SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. ____)
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ x ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
Bando McGlocklin Capital Corporation
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ x ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
PRELIMINARY COPY
[insert logo]
April 5, 2001
Dear Shareholder:
On behalf of the Board of Directors and management of Bando McGlocklin
Capital Corporation (the "Company"), we cordially invite you to attend the
Annual Meeting of Shareholders of the Company, to be held at 4:00 p.m. on
Thursday, May 3, 2001, in the South Grand Ballroom of the Milwaukee Athletic
Club, 758 North Broadway, Milwaukee, Wisconsin. The accompanying Notice of
Annual Meeting of Shareholders and Proxy Statement discuss the business to be
conducted at the meeting. A copy of the Company's Form 10-K is also included in
this booklet. At the meeting we shall report on Company operations and the
outlook for the year ahead.
Your Board of Directors has nominated five persons to serve as directors,
each of whom are incumbent directors. In addition, the Proxy Statement contains
proposals to change the name of the Company to "The Middleton Doll Company" and
to ratify or reject the selection of Virchow, Krause & Company, LLP as the
independent certified public accountants to audit the financial statements of
the Company for the year ending December 31, 2001.
The Board of Directors recommends that you vote your shares for the
director nominees, for the change of name to "The Middleton Doll Company" and to
ratify the selection of Virchow, Krause & Company, LLP as the independent
certified public accountants.
We encourage you to attend the meeting in person. Whether or not you plan
to attend, however, please complete, sign and date the enclosed proxy and return
it in the accompanying postage-paid return envelope as promptly as possible.
This will ensure that your shares are represented at the meeting.
We look forward with pleasure to seeing and visiting with you at the
meeting.
Very truly yours,
BANDO McGLOCKLIN CAPITAL
CORPORATION
George R. Schonath
President and Chief Executive Officer
PRELIMINARY COPY
Bando McGlocklin
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 3, 2001
TO THE SHAREHOLDERS OF BANDO McGLOCKLIN CAPITAL CORPORATION
Notice is hereby given that the Annual Meeting of Shareholders of Bando
McGlocklin Capital Corporation (the "Company"), will be held in the South Grand
Ballroom of the Milwaukee Athletic Club, 758 North Broadway, Milwaukee,
Wisconsin, on Thursday, May 3, 2001 at 4:00 p.m., for the purpose of considering
and voting upon the following matters:
1. To elect five (5) directors, two (2) of whom will be elected by holders of
the Preferred Stock, to hold office until the next annual meeting of
shareholders and until their successors are duly elected and qualified.
2. To amend Article I of the Company's Articles of Incorporation to change the
Company's name to "The Middleton Doll Company".
3. To ratify or reject the selection of Virchow, Krause & Company, LLP as the
independent certified public accountants to audit the financial statements
of the Company for the year ending December 31, 2001.
4. To consider and act upon such other business as may properly come before
the meeting or any adjournment or postponements thereof.
The Board of Directors is not aware of any other business to come before
the meeting. Shareholders of record at the close of business on March 21, 2001,
are the shareholders entitled to vote at the meeting and any adjournments or
postponements thereof.
By Order of the Board of Directors
George R. Schonath
President and Chief Executive Officer
Pewaukee, Wisconsin
April 5, 2001
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES TO ENSURE A QUORUM AT THE MEETING. A SELF-ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED
WITHIN THE UNITED STATES.
PRELIMINARY COPY
Bando McGlocklin
W239 N1700 Busse Road
Waukesha, Wisconsin 53188-1160
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 3, 2001
This Proxy Statement is furnished in connection with the solicitation on
behalf of the Board of Directors of Bando McGlocklin Capital Corporation (the
"Company") of proxies to be used at the annual meeting of shareholders which
will be held in the South Grand Ballroom of the Milwaukee Athletic Club, 758
North Broadway, Milwaukee, Wisconsin, on Thursday, May 3, 2001 at 4:00 p.m., and
all adjournments or postponements thereof (the "Annual Meeting"), for the
purposes set forth in the attached Notice of Annual Meeting of Shareholders.
Voting Rights and Proxy Information
Execution of a proxy given in response to this solicitation will not affect
a shareholder's right to attend the Annual Meeting and to vote in person.
Presence at the Annual Meeting of a shareholder who has signed a proxy does not
in itself revoke a proxy. Any shareholders giving a proxy may revoke it at any
time before it is exercised by giving notice thereof to the Company in writing
or in open meeting. This proxy statement and the enclosed form of proxy are
being mailed to shareholders on or about April 5, 2001.
All shares of Common Stock and Preferred Stock represented at the meeting
by properly executed proxies received prior to or at the meeting, and not
revoked, will be voted at the meeting in accordance with the instructions
thereon. The shares represented by executed but unmarked proxies will be voted
FOR the persons nominated for election as directors, FOR the amendment changing
the Company's name to "The Middleton Doll Company", FOR the ratification of the
selection of Virchow, Krause & Company, LLP (the "Independent Auditors") as the
independent certified public accountants for the year ending December 31, 2001
and on such other business or matters which may properly come before the Annual
Meeting in accordance with the best judgment of the persons named as proxies in
the enclosed form of proxy. A majority of the shares of Common Stock, 6-2/3
cents par value (the "Common Stock"), and the Series A Adjustable Rate
Cumulative Preferred Stock, $.01 par value (the "Preferred Stock"), as one
class, present in person or represented by proxy and entitled to vote, shall
constitute a quorum for purposes of the meeting. Abstentions and broker
non-votes will be counted for purposes of determining a quorum but will not
affect the vote required for approval of the election of directors or any
proposal. Other than the election of directors, the proposal to amend the
Articles of Incorporation and the ratification of the Independent Auditors, the
Board has no knowledge of any matters to be presented for action by the
shareholders at the Annual Meeting.
Only holders of record of Common Stock and Preferred Stock at the close of
business on March 21, 2001, are entitled to vote at the Annual Meeting and at
any adjournment or postponement thereof. Holders of Preferred Stock are entitled
to vote, as a separate voting class, for the election of two (2) directors of
the Company. In addition to a quorum of the shares of Common Stock and Preferred
Stock, as one class, a separate quorum representing a majority of the shares of
Preferred Stock shall be necessary in connection with the voting for such
directors. In addition, holders of Preferred Stock are entitled to vote with
holders of Common Stock, as one voting class, for the election of the remaining
three (3) directors of the Company, the amendment of the Articles of
Incorporation and the ratification of the Independent Auditors. On March 21,
2001, the Company had outstanding and entitled to vote 3,727,589 shares of
Common Stock and 674,191 shares of Preferred Stock. The record holder of each
outstanding share is entitled to one vote.
The Board of Directors would like to have all shareholders represented at
the meeting. Whether or not you plan to attend, please complete, sign and date
the enclosed proxy and return it in the accompanying postpaid return envelope as
promptly as possible. A proxy given pursuant to this solicitation may be revoked
at any time before it is voted. Proxies may be revoked by: (i) duly executing
and delivering to the Secretary of the Company a later dated proxy relating to
the same shares prior to the exercise of such proxy, (ii) filing with the
Secretary of the Company at or before the meeting a written notice of revocation
bearing a later date than the proxy, or (iii) attending the meeting and voting
in person (although attendance at the meeting will not in and of itself
constitute revocation of a proxy). Any written notice revoking a proxy should be
delivered to Susan J. Hauke, Secretary, at W239 N1700 Busse Road, Waukesha,
Wisconsin 53188-1160.
Proposal No. 1 - ELECTION OF DIRECTORS
At the Annual Meeting, the holders of Preferred Stock will elect, voting as
a separate class, two (2) directors of the Company to hold office until the next
annual meeting and until their successors are duly elected and qualified. Unless
the holders of Preferred Stock otherwise specify, the shares represented by the
proxies received for the election of two (2) directors will be voted in favor of
the election as directors of Robert A. Cooper and David A. Geraldson. The
holders of the Common Stock and the Preferred Stock will elect, voting as one
class, three (3) directors of the Company to hold office until the next annual
meeting and until their successors are duly elected and qualified. Unless the
shareholders otherwise specify, the shares represented by the proxies received
for the election of three (3) directors will be voted in favor of the election
as directors of Peter A. Fischer, Salvatore L. Bando and George R. Schonath.
Proxies of holders of Common Stock cannot be voted for more than three (3)
persons and proxies of holders of Preferred Stock cannot be voted for more than
five (5) persons. The Board has no reason to believe that any of the listed
nominees will be unable or unwilling to serve as director if elected. However,
in the event that any of the nominees should be unable or for good cause
unwilling to serve, the shares represented by proxies received will be voted for
substitute nominees selected by the Board. Directors will be elected by a
plurality of the votes cast at the Annual Meeting (assuming a quorum is
present). Consequently, any shares not voted at the Annual Meeting, whether due
to abstentions, broker non-votes or otherwise, will have no
impact on the election of directors. Votes will be tabulated by inspectors of
election appointed by the Board.
The following table sets forth certain information, as of February 28,
2001, about the Board's nominees for election as directors of the Company.
Except as otherwise noted, each nominee has engaged in the principal occupation
or employment and held the offices shown for more than the past five years. The
table provides information as of February 28, 2001, as to the age, principal
occupation, background for at least the last five years and period of service as
a director for each person.
- ----------------------------------------------------- ---------------------------------------
Principal Occupation;
Director Office, if any, Held in the Company;
Name Since Age Other Directorships
- --------------------- ---------------- -------------- ---------------------------------------
Salvatore L. Bando 1999 57 Special Assistant to the President of
the Milwaukee Brewers from September,
1999 to the present. Senior Vice
President of Baseball Operations for the
Milwaukee Brewers from 1991 to 1999.
Director of InvestorsBancorp, a bank
holding company, from 1997 to 1999.
Previously a director of the Company
from 1980 until 1997 and an officer of
the Company from 1980 until 1991.
Robert A. Cooper 1987 74 Retired; formerly, Senior Vice President
of Dain Rauscher Incorporated (a
securities brokerage firm) from
September 1988 through 2000; Executive
Vice President and a Director of
Milwaukee Financial Group, Inc. (a
financial services holding company) from
its incorporation in 1986 until its
acquisition by Dain Bosworth
Incorporated in September 1988; Chairman
of the Board and Chief Executive Officer
of The Milwaukee Company (a securities
brokerage firm) from 1978 to September
1988.
Peter A. Fischer 1983 58 Associate Pastor of Portview Christian
Center, Port Washington, Wisconsin since
1992; a former Director, and from 1981
to 1989, the President and Chief
Executive Officer of Medalist
Industries, Inc. (a manufacturer of
industrial and consumer products).
3
- ----------------------------------------------------- ---------------------------------------
Principal Occupation;
Director Office, if any, Held in the Company;
Name Since Age Other Directorships
- --------------------- ---------------- -------------- ---------------------------------------
David A. Geraldson 1983 70 President since 1993 and prior thereto
Secretary and Treasurer of Precision
Gears, Inc. (a manufacturer of gears,
splined shafts, speed reducers and worm
gear winches).
George R. Schonath 2001 60 President and Chief Executive Officer of
the Company since 1997; Chairman of the
Board and Chief Executive Officer of the
Company from 1983 to 1997; President,
Chief Executive Officer and director of
InvestorsBancorp, Inc. and InvestorsBank
since they were established in 1997
- --------------------- ---------------- -------------- ---------------------------------------
All of the Company's directors will hold office until the next annual
meeting of shareholders and until their respective successors are duly elected
and qualified. There are no arrangements or understandings between the Company
and any other person pursuant to which any of the Company's directors have been
selected for their respective positions.
THE BOARD RECOMMENDS THE FOREGOING NOMINEES FOR ELECTION AS DIRECTORS AND
URGES THE HOLDERS OF PREFERRED STOCK TO VOTE "FOR" MESSRS. COOPER AND GERALDSON
AND URGES EACH SHAREHOLDER TO VOTE "FOR" MESSRS. FISCHER, BANDO AND SCHONATH.
SHARES REPRESENTED AT THE ANNUAL MEETING BY EXECUTED BUT UNMARKED PROXIES WILL
BE VOTED "FOR" ALL APPROPRIATE NOMINEES.
BOARD OF DIRECTORS
The Board has standing Compensation and Audit Committees, but does not have
a nominating committee. The Compensation Committee, which presently consists of
Messrs. Cooper, Fischer, Geraldson and Bando, had two (2) meetings during the
year ended December 31, 2000. The Compensation Committee approves all matters
relating to the compensation of the Company's directors and officers, including
salary rates, participation in any incentive bonus plans, fringe benefits, and
other forms of compensation, and approves the grant of stock options under the
Company's 1997 Stock Option Plan and 1993 Incentive Stock Option Plan.
The Audit committee, which presently consists of Messrs. Geraldson, Bando,
Cooper and Fischer, held one meeting in the year ended December 31, 2000. All of
the members of the Audit Committee are independent (as independence is defined
in the listing standards of the National Association of Securities Dealers,
Inc). The Audit Committee reviews with the Company's independent auditors the
plan and scope of their audit, findings and conclusions of their auditing
engagement, the Company's procedures for internal auditing, the adequacy of the
Company's system of internal controls and the accounting principles and policies
of the Company; evaluates the independence of the independent auditors and the
quality of the
4
professional services provided by the independent auditors and recommends to the
Board the engagement, continuation or discharge of the independent auditors. The
Board of Directors has adopted a written charter for the Audit Committee, a copy
of which is attached hereto as Appendix A.
The Board held five (5) meetings in the year ended December 31, 2000. Each
director attended at least 75% of the aggregate of (a) the total number of
meetings of the Board and (b) the total number of meetings held by all
committees of the Board on which he served.
Directors, who are not Company employees, were paid an annual retainer fee
of $7,500 plus a $1,000 fee for each meeting of the Board or a committee
attended. There were no directors who were employees of the Company in 2000.
Effective February 22, 2001, George R. Schonath, President and Chief Executive
Officer, was elected as a director.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock at February 28, 2001, by each
person known by the Company to be the beneficial owner of more than five (5)
percent of the outstanding Common Stock, by each director or nominee, by each
executive officer named in the Summary Compensation Table set forth below, and
by all directors and executive officers of the Company as a group. No executive
officer or director of the Company beneficially owns any shares of Preferred
Stock and, to the best knowledge of the Company, no person beneficially owns
more than five (5) percent of the outstanding shares of Preferred Stock. Except
as of otherwise indicated, the named individuals have sole power to vote and
dispose of such shares.
Amount and Nature of Beneficial Ownership
Amount and
Name of Nature of Beneficial Percent
Beneficial Owner (1) Ownership (2) Of Class
-------------------- ------------- --------
George R. Schonath 208,048 (3) 5.6%
Salvatore L. Bando 174,658 (4) 4.7%
Robert A. Cooper 32,100 (5) *
Peter A. Fischer 31,422 (6) *
David A. Geraldson 93,950 (7) 2.5%
All executive officers and
directors as a group
(8 persons) 706,774 (8) 18.9%
* Less than one percent (1%).
(1) The address of each person identified in this table is W239 N1700 Busse
Road, Waukesha, Wisconsin 53188-1160.
(2) Includes the following shares subject to stock options which were
exercisable as of or within sixty (60) days of February 28, 2001: all
directors and executive officers as a group, 7,700 shares. Options to
purchase 203,445 shares are not included in the amounts listed in the table
because they are held by
5
Mr. Schonath's daughters' irrevocable trusts. Mr. Schonath disclaims any
beneficial ownership of the options.
(3) Includes (a) 436 shares held by a daughter, (b) 186,375 shares held by the
Schonath Family Partnership for which Mr. Schonath is Managing Partner and
(c) 21,237 shares held by the Company's 401(k) profit sharing plan on
behalf of Mr. Schonath. Does not include (a) 60,284 shares held in
irrevocable trusts for the benefit of his daughters, (b) 203,445 shares
subject to stock options that are held in irrevocable trusts for the
benefit of his daughters and (c) 436 shares held directly by his oldest
daughter.
(4) Includes (a) 59,818 shares held jointly with or by spouse (shared voting
and dispositive power) and (b) 8,159 shares held by the Company's 401(k)
profit sharing plan on behalf of this individual.
(5) Includes 1,100 shares held jointly with or by spouse (shared voting and
dispositive power).
(6) Includes (a) 10,846 shares held jointly with or by spouse (shared voting
and dispositive power) and (b) 11,472 shares held by a Keogh plan on behalf
of this individual.
(7) Includes (a) 10,747 shares held jointly with or by spouse (shared voting
and dispositive power) and (b) 66,058 shares owned by the Precision Gears,
Inc. profit sharing plan for which Mr. Geraldson acts as co-trustee (shared
voting and dispositive power).
(8) Assumes the exercise of all options which were currently exercisable as of
or exercisable within 60 days of February 28, 2001.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors and persons who own more than 10% of the Common Stock to file
reports of ownership with the Securities and Exchange Commission and with the
National Association of Securities Dealers, Inc. Such persons are also required
to furnish the Company with copies of all Section 16(a) forms they file. Mr.
David A. Geraldson and Mr. Robert A. Cooper each filed one late Form 4.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation paid
for the last three years to the Company's President and Chief Executive Officer.
There were no other executive officers of the Company whose aggregate salary and
bonus exceeded $100,000 for the year ended December 31, 2000. The person named
in the table below is sometimes referred to herein as the named executive
officer.
Summary Compensation Table
Annual Compensation Long Term
Compensation Awards
(a) (b) (c) (d) (e) (f) (g) (h)
Securities
Other Restricted Underlying All
Name and Salary Annual Stock Option/ Other
Principal Position Year (1) Bonus Compensation Awards SARs Compensation
George R. Schonath, 2000 $220,000 $ - - - $ - - - $ - - - - - - $68,680(2)
President and Chief 1999 $180,000 $112,000 $ - - - $ - - - - - - $56,412
Executive Officer 1998 $165,000 $ - - - $ - - - $ - - - - - - $43,079
6
(1) Includes amounts deferred under the Company's 401(k) plan.
(2) Consists of (a) $63,680 for the Company's contribution for supplemental
retirement benefits and (b) $5,000 for the Company's contribution to the
401(k) profit sharing plan.
1993 Incentive Stock Option Plan
The Company has in effect the Bando McGlocklin Capital Corporation 1993
Incentive Stock Option Plan (the "1993 Plan") pursuant to which there is
outstanding options to purchase an aggregate of 11,000 shares held by a senior
vice-president of the Company. No options were granted in 2000 under the 1993
Plan. As of December 31, 2000, there were 89,000 shares of Common Stock
available for issuance under the 1993 Plan. The Compensation Committee does not
intend to issue any additional options under the 1993 Plan. Mr. Schonath holds
no options under this plan.
1997 Stock Option Plan
The Company has in effect the 1997 Plan pursuant to which there are
outstanding options to purchase an aggregate of 203,445 shares. The options were
originally granted to George R. Schonath in 1997 and subsequently gifted by him
to his daughters' irrevocable trusts. He holds no options under the 1997 Plan.
No options were granted in 2000 under the 1997 Plan. As of December 31, 2000
there were 16,555 options available for issuance under the 1997 Plan.
Compensation Committee Interlocks and Insider Participation
In May 2000, the Compensation Committee considered the compensation
packages of Mr. George R. Schonath and Mr. Jon McGlocklin, currently a senior
vice president of the Company. The Compensation Committee is composed of Robert
A. Cooper, David A. Geraldson, Salvatore L. Bando and Peter A. Fischer. No
member of the Compensation Committee is a current or former officer or employee
of the Company or any of its subsidiaries except for Mr. Bando who was a former
officer of the Company. Messrs. McGlocklin and Schonath do not participate in
decisions regarding their respective compensation.
Compensation Committee Report
The Compensation Committee of the Board is responsible for all aspects of
the Company's compensation package offered to its executive officers, including
the named executive officer. The Compensation Committee determines the
compensation package (including the grant of stock options pursuant to the 1997
Plan) to be paid to each executive officer.
Executive Compensation Policies. The Company's executive compensation
program is intended to establish a relationship between compensation and the
Company's business strategies as well as the Company's goal of maintaining and
improving profitability and maximizing long-term shareholder value. The focus of
compensation decisions is on the achievement of long-term performance objectives
as opposed to the attainment of short-term, narrowly defined goals. The focus on
long-term performance objectives is intended to avoid
7
unwarranted adjustments in executive compensation based solely on short-term
swings (either up or down) in the Company's markets.
In recommending and establishing levels of executive compensation, it is
the policy of the Compensation Committee to (a) offer competitive compensation
packages in order to attract and retain key executive officers crucial to the
Company's long-term success; (b) provide, on a limited basis, performance-based
compensation opportunities (including equity-based awards) which allow executive
officers to earn rewards for long-term strategic management and the enhancement
of shareholder value; (c) establish a relationship between executive
compensation and the Company's annual and long-term strategic goals; and (d)
provide compensation programs which recognize and reward individual initiative
and achievement.
Executive Compensation Package. As reflected under the Summary Compensation
Table, the Company's executive compensation package consists primarily of salary
and to a limited extent, bonus awards and stock option grants, as well as
benefits under the employee benefits plans offered by the Company.
The Compensation Committee awarded a base salary to its Chief Executive
Officer for the year ended December 31, 2000 of $220,000. No bonus was paid out
to Mr. Schonath for the year ended December 31, 2000.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), limits deductibility for federal income tax purposes of compensation in
excess of $1 million paid to the Chief Executive Officer and certain executive
officers unless certain requirements are met. The Compensation Committee does
not believe that in the foreseeable future the annual compensation of any
executive officer will be subject to the limit.
Bando McGlocklin Capital Corporation
Compensation Committee Members
Salvatore L. Bando
Robert A. Cooper
David A. Geraldson
Peter A. Fischer
AUDIT COMMITTEE REPORT
Pursuant to its written charter, the Audit Committee ("Committee") oversees
the Company's financial reporting process on behalf of the Board of Directors.
Management has the primary responsibility for the financial statements and the
reporting process, including the systems of internal controls. In fulfilling its
oversight responsibilities, the Committee reviewed the audited financial
statements in the Annual Report with management, including a discussion of the
quality, not just the acceptability, of the accounting principles, the
reasonableness of significant judgments, and the clarity of disclosures in the
financial statements.
8
The Committee reviewed with the Independent Auditors, who are responsible
for expressing an opinion on the conformity of those audited financial
statements with generally accepted accounting principles, their judgments as to
the quality, not just the acceptability, of the Company's accounting principles
and such other matters as are required to be discussed with the Committee under
generally accepted auditing standards. In addition, the Committee discussed with
the Independent Auditors the auditors' independence from management and the
Company, including the matters in the written disclosures required by the
Independence Standards Board and considered the compatibility of non-audit
services provided by the auditors to the Company with their independence.
The Committee discussed with the Independent Auditors the overall scope and
plans for their audit of the Company's consolidated financial statements. The
Committee meets with the Independent Auditors, with and, as deemed advisable,
without management present, to discuss the results of their examination, their
evaluation of the Company's internal controls, and the overall quality of the
Company's financial reporting.
In reliance on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors (and the Board of Directors has accepted
that recommendation) that the audited financial statements be included in the
Annual Report on Form 10-K for the fiscal year ended December 31, 2000 for
filing with the Securities and Exchange Commission. The Committee and the Board
have selected, subject to shareholder ratification, the Company's Independent
Auditors.
Bando McGlocklin Capital Corporation
Audit Committee
Salvatore L. Bando
Robert A. Cooper
David A. Geraldson
Peter A. Fischer
PERFORMANCE INFORMATION
The following graph compares on a cumulative basis change since December
31, 1995 in (a) the total shareholder return on the Common Stock, (b) the total
return of companies in the Nasdaq Stock Market Index ("Nasdaq U.S."), and (c)
the total shareholder return of companies in the Nasdaq Stocks Miscellaneous
Investing Index ("Nasdaq MI") consisting of a peer group of publicly-traded
REITs. The total return information presented in the graph assumes the
reinvestment of dividends. The graph assumes $100 was invested on December 31,
1995 in Common Stock, the Nasdaq U.S. and the Nasdaq MI.
9
[GRAPHIC OMITTED]
12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
(1)
Bando McGlocklin
Capital Corporation $ 100.00 $ 96.60 $ 116.86 $ 105.55 $ 113.51 $ 95.43
Nasdaq U.S. $ 100.00 $ 123.03 $ 150.68 $ 212.46 $ 394.82 $ 237.37
Nasdaq MI $ 100.00 $ 122.30 $ 158.00 $ 134.20 $ 153.70 $ 95.50
(1) During the period from December 31, 1995 to December 31, 1996, the Company
was registered under the Investment Company Act of 1940 as a closed-end
investment company, but its shares of Common Stock were traded on the Nasdaq
Stock Market. As of January 1, 1997, the Company became a reporting company
under the Securities Exchange Act of 1934, as amended, and its shares of common
stock are still traded on the Nasdaq Stock Market.
RELATED PARTY TRANSACTIONS
The Company and InvestorsBancorp, Inc., a one-bank holding company,
together with its wholly-owned subsidiary, InvestorsBank, share common offices
and personnel. George R. Schonath is the President and Chief Executive Officer,
a director and beneficial owner of 44% of the issued and outstanding common
stock of InvestorsBancorp and is a director and President and Chief Executive
Officer of InvestorsBank. In addition, Susan J. Hauke, Vice President Finance
and Secretary of the Company, is Vice President Finance and Secretary of
InvestorsBancorp and Vice President Finance and Treasurer of InvestorsBank, and
Scott J. Russell, Senior Vice President of the Company, is a Senior Vice
President of InvestorsBancorp and InvestorsBank. Jon McGlocklin, Senior Vice
President of the Company, is a director of InvestorsBancorp and InvestorsBank.
The Company and the Bank purchase loan participations from each other from time
to time and, pursuant to a Management Services and Allocation of Expenses
Agreement, by and between the Company and the Bank, the Bank performs certain
loan servicing and administration services for the Company. Additional
transactions may be expected to take place in the future. All outstanding loans,
commitments to loan, transactions in repurchase agreements and loan
participation and servicing relationships, in the opinion of management, were
made in the ordinary course of business, on substantially the same terms,
10
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons and did not involve more than the
normal risk of collectibility or present other unfavorable features. The Bank
received an aggregate of $1,012,023 in loan servicing and administration fees
from the Company in 2000, which management believes is comparable to what would
have been charged by an unrelated third party. The Bank also leases space for
its main offices from the Company. The annual rent payable by the Bank under the
lease, including real estate taxes and furnishings, is approximately $113,000,
which represents the Bank's pro rata share of the Company's occupancy expense.
The Company believes the terms of the lease with the Bank are on substantially
the same terms and conditions as could be obtained from unrelated third parties.
The Company loaned $2,500,000 to InvestorsBancorp, Inc. pursuant to an
unsecured subordinated loan maturing April 30, 2010. The loan pays annual
interest of 11%. The Company believes the loan terms on this note are on
substantially the same terms and conditions as could be obtained from unrelated
third parties.
George R. Schonath, the Company's President and Chief Executive Officer,
owns 100% of the voting stock of Lee Middleton Original Dolls, Inc.,
representing 1% of the total equity. The Company owns 100% of the non-voting
stock of Middleton Doll, representing 99% of the total equity of Middleton Doll
Proposal No. 2 - Amendment of Articles of Incorporation to Change
Company's Name to "The Middleton Doll Company"
At the meeting held on February 22, 2001, the Board of directors
unanimously approved a proposal to amend Article I of the Articles of
Incorporation of the Company to change its name to "The Middleton Doll Company,"
subject to shareholder approval. The Board determined that, with the growth of
Lee Middleton Original Dolls, Inc., the Company's doll manufacturing subsidiary,
the name change would more accurately reflect the current and future growth of
the Company. A copy of the proposed amendment is attached hereto as Appendix B.
The vote necessary to approve the amendment is governed by Section
180.0725(3) of the Wisconsin Business Corporation Law, which provides that a
matter will be approved if a quorum is present and the number of votes cast in
favor of the matter exceed the number of votes cast in opposition thereto.
Accordingly, a shareholder will be deemed "present" at the Meeting by proxy
because the shareholder has returned a proxy (even if the proxy card contains no
instructions as to voting with respect to the ratification of the amendment to
the Articles of Incorporation, abstains from voting thereon, or constitutes a
broker non-vote with respect thereto). Assuming a quorum is present, abstentions
and broker non-votes will not affect the vote required to approve the amendment
to the Articles of Incorporation.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE AMENDMENT
TO THE COMPANY'S ARTICLES OF INCORPORATION TO CHANGE ITS NAME TO "THE MIDDLETON
DOLL COMPANY"
11
Proposal No. 3- Ratification of Appointment of Independent Auditors
The Board of Directors has appointed the firm of Virchow, Krause & Company,
LLP as independent auditors to audit the books, records, and accounts of the
Company and its subsidiaries for the year ending December 31, 2001, and proposes
that the shareholders ratify such appointment. Virchow, Krause & Company, LLP
acted as independent auditors for the year ended December 31, 2000. A
representative of Virchow, Krause & Company, LLP is expected to attend the
Annual Meeting, will have the opportunity to make a statement, and will be
available to respond to appropriate questions.
On September 22, 2000, the Company dismissed BDO Seidman, LLP as the
Company's independent public accountant. The reports of BDO Seidman, LLP on the
financial statements of the Company for either of the two previous fiscal years
did not contain any adverse opinion or any disclaimer of opinion, and were not
qualified or modified as to uncertainty, audit scope, or accounting principles.
The dismissal of BDO Seidman, LLP was approved by the Company's audit committee
and its Board of Directors. In connection with its audit for the two previous
fiscal years and through September 22, 2000, there were no disagreements with
BDO Seidman, LLP on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements, if
not resolved to the satisfaction of BDO Seidman, LLP, would have caused it to
make reference to the subject matter of the disagreements in connection with the
financial statements for such years in the Company's report on Form 8-K which
reported the dismissal. On September 22, 2000, the independent accounting firm
of Virchow, Krause & Company, LLP was engaged by the Company to audit its
financial statements for the fiscal year ended December 31, 2000.
The vote necessary to ratify the appointment of independent auditors is
governed by Section 180.0725(3) of the Wisconsin Business Corporation Law, which
provides that a matter will be approved if a quorum is present and the number of
votes cast in favor of the matter exceed the number of votes cast in opposition
thereto. Accordingly, a shareholder will be deemed "present" at the Meeting by
proxy because the shareholder has returned a proxy (even if the proxy card
contains no instructions as to voting with respect to the ratification of the
appointment of independent auditors, abstains from voting thereon, or
constitutes a broker non-vote with respect thereto). Assuming a quorum is
present, abstentions and broker non-votes will not affect the vote required to
ratify the appointment of Virchow, Krause & Company, LLP as independent
auditors.
Audit Fees
The aggregate fees billed by Virchow, Krause & Company, LLP for
professional services rendered for the audit of the Company's annual financial
statements for the fiscal year ended December 31, 2000 and the review of the
financial statements included in the Company's Forms 10-Q were $69,850. In
addition, the Company paid $10,000 to BDO Seidman, LLP for its services in
reviewing the financial statements included in the Company's Forms 10-Q prior to
the date Virchow, Krause & Company, LLP was appointed as Independent Auditors.
12
Financial Information Systems Design and Implementation Fees
No fees were billed by Virchow, Krause & Company, LLP for professional
services rendered in connection with financial systems design and implementation
for the fiscal year ended December 31, 2000.
All Other Fees
For the fiscal year ended December 31, 2000, there were no additional fees
billed for services rendered by Virchow, Krause & Company, LLP, other than the
services described above.
The Audit Committee took into consideration whether the providing of
services described above under "Financial Information Systems Design and
Implementation Fees" and "All Other Fees" was compatible with maintaining the
independence of Virchow, Krause & Company, LLP.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF VIRCHOW, KRAUSE & COMPANY, LLP AS INDEPENDENT
AUDITORS FOR THE YEAR ENDING DECEMBER 31, 2001.
Proposal No. 4 - Other Matters
The matters in the foregoing Notice of Meeting and Proxy Statement are, as
far as the Board of Directors knows, the only matters which will be presented
for consideration at the Annual Meeting. If any other matters properly come
before the Annual Meeting, the individuals named in the accompanying Proxies
will vote on them, in accordance with their best judgment exercising the
authority conferred thereby.
MISCELLANEOUS
Shareholder Proposals
Any proposals of shareholders intended to be presented at the 2002 Annual
Meeting of Shareholders must be received by the Secretary of the Company at its
principal executive offices at W239 N1700 Busse Road, Waukesha, Wisconsin
53188-1160, on or before December 5, 2001, to be considered for inclusion in the
Company's Proxy Statement and proxy relating to such meeting. Additionally, if
the Company receives notice of a shareholder proposal after February 18, 2002,
the persons named in the proxies solicited by the Board of Directors for the
2002 Annual Meeting may exercise discretionary voting power with respect to such
proposal.
13
Solicitation Expenses
The cost of solicitation of proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to be beneficial owners of Common Stock. In addition to solicitation by mail,
directors, officers and regular employees of the Company and/or the Bank may
solicit proxies personally or by telegraph or telephone without additional
compensation.
BY ORDER OF THE BOARD OF DIRECTORS
George R. Schonath
President and Chief Executive Officer
Pewaukee, Wisconsin
April 5, 2001
14
Appendix A
Bando McGlocklin Capital Corporation
Audit Committee Charter
June 9, 2000
The Audit Committee ("the Committee"), of the Board of Directors ("the
Board") of Bando McGlocklin Capital Corporation ("the Company"), will have the
oversight responsibility, authority and specific duties as described below. This
Charter, however, is not intended to, and does not create any legal or fiduciary
duties or responsibilities or form the basis for a breach of fiduciary duty or
potential liability if not complied with.
COMPOSITION
The Committee will be comprised of three or more directors as determined by
the Board. The members of the Committee will meet the independence and
experience requirements of the National Association of Securities Dealers, Inc.
(NASD). The members of the Committee will be elected annually at the
organizational meeting of the full Board held in May and will be listed in the
annual report to shareholders. One of the members of the Committee will be
elected Committee Chair by the Board.
RESPONSIBILITY
The Committee is a part of the Board. It's primary function is to assist
the Board in fulfilling its oversight responsibilities with respect to (i) the
annual financial information to be provided to shareholders and the Securities
and Exchange Commission (SEC); (ii) the system of internal controls that
management has established; and (iii) the internal and external audit process.
In addition, the Committee provides an avenue for communication between the
independent accountants, financial management and the Board. The Committee
should have a clear understanding with the independent accountants that they
must maintain an open and transparent relationship with the Committee, and that
the ultimate accountability of the independent accountants is to the Board and
the Committee. The committee will make regular reports to the Board concerning
its activities.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
This is the responsibility of management and the independent auditor. Nor is it
the duty of the Audit Committee to conduct investigations, to resolve
disagreements, if any, between management and the independent auditor or to
assure compliance with laws and regulations and the Company's business conduct
guidelines.
AUTHORITY
Subject to the prior approval of the Board, the Committee is granted the
authority to investigate any matter or activity involving financial accounting
and financial reporting, as well as the internal controls of the Company. In
that regard, the Committee will have the authority to approve the retention of
external professionals to render advice and counsel in such matters. All
employees will be directed to cooperate with respect thereto as requested by
members of the Committee.
MEETINGS
The Committee is to meet at least once annually and as many additional
times as the Committee deems necessary. Content of the agenda for each meeting
should be cleared by the Committee Chair.
ATTENDANCE
Committee members will strive to be present at all meetings. As necessary
or desirable, the Committee Chair may request that members of management and
representatives of the independent accountants be present at Committee meetings.
A-1
Appendix A
SPECIFIC DUTIES
In carrying out its oversight responsibilities, the Committee will:
1. Review and reassess the adequacy of this charter annually and recommend any
proposed changes to the Board for approval.
2. Review with the Company's management and independent accountants the
Company's accounting and financial reporting controls and management's
responses with respect to recommendations for internal control
improvements.
3. Review with the Company's management and independent accountants
significant accounting and reporting principles, practices and procedures
applied by the Company in preparing its financial statements. Discuss with
the independent accountants their judgments about the quality, not just the
acceptability, of the Company's accounting principles used in financial
reporting.
4. Review the scope and general extent of the independent accountants' annual
audit. The Committee's review should include an explanation from the
independent accountants of the factors considered by the accountants in
determining the audit scope, including the major risk factors. The
independent accountants should confirm to the Committee that no limitations
have been placed on the scope or nature of their audit procedures. The
Committee will review annually with management the fee arrangement with the
independent accountants.
5. Inquire as to the independence of the independent accountants and obtain
from the independent accountants, at least annually, a formal written
statement delineating all relationships between the independent accountants
and the Company as contemplated by Independence Standards Board Standard
No. 1, Independence Discussions with Audit Committees.
6. Have a predetermined arrangement with the independent accountants that they
will advise the Committee through its Chair and management of the Company
of any matters identified through procedures followed for interim quarterly
financial statements, and that such notification as required under
standards for communication with Audit Committees is to be made prior to
the related press release or, if not practicable, prior to filing Forms
10-Q.
7. At the completion of the annual audit, review with management and the
independent accountants the following:
- The annual financial statements and related footnotes and financial
information to be included in the Company's annual report to
shareholders and on Form 10-K.
- Results of the audit of the financial statements and the related
report thereon and, if applicable, a report on changes during the year
in accounting principles and their application.
- Significant changes to the audit plan, if any, and any serious
disputes or difficulties with management encountered during the audit.
Inquire about the cooperation received by the independent accountants
during their audit, including access to all requested records, data
and information. Inquire of the independent accountants whether there
have been any disagreements with management which, if not
satisfactorily resolved, would have caused them to issue a nonstandard
report on the Company's financial statements.
A-2
Appendix A
- Other communications as required to be communicated by the independent
accountants by Statement of Auditing Standards (SAS) 61 as amended by
SAS 90 relating to the conduct of the audit. Further, receive a
written communication provided by the independent accountants
concerning their judgment about the quality of the Company's
accounting principles, as outlined in SAS 61 as amended by SAS 90, and
that they concur with management's representation concerning audit
adjustments.
If deemed appropriate after such review and discussion, recommend to the
Board that the financial statements be included in the Company's annual
report on Form 10-K.
8. After preparation by management and review by independent accountants,
approve the report required under SEC rules to be included in the Company's
annual proxy statement. The charter is to be published as an appendix to
the proxy statement every three years.
9. Discuss with the independent accountants the quality of the Company's
financial and accounting personnel. Also, elicit the comments of management
regarding the responsiveness of the independent accountants to the
Company's needs.
10. Meet with management and the independent accountants to discuss any
relevant significant recommendations that the independent accountants may
have, particularly those characterized as `material' or `serious'.
Typically, such recommendations will be presented by the independent
accountants in the form of a Letter of Comments and Recommendations to the
Committee. The Committee should review responses of management to the
Letter of Comments and Recommendations from the independent accountants and
receive follow-up reports on action taken concerning the aforementioned
recommendations.
11. Recommend to the Board the selection, retention or termination of the
Company's independent accountants.
12. Meet with the Company's outside counsel, when appropriate, to discuss legal
matters that may have a significant impact on the Company's financial
statements.
13. As the Committee may deem appropriate, obtain, weigh and consider expert
advice as to Audit Committee related rules of the NASD, Statements on
Auditing Standards and other accounting, legal and regulatory provisions.
14. Provide an open avenue of communication among the Company's independent
accountants, financial and senior management and the board of directors.
A-3
Appendix B
PROPOSED AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
BANDO McGLOCKLIN CAPITAL CORPORATION
(Proposed additions are in bold type and proposed deletions have been indicated
by overstriking.) (For EDGAR purposes only, additions are bracketed and
deletions are between slashes.)
ARTICLE I
NAME
The name of the corporation shall be /BANDO McGLOCKLIN CAPITAL
CORPORATION/ [THE MIDDLETON DOLL COMPANY].
PRELIMINARY COPY
COMMON STOCK
Bando McGlocklin Capital Corporation
W239 N1700 Busse Road
Waukesha, Wisconsin 53188-1160
This Proxy is Solicited On Behalf of The Board of Directors
The undersigned hereby appoints George R. Schonath and Jon McGlocklin, and each
of them, as Proxies with the power of substitution (to act jointly or if only
one acts then by that one) and hereby authorizes them to represent and to vote
as designated below all of the shares of Common Stock of Bando McGlocklin
Capital Corporation held of record by the undersigned on March 21, 2001, at the
annual meeting of shareholders to be held on May 3, 2001, or at any adjournment
or postponement thereof.
This proxy when properly executed will be voted in the manner directed herein by
the undersigned shareholder. If no direction is made, this proxy will be voted
"FOR" the election of the Board's nominees and "FOR" Items 2 and 3.
|X| PLEASE MARK VOTES AS IN THIS EXAMPLE.
PLEASE COMPLETE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
DETACH BELOW AND RETURN USING THE ENVELOPE PROVIDED
BANDO McGLOCKLIN CAPITAL CORPORATION 2001
ANNUAL MEETING The Board of Directors recommends a
vote FOR the following proposals:
1. ELECTION OF DIRECTORS: [ ] FOR all nominees [ ] WITHHOLD AUTHORITY to
1 - Peter A. Fischer listed to the left vote for all nominees
2 - Salvatore L. Bando (except as specified listed to the left.
3 - George R. Schonath below).
----------------------------------
(Instructions: To withhold authority to
vote for any indicated nominee, write ->
the number(s) of the nominee(s) in the
box provided to the right.) ----------------------------------
2. To amend the Company's Articles of
Incorporation to change the name [ ] FOR [ ] AGAINST [ ] ABSTAIN
to "The Middleton Doll Company".
3. To ratify or reject the selection of
Virchow, Krause & Company, LLP as
the independent certified public [ ] FOR [ ] AGAINST [ ] ABSTAIN
accountants to audit the financial
statements of the Company for the
year ending December 31, 2001.
3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
Date ______________ NO. OF SHARES
--------------------------------------
Check appropriate box.
Indicate changes below:
Address Change? [ ] --------------------------------------
Name change? [ ] Signature(s) in Box
Please sign exactly as your name appears
hereon. When signing as attorney,
executor, administrator, trustee or
guardian, please give fill title as
such. If a corporation, please sign in
full corporate name by the President or
other authorized officer. If a
partnership, please sign in partnership
name by authorized person.
PRELIMINARY COPY
PREFERRED STOCK
Bando McGlocklin Capital Corporation
W239 N1700 Busse Road
Waukesha, Wisconsin 53188-1160
This Proxy is Solicited On Behalf of The Board of Directors
The undersigned hereby appoints George R. Schonath and Jon McGlocklin, and each
of them, as Proxies with the power of substitution (to act jointly or if only
one acts then by that one) and hereby authorizes them to represent and to vote
as designated below all of the shares of Preferred Stock of Bando McGlocklin
Capital Corporation held of record by the undersigned on March 21, 2001, at the
annual meeting of shareholders to be held on May 3, 2001, or at any adjournment
or postponement thereof.
This proxy when properly executed will be voted in the manner directed herein by
the undersigned shareholder. If no direction is made, this proxy will be voted
"FOR" the election of the Board's nominees and "FOR" Items 2 and 3.
|X| PLEASE MARK VOTES AS IN THIS EXAMPLE.
PLEASE COMPLETE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
DETACH BELOW AND RETURN USING THE ENVELOPE PROVIDED
BANDO McGLOCKLIN CAPITAL CORPORATION 2001
ANNUAL MEETING The Board of Directors recommends a
vote FOR the following proposals:
1. ELECTION OF DIRECTORS:
(i) Directors elected by
holders of Preferred 1-Peter A. Fischer
Stock and Common Stock 3-George R. Schonath 2-Salvatore L. Bando
voting together.
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY to
to the left (except as vote for all nominees
specified below) listed to the left.
(ii) Directors elected
by holders of Preferred
Stock voting as a 3-Robert A. Cooper 4-David A. Geraldson
separate class.
-------------------------------------
(Instructions: To withhold authority
to vote for any indicated nominee, ->
write the number(s) of the nominee(s)
in the box provided to the right.) -------------------------------------
2. To amend the Company's Articles
of Incorporation to change [ ] FOR [ ] AGAINST [ ] ABSTAIN
its name to "The Middleton
Doll Company".
3. To ratify or reject the selection
of Virchow, Krause & Company, LLP
as the independent certified [ ] FOR [ ] AGAINST [ ] ABSTAIN
public accountants to audit the
financial statements of the Company
for the year ending December 31, 2001.
4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
Date __________________ NO. OF SHARES
----------------------------------------
Check appropriate box
Indicate changes below:
Address Change? [ ]
Name change? [ ]
----------------------------------------
Signature(s) in Box
Please sign exactly as your name appears
hereon. When signing as attorney,
executor, administrator, trustee or
guardian, please give fill title as
such. If a corporation, please sign in
full corporate name by the President or
other authorized officer. If a
partnership, please sign in partnership
name by authorized person.
PRELIMINARY COPY
April 5, 2001
Dear Fellow Shareholder:
Enclosed you will find the Bando McGlocklin 2000 annual report on Form 10-K and
the notice of meeting and proxy statement for our 2001 Annual Meeting of
Shareholders. Both documents provide a review of company operations and
activities for the year. In addition, I'd like to update you on several
important items.
As the proxy statement indicates, your Board of Directors is recommending that
shareholders approve amending the company's Articles of Incorporation to change
the company name to The Middleton Doll Company. The Board determined that with
the growth of Lee Middleton Original Dolls, Inc., our doll manufacturing
subsidiary, the name change would more accurately reflect the current and future
growth of the company.
Lee Middleton Original Dolls is a rapidly growing designer of high quality
collectible and play dolls and is the largest manufacturer of baby dolls in the
United States. The company's sales increased 20% in 2000, in a market that was
estimated to be down about 12% according to industry sources. The increase in
Lee Middleton sales reflects the introduction of new artist-designed collectible
and baby dolls and our strategy to recruit new dealers and expand sales to large
retailers such as FAO Schwarz.
In the first quarter of 2001, Lee Middleton presented its largest introduction
of new dolls and marketing programs designed to further increase sales and
develop new customers. In its new 2001 catalog, the company introduced the
Artist Studio(TM) Collection brand name to define its limited-edition
collectible dolls. The collection includes new packaging, certificates and a
gold prestige seal to identify Lee Middleton's most elite product line. The
Artist Studio Collection created industry firsts with the introduction of
one-day and one-week limited edition collectible dolls which uniquely bare the
date and time of production. The March 1 production of the one-day limited
edition doll was a sellout in the first week. The one-week doll will be produced
in the beginning of May. Other immediate sellouts include dolls representing
China and India from a new Children of the World series and two Elegant
Editions(TM), which extend the company into its highest price point and most
highly fashioned Artist Studio Collection dolls.
Based on the success of the company-owned Newborn Nursery Adoption Center at its
Belpre, Ohio, factory store, this concept is now being offered to 50 of Lee
Middleton's best dealers. The adoption centers will display 20 baby dolls in a
realistic nursery setting. Girls complete an "adoption" of their personal baby
in a memorable event that concludes with a birth certificate and photo of the
new "mommy" with her baby.
Last year's broad-based play doll success with the "Small Wonder(TM)" play baby
has been expanded into a series with the addition of infant "Newborn Wonder(TM)"
and toddler "Playtime Wonder(TM)". Introduced at the Toy Fair industry trade
show in February, the new Wonder Series play baby collection has quickly become
a hit with dealers and major retailers alike. The entire collection of Lee
Middleton dolls is available for viewing on the company's Web site:
www.leemiddleton.com.
In addition to the new dolls and marketing activities, significant progress was
made in 2000 in developing the infrastructure to support Lee Middleton's future
growth. This includes relocating its distribution facilities and headquarters to
Westerville, Ohio, a suburb of Columbus. In addition, the company expanded its
sales force to seek dealers outside its base in the eastern half of the United
States.
We are excited about Lee Middleton's growth potential as the company's very
special lifelike baby dolls continue to build momentum among both customers and
retailers.
Bando McGlocklin Small Business Lending Corporation will continue to provide
financial services to small business as a subsidiary of The Middleton Doll
Company.
The Bando McGlocklin name has served us well since our founding in 1980. Our
original business, financial services, continues to contribute to the overall
performance of the company. Our evolution into consumer products through Lee
Middleton Original Dolls provides additional growth opportunities and the
potential to further enhance shareholder value over the long term. We believe it
is appropriate that our primary focus is reflected in our new name. We
appreciate your confidence and support as we move into a new era as The
Middleton Doll Company.
Sincerely,
George R. Schonath
President and Chief Executive Officer