UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One): |
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ý | ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED, FOR THE YEAR ENDED OCTOBER 7, 1996]. | |
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For the fiscal year ended December 31, 2002 | ||
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OR | ||
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o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] | |
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| For the transition period from to | |
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Commission file number 0-22010
A. | THOMAS GROUP, INC. |
| 401(k) Savings Plan |
| (Full title of the Plan) |
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B. | THOMAS GROUP, INC. |
5221 North O’Connor Boulevard | |
| Suite 500 |
Irving, Texas 75039 |
(Name and address of issuer of the securities held pursuant
to the Plan and the address of its principal executive office)
Index to Financial Statements, Schedules and Exhibits
Independent Auditor’s Report | ||
Financial Statements: | ||
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Supplemental Schedule: | ||
Schedule H, line 4i – Schedule of Assets (Held at End of Year) | ||
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Exhibits | ||
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23 | Consent of Independent Auditors | |
99.1 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
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99.2 | Certification Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the Plan Committee has caused this Annual Report to be signed by the undersigned thereunto duly authorized.
Dated: June 30, 2003
THOMAS GROUP, INC. 401(k) SAVINGS PLAN
(Name of Plan)
| /s/ John R. Hamann |
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| John R. Hamann |
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| President and Chief Executive Officer |
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2
INDEPENDENT AUDITOR’S REPORT
To the Compensation and Stock Option Committee
Thomas Group, Inc. 401(k) Savings Plan
We have audited the accompanying statements of net assets available for benefits of the Thomas Group, Inc. 401(k) Savings Plan as of December 31, 2002 and 2001, the related statement of changes in net assets available for benefits for the year ended December 31, 2002 and supplemental schedule. These financial statements and schedule are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and schedule are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and schedule. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and schedule referred to above present fairly in all material respects, the net assets available for benefits of the Thomas Group, Inc. 401(k) Savings Plan as of December 31, 2002 and 2001 and the changes in its net assets available for benefits for the year ended December 31, 2002 in conformity with the accounting principles generally accepted in the United States of America.
Hein + Associates llp
Dallas, Texas
May 22, 2003
3
THOMAS GROUP, INC.
401(k) SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
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| DECEMBER 31, |
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| 2002 |
| 2001 |
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ASSETS: |
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Investments, at fair value: |
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Mutual funds |
| $ | 8,609,200 |
| $ | 13,376,213 |
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Money Market funds |
| 1,374,320 |
| 1,448,243 |
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Pooled separate accounts |
| — |
| 6,295 |
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Self-directed accounts |
| 213,326 |
| 348,397 |
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Thomas Group, Inc. common stock |
| 34,308 |
| 119,772 |
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Participant loans |
| 162,984 |
| 148,932 |
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Total investments |
| 10,394,138 |
| 15,447,852 |
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Cash |
| — |
| 5,467 |
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Total assets |
| 10,394,138 |
| 15,453,319 |
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LIABILITIES |
| — |
| — |
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Net assets available for benefits |
| $ | 10,394,138 |
| $ | 15,453,319 |
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See accompanying notes to these financial statements.
4
THOMAS GROUP, INC.
401(k) SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED DECEMBER 31, 2002
ADDITIONS TO NET ASSETS ATTRIBUTABLE TO: |
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Investment income: |
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Dividends and interest |
| 192,497 |
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Contributions: |
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Participant contributions and rollovers |
| 986,607 |
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Total additions |
| 1,179,104 |
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DEDUCTIONS FROM NET ASSETS ATTRIBUTABLE TO: |
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Investment loss: |
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Net depreciation in fair value of investments |
| 2,154,356 |
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Benefits paid directly to participants |
| 4,005,864 |
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Loans paid off as part of a distribution |
| 62,561 |
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Administrative expenses |
| 19,933 |
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Other |
| (4,429 | ) | |
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Total deductions |
| 6,238,285 |
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NET DECREASE IN NET ASSETS AVAILABLE FOR BENEFITS |
| (5,059,181 | ) | |
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NET ASSETS AVAILABLE FOR BENEFITS: |
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Beginning of year |
| 15,453,319 |
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End of year |
| $ | 10,394,138 |
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See accompanying notes to these financial statements.
5
THOMAS GROUP, INC.
401(k) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
1. Description of Plan
The following description of the Thomas Group, Inc. 401(k) Savings Plan (the “Plan”) provides only general information. For a more complete description of the Plan’s provisions, participants should refer to the Summary Plan Description.
General
The Plan is a salary deferral plan which was established January 1, 1990, and restated July 1, 1995. The Plan covers all full-time employees of Thomas Group, Inc. (the “Company” or the “Sponsor”) who have attained 21 years of age, excluding hourly and leased employees. The Plan is subject to the applicable provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”).
Plan Administration
The Plan is administered by the Company. Milliman USA is the Plan’s recordkeeper. Charles Schwab Trust Company (“CSTC”) holds substantially all the Plan’s assets and is the Trustee of those assets. Kemper Investors Life Insurance Company (“Kemper”) holds and manages certain investments representing variable annuities. Certain officers of the Company have been appointed trustee of the Kemper investments.
Contributions
Each year, participants may contribute to the Plan, through periodic payroll deductions, up to 35% of their pre-tax annual compensation, as defined by the Plan, up to the annual deferral limit allowed for U.S. federal income taxes, which was $11,000 for 2002. Participants may also contribute amounts representing distributions from other qualified defined benefit or contribution plans. Each year the Company may elect to provide a matching contribution to the Plan based on the amount of participant pre-tax contributions. The target matching contribution will be in accordance with the following schedule:
Years of Benefit Service |
| Matching Contribution as a Percentage |
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0-3 |
| 10 | % |
4-5 |
| 25 | % |
6-9 |
| 50 | % |
10 or more |
| 75 | % |
The Company may also elect to provide a profit sharing contribution to the Plan. In 2002, the Company elected not to provide a matching or profit-sharing contribution to the Plan.
Participant Accounts
Each participant’s account is credited or charged with: a) all the contributions, forfeitures of the non-vested portion of terminated participants’ accounts, withdrawals and other distributions made to or from such accounts; and, b) its pro rata portion of the appreciation or depreciation in the fair market value of each investment. Such appreciation or depreciation will reflect investment income, realized and unrealized gains and losses, other investment transactions, and expenses paid from each specific investment.
6
Vesting
Participants are immediately vested in their contributions (including rollovers) plus actual earnings thereon. Participants vest in employer contributions based on years of continuous service with the Company, at a rate of 20 percent a year. A participant is 100% vested after five years of credited service. A participant is also 100% vested upon reaching retirement age or if employment is terminated by reason of total and permanent disability or death.
Investment Options
Upon enrollment into the Plan, a participant may direct his or her employee contributions in any increment to the Company’s common stock or any of the mutual fund and money market investment options offered by CSTC. Participants may also direct their contributions into a self-directed brokerage account available through CSTC. The net assets of various Kemper fund options are combined under the heading Pooled Separate Accounts. Prior to 1996, participants could invest in Kemper Variable Annuity Funds. Participants may change the allocation of their existing funds and future contributions at any time. Employer contributions are invested in the same percentages as the employee contributions.
Payment of Benefits
Participants whose employment terminates for any reason (except retirement, death or disability) are entitled to receive the vested portion of their account in the form of a lump sum payment.
Participant Loans
A participant may apply to the Plan administrator for a loan under the Plan. Participants may borrow a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50 percent of their vested account balance. The loans will bear interest equal to the prime rate published in the Wall Street Journal. Repayment are made through mandatory after-tax payroll deductions, not to exceed five years, unless the loan was to purchase a home, in which case, repayment is 15 years. A participant may have only one loan outstanding at any time. Participant loans are collateralized by the respective participant accounts.
Hardship Withdrawals
Upon demonstrated financial need, as defined in the Plan, hardship withdrawals are allowed only from the participant’s cumulative pre-tax contributions made to the Plan.
Forfeitures
Participants who terminate employment prior to being fully vested in Company matching contributions forfeit non-vested amounts. At December 31, 2002, forfeited non-vested accounts were approximately $11,800. Forfeitures of a participant’s employer matching contributions may be used to reduce future Company contributions to the Plan. In 2002, the Company made no matching contributions. Forfeited non-vested accounts were used to pay administrative expenses. Forfeitures of Company profit-sharing contributions are reallocated among all remaining participants.
Administrative Expenses
The Company has paid, at its discretion, the administrative expenses of the Plan. Administrative expenses incurred in 2002 were approximately $54,000.
Tax Status
The Internal Revenue Service has determined and informed the Company by a letter dated December 3, 1996, that the Plan is designed in accordance with applicable sections of the Internal Revenue Code (the
7
“Code”), and therefore the related trust is exempt from taxation. The Plan has been amended since receiving the determination letter; however, the Plan administrator believes the Plan continues to be operated in compliance with applicable requirements of the Code.
2. Summary of Accounting Policies
Basis of Accounting
The financial statements and supplemental schedule are prepared on the accrual basis of accounting.
Valuation of Investments
Shares of registered investment companies are valued at quoted market prices which represent the net asset value of shares held by the Plan at year-end. Equity securities are valued at fair value using quoted market prices. The investments in the pooled separate accounts are valued at the fair value of the underlying investments in the amount as determined by Kemper. Participant loans and investments in money market funds are stated at cost which approximates fair value. Reinvested income, accrued interest and dividends are reflected as additions to the cost basis of the investments. Investment transactions are recorded on a trade-date basis.
Payment of Benefits
Benefits are recorded when paid. Benefits due to participants who have elected to withdraw from the Plan but have not been paid are included in net assets available for benefits. At December 31, 2002 and 2001 there were no amounts allocated to withdrawing participants.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America as applied to defined contribution employee benefit plans requires the Plan’s management to make estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes. Actual results could differ from those estimates.
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3. INVESTMENTS
Investments, at fair value, consisted of the following as of December 31:
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| 2002 |
| 2001 |
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Mutual Funds: |
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American 20th Century International Discovery Fund |
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| $ | 242,051 |
| $ | 132,992 |
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American 20th Century Ultra Fund |
| (a) |
| 652,526 |
| 1,127,524 |
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Berger Small Cap Value Fund |
| (a) |
| 1,942,094 |
| 2,976,427 |
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Charles Schwab S&P 500 Fund |
| (a) |
| 1,256,256 |
| 1,822,756 |
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Fidelity Magellan Fund |
| (a) |
| 843,954 |
| 1,622,418 |
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Fidelity Puritan Fund |
| (a) |
| 911,929 |
| 1,460,043 |
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Harbor Capital Appreciation Fund |
| (a) |
| 1,165,601 |
| 1,447,313 |
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Janus Worldwide Fund |
| (a) |
| 776,238 |
| 547,376 |
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MFS Massachusetts Investors Trust |
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| 331,858 |
| 553,098 |
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Pimco Total Return Fund |
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| 288,581 |
| 1,291,286 |
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Strong Short-Term Bond Fund |
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| 198,112 |
| 394,980 |
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| 8,609,200 |
| 13,376,213 |
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Money Market funds: |
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Charles Schwab Advantage Money Fund |
| (a) |
| 1,374,320 |
| 1,448,243 |
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Self-Directed Accounts |
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| 213,326 |
| 348,397 |
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Pooled separate accounts |
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| — |
| 6,295 |
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Thomas Group, Inc. common stock |
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| 34,308 |
| 119,772 |
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Participant loans |
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| 162,984 |
| 148,932 |
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Total |
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| $ | 10,394,138 |
| $ | 15,447,852 |
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(a) Represents 5% or more of the Plan’s net assets.
During 2002, the Plan’s investments (including investments bought, sold, and held during the year) depreciated by $2,154,356 as follows:
Mutual Funds |
| $ | 2,136,201 | |
Self-directed accounts |
| (50,439 | ) | |
Thomas Group, Inc. common stock |
| 68,594 | ||
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| $ | 2,154,356 |
4. PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the right under the Plan agreement to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants become 100% vested in their accounts.
9
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
EIN: 72-0843540 Plan Number: 003
December 31, 2002
(a) |
| (b) |
| (c) |
| (d) |
| (e) |
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| Identity of Issuer, Borrower, Lessor or Similar Party |
| Description of |
| Cost |
| Current |
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| Cash: |
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* |
| Charles Schwab Trust Company |
| Cash |
| ** |
| $ | — |
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| Money Market Funds: |
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* |
| Charles Schwab Trust Company |
| Advantage Money Fund |
| ** |
| 1,374,320 |
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| Mutual Funds: |
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| American 20th Century |
| International Discovery Fund |
| ** |
| 242,051 |
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| American Century |
| Ultra Fund |
| ** |
| 652,526 |
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|
| Berger |
| Small Cap Value Fund |
| ** |
| 1,942,094 |
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* |
| Charles Schwab Trust Company |
| S&P 500 Fund |
| ** |
| 1,256,256 |
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| Fidelity Investments |
| Magellan Fund |
| ** |
| 843,954 |
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| Fidelity Investments |
| Puritan Fund |
| ** |
| 911,929 |
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| Harbor |
| Capital Appreciation Fund |
| ** |
| 1,165,601 |
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| Janus Investments |
| Worldwide Fund |
| ** |
| 776,238 |
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| MFS Investments |
| Massachusetts Investors Trust |
| ** |
| 331,858 |
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| Pimco |
| Total Return Fund |
| ** |
| 288,581 |
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| Strong |
| Short-Term Bond Fund |
| ** |
| 198,112 |
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* |
| Charles Schwab Trust Company |
| Personal Choice Retirement Account |
| ** |
| 213,326 |
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* |
| Thomas Group, Inc. |
| Common stock, 70,880 shares |
| ** |
| 34,308 |
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* |
| Thomas Group, Inc. 401(k) Savings Plan |
| Loans to participants (4.25% to 9.5% interest and varying maturities) |
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| 162,984 |
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| Total investments |
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| $ | 10,394,138 |
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(a) This column will have an asterisk on each line which is identified as a party-in-interest to the Plan. Charles Schwab Trust Company acts as the Plan’s trustee.
** Historical cost information is omitted as permitted for participant-directed transactions under an individual account plan.
10