Registration No. 33-31800
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 7
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and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 10
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MADISON Bond Fund, Inc.
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(Exact Name of Registrant as Specified in Charter)
6411 Mineral Point Rd. Madison, WI 53705
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (608) 274-0300
Frank E. Burgess, 6411 Mineral Point Rd. Madison, WI 53705
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(Name and Address of Agent or Service)
Copy to : John Rashke, Esq.
DeWitt Ross & Stevens, S.C.
8000 Excelsior Drive Suite 401
Madison, Wisconsin 53717-1914
It is proposed that this filing will become effective
X on February 28, 1997 pursuant to paragraph (b) of Rule 485.
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<PAGE>
Cross-Reference Sheet
Form N1-A
Part A, Information Required in a Prospectus
Item 1 Cover Page
Item 2 Expense Table
Item 3 Financial Highlights
Item 4 Introduction to the Fund, Investment Objectives
and Policies (including Investment
Objectives and Investment Selection and
Limitations)
Item 5 Management of the Fund
Item 5A Incorporated by reference in the
Registrant's annual report
Item 6 Description of Fund Shares,
Shareholder Inquiries & Reports,
Income Dividends, Capital Gain Distributions,
and Taxes, Individual Retirement
Account and back cover
Item 7 Purchase of Shares (including Offering Price)
Item 8 Redemption of Shares (including
Redemption Fee), and Waivers and Reduced
Charges
Item 9 Not applicable
Part B, Items Required in a Statement of
Additional Information
Item 10 Cover page
Item 11 Cover page
Item 12 General Information and History
Item 13 Investment Objectives and Policies,
Investment Restrictions,
Item 14 Management of the Fund
Item 15 Principal Shareholders, Management of
the Fund
Item 16 Investment Advisory and Other Services
Item 17 Brokerage
Item 18 Description of Fund Shares
Item 19 Distribution Plan, Purchase and Redemption
of Fund Shares, Determination of Net Asset
Value
Item 20 Tax Status
Item 21 Not applicable
Item 22 Not applicable
Item 23 Financial Statements (Annual and Semi-Annual
Reports are incorporated by reference)
Part C, Other Information
Items 24 through 32 follow Part B
<PAGE>
MADISON
BOND FUND, INC.
PROSPECTUS
February 28, 1997
MADISON Bond Fund, Inc. (the `Fund'') is a mutual fund
which has two investment objectives: (1) Production of current
income consistent with its quality standards and (2) Preservation
of capital. To achieve its objectives, the Fund will invest in
investment grade bonds with an average dollar weighted maturity
not to exceed 10 years. The Fund is sponsored by Madison
Investment Advisors, Inc., which serves as its investment adviser
and distributor of its shares.
Investors may obtain a Statement of Additional Information,
without charge, from the Fund's office listed below. The
Statement of Additional Information contains further detailed
information about the Fund and is dated February 28, 1997.
This Prospectus sets forth concisely information that
investors should know prior to investing. Investors should read
this Prospectus and retain it for future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION. NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
=====================
Minimum Initial Investment - $1,000
Minimum Subsequent Investment - $100
MADISON Bond Fund, Inc.
6411 Mineral Point Road
Madison, Wisconsin 53705
608/273-2020
800/767-0300
PROSPECTUS
TABLE OF CONTENTS Page
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Financial Highlights...........................................2
Introduction to the Fund.......................................2
Summary of Expenses............................................3
Investment Objectives and Policies.............................3
Investment Selection and Limitations...........................4
Management of the Fund.........................................6
Purchase of Shares.............................................7
Redemption of Shares...........................................8
Waivers and Reduced Charges....................................9
Shareholder Inquiries and Reports..............................9
Income Dividends, Capital Gain Distributions, and Taxes........9
Reinvestment Plan for Distributions...........................10
Description of Fund Shares....................................10
Individual Retirement Account.................................10
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the year)
The following Financial Highlights of Madison Bond Fund, Inc.
have been audited by Williams, Young & Associates, LLC,
independent public accountants. The Independent Auditor's Report
and additional information about the performance of the Fund is
contained in the Annual Report to shareholders which may be
obtained without charge.
<TABLE>
<CAPTION>
Period Ended December 31,
-------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992 1991 1990*
NET ASSET VALUE:
Beginning of year... $21.17 $19.62 $21.21 $21.14 $21.87 $20.55 $20.00
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS:
<S> <C> <C> <C> <C> <C> <C> <C>
Net investment income.. $1.07 $ 1.17 $ 1.15 $ 1.03 $ 1.08 $ 1.22 $ .51
Net realized & unrealized gains
or (losses) on securities (.55) 1.55 (1.59) .24 (.21) 1.58 .55
Total from invstmt operations $ .52 2.72 $ (.44)$ 1.27 $ .87 $ 2.80 $ 1.06
<CAPTION>
LESS DISTRIBUTIONS:
<S> <C> <C> <C> <C> <C> <C> <C>
Dividends from net income. $(1.06)$(1.17)$(1.15)$(1.03)$(1.04)$(1.27)$ (.51)
Capital gains distributions. .00 .00 .00 (.17) (.15) (.21) .00
Return of capital .00 .00 .00 .00 (.41) .00 .00
<CAPTION>
NET ASSET VALUE:
<S> <C> <C> <C> <C> <C> <C> <C>
End of year $20.63 $21.17 $19.62 $21.21 $21.14 $21.87 $20.55
TOTAL RETURN 2.55% 14.11% (2.11%) 6.04% 4.08% 14.01% 5.35%
<CAPTION>
RATIOS:
<S> <C> <C> <C> <C> <C> <C> <C>
Operating expenses to
average net assets 1.51% 1.35% 1.18% 1.19% 1.51% 1.54% 1.57%
Net income to average net assets 4.86% 5.49% 5.50% 4.92% 5.40% 6.36% 3.65%
Portfolio turnover rate 94.24%57.99% 78.29% 67.59% 95.80% 55.70% .00%
*The Fund began operations on April 23, 1990.
</TABLE>
INTRODUCTION TO THE FUND
The Fund is a diversified, open-end management company which
offers investors the opportunity to own a professionally managed
diversified portfolio of government and corporate bonds and money
market instruments. There is a sales load of 2.5% of the offering
price (2.56% of the net amount invested) when you buy the Fund's
shares. In addition, there may be a 2% redemption fee if you
redeem your shares before the end of the second calendar year
following your purchase or a 1% redemption fee if you redeem your
shares before the end of the third calendar year following your
purchase. The Fund assets are also subject to a .25% annual
distribution fee.
INVESTMENT OBJECTIVES AND POLICIES
Investment Objectives
The investment objectives of the Fund are (1) production of
current income consistent with its quality standards and (2)
preservation of capital. The Fund seeks to achieve its objectives
by investing in corporate debt securities, obligations of the
U.S. Government and its Agencies and Instrumentalities and money
market instruments. The Fund will invest at least 65% of its
assets in bonds with the total portfolio having an average dollar
weighted maturity of ten years or less.
The Fund's advisor, Madison Investment Advisors, Inc. (the
`Advisor'' see ``Management of the Fund'' page 6), believes that
capital preservation can best be achieved through flexibility of
investment strategies. Although the careful selection of bonds
and money market instruments is the primary factor affecting the
investment return of the Fund, the percentage of the Fund's
assets which may be invested at any particular time in corporate
bonds, U.S. Government and Government Agency bonds and money
market instruments, and the average weighted maturity of the
total portfolio will depend on management's judgment regarding
the risks in the general market. The Fund's advisor monitors many
factors affecting the market outlook, including economic,
monetary and interest rate trends, market momentum, institutional
psychology and historical similarities to current conditions.
If management believes that market risks are high and bond
prices in general are vulnerable to decline, the Fund may take
certain temporary defensive actions such as reducing the average
maturity of the Fund's bond holdings and increasing the Fund's
cash reserves. Such `cash reserves'' are defined as short-term
investments such as U.S. Treasury Bills, high-grade commercial
paper, (rated in the top two rating classes by Standard & Poor's
or Moody's) bank certificates of deposit or repurchase
agreements. The objective of shortening maturities and holding
substantial cash reserves, as defined above, is to reduce the
Fund's exposure to bond price deprecition during period of rising
interest rates, and to maintain desired liquidity while awaiting
more attractive investment conditions in the bond market. (Continued
below the Summary of Expenses Table)
SUMMARY OF EXPENSES
This table is designed to assist shareholders in understanding
the costs and expenses associated with investing in the Fund.
These are estimates based on projected maximum expenses.
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 2.5%
Maximum Sales Load Imposed on Reinvested
Dividends (as a percentage of offering price) 0%
Deferred Sales Load N/A
Redemption Fees (as a percentage
of original purchase price or redemption proceeds,
as applicable) Based on first three calendar years 2.0%*
Exchange Fee N/A
Annual Fund Operating Expenses
Management Fees .50%
12b-1 Fees .25%
Other Expenses .76%
Total Fund Operating Expenses 1.51%
<TABLE>
<S> <C> <C> <C> <C>
Example 1 Year** 3 Years 5 Years 10 Years
You would pay the following
expenses on a $1,000 investment,
assuming (1) 5% annual return
(before expenses) and (2)
redemption at the end of each
time period: $ 58.75 $ 67.76 $ 98.94 $187.39
You would pay the following
expenses on the same investment,
assuming no redemption: $ 38.75 $ 67.76 $ 98.94 $187.39
</TABLE>
*The redemption fee is 2% when shares are redeemed during the first or
second calendar year following purchase and 1% during the third calendar
year following purchase.
**Assumes first calendar year ends June 30, 1997.
This example should not be considered a representation of past or future
expenses. Actual expenses may be greater or lesser than those shown.
The purpose of this table is to assist prospective investors in under-
standing the various costs and expenses that an investor in the Fund will
bear directly and indirectly.
It is the opinion of the Fund and its Advisor that the Fund's
willingness to shorten maturities and hold substantial cash
reserves during periods of market vulnerability are the most
important factors in comparing the Fund's investment philosophy
and strategies with those of most other mutual funds. In the
advisor's opinion, most other mutual funds do not shorten
maturities dramatically during volatile times. Under normal
circumstances, when the advisor believes interest rates are
stable or falling, the average dollar weighted maturity will be
in the 5-10 year range. On the other hand, when the advisor
believes interest rates are rising, the average dollar weighted
maturity may be shortened dramatically to 1-2 years. It is the
willingness to make these strategic shifts that differentiates
the Fund's strategy from most other funds. It is the general
intention of the Fund to maintain such defensive positions
temporarily or until it perceives that a period of market
vulnerability has passed.
Changes in the level of interest rates will directly affect
the market value of fixed income securities and the value of your
Fund shares. A decline in interest rates will tend to increase
their value, while a rise in interest rates will tend to decrease
their value. The longer the maturity of a security the greater
the price fluctuation will be. Limiting the average weighted
maturity of the portfolio to ten years and shortening the average
maturity during periods of rising interest rates will reduce the
extent to which the value of Fund shares will fluctuate. The
shorter the maturity of a bond the less volatile the price will
be. There can be, of course, no assurance that the Fund will meet
its investment objectives and that the Fund's shareholders can be
protected from risks associated with bond investing.
INVESTMENT SELECTION AND LIMITATIONS
The purpose of the Fund is to make available to investors an
investment program under continuous supervision of experienced
investment management. By purchasing shares of the Fund,
investors obtain in a single investment an interest in a
diversified bond portfolio. It should be recognized that such
diversification does not eliminate the risk involved in all
securities investments. Through ownership of shares of the Fund,
as contrasted with ownership of a number of individual
securities, investors are relieved of many details in
the management of their investments while their bookkeeping and
income tax records are greatly simplified. Ownership of shares in
the Fund, however, does not constitute a complete financial
program, and is not designed for investors primarily seeking
capital appreciation.
Fixed Income Securities. To achieve current income, the Fund
intends to invest in corporate debt securities and obligations of
the U.S. Government and its Agencies. Eligible corporate debt
securities must be accorded one of the four highest quality
ratings by Standard & Poor's or Moody's or, if unrated, judged by
the Advisor to be a comparable quality. Bonds rated AAA, AA, or A
by Standard & Poor's or Aaa, Aa, or A by Moody's indicate strong
to high capacity of the company to pay interest and repay
principal. However, the fourth highest rating, (e.g. BBB by
Standard & Poor's or Baa by Moody's) indicates adequate capacity
to pay interest and repay principal but suggests that adverse
economic conditions may weaken the company's ability to meet
these obligations. Securities rated Baa by Moody's and BBB by
Standard & Poor's are regarded as having some speculative
characteristics. These bonds are also more sensitive to economic
changes than higher grade bonds. If a BBB or Baa bond held in the
portfolio is downgraded by Standard and Poor's or by Moody's, the
bond will be removed within twelve months following the
downgrade.
The Fund may invest in securities guaranteed by the U.S.
Government which include direct obligations of the U.S. Treasury
(Treasury bills, notes and bonds) and federal agency obligations.
The payment of principal and interest on these securities is
unconditionally guaranteed by the U.S. Government, and thus they
are the highest quality rated debt security.
Securities issued by U.S. Government instrumentalities and
certain federal agencies are neither direct obligations of, nor
guaranteed by, the Treasury. However, they generally involve
federal sponsorship in one way or another. These agencies and
instrumentalities include, but are not limited to, Federal Land
Banks, Federal Home Administration, Federal Home Loan Banks,
Federal National Mortgage Association and Government National
Mortgage Association. The Fund may not invest in the securities
of other investment companies.
The Fund may invest in money market securities which include
a) commercial paper (including variable rate master demand notes)
rated at least A-2 by Standard and Poor's Corporation or Prime-2
by Moody's, or if not so rated, issued by a corporation which has
outstanding debt obligations rated at least in the top two
ratings by Standard and Poor's and Moody's; b) debt obligations
(other than commercial paper) of corporate issuers which
obligations are rated at least AA by Standard or Poor's or Aa by
Moody's; and c) obligations of or guaranteed by the U.S.
government, its agencies or instrumentalities. Money market
securities are subject to the limitation that they mature within
one year of the date of their purchase. Government money market
securities include treasury bills, notes and bonds issued by the
U.S. government and backed by the full faith and credit of the
United States, as well as securities issued or guaranteed as to
principal and interest by agencies and instrumentalities of the
U.S. government.
Repurchase Agreements. The Fund may hold repurchase
agreements which are fully collateralized by a U.S. Government
security. Repurchase agreements may be entered into with a member
bank of the Federal Reserve System or primary dealer in U.S.
Government securities under which the bank or dealer agrees to
repurchase the security from the Fund at a mutually agreed upon
time and price, thereby determining the yield during the term of
the agreement. This results in a fixed rate of return, insulated
from market fluctuation during such periods. While the underlying
obligation is a U.S. Government security, the obligation of the
seller to repurchase the security is not guaranteed by the U.S.
Government and there is the risk that the seller may fail to
repurchase the security. Not more than 10% of total net assets
will be invested in repurchase agreements with maturities of
greater than seven days or in other illiquid securities. In
general, the Fund will usually purchase overnight repurchase
agreements which mature the following day.
Covered Call Option Writing. As part of its investment
strategy, for partially defensive purposes, the Fund may write
covered call options, traded on a national securities exchange,
with respect to its debt securities. Covered call option writing
is a conservative technique designed to enhance income and
attempt to hedge against price fluctuations. A call option gives
the purchaser the right to buy, and the writer of the option the
obligation to sell, the underlying security at the exercise price
at any time during the option period. The premium or sales price
of the option is paid to the writer for undertaking the
obligations of the option contract. When a covered call is
written by the Fund, it will make arrangements with the Custodian
to segregate the appropriate portfolio securities or an
equivalent market value of cash until the option is either
exercised, expires or the Fund repurchases the option closing its
obligations under the option contract. Call options are short-
term contracts generally with durations of nine months or less
and are listed on a national securities exchange. A call option
sold by the Fund exposes the Fund to possible loss of opportunity
to realize appreciation in the market value of the related
security or to possible continued holding of a security which
might otherwise have been sold to protect against depreciation in
the market price of such security. Such option writing strategies
will affect less than 25% of the total portfolio and will only be
written on treasury or agency bonds. The Fund will not invest in
puts, calls, straddles, spreads or any combination thereof, other
than as required to participate in covered call option writing as
discussed above.
Foreign Securities. The Fund may invest in foreign currency
denominated debt securities in the top two rating classes of
Standard & Poor's or Moody's. Such securities must be issued by
U.S. corporations or U.S. Government agencies or
instrumentalities, must be liquid, readily salable and publicly
traded in the U.S. securities markets, and, may not exceed 10% of
total net assets of the Fund. Because the value of such
securities varies not only with normal factors affecting the
price of all domestic bonds (i.e. interest rate, monetary and
economic factors), but also with the price change of such foreign
currencies in relation to the U.S. dollar, such securities carry
an inherently higher level of risk. The currencies used shall be
limited to the Canadian dollar, the Australian dollar, the
British pound, the German mark, the Japanese yen and ECU currency
units. The Fund will not effect transactions in foreign
securities markets.
Other Investments. The Fund will not invest in when-issued
securities or restricted securities. The Fund will only invest in
certificates of deposits issued by banks which are members of the
Federal Reserve System and which have total deposits in excess of
one billion dollars.
Limitations. The Fund has adopted other investment
limitations, which like its investment objectives and the
fundamental policies mentioned above, may not be changed without
the approval of a majority of its shareholders. These limitations
generally prohibit (1) investing more than 5% of total net assets
in the securities of any one issuer (except obligations of the
U.S. Government and its Agencies), (2) investing more than 25% of
total net assets in any one industry, (3) borrowing money except
in amounts up to 5% of its assets only for temporary,
extraordinary purposes, (4) purchasing real estate, (5) investing
in oil, gas or mineral exploration programs, (6) the pledge,
mortgage or hypothecation of its assets, except for temporary or
emergency purposes and then to an extent not greater than 10% of
its assets at current value, and (7) more than 10% of total net
assets invested in repurchase agreements with maturities of
greater than seven days or in other illiquid securities. A
complete list of all investment restrictions is found in the
Fund's Statement of Additional Information.
Brokerage Practices. In valuing brokerage services, the
Advisor makes a judgement of the usefulness of research and other
information provided to the Advisor in managing the Fund's
investment portfolio. In some cases, the information relates to a
specific transaction placed with the broker, but for the greater
part, the research consists of a wide variety of investment
strategy, economic, financial and political information, useful
to the Advisor in advising the Fund and its other clients.
It is the policy of the Advisor to seek the best possible
security price available with respect to each transaction at the
best available commission rate. In selecting brokers, the Advisor
considers the broker's reliability, the quality of its execution
services and its financial strength. However, the Advisor also
takes into account the value of research information received for
use in advising the Fund. It is understood by the Fund that other
clients of the advisor might also benefit from the information
obtained. Where the Fund and one or more clients of the Advisor
are simultaneously engaged in the purchase or sale of the same
security, the transactions may be averaged as to price and
allocated equitably. In most cases, it is believed that
coordination and the ability to participate in volume
transactions will be to the benefit of the Fund. The Fund may not
allocate brokerage solely on the basis of selling Fund shares.
During 1996, the portfolio turnover rate was 94.2%.
There can, of course, be no assurance that the Fund will
achieve its investment objective since there is uncertainty in
every investment.
MANAGEMENT OF THE FUND
Under an investment advisory agreement with the Fund,
Madison Investment Advisors, Inc., (the "Advisor'') 6411 Mineral
Point Road, Madison, Wisconsin, furnishes continuous investment
service and management to the Fund. Madison Investment Advisors,
Inc., a licensed investment advisory firm for over twenty-three
years, provides professional portfolio management services to a
number of other clients besides the Fund and has over $2.8
billion under management. Over 80% of the assets are invested in
fixed income securities, with investment objectives substantially
similar to the Fund. In addition, the Advisor manages Bascom Hill
Investors, Inc., an investment company (mutual fund) with total
net assets of $13.1 million on December 31, 1996, and Bascom Hill
Balanced Fund, Inc. with total net assets of $11.0 million on
December 31, 1996. Bascom Hill Investors, an equity oriented
growth fund, and Bascom Hill Balanced Fund, a growth and income
oriented balanced fund, have been managed by the Advisor since
their initial offering in 1978 and 1986, respectively. Subject to
the authority of the Board of Directors, the Advisor is
responsible for the overall management of the Fund's business
affairs besides having primary responsibility for investment
decisions affecting the Fund's portfolio. All investment
decisions for the Fund are made by the Investment Policy
Committee. The Advisor receives an annual fee, paid quarterly, of
.50 of 1% of the average daily net assets of the Fund. Advisory
fees for the year ended December 31, 1996 were $23,878.
PURCHASE OF SHARES
Offering Price
Shares purchased are subject to a 2.50% sales load. All
orders will then be executed at the net asset value per share
next computed after receipt of the investor's order by the
Firstar Trust Company of Milwaukee, the Fund's Transfer Agent.
Applications for purchase received by the Transfer Agent prior to
the close of trading on the New York Stock Exchange (usually 4:00
p.m. New York time) will be based on the net asset value per
share as of the end of that day. The net asset value of the Fund
is determined by the daily closing market value of the Fund's
assets minus any Fund liabilities. The net asset value per share
is computed by dividing the value of the net assets of the Fund
by the total number of shares outstanding. Portfolio securities
are valued at the last sales price on the national securities
exchange on which the securities are primarily traded, at prices
determined immediately following the close of the New York Stock
Exchange (usually 4:00 p.m. New York time). Securities not listed
on an exchange or securities in which there were no transactions
are valued at the most recent reported bid prices. Any securities
for which market quotations are not readily available are valued
at fair value as determined in good faith by the Board of
Directors. Debt securities having maturities of less than 60 days
are valued by the amortized cost method. Redemption of Fund
shares may be subject to a redemption fee. (See "REDEMPTION OF
SHARES"- Redemption Fee).
The Fund is responsible for all normal and reasonable
expenses of a mutual fund including management fees, custodian
and transfer agent fees, auditor expenses, legal fees, directors'
fees, printing and licensing fees, and other miscellaneous
expenses. The Advisor bears all its expenses of providing
services under its Agreement with the Fund, pays all salaries and
expenses of the officers of the Fund, provides office space,
telephone and other communication facilities and personnel to
perform clerical and shareholder relations functions for the
Fund. The Fund will not reimburse the Advisor for any such
expenses. The Advisor is required to reimburse the Fund to the
extent that total annual operating expenses, including the
advisory fee and distribution fee but excluding interest, taxes
and brokerage commissions, exceeds 2% of average net assets.
Reimbursement shall be made on a quarterly basis by reduction to
the advisory fee with total reimbursements reviewed annually.
Total expenses for the year ended December 31, 1996 were 1.51% of
the average net assets. The Advisor, together with its officers
and employees, will not act as a broker or dealer in the sale of
Fund shares.
The minimum initial investment is $1,000, and the minimum
for additional purchases is $100 (except for reinvestment of
dividends and capital gain distributions). The minimum investment
limitations apply to initial contributions to IRA accounts and
retirement fund accounts. In the interest of economy, convenience
and ease of redemption, actual stock certificates representing
Fund shares will not be issued. Applications will not be accepted
unless accompanied by payment.
Sales Charge. There is a sales charge of 2.5% of the
offering price (2.56% of the net amount invested) on the purchase
of Fund shares. The sales charge will be paid to the broker or
dealer at time of purchase unless the investor chooses to spread
it out over a five year period (see `Alternative Payment Plan''
below). Madison may pay a periodic maintenance or service fee to
qualified dealers as compensation for providing initial and
ongoing services for their clients with
respect to the Fund.
Alternative Payment Plan. Shareholders who prefer not to
pay the initial sales charge at time of purchase may elect to pay
the sales charge over a five year period. If this election is
made, the charge will be deducted from the shareholder's account
beginning the following January 10 after the purchase and on each
January 10 for the following four years. This annual charge will
be an amount equal to .50% (.005) of the immediately preceding
December 31 market value of the total original shares of each
purchase (not including the reinvestment of dividend or capital
gain distributions). There may or may not be an advantage in
selecting this form of payment.
Fund shares redeemed prior to the completion of this Payment
Plan will be subject to the unpaid portion of the initial sales
charge and may also be subject to a redemption fee as described
below.
Distribution Plan
Madison Investment Advisors, Inc. (`Madison'') also acts as
distributor of the Fund's shares pursuant to a contract (the
`Distribution Agreement'') with the Fund. Pursuant to the
Distribution Agreement and Rule 12b-1 Plan, Madison will pay,
among other things, commissions and maintenance fees to selected
brokers who sell shares of the Fund, the cost of printing
prospectuses and other materials relating to the Fund, and other
direct mail and advertising expenses in connection with the
distribution of Fund shares. To compensate Madison for its
expenses incurred under the Distribution Agreement, the Fund has
adopted a Plan of Distribution pursuant to Rule 12b-1 (the
`Plan'') under the Investment Company Act of 1940. Under the
Plan, the Fund pays Madison a distribution fee, which is accrued
daily and paid quarterly, of .25 of 1% on an annualized basis of
the Fund's average daily net assets. Madison received $11,940 in
distribution fees during 1996. The Plan does not obligate the
Fund to reimburse Madison for all expenses incurred in fulfilling
its obligations under the Distribution Agreement. In addition to
the distribution fee, Madison receives the redemption fee imposed
on some redemptions of shares (see "REDEMPTION OF SHARES'').
It is likely that the annual distribution fees paid to
Madison in the first few years will not reimburse it for all
distribution expenses it will incur in these years. After the
first few years, annual distribution fees paid to Madison may
exceed actual distribution expenses incurred during that calendar
year. Such excess distribution fees will then reimburse Madison
for any unreimbursed expenses from prior years. At no time will
the fees paid under the Distribution Plan result in a profit to
Madison. In the event this does occur, any profit will be
reimbursed to the Fund. The Plan does not permit reimbursement
for Madison's overhead expenses, officer or employee salaries or
expenses, or for any interest or financing charges on carryover
expense amounts. If either the Plan or the Distribution Agreement
is terminated or not renewed, any unreimbursed distribution
expenses are the sole responsibility of Madison and are not
obligations of the Fund.
The Plan will remain in effect only if approved at least
annually by the Fund's Board of Directors, including a majority
of those directors who are not interested persons of the Fund (as
defined in Investment Company Act of 1940) and who have no direct
or indirect financial interest in the operation of the Plan or in
any agreements related thereto. The Board will review quarterly a
written report of amounts expended and purpose of such
expenditures under the Plan.
REDEMPTION OF SHARES
Fund shareholders may redeem their shares through their
brokerage firms; or directly through the Transfer Agent. Shares
may be redeemed by mailing a signed written request for
redemption addressed to Madison Bond Fund, Inc., c/o Firstar
Trust Company, P.O. Box 701, Milwaukee, Wisconsin 53201-0701. The
written request must be signed exactly as the account is
registered. Incomplete redemption requests will not be processed
until complete information is available. Payment for shares
redeemed will be made within seven days after receipt of the
redemption request and will be paid in cash only. Redemptions
will be effected at the FundOs net asset value next determined
after receipt of a redemption order and may be subject to a
redemption fee, as described below.
Redemption Fee
Fund shares redeemed within three years of their purchase
will not be subject to a fee to the extent that the value of such
shares: (a) represents capital appreciation of Fund assets or (b)
represents reinvestment of dividend or capital gain
distributions. Redemptions of other Fund shares effected within
three years of their purchase may be subject to a redemption fee.
The amount of any applicable fee will be calculated by
multiplying the net asset value of such shares by the applicable
percentage shown in the table below.
Redemption Fee as a
Percentage of Net
Asset Value at
Redemption
Redemption During -----------
Calendar Year of Purchase......... 2.0%
Calendar Year After Purchase...... 2.0%
2nd Calendar Year After Purchase.. 1.0%
In determining the applicability and rate of any redemption
fee, it will be assumed that a redemption is made first of shares
representing capital appreciation, next of shares representing
the reinvestment of dividends and capital gain distributions, and
finally of other shares held by the shareholder for the longest
period of time. This will result in any such charge being imposed
at the lowest possible rate. For federal income tax purposes, the
amount of the redemption fee will reduce the gain or increase the
loss, as the case may be, on the amount realized on redemption.
The amount of any redemption fee will be paid to and retained by
Madison Investment Advisors, Inc.
WAIVERS AND REDUCED CHARGES
The redemption fee will be waived for certain redemptions in
connection with distributions from an IRA or other qualified
retirement plan. Purchases and redemptions of shares by officers,
directors or employees of the Fund or Madison Investment
Advisors, Inc., by investment management clients of Madison
Investment Advisors, Inc. and related parties thereto, as defined
by the Fund's Board of Directors from time to time, or shares on
which the sales charge has been waived upon purchase by the
broker or dealer, may not be subject to sales charges or
redemption fees. A shareholder who redeems shares and reinvests
the proceeds of the redemption in the Fund within fifteen days
will receive a credit against the fee, if any, paid upon the
redemption and the reinvestment will not be subject to an
additional sales charge. The percentage of the fee credited to
the shareholder will be the same as the percentage of the
redemption proceeds reinvested.
SHAREHOLDER INQUIRIES & REPORTS
Shareholders who wish information concerning the Fund's
investments and daily net asset value per share may contact
Madison Bond Fund, Inc., 6411 Mineral Point Road, Madison,
Wisconsin 53705 or phone (608) 273-2020 or (800) 767-0300. Share
applications, redemption request letters, requests for
information, or notifications concerning a shareholder's account
should be directed to Madison Bond Fund, Inc., c/o Firstar Trust
Company, P.O. Box 701, Milwaukee, Wisconsin 53201-0701, or phone
(414) 765-4124.
Shareholders receive quarterly reports on the Fund. These
reports contain information regarding the Fund's net assets along
with management's discussion of the current market outlook and
investment strategy. Shareholders are notified of any dividend
and capital gain distributions as well as yearly tax information
regarding their distributions. The annual shareholder meeting
will be held in April or May.
INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS, AND TAXES
The Fund intends to distribute to its shareholders
substantially all of its net income and realized capital gains.
The Fund intends to qualify as a regulated investment company
under the Internal Revenue Code and, therefore, does not pay
income tax. Income dividends will generally be paid quarterly in
April, July, October and December, while the long-term capital
gains distribution, if any, will be paid in December.
Shareholders are advised annually as to the tax status of all
distributions made during the year. Capital gain distributions
will be taxable to shareholders as long-term gains, regardless of
the length of time the shares of the Fund have been held. Federal
tax treatment of income dividends or capital gain distributions
will be the same whether made in cash or reinvested in Fund
shares. Due to frequent changes in the tax laws, investors are
advised to consult with their tax advisor regarding the income
tax treatment of income and capital gain distributions and
expense deductions from the Fund.
REINVESTMENT PLAN FOR DISTRIBUTIONS
Shareholders may elect, on the application form, to receive
either income dividends or capital gain distributions or both in
cash. If an election is not made, all income dividends and
capital gain distributions will be reinvested in additional
shares of the Fund. Shareholders may change their participation
in the reinvestment plan by notifying the Fund in writing.
Written notification of a change must be received prior to the
record date of a distribution to be effective for that
distribution.
DESCRIPTION OF FUND SHARES
The Fund was incorporated in Wisconsin on October 11, 1989.
The Fund has authorized common stock of 5,600,000 shares, $0.01
par value per share. All shares are of the same class with equal
rights and privileges. Each share has one vote and participates
equally in dividends and distributions declared by the Fund and,
on liquidation, in its net assets remaining after satisfaction of
outstanding liabilities.
INDIVIDUAL RETIREMENT ACCOUNT
An Individual Retirement Account (IRA) is a savings plan for
retirement. Money invested through an IRA compounds on a tax-free
basis until it is distributed to the investor, usually upon
retirement. Contributions to an IRA are invested in shares of the
Fund with all dividend and capital gain distributions
automatically reinvested.
Individuals who are not `active participants'' in employer-
maintained retirement plans may still deduct their IRA
contribution which is limited to the lesser of $2,000 or 100% of
their earned compensation. Spousal IRAs may be deducted up to
$4,000 ($2,250 for 1996) for taxpayers who have non-working spouses.
Individuals who are `active participants'' in an employer
sponsored pension or profit-sharing plan are limited in the
deductibility of their IRA contribution depending on their level
of income. Individual taxpayers with adjustable gross income of
$25,000 or less and married taxpayers filing jointly, with an
adjustable gross income of $40,000 may continue to deduct their
IRA contributions. However, the deductible amount of the IRA
contribution is reduced pro-rata and phased out completely when
individuals have adjusted gross income greater than $35,000 and
when married persons filing jointly claim adjusted gross income
greater than $50,000.
Nondeductible contributions of up to $2,000 or $4,000
($2,250 for 1996) for spousal IRAs may still be made.
The income on the IRA account
remains nontaxable to the taxpayer until it is distributed,
usually upon retirement.
The Fund sponsors IRA accounts and accepts rollover and
transfer IRA accounts. Purchase and redemption of shares are
treated as any other account. (See "PURCHASE OF SHARES" page 7,
and "REDEMPTION OF SHARES" page 8) The initial contribution
must be $1,000 or more. Subsequent payments may be as little as
$100.
The Firstar Trust Company will serve as Custodian. The
Custodian will redeem from each account, regardless of size, a
$12.50 annual maintenance fee. Please refer to the IRA Disclosure
Brochure for a detailed listing of other fees.
The Individual Retirement Account Disclosure Brochure is
available by contacting the Fund. This information should be read
carefully and consultation with an attorney or tax advisor may be
advisable.
No person has been authorized to give any information or to
make any representations not contained in the Prospectus and, if
given or made, such information or representations must not be
relied upon as having been authorized by the Fund or the
Distributor. This Prospectus does not constitute an offering by
the Fund or by the distributor in any jurisdiction in which such
offering may not lawfully be made.
----------------------------------------------------------------
MADISON BOND FUND, INC.
6411 Mineral Point Road
Madison, Wisconsin 53705
(608) 273-2020
(800) 767-0300
STATEMENT OF ADDITIONAL INFORMATION
February 28, 1997
Investors should read the Prospectus, dated February 28,
1997 in conjunction with the Statement of Additional
Information. Investors may obtain a Prospectus, without
charge, from the Fund's office as listed above.
TABLE OF CONTENTS
-----------------
Page
General Information and History ............... 1
Investment Objectives and Policies.............. 1
Investment Restrictions......................... 2
Principal Shareholders.......................... 3
Description of Fund Shares...................... 4
Management of the Fund.......................... 4
Investment Advisory and Other Services.......... 5
Brokerage..... ................................ 6
Distribution Plan .............................. 6
Purchase and Redemption of Fund Shares.......... 7
Determination of Net Asset Value................ 8
Tax Status...................................... 8
Financial Statements............................ 9
GENERAL INFORMATION AND HISTORY
Madison Bond Fund, Inc. (the "Fund") was incorporated
in Madison, Wisconsin as an investment company on October
11, 1989 and began its initial public offering of shares
on April 23, 1990. The Fund's sponsor, investment advisor
and distributor of its shares is Madison Investment
Advisors, Inc. of Madison, Wisconsin. The Fund is
designed to provide investors with a diversified,
professionally managed portfolio.
INVESTMENT OBJECTIVES AND POLICIES
This information supplements the discussion of the
Fund's investment objectives and policies as discussed on
page 3 of the Prospectus. As highlighted in the
Prospectus, the Fund's objectives are (1) production of
current income consistent with its quality standards and
(2) preservation of capital. These objectives are matters
of fundamental policy and cannot be changed without the
approval of a majority of shareholders. In addition, the
Fund will invest at least 65% of its assets in bonds with
the total portfolio having an average dollar weighted
maturity of 10 years or less.
The Fund's management believes that capital
preservation can best be achieved through flexibility of
investment strategies. Although the careful selection of
bonds is a primary factor affecting the investment return
of the Fund, the percentage of the Fund's assets which may
be invested at any particular time in bonds will depend
upon management's judgment regarding the risks present in
the stock and fixed income markets. When management
believes that market risks are high and the prices of
bonds may decline, the Fund may move substantial assets
out of bonds and into short-term fixed income instruments
such as U.S. Treasury Bills, U.S. Treasury Notes, U.S.
Agency Notes or highly rated commercial paper (rated in
the top two rating classes by Standard & Poor's or
Moody's) or money market funds.
To achieve current income, the Fund intends to invest
in corporate debt securities and obligations of the U.S.
Government and its Agencies. Eligible corporate debt
securities must be accorded one of the four highest
quality ratings by Standard & Poor's or Moody's or, if
unrated, judged by the Advisor to be of comparable
quality. Bonds rated A, AA, or AAA by Standard & Poor's or
Aaa, Aa, or A by Moody's indicate strong to high capacity
of the company to pay interest and repay principal.
However, the fourth highest rating, BBB, or Baa indicates
adequate capacity to pay interest and repay principal but
suggests that adverse economic conditions may weaken the
company's ability to meet these obligations. Securities
rated Baa are regarded by Moody's as having some
speculative characteristics.
The Fund may hold repurchase agreements which are fully
collateralized by a U.S. government security. Repurchase
agreements may be entered into with a member bank of the
Federal Reserve System or primary dealer in U.S. govern-
ment securities under which the bank or dealer agrees to
repurchase the security from the Fund at a mutually agreed
upon time and price, thereby determining the yield during
the term of the agreement. This results in a fixed rate
of return insulated from market fluctuations during such
periods. While the underlying obligation is a U.S.
government security, the obligation of the seller to
repurchase the security is not guaranteed by the U.S.
government and there is the risk that the seller may fail
to repurchase the security. Such agreements usually cover
short periods, such as under one week. In general, the
Fund will usually purchase overnight repurchase agreements
which mature the following day. Not more than 10% of net
assets will be invested in repurchase agreements and other
illiquid securities with maturities of greater than seven
days. The Fund may require the seller to provide
additional collateral if the market value of the security
falls below the repurchase price at any time during the
term of the repurchase agreement. In the event of default
by the seller under a repurchase agreement, the underlying
securities are not owned by the Fund but only constitute
collateral for the seller's obligation to pay the
repurchase price. Therefore, the Fund may suffer time
delays and incur costs or losses in connection with the
disposition of the collateral.
INVESTMENT RESTRICTIONS
The Fund has adopted the following restrictions which
are matters of fundamental policy and cannot be changed
without the approval of the holders of the majority of its
outstanding shares:
1. The Fund will not purchase securities on margin,
participate in a joint trading account, sell securities
short, or act as an underwriter of securities. The Fund
will be acting as an underwriter when it purchases or
sells its own securities.
2. The Fund will not purchase or sell real estate or
interest in real estate, commodities or commodity futures.
3. The Fund may make temporary bank borrowings (not in
excess of 5% of the lower of cost or market value of the
Fund's total assets) for emergency or extraordinary
purposes, and not for the purchase of investment securi-
ties.
4. The Fund may not pledge, mortgage or hypothecate
its assets, except for temporary or emergency purposes and
then to an extent not greater than 10% of its assets at
current value.
5. Securities of other investment companies will not
be purchased.
6. Investments will not be made for the purpose of
exercising control or management of any company. The Fund
will not purchase securities of any issuer if, as a result
of such purchase, the Fund would hold more than 10% of the
voting securities of such issuer or more than 10% of all
or any class of securities of such issuer.
7. Not more than 5% of the total net assets will be
invested in the securities of any one issuer (not
including United States government securities.)
8. Not more than 25% of the Fund's total net assets
will be concentrated in companies of any one industry.
9. The Fund will not acquire or retain any security
issued by a company, an officer or director of which is an
officer or director of the Fund or officer, director,
shareholder or interested person of its investment
advisor.
10. The Fund will not acquire or retain any security
issued by a company if one or more directors, shareholders
or affiliated persons of its investment advisor
beneficially own more than one-half of one percent (0.5%)
of such company's securities, and all of the foregoing
persons owning more than one-half of one percent (0.5%)
together own more than 5% of such security.
11. The Fund will not purchase securities of companies
which, together with predecessors, have a record of less
than three years continuous operation.
12. The Fund will not invest in puts, calls, straddles,
spreads or any combination thereof, other than as required
to participate in a covered call option writing program.
13. The Fund will not invest in oil, gas or other
mineral exploration or development programs, provided,
however, this shall not prohibit the Fund from purchasing
publicly traded securities or companies engaging in whole
or in part in such activities.
14. The Fund will not purchase securities from or sell
securities to any of its officers or directors, except
with respect to its own shares.
15. The Fund will not invest in restricted securities.
16. The Fund will not make loans to any person (except
that the Fund may, in fulfillment of its policies and
objectives, purchase a portion of an issue of publicly
distributed bonds, debentures or other debt securities
including commercial paper, bank certificates of deposit,
repurchase agreements or U.S. Government securities
including its agencies and instrumentalities).
17. The Fund will not purchase or issue any warrants.
18. All percentage limitations (except item 19) apply
to the market value on the date of investment by the Fund.
19. Not more than 10% of net assets at any time will
be invested in repurchase agreements with maturities of
greater than seven days or in other illiquid securities.
20. Not more than 10% of the total net assets may be
invested in foreign currency denominated debt securities;
such securities must be issued by U.S. corporations or
U.S. government agencies or instrumentalities, must be
readily saleable and publicly traded in the U.S.
securities markets and be in the top two rating classes of
Standard & Poor's or Moody's. Currencies used shall be
limited to the Canadian dollar, the Australian dollar, the
British pound, the German mark, the Japanese yen and ECU
currency units. The Fund will not effect transactions in
foreign securities markets.
Securities are not purchased with a view to rapid
turnover, although it is expected short-term capital gains
may be realized from time to time from the sale of assets
held less than one year. Securities are purchased which
are believed to have potential for capital appreciation.
Securities will be sold if the Fund's management believes
that such potential has been reached, is no longer
feasible, or if the risk of a decline in the market price
is too great.
The Fund's portfolio turnover rates were 94.24% and 57.99%,
respectively, for the fiscal years ended December 31, 1996
and December 31, 1995. The portfolio turnover rate is
calculated by dividing the lesser of purchases or sales of
portfolio securities for the fiscal year by the monthly
average of the value of the portfolio securities owned by
the Fund during the fiscal year. For the purpose of
determining such portfolio turnover, securities whose
maturity at the time of acquisition is one year or less
are excluded.
PRINCIPAL SHAREHOLDERS
As of January 31, 1997, all officers and directors of
the Fund, as a group beneficially owned less than 1.0% of
the then outstanding shares.
DESCRIPTION OF FUND SHARES
The Fund was incorporated in Wisconsin on October 11,
1989. The Fund has authorized common stock of 5,600,000
shares, $0.01 par value per share. All shares are of the
same class with equal rights and privileges. Each share
has one vote and participates equally in dividends and
distributions declared by the Fund, and on liquidation, in
its net assets remaining after satisfaction of outstanding
liabilities.
MANAGEMENT OF THE FUND
Position(s) held Principal occupations
Name and Address with the fund during the past 5 years
---------------- ------------ -----------------------
Chris Berberet Treasurer Vice President of Madison
6411 Mineral Point Investment Advisors, Inc.
Madison, WI. 53705 Prior to joining Advisor,
he was associated with ELCA
Board of Pensions in
Minneapolis, MN.
Frank E. Burgess President, President and Director of
6411 Mineral Point Director Madison Investment Advisors
Madison, WI 53705 Inc., the Advisor to the
Fund. Prior to forming
the Advisor in 1973, he was
Assistant Vice President &
Trust Officer of M&I Bank of
Madison, Wisconsin. He is a
member of the State
Bar of Wisconsin and Dane
County Bar Association.
Katherine L. Frank Vice President Vice President of Madison
6411 Mineral Point Secretary Investment Advisors, Inc.
Madison, WI 53705 since 1986.
Jay R. Sekelsky Vice President Vice President of Madison
6411 Mineral Point Investment Advisors, Inc.
Madison, WI 53705 since 1990.
W. Richard Mason Asst. Secretary General Counsel of GIT
6411 Mineral Point Investment Funds since
Madison, WI 53705 1992.
James R. Imhoff Jr. Director President of First Weber
429 Gammon Place Group, Inc. of Madison, WI.
Madison, WI 53719
Edmund B. Johnson Director Vice President and Director
3302 Valley Creek of Medix of Wisconsin, Inc.
Middleton, WI 53562
Lorence D. Wheeler Director President of Credit Union
222 W. Washington Benefits Services, Inc.
Madison, WI 53703
During the last fiscal year of the Trust, the Trustees were compensated
as follows:
Total
Pension or Compensation
Retirement from
Aggregate Benefits Estimated Portfolios
Compensa- Accrued as Annual and Fund
tion part of Benefits Complex
from Portfolios Upon Paid to
Portfolios Expense Retirement Trustees**
Frank E. Burgess* 0 0 0 0
Edmund B. Johnson 1,000 0 0 3,000
James R. Imhoff(b) 1,000 0 0 10,500
Lorence D. Wheeler(b) 1,000 0 0 10,500
* Director of the Fund: Is an "interested person" in
the Fund and in the Advisor, as defined by the Investment
Company Act of 1940. All "interested" directors and officers
of the Fund are compensated by the Advisor as specified by the
investment advisory agreement.
** Complex is comprised of 4 trusts and three corporations with
a total of 16 funds and/or series.
INVESTMENT ADVISORY AND OTHER SERVICES
Under an investment advisory agreement with the Fund,
Madison Investment Advisors, Inc., 6411 Mineral Point
Road., Madison, Wisconsin, furnishes continuous investment
service and management to the Fund, for which it receives
an annual fee, paid quarterly, based on the average net
asset value of the Fund, as determined by valuations made
at the close of each business day. The annual fee is .50
of 1% of the total net assets of the Fund. Personnel of
the Advisor are primarily responsible for investment
decisions affecting the Fund's portfolio. During the
years ended December 31, 1996 and December 31, 1995 and
December 31, 1994 the Fund paid the Advisor an aggregate
of $23,878, $30,159 and $41,658, respectively, in advisory
fees.
Under the investment advisory agreement, the Advisor,
at its own expense and without reimbursement from the
Fund, furnishes office space, office facilities,
equipment, executive officers and executive expenses of
the Fund. The Fund will pay all operating expenses
including but not limited to the costs of preparing and
printing its registration statements required under the
Securities Act of 1933 and the Investment Company Act of
1940 and any amendments thereto, the expense of
registering its shares with the Securities and Exchange
Commission and various states, and the cost of
prospectuses for existing shareholders, reports to
shareholders, taxes, and legal expenses. Also included
are fees to Directors who are not interested persons of
the Advisor or officers or employees of the Fund, salaries
of administrative and clerical personnel, auditing and
accounting services, fees and expenses of any custodian,
printing and mailing expenses, postage, and charges and
expenses of dividend disbursing agents, registrars and
stock transfer agents, including the cost of keeping all
necessary shareholder records and accounts and handling.
The Advisor has undertaken to reimburse the Fund to the
extent that the aggregate annual operating expenses,
including the investment advisory fee and distribution
fees but excluding interest, taxes, and brokerage commis-
sions, exceeds 2% of average daily net assets. The
Advisor shall, on a quarterly basis, reimburse the Fund
for all expenses in excess of these amounts.
The agreement with the Advisor is not assignable and
may be terminated by either party, without penalty, on
sixty days' notice. Otherwise, the agreement continues in
effect as long as it is approved annually by (a) the Board
of Directors or by a vote of a majority of the outstanding
shares of the Fund, and (b) in either case, by the
affirmative vote of a majority of directors, who are not
parties to the agreement or "interested persons" of the
Advisor, as defined in the Investment Company Act of 1940,
as amended, cast in person at a meeting called for the
purpose of voting for such approval.
The Advisor may act as an investment advisor to other
persons, firms or corporations, including investment
companies. Madison Investment Advisors, Inc., is a
registered investment advisor and has numerous advisory
clients of its own, including Bascom Hill Investors, Inc.
and Bascom Hill BALANCED Fund, Inc., both registered
investment companies. The Advisor was founded in 1973 and
has never been controlled by or affiliated with any other
business entity or person.
Frank E. Burgess, President, and Director of the Fund
is also President and Director of the Advisor. Katherine
L. Frank is Vice President and Secretary of the Fund and
also Vice President of the Advisor. Jay R. Sekelsky is
Vice President of the Fund and Vice President of the
Advisor. Chris Berberet is Treasurer of the Fund and Vice
President of the Advisor. Elizabeth Hendricks is
Assistant Secretary of the Fund and Controller of the
Advisor. Mr. Burgess owns a majority of the controlling
interest in the Advisor. Investment decisions are made by
the Investment Policy Committee.
The Advisor relies upon information supplied by the
analytical staffs of major brokerage firms as well as
other publications and research services. A discussion of
how the Advisor allocates investment opportunities among
clients, how the Advisor decides which client should
purchase certain securities and how portfolio transactions
are allocated among brokers is found under "BROKERAGE"
below.
Williams, Young and Associates, P.O. Box 8700, Madison,
Wisconsin, 53708 is the Fund's independent public
accountant.
The custodian for the Fund's assets is Firstar Trust
Company, P.O. Box 701, Milwaukee, Wisconsin, 53201-0701.
The Firstar Trust Company also serves as the transfer
agent for the Fund.
BROKERAGE
Portfolio brokerage transactions of the Fund are placed
with those securities brokers which the Advisor believes
will provide the best value in brokerage and research
services for the Fund, either in a particular transaction
or over a period of time. Although some transactions
involve only brokerage services, many involve research
services as well.
In valuing brokerage services, the Advisor makes a
judgment of the usefulness of research and other information
and services provided by a broker to the Advisor 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 and services consist of a wide variety of formation
concerning companies, industries, investment strategy and
economic, financial and political conditions and prospects,
some of which may be provided by means of payment for the
use of electronic terminals providing such information,
useful to the Advisor in advising the Fund and other clients
of the Advisor.
In compensating brokers for their services, the Advisor
takes into account the value of the information received for
use in advising the Fund. It is understood by the Fund that
other clients of the advisor might also benefit from the
information and services obtained. Where the Fund and one
or more clients of the Advisor are simultaneously engaged in
the purchase or sale of the same security, the transactions
will, to the extent possible, be averaged as to price and
allocated equitably. In most cases, it is believed that
coordination and the ability to participate in volume
transactions will be to the benefit of the Fund.
The Fund may not allocate brokerage solely on the basis
of selling Fund shares. When feasible and practical,
over-the-counter purchases and sales are transacted
directly with principal market makers. Principal market
makers are not paid a direct commission. They receive in
payment the difference between the bid and asked prices
for a particular security. Principal transactions totalled
$5,660,514, $5,758,567 and $13,017,363 during the years
ended December 31, 1996, December 31, 1995 and December
31, 1994, respectively.
DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan under which,
among other things, it intends to pay quarterly to Madison
Investment Advisors, Inc. ("Madison"), as distributor of
the Funds shares, a distribution fee equal, on an annual
basis, to .25 of 1% of its average daily net assets. As
required by Rule 12b-1 under the Investment Company Act of
1940, the Plan was approved by the initial Fund
shareholders, was approved at the Fund's first annual
meeting following the initial public offering of its
shares, and was approved (together with the contract
pursuant to which the fee is paid) by the Board of
Directors including a majority of the Directors who are
not interested persons of the Fund (as defined by the
Investment Company Act of 1940) and who have no direct or
indirect financial interest in the operation of the Plan
or the Distribution Agreement. In addition to the
distribution fee, Madison receives the redemption fee
imposed on some redemptions of shares. During the years
ended December 31, 1996, December 31, 1995 and December
31, 1994, the Fund paid Madison $11,940, $15,079 and $20,829
respectively, in distribution fees. The
redemption fees collected were $8,364, $39,693 and $60,784,
respectively.
Pursuant to the Distribution Agreement and Rule 12b-1
Plan, Madison will pay, among other things, commissions
and maintenance fees to selected authorized securities
dealer who sell shares of the Fund, the cost of printing
prospectuses and other materials relating to the Fund,
postage and other direct mail and advertising expenses in
connection with the distribution of Fund shares. Under
the Plan, Madison will provide the Directors for their
review, promptly after the end of each quarter, a written
report setting forth all amounts expended under the Plan
and the purpose for each expenditure.
If either the Plan or the Distribution Agreement is
terminated or not renewed, any distribution expenses
incurred by Madison before or after that time will not be
reimbursed. Madison may incur substantial expenses in the
early years in expectation of being reimbursed by
distribution fees. However, if the Plan is terminated,
Madison will not continue to be reimbursed for
distribution fees, whether incurred before or after such
termination. Expenses incurred in excess of distribution
fee payments are the sole responsibility of Madison and
are not obligations of the Fund. The Plan does not permit
reimbursement for Madison's overhead expenses, officer or
employee salaries or expenses, or for any interest or
financing charges on carryover expense amounts.
PURCHASE AND REDEMPTION OF FUND SHARES
As briefly discussed in the Prospectus, applications
for the purchase of shares should be made to Madison Bond
Fund, Inc. c/o Firstar Trust Company, P.O. Box 701,
Milwaukee, Wisconsin, 53201-0701. The price per share
will be the net asset value computed after the time the
application is received. (See "DETERMINATION OF NET ASSET
VALUE", page 13). The net asset value for a particular
day is applicable to all applications for the purchase of
shares as well as all requests for the redemption of
shares received at or before that day's close of trading
on the New York Stock Exchange (the "Exchange"). The
Exchange usually closes at 4:00 p.m. New York time.
Applications for purchase of shares and requests for
redemptions of shares received after the close of trading
on the Exchange will be based on the net asset value as
determined as of the close of trading on the next day the
Exchange is open.
All applications to purchase capital stock are subject
to acceptance or rejection by authorized officers of the
Fund and are not binding until accepted. Applications
will not be accepted unless they are accompanied by
payment. However, minor differences between amounts
submitted and actual costs of shares will be refunded or
billed. It is the policy of the Fund not to accept
applications under circumstances or in amounts considered
disadvantageous to existing shareholders.
The Board of Directors of the Fund is authorized from
time to time to fix upper and lower limits on the number
of shares which may be purchased. Pursuant to this
authority, the Board of Directors has established $1,000
as the minimum initial purchase and $100 as the minimum
for any subsequent purchase, except through dividend or
capital gain reinvestment.
Purchase of Fund shares will be made in full and
fractional shares, computed to three decimal places,
unless the investor specifies full shares only.
Certificates representing Fund shares purchased will
not be issued. The Fund's transfer agent, Firstar Trust
Company, Milwaukee, Wisconsin, will credit the
shareholder's account with the number of shares purchased.
The Fund offers this service to relieve shareholders of
responsibility for safekeeping certificates and to
eliminate the need for delivery of certificates in the
event of redemption. Written confirmations are issued for
all purchases of Fund shares.
A shareholder may require the Fund at any time to
redeem his or her shares in whole or in part. Redemption
is accomplished by delivering to the Fund, c/o Firstar
Trust Company, P.O. Box 701, Milwaukee, Wisconsin, 53201-
0701, a signed written request for redemption. The
written redemption request must be signed exactly as the
shares are registered. If the account is owned jointly,
both owners must sign. Redemption cannot be accomplished
by telephoning or telegraphing the Fund or Firstar Trust
Company. The redemption price is the net asset value next
computed after receipt of written request in the proper
form set out above.
If there is doubt as to what is necessary in order to
redeem shares, please write or call the Fund's transfer
agent, Firstar Trust Company (telephone no. (414) 765-
4124), prior to submitting the redemption request. No
redemption request will become effective until all
documents have been received in proper form by the
transfer agent.
All redemptions will be processed immediately upon
receipt and the Fund will return redemption requests that
contain restrictions as to the time or date redemptions
are to be affected. The redemption price will depend on
the market value of the investments in the Fund's
portfolio at the time of redemption, (see "DETERMINATION
OF NET ASSET VALUE") and may be more or less than the cost
of shares redeemed. Payments for shares redeemed will be
made within seven days after redemption and redemption
will be made in cash only.
The right of redemption may be suspended for any period
during which the New York Stock Exchange is closed other
than customary and weekend and holiday closings, and may
be suspended for any period during which trading on the
Exchange is restricted as determined that an emergency
exists and, therefore, it is not reasonably practical for
the Fund to dispose of its securities nor to fairly
determine the value of its net assets.
Shares of the Fund may be transferred in much the same
manner as they are redeemed. Written instructions must be
delivered to the Fund, c/o The Firstar Trust Company, P.O.
Box 701, Milwaukee, Wisconsin, 53201-0701, endorsed or
accompanied by the instrument of transfer and guaranteed
in the same manner as described under "PURCHASE AND
REDEMPTION OF FUND SHARES". The instructions must be
signed exactly as provided in "PURCHASE AND REDEMPTION OF
FUND SHARES" for redemption of shares. The Fund is not
bound to record any transfer on the stock transfer books
maintained by the Trust Company until all required
documents have been received by it.
DETERMINATION OF NET ASSET VALUE
The price investors pay for shares, the net asset
value, is determined by dividing the total net assets of
the Fund by the total number of full and fractional shares
outstanding at that time. The net assets of the Fund are
determined by deducting the liabilities of the Fund from
total asset value. The net asset value is determined as of
the close of trading on the New York Stock Exchange
exclusive of federal holidays. Federal holidays include
New Year's Day, President's Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. Shares purchased are subject to a 2.50%
sales charge (see prospectus for details).
Securities traded on a stock exchange will ordinarily
be 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. Securities not listed on an
exchange or securities in which there were no transactions
are valued at the most recent reported bid prices. Any
securities for which market quotations are not readily
available are valued at fair value as is determined in
good faith by the Board of Directors. Short-term
securities with over 60 days to maturity are valued at
market value; those under 60 days to maturity are valued
at amortized cost. All assets other than securities will
be valued at their then current fair value as determined
in good faith by the Board of Directors.
TAX STATUS
During the current taxable year and in future years,
the Fund intends to qualify under the provisions of
Sections 851-855 of the Internal Revenue Code (Subchapter
M) applicable to investment companies.
Upon qualifying under the federal tax laws related to
investment companies, the Fund will not be subject to
federal taxes on income or capital gains distributed to
the shareholders. Distributions designated as "capital
gains distributions" (meaning the excess of net long-term
capital gains over net short-term capital losses) will be
taxable to shareholders as long-term gains, regardless of
the length of time shares of the Fund have been held.
Currently, the maximum long-term capital gains tax rate is
28%. Distributions of the excess of net short-term gains
over the net long-term capital losses and income dividend
distributions are made in cash or reinvested in additional
shares of the Fund.
If the Fund does not qualify for preferential tax
treatment in any fiscal year, it will be taxed as an
ordinary corporation. The net asset value per share may
be adversely affected as a result.
Since at the time of purchase of Fund shares the Fund
may have undistributed income or capital gains,
distributions received shortly after such purchase by a
shareholder may be taxable to the shareholder, although it
is, in whole or in part, a return of capital and may have
the effect of reducing the net asset value per share.
Distributions from net investment income are taxable as
ordinary income to shareholders. Distributions may be
subject to state income tax in states having such a tax.
It is recommended that investors consult with their
personal tax advisor in evaluating their individual tax
situation.
The Fund is legally required to deduct and withhold
income tax from a distribution payment at a 20 percent
rate if:
(1) The shareholder fails to furnish his/her taxpayer
identification number to the Fund;
(2) The IRS notifies the Fund that the taxpayer
identification number furnished by the shareholder is
incorrect;
(3) The IRS notifies the Fund that backup withholding
should be commenced because the shareholder has failed to
properly report interest or dividend income; or
(4) When required to do so, the shareholder fails to
certify, under penalties of perjury, that he/she is not
subject to backup withholdings.
In addition, under the new IRA rollover rules, any
distribution from an employer - sponsored plan is subject
to 20% mandatory withholding, unless it is directly
"rolled over" into an IRA. (See the IRA Disclosure
Brochure for details)
The Tax Reform Act of 1986 made major changes in the
entire tax system, impacting all investors including all
individuals or taxable entities that invest in the Fund.
Individual income tax rates declined to a top rate of 28%.
Currently, capital gains are taxable at ordinary income
rates. Therefore, each investor should consult with his or
her tax advisor regarding the income tax treatment of
income and capital gain distributions and expense
deductions from the Fund in future years.
FINANCIAL STATEMENTS
The following financial information contained in the
Annual Report for Madison Bond Fund, Inc. for the year
ended December 31, 1996 is incorporated herein by
reference:
(a) Statement of Net Assets
(b) Statement of Changes in Net Assets
(c) Statement of Operations
(d) Notes to Financial Statements
(e) Report of Independent Public Accountants
A copy of the Annual Report will accompany the
Statement of Additional Information whenever the Statement
of Additional Information is requested by a shareholder or
prospective investor.
PART C: OTHER INFORMATION
Form N-1A
Item No.
--------
24. Financial Statements and Exhibits
---------------------------------
(a) Per share income and capital changes for the
period ended December 31, 1990 and the years
ended December 31, 1991, 1992,1993, 1994, 1995 and
1996.
Financial Statements Included in Shareholder
Annual Report for the year ended December 31,
1996.
(1) Statement of Net Assets
(2) Statement of Changes in Net Assets
(3) Statement of Operations
(4) Notes to Financial Statements
(b) Exhibits:
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- --------------------------
1. Articles of Incorporation *
2. Bylaws*
3. N/A
4. N/A
5. Investment Advisory Agreement*
6(a). Distribution Agreement *
6(b). Form of Authorized Dealer Agreement *
7. N/A
8(a). Custodian Agreement *
8(b). Transfer/Dividend Disbursing Agent
Agreement *
9. N/A
10. Opinion and Consent of Counsel *
11. Consent of Independent Public Accountant
12. N/A
13. Subscription of Purchase Agreement *
14. IRA Plan *
15. Rule 12b-1 Plan *
* Previously filed and incorporated herein by
reference.
25. Persons Controlled by or under Common Control with Registrant
-------------------------------------------------------------
None
26. Number of Holders of Securities as of December 31, 1996
-------------------------------------------------------
Title of Class Number of Record Holders
-------------- ------------------------
Common Stock 152
27. Indemnification
---------------
Article VIII of the Registrant's Bylaws
provides for the indemnification of its directors
and officers and, therefore, is incorporated
herein by reference.
28. Business and Other Connections of Investment Advisor
----------------------------------------------------
Madison Investment Advisors, Inc., is the
only investment advisor to the Registrant.
Set forth below is a list of the officers and
directors of Madison Investment Advisors, Inc. as
of January 31, 1997, together with information as
to any other business, profession, vocation or
employment of a substantial nature of those
officers and directors during the past two years:
Position with Madison
Name Investment Advisors, Inc. Other
---- ------------------------- -----
Frank E. Burgess President, Treasurer and (1)
Director
Christopher C. Berberet Vice President (1)
Richard L. Ford Vice President
Katherine L. Frank Vice President (1)
L. Louis LeGoullon Vice President
John F. McClure Vice President, Secretary
Director
Michael J. Schlageter Vice President, Director
Jay R. Sekelsky Vice President (1)
Michael R. Yaktus Vice President
Note (1): Certain of the indicated persons are officers and
directors of Bascom Hill Investors, Bascom Hill BALANCED Fund
and Madison Opportunity Fund, all open-ended, diversified investment
companies for which Madison Investment Advisors, Inc. also acts
as investment advisor, and of Government Investors Trust, GIT
Income Trust, GIT Equity Trust and GIT Tax-Free Trust, all open-
ended, diversified investment companies for which Bankers Finance
Advisors, LLC, a subsidiary of Madison Investment Advisors, Inc.
acts as investment advisor with Madison Investment Advisors, Inc.
29. Principal Underwriters
----------------------
Madison Investment Advisors, Inc. acts as Distributor of the shares of common
stock of the Registrant under a Distribution Agreement to this Registration
Statement. Madison Investment Advisors, Inc. also acts as investment advisor
to Bascom Hill Investors, Inc., Bascom Hill BALANCED Fund Inc. and Madison
Opportunity Fund, all registered investment companies and, through its
subsidiary, Bankers Finance Advisors, LLC, to GIT Equity Trust, GIT Income
Trust, GIT Tax-Free Trust and Government Investors Trust. The officers and
directors of Madison Investment Advisors, Inc., their positions or offices,
are outlined in Item 28 of this Registration Statement immediately above.
30. Location of Accounts and Records
--------------------------------
All accounts, books, and other documents required to
be maintained by Section 31(a) of the Investment Company
Act of 1940 and the rules thereunder will be maintained
at the offices of the Registrant at 6411 Mineral Point
Road, Madison, WI 53705-4341 and at the offices of the
Registrant's transfer agent and custodian, Firstar Trust
Company located at 615 East Michigan Avenue, Milwaukee,
WI 53201.
31. Management Services
-------------------
Registrant is not a party to any management-related
service contract other than set forth in Part A or Part
B of this Form.
32. Undertakings
------------
Registrant agrees to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's
latest annual report to shareholders, upon request, and without
charge.
<PAGE>
EXHIBIT 11
Williams, Young & Associates, LLC
2901 West Beltline Highway
P.O. Box 8700
Madison, WI 53708
608-274-1980
Fax 608-274-8085
CONSENT OF INDEPENDENT ACCOUNTANTS
As independent public accountants, we hereby consent to the
use of our report dated January 24, 1997, and to all
references to our Firm included in or made a part of the
Registration Statement on Form N-1A.
WILLIAMS, YOUNG & ASSOCIATES, LLC
(signature)
Madison, Wisconsin
February 3, 1997
Member of the Institute of Profit Advisors
<PAGE>
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 requirement for
effectiveness of the 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, thereto duly authorized, in the City of
Madison and State of Wisconsin on the 28th day of February,
1997.
Madison Bond Fund, Inc.
(signature)
--------------------
Frank E. Burgess, President
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the
following persons in the capacities indicated.
Name Title Date
Frank E. Burgess Director 2/28/97
James R. Imhoff, Jr. Director 2/28/97
Edmund B. Johnson Director 2/28/97
Lorence D. Wheeler Director 2/28/97
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial data extracted from the registrant's
current forms NSAR, N1A and financial statements and is qualified in its
entirety by reference to such source documents.
</LEGEND>
<CIK> 0000857016
<NAME> MADISON BOND FUND, INC.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 3,913,000
<INVESTMENTS-AT-VALUE> 3,921,000
<RECEIVABLES> 181,000
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,102,000
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 14,000
<TOTAL-LIABILITIES> 14,000
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,375,000
<SHARES-COMMON-STOCK> 198,179
<SHARES-COMMON-PRIOR> 273,563
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
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<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 4,088,000
<DIVIDEND-INCOME> 0
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<EXPENSES-NET> 72,000
<NET-INVESTMENT-INCOME> 232,000
<REALIZED-GAINS-CURRENT> 23,000
<APPREC-INCREASE-CURRENT> (155,000)
<NET-CHANGE-FROM-OPS> (132,000)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 231,000
<DISTRIBUTIONS-OF-GAINS> 173,000
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,000
<NUMBER-OF-SHARES-REDEEMED> 86,000
<SHARES-REINVESTED> 8,000
<NET-CHANGE-IN-ASSETS> 1,704,000
<ACCUMULATED-NII-PRIOR> 0
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<OVERDISTRIB-NII-PRIOR> 0
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<GROSS-ADVISORY-FEES> 24,000
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<GROSS-EXPENSE> 72,000
<AVERAGE-NET-ASSETS> 4,695,000
<PER-SHARE-NAV-BEGIN> 21.17
<PER-SHARE-NII> 1.07
<PER-SHARE-GAIN-APPREC> (0.55)
<PER-SHARE-DIVIDEND> 1.06
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<PER-SHARE-NAV-END> 20.63
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
