian and its successors and
assigns against any and all claims, actions or liabilities of the Custodian to
the Depositor or the successors or beneficiaries of the Depositor whatsoever
(including without limitation all reasonable expenses incurred in defending
against or settlement of such claims, actions or liabilities) which may arise in
connection with this Agreement or the Custodial Account, except those due to the
Custodian's own bad faith, gross negligence or willful misconduct. The Custodian
shall not be under any duty to take any action not specified in this Agreement,
unless the Depositor shall furnish it with instructions in proper form and such
instructions shall have been specifically agreed to by the Custodian, or to
defend or engage in any suit with respect hereto unless it shall have first
agreed in writing to do so and shall have been fully indemnified to its
satisfaction.
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 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 (1) 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 contract 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 another 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.)
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 it is expected that the rules will
require that your remaining interest in your Roth IRA 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.
It is expected that two additional distribution options will be available if
your spouse is the beneficiary: (i) payments to your spouse may commence as
late as December 31 of the year you would have attained age 70 1/2 and be
distributed over a period not exceeding the life or life expectancy of your
spouse, or (ii) your spouse can simply elect to treat your Roth IRA as his or
her own, in which case distributions will be required to commence by April 1
following the calendar year in which your spouse attains age 70 1/2.
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.
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 Account Plan has been approved as to form by the
Internal Revenue Service. The Internal Revenue Service approval is a
determination only as to the form of the Plan and does not represent a
determination of the merits of the Plan as adopted by you. You may obtain
further information with respect to your Roth Individual Retirement Account from
any district office of the Internal Revenue Service. 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
The following constitutes an agreement establishing a Roth IRA (under Section
408A of the Internal Revenue Code) between the depositor and the custodian.
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.
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 depositors 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 1.(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
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 Fasciano Co., 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 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.
2. Amendment and Termination.
(a) The custodian may amend the Custodial Account (including retroactive
amendments) by delivering to the depositor written notice of such
amendment setting forth the substance and effective date of the
amendment. The depositor shall be deemed to have consented to any such
amendment not objected to in writing by the 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.
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 depositor or his or her
beneficiaries.
The custodian's fees are set forth in a schedule provided to the depositor.
Extraordinary charges resulting from unusual administrative responsibilities not
contemplated by the schedule will be subject to such additional charges as will
reasonably compensate the custodian. Fees for refund of excess contributions,
transferring to a successor trustee or custodian, or redemption/reinvestment of
Investment Company Shares will be deducted from the refund or redemption
proceeds and the remaining balance will be remitted to the depositor, or
reinvested or transferred in accordance with the depositor's instructions.
4. Reports and Notices.
(a) The custodian shall keep adequate records of transactions it is
required to perform hereunder. After the close of each calendar year,
the custodian shall provide to the depositor or his or her legal
representative a written report or reports reflecting the transactions
effected by it during such year and the assets and liabilities of the
Custodial Account at the close of the year.
(b) All communications or notices shall be deemed to be given upon receipt
by the custodian at 615 E. Michigan St., Milwaukee, WI 53202 or the
depositor at his most recent address shown in the custodian's records.
The depositor agrees to advise the custodian promptly, in writing, of
any change of address.
5. Designation of Beneficiary.
The depositor may designate a beneficiary or beneficiaries to receive benefits
from the custodial account in the event of the depositor's death. In the event
the depositor has not designated a beneficiary, or if all beneficiaries shall
predecease the depositor, the following persons shall take in the order named:
(a) The spouse of the depositor;
(b) If the spouse shall predecease the depositor or if the depositor does
not have a spouse, then to the personal representative of the
depositor's estate.
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.
7. 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.
8. Conflict in Provisions.
To the extent that any provisions of this Article VIII shall conflict with the
provisions of Articles V, VI and/or VIII, the provisions of this Article IX
shall govern.
9. Applicable State Law.
This custodial account shall be construed, administered and enforced according
to the laws of the State of Wisconsin.
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 (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
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
The depositor whose name appears above is establishing an education individual
retirement custodial account under Section 530 for the benefit of 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 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 Fasciano Co., 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 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.
2. Amendment and Termination
(a) The custodian 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 615 E. Michigan St., Milwaukee, WI 53202 or the
responsible individual at his most recent address shown in the
custodian's records. The responsible individual agrees to advise the
custodian promptly, in writing, of any change of address.
5. Monitoring of Contribution Limitations Information
The custodian 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.
9. Applicable State Law
This custodial account shall be construed, administered and enforced according
to the laws of the State of Wisconsin.
(FASCIANO FUND, INC. LOGO)
FASCIANO FUND, INC.
IMPORTANT NOTICE
TO RECIPIENTS OF DISTRIBUTIONS FROM QUALIFIED RETIREMENT PLANS:
The law requires that 20% of your distribution from your employer's qualified
retirement plan eligible for rollover be withheld for tax purposes unless the
distribution is made payable directly to the custodian of your rollover IRA or
another qualified plan.
If you are about to receive a distribution from your employer plan which is
eligible for rollover, that distribution may take one of these three forms:
1. Your employer or plan trustee may deliver a check to you. If so, make
sure the check is payable as follows:
Fasciano Fund, Inc.
Firstar Trust Company, Custodian
A/O ---------------------------------- IRA Rollover
YOUR NAME
and deliver it along with a completed application to the following:
Firstar Trust Company
P.O. Box 701
Milwaukee, WI 53201
2. Your employer or plan trustee may forward your distribution directly
to us. If this occurs, follow the same instructions as above.
3. If your employer requires that an account is opened before sending the
check, make sure that you have sent a completed application to Firstar
Trust Company with the indication that you are about to receive a
rollover.
4. If your employer will be wiring funds to Firstar Trust Company, the
wiring instructions are as follows:
Firstar Bank Milwaukee, N.A.
ABA No. 0750-00022
For credit to:
Firstar Trust Company
Account No. 112-950-027
For further credit to:
Fasciano Fund, Inc.
------------------------------------------------------
YOUR NAME
------------------------------------------------------
ACCOUNT NUMBER
(FASCIANO FUND, INC. LOGO)
FASCIANO FUND, INC.
190 South LaSalle Street, Suite 2800
Chicago, Illinois 60603
1-800-848-6050
CUSTODIAN:
Firstar Trust Company
P.O. Box 701
Milwaukee, Wisconsin 53201-0701
1-800-338-1579
This IRA booklet is authorized for distribution only when preceded or
accompanied by a current Fasciano Fund prospectus.
FASCIANO FUND, INC.
190 S. LASALLE STREET
SUITE 2800
CHICAGO, IL60603
1-800-848-6050
MUTUAL FUND SERVICES
615 EAST MICHIGAN STREET
P.O. BOX 701
MILWAUKEE, WI 53201-0701
1-800-982-3533
FASCIANO FUND, INC.
SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS
TOTAL RETURN
FOR THE YEAR ENDED JUNE 30, 1998
Total Return = (Ending Redeemable Value/ Initial Value) -1
Total Return = (53,151.63/39,905.24) -1
Total Return = 33.19%
FOR THE PERIOD FROM AUGUST 1, 1987
(COMMENCEMENT OF OPERATIONS)
TO JUNE 30, 1998
Total Return = (Ending Redeemable Value/ Initial Value) -1
Total Return = (53,151.63/ 10,000.00) -1
Total Return = 431.52%
[ARTICLE] 6
[CIK] 0000818459
[NAME] FASCIANO FUND, INC.
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] JUN-30-1998
[PERIOD-START] JUL-01-1997
[PERIOD-END] JUN-30-1998
[INVESTMENTS-AT-COST] 75,598
[INVESTMENTS-AT-VALUE] 96,244
[RECEIVABLES] 192
[ASSETS-OTHER] 25
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 96,461
[PAYABLE-FOR-SECURITIES] 1,399
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 105
[TOTAL-LIABILITIES] 1,504
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 65,794
[SHARES-COMMON-STOCK] 2,720
[SHARES-COMMON-PRIOR] 1,530
[ACCUMULATED-NII-CURRENT] (227)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 8,744
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 20,646
[NET-ASSETS] 94,957
[DIVIDEND-INCOME] 446
[INTEREST-INCOME] 516
[OTHER-INCOME] 0
[EXPENSES-NET] 816
[NET-INVESTMENT-INCOME] 146
[REALIZED-GAINS-CURRENT] 8,783
[APPREC-INCREASE-CURRENT] 7,971
[NET-CHANGE-FROM-OPS] 16,900
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 2,598
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1,316
[NUMBER-OF-SHARES-REDEEMED] 211
[SHARES-REINVESTED] 85
[NET-CHANGE-IN-ASSETS] 52,836
[ACCUMULATED-NII-PRIOR] (373)
[ACCUMULATED-GAINS-PRIOR] 2,559
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 605
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 816
[AVERAGE-NET-ASSETS] 61,614
[PER-SHARE-NAV-BEGIN] 27.53
[PER-SHARE-NII] 0.16
[PER-SHARE-GAIN-APPREC] 8.71
[PER-SHARE-DIVIDEND] 0.00
[PER-SHARE-DISTRIBUTIONS] 1.49
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 34.91
[EXPENSE-RATIO] 1.3
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
