Securities Act Registration No. 333-12745
Investment Company Act Reg. No. 811-7831
_______________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
__________________________
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. __ [_]
Post-Effective Amendment No. 2 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 4 [X]
(Check appropriate box or boxes.)
______________________
FMI FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
225 East Mason Street
Milwaukee, Wisconsin 53202
(Address of Principal Executive Offices) (Zip Code)
(414) 226-4555
(Registrant's Telephone Number, including Area Code)
Copy to:
Ted D. Kellner W. David Knox, II
Fiduciary Management, Inc. Foley & Lardner
225 East Mason Street 777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202 Milwaukee, Wisconsin 53202
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable
after the Registration Statement becomes effective.
It is proposed that this filing will become effective (check appropriate
box)
[_] immediately upon filing pursuant to paragraph (b)
[X] on December 31, 1997 pursuant to paragraph (b)
[_] 60 days after filing pursuant to paragraph (a)(1)
[_] on (date) pursuant to paragraph (a)(1)
[_] 75 days after filing pursuant to paragraph (a)(2)
[_] on (date) pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
[_] this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
<PAGE>
FMI FUNDS, INC.
CROSS REFERENCE SHEET
(Pursuant to Rule 481 showing the location in the Prospectus and
the Statement of Additional Information of the responses to the Items of
Parts A and B of Form N-1A.)
Caption or Subheading in
Prospectus or Statement of
Item No. on Form N-1A Additional Information
PART A - INFORMATION REQUIRED IN PROSPECTUS
1. Cover Page Cover Page
2. Synopsis Expense Information
3. Financial Highlights Performance Information;
Financial Highlights
4. General Description of Introduction; Investment
Registrant Objective and Policies
5. Management of the Fund Management of the Fund;
Brokerage Transactions
5A. Management's Discussion of Management's Discussion of
Fund Performance Fund Performance
6. Capital Stock and Other Dividends, Distributions
Securities and Taxes; Capital
Structure; Shareholder
Reports
7. Purchase of Securities Being Purchase of Shares;
Offered Dividend Reinvestment;
Automatic Investment Plan;
Retirement Plans;
Determination of Net Asset
Value
8. Redemption of Repurchase Redemption of Shares;
Systematic Withdrawal Plan;
Exchange Privilege;
Determination of Net Asset
Value
9. Legal Proceedings *
PART B - INFORMATION REQUIRED IN STATEMENT
OF ADDITIONAL INFORMATION
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and *
History
13. Investment Objectives and Investment Restrictions;
Policies Investment Considerations;
Description of Securities
Ratings
14. Management of the Fund Directors and Officers of
the Corporation
15. Control Persons and Principal Stockholders
Principal Holders of
Securities
16. Investment Advisory and Investment Adviser and
Other Services Administrator; Distribution
of Shares; Custodian;
Independent Accountants
17. Brokerage Allocation Allocation of Portfolio
Brokerage
18. Capital Stock and Other Included in Prospectus
Securities under "CAPITAL STRUCTURE";
Stockholder Meetings
19. Purchase, Redemption and Included in Prospectus
Pricing of Securities Being under "DETERMINATION OF NET
Offered ASSET VALUE"; "PURCHASE OF
SHARES"; "DIVIDEND
REINVESTMENT"; "AUTOMATIC
INVESTMENT PLAN";
"SYSTEMATIC WITHDRAWAL
PLAN"; "EXCHANGE
PRIVILEGE"; "RETIREMENT
PLANS"; Determination of
Net Asset Value and
Performance; Distribution
of Shares
20. Tax Status Taxes
21. Underwriters *
22. Calculations of Performance Determination of Net Asset
Data Value and Performance
23. Financial Statements Financial Statements
_______________________
* Answer negative or inapplicable
<PAGE>
P R O S P E C T U S
FMI
FOCUS FUND
A NO-LOAD
MUTUAL FUND
P R O S P E C T U S DECEMBER 31, 1997
FMI FOCUS FUND
FMI Funds, Inc. (the "Company") is an open-end, non-diversified management
investment company -- a mutual fund. The Company presently consists of a single
portfolio, the FMI Focus Fund (the "Fund"). The Fund's investment objective is
capital appreciation. In seeking its investment objective of capital
appreciation, the Fund will invest primarily in common stocks and warrants,
engage in short sales, invest in foreign securities which are publicly traded in
the United States and effect transactions in stock index futures contracts,
options on stock index futures contracts, and options on securities and stock
indexes. The Fund may leverage its investments.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
This Prospectus sets forth concisely the information about the Fund that
prospective investors should know before investing. Investors are advised to
read this Prospectus and retain it for future reference. This Prospectus does
not set forth all of the information included in the Registration Statement and
Exhibits thereto which the Fund has filed with the Securities and Exchange
Commission. A Statement of Additional Information, dated December 31, 1997,
which is a part of such Registration Statement is incorporated by reference in
this Prospectus. Copies of the Statement of Additional Information will be
provided without charge to each person to whom a Prospectus is delivered upon
written or oral request made by writing to the address or calling the telephone
number, stated below. All such requests should be directed to the attention of
the Corporate Secretary.
FMI FOCUS FUND
225 EAST MASON STREET
MILWAUKEE, WISCONSIN 53202
(414) 226-4555
FMI FOCUS FUND
TABLE OF CONTENTS
PAGE NO.
---------
Expense Information 1
Financial Highlights 2
Introduction 2
Investment Objective and Policies 2
Management of the Fund 9
Determination of Net Asset Value 10
Purchase of Shares 11
Redemption of Shares 12
Dividend Reinvestment 13
Automatic Investment Plan 13
Systematic Withdrawal Plan 14
Exchange Privilege 14
Retirement Plans 15
Dividends, Distributions and Taxes 17
Brokerage Transactions 17
Capital Structure 17
Shareholder Reports 18
Performance Information 18
Management's Discussion of
Fund Performance 19
Share Purchase Application 21
EXPENSE INFORMATION
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases or Reinvested Dividends NONE
Deferred Sales Load NONE
Redemption Fee NONE(1)
<F1>
Exchange Fee NONE
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 1.25%(2)
<F2>
12b-1 Fees 0.00%(3)
Other Expenses (net of reimbursements) <F3>
Interest Expense and Dividends on Securities Sold Short 0.17%
All Other Expenses (net of reimbursements) 1.50%(4)
-----<F4>
Total Other Expenses (net of reimbursements) 1.67%(4)
-----<F4>
TOTAL FUND OPERATING EXPENSES (NET OF REIMBURSEMENTS) 2.92%(4)
=====<F4>
(1)<F1>A fee of $12.00 is charged for each wire redemption.
(2)<F2>Management fees have been restated to reflect a fee increase taking
effect January 1, 1998. Management fees for the fiscal year ended September
30, 1997 were 1.00%.
(3)<F3>The maximum level of distribution expenses is 0.25% per annum of the
Fund's average net assets. See "Purchase of Shares" for further information.
The distribution expenses for long-term shareholders may total more than the
maximum sales charge that would have been permissible if imposed entirely as
an initial sales charge.
(4)<F4>Other Expenses and Total Fund Operating Expenses reflect the fact that
the Fund's investment adviser, Fiduciary Management, Inc., has agreed to
reimburse the Fund to ensure that Total Fund Operating Expenses (excluding
interest and dividends on securities sold short) do not exceed 2.75%. Absent
reimbursement, Total Other Expenses and Total Fund Operating Expenses for the
Fund for the period from December 16, 1996 (commencement of operations) to
September 30, 1997 would have been 5.55% (annualized) and 6.55% (annualized),
respectively.
EXAMPLE: 1 YEAR 3 YEARS
------ ------
An investor would pay the following expenses
on a $1,000 investment, assuming (1) 5% annual
return and (2) redemption at the end of each
time period: $30 $90
The purpose of the preceding table is to assist investors in understanding
the various costs that an investor in the Fund will bear, directly or
indirectly. THEY SHOULD NOT BE CONSIDERED TO BE A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.
See "MANAGEMENT OF THE FUND" for a more complete discussion of applicable
management fees. The example assumes a 5% annual rate of return pursuant to
requirements of the Securities and Exchange Commission. This hypothetical rate
of return is not intended to be representative of past or future performance of
the Fund.
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR EACH SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIOD)
The Financial Highlights of the Fund should be read in conjunction with the
Fund's audited financial statements and notes thereto, included in the Fund's
Annual Report to Shareholders which contains the auditor's report as to the
Financial Highlights. The Fund's audited financial statements, notes thereto
and auditor's report thereon contained in the Fund's Annual Report to
Shareholders are incorporated by reference into the Statement of Additional
Information. The Financial Highlights of the Fund set forth below have been
audited. Further information about the performance of the Fund is also
contained in the Fund's Annual Report to Shareholders, copies of which may be
obtained, without charge, upon request.
FOR THE PERIOD FROM
DECEMBER 16, 1996+<F5>TO
SEPTEMBER 30, 1997
--------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $10.00
Income from investment operations:
Net investment loss (a)<F8> (0.04)
Net realized and unrealized gains on
investments and short positions 6.69
------
Total from investment operations 6.65
Less distributions:
Dividend from net investment income (0.01)
Distribution from net realized gains (1.90)
------
Total from distributions (1.91)
------
Net asset value, end of period $14.74
======
TOTAL INVESTMENT RETURN 68.0%*<F6>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's $) 5,156
Ratio of operating expenses (after reimbursement) to
average net assets (b)<F9> 2.75%**<F7>
Ratio of interest expense and dividends on short positions
to average net assets 0.17%**<F7>
Ratio of net investment loss to average net assets (c)<F10> (1.85%)**<F7>
Portfolio turnover rate 298.2%
Average commission rate paid $0.0758
+<F5>Commencement of operations.
*<F6>Not annualized.
**<F7>Annualized.
(a)<F8>Net investment loss before interest expense and dividends on short
positions for the period ended September 30, 1997 was ($0.04).
(b)<F9>Computed after giving effect to adviser's expense limitation
undertaking. If the Fund had paid all of its expenses for the period ended
September 30, 1997, the ratio would have been 6.38%**<F7>.
(c)<F10>Computed after giving effect to adviser's expense limitation
undertaking. If the Fund had paid all of its expenses for the period ended
September 30, 1997, the ratio would have been (5.48%)**<F7>.
INTRODUCTION
FMI Funds, Inc. (the "Company") was incorporated under the laws of Maryland
on September 5, 1996 and is an open-end non-diversified management investment
company registered under the Investment Company Act of 1940 (the "Act"). The
Company presently consists of a single portfolio, the FMI Focus Fund. The Fund
obtains its assets by continuously selling shares to the public. Proceeds from
such sales are invested by the Fund in securities of other companies and certain
other instruments. In this manner, the resources of many investors are combined
and each individual investor has an interest in every one of the securities and
instruments owned by the Fund. The Fund furnishes experienced management to
select and watch over its investments. As an open-end investment company, the
Fund will redeem any of its outstanding shares on demand of the owner at their
net asset value.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is capital appreciation. In seeking its
investment objective of capital appreciation, the Fund will invest primarily in
common stocks and warrants, engage in short sales, invest in foreign securities
which are publicly traded in the United States, and effect transactions in stock
index futures contracts, options on stock index futures contracts, and options
on securities and stock indexes. Dividend income and other income are not
factors considered in selecting these investments. The Fund may leverage its
investments. Warrants, stock index futures contracts, options on stock index
future contracts and options on securities and stock indexes are derivatives.
In managing the investment portfolio for the Fund, the Fund's investment
adviser, Fiduciary Management, Inc. (the "Adviser") may focus on a relatively
limited number of securities. The Adviser believes this focused investment
strategy has the potential for higher total returns than an investment strategy
calling for investment in a large number of securities. However, the use of
this focused investment strategy may increase the volatility of the Fund's
investment performance. Additionally, the Fund could incur greater losses than
it would have had it invested in a greater number of securities if the
securities in which the Fund invests perform poorly.
The Adviser will invest in securities which it believes will appreciate
significantly over a one to two-year period. In doing so, it will employ a
diverse investment approach. For example, it may purchase stocks of any size
market capitalization or in any industry sector. As a consequence, the
performance of the Fund will be more dependent on the Adviser's ability to make
good investment decisions than on whether a particular sector of the market is
performing well or "in favor" with investors.
The Fund may invest in the following portfolio securities and may engage in
the following investment techniques.
COMMON STOCKS
The Fund's common stock investments primarily will be made in companies in
which the Adviser believes to be underpriced relative to the issuing
corporation's future growth prospects. The Adviser will also purchase common
stocks where the price is significantly below the estimated market value of the
issuing corporation's assets less its liabilities on a per share basis.
The Fund may invest in companies with modest capitalization, as well as
start-up companies. Such companies often involve greater risks than larger
companies because they lack the management experience, financial resources,
product diversification, markets, distribution channels and competitive
strengths of larger companies. Additionally, in many instances, the frequency
and volume of their trading is substantially less than is typical of larger
companies. Therefore, the securities of smaller companies as well as start-up
companies may be subject to wider price fluctuations. The spreads between the
bid and asked prices of the securities of these companies in the U.S. over-the-
counter market typically are larger than the spreads for more actively traded
securities. As a result, the Fund could incur a loss if it determined to sell
such a security shortly after its acquisition. When making large sales, the
Fund may have to sell portfolio holdings at discounts from quoted prices or may
have to make a series of small sales over an extended period of time due to the
trading volume of smaller company securities.
FOREIGN SECURITIES
The Fund may invest without limitation in common stocks of foreign issuers
which are publicly traded on U.S. exchanges or in the U.S. over-the-counter
market either directly or in the form of American Depository Receipts ("ADRs").
The Fund will only invest in ADRs that are issuer sponsored. Sponsored ADRs
typically are issued by a U.S. bank or trust company and evidence ownership of
underlying securities issued by a foreign corporation. Investments in foreign
securities involve risks which are in addition to the risks inherent in domestic
investments. Foreign companies are not subject to the regulatory requirements
of U.S. companies and, as such, there may be less publicly available information
about issuers than is available in the reports and ratings published about
companies in the United States. Additionally, foreign companies are not subject
to uniform accounting, auditing and financial reporting standards. Dividends
and interest on foreign securities may be subject to foreign withholding taxes.
To the extent such taxes are not offset by credits or deductions allowed to
investors under U.S. federal income tax laws, such taxes may reduce the net
return to shareholders. Although the Fund intends to invest in securities of
foreign issuers domiciled in nations which the Adviser considers as having
stable and friendly governments, there is the possibility of expropriation,
confiscation, taxation, currency blockage or political or social instability
which could affect investments of foreign issuers domiciled in such nations.
SHORT SALES
The Fund may engage in short sales transactions, including short sales
transactions in which the Fund sells a security the Fund does not own. To
complete such a transaction, the Fund must borrow the security to make delivery
to the buyer. The Fund then is obligated to replace the security borrowed by
purchasing the security at the market price at the time of replacement. The
price at such time may be more or less than the price at which the security was
sold by the Fund. Until the security is replaced, the Fund is required to pay
to the lender amounts equal to any dividends or interest which accrue during the
period of the loan. To borrow the security, the Fund also may be required to
pay a premium, which would increase the cost of the security sold. The proceeds
of the short sale will be retained by the broker, to the extent necessary to
meet the margin requirements, until the short position is closed out.
Until the Fund closes its short position or replaces the borrowed security,
the Fund will: (a) maintain a segregated account containing cash or liquid
securities at such a level that the amount deposited in the account plus the
amount deposited with the broker as collateral will equal the current value of
the security sold short; or (b) otherwise cover the Fund's short position. Up
to 100% of the Fund's assets may be used to cover the Fund's short positions.
FUTURES CONTRACTS AND OPTIONS THEREON
The Fund may purchase and write (sell) stock index futures contracts as a
substitute for a comparable market position in the underlying securities. A
futures contract obligates the seller to deliver (and the purchaser to take
delivery of) the specified commodity on the expiration date of the contract. A
stock index futures contract obligates the seller to deliver (and the purchaser
to take) an amount of cash equal to a specific dollar amount times the
difference between the value of a specific stock index at the close of the last
trading day of the contract and the price at which the agreement is made. No
physical delivery of the underlying stocks in the index is made. It is the
practice of holders of futures contracts to close out their positions on or
before the expiration date by use of offsetting contract positions and physical
delivery is thereby avoided.
The Fund may purchase put and call options and write call options on stock
index futures contracts. When the Fund purchases a put or call option on a
futures contract, the Fund pays a premium for the right to sell or purchase the
underlying futures contract for a specified price upon exercise at any time
during the options period. By writing a call option on a futures contract, the
Fund receives a premium in return for granting to the purchaser of the option
the right to buy from the Fund the underlying futures contract for a specified
price upon exercise at any time during the option period.
Some futures and options strategies tend to hedge the Fund's equity positions
against price fluctuations, while other strategies tend to increase market
exposure. Whether the Fund realizes a gain or loss from futures activities
depends generally upon movements in the underlying stock index. The extent of
the Fund's loss from an unhedged short position in futures contracts or call
options on futures contracts is potentially unlimited. The Fund may engage in
related closing transactions with respect to options on futures contracts. The
Funds will purchase or write options only on futures contracts that are traded
on a United States exchange or board of trade.
Although the Fund intends to sell futures contracts only if there is an
active market for such contracts, no assurance can be given that a liquid market
will exist for any particular contract at any particular time. Many futures
exchanges and boards of trade limit the amount of fluctuation permitted in
futures contract prices during a single trading day. Once the daily limit has
been reached in a particular contract, no trades may be made that day at a price
beyond that limit or trading may be suspended for specified periods during the
day. Futures contract prices could move to the limit for several consecutive
trading days with little or no trading, thereby preventing prompt liquidation of
futures positions and potentially subjecting the Fund to substantial losses. If
trading is not possible, or the Fund determines not to close a futures position
in anticipation of adverse price movements, the Fund will be required to make
daily cash payments of variation margin. The risk that the Fund will be unable
to close out a futures position will be minimized by entering into such
transactions on a national exchange with an active and liquid secondary market.
INDEX OPTIONS TRANSACTIONS
The Fund may purchase put and call options and write call options on stock
indexes. A stock index fluctuates with changes in the market values of the
stock included in the index. Options on stock indexes give the holder the right
to receive an amount of cash upon exercise of the options. Receipt of this cash
amount will depend upon the closing level of the stock index upon which the
option is based being greater than (in the case of a call) or less than (in the
case of a put) the exercise price of the option. The amount of cash received,
if any, will be the difference between the closing price of the index and the
exercise price of the option, multiplied by a specified dollar multiple. The
writer (seller) of the option is obligated, in return for the premiums received
from the purchaser of the option, to make delivery of this amount to the
purchaser. Unlike the options on securities discussed below, all settlements of
index options transactions are in cash.
Some stock index options are based on a broad market index such as the S&P
500 Index, the NYSE Composite Index or the AMEX Major Market Index, or on a
narrower index such as the Philadelphia Stock Exchange Over-the-Counter Index.
Options currently are traded on the Chicago Board of Options Exchange, the AMEX
and other exchanges. Over-the-counter index options, purchased over-the-counter
options and the cover for any written over-the-counter options would be subject
to the Fund's 15% limitation on investment in illiquid securities. See
"Illiquid Securities."
The Adviser may utilize index options as a technique to leverage the
portfolio of the Fund. If the Adviser is correct in its assessment of the
future direction of stock prices, the share price of the Fund will be enhanced.
If the Adviser has the Fund take a position in options and stock prices move in
a direction contrary to the Adviser's forecast however, the Fund would incur
losses greater than the Fund would have incurred without the options position.
OPTIONS ON SECURITIES
The Fund may buy put and call options and write (sell) call options on
securities. By writing a call option and receiving a premium, the Fund may
become obligated during the term of the option to deliver the securities
underlying the option at the exercise price if the option is exercised. By
buying a put option, the Fund has the right, in return for a premium paid during
the term of the option, to sell the securities underlying the option at the
exercise price. By buying a call option, the Fund has the right, in return for
a premium paid during the term of the option, to purchase the securities
underlying the option at the exercise price. Options on securities written by
the Fund will be traded on recognized securities exchanges.
The Fund will realize a gain (or a loss) on a closing purchase transaction
with respect to a call option previously written by the Fund if the premium,
plus commission costs, paid by the Fund to purchase the put option is less (or
greater) than the premium, less commission costs, received by the Fund on the
sale of the call option. The Fund also will realize a gain if a call option
which the Fund has written lapses unexercised, because the Fund would retain the
premium.
The Fund will realize a gain (or a loss) on a closing sale transaction with
respect to a call or a put option previously purchased by the Fund if the
premium, less commission costs, received by the Fund on the sale of the call or
the put option is greater (or less) than the premium, plus commission costs,
paid by the Fund to purchase the call or the put option. If a put or a call
option which the Fund has purchased expires out-of-the-money, the option will
become worthless on the expiration date, and the Fund will realize a loss in the
amount of the premium paid, plus commission costs.
Although certain securities exchanges attempt to provide continuously liquid
markets in which holders and writers of options can close out their positions at
any time prior to the expiration of the option, no assurance can be given that a
market will exist at all times for all outstanding options purchased or sold by
the Fund. In such event, the Fund would be unable to realize its profits or
limit its losses until the Fund would exercise options it holds and the Fund
would remain obligated until options it wrote were exercised or expired.
Because option premiums paid or received by the Fund are small in relation to
the market value of the investments underlying the options, buying and selling
put and call options can be more speculative than investing directly in common
stocks.
U.S. TREASURY SECURITIES
The Fund may invest in U.S. Treasury Securities as "cover" for the investment
techniques the Fund employs. The Fund may also invest in U.S. Treasury
Securities as part of a cash reserve or for liquidity purposes. U.S. Treasury
Securities are backed by the full faith and credit of the U.S. Treasury. U.S.
Treasury Securities differ only in their interest rates, maturities and dates of
issuance. Treasury Bills have maturities of one year or less. Treasury Notes
have maturities of one to ten years and Treasury Bonds generally have maturities
of greater than ten years at the date of issuance. Yields on short-,
intermediate- and long-term U.S. Treasury Securities are dependent on a variety
of factors, including the general conditions of the money and bond markets, the
size of a particular offering and the maturity of the obligation. Debt
securities with longer maturities tend to produce higher yields and are
generally subject to potentially greater capital appreciation and depreciation
than obligations with shorter maturities and lower yields. The market value of
U.S. Treasury Securities generally varies inversely with changes in market
interest rates. An increase in interest rates, therefore, would generally
reduce the market value of the Fund's portfolio investments in U.S. Treasury
Securities, while a decline in interest rates would generally increase the
market value of a Fund's portfolio in investments in these securities.
U.S. Treasury Securities may be purchased at a discount. Such securities,
when retired, may include an element of capital gain. Capital losses may be
realized when such securities purchased at a premium are called or redeemed at a
price lower than their purchase price. Capital gains or losses also may be
realized upon the sale of U.S. Treasury Securities.
REPURCHASE AGREEMENTS
The Fund, as part of a cash reserve or to "cover" investment strategies, may
purchase repurchase agreements secured by U.S. Government Securities. Under a
repurchase agreement, the Fund purchases a debt security and simultaneously
agrees to sell the security back to the seller at a mutually agreed-upon future
price and date, normally one day or a few days later. The resale price is
greater than the purchase price, reflecting an agreed-upon market interest rate
during the purchaser's holding period. While the maturities of the underlying
securities in repurchase transactions may be more than one year, the term of
each repurchase agreement will always be less than one year. The Fund will
enter into repurchase agreements only with member banks of the Federal Reserve
system or primary dealers of U.S. Government Securities. The Adviser will
monitor the creditworthiness of each of the firms which is a party to a
repurchase agreement with the Fund. In the event of a default or bankruptcy by
the seller, the Fund will liquidate those securities (whose market value,
including accrued interest, must be at least equal to 100% of the dollar amount
invested by the Fund in each repurchase agreement) held under the applicable
repurchase agreement, which securities constitute collateral for the seller's
obligation to pay. However, liquidation could involve costs or delays and, to
the extent proceeds from the sale of these securities were less than the agreed-
upon repurchase price the Fund would suffer a loss. The Fund also may
experience difficulties and incur certain costs in exercising its rights to the
collateral and may lose the interest the Fund expected to receive under the
repurchase agreement. Repurchase agreements usually are for short periods, such
as one week or less, but may be longer. It is the current policy of the Fund to
treat repurchase agreements that do not mature within seven days as illiquid for
the purposes of its investment policies.
BORROWING
The Fund may borrow money, including borrowing for investment purposes.
Borrowing for investment is known as leveraging. Leveraging investments, by
purchasing securities with borrowed money, is a speculative technique which
increases investment risk, but also increases investment opportunity. Since
substantially all of the Fund's assets will fluctuate in value, whereas the
interest obligations on borrowings may be fixed, the net asset value per share
of the Fund when it leverages its investments will increase more when the Fund's
portfolio assets increase in value and decrease more when the Fund's portfolio
assets decrease in value than would otherwise be the case. Moreover, interest
costs on borrowings may fluctuate with changing market rates of interest and may
partially offset or exceed the returns on the borrowed funds. Under adverse
conditions, the Fund might have to sell portfolio securities to meet interest or
principal payments at a time investment considerations would not favor such
sales. The Fund intends to use leverage during periods when the Adviser
believes that the Fund's investment objective would be furthered by increasing
the Fund's investments in common stocks.
The Fund may borrow money to facilitate management of the Fund's portfolio by
enabling the Fund to meet redemption requests when the liquidation of portfolio
instruments would be inconvenient or disadvantageous. Such borrowing is not for
investment purposes and will be repaid by the Fund promptly.
As required by the Act, the Fund must maintain continuous asset coverage
(total assets, including assets acquired with borrowed funds, less liabilities
exclusive of borrowings) of 300% of all amounts borrowed. If, at any time, the
value of the Fund's assets should fail to meet this 300% coverage test, the
Fund, within three days (not including Sundays and holidays), will reduce the
amount of the Fund's borrowings to the extent necessary to meet this 300%
coverage. Maintenance of this percentage limitation may result in the sale of
portfolio securities at a time when investment considerations otherwise indicate
that it would be disadvantageous to do so.
In addition to the foregoing, the Fund is authorized to borrow money from a
bank as a temporary measure for extraordinary or emergency purposes in amounts
not in excess of 5% of the value of the Fund's total assets. This borrowing is
not subject to the foregoing 300% asset coverage requirement. The Fund is
authorized to pledge portfolio securities as the Adviser deems appropriate in
connection with any borrowings.
WARRANTS
The Fund may invest in warrants and similar rights, which are privileges
issued by corporations enabling the owners to subscribe to and purchase a
specified number of shares of the corporation at a specified price during a
specified period of time. The purchase of warrants involves the risks that the
Fund could lose the purchase value of a warrant if the right to subscribe to
additional shares is not exercised prior to the warrants expiration. Also the
purchase of warrants involves the risk that the effective price paid for the
warrant added to the subscription price of the related security may exceed the
value of the subscribed security's market price such as when there is no
movement in the level of the underlying security.
MONEY MARKET INSTRUMENTS
The Fund, as part of a cash reserve or to "cover" investment strategies, may
invest in short-term, high quality money market instruments in addition to
repurchase agreements and U.S. Treasury Securities with a remaining maturity of
397 days or less. The Fund may invest in commercial paper and other cash
equivalents rated A-1 or A-2 by Standard & Poor's Corporation ("S&P") or Prime-1
or Prime-2 by Moody's Investors Service, Inc. ("Moody's"), including commercial
paper master notes (which are demand instruments bearing interest at rates which
are fixed to known lending rates and automatically adjusted when such lending
rates change) of issuers whose commercial paper is rated A-1 or A-2 by S&P or
Prime-1 or Prime-2 by Moody's.
The Fund may also invest in securities issued by other investment companies
that invest in high quality, short-term debt securities (i.e., money market
instruments). In addition to the advisory fees and other expenses the Fund
bears directly in connection with its own operations, as a shareholder of
another investment company, the Fund would bear its pro rata portion of the
other investment company's advisory fees and other expenses, and such fees and
other expenses will be borne indirectly by the Fund's shareholders.
ILLIQUID SECURITIES
While the Fund does not anticipate doing so, it may purchase illiquid
securities, including restricted securities. The Fund will not invest more than
15% of its net assets in illiquid securities. Securities eligible to be resold
pursuant to Rule 144A under the Securities Act of 1933 may be considered liquid.
The Board of Directors of the Company has delegated to the Adviser the day-to-
day determination of the liquidity of a security although it has retained
oversight and ultimate responsibility for such determinations. Although no
definite quality criteria are used, the Board of Directors has directed the
Adviser to consider such factors as (i) the nature of the market for a security
(including the institutional private resale markets); (ii) the terms of these
securities or other instruments allowing for the disposition to a third party or
the issuer thereof (e.g. certain repurchase obligations and demand instruments);
(iii) the availability of market quotations; and (iv) other permissible factors.
Investing in Rule 144A securities could have the effect of decreasing the
liquidity of the Fund to the extent that qualified institutional buyers become,
for a time, uninterested in purchasing these securities.
PORTFOLIO TURNOVER
The Fund will generally purchase and sell securities and effect transactions
in futures contracts without regard to the length of time the security has been
held or the futures contract open and, accordingly, it can be expected that the
rate of portfolio turnover may be substantial. The Fund may sell a given
security or close a futures contract, no matter for how long or short a period
it has been held in the portfolio, and no matter whether the sale is at a gain
or loss, if the Adviser believes that it is not fulfilling its purpose. Since
investment decisions are based on the anticipated contribution of the security
in question to the Fund's investment objective, the rate of portfolio turnover
is irrelevant when the Adviser believes a change is in order to achieve those
objectives, and the Fund's annual portfolio turnover rate may vary from year to
year. The Fund's portfolio turnover rate will generally not exceed 300%.
Pursuant to Securities and Exchange Commission requirements, the portfolio
turnover rate of the Fund is calculated without regard to securities, including
short sales, options and futures contracts, having a maturity of less than one
year. The Fund may have a significant portion of its assets in short-term
options and futures contracts which generally are excluded for purposes of
calculating portfolio turnover.
High portfolio turnover in any year will result in the payment by the Fund of
above-average transaction costs and could result in the payment by shareholders
of above-average amounts of taxes on realized investment gains. Distributions
to shareholders of such investment gains, to the extent they consist of net
short-term capital gains, will be considered ordinary income for federal income
tax purposes.
ADDITIONAL RISKS
In addition to the risks discussed above, investors should understand that
there can be no assurance that the Fund will achieve its investment objective.
Many of the investments made by the Fund are subject to significant volatility.
The Fund is intended for investors who can accept this risk. An investment in
the Fund does not constitute a complete investment program. Investors may wish
to complement an investment in the Fund with other types of investments. The
fact that the Fund has a brief operating history should be considered a risk
factor.
As a result of the investment techniques used by the Fund, the Fund may have
a significant portion (up to 100%) of its assets held in a segregated account as
"cover" for the investment techniques the Fund employs. The securities
maintained in the segregated account of the Fund will be liquid securities.
These assets may not be sold while the position in the corresponding instrument
or transaction (e.g. short sale, option or futures contract) is open unless they
are replaced by similar assets. As a result, the commitment of a large portion
of the Fund's assets to "cover" investment techniques could impede portfolio
management or the Fund's ability to meet redemption requests or other current
obligations.
Participation in the options or futures markets by the Fund involves
investment risks and transaction costs to which the Fund would not be subject
absent the use of these strategies. In particular, the loss from investing in
futures contracts is potentially unlimited. Risks inherent in the use of
options, futures contracts and options on futures contracts include: (1)
adverse changes in the value of such instruments; (2) imperfect correlation
between the price of options and futures contracts and options thereon and
movements in the price of the underlying securities, index or futures contracts;
(3) the fact that the skills needed to use these strategies are different from
those needed to select portfolio securities; (4) the possible absence of a
liquid secondary market for any particular instrument at any time; and (5) the
possible need to defer closing out certain positions to avoid adverse tax
consequences.
INVESTMENT RESTRICTIONS
The Fund has adopted certain fundamental investment restrictions that may be
changed only with the approval of a majority of the Fund's outstanding shares.
These restrictions include the Fund's limitations on borrowing described under
the caption "INVESTMENT OBJECTIVE AND POLICIES" and the following restrictions:
(1) The Fund will not purchase the securities of any issuer if the purchase
would cause more than 5% of the value of the Fund's total assets to be invested
in securities of such issuer (except securities of the U.S. government or any
agency or instrumentality thereof), or purchase more than 10% of the outstanding
voting securities of any one issuer, except that up to 50% of the Fund's total
assets may be invested without regard to these limitations. As such the Fund is
classified as a non-diversified investment company under the Act. A non-
diversified portfolio may be more volatile than a diversified portfolio.
(2) The Fund will not invest 25% or more of its total assets at the time of
purchase in securities of issuers whose principal business activities are in the
same industry.
A list of the Fund's policies and restrictions, both fundamental and
nonfundamental, is set forth in the Statement of Additional Information. In
order to provide a degree of flexibility, the Fund's investment objective, as
well as other policies which are not deemed fundamental, may be modified by the
Board of Directors without shareholder approval. Any change in the Fund's
investment objective may result in the Fund having an investment objective
different from the investment objective which the shareholder considered
appropriate at the time of investment in the Fund.
MANAGEMENT OF THE FUND
As a Maryland corporation, the business and affairs of the Fund are managed
by its Board of Directors. Under an investment advisory agreement (the
"Advisory Agreement") with the Fund, Fiduciary Management, Inc. (the "Adviser"),
225 East Mason Street, Milwaukee, Wisconsin 53202, furnishes continuous
investment advisory services and management to the Fund. The Adviser is the
investment adviser to individuals and institutional clients (including
investment companies) with substantial investment portfolios. The Adviser was
organized in 1980 and is controlled by Ted D. Kellner and Donald S. Wilson.
Since that time, Mr. Kellner has served as Chairman of the Board and Chief
Executive Officer and Mr. Wilson has served as President and Treasurer of the
Adviser. Mr. Kellner has been President, Treasurer and a Director of the Fund
and Mr. Wilson has been Vice President, Secretary and a Director of the Fund
during the same period. Messrs. Kellner and Richard E. Lane are primarily
responsible for the day-to-day management of the Fund's portfolio. Mr. Kellner
has held this responsibility since the Fund commenced operations and Mr. Lane
has held this responsibility since October 1, 1997. Mr. Lane has been employed
by the Adviser since 1994. Prior to that time Mr. Lane was a Vice President of
Cleary Gull Reiland &McDevitt, Inc., a securities broker-dealer, since 1989.
The Adviser supervises and manages the investment portfolio of the Fund and
subject to such policies as the Board of Directors of the Fund may determine,
directs the purchase or sale of investment securities in the day to day
management of the Fund's investment portfolio. Under the Advisory Agreement,
the Adviser, at its own expense and without reimbursement from the Fund,
furnishes office space, and all necessary office facilities, equipment and
executive personnel for managing the Fund's investments, and bears all sales and
promotional expenses of the Fund, other than distribution expenses paid by the
Fund pursuant to the Service and Distribution Plan and expenses incurred in
complying with laws regulating the issue or sale of securities. For the
foregoing, the Adviser receives a monthly fee of 1/12th of 1.25% (1.25% per
annum) of the daily net assets of the Fund. Prior to January 1, 1998, the
Adviser received a monthly fee of 1/12th of 1% (1% per annum) of the daily net
assets of the Fund. The advisory fees paid for the period from December 16,
1996 (commencement of operations) to September 30, 1997 were equal to 1.00% of
the Fund's average net assets.
Under an Administration Agreement (the "Administration Agreement") with the
Fund, the Adviser supervises all aspects of the Fund's operations except those
performed by it pursuant to the Advisory Agreement. Under the Administration
Agreement, the Adviser, at its own expense and without reimbursement from the
Fund, furnishes office space, and all necessary office facilities, equipment and
executive personnel for supervising the Fund's operations. For the foregoing,
the Adviser receives a monthly fee of 1/12 of .2% (.2% per annum) of the first
$30,000,000 of daily net assets of the Fund, 1/12 of .1% (.1% per annum) on the
next $70,000,000 of daily net assets of the Fund and 1/12 of .05% (0.05% per
annum) of the daily net assets of the Fund over $100,000,000. The Administration
fee paid for the period from December 16, 1996 (commencement of operations) to
September 30, 1997 was equal to 0.20% of the Fund's average net assets.
The Fund pays all of its expenses not assumed by the Adviser pursuant to the
Advisory Agreement or the Administration Agreement described below including,
but not limited to, the professional costs of preparing and the cost of 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 in the
various states, the printing and distribution cost of prospectuses mailed to
existing shareholders, director and officer liability insurance, reports to
shareholders, reports to government authorities and proxy statements, interest
charges, brokerage commissions and expenses in connection with portfolio
transactions. The Fund also pays the fees of directors who are not interested
persons of the Adviser or officers or employees of the Fund, salaries of
administrative and clerical personnel, association membership dues, auditing and
accounting services, fees and expenses of any custodian or trustees having
custody of Fund assets, expenses of repurchasing and redeeming shares, printing
and mailing expenses, 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 any problems related
thereto.
DETERMINATION OF NET ASSET VALUE
The per share net asset value of the Fund is determined by dividing the total
value of its net assets (meaning its assets less its liabilities excluding
capital and surplus) by the total number of its shares outstanding at that time.
The net asset value is determined as of the close of regular trading (currently
4:00 p.m. Eastern time) on the New York Stock Exchange on each day the New York
Stock Exchange is open for trading. This determination is applicable to all
transactions in shares of the Fund prior to that time and after the previous
time as of which net asset value was determined. Accordingly, purchase orders
accepted or shares tendered for redemption prior to the close of regular trading
on a day the New York Stock Exchange is open for trading will be valued as of
the close of trading, and purchase orders accepted or shares tendered for
redemption after that time will be valued as of the close of the next trading
day.
Common stocks and securities sold short that are listed on any national stock
exchange or quoted on the Nasdaq Stock Market will be valued at the last sale
price on the date valuation is made. Price information on listed securities is
taken from the exchange where the security is primarily traded. Common stocks
which are listed on any national stock exchange or the Nasdaq Stock Market but
which are not traded on the valuation date are valued at the most recent bid
price. Securities sold short which are listed on any national stock exchange or
the Nasdaq Stock Market but which are not traded on the valuation date are
valued at the most recent asked price. Unlisted equity securities for which
market quotations are readily available will be valued at the most recent bid
price. Options purchased or written by the Fund are valued at the average of
the current bid and asked prices. The value of a futures contract equals the
unrealized gain or loss on the contract that is determined by marking the
contract to the current settlement price for a like contract acquired on the day
on which the futures contract is being valued. A settlement price may not be
moved if the market makes a limit move in which event the futures contract will
be valued at its fair value as determined by the Adviser in accordance with
procedures approved by the Board of Directors. Debt securities are valued at
the latest bid prices furnished by independent pricing services. Any securities
for which there are no readily available market quotations and other assets will
be valued at their fair value as determined in good faith by the Board of
Directors. Short-term instruments (those with remaining maturities of 60 days
or less) are valued at amortized cost, which approximates market.
PURCHASE OF SHARES
Shares of the Fund may be purchased directly from the Fund. Share purchase
application forms are included at the back of the Prospectus. The price per
share is the next determined per share net asset value after receipt of an
application. Additional purchase applications may be obtained from the Fund.
Purchase applications should be mailed directly to: FMI Focus Fund, c/o Firstar
Trust Company, P.O. Box 701, Milwaukee, Wisconsin 53201-0701. The U.S. Postal
Service and other independent delivery services are not agents of the Fund.
Therefore, deposit of purchase applications in the mail or with such services
does not constitute receipt by Firstar Trust Company or the Fund. PLEASE DO NOT
mail letters by overnight courier to the Post Office Box address. To purchase
shares by overnight or express mail, please use the following street address:
FMI Focus Fund, c/o Firstar Trust Company, Mutual Fund Services, 615 East
Michigan Street, Milwaukee, Wisconsin 53202. All applications must be
accompanied by payment in the form of a check made payable to FMI Focus Fund, or
by direct wire transfer. All purchases must be made in U.S. dollars and checks
must be drawn on U.S. banks. No cash will be accepted. Firstar Trust Company
will charge a $20 fee against a shareholder's account for any payment check
returned by the custodian. THE SHAREHOLDER WILL ALSO BE RESPONSIBLE FOR ANY
LOSSES SUFFERED BY THE FUND AS A RESULT. When a purchase is made by check
(other than a cashiers or certified check), the Fund may delay the mailing of a
redemption check until it is satisfied that the check has cleared. (It will
normally take up to 3 days to clear local personal or corporate checks and up to
7 days to clear other personal and corporate checks.) To avoid redemption
delays, purchases may be made by cashiers or certified check or by direct wire
transfers. Funds should be wired to:
Firstar Bank Milwaukee, NA
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
ABA #075000022
Credit to: Firstar Trust Company
Account #112-952-137
for further credit to: FMI Focus Fund
"name of shareholder"
"existing account number" (if any).
A WIRE TRANSFER SHOULD BE PRECEDED BY A PHONE CALL TO FIRSTAR TRUST COMPANY
1-800-811-5311, IN ORDER TO OBTAIN A CONFIRMATION NUMBER AND TO ENSURE PROMPT
AND ACCURATE HANDLING OF FUNDS. THE FUND AND ITS TRANSFER AGENT ARE NOT
RESPONSIBLE FOR THE CONSEQUENCES OF DELAYS RESULTING FROM THE BANKING OR FEDERAL
RESERVE WIRE SYSTEM, OR FROM INCOMPLETE WIRING INSTRUCTIONS. A follow up
application should be sent for all new accounts opened by wire transfer.
Applications are subject to acceptance by the Fund, and are not binding until so
accepted. The Fund does not accept telephone orders for purchase of shares and
reserves the right to reject applications in whole or in part. The Board of
Directors of the Fund has established $1,000 as the minimum initial purchase
price and $100 as the minimum for any subsequent purchase (except through
dividend reinvestment and the automatic investment plan), which minimum amounts
are subject to change at any time. Shareholders will be advised at least thirty
days in advance of any increases in such minimum amounts. Stock certificates
for shares are not issued.
Shares may be purchased through registered broker-dealers who may charge a
fee, either at the time of purchase or redemption. The fee, if charged, is
retained by the broker-dealer and not remitted to the Fund or the Adviser.
The Fund had adopted a Service and Distribution Plan (the "Plan") pursuant to
Rule 12b-1 under the Act. The Plan authorizes payments by the Fund in
connection with the distribution of its shares at an annual rate, as determined
from time to time by the Board of Directors, of up to 0.25% of the Fund's
average daily net assets. Payments made pursuant to the Plan may only be used
to pay distribution expenses in the year incurred. Amounts paid under the Plan
by the Fund may be spent by the Fund on any activities or expenses primarily
intended to result in the sale of shares of the Fund, including but not limited
to, advertising, compensation for sales and marketing activities of financial
institutions and others such as dealers and distributors, shareholder account
servicing, the printing and mailing of prospectuses to other than current
shareholders and the printing and mailing of sales literature. The Plan permits
the Fund to employ a distributor of its shares, in which event payments under
the Plan will be made to the distributor and may be spent by the distributor on
any activities or expenses primarily intended to result in the sale of shares of
the Fund, including but not limited to, compensation to, and expenses (including
overhead and telephone expenses) of, employees of the distributor who engage in
or support distribution of the Fund's shares, printing of prospectuses and
reports for other than existing shareholders, advertising and preparation and
distribution of sales literature. Allocation of overhead (rent, utilities,
etc.) and salaries will be based on the percentage of utilization in, and time
devoted to, distribution activities. If a distributor is employed by the Fund,
the distributor will directly bear all sales and promotional expenses of the
Fund, other than expenses incurred in complying with laws regulating the issue
or sale of securities. (In such event, the Fund will indirectly bear sales and
promotional expenses to the extent it makes payments under the Plan.) The Fund
has no present plans to employ a distributor. Pending the employment of a
distributor, the Fund's distribution expenses will be authorized by the officers
of the Company. To the extent any activity is one which the Fund may finance
without a plan pursuant to Rule 12b-1, the Fund may also make payments to
finance such activity outside of the Plan and not subject to its limitations.
REDEMPTION OF SHARES
A shareholder may require the Fund to redeem his shares in whole or part at
any time during normal business hours. Redemption requests must be made in
writing and directed to: FMI Focus Fund, c/o Firstar Trust Company, P.O. Box
701, Milwaukee, Wisconsin 53201-0701. The U.S. Postal Service and other
independent delivery services are not agents of the Fund. Therefore, deposit of
redemption requests in the mail or with such services does not constitute
receipt by Firstar Trust Company or the Fund. PLEASE DO NOT mail letters by
overnight courier to the Post Office Box address. Redemption requests sent by
overnight or express mail should be directed to: FMI Focus Fund, c/o Firstar
Trust Company, Mutual Fund Services, 3rd Floor, 615 East Michigan Street,
Milwaukee, Wisconsin 53202. If a redemption request is inadvertently sent to
the Fund, it will be forwarded to Firstar Trust Company, but the effective date
of redemption will be delayed until the request is received by Firstar Trust
Company. Requests for redemption by telephone or telegram and requests which
are subject to any special conditions or which specify an effective date other
than as provided herein cannot be honored.
Redemption requests should specify the name of the Fund, the number of shares
or dollar amount to be redeemed, shareholder's name, account number and the
additional requirements listed below that apply to the particular account.
TYPE OF REGISTRATION REQUIREMENTS
-------------------- ------------
Individual, Joint Tenants Redemption request signed by all
Sole Proprietor, Custodial person(s) required to sign for the
(Uniform Gift to Minors Act), account, exactly as it is
General Partnership registered.
Corporations, Associations Redemption request and a corporate
resolution, signed by person(s)
required to sign for the
account, accompanied by signature
guarantee(s).
Trusts Redemption request signed by the
trustee(s) with a signature
guarantee. (If the trustee's name
is not registered on the account, a
copy of the trust
document certified within the last
60 days is also required.)
Redemption requests from shareholders in an Individual Retirement Account
must include instructions regarding federal income tax withholding. Unless
otherwise indicated, these redemptions, as well as redemptions of other
retirement plans not involving a direct rollover to an eligible plan, will be
subject to federal income tax withholding. If a shareholder is not included in
any of the above registration categories (e.g., executors, administrators,
conservators or guardians), the shareholder should call the transfer agent,
Firstar Trust Company (1-800-811-5311), for further instructions.
Signatures need not be guaranteed unless the proceeds of redemption are
requested to be sent by wire transfer, to a person other than the registered
holder or holders of the shares to be redeemed, or to be mailed to other than
the address of record, in which case each signature on the redemption request
must be guaranteed by a commercial bank or trust company in the United States, a
member firm of the New York Stock Exchange or other eligible guarantor
institution. Redemptions will not be effective or complete until all of the
foregoing conditions, including receipt of all required documentation by Firstar
Trust Company in its capacity as transfer agent, have been satisfied.
The redemption price is the net asset value next determined after receipt by
Firstar Trust Company in its capacity as transfer agent of the written request
in proper form with all required documentation. The amount received will depend
on the market value of the investments in the Fund's portfolio at the time of
determination of net asset value, and may be more or less than the cost of the
shares redeemed. A check in payment for shares redeemed will be mailed to the
holder no later than the seventh day after receipt of the redemption request in
proper form and all required documentation except as indicated in "Purchase of
Shares" for certain redemptions of shares purchased by check.
The right to redeem shares of the Fund will be suspended for any period
during which the New York Stock Exchange is closed because of financial
conditions or any other extraordinary reason and may be suspended for any period
during which (a) trading on the New York Stock Exchange is restricted pursuant
to rules and regulations of the Securities and Exchange Commission, (b) the
Securities and Exchange Commission has by order permitted such suspension, or
(c) an emergency, as defined by rules and regulations of the Securities and
Exchange Commission, exists as a result of which it is not reasonably
practicable for the Fund to dispose of its securities or fairly to determine the
value of its net assets.
DIVIDEND REINVESTMENT
Shareholders may elect to have all income dividends and capital gains
distributions reinvested or paid in cash, or elect to have income dividends
reinvested and capital gains distributions paid in cash or capital gains
distributions reinvested and income dividends paid in cash. See the Share
Purchase Application included at the back of this Prospectus for further
information. If the shareholder does not specify an election, all income
dividends and capital gains distributions will automatically be reinvested in
full and fractional shares of the Fund, calculated to the nearest 1,000th of a
share. Shares are purchased at the net asset value in effect on the business
day after the dividend record date and are credited to the shareholder's account
on the dividend payment date. As in the case of normal purchases, stock
certificates are not issued. Shareholders will be advised of the number of
shares purchased and the price following each reinvestment. An election to
reinvest or receive dividends and distributions in cash will apply to all shares
of the Fund registered in the same name, including those previously purchased.
A shareholder may change an election at any time by notifying the Fund in
writing or by calling Firstar Trust Company at 1-800-811-5311. If such a notice
is received between a dividend declaration date and payment date, it will become
effective on the day following the payment date. The Fund may modify or
terminate its dividend reinvestment program at any time on thirty days' notice
to participants.
AUTOMATIC INVESTMENT PLAN
Shareholders wishing to invest fixed dollar amounts in the Fund on a regular
basis can make automatic purchases in amounts of $50 or more, on any date
specified by the shareholder each month or calendar quarter by using the Fund's
Automatic Investment Plan. If such date is a weekend or holiday, such purchase
shall be made on the next business day. There is no service fee for
participating in this Plan. A $20 fee will be charged by Firstar Trust Company
if sufficient funds are not available in the shareholder's account at the time
of the automatic transaction. To use this service, the shareholder must
authorize the transfer of funds from his checking or NOW account by completing
the Automatic Investment Plan application included as part of the Share Purchase
Application located at the back of the Prospectus or by calling the Fund's
office at (414) 226-4555. The Automatic Investment Plan must be implemented
with a financial institution that is a member of the Automated Clearing House.
Shareholders may change the date or amount of investments at any time by writing
to or calling Firstar Trust Company at 1-800-811-5311. The Fund reserves the
right to suspend, modify or terminate the Automatic Investment Plan without
notice.
The Automatic Investment Plan is designed to be a method to implement dollar
cost averaging. Dollar cost averaging is an investment approach providing for
the investment of a specific dollar amount on a regular basis thereby precluding
emotions dictating investment decisions. Dollar cost averaging does not insure
a profit nor protect against a loss.
SYSTEMATIC WITHDRAWAL PLAN
The Fund has available to shareholders a Systematic Withdrawal Plan, pursuant
to which a shareholder who owns Fund shares worth at least $10,000 at current
net asset value may provide that a fixed sum will be distributed to him at
regular intervals. To participate in the Systematic Withdrawal Plan, a
shareholder deposits his Fund shares with the Fund and appoints it as his agent
to effect redemptions of Fund shares held in his account for the purpose of
making monthly or quarterly withdrawal payments of a fixed amount to him out of
his account. The Systematic Withdrawal Plan does not apply to Fund shares held
in Individual Retirement Accounts or defined contribution retirement plans. An
application for participation in the Systematic Withdrawal Plan is included as
part of the Share Purchase Application located at the back of this Prospectus or
may be obtained by calling the Fund at (414) 226-4555.
The minimum amount of a withdrawal payment is $100. These payments will be
made from the proceeds of periodic redemption of shares in the account at net
asset value. Redemptions will be made at periodic intervals no more frequent
than monthly on the date specified by the shareholder or, if that day is a
weekend or holiday, on the next business day. See the Share Purchase
Application located in the back of this Prospectus for further information.
Participation in the Systematic Withdrawal Plan constitutes an election by the
shareholder to reinvest in additional Fund shares, at net asset value all income
dividends and capital gains distributions payable by the Fund on shares held in
such account, and shares so acquired will be added to such account. The
shareholder may deposit additional Fund shares in his account at any time.
Withdrawal payments cannot be considered as yield or income on the
shareholder's investment, since portions of each payment will normally consist
of a return of capital. Depending on the size or the frequency of the
disbursements requested, and the fluctuation in the value of the Fund's
portfolio, redemptions for the purpose of making such disbursements may reduce
or even exhaust the shareholder's account.
The shareholder may vary the amount or frequency of withdrawal payments or
temporarily discontinue them by notifying Firstar Trust Company in writing or by
telephone at 1-800-811-5311. To change the designated payee or payee's address,
you must notify Firstar Trust Company in writing.
EXCHANGE PRIVILEGE
A shareholder may redeem all or any portion of his Fund shares and use the
proceeds to purchase shares of Fiduciary Capital Growth Fund, Inc., another
mutual fund managed by the Adviser, or Portico Money Market Fund, a money market
mutual fund not affiliated with the Fund or the Adviser, if such shares are
offered in his state of residence. The Portico Money Market Fund is scheduled
to change its name to ''Firstar Money Market Fund'' on February 1, 1998. The
redemption of shares of the Fund and the purchase of shares of Fiduciary Capital
Growth Fund, Inc. and/or Portico Money Market Fund will be effected at the
respective net asset values of such funds. An exchange transaction is a sale
and purchase of shares for federal income tax purposes and may result in the
realization of a capital gain or loss. Prior to exercising the Exchange
Privilege a shareholder should obtain and carefully read the prospectus for
Fiduciary Capital Growth Fund, Inc. and/or Portico Money Market Fund. The
Exchange Privilege does not in any way constitute an offering of, or
recommendation on the part of the Adviser or the Fund or Fiduciary Capital
Growth Fund, Inc. of, an investment in Portico Money Market Fund. The
registration of both the account from which the exchange is being made and the
account to which the exchange is made must be identical.
Exchange requests must be made in writing. Exchange request forms may be
obtained by writing the Fund or by calling (414) 226-4555. Written requests
should include the account numbers for both the Fund and Fiduciary Capital
Growth Fund, Inc. or Portico Money Market Fund, if an account is already opened,
and the amount of the exchange. If a new account is to be opened by the
exchange, the registration must be identical to that of the original account.
The Fund reserves the right upon prior notice (except as provided below) to
suspend, limit, modify or terminate the Exchange Privilege or its use in any
manner by any person or class. In particular, since an excessive number of
exchanges may be disadvantageous to the Fund, the Fund reserves the right to
terminate the Exchange Privilege of any shareholder who makes more than five
exchanges of shares in a year or three in a calendar quarter. The Fund will not
notify any such shareholder in advance of terminating its Exchange Privilege.
RETIREMENT PLANS
INDIVIDUAL RETIREMENT ACCOUNTS
Individual shareholders may establish their own tax-sheltered Individual
Retirement Accounts ("IRA"). The Fund offers three types of IRAs, including the
Traditional IRA, that can be adopted by executing the appropriate Internal
Revenue Service ("IRS") Form.
Traditional IRA. In a Traditional IRA, amounts contributed to the IRA may be
tax deductible at the time of contribution depending on whether the shareholder
is an "active participant" in an employer-sponsored retirement plan and the
shareholder's income. Distributions from a Traditional IRA will be taxed at
distribution except to the extent that the distribution represents a return of
the shareholder's own contributions for which the shareholder did not claim (or
was not eligible to claim) a deduction. Distributions prior to age 59-1/2 may be
subject to an additional 10% tax applicable to certain premature distributions.
Distributions must commence by April 1 following the calendar year in which the
shareholder attains age 70-1/2. Failure to begin distributions by this date (or
distributions that do not equal certain minimum thresholds) may result in
adverse tax consequences.
Roth IRA. In a Roth IRA (sometimes known as American Dream IRA), amounts
contributed to the IRA are taxed at the time of contribution, but distributions
from the IRA are not subject to tax if the shareholder has held the IRA for
certain minimum periods of time (generally, until age 59-1/2). Shareholders
whose incomes exceed certain limits are ineligible to contribute to a Roth IRA.
Distributions that do not satisfy the requirements for tax-free withdrawal are
subject to income taxes (and possibly penalty taxes) to the extent that the
distribution exceeds the shareholder's contributions to the IRA. The minimum
distribution rules applicable to Traditional IRAs do not apply during the
lifetime of the shareholder. Following the death of the shareholder, certain
minimum distribution rules apply.
For Traditional and Roth IRAs, the maximum annual contribution generally is
equal to the lesser of $2,000 or 100% of the shareholder's compensation (earned
income). An individual may also contribute to a Traditional IRA or Roth IRA on
behalf of his or her spouse provided that the individual has sufficient
compensation (earned income). Contributions to a Traditional IRA reduce the
allowable contribution under a Roth IRA, and contributions to a Roth IRA reduce
the allowable contribution to a Traditional IRA.
Education IRA. In an Education IRA, contributions are made to an IRA
maintained on behalf of a beneficiary under age 18. The maximum annual
contribution is $500 per beneficiary. The contributions are not tax deductible
when made. However, if amounts are used for certain educational purposes,
neither the contributor nor the beneficiary of the IRA are taxed upon
distribution. The beneficiary is subject to income (and possibly penalty taxes)
on amounts withdrawn from an Education IRA that are not used for qualified
educational purposes. Shareholders whose income exceeds certain limits are
ineligible to contribute to an Education IRA.
Under current IRS regulations, an IRA applicant must be furnished a
disclosure statement containing information specified by the IRS. The applicant
generally has the right to revoke his account within seven days after receiving
the disclosure statement and obtain a full refund of his contributions. The
custodian may, in its discretion, hold the initial contribution uninvested until
the expiration of the seven-day revocation period. The custodian does not
anticipate that it will exercise its discretion but reserves the right to do so.
SIMPLIFIED EMPLOYEE PENSION PLAN
A Traditional IRA may also be used in conjunction with a Simplified Employee
Pension Plan ("SEP-IRA"). A SEP-IRA is established through execution of Form
5305-SEP together with a Traditional IRA established for each eligible employee.
Generally, a SEP-IRA allows an employer (including a self-employed individual)
to purchase shares with tax deductible contributions not exceeding annually for
any one participant 15% of compensation (disregarding for this purpose
compensation in excess of $160,000 per year). The $160,000 compensation limit
applies for 1998 and is adjusted periodically for cost of living increases. A
number of special rules apply to SEP Plans, including a requirement that
contributions generally be made on behalf of all employees of the employer
(including for this purpose a sole proprietorship or partnership) who satisfy
certain minimum participation requirements.
SIMPLE IRA
An IRA may also be used in connection with a SIMPLE Plan established by the
shareholder's employer (or by a self-employed individual). When this is done,
the IRA is known as a SIMPLE IRA, although it is similar to a Traditional IRA
with the exceptions described below. Under a SIMPLE Plan, the shareholder may
elect to have his or her employer make salary reduction contributions of up to
$6,000 per year to the SIMPLE IRA. The $6,000 limit applies for 1997 and is
adjusted periodically for cost of living increases. In addition, the employer
will contribute certain amounts to the shareholder's SIMPLE IRA, either as a
matching contribution to those participants who make salary reduction
contributions or as a non-elective contribution to all eligible participants
whether or not making salary reduction contributions. A number of special rules
apply to SIMPLE Plans, including (1) a SIMPLE Plan generally is available only
to employers with fewer than 100 employees; (2) contributions must be made on
behalf of all employees of the employer (other than bargaining unit employees)
who satisfy certain minimum participation requirements; (3) contributions are
made to a special SIMPLE IRA that is separate and apart from the other IRAs of
employees; (4) the distribution excise tax (if otherwise applicable) is
increased to 25% on withdrawals during the first two years of participation in a
SIMPLE IRA; and (5) amounts withdrawn during the first two years of
participation may be rolled over tax-free only into another SIMPLE IRA (and not
to a Traditional IRA or to a Roth IRA). A SIMPLE IRA is established by executing
Form 5304-SIMPLE together with an IRA established for each eligible employee.
403(b)(7) CUSTODIAL ACCOUNT
A 403(b)(7) Custodial Account is available for use in conjunction with the
403(b)(7) program established by certain educational organizations and other
organizations that are exempt from tax under 501(c)(3) of the Internal Revenue
Code as amended (the "Code"). Amounts contributed to the custodial account in
accordance with the employer's 403(b)(7) program will be invested on a tax-
deductible basis in shares of the Fund. Various contribution limits apply with
respect to 403(b)(7) arrangements.
DEFINED CONTRIBUTION RETIREMENT PLAN (401(k))
A prototype defined contribution plan is available for employers who wish to
purchase shares of the Fund with tax deductible contributions. The plan consists
of both profit sharing and money purchase pension components. The profit sharing
component includes a Section 401(k) cash or deferred arrangement for employers
who wish to allow eligible employees to elect to reduce their compensation and
have such amounts contributed to the plan. The limit on employee salary
reduction contributions is $10,000 annually (as adjusted for cost-of-living
increases) although lower limits may apply as a result of non-discrimination
requirements incorporated into the plan. The Fund has received an opinion letter
from the IRS holding that the form of the prototype defined contribution
retirement plan is acceptable under Section 401 of the Code. The maximum annual
contribution that may be allocated to the account of any participant is
generally the lesser of $30,000 or 25% of compensation (earned income).
Compensation in excess of $160,000 (as periodically indexed for cost-of-living
increases) is disregarded for this purpose. The maximum amount that is
deductible by the employer depends upon whether the employer adopts both the
profit sharing and money purchase components of the plan, or only one component.
RETIREMENT PLAN FEES
Firstar Trust Company, Milwaukee, Wisconsin, serves as trustee or custodian
of the retirement plans. Firstar invests all cash contributions, dividends and
capital gains distributions in shares of the Fund. For such services, the
following fees are charged against the accounts of participants; $12.50 annual
maintenance fee per participant account; $15 for transferring to a successor
trustee or custodian; $15 for distribution(s) to a participant; and $15 for
refunding any contribution in excess of the deductible limit. Firstar Trust
Company's fee schedule may be changed upon written notice.
Requests for information and forms concerning the retirement plans should be
directed to the Fund. Because a retirement program may involve commitments
covering future years, it is important that the investment objective of the Fund
be consistent with the participant's retirement objectives. Premature withdrawal
from a retirement plan will result in adverse tax consequences. Consultation
with a competent financial and tax adviser regarding the retirement plans is
recommended.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund will endeavor to qualify annually for and elect tax treatment
applicable to a registered investment company under Subchapter M of the Code.
Pursuant to the qualification requirements of Subchapter M, the Fund intends
normally to distribute substantially all of its net investment income and net
realized capital gains, if any, less any available capital loss carryover, to
its shareholders annually so as to avoid paying income tax on its net investment
income and net realized capital gains or being subject to a federal excise tax
on undistributed net investment income and net realized capital gains. For
federal income tax purposes, distributions by the Fund, whether invested in
additional shares of Common Stock or received in cash, will be taxable to the
Fund's shareholders except those shareholders that are not subject to tax on
their income. Shareholders will be notified annually as to the federal tax
status of dividends and distributions. Distributions and redemptions may also
be taxed under state and local tax laws which may differ from the Code.
BROKERAGE TRANSACTIONS
The Advisory Agreement authorizes the Adviser to select the brokers or
dealers that will execute the purchases and sales of the Fund's portfolio
securities. In placing purchase and sale orders for the Fund, it is the policy
of the Adviser to seek the best execution of orders at the most favorable price
in light of the overall quality of brokerage and research services provided.
The Advisory Agreement permits the Adviser to cause the Fund to pay a broker
which provides brokerage and research services to the Adviser a commission for
effecting securities transactions in excess of the amount another broker would
have charged for executing the transaction, provided the Adviser believes this
to be in the best interests of the Fund. The Fund may place portfolio orders
with broker-dealers who recommend the purchase of Fund shares to clients if the
Adviser believes the commission and transaction quality are comparable to that
available from other brokers and allocate portfolio brokerage on that basis.
CAPITAL STRUCTURE
The Company's Articles of Incorporation permit the Board of Directors to
issue 500,000,000 shares of common stock. The Board of Directors has the power
to designate one or more classes ("series") of shares of common stock and to
classify or reclassify any unissued shares with respect to such series.
Currently the shares of the Fund are the only class of shares being offered by
the Company. Shareholders are entitled: (I) to one vote per full share; (ii)
to such distributions as may be declared by the Company's Board of Directors out
of funds legally available; and (iii) upon liquidation, to participate ratably
in the assets available for distribution. There are no conversion or sinking
fund provisions applicable to the shares, and the holders have no preemptive
rights and may not cumulate their votes in the election of directors.
Consequently the holders of more than 50% of the shares of the Fund voting for
the election of directors can elect the entire Board of Directors and in such
event the holders of the remaining shares voting for the election of directors
will not be able to elect any person or persons to the Board of Directors. The
shares are redeemable and are transferable. All shares issued and sold by the
Fund will be fully paid and nonassessable. Fractional shares entitle the holder
to the same rights as whole shares. The Fund will not issue certificates
evidencing shares. Instead the shareholder's account will be credited with the
number of shares purchased, relieving shareholders of responsibility for
safekeeping of certificates and the need to deliver them upon redemption.
Written confirmations are issued for all purchases of shares. Firstar Trust
Company, 615 East Michigan Street, Milwaukee, Wisconsin 53202 acts as the
Fund's transfer agent and dividend disbursing agent. By virtue of their stock
ownership Ted D. Kellner and Donald S. Wilson are deemed to "control" the Fund
for purposes of the Act.
The Maryland Business Corporation Law permits registered investment
companies, such as the Fund, to operate without an annual meeting of
shareholders under specified circumstances if an annual meeting is not required
by the Act. The Fund has adopted the appropriate provisions in its Bylaws and
does not anticipate holding an annual meeting of shareholders to elect directors
unless otherwise required by the Act. The Fund has also adopted provisions in
its Bylaws for the removal of directors by its shareholders.
SHAREHOLDER REPORTS
Shareholders will be provided at least semi-annually with a report showing
the Fund's portfolio and other information and annually after the close of the
Fund's fiscal year, which ends September 30, with an annual report containing
audited financial statements. Shareholders who have questions about the Fund
should call Firstar Trust Company, 1-800-811-5311 or (414) 765-4124 or write to:
FMI Focus Fund, 225 East Mason Street, Milwaukee, Wisconsin 53202, Attention:
Secretary.
PERFORMANCE INFORMATION
The Fund may provide from time to time in advertisements, reports to
shareholders and other communications with shareholders its average annual total
return. An average annual total return refers to the rate of return which, if
applied to an initial investment in the Fund at the beginning of a stated period
and compounded over the period, would result in the redeemable value of the
investment in the Fund at the end of the stated period assuming reinvestment of
all dividends and distributions and reflecting the effect of all recurring fees.
The Fund may also provide "aggregate" total return information for various
periods, representing the cumulative change in value of an investment in the
Fund for a specific period (again reflecting changes in share price and assuming
reinvestment of dividends and distributions).
Any reported performance results will be based on historical earnings and
should not be considered as representative of the performance of the Fund in the
future. An investment in the Fund will fluctuate in value and at redemption its
value may be more or less than the initial investment. The Fund may compare its
performance to other mutual funds with similar investment objectives and to the
industry as a whole, as reported by Lipper Analytical Services, Inc., Money,
Forbes, Business Week and Barron's magazines and The Wall Street Journal.
(Lipper Analytical Services, Inc. is an independent service that ranks over
1,000 mutual funds based upon total return performance.) The Fund may also
compare its performance to the Dow Jones Industrial Average, Nasdaq Composite
Index, Nasdaq Industrials Index, Value Line Composite Index, the Standard &
Poor's 500 Stock Index and the Consumer Price Index. Such comparisons may be
made in advertisements, shareholder reports or other communications to
shareholders.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
For the fiscal year ended September 30, 1997, most stock market indices made
significant advances. Strong corporate earnings, lower interest rates, and large
cash flows into equity mutual funds were important contributors.
The backdrop of strong earnings and the declining interest rates was
particularly conducive for financial stocks, in which the Fund had a significant
percent of its assets invested. The Fund also had a large investment in Bucyrus
International, which was bought out at a large premium over the market price.
The above factors were meaningful contributors to the Fund's dramatic
outperformance of all market indices.
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
FMI FOCUS FUND, STANDARD & POOR'S 500 INDEX, AND RUSSELL 2000 INDEX
Date FMI Focus Standard & Russell 2000
Fund Poor's 500 Index(1)<F12> Index(2)<F13>
12/16/96*<F11> $10,000 $10,000 $10,000
12/31/96 $10,245 $10,278 $10,346
3/31/97 $10,736 $10,547 $9,811
6/30/97 $12,709 $12,388 $11,401
9/30/97 $16,796 $13,332 $13,098
AVERAGE ANNUAL TOTAL RETURN
Since inception 12/16/96 +68.0%
*<F11>inception date 12/16/196
Past performance is not predictive of future performance.
(1)<F12>The Standard & Poor's 500 Index consists of 500 selected common stocks,
most of which are listed on the New York Stock Exchange. The Standard & Poor's
Ratings Group designates the stocks to be included in the Index on a statistical
basis. A particular stock's weighting in the Index is based on its relative
total market value (i.e., its market price per share times the number of shares
outstanding). Stocks may be added or deleted from the Index from time to time.
(2)<F13>The Russell 2000 Index is an index comprised of 2,000 publicly traded
small capitalization common stocks that are ranked in terms of capitalization
below the large and mid-range capitalization sectors of the United States equity
market. The Russell 2000 Index is a trademark/service mark of the Frank Russell
Company.
FMI FOCUS FUND
- --- This is a follow-up application
(Investment by wire transfer. See page 11 of the Prospectus.)
SHARE PURCHASE APPLICATION
Minimum Initial Investment $1,000
Minimum Subsequent Investment $100
Mail Completed Application to:
FMI Focus Fund
c/o Firstar Trust Company
Mutual Fund Services
P.O. Box 701
Milwaukee, Wisconsin 53201-0701
Overnight Express Mail to:
FMI Focus Fund
c/o Firstar Trust Company
Mutual Fund Services, 3rd Floor
615 E. Michigan Street
Milwaukee, Wisconsin 53202
Use this form for individual, custodial, trust, profit-sharing or pension plan
accounts, including self-directed IRA, SEP/IRA and 401(k) plans. DO NOT USE
THIS FORM FOR FMI FOCUS FUND-SPONSORED 401(K), 403(B)(7), SEP/IRA, SIMPLE IRA,
IRAs OR DEFINED CONTRIBUTION PLANS (KEOGH OR CORPORATE PROFIT-SHARING AND MONEY-
PURCHASE) WHICH REQUIRE FORMS AVAILABLE FROM THE FUND.
For information please call 1-800-811-5311 or 1-414-765-4124.
- ------------------------------------------------------------------------------
o ACCOUNT REGISTRATION
Individual ---
Name
----------------------------------------------------------------------------
Social Security Number Citizen of --- U.S. --- Other
-----------------------------------------------------------------------------
Joint Owner*<F4> ---
Name
-----------------------------------------------------------------------------
Social Security Number Citizen of --- U.S. --- Other
-----------------------------------------------------------------------------
Gift to Minor ---
Custodian
-----------------------------------------------------------------------------
Minor Minor's Birthdate
-----------------------------------------------------------------------------
Minor's Social Security Number Citizen of --- U.S. --- Other
----------------------------------------------------------------------------
Corporation, Partnership or Other Entity ---
Name of Entity
-----------------------------------------------------------------------------
Taxpayer Identification Number
-----------------------------------------------------------------------------
o A corporate resolution form or certificate is required for corporate
accounts.
-----------------------------------------------------------------------------
Trust, Estate or Guardianship ---
*<F4>(Registration will be Joint Tenants with Rights of Survivorship
(JTWROS) unless otherwise specified)
Name
-----------------------------------------------------------------------------
Name of Fiduciary(s)
-----------------------------------------------------------------------------
Taxpayer Identification Number Date of Trust
-----------------------------------------------------------------------------
o Additional documentation and certification may be requested.
- ------------------------------------------------------------------------------
o MAILING ADDRESS
--- Send Duplicate Confirmations To:
- ------------------------------------------------------------------------------
Street, Apt. Name
- ------------------------------------------------------------------------------
City, State, Zip Code Street, Apt.
- ------------------------------------------------------------------------------
Daytime Phone Number City, State, Zip Code
- ------------------------------------------------------------------------------
o INVESTMENT, PAYMENT FOR INITIAL PURCHASE AND DISTRIBUTIONS
By --- check
or --- wire**<F5>
The minimum initial Investment is $1,000 for shares of FMI Focus Fund.
Minimum additions to the Fund are $100.
DISTRIBUTION OPTIONS
Capital Gains Capital Gains
Capital Gains Reinvested in Cash Capital Gains
& Dividends & Dividends & Dividends & Dividends
Amount Reinvested in Cash Reinvested In Cash
$ ---- ---- ---- ----
- ------------------------------------------------------------------------------
(If no dividend option is checked, dividends and capital gains will be
reinvested.)
- ---- If you would like your cash payments automatically deposited to your
checking or savings account, please check the box at left and attach
a voided check.
**<F5>Indicate date and total amount of wire:
Date------------------------------ Amount $--------------------------
WIRING INSTRUCTIONS: The wire transfer should be preceded by a telephone call
to Firstar Trust Company at 1-800-811-5311 or 1-414-765-4124 in order to obtain
a confirmation number and to ensure prompt and accurate handling of funds. The
Fund and its transfer agent are not responsible for the consequences of delays
resulting from the banking or Federal Reserve Wire System, or from incomplete
wiring instructions. A completed share purchase application also must be sent to
FMI Focus Fund at the above address immediately following the investment to
establish a NEW account by wire transfer. A purchase request for the Fund should
be wired through the Federal Reserve System as follows:
Firstar Bank of Milwaukee, N.A.
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
ABA Number 0750-00022
For credit to Firstar Trust Company
Account Number 112-952-137
For further credit to: FMI Focus Fund
Shareholder name:-------------------------------------------
Shareholder account number (if known): ---------------------
- ------------------------------------------------------------------------------
o EXCHANGE PRIVILEGE
If investment is by exchange, such exchange should be made from:
- --- Fiduciary Capital Growth Fund --- Portico Money Market Fund
Account# ------------------------ Account# ----------------------
(I understand that exchanges between the Funds are taxable transactions.)
Amount of Exchange $ --------------or Number of Shares --------------------
- ------------------------------------------------------------------------------
o AUTOMATIC INVESTMENT PLAN
Important: Attach an unsigned, voided check (for checking accounts) or a savings
account deposit slip here, and complete this form.
I would like to establish an Automatic Investment Plan for FMI Focus Fund as
described in the Prospectus. Based on these instructions, Firstar Trust
Company, the Transfer Agent for FMI Focus Fund, will automatically transfer
money directly from my checking or NOW account on the --- day of the month, or
the first business day thereafter, to purchase shares in FMI Focus Fund. If the
automatic purchase cannot be made due to insufficient funds or stop payment, a
$20 fee will be assessed.
Please start the Automatic Investment Plan on this month, day and year: --------
- -----------------------
Please debit my bank account $------------- ($50 minimum) on a --- monthly ---
quarterly basis, to be invested in my FMI Focus Fund account (account number,
if known----------------------------------).
I (we) authorize you via the ACH Network to honor all debit entries initiated
- --- monthly OR --- quarterly through Firstar Bank of Milwaukee, N.A. on behalf
of the Firstar Trust Company. All such debits are subject to sufficient
collected funds in my account to pay the debit when presented.
- -------------------------------------------------------------------------------
Name(s) on your Bank Account Signature of Bank Account Owner
- -------------------------------------------------------------------------------
Signature of Joint Owner (if
any)
- -----------------------------------------
Account Number
- ------------------------------------------------------------------------------
o SYSTEMATIC WITHDRAWALS
A balance of at least $10,000 is required for this option.
I would like to withdraw from FMI Focus Fund -------------- (exact dollars
per payment - $100 minimum)
- --- I would like to have payments made to me on or about the --- day of each
month
OR
- --- I would like to have payments made to me on or about the --- day of these
months:
- --- Jan. --- Feb. --- Mar. --- Apr. --- May --- June
- --- July --- Aug. --- Sept. --- Oct. --- Nov. --- Dec.
- --- I would like my payments automatically deposited to my checking or savings
account. I have attached a voided check.
- ------------------------------------------------------------------------------
o SIGNATURES AND CERTIFICATION
Under the penalty of perjury, I certify that (1) the Social Security Number or
Taxpayer Identification Number shown on this form is my correct Taxpayer
Identification Number, and (2) I am not subject to backup withholding either
because I have not been notified by the Internal Revenue Service (IRS) that I
am subject to backup withholding as a result of a failure to report all
interest or dividends, or the IRS has notified me that I am no longer subject
to backup withholding. The IRS does not require your consent to any provision
of this document other than the certifications required to avoid backup
withholding.
- ------------------------------------------------------------------------------
Signature*<F6> Signature of Co-Owner, if any
- ------------------------------------
Date
*<F6>If shares are to be registered in (1) joint names, both persons should
sign, (2) a custodian for a minor, the custodian should sign, (3) a trust, the
trustee(s) should sign, or (4) a corporation or other entity, an officer should
sign and print name and title on space provided below.
- ------------------------------------------------------------------------------
Print name and title of officer signing for a corporation or other entity.
FMI FOCUS FUND
225 East Mason Street
Milwaukee, Wisconsin 53202
414-226-4555
BOARD OF DIRECTORS
BARRY K. ALLEN
GEORGE D. DALTON
PATRICK J. ENGLISH
TED D. KELLNER
THOMAS W. MOUNT
DONALD S. WILSON
INVESTMENT ADVISER AND ADMINISTRATOR
FIDUCIARY MANAGEMENT, INC.
225 East Mason Street
Milwaukee, Wisconsin 53202
CUSTODIAN, TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
FIRSTAR TRUST COMPANY
615 East Michigan Street
Milwaukee, Wisconsin 53202
1-800-811-5311
or
414-765-4124
INDEPENDENT ACCOUNTANTS
PRICE WATERHOUSE LLP
100 East Wisconsin Avenue
Suite 1500
Milwaukee, Wisconsin 53202
LEGAL COUNSEL
FOLEY & LARDNER
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION December 31, 1997
FMI FUNDS, INC.
225 East Mason Street
Milwaukee, Wisconsin 53202
This Statement of Additional Information is not a prospectus and
should be read in conjunction with the prospectus of FMI Funds, Inc.,
dated December 31, 1997. Requests for copies of the Prospectus should be
made by writing to FMI Funds, Inc., 225 East Mason Street, Milwaukee,
Wisconsin 53202, Attention: Secretary or by calling (414) 226-4555.
FMI FUNDS, INC.
Table of Contents
Page No.
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . 1
INVESTMENT CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . 3
DIRECTORS AND OFFICERS OF THE CORPORATION . . . . . . . . . . . . . . 8
PRINCIPAL STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . 11
INVESTMENT ADVISER AND ADMINISTRATOR . . . . . . . . . . . . . . . . 12
DETERMINATION OF NET ASSET VALUE AND PERFORMANCE . . . . . . . . . . 13
DISTRIBUTION OF SHARES . . . . . . . . . . . . . . . . . . . . . . . 14
ALLOCATION OF PORTFOLIO BROKERAGE . . . . . . . . . . . . . . . . . . 15
CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
STOCKHOLDER MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . 18
DESCRIPTION OF SECURITIES RATINGS . . . . . . . . . . . . . . . . . . 19
INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . 20
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . 21
No person has been authorized to give any information or to make
any representations other than those contained in this Statement of
Additional Information and the Prospectus dated December 31, 1997 and, if
given or made, such information or representations may not be relied upon
as having been authorized by FMI Funds, Inc.
This Statement of Additional Information does not constitute an
offer to sell securities.
INVESTMENT RESTRICTIONS
As set forth in the Prospectus dated December 31, 1997 of FMI
Funds, Inc. (the "Corporation") under the caption "Investment Objective
and Policies", the investment objective of FMI Focus Fund (the "Fund") is
capital appreciation. Consistent with its investment objective, the Fund
has adopted the following investment restrictions which are matters of
fundamental policy and cannot be changed without approval of the holders
of the lesser of: (i) 67% of the Fund's shares present or represented at
a stockholders meeting at which the holders of more than 50% of such
shares are present or represented; or (ii) more than 50% of the
outstanding shares of the Fund.
1. The Fund will not purchase securities on margin (except for
such short term credits as are necessary for the clearance of
transactions); provided, however, that the Fund may (i) borrow money to
the extent set forth in investment restriction no. 3; (ii) purchase or
sell futures contracts and options on futures contracts; (iii) make
initial and variation margin payments in connection with purchases or
sales of futures contracts or options on futures contracts; and (iv) write
or invest in put or call options.
2. The Fund may sell securities short and write put and call
options to the extent permitted by the Investment Company Act of 1940 (the
"Act").
3. The Fund may borrow money or issue senior securities to the
extent permitted by the Act.
4. The Fund may pledge or hypothecate its assets to secure its
borrowings.
5. The Fund will not lend money (except by purchasing publicly
distributed debt securities, purchasing securities of a type normally
acquired by institutional investors or entering into repurchase
agreements) and will not lend its portfolio securities.
6. The Fund will not make investments for the purpose of
exercising control or management of any company.
7. The Fund will not purchase securities of any issuer (other
than the United States or an instrumentality of the United States) if, as
a result of such purchase, the Fund would hold more than 10% of any class
of securities, including voting securities, of such issuer or more than 5%
of the Fund's assets, taken at current value, would be invested in
securities of such issuer, except that up to 50% of the Fund's total
assets may be invested without regard to these limitations.
8. The Fund will not invest 25% or more of the value of its
total assets, determined at the time an investment is made, exclusive of
U.S. government securities, in securities issued by companies primarily
engaged in the same 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 an officer, director or other affiliated person of its
investment adviser.
10. The Fund will not act as an underwriter or distributor of
securities other than shares of the Fund (except to the extent that the
Fund may be deemed to be an underwriter within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"), in the
disposition of restricted securities).
11. The Fund will not purchase any interest in any oil, gas or
other mineral leases or any interest in any oil, gas or any other mineral
exploration or development program.
12. The Fund will not purchase or sell real estate or real
estate mortgage loans or real estate limited partnerships.
13. The Fund will not purchase or sell commodities or commodity
contracts, except that the Fund may enter into futures contracts and
options on futures contracts.
The Fund has adopted certain other investment restrictions which
are not fundamental policies and which may be changed by the Corporation's
Board of Directors without stockholder approval. These additional
restrictions are as follows:
1. The Fund will not invest more than 15% of the value of its
net assets in illiquid securities.
2. The Fund's investments in warrants will be limited to 5% of
the Fund's net assets. Included within such 5%, but not to exceed 2% of
the value of the Fund's net assets, may be warrants which are not listed
on either the New York Stock Exchange or the American Stock Exchange.
3. The Fund will not purchase the securities of other
investment companies except: (a) as part of a plan of merger,
consolidation or reorganization approved by the stockholders of the Fund;
(b) securities of registered open-end investment companies that invest
exclusively in high quality, short-term debt securities; or (c) securities
of registered closed-end investment companies on the open market where no
commission results, other than the usual and customary broker's
commission. No purchases described in (b) and (c) will be made if as a
result of such purchases (i) the Fund and its affiliated persons would
hold more than 3% of any class of securities, including voting securities,
of any registered investment company; (ii) more than 5% of the Fund's net
assets would be invested in shares of any one registered investment
company; and (iii) more than 10% of the Fund's net assets would be
invested in shares of registered investment companies.
The aforementioned percentage restrictions on investment or
utilization of assets refer to the percentage at the time an investment is
made. If these restrictions (other than those relating to borrowing of
money or issuing senior securities) are adhered to at the time an
investment is made, and such percentage subsequently changes as a result
of changing market values or some similar event, no violation of the
Fund's fundamental restrictions will be deemed to have occurred. Any
changes in the Fund's investment restrictions made by the Board of
Directors will be communicated to stockholders prior to their
implementation.
INVESTMENT CONSIDERATIONS
Illiquid Securities
The Fund may invest up to 15% of its net assets in securities
for which there is no readily available market ("illiquid securities").
The 15% limitation includes certain securities whose disposition would be
subject to legal restrictions ("restricted securities"). However certain
restricted securities that may be resold pursuant to Rule 144A under the
Securities Act may be considered liquid. The Board of Directors of the
Corporation has delegated to the Adviser the day-to-day determination of
the liquidity of a security although it has retained oversight and
ultimate responsibility for such determinations. Although no definite
quality criteria are used, the Board of Directors has directed the Adviser
to consider such factors as (i) the nature of the market for a security
(including the institutional private resale markets); (ii) the terms of
these securities or other instruments allowing for the disposition to a
third party or the issuer thereof (e.g. certain repurchase obligations and
demand instruments); (iii) the availability of market quotations; and (iv)
other permissible factors.
Restricted securities may be sold in private negotiated or other
exempt transactions or in a public offering with respect to which a
registration statement is in effect under the Securities Act. When
registration is required, the Fund may be obligated to pay all or part of
the registration expenses and a considerable time may elapse between the
decision to sell and the sale date. If, during such period, adverse
market conditions were to develop, the Fund might obtain a less favorable
price than the price which prevailed when it decided to sell. Restricted
securities will be priced at fair value as determined in good faith by the
Board of Directors.
Futures Contracts and Options Thereon
The Fund may purchase and write (sell) stock index futures
contracts as a substitute for a comparable market position in the
underlying securities. A futures contract obligates the seller to deliver
(and the purchaser to take delivery of) the specified commodity on the
expiration date of the contract. A stock index futures contract obligates
the seller to deliver (and the purchaser to take) an amount of cash equal
to a specific dollar amount times the difference between the value of a
specific stock index at the close of the last trading day of the contract
and the price at which the agreement is made. No physical delivery of the
underlying stocks in the index is made. It is the practice of holders of
futures contracts to close out their positions on or before the expiration
date by use of offsetting contract positions and physical delivery is
thereby avoided.
The Fund may purchase put and call options and write call
options on stock index futures contracts. When the Fund purchases a put
or call option on a futures contract, the Fund pays a premium for the
right to sell or purchase the underlying futures contract for a specified
price upon exercise at any time during the options period. By writing a
call option on a futures contract, the Fund receives a premium in return
for granting to the purchaser of the option the right to buy from the Fund
the underlying futures contract for a specified price upon exercise at any
time during the option period.
Some futures and options strategies tend to hedge the Fund's
equity positions against price fluctuations, while other strategies tend
to increase market exposure. Whether the Fund realizes a gain or loss
from futures activities depends generally upon movements in the underlying
stock index. The extent of the Fund's loss from an unhedged short
position in futures contracts or call options on futures contracts is
potentially unlimited. The Fund may engage in related closing
transactions with respect to options on futures contracts. The Funds will
purchase or write options only on futures contracts that are traded on a
United States exchange or board of trade.
The Fund may purchase and sell futures contracts and options
thereon only to the extent that such activities would be consistent with
the requirements of Section 4.5 of the regulations under the Commodity
Exchange Act promulgated by the Commodity Futures Trading Commission (the
"CFTC Regulations"), under which the Fund would be excluded from the
definition of a "commodity pool operator." Under Section 4.5 of the CFTC
Regulations, the Fund may engage in futures transactions, either for "bona
fide hedging" purposes, as this term is defined in the CFTC Regulations,
or for non-hedging purposes to the extent that the aggregate initial
margins and premiums required to establish such non-hedging positions do
not exceed 5% of the liquidation value of the Fund's portfolio. In the
case of an option on a futures contract that is "in-the-money" at the time
of purchase (i.e., the amount by which the exercise price of the put
option exceeds the current market value of the underlying instrument or
the amount by which the current market value of the underlying instrument
exceeds the exercise price of the call option), the in-the-money amount
may be excluded in calculating this 5% limitation.
When the Fund purchases or sells a stock index futures contract,
the Fund "covers" its position. To cover its position, the Fund may
maintain with its custodian bank (and mark-to-market on a daily basis) a
segregated account consisting of cash or liquid securities that, when
added to any amounts deposited with a futures commission merchant as
margin, are equal to the market value of the futures contract or otherwise
cover its position. If the Fund continues to engage in the described
securities trading practices and properly segregates assets, the
segregated account will function as a practical limit on the amount of
leverage which the Fund may undertake and on the potential increase in the
speculative character of the Fund's outstanding portfolio securities.
Additionally, such segregated accounts will assure the availability of
adequate funds to meet the obligations of the Fund arising from such
investment activities.
The Fund may cover its long position in a futures contract by
purchasing a put option on the same futures contract with a strike price
(i.e., an exercise price) as high or higher than the price of the futures
contract, or, if the strike price of the put is less than the price of the
futures contract, the Fund will maintain in a segregated account cash or
high-grade liquid debt securities equal in value to the difference between
the strike price of the put and the price of the futures contract. The
Fund may also cover its long position in a futures contract by taking a
short position in the instruments underlying the futures contract, or by
taking positions in instruments the prices of which are expected to move
relatively consistently with the futures contract. The Fund may cover its
short position in a futures contract by taking a long position in the
instruments underlying the futures contract, or by taking positions in
instruments the prices of which are expected to move relatively
consistently with the futures contract.
The Fund may cover its sale of a call option on a futures
contract by taking a long position in the underlying futures contract at a
price less than or equal to the strike price of the call option, or, if
the long position in the underlying futures contract is established at a
price greater than the strike price of the written call, the Fund will
maintain in a segregated account cash or high-grade liquid debt securities
equal in value to the difference between the strike price of the call and
the price of the futures contract. The Fund may also cover its sale of a
call option by taking positions in instruments the prices of which are
expected to move relatively consistently with the call option.
Although the Fund intends to sell futures contracts only if
there is an active market for such contracts, no assurance can be given
that a liquid market will exist for any particular contract at any
particular time. Many futures exchanges and boards of trade limit the
amount of fluctuation permitted in futures contract prices during a single
trading day. Once the daily limit has been reached in a particular
contract, no trades may be made that day at a price beyond that limit or
trading may be suspended for specified periods during the day. Futures
contract prices could move to the limit for several consecutive trading
days with little or no trading, thereby preventing prompt liquidation of
futures positions and potentially subjecting the Fund to substantial
losses. If trading is not possible, or the Fund determines not to close a
futures position in anticipation of adverse price movements, the Fund will
be required to make daily cash payments of variation margin. The risk
that the Fund will be unable to close out a futures position will be
minimized by entering into such transactions on a national exchange with
an active and liquid secondary market.
Index Options Transactions
The Fund may purchase put and call options and write call
options on stock indexes. A stock index fluctuates with changes in the
market values of the stock included in the index. Options on stock
indexes give the holder the right to receive an amount of cash upon
exercise of the options. Receipt of this cash amount will depend upon the
closing level of the stock index upon which the option is based being
greater than (in the case of a call) or less than (in the case of a put)
the exercise price of the option. The amount of cash received, if any,
will be the difference between the closing price of the index and the
exercise price of the option, multiplied by a specified dollar multiple.
The writer (seller) of the option is obligated, in return for the premiums
received from the purchaser of the option, to make delivery of this amount
to the purchaser. Unlike the options on securities discussed below, all
settlements of index options transactions are in cash.
Some stock index options are based on a broad market index such
as the S&P 500 Index, the NYSE Composite Index or the AMEX Major Market
Index, or on a narrower index such as the Philadelphia Stock Exchange
Over-the-Counter Index. Options currently are traded on the Chicago Board
of Options Exchange, the AMEX and other exchanges. Over-the-counter index
options, purchased over-the-counter options and the cover for any written
over-the-counter options would be subject to the Fund's 15% limitation on
investment in illiquid securities. See "Illiquid Securities."
Each of the exchanges has established limitations governing the
maximum number of call or put options on the same index which may be
bought or written (sold) by a single investor, whether acting alone or in
concert with others (regardless of whether such options are written on the
same or different exchanges or are held or written on one or more accounts
or through one or more brokers). Under these limitations, options
positions of certain other accounts advised by the same investment adviser
are combined for purposes of these limits. Pursuant to these limitations,
an exchange may order the liquidation of positions and may impose other
sanctions or restrictions. These position limits may restrict the number
of listed options which the Fund may buy or sell; however, the Adviser
intends to comply with all limitations.
Index options are subject to substantial risks, including the
risk of imperfect correlation between the option price and the value of
the underlying securities comprising the stock index selected and the risk
that there might not be a liquid secondary market for the option. Because
the value of an index option depends upon movements in the level of the
index rather than the price of a particular stock, whether the Fund will
realize a gain or loss from the purchase of writing of options on an index
depends upon movements in the level of stock prices in the stock market
generally or, in the case of certain indexes, in an industry or market
segment, rather than upon movements in the price of a particular stock.
Trading in index options requires different skills and techniques than are
required for predicting changes in the prices of individual stocks. The
Fund will not enter into an option position that exposes the Fund to an
obligation to another party, unless the Fund either (i) owns an offsetting
position in securities or other options; and/or (ii) maintains with the
Fund's custodian bank (and marks-to-market, on a daily basis) a segregated
account consisting of cash or liquid securities that, when added to the
premiums deposited with respect to the option, are equal to the market
value of the underlying stock index not otherwise covered.
The Adviser may utilize index options as a technique to leverage
the portfolio of the Fund. If the Adviser is correct in its assessment of
the future direction of stock prices, the share price of the Fund will be
enhanced. If the Adviser has the Fund take a position in options and
stock prices move in a direction contrary to the Adviser's forecast
however, the Fund would incur losses greater than the Fund would have
incurred without the options position.
Options on Securities
The Fund may buy put and call options and write (sell) call
options on securities. By writing a call option and receiving a premium,
the Fund may become obligated during the term of the option to deliver the
securities underlying the option at the exercise price if the option is
exercised. By buying a put option, the Fund has the right, in return for
a premium paid during the term of the option, to sell the securities
underlying the option at the exercise price. By buying a call option, the
Fund has the right, in return for a premium paid during the term of the
option, to purchase the securities underlying the option at the exercise
price. Options on securities written by the Fund will be traded on
recognized securities exchanges.
When writing call options on securities, the Fund may cover its
position by owning the underlying security on which the option is written.
Alternatively, the Fund may cover its position by owning a call option on
the underlying security, on a share for share basis, which is deliverable
under the option contract at a price no higher than the exercise price of
the call option written by the Fund or, if higher, by owning such call
option and depositing and maintaining in a segregated account cash or
liquid securities equal in value to the difference between the two
exercise prices. In addition, the Fund may cover its position by
depositing and maintaining in a segregated account cash or liquid
securities equal in value to the exercise price of the call option written
by the Fund. The principal reason for the Fund to write call options on
stocks held by the Fund is to attempt to realize, through the receipt of
premiums, a greater return than would be realized on the underlying
securities alone.
When the Fund wishes to terminate the Fund's obligation with
respect to an option it has written, the Fund may effect a "closing
purchase transaction." The Fund accomplishes this by buying an option of
the same series as the option previously written by the Fund. The effect
of the purchase is that the writer's position will be canceled. However,
a writer may not effect a closing purchase transaction after the writer
has been notified of the exercise of an option. When the Fund is the
holder of an option, it may liquidate its position by effecting a "closing
sale transaction." The Fund accomplishes this by selling an option of the
same series as the option previously purchased by the Fund. There is no
guarantee that either a closing purchase or a closing sale transaction can
be effected. If any call or put option is not exercised or sold, the
option will become worthless on its expiration date.
The Fund will realize a gain (or a loss) on a closing purchase
transaction with respect to a call option previously written by the Fund
if the premium, plus commission costs, paid by the Fund to purchase the
call option is less (or greater) than the premium, less commission costs,
received by the Fund on the sale of the call option. The Fund also will
realize a gain if a call option which the Fund has written lapses
unexercised, because the Fund would retain the premium.
The Fund will realize a gain (or a loss) on a closing sale
transaction with respect to a call or a put option previously purchased by
the Fund if the premium, less commission costs, received by the Fund on
the sale of the call or the put option is greater (or less) than the
premium, plus commission costs, paid by the Fund to purchase the call or
the put option. If a put or a call option which the Fund has purchased
expires out-of-the-money, the option will become worthless on the
expiration date, and the Fund will realize a loss in the amount of the
premium paid, plus commission costs.
Although certain securities exchanges attempt to provide
continuously liquid markets in which holders and writers of options can
close out their positions at any time prior to the expiration of the
option, no assurance can be given that a market will exist at all times
for all outstanding options purchased or sold by the Fund. In such event,
the Fund would be unable to realize its profits or limit its losses until
the Fund would exercise options it holds and the Fund would remain
obligated until options it wrote were exercised or expired.
Because option premiums paid or received by the Fund are small
in relation to the market value of the investments underlying the options,
buying and selling put and call options can be more speculative than
investing directly in common stocks.
DIRECTORS AND OFFICERS OF THE CORPORATION
The name, address principal occupations during the past five
years and other information with respect to each of the directors and
offices of the Fund are as follows:
BARRY K. ALLEN Age 49
30 South Wacker Drive
Suite 3800
Chicago, IL 60606
(A DIRECTOR OF THE FUND)
Mr. Allen is Executive Vice President, Consumer & Business
Services, Ameritech, Chicago, Illinois and has served in that capacity
since August, 1995. From September, 1993 to August 1995, Mr. Allen was
President and Chief Operating Officer of Marquette Electronics, Inc., a
manufacturer of medical electronic equipment and systems, Milwaukee,
Wisconsin. From July, 1993 to September, 1993, Mr. Allen was President
and Chief Executive Officer of Ameritech Illinois and from July, 1989 to
July, 1993, Mr. Allen was President and Chief Executive Officer of
Wisconsin Bell. Mr. Allen is a director of Harley-Davidson Inc. Mr.
Allen is also a director of Fiduciary Capital Growth Fund, Inc., an
investment company for which the Adviser serves as investment adviser.
GEORGE D. DALTON Age 69
255 Fiserv Drive
Brookfield, WI 53045
(A DIRECTOR OF THE FUND)
Mr. Dalton is Chairman of the Board, Chief Executive Officer and
a director of Fiserv, Inc., a provider of financial data processing
services to financial institutions, and has served in that capacity since
1984. Mr. Dalton is also a member of the Board of Directors of ARI
Network Services, Inc., a provider of standard-based Internet-enabled
electronic commerce services, and APAC TeleServices, Inc., a provider of
out-sourced telephone-based marketing, sales and customer management
solutions.
PATRICK ENGLISH* Age 37
225 East Mason Street
Milwaukee, Wisconsin
(VICE PRESIDENT AND A DIRECTOR OF THE FUND)
Mr. English is Senior Vice President of Fiduciary Management,
Inc. and has been employed by such firm in various capacities since
December, 1986. Mr. English is also Vice President of Fiduciary Capital
Growth Fund, Inc.
TED D. KELLNER* Age 51
225 East Mason Street
Milwaukee, Wisconsin
(PRESIDENT, TREASURER AND A DIRECTOR OF THE FUND)
Mr. Kellner is Chairman of the Board and Chief Executive Officer
of Fiduciary Management, Inc., an investment advisory firm, which he
co-founded with Mr. Donald S. Wilson in 1980. Mr. Kellner is also
President, Treasurer and a director of Fiduciary Capital Growth Fund, Inc.
THOMAS W. MOUNT Age 66
401 Pine Terrace
Oconomowoc, Wisconsin
(A DIRECTOR OF THE FUND)
Mr. Mount is retired Chairman and a director of Stokely
USA, Inc., a canned and frozen food processor and was employed by such
firm in various capacities since 1957. Mr. Mount is also a director of
Fiduciary Capital Growth Fund, Inc.
DONALD S. WILSON* Age 54
225 East Mason Street
Milwaukee, Wisconsin
(VICE PRESIDENT, SECRETARY AND A DIRECTOR OF THE FUND)
Mr. Wilson is President and Treasurer of Fiduciary Management,
Inc. Mr. Wilson is also Vice President, Secretary and a director of
Fiduciary Capital Growth Fund, Inc.
GARY G. WAGNER Age 54
225 East Mason Street
Milwaukee, Wisconsin
(VICE PRESIDENT AND ASSISTANT SECRETARY OF THE FUND)
Mr. Wagner has been Executive Vice President of Fiduciary
Management, Inc. since July 1, 1987. Mr. Wagner is also Vice President
and Assistant Secretary of Fiduciary Capital Growth Fund, Inc.
____________________
* Messrs. English, Kellner and Wilson are directors who are "interested
persons" of the Fund as that term is defined in the Investment Company Act
of 1940.
The Corporation was organized on September 5, 1996. The
Corporation's standard method of compensating directors is to pay each
director who is not an officer of the Corporation a fee of $150 for each
meeting of the Board of Directors attended. The table below sets forth
the compensation paid by the Corporation to each of the directors of the
Corporation during the fiscal year ending September 30, 1997:
<TABLE>
COMPENSATION TABLE
<CAPTION>
Total
Pension or Compensation
Aggregate Retirement Benefits Estimated Annual from Corporation
Name of Compensation Accrued as Part of Benefits Upon and Fund Complex
Person from Corporation Fund Expenses Retirement Paid to Directors(1)
<S> <C> <C> <C> <C>
Barry K. Allen $0 0 0 $600
Ted D. Kellner 0 0 0 0
Thomas W. Mount $0 0 0 $600
Donald S. Wilson 0 0 0 0
____________________
(1) Fiduciary Capital Growth Fund, Inc. and the Corporation are the only
investment companies in the Fund Complex.
</TABLE>
PRINCIPAL STOCKHOLDERS
Set forth below are the names and addresses of all holders of
the Fund's Common Stock who as of November 28, 1997 beneficially owned
more than 5% of the then outstanding shares of the Fund's Common Stock as
well as the number of shares of the Fund's Common Stock beneficially owned
by Ted D. Kellner, Donald S. Wilson and all officers and directors of the
Fund as a group, indicating in each case whether the person has sole or
shared power to vote or dispose of such shares.
<TABLE>
<CAPTION>
Name and Address Amount and Nature of Percent of
of Beneficial Owner Beneficial Ownership Class
Sole Power Shared Power Aggregate
<S> <C> <C> <C> <C>
Ted D. Kellner
225 East Mason Street
Milwaukee, WI 53202 7,589* 214,157* 221,746* 41.05%*
Donald S. Wilson
225 East Mason Street
Milwaukee, WI 53202 2,849 186,378* 189,227* 35.03%*
Peter Griffith Investments
57 Down Heath Circle
Littleton, CO 80127 32,042 85,579 117,561 21.76%
H.M. Baskerville, Jr.
c/o Riverway Co.
7703 Normandale Road
Minneapolis, MN 55435 32,895 9,868* 42,763* 7.92%*
Ronald F. Krantz
2315 Evergreen Road
Middleton, WI 53562 0 34,714* 34,714* 6.43%*
Officers & Directors as
a group (7 persons) -- -- 226,874* 42.00%*
_______________
* Includes 186,378 shares owned by the Adviser, retirement plans of the Adviser and clients
of the Adviser (including H.M. Baskerville, Jr. and Ronald F. Krantz) for whom the Adviser
exercises investment discretion. Messrs. Kellner and Wilson share the power to vote and
dispose of the same 186,378 shares.
</TABLE>
By virtue of their stock ownership, Messrs. Kellner and Wilson
are deemed to "control," as that term is defined in the Act, the Fund and
the Corporation. The Corporation does not control any person.
INVESTMENT ADVISER AND ADMINISTRATOR
As set forth in the Prospectus under the caption "Management of
the Fund" the investment adviser and administrator to the Fund is
Fiduciary Management, Inc. (the "Adviser"). The Adviser is controlled by
Ted D. Kellner and Donald S. Wilson. The Adviser's executive officers
include Messrs. Kellner, Wilson, Wagner, English, Ms. Maria Blanco, Senior
Vice President and Secretary, Mr. John Brandser, Vice President - Fixed
Income, Ms. Camille Wildes, Vice President and Ms. Jody Reckard, Vice
President. The directors of the Adviser are Messrs. Kellner and Wilson.
Pursuant to an investment advisory agreement between the Fund
and the Adviser (the "Advisory Agreement"), the Adviser furnishes
continuous investment advisory services to the Fund. The Fund did not
begin operations until December 16, 1996. During the period from December
16, 1996 through September 30, 1997, the Fund paid the Adviser advisory
fees of $10,941. During such period the Advisory Agreement provided for
the Adviser to be paid annual advisory fees equal to 1.0% of the average
daily net assets of the Fund.
The Adviser has undertaken to reimburse the Fund to the extent
that the aggregate annual operating expenses, including the investment
advisory fee and the administration fee but excluding interest,
reimbursement payments to securities lenders for dividend and interest
payments on securities sold short, taxes, brokerage commissions and
extraordinary items, exceed that percentage of the daily net assets of the
Fund for such year, as determined by valuations made as of the close of
each business day of the year, which is the most restrictive percentage
provided by the state laws of the various states in which its shares are
qualified for sale or, if the states in which its shares are qualified for
sale impose no such restrictions, 2.75%. As of the date of this Statement
of Additional Information, the shares of the Fund are not qualified for
sale in any state which imposes an expense limitation. Accordingly, the
percentage applicable to the Fund is 2.75%. The Fund monitors its expense
ratio on a monthly basis. If the accrued amount of the expenses of the
Fund exceeds the expense limitation, the Fund creates an account
receivable from the Adviser for the amount of such excess. In such a
situation the monthly payment of the Adviser's fee will be reduced by the
amount of such excess, subject to adjustment month by month during the
balance of the Fund's fiscal year if accrued expenses thereafter fall
below this limit. During the period from December 16, 1996 through
September 30, 1997, the Adviser reimbursed the Fund $39,748 for excess
expenses.
As set forth in the Prospectus under the caption "Management of
the Fund" the Adviser is also the administrator to the Fund. Pursuant to
an administration agreement (the "Administration Agreement") between the
Fund and the Adviser, the Adviser supervises all aspects of the Fund's
operations except those performed by it as investment adviser. In
connection with such supervision the Adviser prepares and maintains the
books, accounts and other documents required by the Investment Company Act
of 1940 (the "Act"), calculates the Fund's net asset value, responds to
stockholder inquiries, prepares the Fund's financial statements and excise
tax returns, prepares reports and filings with the Securities and Exchange
Commission and with state Blue Sky authorities, furnishes statistical and
research data, clerical, accounting and bookkeeping services and
stationery and office supplies, keeps and maintains the Fund's financial
accounts and records and generally assists in all respects of the Fund's
operations. During the period from December 16, 1996 through September
30, 1997, the Fund paid the Adviser fees of $3,718 pursuant to the
Administration Agreement.
The Advisory Agreement will remain in effect as long as its
continuance is specifically approved at least annually, by (i) the Board
of Directors of the Corporation, or by the vote of a majority (as defined
in the Act) of the outstanding shares of the Fund, and (ii) by the vote of
a majority of the directors of the Corporation who are not parties to the
Advisory Agreement or interested persons of the Adviser, cast in person at
a meeting called for the purpose of voting on such approval. The
Administration Agreement will remain in effect as long as its continuance
is specifically approved at least annually by the Board of Directors of
the Corporation. Both the Advisory Agreement and the Administration
Agreement provide that they may be terminated at any time without the
payment of any penalty, by the Board of Directors of the Corporation or by
vote of a majority of the Fund's stockholders, on sixty days' written
notice to the Adviser, and by the Adviser on the same notice to the
Corporation and that they shall be automatically terminated if they are
assigned.
The Advisory Agreement and the Administration Agreement provide
that the Adviser shall not be liable to the Fund or its stockholders for
anything other than willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations or duties. The Advisory Agreement
and the Administration Agreement also provide that the Adviser and its
officers, directors and employees may engage in other businesses, devote
time and attention to any other business whether of a similar or
dissimilar nature, and render services to others.
DETERMINATION OF NET ASSET VALUE AND PERFORMANCE
As set forth in the Prospectus under the caption "Determination
of Net Asset Value" the net asset value of the Fund will be determined as
of the close of regular trading (4:00 P.M. Eastern Time) on each day the
New York Stock Exchange is open for trading. The New York Stock Exchange
is open for trading Monday through Friday except New Year's Day, Dr.
Martin Luther King Jr. Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Additionally, if any of the aforementioned holidays falls on a Saturday,
the New York Stock Exchange will not be open for trading on the preceding
Friday and when any such holiday falls on a Sunday, the New York Stock
Exchange will not be open for trading on the succeeding Monday, unless
unusual business conditions exist, such as the ending of a monthly or the
yearly accounting period.
Any total rate of return quotation for the Fund will be for a period
of three or more months and will assume the reinvestment of all dividends
and capital gains distributions which were made by the Fund during that
period. Any period total rate of return quotation of the Fund will be
calculated by dividing the net change in value of a hypothetical
shareholder account established by an initial payment of $1,000 at the
beginning of the period by 1,000. The net change in the value of a
shareholder account is determined by subtracting $1,000 from the product
obtained by multiplying the net asset value per share at the end of the
period by the sum obtained by adding (A) the number of shares purchased at
the beginning of the period plus (B) the number of shares purchased during
the period with reinvested dividends and distributions. Any average
annual compounded total rate of return quotation of the Fund will be
calculated by dividing the redeemable value at the end of the period
(i.e., the product referred to in the preceding sentence) by $1,000. A
root equal to the period, measured in years, in question is then
determined and 1 is subtracted from such root to determine the average
annual compounded total rate of return.
The foregoing computation may also be expressed by the following
formula:
n
P(1 + T) = ERV
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a
hypothetical $1,000 payment made
at the beginning of the stated
period at the end of the stated
period
DISTRIBUTION OF SHARES
The Fund has adopted a Service and Distribution Plan (the
"Plan") in anticipation that the Fund will benefit from the Plan through
increased sales of shares, thereby reducing the Fund's expense ratio and
providing the Adviser with greater flexibility in management. The Plan
may be terminated by the Fund at any time by a vote of the directors of
the Corporation who are not interested persons of the Corporation and who
have no direct or indirect financial interest in the Plan or any agreement
related thereto (the "Rule 12b-1 Directors") or by a vote of a majority of
the outstanding shares of the Fund. Messrs. Allen, Dalton and Mount are
currently the Rule 12b-1 Directors. Any change in the Plan that would
materially increase the distribution expenses of the Fund provided for in
the Plan requires approval of the stockholders of the Fund and the Board
of Directors, including the Rule 12b-1 Directors.
While the Plan is in effect, the selection and nomination of
directors who are not interested persons of the Corporation will be
committed to the discretion of the directors of the Corporation who are
not interested persons of the Corporation. The Board of Directors of the
Corporation must review the amount and purposes of expenditures pursuant
to the Plan quarterly as reported to it by a Distributor, if any, or
officers of the Corporation. The Plan will continue in effect for as long
as its continuance is specifically approved at least annually by the Board
of Directors, including the Rule 12b-1 Directors. The Fund has not
incurred any distribution costs as of the date of this Statement of
Additional Information.
ALLOCATION OF PORTFOLIO BROKERAGE
Decisions to buy and sell securities for the Fund are made by
the Adviser subject to review by the Corporation's Board of Directors. In
placing purchase and sale orders for portfolio securities for the Fund, it
is the policy of the Adviser to seek the best execution of orders at the
most favorable price in light of the overall quality of brokerage and
research services provided, as described in this and the following
paragraph. In selecting brokers to effect portfolio transactions, the
determination of what is expected to result in best execution at the most
favorable price involves a number of largely judgmental considerations.
Among these are the Adviser's evaluation of the broker's efficiency in
executing and clearing transactions, block trading capability (including
the broker's willingness to position securities and the broker's financial
strength and stability). The most favorable price to the Fund means the
best net price without regard to the mix between purchase or sale price
and commission, if any. Over-the-counter securities are generally
purchased and sold directly with principal market makers who retain the
difference in their cost in the security and its selling price. In some
instances, the Adviser feels that better prices are available from
non-principal market makers who are paid commissions directly. The Fund
may place portfolio orders with broker-dealers who recommend the purchase
of Fund shares to clients if the Adviser believes the commissions and
transaction quality are comparable to that available from other brokers
and may allocate portfolio brokerage on that basis.
In allocating brokerage business for the Fund, the Adviser also
takes into consideration the research, analytical, statistical and other
information and services provided by the broker, such as general economic
reports and information, reports or analyses of particular companies or
industry groups, market timing and technical information, and the
availability of the brokerage firm's analysts for consultation. While the
Adviser believes these services have substantial value, they are
considered supplemental to the Adviser's own efforts in the performance of
its duties under the Advisory Agreement. Other clients of the Adviser may
indirectly benefit from the availability of these services to the Adviser,
and the Fund may indirectly benefit from services available to the Adviser
as a result of transactions for other clients. The Advisory Agreement
provides that the Adviser may cause the Fund to pay a broker which
provides brokerage and research services to the Adviser a commission for
effecting a securities transaction in excess of the amount another broker
would have charged for effecting the transaction, if the Adviser
determines in good faith that such amount of commission is reasonable in
relation to the value of brokerage and research services provided by the
executing broker viewed in terms of either the particular transaction or
the Adviser's overall responsibilities with respect to the Fund and the
other accounts as to which it exercises investment discretion. During the
period from December 16, 1996 through September 30, 1997, the Fund paid
brokerage commissions of $12,156 on transactions having a total value of
$5,340,120. All of the brokers to whom the Fund paid commissions provided
research services to the Adviser.
CUSTODIAN
Firstar Trust Company, 615 East Michigan Street, Milwaukee,
Wisconsin 53202, acts as custodian for the Fund. As such, Firstar Trust
Company holds all securities and cash of the Fund, delivers and receives
payment for securities sold, receives and pays for securities purchased,
collects income from investments and performs other duties, all as
directed by officers of the Fund. Firstar Trust Company does not exercise
any supervisory function over the management of the Fund, the purchase and
sale of securities or the payment of distributions to stockholders.
Firstar Trust Company also acts as the Fund's transfer agent and dividend
disbursing agent.
TAXES
As set forth in the Prospectus under the caption "Dividends,
Distributions and Taxes" the Fund will endeavor to qualify annually for
and elect tax treatment applicable to a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code").
If a call option written by the Fund expires, the amount of the
premium received by the Fund for the option will be short-term capital
gain to the Fund. If such an option is closed by the Fund, any gain or
loss realized by the Fund as a result of the closing transaction will be
short-term capital gain or loss. If the holder of a call option exercises
the holder's right under the option, any gain or loss realized by the Fund
upon the sale of the underlying security or underlying futures contract
pursuant to such exercise will be short-term or long-term capital gain or
loss to the Fund depending on the Fund's holding period for the underlying
security or underlying futures contract.
With respect to call options purchased by the Fund, the Fund
will realize short-term or long-term capital gain or loss if such option
is sold and will realize short-term or long-term capital loss if the
option is allowed to expire depending on the Fund's holding period for the
call option. If such a call option is exercised, the amount paid by the
Fund for the option will be added to the basis of the stock or futures
contract so acquired.
The Fund will utilize options on stock indexes. Options on
"broadbased" stock indexes are generally classified as "nonequity options"
under the Code. Gains and losses resulting from the expiration, exercise
or closing of such nonequity options, as well as gains and losses
resulting from regulated futures contract transactions, will be treated as
long-term capital gain or loss to the extent of 60% thereof and short-term
capital gain or loss to the extent of 40% thereof (hereinafter "blended
gain or loss") for determining the character of the distributions. In
addition, nonequity options held by the Fund on the last day of a fiscal
year will be treated as sold for market value on that date, and gain or
loss recognized as a result of such deemed sale will be blended gain or
loss. The realized gain or loss on the ultimate disposition of the option
will be increased or decreased to take into consideration the prior marked
to market gains and losses. These tax considerations may have an impact
on investment decisions made by the Fund. The trading strategies of the
Fund involving nonequity options on stock indexes may constitute
"straddle" transactions. "Straddles" may affect the short-term or long-
term holding period of such instruments for distributions
characterization.
The Fund may acquire put options. Under the Code, put options
on stock are taxed similar to short sales. If the Fund exercises or fails
to exercise a put option the Fund will be considered to have closed a
short sale. If the Fund owns the underlying stock or acquires the
underlying stock before closing the short sale, the Straddle Rules may
apply and the option positions may be subject to certain modified short
sale rules. The Fund will generally have a short-term gain or loss on the
closing of a short sale. The determination of the length of the holding
period is dependent on the holding period of the stock used to exercise
the put option. If the Fund sells the put option without exercising it,
its holding period will be the holding period of the option.
The Fund intends to distribute substantially all of its net
investment income and net capital gain each fiscal year. Dividends from
net investment income are taxable to investors as ordinary income, while
distributions of net capital gain are taxable as long-term capital gain
regardless of the stockholder's holding period for the shares. The Code
provides for a three-tiered tax rate structure for long-term capital gains
dependent upon the Fund's holding period of the underlying financial
instrument or capital asset. Distributions from the Fund are taxable to
investors, whether received in cash or in additional shares of the Fund.
A portion of the Fund's income distributions may be eligible for the 70%
dividends-received deduction for domestic corporate stockholders.
Any dividend or capital gain distribution paid shortly after a
purchase of shares of the Fund, will have the effect of reducing the per
share net asset value of such shares by the amount of the dividend or
distribution. Furthermore, if the net asset value of the shares of the
Fund immediately after a dividend or distribution is less than the cost of
such shares to the stockholder, the dividend or distribution will be
taxable to the stockholder even though it results in a return of capital
to him.
Redemption of shares will generally result in a capital gain or
loss for income tax purposes. Such capital gain or loss will be long term
or short term, depending upon the holding period. However, if a loss is
realized on shares held for six months or less, and the investor received
a capital gain distribution during that period, then such loss is treated
as a long-term capital loss to the extent of the capital gain distribution
received.
The Fund may be required to withhold Federal income tax at a
rate of 31% ("backup withholding") from dividend payments and redemption
proceeds if a stockholder fails to furnish the Fund with his social
security or other tax identification number and certify under penalty of
perjury that such number is correct and that he is not subject to backup
withholding due to the under reporting of income. The certification form
is included as part of the share purchase application and should be
completed when the account is opened.
This section is not intended to be a full discussion of present
or proposed federal income tax laws and the effect of such laws on an
investor. Investors are urged to consult with their respective tax
advisers for a complete review of the tax ramifications of an investment
in the Fund.
STOCKHOLDER MEETINGS
The Maryland Business Corporation Law permits registered
investment companies, such as the Fund, to operate without an annual
meeting of stockholders under specified circumstances if an annual meeting
is not required by the Act. The Corporation has adopted the appropriate
provisions in its bylaws and may, at its discretion, not hold an annual
meeting in any year in which the election of directors is not required to
be acted upon by the stockholders under the Act.
The Corporation's bylaws also contain procedures for the removal
of directors by its stockholders. At any meeting of stockholders, duly
called and at which a quorum is present, the stockholders may, by the
affirmative vote of the holders of a majority of the votes entitled to be
cast thereon, remove any director or directors from office and may elect a
successor or successors to fill any resulting vacancies for the unexpired
terms of removed directors.
Upon the written request of the holders of shares entitled to
not less than ten percent (10%) of all the votes entitled to be cast at
such meeting, the Secretary of the Corporation shall promptly call a
special meeting of stockholders for the purpose of voting upon the
question of removal of any director. Whenever ten or more stockholders of
record who have been such for at least six months preceding the date of
application, and who hold in the aggregate either shares having a net
asset value of at least $25,000 or at least one percent (1%) of the total
outstanding shares, whichever is less, shall apply to the Corporation's
Secretary in writing, stating that they wish to communicate with other
stockholders with a view to obtaining signatures to a request for a
meeting as described above and accompanied by a form of communication and
request which they wish to transmit, the Secretary shall within five
business days after such application either: (1) afford to such
applicants access to a list of the names and addresses of all stockholders
as recorded on the books of the Corporation; or (2) inform such applicants
as to the approximate number of stockholders of record and the approximate
cost of mailing to them the proposed communication and form of request.
If the Secretary elects to follow the course specified in
clause (2) of the last sentence of the preceding paragraph, the Secretary,
upon the written request of such applicants, accompanied by a tender of
the material to be mailed and of the reasonable expenses of mailing,
shall, with reasonable promptness, mail such material to all stockholders
of record at their addresses as recorded on the books unless within five
business days after such tender the Secretary shall mail to such
applicants and file with the Securities and Exchange Commission, together
with a copy of the material to be mailed, a written statement signed by at
least a majority of the Board of Directors to the effect that in their
opinion either such material contains untrue statements of fact or omits
to state facts necessary to make the statements contained therein not
misleading, or would be in violation of applicable law, and specifying the
basis of such opinion.
After opportunity for hearing upon the objections specified in
the written statement so filed, the Securities and Exchange Commission
may, and if demanded by the Board of Directors or by such applicants
shall, enter an order either sustaining one or more of such objections or
refusing to sustain any of them. If the Securities and Exchange
Commission shall enter an order refusing to sustain any of such
objections, or if, after the entry of an order sustaining one or more of
such objections, the Securities and Exchange Commission shall find, after
notice and opportunity for hearing, that all objections so sustained have
been met, and shall enter an order so declaring, the Secretary shall mail
copies of such material to all stockholders with reasonable promptness
after the entry of such order and the renewal of such tender.
DESCRIPTION OF SECURITIES RATINGS
As set forth in the Corporation's Prospectus, the Fund may
invest in commercial paper and commercial paper master notes assigned
ratings of either Standard & Poor's Corporation ("Standard & Poor's") or
Moody's Investors Service, Inc. ("Moody's"). A brief description of the
ratings symbols and their meanings follows:
Standard & Poor's Commercial Paper Ratings. A Standard & Poor's
commercial paper rating is a current assessment of the likelihood of
timely payment of debt considered short-term in the relevant market.
Ratings are graded into several categories, ranging from A-1 for the
highest quality obligations to D for the lowest. The categories rated A-3
or higher are as follows:
A-1. This highest category indicates that the degree of safety
regarding timely payment is strong. Those issuers determined to possess
extremely strong safety characteristics are denoted with a plus sign (+)
designation.
A-2. Capacity for timely payment on issues with this
designation is satisfactory. However the relative degree of safety is not
as high as for issuers designed "A-1."
A-3. Issues carrying this designation have adequate capacity
for timely payment. They are, however, more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the higher
designation.
Moody's Short-Term Debt Ratings. Moody's short-term debt
ratings are opinions of the ability of issuers to repay punctually senior
debt obligations which have an original maturity not exceeding one year.
Obligations relying upon support mechanisms such as letters-of-credit and
bonds of indemnity are excluded unless explicitly rated.
Moody's employs the following three designations, all judged to
be investment grade, to indicate the relative repayment ability of rated
issuers:
Prime-1. Issuers rated Prime-1 (or supporting institutions)
have a superior ability for repayment of senior short-term debt
obligations. Prime-1 repayment ability will often be evidenced by many of
the following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with moderate
reliance on debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
- Well-established access to a range of financial markets and
assured sources of alternate liquidity.
Prime-2. Issuers rated Prime-2 (or supporting institutions)
have a strong ability for repayment of senior short-term debt obligations.
This will normally be evidenced by many of the characteristics cited above
but to a lesser degree. Earnings trends and coverage ratios, while sound,
may be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample
alternate liquidity is maintained.
Prime-3. Issuers rated Prime-3 (or supporting institutions)
have an acceptable ability for repayment of senior short-term obligations.
The effect of industry characteristics and market compositions may be more
pronounced. Variability in earnings and profitability may result in
changes in the level of debt protection measurements and may require
relatively high financial leverage. Adequate alternate liquidity is
maintained.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 100 East Wisconsin Avenue, Suite 1500,
Milwaukee, Wisconsin 53202 has served as the independent accountants for
the Fund since the Fund's inception. As such Price Waterhouse LLP
performs an audit of the Fund's financial statements and considers the
Fund's internal control structure.
FINANCIAL STATEMENTS
The following audited financial statements are incorporated by
reference herein to the Corporation's Annual Report, dated September 30,
1997, (File No. 811-7831), as filed with the Securities and Exchange
Commission through the EDGAR System on November 12, 1997.
- Report of Independent Accountants
- Statement of Assets and Liabilities as of September 30,
1997
- Schedule of Investments as of September 30, 1997
- Statement of Operations for the period from December 16,
1996 (commencement of operations) to September 30, 1997
- Statement of Changes in Net Assets for the period from
December 16, 1996 (commencement of operations) to September
30, 1997
- Financial Highlights for the period from December 16, 1996
(commencement of operations) to September 30, 1997
- Notes to Financial Statements
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a.) Audited Financial Statements (Financial Highlights included in
Part A and all incorporated by reference in Part B to the
Annual Report of Registrant dated September 30, 1997 (File No.
811-7831) (as filed with the Securities and Exchange
Commission on November 12, 1997)
Report of Independent Accountants
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Financial Highlights
Schedule of Investments
Notes to Financial Statements
(b.) Exhibits
(1) Registrant's Articles of Incorporation (Exhibit 1 to
Registrant's Registration Statement on Form N-1A is
incorporated by reference pursuant to Rule 411 under the
Securities Act of 1933).
(2) Registrant's Bylaws (Exhibit 2 to Registrant's
Registration Statement on Form N-1A is incorporated by
reference pursuant to Rule 411 under the Securities Act
of 1933).
(3) None
(4) None
(5) Investment Advisory Agreement with Fiduciary Management,
Inc. relating to FMI Focus Fund.
(6) None
(7) None
(8) Custodian Agreement with Firstar Trust Company (Exhibit
8 to Registrant's Registration Statement on Form N-1A is
incorporated by reference pursuant to Rule 411 under the
Securities Act of 1933).
(9.1) Fund Administration Servicing Agreement with Fiduciary
Management, Inc. relating to FMI Focus Fund (Exhibit 9.1
to Amendment No. 1 to Registrant's Registration
Statement on Form N-1A is incorporated by reference
pursuant to Rule 411 under the Securities Act of 1933).
(9.2) Transfer Agent Agreement with Firstar Trust Company
relating to FMI Focus Fund (Exhibit 9.2 to Registrant's
Registration Statement on Form N-1A is incorporated by
reference pursuant to Rule 411 under the Securities Act
of 1933).
(10) Opinion of Foley & Lardner, counsel for Registrant
(Exhibit 10 to Registrant's Registration Statement on
Form N-1A is incorporated by reference pursuant to Rule
411 under the Securities Act of 1933).
(11) Consent of Price Waterhouse LLP.
(12) None
(13) Subscription Agreement (Exhibit 13 to Registrant's
Registration Statement on Form N-1A is incorporated by
reference pursuant to Rule 411 under the Securities Act
of 1933).
(14.1) Individual Retirement Custodial Accounts
(14.2) Model 403(b)(7) plan
(14.3) Prototype Defined Contribution Retirement Plan
(15) Service and Distribution Plan (Exhibit 15 to
Registrant's Registration Statement on Form N-1A is
incorporated by reference pursuant to Rule 411 under the
Securities Act of 1933).
(16) None
(17) Financial Data Schedule.
(18) None
Item 25. Persons Controlled by or under Common Control with Registrant
As of November 28, 1997, Registrant was controlled by Ted D.
Kellner and Donald S. Wilson. Registrant and its investment adviser,
Fiduciary Management, Inc., were under the common control of Ted D.
Kellner and Donald S. Wilson.
Item 26. Number of Holders of Securities
Number of Record Holders
Title of Class as of November 28, 1997
Class A Common Stock, $0.0001 142
par value (FMI Focus Fund)
Item 27. Indemnification
Pursuant to the authority of the Maryland General Corporation
Law, particularly Section 2-418 thereof, Registrant's Board of Directors
has adopted the following bylaw which is in full force and effect and has
not been modified or cancelled:
Article VII
GENERAL PROVISIONS
Section 7. Indemnification.
A. The Corporation shall indemnify all of its corporate
representatives against expenses, including attorneys fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred by
them in connection with the defense of any action, suit or proceeding, or
threat or claim of such action, suit or proceeding, whether civil,
criminal, administrative, or legislative, no matter by whom brought, or in
any appeal in which they or any of them are made parties or a party by
reason of being or having been a corporate representative, if the
corporate representative acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the corporation
and with respect to any criminal proceeding, if he had no reasonable cause
to believe his conduct was unlawful provided that the corporation shall
not indemnify corporate representatives in relation to matters as to which
any such corporate representative shall be adjudged in such action, suit
or proceeding to be liable for gross negligence, willful misfeasance, bad
faith, reckless disregard of the duties and obligations involved in the
conduct of his office, or when indemnification is otherwise not permitted
by the Maryland General Corporation Law.
B. In the absence of an adjudication which expressly absolves the
corporate representative, or in the event of a settlement, each corporate
representative shall be indemnified hereunder only if there has been a
reasonable determination based on a review of the facts that
indemnification of the corporate representative is proper because he has
met the applicable standard of conduct set forth in paragraph A. Such
determination shall be made: (i) by the board of directors, by a majority
vote of a quorum which consists of directors who were not parties to the
action, suit or proceeding, or if such a quorum cannot be obtained, then
by a majority vote of a committee of the board consisting solely of two or
more directors, not, at the time, parties to the action, suit or
proceeding and who were duly designated to act in the matter by the full
board in which the designated directors who are parties to the action,
suit or proceeding may participate; or (ii) by special legal counsel
selected by the board of directors or a committee of the board by vote as
set forth in (i) of this paragraph, or, if the requisite quorum of the
full board cannot be obtained therefor and the committee cannot be
established, by a majority vote of the full board in which directors who
are parties to the action, suit or proceeding may participate.
C. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall create a rebuttable presumption that the person was
guilty of willful misfeasance, bad faith, gross negligence or reckless
disregard to the duties and obligations involved in the conduct of his or
her office, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his or her conduct was unlawful.
D. Expenses, including attorneys' fees, incurred in the preparation
of and/or presentation of the defense of a civil or criminal action, suit
or proceeding may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding as authorized in the manner
provided in Section 2-418(F) of the Maryland General Corporation Law upon
receipt of: (i) an undertaking by or on behalf of the corporate
representative to repay such amount unless it shall ultimately be
determined that he or she is entitled to be indemnified by the corporation
as authorized in this bylaw; and (ii) a written affirmation by the
corporate representative of the corporate representative's good faith
belief that the standard of conduct necessary for indemnification by the
corporation has been met.
E. The indemnification provided by this bylaw shall not be deemed
exclusive of any other rights to which those indemnified may be entitled
under these bylaws, any agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his or her official capacity
and as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director, officer, employee
or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person subject to the limitations imposed from
time to time by the Investment Company Act of 1940, as amended.
F. This corporation shall have power to purchase and maintain
insurance on behalf of any corporate representative against any liability
asserted against him or her and incurred by him or her in such capacity or
arising out of his or her status as such, whether or not the corporation
would have the power to indemnify him or her against such liability under
this bylaw provided that no insurance may be purchased or maintained to
protect any corporate representative against liability for gross
negligence, willful misfeasance, bad faith or reckless disregard of the
duties and obligations involved in the conduct of his or her office.
G. "Corporate Representative" means an individual who is or was a
director, officer, agent or employee of the corporation or who serves or
served another corporation, partnership, joint venture, trust or other
enterprise in one of these capacities at the request of the corporation
and who, by reason of his or her position, is, was, or is threatened to be
made, a party to a proceeding described herein.
Insofar as indemnification for and with respect to liabilities
arising under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of Registrant pursuant to the foregoing
provisions or otherwise, Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by Registrant of expenses incurred or paid by a
director, officer or controlling person or Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
Incorporated by reference to pages 8 through 10 of the Statement
of Additional Information pursuant to Rule 411 under the Securities Act of
1933.
Item 29. Principal Underwriters
Not Applicable.
Item 30. Location of Accounts and Records
The accounts, books and other documents required to be
maintained by Registrant pursuant to Section 31(a) of the Investment
Company Act of 1940 and the rules promulgated thereunder are in the
physical possession of Registrant's Treasurer, Ted D. Kellner, at
Registrant's corporate offices, 225 East Mason Street, Milwaukee,
Wisconsin 53202.
Item 31. Management Services
All management-related service contracts entered into by
Registrant are discussed in Parts A and B of this Registration Statement.
Item 32. Undertakings
With respect to stockholder meetings, Registrant undertakes to
call stockholder meetings in accordance with the provisions of Article I
of its Bylaws, which are discussed in Parts A and B of this Registration
Statement.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant certifies that it meets
all of the requirements for effectiveness of this amended Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this amended Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Milwaukee
and State of Wisconsin on the 31st day of December, 1997.
FMI FUNDS, INC.
(Registrant)
By: /s/ Ted D. Kellner
Ted D. Kellner, 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 and on the date(s) indicated.
Name Title Date
/s/ Ted D. Kellner (Principal Executive, December 31, 1997
Ted D. Kellner Financial and Accounting
Officer) and a Director
/s/ Barry K. Allen Director December 31, 1997
Barry K. Allen
Director December __, 1997
George D. Dalton
/s/ Patrick J. English Director December 30, 1997
Patrick J. English
/s/ Thomas W. Mount Director December 31, 1997
Thomas W. Mount
/s/ Donald S. Wilson Director December 30, 1997
Donald S. Wilson
EXHIBIT INDEX
Exhibit No. Exhibit Page No.
(1) Registrant's Articles of
Incorporation*
(2) Registrant's Bylaws*
(3) None
(4) None
(5) Investment Advisory Agreement with
Fiduciary Management, Inc.
(6) None
(7) None
(8) Custodian Agreement with Firstar
Trust Company*
(9.1) Fund Administration Servicing
Agreement with Fiduciary
Management, Inc. relating to FMI
Focus Fund*
(9.2) Transfer Agent Agreement with
Firstar Trust Company*
(10) Opinion of Foley & Lardner,
counsel for Registrant*
(11) Consent of Price Waterhouse LLP
(12) None
(13) Subscription Agreement*
(14.1) Individual Retirement Custodial
Accounts
(14.2) Model 403(b)(7) Plan
(14.3) Prototype Defined Contribution
Retirement Plan
(15) Service and Distribution Plan*
(16) None
(17) Financial Data Schedule
(18) None
_______________
* Incorporated by reference.
INVESTMENT ADVISORY AGREEMENT
Agreement made this 1st day of January, 1998 between FMI Funds,
Inc., a Maryland corporation (the "Company"), and Fiduciary Management,
Inc., a Wisconsin corporation (the "Adviser").
W I T N E S S E T H:
WHEREAS, the Company is registered with the Securities and
Exchange Commission under the Investment Company Act of 1940 (the "Act")
as an open-end management investment company consisting initially of one
series FMI Focus Fund (the "Fund"); and
WHEREAS, the Company desires to retain the Adviser, which is an
investment adviser registered under the Investment Advisers Act of 1940,
as the investment adviser for the Fund.
NOW, THEREFORE, the Company and the Adviser do mutually promise
and agree as follows:
1. Employment. The Company hereby employs the Adviser to
manage the investment and reinvestment of the assets of the Fund for the
period and on the terms set forth in this Agreement. The Adviser hereby
accepts such employment for the compensation herein provided and agrees
during such period to render the services and to assume the obligations
herein set forth.
2. Authority of the Adviser. The Adviser shall supervise and
manage the investment portfolio of the Fund, and, subject to such policies
as the directors of the Company may determine, direct the purchase and
sale of investment securities in the day-to-day management of the Fund.
The Adviser shall for all purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided or authorized,
have no authority to act for or represent the Company or the Fund in any
way or otherwise be deemed an agent of the Company or the Fund. However,
one or more shareholders, officers, directors or employees of the Adviser
may serve as directors and/or officers of the Company, but without
compensation or reimbursement of expenses for such services from the
Company. Nothing herein contained shall be deemed to require the Company
to take any action contrary to its Articles of Incorporation or By-Laws or
any applicable statute or regulation, or to relieve or deprive the
directors of the Company of their responsibility for, and control of, the
affairs of the Fund.
3. Expenses. The Adviser, at its own expense and without
reimbursement from the Company or the Fund, shall furnish office space,
and all necessary office facilities, equipment and executive personnel for
managing the investments of the Fund. The Fund shall bear all expenses
initially incurred by it, provided that the total expenses borne by the
Fund, including the Adviser's fee but excluding all federal, state and
local taxes, interest, reimbursement payments to securities lenders for
dividend and interest payments on securities sold short, brokerage
commissions and extraordinary items, shall not in any year exceed that
percentage of the average net assets of the Fund for such year, as
determined by valuations made as of the close of each business day, which
is the most restrictive percentage provided by the state laws of the
various states in which the Fund's shares are qualified for sale or, if
the states in which the Fund's shares are qualified for sale impose no
such restrictions, 2.75%. The expenses of the Fund's operations borne by
the Fund include by way of illustration and not limitation, director's
fees paid to those directors who are not officers of the Company, the
costs of preparing and printing its registration statements required under
the Securities Act of 1933 and the Act (and amendments thereto), the
expense of registering its shares with the Securities and Exchange
Commission and in the various states, payments made pursuant to the
Service and Distribution Plan, the printing and distribution cost of
prospectuses mailed to existing shareholders, the cost of share
certificates (if any), director and officer liability insurance, reports
to shareholders, reports to government authorities and proxy statements,
interest charges, reimbursement payments to securities lenders for
dividend and interest payments on securities sold short, taxes, legal
expenses, salaries of administrative and clerical personnel, association
membership dues, auditing and accounting services, insurance premiums,
brokerage and other expenses connected with the execution of portfolio
securities transactions, fees and expenses of the custodian of the Fund's
assets, expenses of calculating the net asset value and repurchasing and
redeeming shares, charges and expenses of dividend disbursing agents,
registrars and stock transfer agents and the cost of keeping all necessary
shareholder records and accounts.
The Company shall monitor the expense ratio of the Fund on a
monthly basis. If the accrued amount of the expenses of the Fund exceeds
the expense limitation established herein, the Company shall create an
account receivable from the Adviser for the amount of such excess. In
such a situation the monthly payment of the Adviser's fee will be reduced
by the amount of such excess, subject to adjustment month by month during
the balance of the Company's fiscal year if accrued expenses thereafter
fall below the expense limitation.
4. Compensation of the Adviser. For the services and
facilities to be rendered and the charges and expenses to be assumed by
the Adviser hereunder, the Company, through and on behalf of the Fund
shall pay to the Adviser an advisory fee, paid monthly, based on the
average net assets of the Fund, as determined by valuations made as of the
close of each business day of the month. The advisory fee shall be 1/12
of 1.25% (1.25% per annum) of such average net assets. For any month in
which this Agreement is not in effect for the entire month, such fee shall
be reduced proportionately on the basis of the number of calendar days
during which it is in effect and the fee computed upon the average net
assets of the business days during which it is so in effect.
5. Ownership of Shares of the Fund. Except in connection with
the initial capitalization of the Fund, the Adviser shall not take, and
shall not permit any of its shareholders, officers, directors or employees
to take, a long or short position in the shares of the Fund, except for
the purchase of shares of the Fund for investment purposes at the same
price as that available to the public at the time of purchase.
6. Exclusivity. The services of the Adviser to the Fund
hereunder are not to be deemed exclusive and the Adviser shall be free to
furnish similar services to others as long as the services hereunder are
not impaired thereby. Although the Adviser has permitted and is
permitting the Fund and the Company to use the name "FMI," it is
understood and agreed that the Adviser reserves the right to use and to
permit other persons, firms or corporations, including investment
companies, to use such name, and that the Fund and the Company will not
use such name if the Adviser ceases to be the Fund's sole investment
adviser. During the period that this Agreement is in effect, the Adviser
shall be the Fund's sole investment adviser.
7. Liability. In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Adviser, the Adviser shall not be subject to
liability to the Fund or to any shareholder of the Fund for any act or
omission in the course of, or connected with, rendering services
hereunder, or for any losses that may be sustained in the purchase,
holding or sale of any security.
8. Brokerage Commissions. The Adviser may cause the Fund to
pay a broker-dealer which provides brokerage and research services, as
such services are defined in Section 28(e) of the Securities Exchange Act
of 1934 (the "Exchange Act"), to the Adviser a commission for effecting a
securities transaction in excess of the amount another broker-dealer would
have charged for effecting such transaction, if the Adviser determines in
good faith that such amount of commission is reasonable in relation to the
value of brokerage and research services provided by the executing
broker-dealer viewed in terms of either that particular transaction or his
overall responsibilities with respect to the accounts as to which he
exercises investment discretion (as defined in Section 3(a)(35) of the
Exchange Act).
9. Amendments. This Agreement may be amended by the mutual
consent of the parties; provided, however, that in no event may it be
amended without the approval of the directors of the Company in the manner
required by the Act, and, if required by the Act, by the vote of the
majority of the outstanding voting securities of the Fund, as defined in
the Act.
10. Termination. This Agreement may be terminated at any time,
without the payment of any penalty, by the directors of the Company or by
a vote of the majority of the outstanding voting securities of the Fund,
as defined in the Act, upon giving sixty (60) days' written notice to the
Adviser. This Agreement may be terminated by the Adviser at any time upon
the giving of sixty (60) days' written notice to the Company. This
Agreement shall terminate automatically in the event of its assignment (as
defined in Section 2(a)(4) of the Act). Subject to prior termination as
hereinbefore provided, this Agreement shall continue in effect for two (2)
years from the date hereof and indefinitely thereafter, but only so long
as the continuance after such two (2) year period is specifically approved
annually by (i) the directors of the Company or by the vote of the
majority of the outstanding voting securities of the Fund, as defined in
the Act, and (ii) the directors of the Company in the manner required by
the Act, provided that any such approval may be made effective not more
than sixty (60) days thereafter.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on the day first above written.
FIDUCIARY MANAGEMENT, INC. FMI FUNDS, INC.
(the "Adviser") (the "Company")
By:/s/ Donald S. Wilson By:/s/ Ted D. Kellner
President President
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus aand
Statement of Additional Information constituting parts of this Post-
Effective Amendment No. 2 to the registration statement on Form N-1A (the
"Registration Statement") of our report dted October 27, 1997, relating to
the financial statements and financial highlights appearing in the
September 30, 1997 Annual Report to Shareholders of FMI Focus Fund,
portions of which are incorporated by reference into the Registration
Statement. We also consent to the reference to us under the heading
"Independent Accountants" in the Statement of Additional Information.
PRICE WATERHOUSE LLP
Milwaukee, Wisconsin
December 30, 1997
FIDUCIARY FUNDS
INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT
The following constitutes an agreement establishing an
Individual Retirement Account (under Section 408(a) of the Internal
Revenue Code) between the Depositor and the Custodian.
ARTICLE I
The Custodian may accept additional cash contributions on behalf
of the Depositor for a tax year of the Depositor. The total cash
contributions are limited to $2,000 for the tax year unless the
contribution is a rollover contribution described in Section 402(c) (but
only after December 31, 1992), 403(a)(4), 403(b)(8), 408(d)(3), or an
employer contribution to a simplified employee pension plan as described
in Section 408(k). Rollover contributions before January 1, 1993, include
rollovers described in Section 402(a)(5), 402(a)(6), 402(a)(7), 403(a)(4),
403(b)(8), 408(d)(3), or an employer contribution to a simplified employee
pension plan as described in Section 408(k).
ARTICLE II
The Depositor's interest in the balance in the custodial account
is nonforfeitable.
ARTICLE III
1. No part of the custodial funds may be invested in life
insurance contracts, nor may the assets of the custodial account be
commingled with other property except in a common trust fund or common
investment fund (within the meaning of Section 408(a)(5)).
2. No part of the custodial funds may be invested in
collectibles (within the meaning of Section 408(m)) except as otherwise
permitted by Section 408(m)(3) which provides an exception for certain
gold and silver coins and coins issued under the laws of any state.
ARTICLE IV
1. Notwithstanding any provision of this agreement to the
contrary, the distribution of the Depositor's interest in the custodial
account shall be made in accordance with the following requirements and
shall otherwise comply with Section 408(a)(6) and Proposed Regulations
Section 1.408-8, including the incidental death benefit provisions of
Proposed Regulations Section 1.401(a)(9)-2, the provisions of which are
incorporated by reference.
2. Unless otherwise elected by the time distributions are
required to begin to the Depositor under Paragraph 3, or to the surviving
spouse under Paragraph 4, other than in the case of a life annuity, life
expectancies shall be recalculated annually. Such election shall be
irrevocable as to the Depositor and the surviving spouse and shall apply
to all subsequent years. The life expectancy of a nonspouse beneficiary
may not be recalculated.
3. The Depositor's entire interest in the custodial account
must be, or begin to be, distributed by the Depositor's required beginning
date, (April 1 following the calendar year end in which the Depositor
reaches age 70 1/2). By that date, the Depositor may elect, in a manner
acceptable to the Custodian, to have the balance in the custodial account
distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially
equal monthly, quarterly, or annual payments over the life of the
Depositor.
(c) An annuity contract that provides equal or substantially
equal monthly, quarterly, or annual payments over the joint and last
survivor lives of the Depositor and his or her designated beneficiary.
(d) Equal or substantially equal annual payments over a
specified period that may not be longer than the Depositor's life
expectancy.
(e) Equal or substantially equal annual payments over a
specified period that may not be longer than the joint life and last
survivor expectancy of the Depositor and his or her designated
beneficiary.
4. If the Depositor dies before his or her entire interest is
distributed to him or her, the entire remaining interest will be
distributed as follows:
(a) If the Depositor dies on or after distribution of his or
her interest has begun, distribution must continue to be made in
accordance with Paragraph 3.
(b) If the Depositor dies before distribution of his or her
interest has begun, the entire remaining interest will, at the election of
the Depositor or, if the Depositor has not so elected, at the election of
the beneficiary or beneficiaries, either
(i) Be distributed by the December 31 of the year
containing the fifth anniversary of the Depositor's
death, or
(ii) Be distributed in equal or substantially equal
payments over the life or life expectancy of the
designated beneficiary or beneficiaries starting by
December 31 of the year following the year of the
Depositor's death. If, however, the beneficiary is
the Depositor's surviving spouse, then this
distribution is not required to begin before December
31 of the year in which the Depositor would have
turned age 70 1/2.
(c) Except where distribution in the form of an annuity meeting
the requirements of Section 408(b)(3) and its related regulations has
irrevocably commenced, distributions are treated as having begun on the
Depositor's required beginning date, even though payments may actually
have been made before that date.
(d) If the Depositor dies before his or her entire interest has
been distributed and if the beneficiary is other than the surviving
spouse, no additional cash contributions or rollover contributions may be
accepted in the account.
5. In the case of a distribution over life expectancy in equal
or substantially equal annual payments, to determine the minimum annual
payment for each year, divide the Depositor's entire interest in the
custodial account as of the close of business on December 31 of the
preceding year by the life expectancy of the Depositor (or the joint life
and last survivor expectancy of the Depositor and the Depositor's
designated beneficiary, or the life expectancy of the designated
beneficiary, whichever applies). In the case of distributions under
Paragraph 3, determine the initial life expectancy (or joint life and last
survivor expectancy) using the attained ages of the Depositor and designed
beneficiary as of their birthdays in the year the Depositor reaches age 70
1/2. In the case of a distribution in accordance with Paragraph 4(b)(ii),
determine life expectancy using the attained age of the designated
beneficiary as of the beneficiary's birthday in the year distributions are
required to commence.
6. The owner of two or more individual retirement accounts may
use the "alternative method" described in Notice 88-38, 1988-1 C.B. 524,
to satisfy the minimum distribution requirements described above. This
method permits an individual to satisfy these requirements by taking from
one individual retirement account the amount required to satisfy the
requirement for another.
ARTICLE V
1. The Depositor agrees to provide the Custodian with
information necessary for the Custodian to prepare any reports required
under Section 408(i) and Regulations Section 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal
Revenue Service and the Depositor prescribed by the Internal Revenue
Service.
ARTICLE VI
Notwithstanding any other articles which may be added or
incorporated, the provisions of Articles I through III and this sentence
will be controlling. Any additional articles that are not consistent with
Section 408(a) and related regulations will be invalid.
ARTICLE VII
This agreement will be amended from time to time to comply with
the provisions of the Code and related regulations. Other amendments may
be made with the consent of the persons whose signatures appear below.
ARTICLE VIII
1. Investment of Account Assets. (a) All contributions to
the custodial account shall be invested in the shares of any regulated
investment company ("Investment Company") for which Fiduciary Management,
Inc. serves as investment advisor, or any other regulated investment
company designated by the investment advisor. Shares of stock of an
Investment Company shall be referred to as Investment Company Shares."
(b) Each contribution to the custodial account shall identify
the Depositor's account number and be accompanied by a signed statement
directing the investment of that contribution. The Custodian may return
to the Depositor, without liability for interest thereon, any contribution
which is not accompanied by adequate account identification or an
appropriate signed statement directing investment of that contribution.
(c) Contributions shall be invested in whole and fractional
Investment Company Shares at the price and in the manner such shares are
offered to the public. All distributions received on Investment Company
Shares held in the custodial account shall be reinvested in like shares.
If any distribution of Investment Company Shares may be received in
additional like shares or in cash or other property, the Custodian shall
elect to receive such distribution in additional like Investment Company
Shares.
(d) All Investment Company Shares acquired by the Custodian
shall be registered in the name of the Custodian or its nominee. The
Depositor shall be the beneficial owner of all Investment Company Shares
held in the custodial account and the Custodian shall not vote any such
shares, except upon written direction of the Depositor. The Custodian
agrees to forward to the Depositor each prospectus, report, notice, proxy
and related proxy soliciting materials applicable to Investment Company
Shares held in the custodial account received by the Custodian.
(e) The Depositor may, at any time, by written notice to the
Custodian, redeem any number of shares held in the custodial account and
reinvest the proceeds in the shares of any other Investment Company. Such
redemptions and reinvestments shall be done at the price and in the manner
such shares are then being redeemed or offered by the respective
Investment Companies.
2. Amendment and Termination. (a) The Custodian may amend
the Custodial Account (including retroactive amendments) by delivering to
the Depositor written notice of such amendment setting forth the substance
and effective date of the amendment. The Depositor shall be deemed to
have consented to any such amendment not objected to in writing by the
Depositor within thirty (30) days of receipt of the notice, provided that
no amendment shall cause or permit any part of the assets of the custodial
account to be diverted to purposes other than for the exclusive benefit of
the Depositor or his or her beneficiaries.
(b) The Depositor may terminate the custodial account at any
time by delivering to the Custodian a written notice of such termination.
(c) The custodial account shall automatically terminate upon
distribution to the Depositor or his or her beneficiaries of its entire
balance.
3. Taxes and Custodial Fees. Any income taxes or other taxes
levied or assessed upon or in respect of the assets or income of the
custodial account and any transfer taxes incurred shall be paid from the
custodial account. All administrative expenses incurred by the Custodian
in the performance of its duties, including fees for legal services
rendered to the Custodian, and the Custodian's compensation shall be paid
from the custodial account, unless otherwise paid by the Depositor or his
or her beneficiaries.
The Custodian's fees are set forth in a schedule provided to the
Depositor. Extraordinary charges resulting from unusual administrative
responsibilities not contemplated by the schedule will be subject to such
additional charges as will reasonably compensate the Custodian. Fees for
refund of excess contributions, transferring to a successor trustee or
custodian, or redemption/reinvestment of Investment Company Shares will be
deducted from the refund or redemption proceeds and the remaining balance
will be remitted to the Depositor, or reinvested or transferred in
accordance with the Depositor's instructions.
4. Reports and Notices. (a) The Custodian shall keep
adequate records of transactions it is required to perform hereunder.
After the close of each calendar year, the Custodian shall provide to the
Depositor or his or her legal representative a written report or reports
reflecting the transactions effected by it during such year and the assets
and liabilities of the Custodial Account at the close of the year.
(b) All communications or notices shall be deemed to be given
upon receipt by the Custodian at Post Office Box 701, Milwaukee, Wisconsin
53201-0701 or the Depositor at his most recent address shown in the
Custodian's records. The Depositor agrees to advise the Custodian
promptly, in writing, of any change of address.
5. Designation of Beneficiary. The Depositor may designate a
beneficiary or beneficiaries to receive benefits from the custodial
account in the event of the Depositor's death. In the event the Depositor
has not designated a beneficiary, or if all beneficiaries shall predecease
the Depositor, the following persons shall take in the order named:
(a) The spouse of the Depositor;
(b) If the spouse shall predecease the Depositor or if the
Depositor does not have a spouse, then to the personal representative of
the Depositor's estate.
6. Multiple Individual Retirement Accounts. In the event the
Depositor maintains more than one individual retirement account (as
defined in Section 408(a)) and elects to satisfy his or her minimum
distribution requirements described in Article IV above by making a
distribution for another individual retirement account in accordance with
Paragraph 6 thereof, the Depositor shall be deemed to have elected to
calculate the amount of his or her minimum distribution under this
custodial account in the same manner as under the individual retirement
account from which the distribution is made.
7. Inalienability of Benefits. The benefits provided under
this custodial account shall not be subject to alienation, assignment,
garnishment, attachment, execution or levy of any kind and any attempt to
cause such benefits to be so subjected shall not be recognized except to
the extent as may be required by law.
8. Rollover Contributions and Transfers. The Custodian shall
have the right to receive rollover contributions and to receive direct
transfers from other custodians or trustees. All contributions must be
made in cash or check.
9. Conflict in Provisions. To the extent that any provisions
of this Article VIII shall conflict with the provisions of Articles IV, V
and/or VII, the provisions of this Article VIII shall govern.
10. Applicable State Law. This custodial account shall be
construed, administered and enforced according to the laws of the State of
Wisconsin.
<PAGE>
FIDUCIARY FUNDS
ROTH INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT
The following constitutes an agreement establishing a Roth IRA
(under Section 408A of the Internal Revenue Code) between the depositor
and the custodian.
ARTICLE I
1. If this Roth IRA is not designated as a Roth Conversion IRA,
then, except in the case of a rollover contribution described in section
408A(e), the custodian will accept only cash contributions and only up to
a maximum amount of $2,000 for any tax year of the depositor.
2. If this Roth IRA is designated as a Roth Conversion IRA, no
contributions other than IRA Conversion Contributions made during the same
tax year will be accepted.
ARTICLE II
The $2,000 limit described in Article I is gradually reduced to $0
between certain levels of adjusted gross income (AGI). For a single
depositor, the $2,000 annual contribution is phased out between AGI of
$95,000 and $110,000; for a married depositor who files jointly, between
AGI of $150,000 and $160,000; and for a married depositor who files
separately, between $0 and $10,000. In the case of a conversion, the
custodian will not accept IRA Conversion Contributions in a tax year if
the depositor's AGI for that tax year exceeds $100,000 or if the depositor
is married and files a separate return. Adjusted gross income is defined
in section 408A(c)(3) and does not include IRA Conversion Contributions.
ARTICLE III
The depositor's interest in the balance in the custodial account if
nonforfeitable.
ARTICLE IV
1. No part of the custodial funds may be invested in life insurance
contracts, nor may the assets of the custodial account be commingled with
other property except in a common trust fund or common investment fund
(within the meaning of section 408(a)(5)).
2. No part of the custodial funds may be invested in collectibles
(within the meaning of section 408(m) except as otherwise permitted by
section 408(m)(3), which provides an exception for certain gold, silver,
and platinum coins, coins issued under the laws of any state, and certain
bullion.
ARTICLE V
1. If the depositor dies before his or her entire interest is
distributed to him or her and the grantor's surviving spouse is not the
sole beneficiary, the entire remaining interest will, at the election of
the depositor or, if the depositor has not so elected, at the election of
the beneficiary or beneficiaries, either.
(a) Be distributed by December 31 of the year containing the fifth
anniversary of the depositor's death, or
(b) Be distributed over the life expectancy of the designated
beneficiary starting no later than December 31 of the year following the
year of the depositor's death.
If distributions do not begin by the date described in (b),
distribution method (a) will apply.
2. In the case of distribution method 1.(b) above, to determine the
minimum annual payment for each year, divide the grantor's entire interest
in the trust as of the close of business on December 31 of the preceding
year by the life expectancy of the designated beneficiary using the
attained age of the designated beneficiary as of the beneficiary's
birthday in the year distributions are required to commence and subtract 1
for each subsequent year.
3. If the depositor's spouse is the sole beneficiary on the
depositor's date of death, such spouse will then be treated as the
depositor.
ARTICLE VI
1. The depositor agrees to provide the custodian with information
necessary for the custodian to prepare any reports required under section
408(i) and 408A(d)(3)(E), regulations sections 1.408-5 and 1.408-6, and
under guidance published by the Internal Revenue Service.
2. The custodian agrees to submit reports to the Internal Revenue
Service and the depositor prescribed by the Internal Revenue Service.
ARTICLE VII
Notwithstanding any other articles which may be added or
incorporated, the provisions of Articles I through IV and this sentence
will be controlling. Any additional articles that are not consistent with
section 408A, the related regulations, and other published guidance will
be invalid.
ARTICLE VIII
This Agreement will be amended from time to time to comply with the
provisions of the Code, related regulations, and other published guidance.
Other amendments may be made with the consent of the persons whose
signatures appear below.
ARTICLE IX
1. Investment of Account Assets. (a) All contributions to the
custodial account shall be invested in the shares of any regulated
investment company ("Investment Company") for which Fiduciary Management,
Inc. serves as investment advisor, or any other regulated investment
company designated by the investment advisor. Shares of stock of an
Investment Company shall be referred to as "Investment Company Shares."
(b) Each contribution to the custodial account shall identify the
depositor's account number and be accompanied by a signed statement
directing the investment of that contribution. The custodian may return
to the depositor, without liability for interest thereon, any contribution
which is not accompanied by adequate account identification or an
appropriate signed statement directing investment of that contribution.
(c) Contributions shall be invested in whole and fractional
Investment Company Shares at the price and in the manner such shares are
offered to the public. All distributions received on Investment Company
Shares held in the custodial account shall be reinvested in like shares.
If any distribution of Investment Company Shares may be received in
additional like shares or in cash or other property, the custodian shall
elect to receive such distribution in additional like Investment Company
Shares.
(d) All Investment Company Shares acquired by the custodian shall be
registered in the name of the custodian or its nominee. The depositor
shall be the beneficial owner of all Investment Company Shares held in the
custodial account and the custodian shall not vote any such shares, except
upon written direction of the depositor. The custodian agrees to forward
to the depositor each prospectus, report, notice, proxy and related proxy
soliciting materials applicable to Investment Company Shares held in the
custodial account received by the custodian.
(e) The depositor may, at any time, by written notice to the
custodian, redeem any number of shares held in the custodial account and
reinvest the proceeds in the shares of any other Investment Company. Such
redemptions and reinvestments shall be done at the price and in the manner
such shares are then being redeemed or offered by the respective
Investment Companies.
2. Amendment and Termination. (a) The custodian may amend the
Custodial Account (including retroactive amendments) by delivering to the
depositor written notice of such amendment setting forth the substance and
effective date of the amendment. The depositor shall be deemed to have
consented to any such amendment not objected to in writing by the
depositor within thirty (30) days of receipt of the notice, provided that
no amendment shall cause or permit any part of the assets of the custodial
account to be diverted to purposes other than for the exclusive benefit of
the depositor or his or her beneficiaries.
(b) The depositor may terminate the custodial account at any time by
delivering to the custodian a written notice of such termination.
(c) The custodial account shall automatically terminate upon
distribution to the depositor or his or her beneficiaries of its entire
balance.
3. Taxes and Custodial Fees. Any income taxes or other taxes
levied or assessed upon or in respect of the assets or income of the
custodial account and any transfer taxes incurred shall be paid from the
custodial account. All administrative expenses incurred by the custodian
in the performance of its duties, including fees for legal services
rendered to the custodian, and the custodian's compensation shall be paid
from the custodial account, unless otherwise paid by the depositor or his
or her beneficiaries.
The custodian's fees are set forth in a schedule provided to the
depositor. Extraordinary charges resulting from unusual administrative
responsibilities not contemplated by the schedule will be subject to such
additional charges as will reasonably compensate the custodian. Fees for
refund of excess contributions, transferring to a successor trustee or
custodian, or redemption/reinvestment of Investment Company Shares will be
deducted from the refund or redemption proceeds and the remaining balance
will be remitted to the depositor, or reinvested or transferred in
accordance with the depositor's instructions.
4. Reports and Notices. (a) The custodian shall keep adequate
records of transactions it is required to perform hereunder. After the
close of each calendar year, the custodian shall provide to the depositor
or his or her legal representative a written report or reports reflecting
the transactions effected by it during such year and the assets and
liabilities of the Custodial Account at the close of the year.
(b) All communications or notices shall be deemed to be given upon
receipt by the custodian at Fiduciary Funds, c/o Firstar Trust Company,
Mutual Fund Services, 615 East Michigan Street, 3d Floor, P.O. Box 701,
Milwaukee, WI 53201-0701, or the depositor at his most recent address
shown in the custodian's records. The depositor agrees to advise the
custodian promptly, in writing, of any change of address.
5. Designation of Beneficiary. The depositor may designate a
beneficiary or beneficiaries to receive benefits from the custodial
account in the event of the depositor's death. In the event the depositor
has not designated a beneficiary, or if all beneficiaries shall predecease
the depositor, the following persons shall take in the order named:
(a) The spouse of the depositor;
(b) If the spouse shall predecease the depositor or if the depositor
does not have a spouse, then to the personal representative of the
depositor's estate.
6. Inalienability of Benefits. The benefits provided under this
custodial account shall not be subject to alienation, assignment,
garnishment, attachment, execution or levy of any kind and any attempt to
cause such benefits to be so subjected shall not be recognized except to
the extent as may be required by law.
7. Rollover Contributions and Transfers. Subject to the
restrictions in Article I, the custodian shall have the right to receive
rollover contributions and to receive direct transfers from other
custodians or trustees. All contributions must be made in cash or check.
8. Conflict in Provisions. To the extent that any provisions of
this Article VIII shall conflict with the provisions of Articles V, VI
and/or VIII, the provisions of this Article IX shall govern.
9. Applicable State Law. This custodial account shall be
construed, administered and enforced according to the laws of the State of
Wisconsin.
<PAGE>
FIDUCIARY FUNDS SIMPLE PLAN
Article I Employee Requirements (Complete appropriate box(es) and
blanks-see instructions)
1 General Eligibility Requirements. The Employer agrees to permit
salary reduction contributions to be made in each calendar year to the
SIMPLE IRA established by each employee who meets the following
requirements (select either 1a or 1b):
a [_] Full Eligibility. All employees are eligible.
b [_] Limited Eligibility. Eligibility is limited to employees who
are described in both (i) and (ii) below:
(i) Current compensation. Employees who are reasonably
expected to receive at least $_____________ in compensation (not to exceed
$5,000) for the calendar year.
(ii) Prior compensation. Employees who have received at
least $___________ in compensation (not to exceed $5,000) during any
_______ calendar year(s) (insert 0, 1, or 2) preceding the calendar year.
2 Excludable Employees (OPTIONAL)
[_] The Employer elects to exclude employees covered under a
collective bargaining agreement for which retirement benefits were the
subject of good faith bargaining.
Article II-Salary Reduction Agreements (Complete the box and blank, if
appropriate-see instructions.)
1 Salary Reduction Election. An eligible employee may make a salary
reduction election to have his or her compensation for each pay period
reduced by a percentage. The total amount of the reduction in the
employee's compensation cannot exceed $6,000* for any calendar year.
-------------
* This amount will be adjusted to reflect any annual cost-of-living
increases announced by the IRS.
2 Timing of Salary Reduction Elections
a For a calendar year, an eligible employee may make or modify a salary
reduction election during the 60-day period immediately preceding January
1 of that year. However, of for the year in which the employee becomes
eligible to make salary reduction contributions, the period during which
the employee may make or modify the election is a 60-day period that
includes either the date the employee becomes eligible or the day before.
b In addition to the election in 2a, eligible employees may make salary
reduction elections or modify prior elections _______________ (If the
Employer chooses this option, insert a period or periods (e.g. semi-
annually, quarterly, monthly, or daily) that will apply uniformly to all
eligible employees.)
c No salary reduction election may apply to compensation that an
employee received, or had a right to immediately receive, before execution
of the salary reduction election.
d An employee may terminate a salary reduction election at any time
during the calendar year. [_] If this box is checked, an employee who
terminates a salary reduction election not in accordance with 2b may not
resume salary reduction contributions during the calendar year.
Article III-Contributions (Complete the blank, if appropriate-see
instructions.)
1 Salary Reduction Contributions. The amount by which an employee
agrees to reduce his or her compensation will be contributed by the
Employer to the employee's SIMPLE IRA.
2 Other Contributions
a Matching Contributions
(i) For each calendar year, the Employer will contribute a matching
contribution to each eligible employee's SIMPLE IRA equal to the
employee's salary education contributions up to a limit of 3% of the
employee's compensation for the calendar year.
(ii) The Employer may reduce the 3% limit for the calendar year in
(i) only if:
(1) The limit is not reduced below 1%; (2) The limit is not
reduced for more than 2 calendar years during the 5-year period ending
with the calendar year the reduction is effective; and (3) Each employee
is notified of the reduced limit within a reasonable period of time before
the employees' 60-day election period for the calendar year (described in
Article II, item 2a).
b Nonelective Contributions
(i) For any calendar year, instead of making matching contributions
the Employer may make nonelective contributions equal to 2% of
compensation for the calendar year to the SIMPLE IRA of each eligible
employee who has at least $______________ (not more than $5,000) in
compensation for the calendar year. No more than $160,000?* in
compensation can be taken into account in determining the nonelective
contribution for each eligible employee.
--------------
* This amount will be adjusted to reflect any annual cost-of-living
increases announced by the IRS.
(ii) For any calendar year, the Employer may make 2% nonelective
contributions instead of matching contributions only if:
(1) Each eligible employee is notified that a 2% nonelective
contribution will be made instead of a matching contribution; and
(2) This notification is provided within a reasonable period of time
before the employees' 60-day election period for the calendar year
(described in Article II, item 2a).
Time and Manner of Contributions
a The Employer will make the salary reduction contributions
(described in 1 above) for each eligible employee to the SIMPLE IRA
established at the financial institution selected by that employee no
later than 30 days after the end of the month in which the money is
withheld from the employee's pay. See instructions.
b The Employer will make the matching or nonelective contributions
(described in 2a and 2b above) for each eligible employee to the SIMPLE
IRA established at the financial institution selected by that employee no
later than the due date for filing the Employer's tax return, including
extensions, for the taxable year that includes the last day of the
calendar year for which the contributions are made.
Article IV-Other Requirements and Provisions
1 Contributions in General. The Employer will make no contributions to
the SIMPLE IRAs other than salary reduction contributions (described in
Article III, item 1) and matching or nonelective contributions (described
in Article III, items 2a and 2b).
2 Vesting Requirements. All contributions made under this SIMPLE plan
are fully vested and nonforfeitable.
3 No Withdrawal Restrictions. The Employer may not require the
employee to retain any portion of the contributions in his or her SIMPLE
IRA or otherwise impose any withdrawal restrictions.
4 Selection of IRA Trustee. The employer must permit each eligible
employee to select the financial institution that will serve as the
trustee, custodian, or issuer of the SIMPLE IRA to which the employer will
make all contributions on behalf of that employee.
5 Amendments To This SIMPLE Plan. This SIMPLE plan may not be amended
except to modify the entries inserted in the blanks or boxes provided in
Articles I, II, III, VI, and VII.
6 Effects of Withdrawals and Rollovers
a An amount withdrawn from the SIMPLE IRA is generally includible
in gross income. However, a SIMPLE IRA balance may be rolled over or
transferred on a tax-free basis to another IRA designed solely to hold
funds under a SIMPLE plan. In addition, an individual may roll over or
transfer his or her SIMPLE IRA balance to any IRA on a tax-free basis
after a 2-year period has expired since the individual first participate
in a SIMPLE plan. Any rollover or transfer must comply with the
requirements under section 408.
b If an individual withdraws an amount from a SIMPLE IRA during
the 2-year period beginning when the individual first participate in a
SIMPLE plan and the amount is subject to the additional tax on early
distributions under section 72(t), this additional tax is increased from
10% to 25%.
Article V-Definitions
1 Compensation
a General Definition of Compensation. Compensation means the sum
of wages, tips, and other compensation from the Employer subject to
federal income tax withholding (as described in section 6051(a)(3)) and
the employee's salary reduction contributions made under this plan, and if
applicable, elective deferrals under a section 401(k) plan, a SARSEP, or a
section 403(b) annuity contract and compensation deferred under a section
45 plan required to be reported by the Employer on Form W-2 (as described
in section 6051(a)(8)).
b Compensation for Self-Employed Individuals. For self-employed
individuals, compensation means that net earnings from self-employment
determined under section 1402(a) prior to subtracting any contributions
made pursuant to this plan on behalf of the individual.
2 Employee. Employee means a common-law employee of the Employer. The
term employee also includes a self-employed individual and a leased
employee described in section 414(n) but does not include a nonresident
alien who received no earned income from the Employer that constitutes
income from sources within the United States.
Eligible Employee. An eligible employee means an employee who satisfies
the conditions in Article I, item 1 and is not excluded under Article I,
item 2.
4 SIMPLE IRA. A SIMPLE IRA is an individual retirement account
described in section 408(a), or an individual retirement annuity described
in section 408(b), to which the only contributions that can be made are
contributions under SIMPLE plan and rollovers or transfers from another
SIMPLE IRA.
Article VI-Procedures for Withdrawal. (The employer will provide each
employee with the procedures for withdrawals of contributions received by
the financial institution selected by that employee, and that financial
institution's name and address (by attaching that information or inserting
it in the space below) unless: (1) that financial institution's
procedures are unavailable, or (2) that financial institution provides the
procedures directly to the employee. See Employee Notification section in
the instructions.
Article VII-Effective Date
This SIMPLE plan is effective _________________________________ (See
instructions.)
* * * *
___________________________ ________________________________
Name of Employer By: Signature Date
___________________________ ________________________________
Address of Employer Name and title
Model Notification to Eligible Employees
I. Opportunity to Participate in the SIMPLE Plan
You are eligible to make salary reduction contributions to the
___________ SIMPLE plan. This notice and the attached summary description
provide you with information that you should consider before you decide
whether to start, continue, or change your salary reduction agreement.
II. Employer Contribution Election
For the ______ calendar year, the employer elects to contribute to
your SIMPLE IRA (employer must select either (1), (2) or (3)):
[ ] (1) A matching contribution equal to your salary reduction
contributions up to a limit of 3% of your compensation for
the year.
[ ] (2) A matching contribution equal to your salary reduction
contributions up to a limit of ______% (employer must
insert a number from 1 to 3 and is subject to certain
restrictions) of your compensation for the year; or
[ ] (3) A nonelective contribution equal to 2% of your compensation
for the year (limited to $160,000*) if you are an employee
who makes at least $__________ (employer must insert an
amount that is $5,000 or less) in compensation for the
year.
-------------
* This amount will be adjusted to reflect any annual cost-of-living
increases announced by the IRS.
III. Administrative Procedures
If you decide to start or change your salary reduction agreement, you
must complete the salary reduction agreement and return it to
___________________________________ (employer should designate a place or
individual) by _____________________ (employer should insert a date that
is not less than 60 days after notice is given).
IV. Employee Selection of Financial Institution
You must select the financial institution that will serve as the
trustee, custodian, issuer or your SIMPLE IRA and notify your employer of
your selection.
Model Salary Reduction Agreement
I. Salary Reduction Election
Subject to the requirements of the SIMPLE plan of ___________________
(name of employer) I authorize __________% or $____________ (which equals
________% of my current rate of pay) to be withheld from my pay for each
pay period and contributed to my SIMPLE IRA as a salary reduction
contribution.
II. Maximum Salary Reduction
I understand that the total amount of my salary reduction
contributions in any calendar year cannot exceed $6,000*.
-----------
* This amount will be adjusted to reflect any annual cost-of-living
increases announced by the IRS.
III. Date Salary Reduction Begins
I understand that my salary reduction contributions will start as
soon as permitted under the SIMPLE plan and as soon as administratively
feasible or, if later, ____________. (Fill in the date you want the
salary reduction contributions to begin. The date must be after you sign
this agreement).
IV. Employee Selection of Financial Institution
I select the following financial institution to serve as the trustee,
custodian, or issuer of my SIMPLE IRA.
____________________________________________
Name of financial institution
____________________________________________
Address of financial institution
____________________________________________
SIMPLE IRA account name and number
I understand that I must establish a SIMPLE IRA to receive any
contributions made on my behalf under this SIMPLE plan. If the
information regarding my SIMPLE IRA is incomplete when I first submit my
salary reduction agreement, I realize that it must be completed by the
date contributions must be made under the SIMPLE plan. If I fail to
update my agreement to provide this information by that date, I understand
that my employer may select a financial institution of my SIMPLE IRA.
V. Duration of Election
This salary reduction agreement replaces any earlier agreement and
will remain in effect as long as I remain an eligible employee under the
SIMPLE plan or until I provide my employer with a request to end my salary
reduction contributions or provide a new salary reduction agreement as
permitted under this SIMPLE plan.
Signature of employee ___________________________
Date ___________________________
<PAGE>
FIDUCIARY FUNDS
SIMPLIFIED EMPLOYEE PENSION-INDIVIDUAL
RETIREMENT ACCOUNTS CONTRIBUTION AGREEMENT
(Under Section 408(k) of the Internal Revenue Code)
_____________________ makes the following agreement under
(Name of employer)
Section 408(k) of the Internal Revenue Code and the instructions to this
form.
Article I--Eligibility Requirements (Check appropriate boxes--see
Instructions.)
The employer agrees to provide for discretionary contributions in each
calendar year to the individual retirement account or individual
retirement annuity (IRA) of all employees who are at least ______ years
old (not to exceed 21 years old) and have performed services for the
employer in at least ______ years (not to exceed 3 years) of the
immediately preceding 5 years. This simplified employee pension (SEP) [ ]
includes [ ] does not include employees covered under a collective
bargaining agreement, [ ] includes [ ] does not include certain
nonresident aliens, and [ ] includes [ ] does not include employees whose
total compensation during the year is less than $400*.
-----------
* This amount reflects the cost-of-living increase effective January 1,
1997. The amount is adjusted annually. The IRS announces the increase,
if any, in a news release and in the Internal Revenue Bulletin.
Article II--SEP Requirements (See Instructions.)
The employer agrees that contributions made on behalf of each eligible
employee will be:
A. Based only on the first $160,000* of compensation.
B. Made in an amount that is the same percentage of compensation for
every employee.
C. Limited annually to the smaller of $30,000* or 15% of
compensation.
001.211008
D. Paid to the employee's IRA trustee, custodian, or insurance company
(for an annuity contract).
___________________________________ ______________________________
Employer's Signature and date Name and title
<PAGE>
FIDUCIARY FUNDS SIMPLIFIED EMPLOYEE PENSION
Instructions
Section references are to the Internal Revenue Code unless otherwise
noted.
Purpose of Form
Form 5305-SEP (Model SEP) is used by an employer to make an agreement to
provide benefits to all eligible employees under a SEP described in
section 408(k). Do not file this form with the IRS. See Pub. 560,
Retirement Plans for the Self-Employed, and Pub. 590, Individual
Retirement Arrangements (IRAs).
Instructions to the Employer
Simplified Employee Pension.-A SEP is a written arrangement (a plan) that
provides you with a simplified way to make contributions toward your
employees' retirement income. Under a SEP, you can contribute to an
employee's individual retirement account or annuity (IRA). You make
contributions directly to an IRA set up by or for each employee with a
bank, insurance company, or other qualified financial institution. When
using Form 5305-SEP to establish a SEP, the IRA must be a Model IRA
established on an IRS form or a master or prototype IRA for which the IRS
has issued a favorable opinion letter. Making the agreement on Form 5305-
SEP does not establish an employer IRA described in section 408(c).
When Not To Use Form 5305-SEP.-Do not use this form if you:
1. Currently maintain any other qualified retirement plan. This
does not prevent you from maintaining another SEP.
2. Previously maintained a defined benefit plan that is now
terminated.
3. Have any eligible employees for whom IRAs have not been
established.
4. Use the services of leased employees (described in section
414(n)).
5. Are a member of an affiliated service group (described in
section 414(m)), a controlled group of corporations (described in section
414(b)), or trades or businesses under common control (described in
sections 414(c) and 414(o)), unless all eligible employees of all the
members of such groups,trades, or businesses, participate in the SEP.
6. Will not pay the cost of the SEP contributions. Do not use Form
5305-SEP for a SEP that provides for elective employee contributions even
if the contributions are made under a salary reduction agreement.
Use Form 5305A-SEP, or a nonmodel SEP if you permit elective
deferrals to a SEP.
Note: SEPs permitting elective deferrals cannot be established after
1996.
Eligible Employees.-All eligible employees must be allowed to participate
in the SEP. An eligible employee is any employee who: (1) is at least 21
years old, and (2) has performed "service" for you in at least 3 of the
immediately preceding 5 years.
Note: You can establish less restrictive eligibility requirements, but
not more restrictive ones.
Service is any work performed for you for any period of time, however
short. If you are a member of an affiliated service group, a controlled
group of corporations,or trades or businesses under common control,
service includes any work performed for any period of time for any other
member of such group,trades, or businesses.
Excludable Employees.-The following employees do not have to be covered by
the SEP: (1) employees covered by a collective bargaining agreement whose
retirement benefits were bargained for in good faith by you and their
union, (2) nonresident alien employees who did not earn U.S.source income
from you, and (3) employees who received less than $400* in compensation
during the year.
---------------
* This amount reflects the cost-of-living increase effective January 1,
1997. The amount is adjusted annually. The IRS announces the increase,
if any, in a news release and in the Internal Revenue Bulletin.
Contribution Limits.-The SEP rules permit you to make an annual
contribution of up to 15% of the employee's compensation or $300,000*,
whichever is less. Compensation, for this purpose, does not include
employer contributions to the SEP or the employee's compensation in excess
of $160,000*. If you also maintain a Model Elective SEP or any other SEP
that permits employees to make elective deferrals, contributions to the
two SEPs together may not exceed the smaller of $300,000* or 15% of
compensation for any employee.
---------------
* This amount reflects the cost-of-living increase effective January 1,
1997. The amount is adjusted annually. The IRS announces the increase,
if any, in a news release and in the Internal Revenue Bulletin.
Contributions cannot discriminate in favor of highly compensated
employees. You are not required to make contributions every year. But
you must contribute to the SEP-IRAs of all of the eligible employees who
actually performed services during the year of the contribution. This
includes eligible employees who die or quit working before the
contribution is made.
You may also not integrate your SEP contributions with, or offset
them by, contributions made under the Federal Insurance Contributions Act
(FICA).
If this SEP is intended to meet the top-heavy minimum contribution
rules of section 416, but it does not cover all your employees who
participate in your elective SEP, then you must make minimum contributions
to IRAs established on behalf of those employees.
Deducting Contributions.--You may deduct contributions to a SEP subject to
the limits of section 404(h). This SEP is maintained on a calendar year
basis and contributions to the SEP are deductible for your tax year with
or within which the calendar year ends. Contributions made for a
particular tax year must be made by the due date of your income tax return
(including extensions) for that tax year.
Completing the Agreement.--This agreement is considered adopted when:
- IRAs have been established for all your eligible employees;
- You have completed all blanks on the agreement form without
modification; and
- You have given all your eligible employees the following information:
1. A copy of Form 5305-SEP.
2. A statement that IRAs other than the IRAs into which employer
SEP contributions will be made may provide different rates of return and
different terms concerning, among other things, transfers and withdrawals
of funds from the IRAs.
3. A statement that, in addition to the information provided to an
employee at the time the employee becomes eligible to participate, the
administrator of the SEP must furnish each participant within 30 days of
the effective date of any amendment to the SEP, a copy of the amendment
and a written explanation of its effects.
4. A statement that the administrator will give written
notification to each participant of any employer contributions made under
the SEP to that participant's IRA by the later of January 31 of the year
following the year for which a contribution is made or 30 days after the
contribution is made.
Employers who have established a SEP using Form 5305-SEP and have
furnished each eligible employee with a copy of the completed Form 5305-
SEP and provided the other documents and disclosures described in
Instructions to the Employer and Information for the Employee, are not
required to file the annual information returns, Forms 5500, 5500-C/R, or
5500-EZ for the SEP. However, under Title I of ERISA, this relief from
the annual reporting requirements may not be available to an employer who
selects, recommends, or influences its employees to choose IRAs into which
contributions will be made under the SEP, if those IRAs are subject to
provisions that impose any limits on a participant's ability to withdraw
funds (other than restrictions imposed by the Code that apply to all
IRAs). For additional information on Title I requirements, see the
Department of Labor regulation at 29 CFR 2520.104-48.
Information for the Employee
The information below explains what a SEP is, how contributions are made,
and how to treat your employer's contributions for tax purposes. For more
information, see Pub. 590.
Simplified Employee Pension.--A SEP is a written arrangement (a plan) that
allows an employer to make contributions toward your retirement.
Contributions are made to an individual retirement account/annuity (IRA).
Contributions must be made to either a Model IRA executed on an IRS form
or a master or prototype IRA for which the IRS has issued a favorable
opinion letter.
An employer is not required to make SEP contributions. If a
contribution is made, it must be allocated to all the eligible employees
according to the SEP agreement. The Model SEP (Form 5305-SEP) specifies
that the contribution for each eligible employee will be the same
percentage of compensation (excluding compensation higher than $160,000*)
for all employees.
Your employer will provide you with a copy of the agreement
containing participation rules and a description of how employer
contributions may be made to your IRA. Your employer must also provide
you with a copy of the completed Form 5305-SEP and a yearly statement
showing any contributions to your IRA.
All amounts contributed to your IRA by your employer belong to you
even after you stop working for that employer.
Contribution Limits.--Your employer will determine the amount to be
contributed to your IRA each year. However, the amount for any year is
limited to the smaller of $30,000* or 15% of your compensation (currently
limited to $160,000) for that year. Compensation does not include any
amount that is contributed by your employer to your IRA under the SEP.
Your employer is not required to make contributions every year or to
maintain a particular level of contributions.
Tax Treatment of Contributions.--Employer contributions to your SEP-IRA
are excluded from your income unless there are contributions in excess of
the applicable limit. Employer contributions within these limits will not
be included on your Form W-2.
Employee Contributions.--You may contribute the smaller of $2,000 or 100%
of your compensation to an IRA. However, the amount you can deduct may be
reduced or eliminated because, as a participant in a SEP, you are covered
by an employer retirement plan.
SEP Participation.--If your employer does not require you to participate
in a SEP as a condition of employment, and you elect not to participate,
all other employees of your employer may be prohibited from participating.
If one or more eligible employees do not participate and the employer
tries to establish a SEP for the remaining employees, it could cause
adverse tax consequences for the participating employees.
An employer may not adopt this IRS Model SEP if the employer
maintains another qualified retirement plan or has ever maintained a
qualified defined benefit plan. This does not prevent your employer from
adopting this IRS Model SEP and also maintaining an IRS Model Elective SEP
or other SEP. However, if you work for several employers, you may be
covered by a SEP of one employer and a different SEP or pension or profit-
sharing plan of another employer.
SEP-IRA Amounts--Rollover or Transfer to Another IRA.--You can withdraw or
receive funds from your SEP-IRA if within 60 days of receipt, you place
those funds in another IRA or SEP-IRA. This is called a "rollover" and
can be done without penalty only once in any 1-year period. However,
there are no restrictions on the number of times you may make "transfers"
if you arrange to have these funds transferred between the trustees or the
custodians so that you never have possession of the funds.
Withdrawals.--You may withdraw your employer's contribution at any time,
but any amount withdrawn is includible in your income unless rolled over.
Also, if withdrawals occur before you reach age 59-1/2, you may be subject
to a tax on early withdrawal.
Excess SEP Contributions.--Contributions exceeding the yearly limitations
may be withdrawn without penalty by the due date (plus extensions) for
filing your tax return (normally April 15), but is includible in your
gross income. Excess contributions left in your SEP-IRA account after
that time may have adverse tax consequences. Withdrawals of those
contributions may be taxed as premature withdrawals.
Financial Institution Requirements.--The financial institution where your
IRA is maintained must provide you with a disclosure statement that
contains the following information in plain, nontechnical language:
1. The law that relates to your IRA.
2. The tax consequences of various options concerning your IRA.
3. Participation eligibility rules, and rules on the deductibility
of retirement savings.
4. Situations and procedures for revoking your IRA, including the
name, address, and telephone number of the person designated to receive
notice of revocation. (This information must be clearly displayed at the
beginning of the disclosure statement.)
5. A discussion of the penalties that may be assessed because of
prohibited activities concerning your IRA.
6. Financial disclosure that provides the following information:
a. Projects value growth rates of your IRA under various
contribution and retirement schedules, or describes the method of
determining annual earnings and charges that may be assessed.
b. Describes whether, and for when, the growth projections are
guaranteed, or a statement of the earnings rate and the terms on which the
projections are based.
c. States the sales commission for each year expressed as a
percentage of $1,000.
In addition, the financial institution must provide you with a
financial statement each year. You may want to keep these statements to
evaluate your IRA's investment performance.
<PAGE>
Fiduciary Funds
IRA Application
Mail completed Application to:
Fiduciary Funds, Firstar Trust Company, Mutual
Fund Services, 615 East Michigan Street,
3rd Floor, P.O. Box 701, Milwaukee, WI 53201-0701
1. Account Name ______________________________________
Holder Daytime Phone Number ( ) ________________
Address ___________________________________
City/State/Zip ____________________________
Birthdate _________________________________
Social Security Number ____________________
2. Beneficiary Name ______________________________________
Designation* Relationship ______________________________
Address ___________________________________
City/State/Zip ____________________________
Birthdate _________________________________
Social Security Number ____________________
* If no beneficiary is named, in the event of your
death your IRA will be payable to spouse, or if you
have no spouse, to your estate.
3. Type of IRA [ ] Individual Retirement Account
(Check One) For Tax Year 19___.
[ ] Roth IRA
For Tax Year ______ (beginning in 1998).
[ ] Roth Conversion IRA
For Tax Year _____.
[ ] Spousal Account. (If electing this option be
sure to complete Section 1 showing your spouse as
the account holder.)
For Tax Year 19___.
[ ] SEP Account (IRS Form 5305-SEP is required with
your Application).
For Tax Year 19___.
[ ] SIMPLE Account (IRS Form 5304 SIMPLE is required
with your application.)
[ ] Rollover Account (You had physical receipt of
assets for less than 60 days or you have
authorized a direct rollover from a qualified
plan). If Rollover Account, please specify the
type of account held by previous custodian below.
[ ] IRA to IRA
[ ] IRA to Roth Conversion IRA
[ ] Roth IRA to Roth IRA
[ ] Employer-Sponsored SIMPLE IRA to IRA
[ ] Employer-Sponsored Plan to IRA
[ ] Transfer Account - Check this box if assets are a
direct transfer from current IRA custodian (you
will not have personal receipt of assets) and
complete an IRA Transfer Form.
4. Your Fill in the amount to be invested in the Fund.
Investment (Minimum investment per Fund is $1,000)
Instructions
Amount
Fiduciary Capital Growth Fund, Inc. $__________
FMI Focus Fund $__________
Fiduciary/Portico Money Market
Fund, Inc. $__________
5. Acknowledge- I adopt the Fiduciary Funds IRA, appointing Firstar
ment and Trust Company to act as Custodian and to perform
Signature administrative services. I have received and read
the prospectus(es) for the Fund(s) in which I am
making my contribution, and have read and understand
the IRA Custodial Agreement and Disclosure Statement.
I certify under penalties of perjury that my Social
Security Number (above) is correct and that I am of
legal age. I understand that the Custodian will
charge fees that are shown in the Disclosure
Statement (or any update thereto) and they may be
separately billed or collected by redeeming
sufficient shares from my Fund(s) account balance. I
will supply the Internal Revenue Service with
information as to any taxable year as required unless
filed by the Custodian.
I represent and certify that, if I am converting or
transferring amounts from an IRA to a Roth Conversion
IRA that I comply with all legal requirements for
such conversion or transfer.
I have read, accept and incorporate the Custodial
Agreement and Disclosure Statement herein, by
reference. I appoint Firstar Trust Company or its
successors, as Custodian of the account(s).
Your Signature ______________________ Date ________
Firstar Trust Company
Authorized Signature _________________ Date ________
Appointment of Custodian accepted:
FIRSTAR TRUST COMPANY
FIDUCIARY FUNDS
SECTION 403(B)(7) CUSTODIAL ACCOUNT AGREEMENT
ACCOUNT APPLICATION
1. EMPLOYEE INFORMATION
Name ______________________ Telephone Number (___) _____________________
Address ________________________________________________________________
City __________________________ State ______________ Zip _______________
Birth Date _______________________ Social Security Number _______________
2. EMPLOYER INFORMATION
Employer Name ___________________________________________________________
Address ________________________________________________________________
City ______________________________ State __________ Zip ______________
Employer Tax ID ___________________ Telephone Number (___) ______________
3. INVESTMENTS
I elect that my contributions be invested as follows:
Fiduciary Capital Growth Fund _____%
FMI Focus Fund _____%
Fiduciary/Portico Money Market Fund _____%
4. EMPLOYEE SIGNATURE
I adopt the Fiduciary Funds Section 403(b)(7) Custodial Account Agreement
and appoint Firstar Trust Company as Custodian. I acknowledge that I have
received and read the Prospectus for the Fiduciary Funds. If I am
contributing a distribution from another employer-sponsored retirement
plan, I certify that such distribution is a qualifying transfer or
rollover. I certify under penalties of perjury that my Social Security
Number (above) is correct. I understand that the Custodian will charge
fees that are shown in the Custodian's fee schedule, and that such fees
may be separately billed or collected by redeeming sufficient shares from
my fund account balance.
_____________________________________ ___________________________
Employee Signature Date
5. EMPLOYER ADOPTION
The Employer adopts the Fiduciary Funds Section 403(b)(7) Custodial
Account Agreement for the benefit of the employee named above. The
Employer certifies that it is a qualifying organization described in Code
Section 403(b)(1)(A) and further agrees that it shall be responsible for
any Section 403(b) plan it maintains.
_____________________________________ ___________________________
Employer Authorized Signature Title Date
6. CUSTODIAN ACCEPTANCE
FIRSTAR TRUST COMPANY
_____________________________________ ___________________________
Authorized Signature Title Date
<PAGE>
FIDUCIARY FUNDS
SECTION 403(B)(7) CUSTODIAL ACCOUNT AGREEMENT
<PAGE>
FIDUCIARY FUNDS
SECTION 403(B)(7) CUSTODIAL ACCOUNT AGREEMENT
Introduction
The Fiduciary Funds Section 403(b)(7) Custodial Account
Agreement ("Custodial Account Agreement" or "Agreement") is intended for
use in connection with Section 403(b)(7) arrangements where the parties
desire that all or part of the contributions made to the arrangement be
invested in shares of one or more of the portfolios of the Fiduciary Funds
managed by Fiduciary Management, Inc. (the "Investment Advisor"). The
Custodial Account Agreement, and all funds held under the Agreement, are
intended to comply with, and be administered in accordance with, the
provisions of the Internal Revenue Code of 1986 ("Code") and, to the
extent applicable, the Employee Retirement Income Security Act of 1974
("ERISA"), as such laws may be amended and in effect from time to time.
Article I. Eligibility and Participation.
Eligible Employees
Section 403(b)(7) of the Code provides special retirement plan
rules applicable to employees of an Employer that is:
(1) an organization described in Section 501(c)(3) of the Code
and that is exempt from tax under Section 501(a) of the
Code; or
(2) an educational organization as defined in Section
170(b)(1)(A)(ii) of the Code if the education organization
is maintained by a State or a political subdivision of a
State or an agency or instrumentality of either.
Adoption of Custodial Account Agreement
An Employee who performs services for an organization described
in (1) or (2) above may adopt this Custodial Account Agreement. The
Employee adopts the Custodial Account Agreement by completing and signing
the Account Application and by delivering it (via first class mail or
recognized courier service) to the Custodian. The Custodial Account
Agreement will become effective upon written acceptance of the Account
Application by the Custodian (or by its delegate or agent). Although the
Employer is not required to sign the Account Application, the Employer
will be deemed to have established the Custodial Account for the benefit
of the Employee as of the date on which the Employer transmits a
contribution (including, without limitation, a Salary Reduction
contribution) to the Custodian for the benefit of the Employee's account.
Incorporation of Documents
The Account Application and (if contributions will be made on a
salary reduction basis) the Salary Reduction Agreement between the
Employer and the Employee, are incorporated by reference and made a part
of the Custodial Account Agreement.
Article II. Contributions.
In General
Subject to the special limitations described in this Article II,
the Employer may contribute to the Custodial Account (in cash) for any
taxable year, provided that the amount of the contribution does not
represent an "excess contribution" as defined in Section 4973(c) of the
Code.
Limitation on Salary Reduction Contributions.
The amount contributed to an Employee's Custodial Account in any
calendar year as a Salary Reduction Contribution shall not exceed the
greater of $10,000 or the limitation on elective deferrals in effect for
such year under Section 402(g) of the Code ($7,000, indexed for cost-of-
living increases). The limitation determined in accordance with the
foregoing sentence is then reduced by the amount of any Salary Reduction
Contributions made during the calendar year by or on behalf of the
Employee under a qualified cash or deferred arrangement under Section
401(k) of the Code, a simplified employee pension under Section 408(k) of
the Code, an eligible deferred compensation plan under Section 457 of the
Code, or another tax deferred annuity or custodial account under Section
403(b) of the Code.
In the case of an individual who has completed at least fifteen
(15) years of service with an educational institution, hospital, home
health service agency, health and welfare service agency, church or
convention or association of churches, or a tax-exempt organization
controlled by a church or convention or association of churches as
described in Section 414(e)(3)(B)(ii) of the Code (collectively referred
to as a "Qualified Organization"), the limitation on Salary Reduction
Contributions for any year as determined above shall be increased by the
least of the following amounts:
(1) $3,000;
(2) the difference (but not less than zero) between
$15,000 and any amounts excluded from gross income in
prior years as a result of this special "catch up"
rule; and
(3) the difference (but not less than zero) between (A)
$5,000 multiplied by the number of years of service
that the individual has with the Qualified
Organization, and (B) the amount of Salary Reduction
Contributions made by the Qualified Organization on
behalf of the individual for prior taxable years under
a qualified cash or deferred arrangement under Section
401(k) of the Code, a simplified employee pension
under Section 408(k) of the Code, or another tax
deferred annuity or custodial account under Section
403(b) of the Code.
In the event that an Employee determines that the amount
contributed for any calendar year exceeds the limitation on Salary
Reduction Contributions, and if the Employee notifies the Custodian in
writing of such excess amount no later than March 1 of the following
calendar year, the Custodian will distribute such excess amount (plus any
income attributable thereto) to the Employee not later than April 15 of
the year following the year in which the excess Salary Reduction
Contributions were made. Neither the Investment Advisor nor the Custodian
shall have any responsibility for determining whether excess Salary
Reduction Contributions have been made or, if made, for distributing any
excess amount except in accordance with the specific written instructions
of the Employee.
Limitations on Total Contributions (Employer Non-Elective and Employee
Salary Reduction Contributions.
The maximum amount of contributions (including Salary Reduction
Contributions) that may be contributed to an Employee's Custodial Account
for any taxable year shall not exceed the lesser of the Employee's:
(1) Exclusion Allowance computed in accordance with Section
403(b)(2) of the Code, i.e., generally, twenty percent
(20%) of the Employee's "includable compensation"
multiplied by the Employee's years of service, less all
contributions made in prior years; or
(2) Section 415 Limit, i.e., generally, the lesser of twenty
five percent (25%) of the individual's "compensation" for
the limitation year (the calendar year unless the Employer
has designated a different year) or $30,000 (as adjusted
from time to time in accordance with Section 415(d) of the
Code).
Salary Reduction Contributions generally reduce the Employee's
"compensation" and "includable compensation" for purposes of the foregoing
limits.
An Employee who is employed by a Qualified Organization may
elect to calculate his total contribution limit in accordance with one of
the alternative limitations described in Section 415(c)(4) of the Code.
In general, Section 415(c)(4) of the Code permits the Employee to elect:
(1) to insert, in lieu of the Section 415 Limit, on amount
equal to the lesser of (A) $15,000 or (B) twenty five
percent (25%) of the Employee's "includable compensation"
plus $4,000;
(2) to disregard the Section 415 Limit, so that the Employee's
total contribution limit will equal the Employee's
Exclusion Allowance; or
(3) for the year in which the Employee terminates employment,
to replace the Section 415 Limit with an amount equal to
the lesser of (A) $30,000 (as adjusted from time to time in
accordance with Section 415(d) of the Code), or (B) the
amount of contributions which could have been, but were
not, made under Section 403(b) during the ten year period
ending on the date of the Employee's termination,
determined by taking into account only the Employee's
period of employment with the Employer.
The alternate limitation elections described in Paragraphs (1), (2) and
(3) above are mutually exclusive and irrevocable, so that an Employee who
elects one of the alternate limitations may not thereafter utilize another
of the alternate limits. Further, the alternate limitation described in
Paragraph (3) above may be used only once by an Employee, rather than once
with respect to each Employer.
In the case of contributions other than Salary Reduction
Contributions, an Employee's "compensation" or "includable compensation"
shall not exceed $160,000 or such other limit in effect for such year
under Section 401(a)(17) of the Code.
Limitation on Custodian or Investment Advisor Duties and Responsibilities.
Neither the Investment Advisor nor the Custodian shall be
responsible for determining the amount that may be contributed on behalf
of the Employee, unless such obligation is explicitly undertaken by
separate written agreement. In addition, neither the Investment Advisor
nor the Custodian shall be responsible to recommend or compel Employer
contributions to the Custodial Account. The disposition of excess
contributions will be made in accordance with instructions from the
Employer to the extent such instructions are consistent with applicable
law.
Rollover or Transfer Contributions
The Employee or the Employer may transfer or cause to be
transferred to this Custodial Account, by rollover, direct rollover or
direct transfer, assets available from an existing annuity contract or
custodial account established under Section 403(b) of the Code for which
previous contributions were made on the Employee's behalf. In addition, a
rollover, direct rollover or transfer may be made from an individual
retirement account or annuity established pursuant to Section 408 of the
Code, if the assets in the individual retirement account or annuity are
attributable solely to a previous rollover contribution to the account or
annuity from one or more annuity contracts or custodial accounts
established pursuant to Section 403(b) of the Code. Notwithstanding the
foregoing, if the Employer maintains a written Section 403(b) plan for
which this Custodial Account serves as a funding vehicle, any restrictions
imposed by the terms of such plan upon rollovers, direct rollovers, or
transfers shall, to the extent that they are inconsistent with the
provisions of this paragraph, take precedence over this paragraph.
Article III. Investment of Contributions
Employee Investment Election
All contributions made to the Custodial Account shall be used by
the Custodian to purchase shares of one or more of the portfolios of the
regulated investment company known as the Fiduciary Funds. For purposes
of this Custodial Account, each such portfolio will be referred to as an
"Investment Company," and the shares of each Investment Company will be
referred to as "Investment Company Shares". The Employee (or the
Employee's beneficiary, executor or administrator) may direct the
Custodian to invest his Custodial Account in the shares of the Investment
Companies or other regulated investment companies as may be made available
by the Investment Advisor in the future. The Employee (or the Employee's
beneficiary, executor or administrator) may direct the Custodian to
transfer all or any part of his Custodial Account assets from one
Investment Company to another at any time. In directing the Custodian the
Employee (or the Employee's beneficiary, executor or administrator) shall
designate a percentage allocation to any or all of the then available
Investment Companies, subject to the rules of such Investment Company with
respect to minimum investment or allocation. Any changes in the
allocation of future contributions or current Custodial Account assets
will be effective only when the Custodian receives appropriate
instructions from the Employee (or the Employee's beneficiary, executor or
administrator). Such instructions may be given by the Employee either in
writing and in such form as may be acceptable to the Custodian, or (if
available) by use of the telephone system maintained for such purpose by
the Custodian or its agent. By giving such instructions to the Custodian,
the Employee will be deemed to have acknowledged receipt of the current
prospectus of any Investment Company in which the Employee instructs the
Custodian to invest. In the event no direction is made, or if the opinion
of the Custodian the directions received are not clear, the Custodian will
invest all contributions in such fund as the Investment Advisor may from
time to time designate, until further notice or clarifying written
instructions are received from the Employee. All dividends and capital
gains shall be reinvested in additional Investment Company Shares. All
Investment Company Shares acquired by the Custodian shall be registered in
the name of the Custodian or its nominee.
Custodian Reliance and Duty
The Custodian and its agents may conclusively rely upon and
shall be protected in acting upon any direction, instruction or order from
the Employee or any other written notice, request, or instrument believed
by it to be genuine and to have been properly executed and, so long as the
Custodian acts in good faith, in taking or omitting to take any other
action.
The Custodian shall have no duty to question the directions of
the Employee (or the Employee's beneficiary, executor or administrator),
regarding the investment of the assets in the Custodial Account or to
advise such persons regarding such investments, nor shall the Custodian,
the Investment Advisor, or any affiliates of either, be liable for any
loss that results from the exercise of control (whether by action or
inaction) over the Custodian Account by the Employee (or the Employee's
beneficiary, executor or administrator).
Article IV. Distribution of Custodial Account
Distribution Events
The Custodian shall have no responsibility for making
distribution from the Custodial Account prior to receipt of an executed
distribution election form, which shall be in such form and completed in
such manner as the Custodian may prescribe. Distribution from the
Employee's Custodial Account shall not be made prior to the date on which
one of the following events has occurred:
(1) The Employee has attained age 59 and 1/2;
(2) The Employee has separated from service with the Employer;
(3) The Employee has become disabled; or
(4) The Employee has died.
To the extent that the Employer's Section 403(b) program allows,
distribution of the portion of the Employee's Custodial Account
attributable to Salary Reduction Contributions (but not including any
earnings thereon) also may be made in the event of the Employee's
financial hardship. A substantial financial hardship shall exist if the
Employee incurs an immediate and heavy financial need that cannot be met
by other resources reasonably available to the Employee. The Employee's
financial hardship must be certified to by the Employer in accordance with
the standards for financial hardship promulgated from time to time by the
Internal Revenue Service for application to Section 403(b) arrangements.
In no event shall the Custodian or the Investment Advisor certify to the
Employee's hardship.
Distributions prior to age 59 and 1/2 may be subject to a ten
percent (10%) additional tax under Section 72(t) of the Code.
The Employer, in its Section 403(b) document, may provide for
distribution later than the time of the foregoing events, and to the
extent that the events specified in the Employer's plan are consistent
with the minimum distribution requirements of Section 403(b)(10) of the
Code, the terms of the Employer's plan shall govern. The Employer's plan
may not, however, specify payment prior to the occurrence of one or more
of the events described above.
For purposes of Paragraph (3) above, the Employee shall be
considered disabled if he is disabled within the meaning of Section
72(m)(7) of the Code, meaning that the Employee is unable to engage in any
substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or
be of long continued and indefinite duration.
Form of Distribution
The Employee may elect a form of distribution from among the
following alternatives:
(1) A single sum payment in cash;
(2) A specified dollar amount as directed by the Employee from
time to time;
(3) Monthly, quarterly, or annual installment payments over a
period not extending beyond the life expectancy of the
Employee; or
(4) Monthly, quarterly, or annual installment payments over a
period not extending beyond the joint and last survivor
life expectancy of the Employee and his beneficiary.
Such election shall be made in writing in such form as shall be
acceptable to the Custodian. After attaining age 702, certain
restrictions may apply to the Employee's ability to change the period over
which payments are made. In no event shall the Custodian or the Investment
Advisor have any responsibility for determining, or giving advice with
respect to, the form of benefit, life expectancies or minimum distribution
requirements.
If the Employee fails to elect any of the methods of
distribution described above within the time specified for such election,
the Custodian may distribute the Employee's Custodial Account in the form
of a single sum cash payment by the April 1 following the calendar year in
which the Employee attains age 702. Except as otherwise required by
Section 403(b)(10) of the Code, the amount of the monthly, quarterly or
annual installment payments shall be determined by dividing the entire
interest of the Employee in the Custodial Account at the close of the
prior year by the number of years remaining in the period specified by the
Employee's election.
Minimum Distribution Requirements
The Employee must receive distributions from the Custodial
Account in accordance with Regulations prescribed by the Secretary of the
Treasury pursuant to Section 403(b)(10) of the Code which are hereby
incorporated by reference, or in the absence of such regulations, in
accordance with Section 401(a)(9) of the Code. In general, these
provisions require that certain minimum distributions must commence not
later than the April 1 of the calendar following the calendar year in
which the Employee has both retired and attained age 702 (the "required
beginning date"). For any Employee who attained age 702 prior to January
1, 1988, the Employee's "required beginning date" is the April 1 of the
calendar year following the calendar year of the Employee's retirement or
attainment of age 702, whichever occurs later. Certain accounts in
existence prior to January 1, 1987 may be subject to special treatment.
Life expectancies are computed by use of Tables V and VI of
Section 1.72-9 of the Income Tax Regulations, or any updated tables
published by the Internal Revenue Service for this purpose. Unless the
Employee (or his spouse) elects not to have life expectancy recalculated,
the Employee's life expectancy (and the life expectancy of the Employee's
spouse, if applicable) will be recalculated annually using their attained
ages as of their birthdays in the year for which the minimum annual
payment is being determined. The life expectancy of the designated
beneficiary (other than the spouse) will not be recalculated. Any such
election to recalculate or not to recalculate life expectancies shall be
irrevocable as to the Employee and spouse as of the required beginning
date, and may not thereafter be changed. The minimum annual payment may
be made in a series of installments (e.g., monthly, quarterly, etc.) as
long as the total payments for the year made by the date required are not
less than the minimum amounts required.
If the Employee dies before his entire interest in the Custodial
Account is distributed to him, the remaining undistributed balance of such
interest shall be distributed to the beneficiary or beneficiaries, if any,
designated by the Employee. If no valid designation of a beneficiary
shall have been made, distribution shall be made to the Employee's
surviving spouse, or the Employee's estate, in that order.
If the Employee dies on or after the required beginning date,
the beneficiary must continue to receive distributions at least as rapidly
as under the payment method in effect at the Employee's death.
If the Employee dies prior to the required beginning date, the
beneficiary may elect, in writing, to receive the distribution in one of
the following forms:
(a) A single sum payment in cash made by the
December 31 of the year containing the fifth
anniversary of the Employee's death; or
(b) Monthly, quarterly, or annual payments
commencing not later than the December 31
following the year of the Employee's death
over a period not to exceed the life
expectancy of the beneficiary.
Notwithstanding the foregoing, if the beneficiary is the Employee's
spouse, distributions may be delayed until the December 31 of the year in
which the Employee would have attained age 702. A beneficiary must
receive distributions from the Custodial Account in accordance with the
regulations prescribed by the Secretary of the Treasury pursuant to
Section 403(b)(10) of the Code, including the incidental death benefit
requirements, which are hereby incorporated by reference, or in the
absence of such Regulations, in accordance with Section 401(a)(9) of the
Code and the regulations thereunder.
Beneficiary
The Employee may designate a beneficiary or beneficiaries (which
may include a trust or the Employee's estate), and may, in addition, name
a contingent beneficiary. Such designation shall be made in writing in a
form acceptable to the Custodian. The Employee may, at any time, revoke
his or her designation of a beneficiary or change the beneficiary by
filing notice of such revocation or change with the Custodian, provided
that no such designation or change in designation executed by the Employee
prior to death may be filed with the Custodian more than thirty (30) days
following the Employee's death. Notwithstanding the foregoing, in the
event the Employee is married at the time of his death, the beneficiary
shall be the Employee's surviving spouse unless such spouse has consented
in writing to the designation of an alternative beneficiary after notice
of the spouse's rights and such consent was witnessed by a notary public
or representative of the Employer. In the event no valid designation of
beneficiary is on file with the Employer or the Custodian at the date of
death or no designated beneficiary survives the Employee, the Employee's
spouse shall be deemed the beneficiary; in the further event the Employee
is unmarried or his spouse does not survive him, the Employee's estate
shall be deemed to be his beneficiary.
Direct Rollover Option
In the case of any distribution from this Custodial Account that
constitutes an "eligible rollover distribution" as defined in Section
402(c)(4) of the Code, the Custodian shall provide the Employee or
beneficiary with the option of (A) receiving the distribution directly,
(B) having the distribution transferred to an individual retirement
account or eligible 403(b) program that accepts such "direct rollovers",
or (C) to the extent required under regulations issued by the Secretary of
the Treasury, a combination of (A) and (B).
If the Employee or beneficiary timely elects the transfer option
and provides the Custodian with such information as the Custodian may
prescribe regarding the transferee plan or account, including the name of
the transferee plan or account and identity of the trustee or custodian,
the distribution amount shall be transferred to the successor trustee or
custodian in a "direct rollover" in accordance with Sections 403(b)(10)
and 401(a)(31) of the Code. The Custodian may elect to accomplish the
"direct rollover" by delivering to the Employee or beneficiary a check,
for the full amount of the distribution, but made payable to the trustee
or custodian of the transferee plan or account. The Employee or
beneficiary shall then be responsible for delivering the check to the
trustee or custodian or the transferee plan.
If the Employee or beneficiary elects payments made directly to
the Employee or beneficiary, distribution shall be accomplished by
delivering to the Employee or beneficiary a check, for the amount of the
distribution less applicable required withholding, made payable to the
Employee or beneficiary.
If the Employee or beneficiary fails to make a timely election,
or if the participant or beneficiary elects the transfer option but fails
to provide the Custodian with appropriate information to enable the
Custodian to implement the transfer, the Custodian shall, subject to
applicable consent requirements, cause the Employee's or beneficiary's
distribution to be paid directly to the Employee or beneficiary, less
applicable required withholding.
The Custodian need not offer the "direct rollover" option in the
case of any distribution that has been exempted from the "direct rollover"
requirements under rules and regulations issued (whether in proposed,
temporary or final form) by the Secretary of the Treasury. In addition,
the Custodian may promulgate additional rules and regulations, including
rules and regulations governing the time by which elections must be made,
that it determines to be necessary or desirable to the administer this
provision.
The Custodian shall not be responsible for the tax consequences
resulting from an Employee's election between receiving a distribution
directly or having the distribution transferred to an individual
retirement account or eligible 403(b) program in a "direct rollover."
Responsibilities of Custodian
The Custodian does not assume and shall not have any
responsibility to make any distribution except in accordance with written
instructions received by the Custodian. In addition, no distribution
shall be made unless and until the Custodian shall have been furnished
with all certificates, signature guarantees and other documents (including
proof of any legal representative's authority) that the Custodian may have
requested.
Tax Withholding
Any distribution made by the Custodian from the Custodial
Account shall be subject to withholding in accordance with applicable law.
Article V. Administration
In General
The Custodian shall perform solely the duties assigned to the
Custodian hereunder; provided that the Custodian may contract with
affiliates of the Custodian or other parties for the performance of
certain services. The Custodian shall not be deemed to be a fiduciary in
carrying out the following duties:
(a) Receiving contributions pursuant to the
provisions of the Custodial Account.
(b) Holding, investing and reinvesting the
contributions in Investment Company Shares.
(c) Registering any property held by the
Custodian in its own name, or in nominee or
bearer form that will pass delivery.
(d) Making distributions from the Custodial
Account in cash.
Voting
The Custodian shall mail to the Employee all proxies, proxy
soliciting materials, and periodic reports or other communications that
may come into the Custodian's possession by reason of its custody of
Investment Company Shares. The Employee shall vote the proxy,
notwithstanding the fact that the Custodian may be the registered owner of
the Investment Company Shares, and the Custodian shall have no further
liability or responsibility with respect to the voting of such shares.
Reports
The Custodian shall keep accurate and detailed account of its
receipts, investments and disbursements. As soon as practicable after
December 31st each year, and whenever required by Regulations adopted by
the Internal Revenue Service under the Act or the Code, the Custodian
shall file with the Employee a written report of the Custodian's
transactions relating to the Custodial Account during the period from the
last previous accounting, and shall file such other reports with the
Internal Revenue Service as may be required by its Regulations (but not
including any reports that may be required to be filed by the Employer).
Unless the Employee sends the Custodian written objection to a
report within sixty (60) days after its receipt, the Employee shall be
deemed to have approved such report, and, in such case the Custodian shall
be forever released and discharged with respect to all matters and things
included therein. The Custodian may seek a judicial settlement of its
accounts. In any such proceeding the only necessary party thereto in
addition to the Custodian shall be the Employee.
Written Notices
All written notices or communications to the Employee or the
Employer shall be effective when sent by first class mail to the last
known address of the Employee or the Employer on the Custodian's records.
All written notices or communications to the Custodian shall be mailed or
delivered to the Custodian at its designated mailing address, and no such
written notice of communications shall be effective until the Custodian's
actual receipt thereof. The Custodian shall be entitled to rely
conclusively upon, and shall be fully protected in any action taken by it
in good faith in reliance upon the authenticity of signatures contained in
all written notices or other communications which it receives and which
appear to have been sent by the Employee, the Employer, or any other
person.
Indemnification and Limitation on Liability
The Employee, Employer, and Custodian intend that the Custodian
shall have and exercise no discretion, authority or responsibility as to
any investment in connection with the Custodial Account, and the Custodian
shall not be responsible in any way for the tax treatment of any
contribution or distribution, or for any other action or nonaction taken
pursuant to the Employee's or Employer's direction or that of the
Employee's beneficiary, executor or administrator. The Employee who
directs the investment of his or her Custodial Account shall bear sole
responsibility for the suitability of any directed investment and for any
adverse consequences arising from such an investment.
The Custodian shall have no responsibilities other than those
provided for herein or in ERISA or Code and shall not be liable for a
mistake in judgment, for any action taken (or not taken) in good faith, or
for any loss that is not a result of its gross negligence, except as
provided in ERISA or the Code.
The Employee (and the Employee's beneficiary, executor or
administrator) shall indemnify and hold the Custodian harmless from and
against any liability that the Custodian, the Investment Advisor, their
agents, affiliates, successors, assigns, officers, directors and employees
may incur in connection with the Custodial Account, unless arising from
the Custodian's own gross negligence or willful misconduct or from a
violation of the provisions of ERISA or Regulations promulgated
thereunder.
The Custodian shall be under no duty to question any direction
of the Employee with respect to the investment of contributions, or to
make suggestions to the Employee with respect to the investment, retention
or disposition of any contributions or assets held in the Custodial
Account. The Custodian and Investment Advisor shall have no duty to give
effect to an investment direction from anyone other than the Employee (or
the Employee's beneficiary, executor or administrator). However, the
Custodian and Investment Advisor may, in their discretion, establish
procedures pursuant to which the Employee (or the Employee's beneficiary,
executor or administrator) may delegate to a third party any or all of the
Employee's power and duties hereunder, not including the authority to
execute the Account Application or a beneficiary designation form.
Expenses
The Custodian shall be paid out of the Custodial Account for
expenses of administration, including the fees of counsel employed by the
Custodian relating directly to administration of or claims against or on
behalf of the Custodial Account, taxes, and its fees for maintaining the
Custodial Account which are set forth in the Application or in accordance
with any schedule of fees subsequently adopted by the Custodian. The
Custodian may sell Investment Company Shares and use the proceeds of sale
to pay the foregoing expenses.
Resignation and Removal
The Investment Advisor may remove the Custodian at any time.
The Custodian may resign as Custodian of any Employee's Custodial Account
upon sixty (60) days' prior notice to the Investment Advisor.
Upon the removal or resignation of the Custodian, the Investment
Advisor may, but shall not be required to, appoint a successor custodian
under this Custodial Agreement, provided that the successor custodian
satisfies the requirements of Section 401(f)(2) of the Code. The
Custodian shall transfer the assets of the Custodial Account, together
with copies of relevant books and records, to the successor custodian,
provided that the Custodian is authorized to reserve such sum of money or
property as it may deem advisable for payment of any fees or other
liabilities constituting a charge on or against the assets of the
Custodial Account. The Custodian shall not be liable for the acts or
omissions of any successor to it. If no successor custodian is appointed
by the Investment Advisor, the Custodial Account shall be terminated in
accordance with Article VII.
Article VI. The Investment Advisor
The Employee and the Employer delegate to the Investment Advisor
the following powers with respect to the Custodial Account: to remove the
Custodian and select a successor Custodian; and to amend the Custodial
Account as provided in Article VII hereof.
The powers herein delegated to the Investment Advisor shall be
exercised by such officer thereof as the Investment Advisor may designate
from time to time.
Neither an Investment Company, the Investment Advisor, nor any
officer, director, board, committee, employee or member of any Investment
Company or of the Investment Advisor shall have any responsibility with
regard to the administration of this Custodial Account (or any Employer
plan that utilizes this Custodial Account as a funding vehicle) except as
provided in this Article VI, and none of them shall incur any liability of
any nature to the Employee or beneficiary or other person in connection
with any act done or omitted to be done in good faith in the exercise of
any power or authority herein delegated to the Investment Advisor.
The Employee and the Employer agree to indemnify and hold the
Investment Companies and the Investment Advisor harmless from and against
any and all liabilities and expenses, including attorneys' and
accountants' fees, incurred in connection with the exercise of, or
omission to exercise, any of the powers delegated to it under this
Article, except such liabilities and expense as may arise from the
Investment Advisor's and/or Investment Company's willful gross negligence
or misconduct.
If the Investment Advisor shall hereafter determine that it is
no longer desirable for it to continue to exercise any of the powers
hereby delegated to it, it may relieve itself of any further
responsibilities hereunder by notice in writing to the Employee at least
sixty (60) days prior to the date on which it proposes to discontinue the
exercise of the powers delegated to it.
Article VII. Amendment and Termination
The Employee, the Employer and the Custodian delegate to the
Investment Advisor the power to amend this Custodian Account (including
retroactive amendments).
The Employee or the Employer may amend the Account Application
by submitting to the Custodian a copy of such amended Account Application,
and evidence satisfactory to the Custodian that the Employer's Section
403(b)(7) program, as amended by such amended Application, will continue
to qualify under the provisions of Section 403(b)(7) of the Code.
No amendment shall be effective if it would cause or permit:
(a) any part of the Custodial Account to be diverted to any purpose that
is not for the exclusive benefit of the Employee and his beneficiaries;
(b) the Employee to be deprived of any portion of his interest in the
Custodial Account; or (c) the imposition of an additional duty on the
Custodian without its consent.
The Employer reserves the right to terminate further
contributions to this Custodial Account. The Employee may terminate or
change the rate of further Salary Reduction Contributions to the Custodial
Account by entering into a revised agreement with his or her Employer, so
long as the form and the timing of the revised agreement is in accordance
with the rules applicable to Section 403(b) arrangements. The Employee
also reserves the right to transfer the assets of his Custodial Account to
such other form of Section 403(b) retirement plan as he or she may
determine, upon written instructions to the Custodian in such form as the
Custodian may reasonably require. The appointment of the successor
custodian in accordance with Article VI shall not be a termination of the
Custodial Account, nor shall the amendment of the Custodial Account by the
Investment Advisor be a termination of the Account.
Following termination of the Custodial Account, the Custodian
shall distribute all assets of the Custodial Account to the Employee.
There shall be no liability on the part of the Custodian or the Investment
Advisor for any tax consequences to the Employee (or the Employee's
beneficiary, executor or administrator) resulting from such termination
distribution.
Article VIII. Discrimination Requirements
Non-Discrimination Requirements
Section 403(b) of the Code generally requires that tax sheltered
annuity and custodial account arrangements (other than arrangements
maintained by a church or convention or association of churches) satisfy
certain participation and non-discrimination requirements.
In general, Salary Reduction Contributions made pursuant to an
Employee's election are eligible for exclusion from income only if the
Employer has established a program that provides all employees the
opportunity to make Salary Reduction Contributions of at least $200 per
year. For this purpose, the Employer may exclude from consideration (1)
employees who fail to satisfy minimum age and service requirements (to the
extent such requirements are adopted by the Employer in accordance with
Section 403(b)(12) and 410(b) of the Code for use in its plan); (2)
employees who are participants in an eligible deferred compensation plan
under Section 457 of the Code, qualified cash or deferred arrangement
under Section 401(k) of the Code (to the extent the Employer may maintain
such a plan) or another Section 403(b) plan or arrangement; (3) employees
normally working less than 20 hours per week; (4) employees who are non-
resident aliens; (5) certain student employees performing services
described in Section 3121(w)(3)(A) of the Code; and (6) any other
employees that may be excluded in accordance with rules and regulations
promulgated by the Secretary of the Treasury.
Non-elective contributions made by the Eligible Employer must
satisfy the participation and nondiscrimination requirements of Section
403(b)(12)(A)(i) of the Code.
Responsibility for Compliance With Discrimination Standards
Neither the Custodian nor the Investment Advisor shall have any
responsibility for determining whether contributions that are or may be
made to this Custodial Account are being made pursuant to a plan that
satisfies applicable non-discrimination requirements under the Code or any
other law, or for advising the Employee, the Employer, or any other person
with respect to such requirements. Further, neither the Custodian nor the
Investment Advisor shall have any responsibility or liability for adverse
tax consequences or any other consequences that may result from
contributions being made to this Custodial Account where the underlying
Employer plan or program fails to satisfy applicable legal requirements.
Article IX. Miscellaneous Provisions
Qualified Domestic Relations Order
In the case of a Custodial Account that is part of an "employee
pension benefit plan" under ERISA, the Custodian shall make distributions
in accordance with the terms of a "qualified domestic relations order" as
defined in Section 206(d) of ERISA, provided that the Employer (or its
duly appointed plan administrator) shall be responsible for determining
the qualified status of the order and distribution shall be made by the
Custodian only upon receipt of written direction from the Employer (or its
duly appointed plan administrator) that the order is a "qualified domestic
relations order" for purposes of ERISA.
Assignment and Alteration
The interest of the Employee in the Custodial Account shall be
held for the exclusive benefit of the Employee or his or her beneficiary,
and shall not be assigned or transferred by the Employee, nor shall it be
subject to alienation, assignment, garnishment, attachment, execution or
levy of any kind, except as described above in connection with "qualified
domestic relations orders", except with regard to payment of the expenses
of the Custodian or its agent as authorized by the provisions of this
Custodial Agreement, and except as otherwise required by law.
Governing Law
This Custodial Agreement shall be governed by the laws of the
state in which the Custodian is incorporated, except to the extent that
such laws are superseded by federal laws or regulations.
Effect on Other 403(b) Arrangements
This Custodial Account shall not prevent the Employee or the
Employer from making contributions toward another Section 403(b) annuity
contract or Section 403(b)(7) custodial account, provided that the
aggregate contributions to or under such annuity contracts or custodial
accounts and under this Custodial Account shall not exceed the maximum
permissible amounts as determined pursuant to Article III hereof. Neither
the Custodian nor the Investment Advisor shall have any responsibility for
monitoring compliance with the maximum contribution limitations.
Establishment of Custodial Account by Former Employee
To the extent authorized by the Internal Revenue Service as
being permissible under Section 403(b) of the Code, a former Employee who
is eligible for a distribution from his or her Employer's Section 403(b)
program may, without the consent of his or her former Employer, adopt this
Custodial Account for the purpose of receiving a rollover contribution
from the prior Employer's Section 403(b) Plan, or from the Custodial
Account through which such plan is funded. In any such event, however, no
additional Salary Reduction Contributions or Employer non-elective
contributions shall be made to this Custodial Account unless a subsequent
employer consents to the former Employee's adoption of the Custodial
Account.
Definitions
As used in this Custodial Account Agreement, the following terms
have the meaning set forth below, unless a different meaning is clearly
required by the context.
(1) "Code" means the Internal Revenue Code of 1986, as amended.
(2) "Custodial Account" means the custodial account established
hereunder for the benefit of the Employee.
(3) "Custodian" shall mean the designated custodian, or its
successors.
(4) "Employee" means the person named in the Account
Application.
(5) "Employer" means the employer organization named in the
Account Application.
(6) "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
(7) "Investment Advisor" shall mean Fiduciary Management, Inc.,
or any successor or affiliate thereto.
(8) "Investment Company" means the portfolios of the Fiduciary
Funds or such other regulated investment companies whose
investment advisor is Fiduciary Management, Inc., or its
successors or affiliates, and whose shares are authorized
(under the terms of the prospectus of the investment
company, and subject to any limitations imposed by the
Employer's plan) for purchase under this Agreement.
(9) "Salary Reduction Contributions" means contributions made
pursuant to a written agreement between the Employee and
the Employer, and by which the Employee's salary for future
services is reduced and the amount of such reduction is
contributed by the Employer to the Custodial Account.
FIDUCIARY FUNDS PROTOTYPE
DEFINED CONTRIBUTION RETIREMENT PLAN
ADOPTION AGREEMENT [STANDARDIZED]
(PROFIT-SHARING PLAN)
The undersigned Employer, hereby adopts and establishes the
Fiduciary Funds Prototype Defined Contribution Retirement Plan. This Plan
is subject to the terms set forth below in this Adoption Agreement.
1. EMPLOYER INFORMATION
Name: _______________________________________
Address: _______________________________________
_______________________________________
Telephone
Number: (___) __________________________________
Employer Identification Number: ________________________
Type of Entity: [_] Corporation
[_] Partnership
[_] Sole Proprietorship
[_] Other (please describe)
________________________________
Employer's Taxable Year is [_] calendar year or [_] fiscal year
beginning _____________________
2. PLAN INFORMATION
Plan Administrator (if other than the Employer):
Name: __________________________________________
Address: __________________________________________
__________________________________________
Telephone Number: (___) ___________________________
Plan Year is the [_] calendar year, [_] Employer's fiscal year,
or [_] year beginning __________________
3. EFFECTIVE DATE
Execution of this Adoption Agreement (elect one):
[_] Establishes a new plan.
[_] Is an amendment to an Original Plan. This amendment is
effective ____________, 19__.
[_] Is an amendment to an Original Plan under which no further
contributions will be made or participation permitted (a "frozen
plan"). This amendment is effective ______________, 19__. (You
need not complete items 4, 5 or 6 and check item 7(A)(l).)
The Effective Date of the Plan is ____________, 19__. (If this is an
amended plan enter the date the Original Plan first started.)
4. ELIGIBILITY REQUIREMENTS
(A) Please check one:
[_] An Employee need not complete any waiting period.
[_] In order to become a Participant, an Employee must satisfy
the following Age and Service Requirements (please fill in
the blanks):
(1) An Employee must complete ____ (enter 1 or 2 years)
Year(s) of Employment. If more than 1 year is
selected, you must also check item 7(A)(1).
A Year of Employment shall mean the 12 consecutive
month period beginning on the date an Employee first
performs an Hour of Service or an anniversary thereof
during which the Employee has completed _________
(insert 1,000 or less) Hours of Service.
Hours of Service shall be determined on the basis of
the method elected below. Only one method may be
elected. The method elected shall be applied to all
Employees covered under the Plan.
[_] On the basis of actual hours for which an
Employee is paid or entitled to payment.
[_] On the basis of days worked:
An Employee shall be credited with 10 Hours of
Service if the Employee would be credited with at
least 1 Hour of Service during the day.
[_] On the basis of weeks worked:
An Employee shall be credited with 45 Hours of
Service if the Employee would be credited with at
least 1 Hour of Service during the week.
[_] On the basis of months worked:
An Employee shall be credited with 190 Hours of
Service if the Employee would be credited with at
least 1 Hour of Service during the month.
(2) An Employee must attain age _____ (not greater than
age 21).
(B) Union Employees shall be:
[_] Included as eligible employees.
[_] Excluded from participation in the Plan.
Note: Union Employees must be covered by a collective
bargaining agreement between the Employer and employee
representatives under which retirement benefits were the
subject of good faith bargaining. The term "employee
representatives" does not include any organization more
than one-half of whose members are officers, executives or
owners of the Employer.
5. COMPENSATION
(A) A Participant's "Compensation" shall include
(check one):
[_] All taxable earnings for the Plan Year.
[_] Only amounts earned after completion of the eligibility
requirements selected in item 4 above.
(B) For any self-employed individual, Compensation means Earned
Income.
6. EMPLOYER PROFIT SHARING CONTRIBUTIONS
(A) The Employer Profit Sharing Contributions for each Plan Year
shall be (check one):
[_] A discretionary amount determined by the Employer, but not
more than 15% of the aggregate Compensation and Earned
Income of Participants eligible to share in such
contribution for the Plan Year.
[_] An amount equal to ____% (not more than 15%) of the
aggregate Compensation and Earned Income of Participants
eligible to share in such contribution for the Plan Year.
(B) Employer Profit Sharing Contributions:
[_] Shall be made out of Net Profits.
[_] May be made without regard to Net Profits.
(C) Allocation Formulas
The Employer Profit Sharing Contributions (and) forfeitures)
shall be allocated to the accounts of eligible Participants
pursuant to the following formula (elect one):
(1) [_] Compensation Formula
Employer Profit Sharing Contributions (and
forfeitures) shall be allocated based on each eligible
Participant's total Compensation for the Plan Year.
NOTE: If the Integration Formula is selected under
the Pension Plan, the Compensation Formula must be
selected under this Plan.
(2) [_] Integration Formula
Employer Profit Sharing Contributions (and
forfeitures) shall be allocated based on each eligible
Participant's Compensation in excess of the
Integration Level and total Compensation for the Plan
Year, subject to the limitation set forth in Section
4.1(b) of the Plan.
[_] The Integration Level shall be the taxable wage base
for FICA tax purposes.
[_] The Integration Level shall be $_________ (not to
exceed the FICA taxable wage base).
NOTE: If the Plan is top-heavy all eligible Participants
must first be allocated 3% of their total Compensation and
any remaining contributions may be allocated pursuant to
the Integration Formula.
7. VESTING
(A) A Participant shall have a nonforfeitable and fully vested
interest in his Employer Profit Sharing Contribution Account
under the following vesting schedule (check one):
(1) [_] A Participant shall at all times have a nonforfeitable
and fully vested interest.
(2) [_] A Participant shall be fully vested after _____ (not
more than 3) Years of Service.
(3) [_] A Participant shall become vested in accordance with
the following schedule:
Vested
Years of Service Percentage
Less than 2 0%
2 20%
3 40%
4 60%
5 80%
6 or more 100%
(B) A "Year of Service" shall mean any Plan Year in which an
Employee completes at least ____ (insert 1,000 or less) Hours of
Service. Years of Service shall include all Years of Service
with the Employer except as noted below (check one, both or
none).
(1) [_] All Years of Service prior to the effective date of
this Plan (or a predecessor plan) shall be excluded.
(2) [_] All Years of Service before the Plan Year in which the
Participant attained age 18 shall be excluded.
8. CASH OR DEFERRED ARRANGEMENT (Section 401(k))
Please check one:
[_] This Plan will include a cash or deferred arrangement (complete
the remainder of this Section). The Effective Date of this Cash
or Deferred Arrangement (Section 401(k)) is ________________,
19__.
[_] This Plan will not include a cash or deferred arrangement (do
not complete the remainder of this Section).
(A) Elective Deferrals.
(1) An Employee shall be eligible to make Elective
Deferrals under Article V of the Plan upon satisfying
the following eligibility requirements:
[_] An Employee must complete _____ (not greater than
1 year) Years of Employment.
[_] An Employee must attain age ____ (not greater
than 21).
[_] Union Employees are excluded from making Elective
Deferrals.
[_] All Employees are eligible to make Elective
Deferrals.
(2) An Employee may elect to make Elective Deferrals to
the Plan equal to a percentage of regular salary or
wages for a pay period as specified in a salary
reduction agreement. The maximum percentage of
Elective Deferrals shall be _____%.
[_] Elective Deferrals may be based on cash bonuses
paid to the Employee. The maximum percentage of
such Elective Deferrals shall be _____%.
(3) An Employee may change the rate of his Elective
Deferrals:
[_] On the first day of each Plan Year.
[_] And on the following additional dates:
______________________
(4) [_] Recharacterization of excess contributions will
be available only for non-highly compensated
employees.
(B) Matching Contributions
(1) The percentage of Elective Deferral contributions
which are matched is:
[_] ___%.
[_] ___% of the first ___% or $________ of Elective
Deferrals.
[_] A percentage determined by the Employer, but will
not be more than 100%.
(2) Matching Contributions are made:
[_] Each pay period in which Elective Deferrals are
made.
[_] At the end of the Plan Year for Employees meeting
the requirements for annual contributions.
(3) Matching Contributions will vest under the following
schedule (elect one):
[_] Employee shall at all times have a nonforfeitable
and fully vested interest in any Matching
Contributions.
[_] An Employee shall be fully vested in any Matching
Contributions after ____ (not more than 3) Years
of Service.
[_] An Employee shall become vested in any Matching
Contributions in accordance with the following
schedule:
Nonforfeitable
Years of Service Percentage
Less than 2 0%
2 20%
3 40%
4 60%
5 80%
6 or more 100%
(C) Special Contributions
[_] The Employer may make Qualified Matching Contributions
subject to Section 5.4 of the Plan.
[_] The Employer may make Qualified Non-Elective
Contributions, subject to Section 5.4 of the Plan.
Note: These special contributions are used to satisfy
the nondiscrimination tests which apply to elective
deferral and matching contributions.
(D) Hardship Withdrawals
[_] Withdrawals on account of financial hardship are
allowed in accordance with Section 5.5(a) of the Plan.
[_] Withdrawals on account of financial hardship are not
allowed.
9. PARTICIPANT AFTER-TAX CONTRIBUTIONS
Participant Voluntary Contributions (check one):
[_] Participant Voluntary Contributions are permitted.
[_] Participant Voluntary Contributions are permitted only for
non-highly compensated employees.
[_] Participant Voluntary Contributions are not permitted.
10. WITHDRAWAL OF EMPLOYER PROFIT SHARING CONTRIBUTIONS
[_] A Participant who has participated in the Plan for at least 5
years may withdraw up to _____% of his vested Employer Profit
Sharing Contribution Account after attaining age 59-1/2 or on
account of a financial hardship in accordance with Section 8.6
of the Plan.
Note: Withdrawals are not permitted if the Integration Formula
is selected in item 6(C)(2).
[_] Withdrawals are not permitted.
11. NORMAL RETIREMENT AGE
[_] The Normal Retirement Age shall be age ___ [insert an age not to
exceed 65].
12. LIMITATION ON ALLOCATIONS
"Limitation Year", if other than a calendar year, shall mean the 12
consecutive month period ending on the last day of ________________.
Follow these instructions only if the Employer maintains (or has ever
maintained) another qualified plan (other than the Pension Plan)
which is either (i) a qualified defined contribution plan other than
a Master or Prototype Plan or (ii) a qualified defined benefit plan
in which any Participant in this Plan is (or was) a participant or
could become a participant, or if the Employer maintains a welfare
benefit fund or an individual medical account.
To comply with Internal Revenue Code requirements, please attach
appropriate provisions that limit the amount of Annual Additions
allocated to any Participant's Account.
If you do not attach the appropriate provisions, Sections 6.3. and
6.4 of the Plan will automatically apply.
13. TOP-HEAVY PROVISIONS
The interest rate and mortality assumptions for determining Top-Heavy
status shall be the assumptions designated under Section 13.2(h) of
the Plan, unless different assumptions are selected below.
The interest rate and mortality assumptions for determining present
values to compute the Top-Heavy ratio shall be:
Interest Rate: _____%
Mortality Table: _____________________________
14. ESTABLISHMENT OF ACCOUNTS
(A) Unless elected below, the Custodian shall establish individual
Custodial Accounts for each Participant.
[_] The Custodian shall establish a single Custodial Account in
the name of the Employer and the Employer shall keep all
records for the individual Participants.
(B) Unless elected below, a Participant shall be permitted to direct
the investment of his Account balance.
[_] Participant self-direction of the investment of his Account
balance is not permitted.
15. CUSTODIAN
The undersigned as Employer hereby appoints First Wisconsin Trust
Company as Custodian.
16. FEES
The Custodian shall receive fees for its services in respect to each
Participant's Account in accordance with the attached fee schedule.
The fee schedule may be changed by the Custodian with advance notice.
If not separately included, any acceptance fee listed in the attached
schedule will be deducted from the initial contribution received from
the Employer. Any acceptance or other Custodian fees included will
be deducted equally from each Owner-Employee's contribution or
Account. Annual maintenance fees for each Participant's Account and
any fees directly related to activity in that Participant's Account
shall be deducted annually and activity fees will be deducted at the
time incurred. Sufficient Investment Company Shares will be redeemed
to cover this fee.
Extraordinary services resulting from unusual administrative
responsibilities not contemplated by this schedule will be subject to
such additional charges as will reasonably compensate the Custodian
for the services performed.
17. REPRESENTATION OF EMPLOYER
The Employer represents that it has consulted its legal and tax
advisors with respect to the Plan. The Employer acknowledges that it
may not continue participation under the Plan if it fails to attain
or maintain tax qualification of the Plan or if it amends the Plan
other than by a change in the Adoption Agreement. The Employer
agrees that whenever a Participant Contribution is made, the Employer
will determine that the Participant has received the appropriate
current Investment Company prospectus. The Employer represents that
the Participant has received such prospectus by depositing
contributions with the Custodian.
The Employer acknowledges that if it has ever maintained or later
adopts any plan (including after December 31, 1985, a welfare benefit
fund, as defined in Code Section 419(e), which provides
post-retirement medical benefits allocated to separate accounts for
key employees, as defined in Code Section 419A(d)(3) or an individual
medical account, as defined in Code Section 415(l)(2)) in addition to
this Plan (or the Pension Plan), it may not rely on an opinion letter
issued by the National Office of the Internal Revenue Service as
evidence that this Plan is qualified under Code Section 401. If the
Employer adopts or maintains multiple plans and wishes reliance that
the Plan is qualified, application for an individual determination
letter should be made to the appropriate District Office of the
Internal Revenue Service.
18. ADDITIONAL INFORMATION
This Plan is sponsored by:
Fiduciary Management, Inc.
225 East Mason Street
Milwaukee, Wisconsin 53202
(414) 226-4545
Further information regarding this Plan may be obtained by contacting
the Plan Sponsor at the address or telephone number listed above.
The Plan Sponsor will inform the undersigned Employer of any
amendments made to this Plan or of the discontinuance or abandonment
of this Plan.
Failure to properly fill out this Adoption Agreement may result in
disqualification of this Plan.
This Adoption Agreement can only be used with Plan document No. 01.
Signature of Employer: ________________________________________________
Name of person signing above (please print): ____________________________
Date: ________________________
CUSTODIAN ACCEPTANCE
The undersigned hereby accepts appointment as Custodian under
the Plan.
FIRSTAR TRUST COMPANY
By: ___________________________________
Date: ___________________________________
<PAGE>
FIDUCIARY FUNDS PROTOTYPE
DEFINED CONTRIBUTION RETIREMENT PLAN
ADOPTION AGREEMENT [STANDARDIZED]
(PENSION PLAN)
The undersigned Employer, hereby adopts and establishes the
Fiduciary Funds Prototype Defined Contribution Retirement Plan. This Plan
is subject to the terms set forth below in this Adoption Agreement.
1. EMPLOYER INFORMATION
Name: _______________________________________________
Address: _______________________________________________
_______________________________________________
Telephone Number: (___) ___________________________________
Employer Identification Number: ____________________________
Type of Entity: [_] Corporation
[_] Partnership
[_] Sole Proprietorship
[_] Other (please describe)
________________________________
Employer's Taxable Year is [_] calendar year or [_] fiscal year
beginning ______________________
2. PLAN INFORMATION
Plan Administrator (if other than the Employer):
Name: ___________________________________
Address: ___________________________________
___________________________________
Telephone Number: (___) __________________________
Plan Year is the [_] calendar year, [_] Employer's fiscal year, or
[_] year beginning ___________________
3. EFFECTIVE DATE
Execution of this Adoption Agreement (check one):
[_] Establishes a new plan.
[_] Is an amendment to an Original Plan. This amendment is
effective _____________, 19__.
[_] Is an amendment to an Original Plan under which no further
contributions will be made or participation permitted (a
"frozen plan"). This amendment is effective __________,
19__. (You need not complete items 4, 5 or 6 and check
item 7(A)(1)).
The Effective Date of the Plan is ____________, 19__. (If this is an
amended plan enter the date the Original Plan first started.)
4. ELIGIBILITY REQUIREMENTS
(A) Please check one:
[_] An Employee need not complete any waiting period.
[_] In order to become a Participant, an employee must satisfy
the following Age and Service Requirements:
(1) An Employee must complete ____ (enter 1 or 2 years)
Year(s) of Employment. If more than 1 year is
selected, you must also check item 7(A)(1).
A Year of Employment shall mean the 12 consecutive
month period beginning on the date an Employee first
performs an Hour of Service or an anniversary thereof
during which the Employee has completed ________
(insert 1,000 or less) Hours of Service.
Hours of Service shall be determined on the basis of
the method elected below. Only one method may be
elected. The method elected shall be applied to all
Employees covered under the Plan.
[_] On the basis of actual hours for which an
Employee is paid
or entitled to payment.
[_] On the basis of days worked:
An Employee shall be credited with 10 Hours of
Service if the Employee would be credited with at
least 1 Hour of Service during the day.
[_] On the basis of weeks worked:
An Employee shall be credited with 45 Hours of
Service if the Employee would be credited with at
least 1 Hour of Service during the week.
[_] On the basis of months worked:
An Employee shall be credited with 190 Hours of
Service if the Employee would be credited with at
least 1 Hour of Service during the month.
(2) An Employee must attain age ____ (not greater than age
21).
(B) Union Employees shall be:
[_] Included as eligible employees.
[_] Excluded from participation in the Plan.
Note: Union Employees must be covered by a collective
bargaining agreement between the Employer and employee
representatives under which retirement benefits were
the subject of good faith bargaining. The term
"employee representatives" does not include any
organization more than one-half of whose members are
officers, executives or owners of the Employer.
5. COMPENSATION
(A) A Participant's "Compensation" shall include
(check one):
[_] All taxable earnings for the Plan Year.
[_] Only amounts earned after completion of the eligibility
requirements selected in 4 above.
(B) For any self-employed individual, Compensation means Earned
Income.
6. EMPLOYER PENSION CONTRIBUTIONS
(A) The Employer Pension Contribution for each Plan Year shall be
____% (not more than 25%) of the aggregate Compensation and
Earned Income of eligible Participants. This contribution will
be reduced by the amount of any forfeitures allocated to the
accounts of Participants for such Plan Year.
(B) Allocation Formulas
The Employer Pension Contributions shall be allocated pursuant
to the following formula (check one):
[_] Compensation Formula
Employer Pension Contributions shall be allocated based on
each eligible Participant's total Compensation for the Plan
Year.
Note: If the Integration Formula is elected under the Profit
Sharing Plan, the Compensation Formula must be elected under
this Plan.
[_] Integration Formula
Employer Pension Contributions (and forfeitures) shall be
allocated based on each eligible Participant's Compensation
in excess of the Integration Level and total Compensation
for the Plan Year, subject to the limitations set forth in
Section 4.2(b) of the Plan.
[_] The Integration Level shall be the taxable wage base
for FICA tax purposes.
[_] The Integration Level shall be $_________ (not to
exceed the FICA taxable wage base).
Note: If the Plan is top-heavy all eligible Participants must
first be allocated 3% of their total Compensation and any
remaining contribution may be allocated pursuant to the
Integration Formula.
7. VESTING
(A) A Participant shall have a nonforfeitable and fully vested
interest in his Employer Pension Contribution Account under the
following vesting schedule (check one):
(1) [_] A Participant shall at all times have a nonforfeitable
and fully vested interest.
(2) [_] A Participant shall be fully vested after _____ (not
more than 3) Years of Service.
(3) [_] A Participant shall become vested in accordance with
the following schedule:
Vested
Years of Service Percentage
Less than 2 0%
2 20%
3 40%
4 60%
5 80%
6 or more 100%
(B) A "Year of Service" shall mean any Plan year in which an
Employee completes at least ____ (insert 1,000 or less) Hours of
Service. Years of Service shall include all Years of Service
with the Employer except as noted below (check one, both or
none):
(1) [_] All Years of Service prior to the effective date of
this Plan (or a predecessor plan) shall be excluded.
(2) [_] All Years of Service before the Plan Year in which the
Participant attained age 18 shall be excluded.
8. PARTICIPANT AFTER-TAX CONTRIBUTIONS
Participant Voluntary Contributions (check one):
[_] Participant Voluntary Contributions are permitted.
[_] Participant Voluntary Contributions are permitted only for
non-highly compensated employees.
[_] Participant Voluntary Contributions are [_] not permitted.
9. NORMAL RETIREMENT AGE
The Normal Retirement Age Shall be age ___ [insert an age not to
exceed 65].
10. LIMITATION ON ALLOCATIONS
"Limitation Year", if other than a calendar year, shall mean the 12
consecutive month period ending on the last day of ___________________.
Follow these instructions only if the Employer maintains (or has ever
maintained) another qualified plan (other than the Profit Sharing
Plan) which is either (i) a qualified defined contribution plan other
than a Master or Prototype Plan or (ii) a qualified defined benefit
plan in which any Participant in this Plan is (or was) a participant
or could become a participant, or if the Employer maintains a welfare
benefit fund or an individual medical account.
To comply with Internal Revenue Code requirements, please attach
appropriate provisions that limit the amount of Annual Additions
allocated to any Participant's Account.
If you do not attach the appropriate provisions, Sections 6.3. and
6.4 of the Plan will automatically apply.
11. TOP-HEAVY PROVISIONS
The interest rate and mortality assumptions for determining Top-Heavy
status shall be the assumptions designated under Section 13.2(h) of
the Plan, unless different assumptions are selected below.
The interest rate and mortality assumptions for determining present
values to compute the Top-Heavy ratio shall be:
Interest Rate: _____%
Mortality Table: _____________________________
12. ESTABLISHMENT OF ACCOUNTS
(A) Unless elected below, the Custodian shall establish individual
Custodial Accounts for each Participant.
(1) The Custodian shall establish a single Custodial Account in
the name of the Employer and the Employer shall keep all
records for the individual Participants.
(B) Unless elected below, a Participant shall be permitted to direct
the investment of his Account balance.
(1) Participant self-direction of the investment of his Account
balance is not permitted.
13. CUSTODIAN
The undersigned as Employer hereby appoints First Wisconsin Trust
Company as Custodian.
14. FEES
The Custodian shall receive fees for its services in respect to each
Participant's Account in accordance with the attached fee schedule.
The fee schedule may be changed by the Custodian with advance notice
from time to time. If not separately included, any acceptance fee
listed in the attached schedule will be deducted from the initial
contribution received from the Employer. Any acceptance or other
Custodian fees included will be deducted equally from each
Owner-Employee's contribution or Account. Annual maintenance fees
for each Participant's Account and any fees directly related to
activity in that Participant's Account shall be deducted annually and
activity fees will be deducted at the time incurred. Sufficient
Investment Company Shares will be redeemed to cover this fee.
Extraordinary services resulting from unusual administrative
responsibilities not contemplated by this schedule will be subject to
such additional charges as will reasonably compensate the Custodian
for the services performed.
15. FUNDING WAIVER
In the event the Employer obtains a funding waiver under Code Section
412 from the Internal Revenue Service, the Employer shall amend the
Plan by adding language which will override the affected provisions
of the Plan and this Adoption Agreement (attach appropriate
overriding language to this Adoption Agreement to comply with the
Code).
Note: An Employer that amends the Plan because of a waiver of the
minimum funding requirements under Code Section 412 will no longer
participate in this prototype Plan and will be considered to have
adopted an individually designed plan.
16. REPRESENTATION OF EMPLOYER
The Employer represents that it has consulted its legal and tax
advisors with respect to the Plan. The Employer acknowledges that it
may not continue participation under the Plan if it fails to attain
or maintain tax qualification of the Plan or if it amends the Plan
other than by a change in the Adoption Agreement. The Employer
agrees that whenever a Participant contribution is made, the Employer
will determine that the Participant has received the appropriate
current Investment Company prospectus. The Employer represents that
the Participant has received such prospectus by depositing
contributions with the Custodian.
The Employer acknowledges that if it has ever maintained or later
adopts any plan (including after December 31, 1985, a welfare benefit
fund, as defined in Code Section 419(e), which provides
post-retirement medical benefits allocated to separate accounts for
key employees, as defined in Code Section 419A(d)(3) or an individual
medical account, as defined in Code Section 415(l)(2)) in addition to
this Plan (or the Profit Sharing Plan), it may not rely on an opinion
letter issued by the National Office of the Internal Revenue Service
as evidence that this Plan is qualified under Code Section 401. If
the Employer adopts or maintains multiple plans and wishes reliance
that the Plan is qualified, application for an individual
determination letter should be made to the appropriate District
Office of the Internal Revenue Service.
17. ADDITIONAL INFORMATION
This Plan is sponsored by:
Fiduciary Management, Inc.
225 East Mason Street
Milwaukee, Wisconsin 53202
(414) 226-4545
Further information regarding this Plan may be obtained by contacting
the Plan Sponsor at the address or telephone number listed above.
The Plan Sponsor will inform the undersigned Employer of any
amendments made to this Plan or of the discontinuance or abandonment
of this Plan.
Failure to properly fill out this Adoption Agreement may result in
disqualification of this Plan.
This Adoption Agreement can only be used with Plan document No. 01.
Signature of Employer: __________________________________________________
Name of person signing above (please print): _____________________________
Date: ___________________________________
CUSTODIAN ACCEPTANCE
The undersigned hereby accepts appointment as Custodian under
the Plan.
FIRSTAR TRUST COMPANY
By: ___________________________
Date: ___________________________
<PAGE>
FIDUCIARY FUNDS
PROTOTYPE DEFINED CONTRIBUTION
RETIREMENT PLAN
Profit Sharing Plan AA - Plan No. 01-001
Pension Plan AA - Plan No. 01-002
<PAGE>
FIDUCIARY FUNDS
PROTOTYPE DEFINED CONTRIBUTION
RETIREMENT PLAN
Profit Sharing Plan AA - Plan No. 01-001
Pension Plan AA - Plan No. 01-002
<PAGE>
FIDUCIARY FUNDS
PROTOTYPE DEFINED CONTRIBUTION
RETIREMENT PLAN
Table of Contents
ARTICLE I INTRODUCTION . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II DEFINITIONS . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE III PARTICIPATION . . . . . . . . . . . . . . . . . . . . 10
Section 3.1. Participation at Effective Date . . . . . . . . . . . 10
Section 3.2. Participation after Effective Date . . . . . . . . . . 10
Section 3.3. Reentry . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.4. Participation by an Owner-Employee of More Than One
Trade or Business . . . . . . . . . . . . . . . . . . 10
ARTICLE IV CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . 12
Section 4.1. Employer Profit Sharing Contributions . . . . . . . . 12
Section 4.2. Employer Pension Contributions . . . . . . . . . . . . 14
Section 4.3. Participant Voluntary Contributions . . . . . . . . . 14
Section 4.4. Time for Making Contributions . . . . . . . . . . . . 15
Section 4.5. Leased Employees . . . . . . . . . . . . . . . . . . . 15
Section 4.6. Rollovers and Transfers . . . . . . . . . . . . . . . 15
ARTICLE V. CASH OR DEFERRED ARRANGEMENT
(CODE SECTION 401(k)) . . . . . . . . . . . . . . . . 16
Section 5.1. Cash or Deferred Arrangement (Code Section 401(k)) . . 16
Section 5.2. Elective Deferrals . . . . . . . . . . . . . . . . . . 16
Section 5.3. Matching Contributions . . . . . . . . . . . . . . . . 21
Section 5.4. Qualified Matching Contributions and Qualified
Non-Elective Contributions . . . . . . . . . . . . . . 24
Section 5.5. Special Distribution Rules . . . . . . . . . . . . . . 25
Section 5.6. Definitions . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE VI SECTION 415 LIMITATIONS . . . . . . . . . . . . . . . 31
Section 6.1. Employers Maintaining Only this Plan . . . . . . . . . 31
Section 6.2. Employers Maintaining Other Master or Prototype
Defined Contribution Plans . . . . . . . . . . . . . . 32
Section 6.3. Employers Maintaining Other Defined Contribution
Plans . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 6.4. Employers Maintaining Defined Benefit Plans . . . . . 33
Section 6.5. Definitions . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE VII PARTICIPANTS' ACCOUNTS . . . . . . . . . . . . . . . . 38
Section 7.1. Separate Accounts . . . . . . . . . . . . . . . . . . 38
Section 7.2. Vesting . . . . . . . . . . . . . . . . . . . . . . . 38
Section 7.3. Computation of Vesting Service . . . . . . . . . . . . 38
Section 7.4. Allocation of Forfeitures . . . . . . . . . . . . . . 39
ARTICLE VIII PAYMENT OF BENEFITS . . . . . . . . . . . . . . . . . 40
Section 8.1. Benefits Payable Under the Plan . . . . . . . . . . . 40
Section 8.2. Manner of Distributions . . . . . . . . . . . . . . . 41
Section 8.3. Commencement of Payments . . . . . . . . . . . . . . . 45
Section 8.4. Payment of Small Amounts . . . . . . . . . . . . . . . 49
Section 8.5. Persons Under Legal or Other Disability . . . . . . . 50
Section 8.6. Withdrawals from Profit Sharing Plan . . . . . . . . . 50
Section 8.7. Transfer of Benefits to Eligible Retirement Plan . . . 51
ARTICLE IX ESTABLISHMENT OF CUSTODIAL ACCOUNT; INVESTMENTS . . . 52
Section 9.1. Custodial Account . . . . . . . . . . . . . . . . . . 52
Section 9.2. Receipt of Contributions . . . . . . . . . . . . . . . 52
Section 9.3. Investment of Account Assets . . . . . . . . . . . . . 52
Section 9.4. Exclusive Benefit . . . . . . . . . . . . . . . . . . 53
Section 9.5. Expenses . . . . . . . . . . . . . . . . . . . . . . . 53
Section 9.6. Voting . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 9.7. Reports of the Custodian and Administrator . . . . . . 53
Section 9.8. Limitation of Custodian's Duties and Liability . . . . 54
ARTICLE X AMENDMENT AND TERMINATION . . . . . . . . . . . . . . 56
Section 10.1. Amendment . . . . . . . . . . . . . . . . . . . . . . 56
Section 10.2. Termination . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE XI FIDUCIARY RESPONSIBILITIES . . . . . . . . . . . . . . 58
Section 11.1. Administrator . . . . . . . . . . . . . . . . . . . . 58
Section 11.2. Powers of Administrator . . . . . . . . . . . . . . . 58
Section 11.3. Records and Reports . . . . . . . . . . . . . . . . . 58
Section 11.4. Other Administrative Provisions . . . . . . . . . . . 58
Section 11.5. Claims Procedure . . . . . . . . . . . . . . . . . . . 59
Section 11.6. Claims Review Procedure . . . . . . . . . . . . . 59
ARTICLE XII AMENDMENT AND CONTINUATION OF ORIGINAL PLAN . . . . . 61
ARTICLE XIII TOP-HEAVY PROVISIONS . . . . . . . . . . . . . . . . . 63
Section 13.1. Effect of Top-Heavy Status . . . . . . . . . . . . . . 63
Section 13.2. Additional Definitions . . . . . . . . . . . . . . . . 63
Section 13.3. Minimum Allocations . . . . . . . . . . . . . . . . . 65
Section 13.4. Benefit Limit Change . . . . . . . . . . . . . . . . . 66
ARTICLE XIV MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . 67
Section 14.1. Rights of Employees and Participants . . . . . . . . . 67
Section 14.2. Merger With Other Plans . . . . . . . . . . . . . . . 67
Section 14.3. Non-Alienation of Benefits . . . . . . . . . . . . . . 67
Section 14.4. Failure to Qualify . . . . . . . . . . . . . . . . . . 67
Section 14.5. Mistake of Fact; Disallowance of Deduction . . . . . . 68
Section 14.6. Participation under Prototype Plan . . . . . . . . . . 68
Section 14.7. Gender . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 14.8. Headings . . . . . . . . . . . . . . . . . . . . . . . 68
Section 14.9. Governing Law . . . . . . . . . . . . . . . . . . . . 68
<PAGE>
FIDUCIARY FUNDS
PROTOTYPE DEFINED CONTRIBUTION
RETIREMENT PLAN
ARTICLE I
INTRODUCTION
This Plan, which is made available by Fiduciary Management, Inc.
has been adopted by the Employer named in the Adoption Agreement(s) as a
qualified money purchase pension and/or profit sharing plan for its
eligible employees which is intended to qualify under Code Section 401(a).
The Employer's Plan shall consist of the following provisions, together
with the Adoption Agreement(s).
ARTICLE II
DEFINITIONS
Section 2.1. "Account" means the account or accounts
maintained by the Custodian for a Participant, as described in Article
VII.
Section 2.2. "Administrator" means the plan administrator and
fiduciary of the Plan with authority and responsibility to control and
manage the operation and administration of the Plan in accordance with its
terms and to comply with the reporting, disclosure and other requirements
of ERISA. Unless a different Administrator is appointed by the Employer,
the Administrator shall be the Employer.
Section 2.3. "Beneficiary" means the person or persons
designated by a Participant or otherwise entitled to receive benefits in
the event of the Participant's death as provided herein. Such designation
shall be made in writing and in such form as may be required by the
Administrator, and shall be filed with the Administrator. Any designation
may include contingent or successive Beneficiaries. Where such
designation has been properly made, distribution of benefits shall be made
directly to such Beneficiary or Beneficiaries. The Beneficiary or
Beneficiaries designated by a Participant may be changed or withdrawn at
any time from time to time, by the Participant, but only by filing with
the Administrator a new designation, and revoking all prior designations.
The most recent valid designation on file with the Administrator at the
time of the Participant's death shall be the Beneficiary. Notwithstanding
the foregoing, in the event the Participant is married at the time of his
death, the Beneficiary shall be the Participant's surviving spouse unless
such spouse consented in writing to the designation of an alternative
Beneficiary after notice of the spouse's rights and such consent was
witnessed by a Plan representative appointed by the Administrator or a
notary public as provided in Section 8.2(a) hereof. In the event no valid
designation of Beneficiary is on file with the Administrator at the date
of death or no designated Beneficiary survives him, the Participant's
spouse shall be deemed the Beneficiary; in the further event the
Participant is unmarried or his spouse does not survive him, the
Participant's estate shall be deemed to be his Beneficiary.
Section 2.4. "Break in Service" means a Plan Year in which a
Participant fails to complete at least five hundred one (501) Hours of
Service. Breaks in Service and Years of Service will be measured on the
same vesting computation period.
Section 2.5. "Code" means the Internal Revenue Code of 1986,
as interpreted by applicable regulations and rulings issued pursuant
thereto, all as amended and in effect from time to time. Reference to a
Code Section shall include that Section, and any comparable section or
sections of any future legislation that amends, supplements or supersedes
that Section.
Section 2.6. "Compensation" is defined as wages within the
meaning of Section 3401(a) of the Code and all other payments of
compensation to the Employee by the Employer (in the course of the
Employer's trade or business) for which the Employer is required to
furnish the Employee a written statement under Sections 6041(d),
6051(a)(3) and 6052 of the Code, determined without regard to any rules
under Section 3401(a) that limit the remuneration included in wages based
on the nature or locations of the employment or the services performed.
For any Self-Employed Individual covered under the Plan, Compensation
shall mean such individual's Earned Income.
For Plan Years beginning after December 31, 1988, the maximum
amount of Compensation taken into account under the Plan for a Participant
in any Plan Year shall not exceed two hundred thousand dollars ($200,000)
or such greater amount as permitted by the Secretary of the Treasury,
except that the dollar increase in effect on January 1 of any calendar
year is effective for years beginning in such calendar year and the first
adjustment to the $200,000 limitation is effective on January 1, 1990. If
the Plan determines Compensation on a period of time that contains fewer
than 12 calendar months, then the annual compensation limit is an amount
equal to the annual compensation limit for the calendar year in which the
compensation period begins multiplied by the ratio obtained by dividing
the number of full months in the period by 12.
For purposes of this limitation, the family aggregation rules of
Code Section 414(q)(6) shall apply, except that the term "family" shall
include only the spouse of the Participant and any lineal descendants of
the Participant who have not attained age nineteen (19) before the close
of such year. If, as a result of the application of such rules the
adjusted two hundred thousand dollars ($200,000) limitation is exceeded,
then (except for purposes of determining the portion of Compensation up to
the integration level if the Plan provides for permitted disparity), the
limitation shall be prorated among the affected individuals in proportion
to each such individual's Compensation as determined under this Section
prior to the application of this limitation. If Compensation for any prior
Plan Year is taken into account in determining an Employee's contributions
or benefits for the current year, the Compensation for such prior year is
subject to the applicable annual compensation limit in effect for that
prior year. For this purpose, for years beginning before January 1, 1990,
the applicable annual compensation limit is $200,000.
In addition to other applicable limitations set forth in the
plan, and notwithstanding any other provision of the plan to the contrary,
for plan years beginning on or after January 1, 1994, the annual
Compensation of each employee taken into account under the plan shall not
exceed the OBRA '93 annual compensation limit. The OBRA '93 annual
compensation limit is $150,000, as adjusted by the Commissioner for
increases in the cost of living in accordance with section 401(a)(17)(B)
of the Internal Revenue Code. The cost-of-living adjustment in effect for
a calendar year applies to any period, not exceeding 12 months, over which
compensation is determined (determination period) beginning in such
calendar year. If a determination period consists of fewer than 12
months, the OBRA '93 annual compensation limit will be multiplied by a
fraction, the numerator of which is the number of months in the
determination period, and the denominator of which is 12.
For plan years beginning on or after January 1, 1994, any
reference in this plan to the limitation under section 401(a)(17) of the
Code shall mean the OBRA '93 annual compensation limit set forth in this
provision.
If Compensation for any prior determination period is taken into
account in determining an employee's benefits accruing in the current plan
year, the compensation for that prior determination period is subject to
OBRA '93 annual compensation limit in effect for that prior determination
period. For this purpose, for determination periods beginning before the
first day of the first plan year beginning on or after January 1, 1994,
the OBRA '93 annual compensation limit is $150,000.
Section 2.7. "Custodial Account" means the account established
by the Custodian, in accordance with Article IX, in the name of the
Employer or for each Participant as elected in the Adoption Agreement.
Section 2.8. "Custodian" means Firstar Trust Company, or any
successor thereto.
Section 2.9. "Disability" means a mental or physical condition
of injury or sickness, as determined by the Administrator based upon the
report of a medical examiner satisfactory to the Employer, which prevents
a Participant from carrying out the duties of his position and which is
likely to be permanent. Any such determination by the Administrator shall
be made in a uniform and nondiscriminatory manner.
Section 2.10. "Earned Income" means net earnings from
self-employment in the trade or business with respect to which the Plan is
established for which the personal services of the individual are a
material income-producing factor. Net earnings shall be determined
without regard to items not included in gross income and the deductions
allocable to such items. Net earnings shall be reduced by contributions
by the Employer to a qualified plan to the extent deductible under Code
Section 404. Net earnings shall be determined with regard to the
deduction allowed to the Employer under Code Section 164(f) for taxable
years beginning after December 31, 1989.
Section 2.11. "Effective Date" means the date as of which this
Plan is initially effective as indicated in item 3 of the Adoption
Agreement.
Section 2.12. "Elective Deferrals" means any Employer
contributions made to the Plan at the election of a participating
Employee, in lieu of payment of an equal amount to the participating
Employee in cash as Compensation pursuant to Section 5.2 hereof, and shall
include contributions made pursuant to a salary reduction agreement or
other deferral method. With respect to any taxable year, a participating
Employee's Elective Deferrals are the sum of all employer contributions
made on behalf of such Employee pursuant to an election to defer under any
qualified CODA as described in Code Section 401(k), any simplified
employee pension cash or deferred arrangement as described in Code Section
402(h)(1)(B), any eligible deferred compensation plan under Code Section
457, any plan as described under Code Section 501(c)(18), and any employer
contributions made on the behalf of a participating Employee for the
purchase of an annuity contract under Code Section 403(b) pursuant to a
salary reduction agreement.
Section 2.13. "Employee" means an individual employed by the
Employer (including any eligible Self-Employed Individual) or any Related
Employer adopting this Plan except as excluded pursuant to item 4 of the
Adoption Agreement. The term Employee shall also include any individual
who is a Leased Employee, unless excluded pursuant to item 4 of the
Adoption Agreement.
Section 2.14. "Employer" means any entity adopting the Plan.
Section 2.15. "Employer Pension Contributions" means the
contributions made by the Employer pursuant to Section 4.2 hereof if
elected in item 6 of the Adoption Agreement (Pension Plan).
Section 2.16. "Employer Profit Sharing Contributions" means the
contributions made by the Employer pursuant to Section 4.1 hereof if
elected in item 6 of the Adoption Agreement (Profit Sharing Plan).
Section 2.17. "ERISA" means the Employee Retirement Income
Security Act of 1974, as interpreted and applied under regulations and
rulings issued pursuant thereto, all as amended and in effect from time to
time.
Section 2.18. "Hour of Service" means:
(a) Each hour for which an Employee is paid, or entitled to
payment for the performance of duties for the Employer. These hours shall
be credited to the Employee for the computation period in which the duties
are performed; and
(b) Each hour for which an Employee is paid, or entitled to
payment, by the Employer on account of a period of time during which no
duties are performed (irrespective of whether the employment relationship
has terminated) due to vacation, holiday, illness, incapacity (including
disability), layoff, jury duty, military duty or leave of absence. No
more than five hundred one (501) Hours of service shall be credited under
this paragraph for any single continuous period (whether or not such
period occurs in a single computation period). Hours of Service under
this paragraph shall be calculated and credited pursuant to Section
2530.200b-2 of the Department of Labor Regulations which are incorporated
herein by this reference; and
(c) Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Employer. The same Hours
of Service shall not be credited both under subsection (a) or subsection
(b), as the case may be, and under this subsection (c). These hours shall
be credited to the Employee for the computation period or periods to which
the award or agreement pertains rather than the computation period in
which the award, agreement or payment is made.
(d) Solely for purposes of determining whether a Break in
Service, as defined in Section 2.4, for participation and vesting purposes
has occurred in a computation period, an individual who is absent from
work for maternity or paternity reasons shall receive credit for the Hours
of Service which would otherwise have been credited to such individual but
for such absence, or in any case in which such hours cannot be determined,
eight (8) hours of service per normal workday of such absence. For
purposes of this paragraph, an absence from work for maternity or
paternity reasons means an absence:
(i) by reason of the pregnancy of the
individual;
(ii) by reason of a birth of a child of the
individual;
(iii) by reason of the placement of a child with
the individual in connection with the
adoption of such child by such individual;
or
(iv) for purposes of caring for such child for a
period beginning immediately following such
birth or placement.
The Hours of Service credited under this Section 2.18 shall be credited
(i) in the computation period in which the absence begins if the crediting
is necessary to prevent a Break in Service in that period, or (ii) in all
other cases the following computation period.
(e) Hours of Service shall be determined on the basis of actual
hours for which an Employee is paid or entitled to payment unless a
different method of determining Hours of Service is selected in item 4(A)
of the Adoption Agreement.
(f) In the event the Employer maintains the plan of a
predecessor employer, service for such predecessor employer shall be
treated as service for the Employer. Hours of Service will be credited
for employment with members of an affiliated service group under Code
Section 414(m), a controlled group of corporations under Code Section
414(b), or a group of trades or businesses under common control under Code
Section 414(c) of which the Employer is a member and any other entity
required to be aggregated with the Employer pursuant to Code Section
414(o) and the Regulations thereunder. Hours of Service will also be
credited for any Leased Employee for purposes of this Plan under Code
Sections 414(n) or (o) and the Regulations thereunder, unless excluded
under item 4 of the Adoption Agreement.
Section 2.19. "Investment Advisor" means Fiduciary Management,
Inc.
Section 2.20. "Investment Company" means the Fiduciary Funds
and any other regulated investment company(ies) designated by the
Investment Advisor.
Section 2.21. "Investment Company Shares" means the shares of
each Investment Company.
Section 2.22. "Leased Employee" means any individual who is
considered a leased employee within the meaning of Code Sections 414(n) or
(o). For purposes of this Section, a Leased Employee means any person
who, pursuant to an agreement between the Employer and any other person
(which may include the Leased Employee), has performed services for the
Employer (or for the Employer and any Related Employer) in a capacity
other than as a common law employee on a substantially full-time basis for
a period of at least one year, and such services are of a type
historically performed by employees in the business field of the Employer.
Notwithstanding the foregoing, no individual shall be considered to be a
Leased Employee if (a) such individual is covered by a money purchase
pension plan providing: (i) a non-integrated employer contribution rate
of at least ten percent (10%) of compensation, as defined in Code Section
415(c)(3), but including amounts contributed pursuant to a salary
reduction agreement which are excludable from the individual's gross
income under Code Sections 125, 402(a)(8), 402(h) or 403(b), (ii)
immediate participation, and (iii) full and immediate vesting and (b)
Leased Employees do not constitute more than twenty percent (20%) of the
Employer's nonhighly compensated work force. Contributions or benefits
provided to a Leased Employee by the leasing organization which are
attributable to services performed for the Employer shall be treated as
provided by the Employer.
Section 2.23. "Matching Contribution" means an Employer
contribution made to the Plan or any other defined contribution plan on
behalf of a participating Employee on account of a participating
Employee's Elective Deferrals pursuant to Section 5.3 hereof or on account
of any employee contributions or elective deferrals made to any other
plan.
Section 2.24. "Net Profits" means the current or accumulated
earnings of the Employer before federal and state taxes and contributions
to this or any other qualified plan.
Section 2.25. "Normal Retirement Age" means age 65 or such
other age as selected in item 11 of the Adoption Agreement (Profit Sharing
Plan) and item 9 of the Adoption Agreement (Pension Plan). If the
Employer enforces a mandatory retirement age, the Normal Retirement Age
shall be the lesser of such mandatory retirement age or the age specified
in the Adoption Agreement.
Section 2.26. "Original Plan" means any defined contribution
plan which meets the requirements of Code Section 401 and referred to in
Article XII of the Plan.
Section 2.27. "Owner-Employee" means an individual who is a
sole proprietor, or who is a partner owning more than ten percent (10%) of
either the capital or profits interest of the partnership.
Section 2.28. "Participant" means each Employee (including any
eligible Self-Employed Individual) who has completed the requirements for
eligibility specified in Section 3.1 hereof. Each such Employee shall
become a Participant as of the earlier of: (i) the first day of the Plan
Year or (ii) the first day of the seventh month of the Plan Year beginning
after he completes such requirements.
Section 2.29. "Participant Voluntary Contributions" means
contributions by a Participant under the Plan pursuant to Section 4.3, if
elected in item 9 of the Adoption Agreement (Profit Sharing Plan) and item
8 of the Adoption Agreement (Pension Plan).
Section 2.30. "Pension Plan" means the feature of the Plan
pursuant to which the Employer makes Employer Pension Contributions. Such
feature applies only to the extent elected in item 6 of the Adoption
Agreement (Pension Plan).
Section 2.31. "Plan" means this prototype profit sharing plan
and/or money purchase pension plan, together with the appropriate Adoption
Agreement(s), as set forth herein and as may be amended from time to time.
As used herein, the term Plan shall mean either or both the money purchase
pension plan and the profit-sharing plan depending on whether the Employer
has adopted one or both plans.
Section 2.32. "Plan Year" means the twelve (12) consecutive
month period designated in item 2 of the Adoption Agreement. The first
Plan Year shall commence on the Effective Date.
Section 2.33. "Profit Sharing Plan" means the features of the
Plan pursuant to which all contributions, other than Employer Pension
Contributions, are made to the Plan, including any contributions pursuant
to the cash or deferred arrangement (Section 401(k)) described in Article
V hereof. Such features apply only to the extent elected in items 6
and/or 8 of the Adoption Agreement (Profit Sharing Plan).
Section 2.34. "Related Employer" means an organization which,
together with the Employer, constitutes (i) a controlled group of
corporations as defined in Code Section 414(b); (ii) trades or businesses
under common control as defined in Code Section 414(c); (iii) an
affiliated service group as defined in Code Section 414(m); or (iv) a
group of employers required to be aggregated under Code Section 414(o).
Section 2.35. "Self-Employed Individual" means an individual
who has Earned Income for the taxable year from the trade or business for
which.the Plan was established or who would have had Earned Income but for
the fact that the trade or business had no Net Profits for the taxable
year.
Section 2.36. "Valuation Date" means the last day of each Plan
Year and such other times as shall be determined by the Administrator.
Section 2.37. "Year of Employment" means the twelve (12)
consecutive month period, beginning on the date the Employee first
performs an Hour of Service or any anniversary thereof, in which the
Employee completes at least one thousand (1,000) Hours of Service or such
lesser number of Hours of Service as selected in item 4 of the Adoption
Agreement.
Section 2.38. "Year of Service" means a Plan Year in which the
Employee completes at least one thousand (1,000) Hours of Service or such
lesser number of Hours of Service as selected in item 7 of the Adoption
Agreement.
ARTICLE III
PARTICIPATION
Section 3.1. Participation at Effective Date. Each Employee
shall become a Participant on the Effective Date, if on the Effective Date
such Employee has completed the number of Years of Employment and has
attained age 21 or such lesser age as elected in item 4 of the Adoption
Agreement.
Section 3.2. Participation after Effective Date. Each Employee
who did not become a Participant as of the Effective Date, including
future Employees, shall be entitled to become a Participant in accordance
with Section 2.28 after such Employee has completed the number of Years of
Employment and has attained age 21 or such lesser age as elected in item 4
of the Adoption Agreement.
Section 3.3. Reentry. A former Participant shall become a
Participant immediately upon his return to employment with the Employer or
his return to an eligible class of Employees, whichever is applicable. In
the event an Employee who is not a member of the eligible class of
Employees becomes a member of the eligible class, such Employee will
become a Participant in accordance with Section 3.2 above; provided that
if the Employee has previously satisfied the eligibility requirements of
Section 3.2, the Employee shall become a Participant immediately upon
becoming a member of the eligible class of Employees.
Section 3.4. Participation by an Owner-Employee of More Than
One Trade or Business.
(a) If this Plan provides contributions or benefits for one or
more Owner-Employees who control both the business with respect to which
this Plan is established, and one or more other trades or businesses, this
Plan and the plan established with respect to such other trades or
businesses must, when looked at as a single plan, satisfy Code Sections
401(a) and (d) with respect to the employees of this and all such other
trades or businesses.
(b) If this Plan provides contributions or benefits for one or
more Owner-Employees who control one or more other trades or businesses,
the employees of each such other trade or business must be included in a
plan which satisfies Code Section 401(a) and (d) and which provides
contributions and benefits not less favorable than provided for such
Owner-Employees under this Plan.
(c) If an individual is covered as an Owner-Employee under the
plans of two or more trades or businesses which he does not control, and
such individual controls a trade or business, then the contributions or
benefits of the employees under the plan of the trade or business which he
or she does control must be as favorable as those provided for him or her
under the most favorable plan of the trade or business which he or she
does not control.
(d) For purposes of the preceding subparagraphs, an
Owner-Employee, or two or more Owner-Employees, shall be considered to
control a trade or business if such Owner-Employee, or such two or more
Owner-Employees together, own the entire interest in an unincorporated
trade or business, or, in the case of a partnership, own more than fifty
percent (50%) of either the capital interest or the profits interest in
such partnership. For purposes of the preceding sentence, an
Owner-Employee, or two or more Owner-Employees, shall be treated as owning
any interest in a partnership which is owned, directly or indirectly, by a
partnership which such Owner-Employee, or such two or more
Owner-Employees, are considered to control within the meaning of the
preceding sentence.
(e) Employees and Owner-Employees of trades or businesses which
are under common control (within the meaning of Code Section 414(c)) and
Employees and Owner-Employees of the members of an affiliated service
group (within the meaning of Code Section 414(m)) or of a group of
aggregated employers (under Code Section 414(o)) will be treated as
employed by a single Employer for purposes of employee benefit
requirements of Code Section 414(m)(4).
ARTICLE IV
CONTRIBUTIONS
Section 4.1. Employer Profit Sharing Contributions.
(a) If elected in item 6 of the Adoption Agreement (Profit
Sharing Plan), the Employer shall make an Employer Profit Sharing
Contribution for each Plan Year ending on or after the Effective Date in
the amount determined under such Adoption Agreement.
(b) The total amount of such Employer Profit Sharing
Contribution for a Plan Year shall be allocated to the Account of each
eligible Participant as follows:
(i) Unless otherwise elected in item 6(C) of the Adoption
Agreement, the total amount of such Employer Profit Sharing Contribution
shall be allocated based on the ratio that such eligible Participant's
Compensation and/or Earned Income for the Plan Year bears to the total
Compensation and Earned Income of all eligible Participants for the Plan
Year.
(ii) If the Integration Formula is selected in item 6(C) of the
Adoption Agreement, the total amount of such Employer Profit Sharing
Contribution shall be allocated based on the ratio that such eligible
Participant's Compensation and/or Earned Income for the Plan Year in
excess of the integration level for the Plan Year bears to the total
Compensation and Earned Income for all eligible Participants in excess of
the integration level for the Plan Year; provided, however, that
contributions allocated to a Participant with respect to Compensation
and/or Earned Income in excess of the integration level shall not
represent a greater percentage of such excess Compensation and/or Earned
Income than the lesser of
(A) 200% of the base contribution
percentage, or
(B) the base contribution percentage
plus the greater of
(I) 5.7%, or
(II) the rate of tax under Code Section
3111(a) which is attributable to
old-age insurance in effect at the
beginning of the Plan Year.
Any Employer Profit Sharing Contribution remaining after the allocation in
this subsection (ii) shall be allocated in accordance with subsection (i)
above. The "integration level" shall be the taxable wage base or such
lesser level of Compensation and/or Earned Income selected in item 6(C) of
the Adoption Agreement. The "base contribution percentage" shall mean the
percentage of Compensation and/or Earned Income which is contributed under
the Plan with respect to each Participant's Compensation and/or Earned
Income not in excess of the integration level.
If the integration level exceeds the greater of ten thousand
dollars ($10,000) or one-fifth (1/5) of the taxable wage base but is not
more than eighty percent (80%) of the taxable wage base, the percentage
referred to in (I) above shall be reduced to 4.3% and a proportionate
reduction shall be made to the rate described in (II) above. If the
integration level is more than eighty percent (80%) but less than one
hundred percent (100%) of the taxable wage base, the percentage referred
to in (I) above shall be reduced to 5.4% and a proportionate reduction
shall be made to the rate described in (II) above. The "taxable wage
base" shall be the maximum amount of earnings which may be considered
wages for a year under Code Section 3121(a)(1) in effect as of the
beginning of the applicable Plan Year.
Notwithstanding the above, for any Plan Year in which the Plan
is top-heavy (as defined in Section 13.1 hereof) the Employer Profit
Sharing Contribution shall be allocated
(A) first, to each eligible Participant
based on the ratio that such
Participant's Compensation and/or
Earned Income for the Plan Year bears
to the total Compensation and Earned
Income of all eligible Participants for
the Plan Year, but not more than three
percent (3%) of such Participant's
Compensation and/or Earned Income,
(B) second, to each eligible Participant
based on the ratio that such
Participant's Compensation and/or
Earned Income in excess of the
integration level for the Plan Year
bears to the total Compensation and
Earned Income of all eligible
Participants in excess of the
integration level for the Plan Year,
but not more than three percent (3%) of
such Participant's excess Compensation
and/or Earned Income, and
(C) any remaining Employer Profit Sharing
Contribution shall be allocated
pursuant to the provisions of this
subsection (ii) above.
(c) A Participant will be considered eligible for an allocation
of the Employer Profit Sharing Contribution if the Participant (i) is
employed by the Employer on the last day of the Plan Year or (ii) has
completed at least Five Hundred one (501) Hours of Service during the Plan
Year.
(d) If elected in item 6(B) of the Adoption Agreement, Employer
Profit Sharing Contributions for a Plan Year shall not exceed the Net
Profits of the Employer for such Plan Year.
Section 4.2. Employer Pension Contributions.
(a) If elected in item 6 of the Adoption Agreement (Pension
Plan), the Employer shall make an Employer Pension Contribution for each
eligible Participant for each Plan Year ending on or after the Effective
Date in an amount determined under such Adoption Agreement.
(b) The total amount of such Employer Pension Contribution for
a Plan Year shall be allocated to the Account of each eligible Participant
as follows:
(i) Unless otherwise elected in item 6(B) of the Adoption
Agreement, each eligible Participant shall be allocated an amount equal to
the percentage of such eligible Participant's Compensation and/or Earned
Income as specified in the Adoption Agreement.
(ii) If the Integration Formula is selected in item 6(B) of the
Adoption Agreement, the total amount of such Employer Pension Contribution
shall be allocated in accordance with the method described in Section
4.1(b)(ii) above. Notwithstanding the foregoing, if the Integration
Formula is selected under the Profit Sharing Plan, the Employer Pension
Contribution shall be allocated in accordance with subsection (b)(i)
above.
(c) A Participant will be considered eligible for an Employer
Pension Contribution if the Participant (i) is employed by the Employer on
the last day of the Plan Year or (ii) has completed at least Five Hundred
one (501) Hours of Service during the Plan Year.
Section 4.3. Participant Voluntary Contributions.
(a) If elected in item 9 of the Adoption Agreement (Profit
Sharing Plan) or item 8 of the Adoption Agreement (Pension Plan), a
Participant may voluntarily contribute to the Plan an amount up to ten
percent (10%) of his aggregate Compensation for all years since becoming a
Participant under this Plan and all other qualified plans of the Employer.
Any Participant Voluntary Contributions shall be limited in accordance
with the provisions of Section 5.3, even if the Employer does not elect
the Cash or Deferred Arrangement (Section 401(k)) under item 8 of the
Adoption Agreement (Profit Sharing Plan). If the Profit Sharing Plan is
elected, all Participant Voluntary Contributions shall be deemed made to
such plan. Participant Voluntary Contributions shall be limited to
Participants who are not highly compensated employees (within the meaning
of Code Section 414(q)) if elected in the Adoption Agreement.
(b) A Participant shall be entitled to withdraw from his
appropriate Account at any time upon thirty (30) days' notice from the
Administrator to the Custodian (which notice shall specify the amount of
the withdrawal), a sum not in excess of the capital amount contributed by
him as Participant Voluntary Contributions under the provisions of this
Section 4.3, or the value of such Account, whichever is less, provided
that no ordinary income or capital gains attributable to such
contributions shall be subject to withdrawal. Notwithstanding anything to
the contrary herein, (i) all withdrawals are subject to the provisions of
Article VIII, and (ii) no forfeiture shall occur solely as a result of a
Participant's withdrawal of all or any portion of his Participant
Voluntary Contributions.
(c) No deductible voluntary employee contributions may be made
for taxable years beginning after December 31, 1986. Such contributions
made prior to that date will be maintained in a separate Account which
will be nonforfeitable at all times. The Account will share in the gains
or losses in the same manner as described in Section 9.3 of the Plan.
Subject to Section 8.2, a Participant may withdraw any part of the
deductible voluntary contribution Account by making a written application
to the Administrator.
Section 4.4. Time for Making Contributions. Employer Pension
Contributions and Employer Profit Sharing Contributions must be made no
later than the due date, including extensions thereof, for filing the
Employer's Federal income tax return for the year coincident with or
within which the Plan Year ends (or such later time as authorized by
Treasury Regulations). Participant Voluntary Contributions for any Plan
Year shall be made no later than thirty (30) days after the end of such
Plan Year. The Employer may establish a payroll deduction system or other
procedure to assist the making of Participant Voluntary Contributions and
shall transfer such contributions to the Custodian as soon as practicable
after collected.
Section 4.5. Leased Employees. Contributions or benefits
provided to a Leased Employee by the leasing organization (within the
meaning of Code Section 414(n)) which are attributable to services
performed for the Employer shall be treated as provided by the Employer
for purposes of this Plan.
Section 4.6. Rollovers and Transfers. In the discretion of
the Administrator according to such uniform and nondiscriminatory rules
established by the Administrator, and in accordance with Sections 402 and
408 of the Code, a Participant may make a rollover to the Plan or the Plan
may accept a direct transfer (including voluntary after-tax contributions)
from another plan qualified under Section 401(a) of the Code or from an
individual retirement account. If the Employer has adopted the Profit
Sharing Plan, any rollover or transfer shall be made to such Plan.
ARTICLE V. CASH OR DEFERRED ARRANGEMENT
(CODE SECTION 401(k))
Section 5.1. Cash or Deferred Arrangement (Code Section
401(k)). The provisions of this Article shall be effective as of the
first day of the Plan Year in which this cash or deferred arrangement is
elected in item 8 of the Adoption Agreement (Profit Sharing Plan). Under
no circumstances shall the provisions of this Article apply prior to the
time specified in the preceding sentence.
Section 5.2. Elective Deferrals. (a) Election. (i) An
Employee who has satisfied the minimum age and service requirements set
forth in item 8(A) of the Adoption Agreement (Profit Sharing Plan) may
elect to have Elective Deferrals made to the Plan pursuant to a salary
reduction agreement to the extent permitted in item 8(A) of the Adoption
Agreement (Profit Sharing Plan). Such an election shall be effective as
of the time specified in item 8(A) of the Adoption Agreement (Profit
Sharing Plan) and may not be made effective retroactively.
(ii) An eligible Employee may also base Elective Deferrals, to
the extent provided in item 8(A) of the Adoption Agreement (Profit Sharing
Plan), on cash bonuses that, at the Employee's election, may be
contributed to the Plan or received by the Employee. Such an election
shall be effective as of the time specified in item 8(A) of the Adoption
Agreement (Profit Sharing Plan) and may not be made effective
retroactively.
(b) Change in Rate. The rate at which Elective Deferrals are
made shall remain in effect until modified in accordance with item 8(A) of
the Adoption Agreement (Profit Sharing Plan). Notwithstanding the
foregoing, Elective Deferrals may be suspended entirely by an Employee at
any time by written notice to the Administrator. Any such suspension
shall be effective as soon as administratively practicable following the
Administrator's receipt of such notice.
(c) Vesting. A Participant shall at all times have a fully
vested and nonforfeitable interest in his Elective Deferrals.
(d) Excess Elective Deferrals. (i) No Participating Employee
shall be permitted to have Elective Deferrals made under this Plan or any
other qualified plan maintained by the Employer during any taxable year
pursuant to Code Sections 401(k), 408(k) or 403(b) in excess of the dollar
limitation contained in Code Section 402(g) in effect at the beginning of
such taxable year.
(ii) A Participating Employee may assign to the Plan any Excess
Elective Deferrals made during a taxable year of such Employee by
notifying the Administrator on or before the date specified below of the
Excess Elective Deferrals to be assigned to the Plan. Notwithstanding any
other provision of the Plan, Excess Elective Deferrals, plus any income
and minus any loss allocable thereto, may be distributed no later than
April 15 to any Participating Employee to whose Accounts Excess Elective
Deferrals were assigned for the preceding year and who claims Excess
Elective Deferrals for such taxable year. A Participating Employee's
claim for Excess Elective Deferrals shall be made in writing and shall be
submitted to the Administrator not later than the March 1 immediately
preceding the relevant April 15. Such claim shall specify the amount of
the Participating Employee's Excess Elective Deferrals for the preceding
taxable year and shall be accompanied by the Participating Employee's
written statement that if such amounts are not distributed, such Excess
Elective Deferrals, when added to amounts deferred under other plans or
arrangements described in Code Sections 401(k), 408(k) or 403(b), exceed
the limit imposed on the Participating Employee by Code Section 402(g) for
the year of the deferral.
(iii) Excess Elective Deferrals shall be adjusted for any
income or loss up to the date of distribution. The income or loss
allocable to Excess Elective Deferrals is the sum of:
(A) income or loss allocable to the
participating Employee's Elective Deferrals
Account for the taxable year for which the
Excess Elective Deferrals occurred
multiplied by a fraction, the numerator of
which is such Participating Employee's
Excess Elective Deferrals for such taxable
year and the denominator of which is such
Participating Employee's Elective Deferrals
Account balance as of the end of the taxable
year without regard to any income or loss
occurring during such taxable year; and
(B) income or loss allocable to the
Participating Employee's Elective Deferrals
Account for the period between the end of
such taxable year and the date of
distribution under (A) above; or, at the
option of the Employer, ten percent (10%) of
the amount determined under (A) above
multiplied by the number of whole calendar
months between the end of such taxable year
and the date of distribution, counting the
month of distribution if distribution occurs
after the fifteenth (15th) of such month.
The amount of Excess Elective Deferrals that may be distributed with
respect to a Participating Employee shall be reduced by any Excess
Contributions previously distributed or recharacterized with respect to
such Participating Employee for the Plan Year beginning with or within
such taxable year. In no event may the amount distributed exceed the
Participating Employee's total Elective Deferrals for such taxable year.
(e) Actual Deferral Percentage. (i) The Actual Deferral
Percentage for Participating Employees who are Highly Compensated
Employees for each Plan Year and the Actual Deferral Percentage for
Participating Employees who are not Highly Compensated Employees for the
same Plan Year must satisfy one of the following tests:
(A) The Actual Deferral Percentage for
Participating Employees who are Highly
Compensated Employees for the Plan Year
shall not exceed the Actual Deferral
Percentage for Participating Employees who
are not Highly Compensated Employees for the
same Plan Year multiplied by 1.25; or
(B) The Actual Deferral Percentage for
Participating Employees who are Highly
Compensated Employees for the Plan Year
shall not exceed the Actual Deferral
Percentage for Participating Employees who
are not Highly Compensated Employees for the
same Plan Year multiplied by 2.0, provided
that the Actual Deferral Percentage for
Participating Employees who are Highly
Compensated Employees does not exceed the
Actual Deferral Percentage for Participating
Employees who are not Highly Compensated
Employees by more than two (2) percentage
points.
(ii) The Actual Deferral Percentage for any Participating
Employee who is a Highly Compensated Employee for the Plan Year and who is
eligible to have Elective Deferrals (and Qualified Non-Elective
Contributions or Qualified Matching Contributions, or both) allocated to
his Accounts under two or more arrangements described in Code Section
401(k), that are maintained by the Employer, shall be determined as if
such Elective Deferrals (and, if applicable, such Qualified Non-Elective
Contributions or Qualified Matching Contributions, or both) were made
under a single arrangement. If a Highly Compensated Employee participates
in two or more cash or deferred arrangements that have different Plan
Years, contributions for such employee shall be aggregated for purposes of
this subsection (e). Contributions which are required to be aggregated
are any contributions made under all cash or deferred arrangements ending
with or within the same calendar year.
(iii) In the event that the Plan satisfies the requirements
of Code Sections 401(k), 401(a)(4) or 410(b) only if aggregated with one
or more other plans, or if one or more other plans satisfy the
requirements of such Code Sections only if aggregated with this Plan, then
this subsection shall be applied by determining the Actual Deferral
Percentage of Participating Employees as if all such plans were a single
plan. For Plan Years beginning after December 31, 1989, plans may be
aggregated in order to satisfy Code Section 401(k) only if they have the
same Plan Year.
(iv) For purposes of determining the Actual Deferral Percentage
of a Participating Employee who is a five (5) percent owner or one of the
ten (10) most highly-paid Highly Compensated Employees, the Elective
Deferrals (and Qualified Non-Elective Contributions and Qualified Matching
Contributions, or both) and Compensation of such Participating Employee
shall include the Elective Deferrals (and, if applicable, Qualified
Non-Elective Contributions and Qualified Matching Contributions, or both)
and Compensation for the Plan Year of Family Members. Family Members,
with respect to such Highly Compensated Employees, shall be disregarded as
separate employees in determining the Actual Deferral Percentage both for
Participating Employees who are not Highly Compensated Employees and for
Participating Employees who are Highly Compensated Employees.
(v) For purposes of determining the Actual Deferral Percentage
test, Elective Deferrals, Qualified Non-Elective Contributions and
Qualified Matching Contributions must be made before the last day of the
twelve-month period immediately following the Plan Year to which such
contributions relate.
(vi) The Employer shall maintain records sufficient to
demonstrate satisfaction of the Actual Deferral Percentage test and the
amount of Qualified Non-Elective Contributions or Qualified Matching
Contributions, or both, used in such test.
(vii) The determination and treatment of the Actual Deferral
Percentage amounts of any Participating Employee shall satisfy such other
requirements as may be prescribed by the Secretary of the Treasury.
(f) Distribution of Excess Contributions. (i) Notwithstanding
any other provision of this Plan, Excess Contributions, plus any income
and minus any loss allocable thereto, shall be distributed no later than
the last day of each Plan Year to Participating Employees to whose
Accounts such Excess Contributions were allocated for the preceding Plan
Year. If such excess amounts are distributed more than two and one-half
(2-1/2) months after the last day of the Plan Year in which such excess
amounts arose, a ten percent (10%) excise tax will be imposed on the
Employer with respect to such amounts. Such distributions shall be made
to Highly Compensated Employees on the basis of the respective portions of
the Excess Contributions attributable to each of such Employees. Excess
Contributions shall be allocated to Participating Employees who are
subject to the family member aggregation rules of Code Section 414(q)(6)
in the manner prescribed by the regulations. Excess Contributions
(including any amounts recharacterized) shall be treated as Annual
Additions for purposes of Article VI of the Plan.
(ii) Excess Contributions shall be adjusted for any income or
loss up to the date of distribution. The income or loss allocable to
Excess Contributions is the sum of:
(A) income or loss allocable to the
Participating Employee's Elective Deferrals
Account (and, if applicable, the Qualified
Non-Elective Contributions Account or the
Qualified Matching Contributions Account, or
both) for the Plan Year for which the Excess
Contributions occurred multiplied by a
fraction, the numerator of which is such
Participating Employee's Excess
Contributions for such Plan Year and the
denominator of which is such Participating
Employee's Account balance(s) attributable
to Elective Deferrals (and Qualified
Non-Elective Contributions or Qualified
Matching Contributions, or both) as of the
end of the Plan Year without regard to any
income or loss occurring during such Plan
Year; and
(B) income or loss allocable to the
Participant's Elective Deferrals Account
(and, if applicable, the Qualified
Non-Elective Contribution Account or the
Qualified Matching Contribution Account, or
both) for the period between the end of such
Plan Year and the date of distribution
multiplied by the fraction determined under
(A) above; or, at the option of the
Employer, ten percent (10%) of the amount
determined under (A) above multiplied by the
number of whole calendar months between the
end of such Plan Year and the date of
distribution, counting the month of
distribution if distribution occurs after
the fifteenth (15th) of such month.
(iii) Excess Contributions shall be distributed from the
Participating Employee's Elective Deferrals Account and Qualified Matching
Contributions Account (if applicable) in proportion to the Participating
Employee's Elective Deferrals and Qualified Matching Contributions (to the
extent used in the Actual Deferral Percentage test) for the Plan Year.
Excess Contributions shall be distributed from the Participating
Employee's Qualified Non-Elective Contributions Account only to the extent
that such Excess Contributions exceed the balance in the Participating
Employee's Elective Deferrals Account and Matching Contributions Account.
(g) Recharacterization. (i) A Participating Employee may
treat his Excess Contributions as an amount distributed to the
Participating Employee and then contributed by the Participating Employee
to the Plan. Recharacterized amounts will remain nonforfeitable and
subject to the same distribution requirements as Elective Deferrals.
Amounts may not be recharacterized by a Highly Compensated Employee to the
extent that such amount in combination with other Participant Voluntary
Contributions would exceed any stated limit under the Plan on Participant
Voluntary Contributions. Recharacterizing Excess Contributions shall be
limited to Participants who are not Highly Compensated Employees if
elected in the Adoption Agreement.
(ii) Recharacterization must occur no later than two and
one-half (2-1/2) months after the end of the Plan Year in which such Excess
Contributions arose and is deemed to occur no earlier than the date the
last Highly Compensated Employee is informed in writing of the amount
recharacterized and the consequences thereof. Recharacterized amounts
will be taxable to the Participating Employee for such Participating
Employee's taxable year in which the Participating Employee would have
received them in cash.
Section 5.3. Matching Contributions. (a) The Employer shall
make Employer Matching Contributions to the Plan to the extent elected in
item 8(B) of the Adoption Agreement (Profit Sharing Plan).
(b) A Participant shall have a vested interest in his Matching
Contributions Account as determined under the vesting schedule elected in
item 8(B) of the Adoption Agreement (Profit Sharing Plan). Forfeitures
derived from Matching Contributions which become available because of the
vesting provisions above, shall be applied to reduce the Employer Matching
Contributions that would otherwise be due for the Plan Year, or subsequent
Plan Years.
(c) Actual Contribution Percentage. (i) The Actual
Contribution Percentage for Participating Employees who are Highly
Compensated Employees for each Plan Year and the Actual Contribution
Percentage for Participating Employees who are not Highly Compensated
Employees for the same Plan Year must satisfy one of the following tests:
(A) The Actual Contribution Percentage for
Participating Employees who are Highly
Compensated Employees for the Plan Year
shall not exceed the Actual Contribution
Percentage for Participating Employees who
are not Highly Compensated Employees for the
same Plan Year multiplied by 1.25; or
(B) The Actual Contribution Percentage for
Participating Employees who are Highly
Compensated Employees for the Plan Year
shall not exceed the Actual Contribution
Percentage for Participating Employees who
are not Highly Compensated Employees for the
same Plan Year multiplied by two (2),
provided that the Actual Contribution
Percentage for Participating Employees who
are Highly Compensated Employees does not
exceed the Actual Contribution Percentage
for Participating Employees who are not
Highly Compensated Employees by more than
two (2) percentage points.
(ii) If one or more Highly Compensated Employees participate in
both a cash or deferred arrangement and a plan subject to the Actual
Contribution Percentage test maintained by the Employer and the sum of the
Actual Deferral Percentage and the Actual Contribution Percentage of those
Highly Compensated Employees subject to either or both tests exceeds the
Aggregate Limit, then the Actual Contribution Percentage of those Highly
Compensated Employees who also participate in a cash or deferred
arrangement will be reduced (beginning with such Highly Compensated
Employee whose Actual Contribution Percentage is the highest) so that the
limit is not exceeded. The amount by which each Highly Compensated
Employee's Contribution Percentage Amount is reduced shall be treated as
an Excess Aggregate Contribution. The Actual Deferral Percentage and the
Actual Contribution Percentage of the Highly Compensated Employees are
determined after any corrections required to meet the Actual Deferral
Percentage and the Actual Contribution Percentage tests. Multiple use
does not occur if both the Actual Deferral Percentage and the Actual
Contribution Percentage of the Highly Compensated Employees does not
exceed 1.25 multiplied by the Actual Deferral Percentage and the Actual
Contribution Percentage of the Participating Employees who are not Highly
Compensated Employees.
(iii) For purposes of this subsection, the Contribution
Percentage for any Participating Employee who is a Highly Compensated
Employee and who is eligible to have Contribution Percentage Amounts
allocated to his account under two or more plans described in Code Section
401(a), or arrangements described in Code Section 401(k) that are
maintained by the Employer, shall be determined as if the total of such
Contribution Percentage Amounts was made under each plan. If a Highly
Compensated Employee participates in two or more cash or deferred
arrangements that have different plan years, all cash or deferred
arrangements ending with or within the same calendar year shall be treated
as a single arrangement.
(iv) In the event that this Plan satisfies the requirements of
Code Sections 401(m), 401(a)(4) or 410(b) only if aggregated with one or
more other plans, or if one or more other plans satisfy the requirements
of such Code Sections only if aggregated with this Plan, then this
subsection shall be applied by determining the Contribution Percentage of
employees as if all such plans were a single plan. For plan years
beginning after December 31, 1989, plans may be aggregated in order to
satisfy Code Section 401(m) only if they have the same plan year.
(v) For purposes of determining the Contribution Percentage of
a Participating Employee who is a five percent owner or one of the ten
(10) most highly-paid Highly Compensated Employees, the Contribution
Percentage Amounts and Compensation of such Participating Employee shall
include the Contribution Percentage Amounts and Compensation for the Plan
Year of Family Members. Family Members, with respect to Highly
Compensated Employees, shall be disregarded as separate employees in
determining the Contribution Percentage both for Participating Employees
who are not Highly Compensated Employees and for Participating Employees
who are Highly Compensated Employees.
(vi) For purposes of determining the Contribution Percentage
test, Employee Contributions are considered to have been made in the Plan
Year in which contributed to the Plan. Matching Contributions and
Qualified Non-Elective Contributions shall be considered made for a Plan
Year if made no later than the end of the twelve-month period beginning on
the day after the close of the Plan Year.
(vii) The Employer shall maintain records sufficient to
demonstrate satisfaction of the Actual Contribution Percentage test and
the amount of Qualified Non-Elective Contributions or Qualified Matching
Contributions, or both, used in such test.
(viii) The determination and treatment of the Contribution
Percentage of any Participating Employee shall satisfy such other
requirements as may be prescribed by the Secretary of the Treasury.
(d) Distribution of Excess Aggregate Contributions. (i)
Notwithstanding any other provision of this Plan, Excess Aggregate
Contributions, plus any income and minus any loss allocable thereto, shall
be forfeited, if forfeitable, or if not forfeitable, distributed no later
than the last day of each Plan Year to Participating Employees to whose
Accounts such Excess Aggregate Contributions were allocated for the
preceding Plan Year. Excess Aggregate Contributions shall be allocated to
Participating Employees who are subject to the family member aggregation
rules of Code Section 414(q)(6) in the manner prescribed by the
regulations. If such Excess Aggregate Contributions are distributed more
than two and one-half (2-1/2) months after the last day of the Plan Year in
which such excess amounts arose, a ten percent (10%) excise tax will be
imposed on the Employer with respect to those amounts. Excess Aggregate
Contributions shall be treated as Annual Additions for purposes of Article
VI of the Plan.
(ii) Excess Aggregate Contributions shall be adjusted for any
income or loss up to the date of distribution. The income or loss
allocable to Excess Aggregate Contributions is the sum of:
(A) income or loss allocable to the
Participating Employee's Participant
Voluntary Contributions Account, Matching
Contributions Account, Qualified Matching
Contribution Account (if any, and if all
amounts therein are not used in the Actual
Deferral Percentage test) and, if
applicable, Qualified Non-Elective
Contributions Account and Elective Deferrals
Account for the Plan Year for which the
Excess Aggregate Contributions occurred
multiplied by a fraction, the numerator of
which is such Participating Employee's
Excess Aggregate Contributions for such Plan
Year and the denominator of which is the
Participating Employee's Account balance(s)
attributable to Contribution Percentage
Amounts as of the end of the Plan Year
without regard to any income or loss
occurring during such Plan Year; and
(B) income or loss allocable to the
Participating Employee's Participant
Voluntary Contribution Account, Matching
Contributions Account, Qualified Matching
Contribution Account (if any, and if all
amounts therein are not used in the Actual
Deferral Percentage test) and, if
applicable, Qualified Non-Elective
Contributions Account and Elective Deferrals
Account for the period between the end of
such Plan Year and the date of distribution
multiplied by the fraction determined under
(A) above; or, at the election of the
Employer, ten percent (10%) of the amount
determined under (A) above multiplied by the
number of whole calendar months between the
end of such Plan Year and the date of
distribution, counting the month of
distribution if distribution occurs after
the fifteenth (15th) of such month.
(iii) Forfeitures of Excess Aggregate Contributions shall be
applied to reduce Employer contributions for subsequent Plan Years.
(iv) Excess Aggregate Contributions shall be forfeited, if
forfeitable, or distributed on a pro rata basis from the Participating
Employee's Participant Voluntary Contributions Account, Matching
Contributions Account and Qualified Matching Contribution Account (and, if
applicable, the Participating Employee's Qualified Non-Elective
Contributions Account or Elective Deferrals Account, or both).
Section 5.4. Qualified Matching Contributions and Qualified
Non-Elective Contributions.
(a) Qualified Matching Contributions. The Employer may elect
to make Qualified Matching Contributions under the Plan in item 8(C) of
the Adoption Agreement. Qualified Matching Contributions may be made in
lieu of distributing Excess Contributions as provided in Section 5.2(f)
hereof. Qualified Matching Contributions may be either (i) additional
amounts contributed to the Plan by the Employer and allocated to the
Accounts of Participating Employees who are not Highly Compensated
Employees based on such Employees' Elective Deferrals or (ii) Matching
Contributions otherwise made to the Plan pursuant to Section 5.3(a) hereof
which the Employer designates as Qualified Matching Contributions. The
amount of Qualified Matching Contributions (if any) shall be determined by
the Employer for each year. All Qualifying Matching Contributions shall
be used to satisfy the Actual Deferral Percentage test pursuant to
regulations under the Code.
(b) The Employer may elect to make Qualified NonElective
Contributions under the Plan in item 8(C) of the Adoption Agreement.
Qualified Non-Elective Contributions may be made in lieu of distributing
Excess Contributions as provided in Section 5.2(f) or Excess Aggregate
Contributions as provided in Section 5.3(d) hereof. Qualified
Non-Elective Contributions may be either (i) additional amounts
contributed to the Plan by the Employer and allocated to the Accounts of
Participating Employees who are not Highly Compensated Employees based on
such Employees' Compensation or (ii) Profit Sharing Contributions
otherwise made to the Plan pursuant to Section 4.1(a) hereof which the
Employer designates as Qualified Non-Elective Contributions. The amount
of Qualified Non-Elective Contributions (if any) shall be determined by
the Employer for each year. All Qualified Non-Elective Contributions
shall be used to satisfy either the Actual Deferral Percentage test or the
Average Contribution Percentage test, or both, pursuant to regulations
under the Code.
(c) Separate accounts for Qualified Non-Elective Contributions
and Qualified Matching Contributions will be maintained for each
Participant consistent with Section 7.1 hereof. Each account will be
credited with the applicable contributions and earnings thereon.
(d) For purposes of the special distribution rules in Section
5.5, Qualified Matching Contributions and Qualified Non-Elective
Contributions shall be treated as Elective Deferrals.
(e) Qualified Matching Contributions and Qualified Non-Elective
Contributions shall be appropriately designated when contributed.
Section 5.5. Special Distribution Rules. Except as provided
below, Elective Deferrals, Qualified Non-Elective Contributions and
Qualified Matching Contributions, and income allocable to each, are not
distributable to a Participant or a Beneficiary, in accordance with such
Participant's or Beneficiary's election, earlier than upon separation from
service, death, or disability.
(a) Financial Hardship. (i) If elected by the Employer in item
8(D) of the Adoption Agreement (Profit Sharing Plan), a Participant may
elect to withdraw all or any portion of his Elective Deferrals (excluding
net earnings credited thereto after December 31, 1988) on account of
financial hardship. For purposes of this Section 5.5, a financial
hardship shall mean an immediate and heavy financial need of the
Participant which cannot be satisfied from other resources reasonably
available to such Participant. Hardship withdrawals are subject to the
spousal consent requirements of Code Sections 401(a)(11) and 417.
(ii) A withdrawal is made on account of an immediate and heavy
financial need of a Participant only if it is made on account of: (A)
unreimbursed medical expenses described in Code Section 213(d) of the
Participant or the Participant's spouse or dependents (as defined in Code
Section 152); (B) the purchase (excluding mortgage payments) of a
principal residence for the Participant; (C) payment of tuition for the
next term of post-secondary education for the Participant or the
Participant's spouse, children or dependents; or (D) the need to prevent
the Participant's eviction from, or foreclosure on the mortgage of, the
Participant's principal residence or such other events as may be approved
by the Commissioner of Internal Revenue in rulings, notices or other
published documents.
(iii) A distribution will be considered as necessary to
satisfy an immediate and heavy financial need of the Participant only if:
(A) the Participant has obtained all distributions, other than hardship
distributions, and all nontaxable loans under all plans maintained by the
Employer; (B) all plans maintained by the Employer provide that the
Participant's Elective Deferrals and any other elective contributions or
employee contributions under this Plan and any other plan maintained by
the Employer (both qualified and nonqualified) will be automatically
suspended for twelve (12) months after the receipt of the hardship
distribution; (C) the distribution is not in excess of the amount of an
immediate and heavy financial need; and (D) all plans maintained by the
Employer provide that the Participant may not make Elective Deferrals for
the Participant's taxable year immediately following the taxable year of
the hardship distribution in excess of the applicable limit under Code
Section 402(g) for such taxable year less the amount of such Participant's
Elective Deferrals for the taxable year of the hardship distribution.
(iv) A request for a hardship distribution shall be made in
writing and in such form as may be prescribed by the Administrator.
Processing of applications and distributions of amounts under this
Section, on account of a bona fide financial hardship, shall be made as
soon as administratively feasible.
(b) Elective Deferrals at Age 59-1/2. Upon attaining age
fifty-nine and one-half (59-1/2), a Participant may elect to withdraw all
or any portion of his Elective Deferrals Account and/or Employer Matching
Contributions Account, as of the last day of any month, even if he is
still employed.
Section 5.6. Definitions. For purposes of this Article, the
following words and phrases shall have the following meanings:
(a) "Actual Deferral Percentage" means, for a specified group
of Participating Employees for a Plan Year, the average of the ratios
(calculated separately for each Participating Employee in such group) of
(i) the amount of Employer contributions actually paid over to the Plan on
behalf of such Participating Employee for the Plan Year to (ii) the
Participating Employee's Compensation for such Plan Year (whether or not
the Employee was a Participating Employee for the entire Plan Year).
Employer contributions on behalf of any Participating Employee shall
include: (i) any Elective Deferrals made pursuant to the Participating
Employee's deferral election, including Excess Elective Deferrals of
Highly Compensated Employees, but excluding Elective Deferrals that are
taken into account in the Contribution Percentage test (provided the
Actual Deferral Percentage test is satisfied both with and without
exclusion of these Elective Deferrals); and (ii) at the election of the
Employer, Qualified Non-Elective Contributions and Qualified Matching
Contributions. For purposes of computing Actual Deferral Percentages, an
Employee who would be a Participating Employee but for the failure to make
Elective Deferrals shall be treated as a Participating Employee on whose
behalf no Elective Deferrals are made.
(b) "Aggregate Limit" means the sum of (i) one hundred
twenty-five percent (125%) of the greater of the Actual Deferral
Percentage of the Participating Employees who are not Highly Compensated
Employees for the Plan Year or the Actual Contribution Percentage of
Participating Employees who are not Highly Compensated Employees under the
Plan subject to Code Section 401(m) for the Plan Year beginning with or
within the Plan Year of the cash or deferred arrangement and (ii) the
lesser of two hundred percent (200%) or two (2) plus the lesser of such
Actual Deferral Percentage or Actual Contribution Percentage. "Lesser" is
substituted for "greater" in (i) above and "greater" is substituted for
"lesser" after "two plus the" in (ii) above if it would result in a larger
Aggregate Limit.
(c) "Average Contribution Percentage" means the average of the
Contribution Percentages of the Employees in a group who are eligible to
make Participant Voluntary Contributions, or Elective Deferrals (if the
Employer takes such contributions into account in the calculation of the
Contribution Percentage), or to receive Matching Contributions (including
forfeitures) or Qualified Matching Contributions.
(d) "Contribution Percentage" means the ratio (expressed as a
percentage) of the Participating Employee's Contribution Percentage
Amounts to the Participating Employee's Compensation for the Plan Year
(whether or not the Employee was a Participating Employee for the entire
Plan Year).
(e) "Contribution Percentage Amounts" means the sum of the
Participant Voluntary Contributions, Matching Contributions, and Qualified
Matching Contributions (to the extent not taken into account for purposes
of the Actual Deferral Percentage test) made under the Plan on behalf of
the Participating Employee for the Plan Year. Such Contribution
Percentage Amounts shall include forfeitures of Excess Aggregate
Contributions or Matching Contributions allocated to the Participating
Employee's Accounts which shall be taken into account in the year in which
such forfeiture is allocated. The Employer may elect to include Qualified
Non-Elective Contributions in the Contribution Percentage Amounts. The
Employer also may elect to use all or part of the Elective Deferrals for
the Plan Year in the Contribution Percentage Amounts so long as the Actual
Deferral Percentage test is satisfied both including and excluding the
Elective Deferrals that are included in the Contribution Percentage
Amounts.
(f) "Excess Aggregate Contributions" means, with respect to any
Plan Year, the excess of:
(i) the aggregate Contribution Percentage Amounts taken into
account in computing the numerator of the Contribution Percentage actually
made on behalf of Highly Compensated Employees for such Plan Year, over
(ii) the maximum Contribution Percentage Amounts permitted by
the Actual Contribution Percentage test (determined by reducing
contributions made on behalf of Highly Compensated Employees in order of
their Contribution Percentages beginning with the highest of such
percentages).
Such determination shall be made after first determining Excess Elective
Deferrals pursuant to Section 5.2(d) hereof and then determining Excess
Contributions pursuant to Section 5.2(f) hereof.
(g) "Excess Contributions" means, with respect to any Plan
Year, the excess of:
(i) the aggregate amount of Employer contributions actually
taken into account in computing the Actual Deferral Percentage of Highly
Compensated Employees for such Plan Year, over
(ii) the maximum amount of such contributions permitted by the
Actual Deferral Percentage test (determined by reducing contributions made
on behalf of Highly Compensated Employees in order of the Actual Deferral
Percentages, beginning with the highest of such percentages).
(h) "Excess Elective Deferrals" means those Elective Deferrals
that are includible in a Participating Employee's gross income for a
taxable year under Code Section 402(g) because they exceed the limitation
specified in Section 5.2(d)(i) hereof. Excess Elective Deferrals shall be
treated as Annual Additions under the Plan.
(i) "Family Member" means the spouse, lineal ascendants and
descendants of the employee or former employee and the spouses of such
lineal ascendants and descendants, all within the meaning of Code Section
414(q)(6).
(j) "Highly Compensated Employee" means both highly compensated
active employees and highly compensated former employees.
(i) A highly compensated active employee includes any Employee
who performs service for the Employer during the determination year and
who, during the look-back year: (i) received compensation from the
Employer in excess of $75,000 (as adjusted pursuant to Code Section
415(d)); (ii) received compensation from the Employer in excess of $50,000
(as adjusted pursuant to Code Section 415(d)) and was a member of the
top-paid group for such year; or (iii) was an officer of the Employer and
received compensation during such year that is greater than 50 percent of
the dollar limitation in effect under Code Section 415(b)(1)(A). The term
Highly Compensated Employee also includes: (i) employees who are both
described in the preceding sentence if the term "determination year" is
substituted for the term "look-back year" and the employee is one of the
100 employees who received the most compensation from the Employer during
the determination year; and (ii) employees who are 5 percent owners at any
time during the look-back year or determination year. If no officer has
satisfied the compensation requirement of (iii) above during either a
determination year or look-back year, the highest paid officer for such
year shall be treated as a Highly Compensated Employee. For this purpose,
the determination year shall be the Plan Year. The look-back year shall
be the twelve-month period immediately preceding the determination year.
(ii) A highly compensated former employee includes any Employee
who separated from service (or was deemed to have separated) prior to the
determination year, performs no service for the Employer during the
determination year, and was a highly compensated active employee for
either the separation year or any determination year ending on or after
the employee's fifty-fifth (55th) birthday.
(iii) If an employee is, during a determination year or
look-back year, a Family Member of either a five percent owner who is an
active or former employee or a Highly Compensated Employee who is one of
the ten (10) most highly compensated employees ranked on the basis of
Compensation paid by the Employer during such year, then the Family Member
and the five percent owner or top-ten Highly Compensated Employee shall be
aggregated. In such case, the Family Member and five percent owner or
top-ten Highly Compensated Employee shall be treated as a single employee
receiving Compensation and Plan contributions or benefits equal to the sum
of such Compensation and contributions or benefits of the Family Member
and five percent owner or top-ten Highly Compensated Employee.
(iv) The determination of who is a Highly Compensated Employee,
including the determinations of the number and identity of employees in
the top-paid group, the top 100 employees, the number of employees treated
as officers and the Compensation that is considered, will be made in
accordance with Code Section 414(q).
(k) "Participating Employee" means an Employee who is eligible
to make Elective Deferrals or Participant Voluntary Contributions (if the
Employer takes such contributions into account in the calculation of the
Contribution Percentage), or to receive Matching Contributions (including
forfeitures) or Qualified Matching Contributions. If an Employee
contribution is required as a condition of participation in the Plan, any
Employee who would be a Participant in the Plan if such Employee made such
a contribution shall be treated as a Participating Employee on behalf of
whom no Employee contributions are made.
(l) "Qualified Matching Contributions" means Matching
Contributions which are one hundred percent (100%) vested and
nonforfeitable at all times and which are distributable only in accordance
with the distribution provisions applicable to Elective Deferrals.
(m) "Qualified Non-Elective Contributions" means contributions
(other than Matching Contributions or Qualified Matching Contributions)
made by the Employer and allocated to Participating Employees' Accounts
that the Participating Employees may not elect to receive in cash until
distributed from the Plan, are one hundred percent (100%) vested and
nonforfeitable when made, and are distributable only in accordance with
the distribution provisions applicable to Elective Deferrals.
ARTICLE VI
SECTION 415 LIMITATIONS
Section 6.1. Employers Maintaining Only this Plan.
(a) If the Participant does not participate in, and has never
participated in another qualified plan, a welfare benefit fund (as defined
in Code Section 419(e)) or an individual medical account (as defined in
Code Section 415(1)(2)) maintained by the Employer, the amount of Annual
Additions which may be credited to a Participant's Account under this Plan
for a Limitation Year shall not exceed the lesser of the Maximum
Permissible Amount or any other limitation contained in this Plan. If the
Employer's contribution that would otherwise be contributed or allocated
to the Participant's Account would cause the Annual Additions for the
Limitation Year to exceed the Maximum Permissible Amount, the amount
contributed or allocated will be reduced so that the Annual Additions for
the Limitation Year will equal the Maximum Permissible Amount.
(b) Prior to the determination of the Participant's actual
compensation for a Limitation Year, the Maximum Permissible Amount may be
determined on the basis of the Participant's estimated annual compensation
for such Limitation Year. Such estimated annual compensation shall be
determined on a reasonable basis and shall be uniformly determined for all
Participants similarly situated. Any Employer contributions based on
estimated annual compensation shall be reduced by any Excess Amounts
carried over from prior years.
(c) As soon as it is administratively feasible after the end of
the Limitation Year, the Maximum Permissible Amount for such Limitation
Year shall be determined on the basis of the Participant's actual
Compensation for such Limitation Year.
(d) If, pursuant to Section 6.1(c) and notwithstanding the
provisions of Section 6.1(a) hereof which require a reduction of
contributions so as not to exceed the limitations of this Article VI,
there is an Excess Amount with respect to a Participant for a Limitation
Year, such Excess Amount shall be disposed of as follows:
(i) Any Participant Voluntary Contributions, to the extent that
the return would reduce the Excess Amount, shall be returned to the
Participant.
(ii) In the event that the Participant is covered by this Plan
at the end of the Limitation Year, remaining Excess Amounts after the
application of clause (i) shall be applied to reduce future Employer
contributions (including any allocation of forfeitures) for such
Participant under this Plan in the next Limitation Year (and each
succeeding year, as necessary).
(iii) In the event that the Participant is not covered by
this Plan at the end of the Limitation Year, remaining Excess Amounts
after the application of clause (i) shall not be distributed to the
Participant, but shall be held unallocated in a suspense account and shall
be applied to reduce future Employer contributions (including any
allocation of forfeitures) for all remaining Participants in the next
Limitation Year (and each succeeding year, as necessary).
(iv) If a suspense account is in existence at any time during
the Limitation Year pursuant to this Section, it will not participate in
the allocation of any investment gains and losses, and all amounts in the
suspense account must be allocated and reallocated to Participants'
Accounts before any Employer or Employee contributions may be made to the
Plan for such Limitation Year. Excess amounts may not be distributed to
Participants or former Participants.
Section 6.2. Employers Maintaining Other Master or Prototype
Defined Contribution Plans.
(a) If, in addition to this Plan, the Participant is covered
under another qualified defined contribution plan which qualifies as a
Master or Prototype Plan or a welfare benefit fund (as defined in Code
Section 419(e)) or an individual medical account (as defined in Code
Section 415(1)(2)) maintained by the Employer during any Limitation Year,
the amount of Annual Additions which may be allocated under this Plan on
the Participant's behalf for such Limitation Year, shall not exceed the
Maximum Permissible Amount reduced by the Annual Additions credited to a
Participant's account under such other plans, welfare benefit funds or
individual medical accounts for the same Limitation Year. If the Annual
Additions with respect to the Participant under other defined contribution
plans and welfare benefit funds maintained by the Employer are less than
the Maximum Permissible Amount and the Employer contribution that would
otherwise be contributed or allocated to the Participant's Account under
this Plan would cause the Annual Additions for the Limitation Year to
exceed this limitation, the amount contributed or allocated will be
reduced so that the Annual Additions under all such plans and funds for
the Limitation Year will equal the Maximum Permissible Amount. If the
Annual Additions with respect to the Participant under such other defined
contribution plans and welfare benefit funds in the aggregate are equal to
or greater than the Maximum Permissible Amount, no amount will be
contributed or allocated to the Participant's Account under this Plan for
the Limitation Year.
(b) Prior to the determination of the Participant's actual
Compensation for the Limitation Year, the amounts referred to in
subsection (a) above may be determined on the Participant's estimated
annual compensation for such Limitation Year. Such estimated annual
compensation shall be determined on a reasonable basis and shall be
uniformly determined for all Participants similarly situated. Any
Employer contribution based on estimated annual compensation shall be
reduced by any Excess Amounts carried over from prior years.
(c) As soon as it is administratively feasible after the end of
the Limitation Year, the amounts referred to in subsection (a) above shall
be determined on the basis of the Participant's actual Compensation for
such Limitation Year.
(d) If a Participant's Annual Additions under this Plan and all
such other plans result in an Excess Amount for a Limitation Year, such
Excess Amount shall be deemed to consist of the Annual Additions last
allocated, except that Annual Additions attributable to a welfare benefit
fund or individual medical account will be deemed to have been allocated
first regardless of the actual allocation date.
(e) If an Excess Amount was allocated to a Participant on an
allocation date of this Plan which coincides with an allocation date of
another plan, the Excess Amount attributed to this Plan will be the
product of:
(i) the total Excess Amount allocated as of such date
(including any amount which would have been allocated but for the
limitations of Code Section 415), times
(ii) the ratio of (A) the amount allocated to the Participant as
of such date under this Plan, divided by (B) the total amount allocated as
of such date under all qualified master or prototype defined contribution
plans (determined without regard to the limitations of Code Section 415).
(f) Any Excess Amounts attributed to this Plan shall be
disposed of as provided in Section 6.1(d).
Section 6.3. Employers Maintaining Other Defined Contribution
Plans. If the Participant is covered under another plan which is a
qualified defined contribution plan which is not a Master or Prototype
Plan maintained by the Employer, Annual Additions allocated under this
Plan on behalf of any Participant shall be limited in accordance with the
provisions of Section 6.2, as though the other plan were a Master or
Prototype Plan, unless the Employer provides other limitations in the
Adoption Agreement.
Section 6.4. Employers Maintaining Defined Benefit Plans. If
the Participant is covered or was covered at any time under a qualified
defined benefit plan maintained by the Employer, the projected annual
benefit thereunder and the Annual Additions credited to any such
Participant's Account under this Plan and any other qualified defined
contribution plan in any Limitation Year will be limited so that the sum
of the Defined Contribution Fraction and the Defined Benefit Fraction with
respect to such Participant will not exceed 1.0 in any Limitation Year.
The Annual Additions which may be credited to the Participant's Account
under this Plan for any Limitation Year will be limited in accordance with
the Adoption Agreement.
Section 6.5. Definitions. For purposes of this Article VI,
the following terms shall be defined as follows:
(a) Annual Additions -- The sum of the following amounts
allocated to a Participant's Account for a Limitation Year: (i) all
Employer contributions; (ii) all Participant contributions (other than a
qualified rollover contribution as described in Code Section 402(a)(5));
(iii) all forfeitures; (iv) all amounts allocated, after March 31, 1984,
to an individual medical account (as defined in Code Section 415(1)(2))
which is part of a defined benefit or annuity plan maintained by the
Employer are treated as Annual Additions to a defined contribution plan;
and (v) amounts derived from contributions paid or accrued after December
31, 1985, in taxable years ending after such date, which are attributable
to post-retirement medical benefits allocated to the separate account of a
"key employee" (as defined in Code Section 419A(d)(3)) under a welfare
benefit fund (as defined in Code Section 419(e)) maintained by the
Employer, are treated as Annual Additions to a defined contribution plan.
For the purposes of this Article VI, amounts reapplied under Sections
6.1(d) and 6.2(f) of the Plan to reduce Employer contributions shall also
be included as Annual Additions.
(b) Compensation is defined as wages within the meaning of
Section 3401(a) of the Code and all other payments of compensation to the
Employee by the Employer (in the course of the Employer's trade or
business) for which the Employer is required to furnish the Employee a
written statement under Sections 6041(d), 6051(a)(3) and 6052 of the Code,
determined without regard to any rules under Section 3401(a) that limit
the remuneration included in wages based on the nature or locations of the
employment or the services performed.
For Plan Years beginning after December 31, 1988, the maximum
amount of Compensation taken into account under the Plan for a Participant
in any Plan Year shall not exceed two hundred thousand dollars ($200,000)
or such greater amount as permitted by the Secretary of the Treasury,
except that the dollar increase in effect on January 1 of any calendar
year is effective for years beginning in such calendar year and the first
adjustment to the $200,000 limitation is effective on January 1, 1990. If
the Plan determines Compensation on a period of time that contains fewer
than 12 calendar months, then the annual compensation limit is an amount
equal to the annual compensation limit for the calendar year in which the
compensation period begins multiplied by the ratio obtained by dividing
the number of full months in the period by 12.
In addition to other applicable limitations set forth in the
plan, and notwithstanding any other provision of the plan to the contrary,
for plan years beginning on or after January 1, 1994, the annual
Compensation of each employee taken into account under the plan shall not
exceed the OBRA '93 annual compensation limit. The OBRA '93 annual
compensation limit is $150,000, as adjusted by the Commissioner for
increases in the cost of living in accordance with section 401(a)(17)(B)
of the Internal Revenue Code. The cost-of-living adjustment in effect for
a calendar year applies to any period, not exceeding 12 months, over which
compensation is determined (determination period) beginning in such
calendar year. If a determination period consists of fewer than 12
months, the OBRA '93 annual compensation limit will be multiplied by a
fraction, the numerator of which is the number of months in the
determination period, and the denominator of which is 12.
For plan years beginning on or after January 1, 1994, any
reference in this plan to the limitation under section 401(a)(17) of the
Code shall mean the OBRA '93 annual compensation limit set forth in this
provision.
If Compensation for any prior determination period is taken into
account in determining an employee's benefits accruing in the current plan
year, the compensation for that prior determination period is subject to
OBRA '93 annual compensation limit in effect for that prior determination
period. For this purpose, for determination periods beginning before the
first day of the first plan year beginning on or after January 1, 1994,
the OBRA '93 annual compensation limit is $150,000.
For Limitation Years beginning after December 31, 1991, for
purposes of applying the limitations of this Article, Compensation for a
Limitation Year is the Compensation actually paid or includible in gross
income during such Limitation Year. Notwithstanding the preceding
sentence, Compensation for a participant in a defined contribution plan
who is permanently and totally disabled (as defined in Code Section
22(e)(3)) is the Compensation such participant would have received for the
Limitation Year if the participant had been paid at the rate of
Compensation paid immediately before becoming permanently and totally
disabled. Such imputed Compensation for a disabled participant may be
taken into account only if the participant is not a highly compensated
employee (as defined in Code Section 414(q)) and contributions made on
behalf of such participant are nonforfeitable when made.
(c) Defined Benefit Fraction -- A fraction, the numerator of
which is the sum of a Participant's Projected Annual Benefits under all
the qualified defined benefit plans whether or not terminated) maintained
by the Employer determined at the end of the Limitation Year, and the
denominator of which is the lesser of (i) one hundred and twenty-five
percent (125%) of the dollar limitation for such Limitation Year under
Code Sections 415(b) and (d) (or such higher amount determined by the
Commissioner of Internal Revenue applicable to the calendar year with
which or within which the Limitation Year ends) or (ii) one hundred and
forty percent (140%) of the Participant's average Compensation (or Earned
Income) for the three highest consecutive calendar years of service during
which the Participant was in the Plan including any adjustments under Code
Section 415(b). Notwithstanding the above, if the Participant was a
Participant as of the first limitation year beginning after December 31,
1986 in one or more defined benefit plans maintained by the Employer which
were in existence on May 6, 1986, the denominator of this fraction will
not be less than the product of 1.25 times the sum of the annual benefits
under such plans which the Participant had accrued as of the close of the
last Limitation Year beginning after January 1, 1987, disregarding any
changes in the terms and conditions of the Plan after May 5, 1986. The
preceding sentence applies only if the defined benefit plans individually
and in the aggregate satisfied the requirements of Code Section 415 for
all Limitation Years beginning before January 1, 1987.
(d) Employer -- The Employer that adopts this Plan and in the
case of a group of employers which constitutes (i) a controlled group of
corporations (as defined in Code Section 414(b) as modified by Code
Section 415(h)); (ii) trades or businesses (whether or not incorporated)
which are under common control (as defined in Section 414(c) as modified
by Code Section 415(h)); (iii) an affiliated service group (as defined in
Code Section 414(m)); or (iv) a group of entities required to be
aggregated (pursuant to Code Section 414(o)) all such employers shall be
considered a single employer for purposes of applying the limitations of
this Article VI.
(e) Excess Amount -- The excess of the Participant's Annual
Additions for the Limitation Year over the Maximum Permissible Amount.
(f) Limitation Year -- A calendar year or any other twelve (12)
consecutive month period adopted by the Employer in item 12 of the
Adoption Agreement (Profit Sharing Plan) or item 10 of the Adoption
Agreement (Pension Plan). All qualified plans maintained by the Employer
shall use the same Limitation Year. If the Limitation Year is amended to
a different twelve (12) consecutive month period, the new Limitation Year
shall begin on the date within the Limitation Year in which the amendment
is made.
(g) Master or Prototype Plan -- A plan the form of which is the
subject of a favorable opinion letter from the Internal Revenue Service.
(h) Maximum Permissible Amount -- For a Limitation Year, the
Maximum Permissible Amount with respect to any Participant shall be the
lesser of (i) the Defined Contribution Dollar Limitation or (ii)
twenty-five percent (25%) of the Participant's Compensation for the
Limitation Year. The Compensation limitation described in (ii) shall not
apply to any contribution for medical benefits (within the meaning of Code
Sections 401(h) or 419A(f)(2)) which is otherwise treated as an Annual
Addition under Code Sections 415(1)(1) or 419A(d)(2). If a short
Limitation Year is created because of an amendment changing the Limitation
Year to a different twelve (12) consecutive month period, the Maximum
Permissible Amount shall not exceed the defined contribution dollar
limitation in Code Section 415(c)(1)(A) multiplied by a fraction, the
numerator of which is the number of months in the short Limitation Year
and the denominator of which is twelve (12).
(i) Projected Annual Benefit -- A Participant's annual
retirement benefit (adjusted to the actuarial equivalent of a straight
life annuity if expressed in a form other than a straight life or
qualified joint and survivor annuity) under the Plan, assuming that the
Participant will continue employment until the later of current age or
Normal Retirement Age, and that the Participant's Compensation for the
Limitation Year and all other relevant factors used to determine benefits
under the Plan will remain constant for all future Limitation Years.
(j) Defined Contribution Fraction -- A fraction, the numerator
of which is the sum of the Annual Additions credited to the Participant's
account under this and all other qualified defined contribution plans
(whether or not terminated) maintained by the Employer for the current and
all prior Limitation Years (including the Annual Additions attributable to
the Participant's non-deductible employee contributions to all qualified
defined benefit plans (whether or not terminated) maintained by the
Employer for the current and all prior Limitation Years and the Annual
Additions attributable to all welfare benefit funds (as defined in Code
Section 419(e)) and individual medical accounts (as defined in Code
Section 415(1)(2) maintained by the Employer), and the denominator of
which is the sum of the maximum aggregate amounts for the current and all
prior Limitation Years of service with the Employer (regardless of whether
a defined contribution plan was maintained by the Employer). The maximum
aggregate amount in any Limitation Year is the lesser of (i) one hundred
and twenty-five percent (125%) of the dollar limitation determined under
Code Sections 415(b) and (d) in effect under Code Section 415(c)(1)(A) or
(ii) thirty-five percent (35%) of the Participant's Compensation for such
Limitation Year.
If the Employee was a participant as of the end of the first day
of the first Limitation Year beginning after December 31, 1986, in one or
more defined contribution plans maintained by the Employer which were in
existence on May 5, 1986, the numerator of this fraction will be adjusted
if the sum of this fraction and the defined benefit fraction would
otherwise exceed 1.0 under the terms of this Plan. Under the adjustment,
an amount equal to the product of: (i) the excess of the sum of the
fractions over 1.0 times (ii) the denominator of this fraction, will be
permanently subtracted from the numerator of this fraction. The
adjustment is calculated using the fractions as they would be computed as
of the end of the last Limitation Year beginning before January 1, 1987,
and disregarding any changes in the terms and conditions of the Plan made
after May 5, 1986, but using the Code Section 415 limitation applicable to
the first Limitation Year beginning on or after January 1, 1987. The
annual addition for any Limitation Year beginning before January 1, 1987,
shall not be computed to treat all Employee contributions as Annual
Additions.
(k) Defined Contribution Dollar Limitation -- For a Limitation
Year, thirty thousand dollars ($30,000) or, if greater, one-fourth of the
defined benefit dollar limitation set forth in Code Section 415(b)(1) as
in effect for such Limitation Year.
(l) Highest Average Compensation -- The average Compensation
for the three consecutive Years of Service with the Employer which
produces the highest average.
ARTICLE VII
PARTICIPANTS' ACCOUNTS
Section 7.1. Separate Accounts. Separate Accounts will be
maintained for each Participant for each of the following types of
contributions, and the income, expenses, gains and losses attributable
thereto:
(a) Employer Profit Sharing Contributions pursuant to Section
4.1 hereof;
(b) Employer Pension Contributions pursuant to Section 4.2
hereof;
(c) Participant Voluntary Contributions pursuant to Section 4.3
hereof;
(d) Elective Deferrals pursuant to Section 5.2 hereof;
(e) Matching Contributions pursuant to Section 5.3 hereof;
(f) Rollover Contributions pursuant to Section 4.6 hereof.
The Custodian shall establish such other separate Accounts as may be
necessary under the Plan. These Accounts shall be for accounting purposes
only and the Custodian shall not be required to establish separate
Custodial Accounts for these contributions.
Section 7.2. Vesting. (a) A Participant shall at all times
have a fully vested and nonforfeitable interest in all his Accounts except
his Employer Profit Sharing Contributions Account and/or his Employer
Pension Contributions Account.
(b) A Participant shall have a vested interest in his Employer
Profit Sharing Contributions Account and/or his Employer Pension
Contributions Account as determined under the vesting schedule elected in
item 7 of the Adoption Agreement.
Section 7.3. Computation of Vesting Service. All of a
Participant's Years of Service with the Employer shall be counted to
determine the nonforfeitable percentage of his Employer Profit Sharing
Contributions Account and/or his Employer Pension Contributions Account
except those Years of Service excluded under item 7 of the Adoption
Agreement. A former Participant who had a nonforfeitable right to all or
a portion of his Account balance derived from Employer contributions at
the time of his termination shall receive credit for Years of Service
prior to his Break in Service upon completing a Year of Service after his
return to the employ of the Employer. A former Participant who did not
have a nonforfeitable right to any portion of his Account balance derived
from Employer contributions at the time of termination from service will
be considered a new employee for vesting purposes, if the number of
consecutive one year Breaks in Service equals or exceeds the greater of
(i) five (5) years or (ii) the aggregate number of Years of Service before
such Breaks in Service. If such a former Participant's Years of Service
before termination from service may not be disregarded pursuant to the
preceding sentence, such former Participant's prior Years of Service shall
not be cancelled hereunder.
Section 7.4. Allocation of Forfeitures.
(a) As of the end of the Plan Year, forfeitures derived from
Employer Profit Sharing Contributions Accounts which become available for
reallocation during such Plan Year because of the operation of the vesting
provisions of Section 7.2(b), shall be allocated to the Employer Profit
Sharing Contribution Accounts of the Participants who are eligible to
share in an Employer Profit Sharing Contributions for the Plan Year. Such
amounts shall be allocated according to the ratio that each such
Participant's Compensation or Earned Income for the Plan Year bears to the
total Compensation and Earned Income of all such Participants for the Plan
Year. Forfeitures under this subsection (a) will be allocated only for
the benefit of Participants of the Employer adopting this Plan.
(b) Forfeitures derived from Employer Pension Contributions
which become available for reallocation during a Plan Year shall be
applied to reduce the Employer Pension Contributions that would otherwise
be due for such Plan Year under Section 4.2. Forfeitures under this
subsection (b) will only be used to reduce the Employer Pension
Contributions of the Employer adopting this Plan.
(c) If a benefit is forfeited because a Participant or
Beneficiary cannot be found, such benefit will be reinstated if a claim is
made by the Participant or Beneficiary.
(d) No forfeiture will occur solely as a result of a
Participant's withdrawal of any Employee contributions.
ARTICLE VIII
PAYMENT OF BENEFITS
Section 8.1. Benefits Payable Under the Plan.
(a) Normal Retirement. A Participant's interest in all
Employer contributions allocated to his Accounts shall be fully vested and
nonforfeitable on and after his Normal Retirement Age. Such Participant
may retire at any time on or after that date and shall be entitled to
receive, in accordance with the provisions of Sections 8.2 and 8.3 hereof,
the total amount credited to his Accounts. Any Participant who is
employed beyond his Normal Retirement Age shall continue to share in
Employer contributions until his actual retirement.
(b) Death Benefits. Upon the death of a Participant while
employed by the Employer, the total amount credited to such Participant's
Accounts (plus such Participant's share of the Employer contributions for
the year of his death), shall be payable to such Participant's Beneficiary
in accordance with Sections 8.2 and 8.3 hereof. Upon the death of a
Participant following his termination of employment with the Employer, the
vested portion of his Accounts which has not been distributed shall be
payable to such Participant's Beneficiary in accordance with Sections 8.2
and 8.3 hereof.
(c) Other Termination of Employment. A Participant who
terminates employment with the Employer on account of Disability shall be
entitled to receive, in accordance with Sections 8.2 and 8.3 hereof, the
total amount credited to his Account. A Participant whose employment with
the Employer is terminated prior to his Normal Retirement Date for any
reason other than death or Disability shall be entitled to receive, in
accordance with the provisions of Sections 8.2 and 8.3 hereof, the
portions of his Accounts that have vested pursuant to Section 7.2 hereof.
(d) Forfeitures. Any amounts in a Participant's Accounts which
are not payable under subsection (c) above when his employment with the
Employer is terminated shall remain in such Accounts and shall continue to
share in profits or losses on investments under Section 9.3 hereof until
such former Participant incurs five (5) consecutive Breaks in Service,
whereupon they shall be forfeited and administered in accordance with
Section 7.4 hereof. In the event a former Participant is reemployed by
the Employer before incurring five (5) consecutive Breaks in Service his
Accounts shall continue to vest in accordance with the vesting schedule
specified in the applicable Adoption Agreement. Notwithstanding the
foregoing, if a terminated Participant receives a distribution on account
of termination of his participation in the Plan of his entire vested
interest in the Pension Plan or the Profit Sharing Plan, such
Participant's nonvested interest in the relevant plan shall be treated as
a forfeiture and administered in accordance with Section 7.4 hereof. If
the Participant elects to have distributed less than the entire vested
portion of his Account balance derived from Employer contributions, the
part of the nonvested portion that will be treated as a forfeiture is the
total nonvested portion multiplied by a fraction, the numerator of which
is the amount of the distribution attributable to Employer contributions
and the denominator of which is the total value of the vested Employer
derived Account balance. For purposes of this Section, if the value of an
employee's vested account balance is zero, the Employee shall be deemed to
have received a distribution of such vested account balance. A
Participant's vested account balance shall not include accumulated
deductible employee contributions within the meaning of Code Section
72(o)(5)(B) for plan years beginning prior to January 1, 1989. If a
Participant receives or is deemed to receive a distribution pursuant to
this subsection (d) and such Participant subsequently resumes employment
covered under the Plan, the forfeited amounts shall be restored from
current forfeitures, or if those are insufficient by a special Employer
contribution, provided that the Participant repays to the Plan the full
amount of the distribution attributable to Employer contributions prior to
the earlier of (i) five (5) years after the Participant is reemployed, or
(ii) the time the Participant incurs five (5) consecutive Breaks in
Service. In the event a former Participant is reemployed after incurring
five (5) consecutive Breaks in Service, separate Accounts will be
maintained for Employer contributions allocated before and after the Break
in Service, and Years of Service earned after his return to employment
shall be disregarded in determining the Participant's vested percentage in
his prebreak Employer contributions.
Section 8.2. Manner of Distributions.
(a) Distributions From Pension Plan. Distributions from the
Pension Plan shall be made as follows:
(i) A Participant's vested interest in the Plan shall be paid
by purchasing an annuity contract from a licensed insurance company,
unless the Participant elects to receive his interest in one of the
alternate forms of benefit described in subsection (c) below. If a
Participant is not married at his annuity starting date, the annuity
contract shall provide a monthly benefit for his life. If a Participant
is married at his annuity starting date, the annuity shall be in the form
of a qualified joint and survivor annuity. A "qualified joint and survivor
annuity" is an immediate annuity for the life of the Participant with a
survivor annuity for the life of the spouse which is equal to fifty
percent (50%) of the amount of the annuity which is payable during the
joint lives of the Participant and the spouse and which is the amount of
benefit which can be purchased with the Participant's vested Account
balance. The Participant may elect to have such annuity distributed upon
attainment of the earliest retirement age under the Plan. Any annuity
contract purchased hereunder and distributed in accordance with this
Section 8.2 shall be nontransferable and shall comply with the terms of
this Plan. For purposes of this Section, the earliest retirement age
shall be the Participant's age on the earliest date on which the
Participant could elect to receive retirement benefits.
(ii) Unless an optional form of benefit is selected in
accordance with subsection (c) below, if a Participant has a spouse and
dies prior to his annuity starting date (the date annuity payments
commence), the Participant's vested Account balance in the Plan shall be
applied toward the purchase of a life only annuity contract from a
licensed insurance company providing a benefit for the life of the
surviving spouse. The surviving spouse may elect to have such annuity
distributed within a reasonable period after the Participant's death.
(iii) For any distribution subject to the annuity
requirements in subsection (i) above, a Participant or Beneficiary may
elect in writing, within the ninety (90) day period ending on the annuity
starting date (the date annuity or any other form of benefit payments
commence), to receive his vested interest in the Plan in one of the
alternate forms of benefit set forth in subsection (c) below in lieu of
the form of benefit otherwise payable hereunder. Any waiver of the joint
and survivor annuity by a married Participant shall not be effective
unless: (A) the Participant's spouse consents in writing to the election;
(B) the election designates a specific Beneficiary, including any class of
beneficiaries or any contingent beneficiaries, which may not be changed
without spousal consent (or the spouse expressly permits designations by
the Participant without any further spousal consent); (C) the spouse's
consent acknowledges the effect of the election; and (D) the spouse's
consent is witnessed by a Plan representative or notary public.
Additionally, a Participant's waiver of the joint and survivor annuity
shall not be effective unless the election designates a form of benefit
payment which may not be changed without spousal consent (or the spouse
expressly permits designations by the Participant without any further
spousal consent). If it is established to the satisfaction of a Plan
representative that there is no spouse or that the spouse cannot be
located, a waiver will be deemed a qualified election. Any consent by a
spouse obtained under this provision (or establishment that the consent of
a spouse may not be obtained) shall be effective only with respect to such
spouse. A consent that permits designations by the Participant without
any requirement of further consent by such spouse must acknowledge that
the spouse has the right to limit consent to a specific Beneficiary, and a
specific form of benefit where applicable, and that the spouse voluntarily
elects to relinquish either or both of such rights. A revocation of a
prior election may be made by a Participant without the consent of the
spouse at any time before the commencement of benefits. The number of
revocations shall not be limited. No consent obtained under this
provision shall be valid unless the Participant and the spouse have
received notice as provided in subsection (v) below.
(iv) A Participant may elect in writing to waive the surviving
spouse benefit otherwise payable under subsection (ii) above. The benefit
may be waived at any time during the period which begins on the first day
of the Plan Year in which the Participant attains age 35 and ends on the
date of the Participant's death. A Participant and the spouse may waive
the pre-retirement survivor death benefit prior to age 35, provided that
such early waiver becomes invalid in the Plan Year the Participant attains
age 35 and a new waiver must be made pursuant to this subsection (iv). If
the Participant separates from service prior to the first day of the Plan
Year in which he attains age 35, the surviving spouse benefit may be
waived, with respect to the Participant's account balance as of the date
of separation, at any time during the period which begins on the date of
such separation and ends on the date of the Participant's death.
Notwithstanding the foregoing, any election by a Participant to waive the
surviving spouse benefit payable under subsection (ii) above shall not be
effective unless: (A) the Participant's spouse consents in writing to the
election; (B) the spouse's consent acknowledges the effect of the
election; and (C) the spouse's consent is witnessed by a Plan
representative or notary public. If it is established to the satisfaction
of a Plan representative that there is no spouse or that the spouse cannot
be located, a waiver will be deemed a qualified election. Any consent by
a spouse obtained under this provision (or establishment that the consent
of a spouse may not be obtained) shall be effective only with respect to
such spouse. A revocation of a prior election may be made by a
Participant without the consent of the spouse at any time before the
commencement of benefits. The number of revocations shall not be limited.
No consent obtained under this provision shall be valid unless the
Participant and the spouse have received notice as provided in subsection
(v) below.
(v) The Administrator shall provide the Participant and the
Spouse, as applicable, with a written explanation of: (A) the terms and
conditions of the annuity described in subsections (i) or (ii), as
applicable; (B) the Participant's or Spouse's, as applicable, right to
waive the payment of benefits in the form of an annuity; (C) the rights of
the Participant's spouse; and (D) the right to make, and the effect of,
the revocation of a previous election to waive the payment of benefits in
the form of an annuity described in subsections (i) or (ii) hereof. In
the case of the annuity described in subsection (i), such explanation
shall be provided no less than thirty (30) days and no more than ninety
(90) days prior to the annuity starting date. In the case of the annuity
described in subsection (ii), such explanation shall be provided within
the applicable period for such Participant. The applicable period for a
Participant is whichever of the following periods ends last: (A) the
period beginning with the first day of the Plan Year in which the
Participant attains age 32 and ending with the close of the Plan Year
preceding the Plan Year in which the Participant attains age 35; (B) a
reasonable period ending after the individual becomes a Participant; (C) a
reasonable period ending after this Article first applies to the
Participant. Notwithstanding the foregoing, notice must be provided
within a reasonable period ending after separation from service in the
case of a Participant who separates from service before attaining age 35.
For purposes of applying the preceding paragraph, a reasonable period
ending after the enumerated events described in (B) and (C) is the end of
the two-year period beginning one year prior to the date the applicable
event occurs, and ending one year after that date. In the case of a
Participant who separates from service before the Plan Year in which age
35 is attained, notice shall be provided within the two-year period
beginning one year prior to separation and ending one year after
separation. If such a Participant thereafter returns to employment with
the Employer, the applicable period for such Participant shall be
redetermined. A written explanation comparable to the notices described
above shall be provided to a Participant who is waiving the surviving
spouse benefit prior to attaining age 35.
(vi) The Administrator shall be responsible for the purchase of
any annuity contracts required to be purchased in accordance with the
terms of this Plan.
(b) Distributions from Profit Sharing Plan. Distributions from
the Profit Sharing Plan shall be made in the form elected by the
Participant (or Beneficiary) as described in subsection (c) below.
Notwithstanding the foregoing, if the Profit Sharing Plan is a direct or
indirect transferee of a defined benefit plan, a money purchase pension
plan (including a target benefit plan), or a stock bonus or profit sharing
plan or is an amendment of an original Plan which is (or was) subject to
the survivor annuity requirements of Code Sections 401(a)(11) or 417 then
distributions shall be made in accordance with the provisions of
subsection (a) above. This amendment is effective on the first day of the
first plan year beginning on or after December 12, 1994, or, if later, 90
days after December 12, 1994. Notwithstanding any provision of this plan
to the contrary, to the extent that any optional form of benefit under
this plan permits a distribution prior to the employee's retirement,
death, disability, or severance from employment, and prior to plan
termination, the optional form of benefit is not available with respect to
benefits attributable to assets (including the post-transfer earnings
thereon) and liabilities that are transferred, within the meaning of
section 414(l) of the Internal Revenue Code, to this plan from a money
purchase pension plan qualified under section 401(a) of the Internal
Revenue Code (other than any portion of those assets and liabilities
attributable to voluntary employee contributions).
(c) Optional Forms of Distribution. All distributions required
under this subsection shall be determined and made in accordance with the
Income Tax Regulations under Code Section 401(a)(9), including the minimum
distribution incidental benefit requirement of Section 1.401(a)(9)-2 of
such Regulations.
(i) Amounts payable to a Participant shall be distributed in
one of the following forms as elected by the Participant, with spousal
consent, as applicable:
(A) a lump sum; or
(B) installments over a period certain not to
exceed the life expectancy of the
Participant or the joint life expectancy of
the Participant and his Beneficiary.
Such election shall be made in writing and in such form as shall be
acceptable to the Administrator. If the Participant fails to elect any of
the methods of distribution described above within the time specified for
such election, the Administrator shall distribute the Participant's
Account in the form of a single sum cash payment by the April 1 following
the calendar year in which the Participant attains age seventy and
one-half (70-1/2).
(ii) If a Participant's benefit is to be distributed in
installment payments under (B) above, the amount distributed for each
calendar year, beginning with distributions for the first distribution
calendar year, must at least equal the quotient obtained by dividing the
Participant's benefit by the applicable life expectancy. The life
expectancy (or joint and last survivor expectancy) is calculated using the
attained age of the Participant (or Beneficiary) as of the Participant's
(or Beneficiary's) birthday in the applicable calendar year reduced by one
for each calendar year which has elapsed since the date life expectancy
was first calculated. If life expectancy is being recalculated, the
applicable life expectancy shall be the life expectancy as so
recalculated. The applicable calendar year shall be the first
distribution calendar year, and, if life expectancy is being recalculated,
such succeeding calendar year.
Unless otherwise elected by the Participant (or the
Participant's spouse) by the time distributions are required to begin,
life expectancies shall be recalculated annually. Such election shall be
irrevocable as to the Participant (or spouse) and shall apply to all
subsequent years. The life expectancy of a nonspouse Beneficiary may not
be recalculated. Life expectancy and joint life expectancy are computed
by use of the expected return multiples in Tables V and VI of Section
1.72-9 of the Income Tax Regulations.
Notwithstanding anything herein to the contrary, for calendar
years beginning before January 1, 1989, if the Participant's spouse is not
the designated Beneficiary, the method of distribution selected must
assure that at least fifty percent (50%) of the present value of the
amount available for distribution is paid within the life expectancy of
the Participant. For calendar years beginning after December 31, 1988,
the amount to be distributed each year shall not be less than the quotient
obtained by dividing the Participant's benefit by the lesser of (A) the
applicable life expectancy or (B) if the Participant's spouse is not the
designated Beneficiary, the applicable divisor determined from the table
set forth in Q&A-4 of Section 1.401(a)(9)-2 of the Income Tax Regulations.
Distributions after the death of the Participant shall be distributed
using the applicable return multiple specified in Section 1.72-9 of the
Income Tax Regulations as the relevant divisor without regard to Section
1.401(a)(9)-2 of the Income Tax Regulations.
(iii) The minimum distribution required for the
Participant's first distribution calendar year must be made on or before
the Participant's required beginning date as described in Section 8.3(c)
hereof. The minimum distribution for other calendar years, including the
minimum distribution for the distribution calendar year in which such
required beginning date occurs, must be made on or before December 31 of
that distribution calendar year.
(e) In any case where the Participant or Beneficiary has
determined payment to be on an installment basis, such Participant or
Beneficiary may by written request directed to the Administrator, at any
time following commencement of such installment payments, accelerate all
or any portion of the unpaid balance.
(f) For purposes of this Section a "spouse" shall include the
spouse or surviving spouse of a Participant, provided that a former spouse
shall be treated as the spouse or surviving spouse and a current spouse
will not be treated as a spouse or surviving spouse to the extent provided
under a qualified domestic relations order as described in Code Section
414(p).
(g) The payment of benefits in either a lump sum or in
installments under this Section 8.2 may be made in cash or in Investment
Company Shares.
Section 8.3. Commencement of Payments. (a) Subject to the
provisions of this Section 8.3, payment of benefits, under whichever
method is selected, shall be made or commence as soon as administratively
practicable after the Valuation Date immediately following the
Participant's retirement, death or other termination of employment.
(b) If the Participant's vested Account balance in the Pension
Plan or the Profit Sharing Plan exceeds (or at the time of any prior
distribution exceeded) three thousand five hundred dollars ($3,500), no
distribution of that interest shall be made prior to the time the
Participant's Account becomes immediately distributable without the
written consent of the Participant and, in the case of the Pension Plan,
the Participant's spouse (or where either the Participant or the spouse
has died, the survivor). The consent of the Participant and the
Participant's spouse shall be obtained in writing within the ninety (90)
day period ending on the annuity starting date. The annuity starting date
is the first day of the first period for which an amount is paid as an
annuity or any other form. The Administrator shall notify the Participant
and the Participant's spouse of the right to defer any distribution until
the Participant's Account balance is no longer immediately distributable.
Such notification shall include a general description of the material
features, and an explanation of the relative values of the optional forms
of benefit available under the Plan in a manner that would satisfy the
notice requirements of Code Section 417(a)(3), and shall be provided no
less than thirty (30) days and no more than ninety (90) days prior to the
annuity starting date; provided that if a distribution is one to which
Sections 401(a)(11) and 417 of the Internal Revenue Code do not apply,
such distribution may commence less than 30 days after the notice required
under Section 1.411(a)-11(c) of the Income Tax Regulations is given,
provided that:
(1) the Administrator clearly informs the Participant that
the Participant has a right to a period of at least 30 days
after receiving the notice to consider the decision of whether
or not to elect a distribution (and, if applicable, a particular
distribution option), and
(2) the Participant, after receiving the notice,
affirmatively elects a distribution.
Notwithstanding the foregoing, only the Participant need consent
to the commencement of a distribution in the form of a qualified joint and
survivor annuity while the Account balance is immediately distributable.
(Furthermore, if payment in the form of a qualified joint and survivor
annuity is not required with respect to the Participant pursuant to
Section 8.2(b) of the Plan, only the Participant need consent to the
distribution of an Account balance that is immediately distributable.)
Neither the consent of the Participant nor the Participant's spouse shall
be required to the extent that a distribution is required to satisfy Code
Sections 401(a)(9) or 415. In addition, upon termination of this Plan if
the Plan does not offer an annuity option (purchased from a commercial
insurance company), the Participant's Account balance may, without the
Participant's consent, be distributed to the Participant or transferred to
another defined contribution plan (other than an employee stock ownership
plan as defined in Code Section 4975(e)(7)) within the same controlled
group.
An Account balance is immediately distributable if any part of
the Account balance could be distributed to the Participant (or surviving
spouse) before the Participant attains (or would have attained if not
deceased) the later of his Normal Retirement Age or age sixty-two (62).
For purposes of determining the applicability of the foregoing
consent requirements to distributions made before the first day of the
first Plan Year beginning after December 31, 1988, a Participant's vested
Account balance shall not include amounts attributable to accumulated
deductible employee contributions within the meaning of Code Section
72(o)(5)(B).
(c) Unless the Participant (or the Participant's Beneficiary,
if the Participant is dead) elects to defer commencement under (b) above,
distribution of benefits shall begin no later than the sixtieth (60th) day
after the close of the Plan Year in which occurs the latest of (i) the
Participant's attainment of age 65 (or normal retirement age, if earlier);
(ii) the tenth (10th) anniversary of the year in which the Participant
commenced participation in the Plan; or (iii) the date the Participant
terminates service with the Employer. Notwithstanding the foregoing, the
failure of a Participant and the spouse to consent to a distribution while
a benefit is immediately distributable, within the meaning of Section 8.1
of the Plan, shall be deemed to be an election to defer commencement of
payment of any benefit sufficient to satisfy this Section.
(d) Notwithstanding anything herein to the contrary, payment of
benefits to a Participant shall commence by the Participant's required
beginning date, even if the Participant is still employed. A
Participant's required beginning date is the April 1 of the calendar year
following the calendar year in which the Participant attains age seventy
and one-half (70-1/2); provided that the required beginning date of a
Participant who attains age 70-1/2 before January 1, 1988, shall be
determined in accordance with (i) or (ii) below:
(i) The required beginning date of a Participant who is not a
5-percent owner is the first day of April of the calendar year following
the calendar year in which the later of retirement or attainment of age
seventy and one-half (70-1/2) occurs.
(ii) The required beginning date of a Participant who is a
5-percent owner during any year beginning after December 31, 1979, is the
first day of April following the later of the calendar year in which the
Participant attains age seventy and one-half (70-1/2), or the earlier of
the calendar year with or within which ends the Plan Year in which the
Participant becomes a 5-percent owner, or the calendar year in which the
Participant retires.
The required beginning date of a Participant who is not a 5-percent owner
who attains age seventy and one-half (70-1/2) during 1988 and who has not
retired as of January 1, 1989, is April 1, 1990.
A Participant is treated as a 5-percent owner for purposes of
this subsection (d) if such Participant is a 5-percent owner as defined in
Code Section 416(i) (determined in accordance with Code Section 416, but
without regard to whether the Plan is top-heavy) at any time during the
Plan Year ending with or within the calendar year in which such owner
attains age sixty-six and one-half (66-1/2) or any subsequent Plan Year.
Once distributions have begun to a 5-percent owner under this
subsection (d), they must continue to be distributed, even if the
Participant ceases to be a 5-percent owner in a subsequent year.
Distributions may be delayed pursuant to an election made prior
to January 1, 1984, under Section 242 of the Tax Equity and Fiscal
Responsibility Act of 1982; provided that the method of distribution
selected must be in accordance with the requirements of Code Section
401(a)(9) as in effect prior to amendment by the Deficit Reduction Act of
1984. If such an election is revoked, any subsequent distribution must
satisfy the requirements of Code Section 401(a)(9). If a designation is
revoked subsequent to the date distributions are required to begin, the
Plan must distribute by the end of the calendar year following the
calendar year in which the revocation occurs the total amount not yet
distributed which would have been required to have been distributed to
satisfy Code Section 401(a)(9), but for such Section 242(b)(2) election.
For calendar years beginning after December 31, 1988, such distributions
must meet the minimum distribution incidental benefit requirements in
Section 1.401(a)(9)-2 of the Income Tax Regulations. Any changes in the
designation will be considered to be a revocation of the designation.
However, the mere substitution or addition of another Beneficiary (one not
named in the designation) under the designation will not be considered to
be a revocation of the designation, so long as such substitution or
addition does not alter the period over which distributions are to be made
under the designation, directly or indirectly (for example, by altering
the relevant measuring life).
(e)(i) If a Participant dies after benefit payments have
begun, the Participant's remaining interest in the Plan shall be
distributed to his designated Beneficiary at least as rapidly as under the
method of distribution being used prior to the Participant's death.
(ii) If the Participant dies before benefit payments have
commenced, distribution of the Participant's entire interest in the Plan
shall be completed by the December 31 of the calendar year containing the
fifth (5th) anniversary of the Participant's death, except to the extent
that an election is made to receive distributions in accordance with the
following: (A) if any portion of the Participant's interest is payable to
a designated Beneficiary, distributions may be made over the life or over
a period certain not greater than the life expectancy of the designated
Beneficiary commencing on or before December 31 of the calendar year
immediately following the calendar year in which the Participant died; (B)
if the designated Beneficiary is the Participant's surviving spouse, the
date distributions are required to begin in accordance with (A) above
shall not be earlier than the later of December 31 of the calendar year
immediately following the calendar year in which the Participant died and
December 31 of the calendar year in which the Participant would have
attained age seventy and one-half (70-1/2).
If the Participant has not made an election pursuant to this
subsection (ii) by the time of his death, the designated Beneficiary must
elect the method of distribution no later than the earlier of December 31
of the calendar year in which distributions would be required to begin
under this subsection (e) or December 31 of the calendar year which
contains the fifth anniversary of the date of death of the Participant.
If the Participant has no designated Beneficiary, or if the designated
Beneficiary does not elect a method of distribution, distribution of the
Participant's entire interest in the Plan must be completed by December 31
of the calendar year containing the fifth anniversary of the Participant's
death.
For purposes of this subsection (ii), if the surviving spouse
dies after the Participant, but before payments to such spouse begin, the
provisions of this subsection (ii), with the exception of paragraph (B)
above, shall be applied as if the surviving spouse were the Participant.
Any amount paid to a child of the Participant will be treated as if it had
been paid to the surviving spouse if the amount becomes payable to the
surviving spouse when the child reaches the age of majority.
For the purposes of this subsection (e), distribution of a
Participant's interest is considered to begin on the Participant's
required beginning date (or the date distribution is required to begin to
the surviving spouse). If a distribution in the form of an annuity
irrevocably commences to the Participant before the required beginning
date, the date the distribution is considered to begin is the date
distribution actually commences.
(iii) A Participant's interest in the Plan is his Account
balance as of the last valuation date in the calendar year immediately
preceding the distribution calendar year (the valuation calendar year)
increased by the amount of any contributions or forfeitures allocated to
the Account balance as of dates in the valuation calendar year after the
valuation date and decreased by distributions made in the valuation
calendar year after the valuation date. If any portion of the minimum
distribution for the first distribution calendar year is made in the
second distribution calendar year on or before the required beginning
date, the amount of the minimum distribution made in the second
distribution calendar year shall be treated as if it had been made in the
immediately preceding distribution calendar year.
The distribution calendar year is a calendar year for which a
minimum distribution is required. For distributions beginning before the
Participant's death, the first distribution calendar year is the calendar
year immediately preceding the calendar year which contains the
Participant's required beginning date. For distributions beginning after
the Participant's death, the first distribution calendar year is the
calendar year in which distributions are required to begin pursuant to
subsection (ii) above.
For purposes of this subsection (e), the designated Beneficiary
is the individual who is designated as the Beneficiary under the Plan in
accordance with Code Section 401(a)(9) and the proposed regulations
thereunder.
Section 8.4. Payment of Small Amounts. Notwithstanding
anything herein to the contrary, if the present value of the Participant's
vested interest in the Pension Plan does not exceed (nor at the time of
any prior distribution exceeded) three thousand five hundred dollars
($3,500) as of the date the Participant's employment with the Employer
terminates, the Administrator shall distribute the present value of such
interest to the Participant in a lump sum as soon as administratively
practicable after the end of the Plan Year in which termination occurs.
Likewise, if the total present value of the Participant's vested interest
in the Profit Sharing Plan and Cash or Deferred Arrangement does not
exceed (nor at any time of any prior distribution exceeded) three thousand
five hundred dollars ($3,500) as of the date the Participant's employment
with the Employer terminates, the Administrator shall distribute the
present value of this interest to the Participant in a lump sum as soon as
administratively practicable after the end of the Plan Year in which
termination occurs. A Participant whose entire vested interest in the
Pension Plan and/or the Profit Sharing Plan has been distributed or who
has no vested interest in the Pension Plan and/or the Profit Sharing Plan
shall be deemed cashed out from the Pension Plan and/or the Profit Sharing
Plan, as applicable.
Section 8.5. Persons Under Legal or Other Disability. In the
event a Participant or Beneficiary is declared incompetent and a guardian
or other person legally charged with the care of his person or of his
property is appointed, any benefits to which such Participant or
Beneficiary is entitled shall be paid to such guardian or other person
legally charged with the care of his person or of his property.
Section 8.6. Withdrawals from Profit Sharing Plan. (a) If
elected in item 10 of the Adoption Agreement (Profit Sharing Plan), a
Participant shall be permitted to withdraw the specified percentage of his
vested Employer Profit Sharing Account while he is still employed after
attainment of age fifty-nine and one-half (59-1/2) or prior to attainment
of such age on account of a financial hardship; provided, that such
Participant has been an active Participant in the Plan for at least five
(5) years. A Participant may not make another withdrawal on account of
financial hardship under this Section 8.6 until he has been an active
Participant for at least an additional five (5) years from the date of his
last hardship withdrawal. For purposes of this Section 8.6, a financial
hardship shall mean a financial need or emergency which requires the
distribution of a Participant's Plan account in order to meet such need or
emergency. The determination of the existence of a financial hardship and
the amount required to be distributed to meet the hardship shall be made
by the Administrator in accordance with such uniform and nondiscriminatory
rules as may be established by the Administrator. A request for a
withdrawal shall be made in writing in a form prescribed by the
Administrator and shall be made in accordance with procedures and
limitations established by the Administrator. Notwithstanding the above,
no withdrawal under this Section 8.6 shall be permitted if the Integration
Formula is selected in item 6 of the Adoption Agreement (Profit Sharing
Plan).
(b) If a distribution is made pursuant to this Section 8.6 at a
time when the Participant has a nonforfeitable right to less than one
hundred percent (100%) of his Account balance derived from Employer
contributions and the Participant may increase the nonforfeitable
percentage in the Account:
(i) A separate Account will be established for the
Participant's interest in the Plan as of the time of the distribution; and
(ii) At any relevant time the Participant's nonforfeitable
portion of the separate Account will be equal to an amount ("X")
determined by the formula:
X = P(AB + (R x D)) - (R x D)
For purposes of applying the formula above: P is the nonforfeitable
percentage at the relevant time, AB is the Account balance at the relevant
time, D is the amount of the distribution, and R is the ratio of the
Account balance at the relevant time to the Account balance after
distribution.
Section 8.7. Transfer of Benefits to Eligible Retirement Plan.
(a) This Section applies to distributions made on or after January 1,
1993. Notwithstanding any provision of the Plan to the contrary that
would otherwise limit a distributee's election under this Article VIII, a
distributee may elect, at the time and in the manner prescribed by the
Administrator, to have any portion of an eligible rollover distribution
paid directly to an eligible retirement plan specified by the distributee
in a direct rollover.
(b) An eligible rollover distribution is any distribution of
all or any portion of the balance to the credit of the distributee, except
that an eligible rollover distribution does not include (i) any
distribution that is one of a series of substantially equal periodic
payments (not less frequently than annually) made for the life (or life
expectancy) of the distributee or the joint lives (or joint life
expectancies) of the distributee and the distributee's designated
beneficiary, or for a specified period of ten years or more; (ii) any
distribution to the extent such distribution is required under Section
401(a)(9) of the Code; and (iii) the portion of any distribution that is
not includible in gross income (determined without regard to the exclusion
for net unrealized appreciation with respect to employer securities).
(c) An eligible retirement plan is an individual retirement
account described in Section 408(a) of the Code, an individual retirement
annuity described in Section 408(b) of the Code, an annuity plan described
in Section 403(a) of the Code, or a qualified trust described in Section
401(a) of the Code, that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible rollover distribution
to the surviving spouse, an eligible retirement plan is an individual
retirement account or individual retirement annuity.
(d) A distributee includes an employee or former employee. In
addition, the employee's or former employee's surviving spouse and the
employee's or former employee's spouse or former spouse who is the
alternate payee under a qualified domestic relations order, as defined in
Section 414(p) of the Code, are distributees with regard to the interest
of the spouse or former spouse.
(e) A direct rollover is a payment by the plan to the eligible
retirement plan specified by the distributee.
ARTICLE IX
ESTABLISHMENT OF
CUSTODIAL ACCOUNT; INVESTMENTS
Section 9.1. Custodial Account. (a) Unless the Employer
elects otherwise in the Adoption Agreement, the Custodian shall open and
maintain separate Custodial Accounts for each individual that the Employer
shall from time to time certify to the Custodian as a Participant in the
Plan. Such Custodial Accounts shall reflect the various Participant
Accounts described at Section 7.1 hereof.
(b) If the Employer so elects in the Adoption Agreement the
Custodian shall open and maintain a single Custodial Account in the name
of the Employer. If only a single Custodial Account is established, the
Employer shall be responsible for maintaining the records for the
individual Participant accounts.
(c) In the event that separate balances are not maintained for
the portion of a Participant's Account balance derived from Employer
contributions and Participant Voluntary Contributions, the Account balance
derived from Participant Voluntary Contributions shall be the
Participant's total account balance multiplied by a fraction, the
numerator of which is the total amount of Participant Voluntary
Contributions (less any withdrawals) and the denominator of which is the
sum of the numerator and the total Employer contributions (including
Elective Deferrals) made on behalf of such Participant.
Section 9.2. Receipt of Contributions. The Custodian shall
accept such contributions of money on behalf of Participants as it may
receive from time to time from the Employer. The Custodian may, in its
sole discretion, also accept money or Investment Company Shares held under
a preceding plan of the Employer qualified under Code Section 401(a) or
which qualify as rollover contributions or transfers under Section 4.6 of
the Plan. All such contributions shall be accompanied by written
instructions, in a form acceptable to the Custodian, from the Employer
specifying the Participant Accounts to which they are to be credited.
Section 9.3. Investment of Account Assets. (a) Upon written
instructions given by the Employer on a uniform and nondiscriminatory
basis as between Participants, the Custodian shall invest and reinvest
contributions credited to a Participant Account(s) in Investment Company
Shares. All Participant Accounts shall share in the profits or losses of
the investments on a pro rata basis (i.e., in the ratio that the
Participant's Account balance bears to all Account balances, other than
Accounts which are self-directed under subsection (b) below), subject to
adjustment by the Administrator on a fair and equitable basis for
contributions, distributions and/or withdrawals during the year. The
amount of each contribution credited to a Participant Account to be
applied to the purchase of Investment Company Shares shall be invested by
the Custodian at the applicable offering price. These purchases shall be
credited to such Account with notation as to cost. The Custodian shall
have no discretionary investment responsibility and in no event be liable
to any person for following investment instructions given by the Employer
or the Participant in the manner provided herein.
(b) Each Participant, through his separate Participant
Account(s), shall be the beneficial owner of all investments held in such
Account(s). The Employer however shall direct the Custodian (in a
nondiscriminatory manner) regarding the selection of specific Investment
Company Shares to be purchased for the Accounts of the Participants. The
Employer may permit (in a nondiscriminatory manner) the individual
Participants to select and direct the purchase of specific Investment
Company Shares for their own Account(s). In such a situation, the
Employer shall transmit all such directions to the Custodian.
Notwithstanding the foregoing, unless otherwise elected in the Adoption
Agreement the individual Participant may direct the investment of his
Account(s) and select the specific Investment Company Shares for purchase
for his individual Account(s) by directly communicating with the
Custodian.
(c) All income, dividends and capital gain distributions
received on the Investment Company Shares held in each Participant Account
shall be reinvested in such shares which shall be credited to such
Account. If any distribution on Investment Company Shares may be received
at the election of the Participant in additional shares or in cash or
other property, the Custodian shall elect to receive it in additional
shares. All investments acquired by the Custodian shall be registered in
the name of the Custodian or its registered nominee.
Section 9.4. Exclusive Benefit. The Custodial Account or
Accounts established hereby shall not be used or diverted to purposes
other than the exclusive benefit of Participants or their Beneficiaries.
Section 9.5. Expenses. All expenses and charges in respect of
the Plan and the Custodial Account, including, without limitation, the
Custodian's fees and commissions and taxes of any kind upon or with
respect to the Plan, shall be paid by the Employer; provided, however,
that the Custodian shall be authorized to pay such charges and expenses
from the Plan if the Employer shall fail to make payment within thirty
(30) days after it has been billed therefor by the Custodian or such
charges have otherwise become due.
Section 9.6. Voting. The Custodian shall deliver, or cause to
be executed and delivered, to the Employer all notices, prospectuses,
financial statements, proxies and proxy soliciting materials received by
the Custodian relating to investments held in Participants' Accounts. The
Custodian shall vote all proxies only in accordance with instructions
received from the Employer.
Section 9.7. Reports of the Custodian and Administrator. (a)
The Custodian shall keep accurate and detailed records of all receipts,
investments, disbursements and other transactions required to be performed
hereunder. Not later than sixty (60) days after the close of each
calendar year (or after the Custodian's resignation or removal), the
Custodian shall file with the Employer a written report reflecting the
receipts, disbursements and other transactions effected by it during such
year (or period ending with such resignation or removal) and the assets of
this Plan at its close. Such report shall be open to inspection by any
Participant for a period of thirty (30) days immediately following the
date on which it is filed with the Employer. Upon the expiration of such
thirty (30) day period, the Custodian shall be forever released and
discharged from all liability and accountability to anyone with respect to
its acts, transactions, duties, obligations or responsibilities as shown
in or reflected by such report, except with respect to any such acts or
transactions as to which the Employer shall have filed written objections
with the Custodian within such thirty (30) day period.
(b) Annual reports provided to the Employer by the Custodian
shall be, in the Custodian's discretion, on a calendar year basis unless
otherwise required by law. The Employer shall compute the valuation of
all Plan assets at least annually at the fair market value as of the last
day of each calendar year.
(c) The Custodian shall keep such records, make such
identifications and file such returns and other information concerning the
Plan as may be required of the Custodian under the Code or forms adopted
thereunder.
(d) The Administrator shall be solely responsible for the
filing of any reports or information required under the Code or forms
adopted thereunder.
Section 9.8. Limitation of Custodian's Duties and Liability.
(a) The Custodian's duties are limited to those set forth in this Plan,
and the Custodian shall have no other responsibility in the administration
of the Plan or for compliance by the Employer with any provision thereof.
The Custodian shall not be responsible for the collection of contributions
provided for under the Plan; the purpose or propriety of any distribution;
or any action or nonaction taken by the Employer or pursuant to the
Employer's request. The Custodian shall have no responsibility to
determine if instructions received by it from the Employer, or the
Employer's designated agent, comply with the provisions of the Plan. The
Custodian shall not have any obligation either to give advice to any
Participant on the taxability of any contributions or payments made in
connection with the Plan or to determine the amount of excess contribution
and net income attributable thereto. The Custodian may employ suitable
agents and counsel and pay their reasonable expenses and compensation, and
such agents or counsel may or may not be agent or counsel for the
Employer, and may be the Investment Advisor or an Investment Company.
(b) The Employer shall at all times fully indemnify and hold
harmless the Custodian, its agents, counsel, successors and assigns, from
any liability arising from distributions made or actions taken, and from
any and all other liability whatsoever which may arise in connection with
this Plan, except liability arising from the negligence or willful
misconduct of the Custodian. The Custodian shall be under no duty to take
any action other than as herein specified with respect to this Plan unless
the Employer shall furnish the Custodian with instructions in a form
acceptable to the Custodian; or to defend or engage in any suit with
respect to this Plan unless the Custodian shall have first agreed in
writing to do so and shall have been fully indemnified to the satisfaction
of the Custodian. The Custodian (and its agents) may conclusively rely
upon and shall be protected in acting upon any written order from the
Employer or any other notice, request, consent, certificate or other
instrument or paper believed by it to be genuine and to have been properly
executed, and, so long as it acts in good faith, in taking or omitting to
take any other action. No amendment to the Plan shall place any greater
burden on the Custodian without its written consent. The Custodian shall
not be liable for interest on any cash balances maintained in the Plan.
(c) The Employer shall have the sole authority to enforce the
terms of the Plan on behalf of any and all persons having or claiming any
interest therein by virtue of the Plan.
(d) The Custodian, its agents, counsel, successors and assigns,
shall not be liable to the Employer, or to any Participants or Beneficiary
for any depreciation or loss of assets, or for the failure of this Plan to
produce any or larger net earnings. The Custodian further shall not be
liable for any act or failure to act of itself, its agents, employees, or
attorneys, so long as it exercises good faith, is not guilty of negligence
or willful misconduct, and has selected such agents, employees, and
attorneys with reasonable diligence. The Custodian shall have no
responsibility for the determination or verification of the offering or
redemption prices or net asset values of Investment Company Shares, and
shall be entitled to rely for such prices and net asset values upon
statements issued by or on behalf of the Investment Company issuing the
Investment Company Shares. The Custodian shall have no duty to inquire
into the investment practices of such Investment Company; such Investment
Company shall have the exclusive right to control the investment of its
funds in accordance with its stated policies, and the investments shall
not be restricted to securities of the character now or hereafter
authorized for trustees by law or rules of court. The Custodian shall not
be liable or responsible for any omissions, mistakes, acts or failures to
act of such Investment Company, or its successors, assigns or agents.
Notwithstanding the foregoing, nothing in this Plan shall relieve the
Custodian of any responsibility or liability under ERISA.
ARTICLE X
AMENDMENT AND TERMINATION
Section 10.1. Amendment. (a) The Employer reserves the right
at any time and from time to time to amend or terminate the Plan. No part
of the Plan shall by reason of any amendment or termination be used for or
diverted to purposes other than the exclusive benefit of Participants and
their Beneficiaries, and further that no amendment or termination may
retroactively change or deprive any Participant or Beneficiary of rights
already accrued under the Plan except insofar as such amendment is
necessary to preserve the qualification and tax exemption of the Plan
pursuant to Code Section 401. No amendment shall increase the duties of
the Custodian or otherwise adversely affect the Custodian unless the
Custodian expressly agrees thereto. However, if the Employer amends any
provision of this Plan (including a waiver of the minimum funding
requirements under Code Section 412(d)) other than by changing any
election made in the Adoption Agreement, adopting an amendment stated in
the Adoption Agreement which allows the Plan to satisfy Code Section 415,
to avoid duplication of minimum benefits under Code Section 416 or to add
certain model amendments published by the Internal Revenue Service which
specifically provide that their adoption will not cause the Plan to be
treated as an individually designed plan, such Employer shall no longer
participate under this prototype plan and the Employer's Plan shall be
deemed to be an individually designed plan. The Employer hereby
irrevocably delegates (retaining, however, the right and power to change
any election made in the Adoption Agreement) to the Investment Advisor the
right and power to amend the Plan at any time, and from time to time, and
the Employer by adopting the Plan shall be deemed to have consented
thereto. The Investment Advisor shall notify the Employer of any
amendment to the Plan. For purposes of any Investment Advisor amendments,
the mass submitter shall be recognized as the agent of the Investment
Advisor. If the Investment Advisor does not adopt the amendments made by
the mass submitter, it will no longer be identical to or a minor modifier
of the mass submitter plan.
(b) No amendment to the Plan shall be effective to the extent
that it has the effect of decreasing a Participant's accrued benefit
except to the extent permitted by Code Sections 412(c)(8) and 411(d)(6).
For purposes of this subsection, a Plan amendment which has the effect of
decreasing a Participant's Account balance or eliminating an optional form
of benefit, with respect to benefits attributable to service before the
amendment shall be treated as reducing an accrued benefit. Furthermore,
if the vesting schedule of a Plan is amended, in the case of an Employee
who is a Participant as of the later of the date such amendment is adopted
or the date it becomes effective, the nonforfeitable percentage
(determined as of such date) of such Employee's right to his
Employer-derived accrued benefit will not be less than his percentage
computed under the Plan without regard to such amendment.
(c) Notwithstanding subsection (a) above, an Employer may amend
the Plan by adding overriding plan language to the Adoption Agreement
where such language is necessary to satisfy Code Sections 415 or 416
because of the required aggregation of multiple plans under such Code
Sections.
Section 10.2. Termination. Upon complete discontinuance of the
Employer's Profit Sharing Contributions (if the Employer has adopted a
Profit Sharing Plan by completing the appropriate Adoption Agreement) or
termination or partial termination of the Plan, each affected
Participant's Account shall become nonforfeitable. Upon termination or
partial termination of the Plan, the Employer shall instruct the Custodian
whether currently to distribute to each Participant the entire amount of
the Participant's Account, in such one or more of the methods described in
Article VIII, or whether to continue the Plan and to make distributions
therefrom as if the Plan had continued; provided that, in the event the
Plan is continued, the Plan must continue to satisfy the requirements of
Code Section 401(a). The Employer shall in all events exercise such
discretion in a nondiscriminatory manner. The Plan shall continue in
effect until the Custodian shall have completed the distribution of all of
the Plan asset and the accounts of the Custodian have been settled.
ARTICLE XI
FIDUCIARY RESPONSIBILITIES
Section 11.1. Administrator. The Administrator shall have the
power to allocate fiduciary responsibilities and to designate other
persons to carry out such fiduciary responsibilities; provided such
allocation is in writing and filed with the Plan records. The
Administrator may employ one or more persons to render advice to the
Administrator with regard to its responsibilities under the Plan, and
consult with counsel, who may be counsel to the Employer.
Section 11.2. Powers of Administrator. The Administrator shall
administer the Plan in accordance with its terms and shall have all powers
necessary to carry out its terms. The Administrator shall have
discretionary authority to determine eligibility for benefits and to
interpret and construe the terms of the Plan, and any such determination,
interpretation or construction shall be final and binding on all parties
unless arbitrary and capricious. Any such discretionary authority shall be
carried out in a uniform and nondiscriminatory manner.
Section 11.3. Records and Reports. The Administrator, or those
to whom it has delegated fiduciary duties, shall keep a record of all
proceedings and actions, and shall maintain all such books of account,
records and other data as shall be necessary for the proper administration
of the Plan. The Administrator, or those to whom it has delegated
fiduciary duties, shall have responsibility for compliance with the
provisions of ERISA relating to such office, including filing with the
Secretary of Labor and Internal Revenue Service of all reports required by
the Code and/or ERISA and furnishing Participants and Beneficiaries with
descriptions of the Plan and reports required by ERISA.
Section 11.4. Other Administrative Provisions.
(a) No bond or other security shall be required of the
Administrator, and/or any officer or Employee of the Employer to whom
fiduciary responsibilities are allocated, except as may be required by
ERISA.
(b) The Administrator or the Employer may shorten, extend or
waive the time (but not beyond sixty days) required by the Plan for filing
any notice or other form with the Administrator or the Employer, or taking
any other action under the Plan, except a response to an appeal under
Section 11.6, from a decision of the Administrator.
(c) The Administrator or the Employer may direct that such
reasonable expenses as may be incurred in the administration of the Plan
shall be paid out of the funds of the Plan, unless the Employer shall pay
them.
(d) The Administrator, the Custodian, and any other persons
performing fiduciary duties under the Plan shall act with the care, skill,
prudence and diligence under the circumstances then prevailing that a
prudent man acting in a like capacity and familiar with such matters would
use in the conduct of an enterprise of like character and with like aims,
and no such person shall be liable, to the maximum extent permitted by
ERISA, for any act of commission or omission in accordance with the
foregoing standard.
Section 11.5. Claims Procedure. Any claim relating to benefits
under the Plan shall be filed with the Administrator on a form prescribed
by the Administrator. If a claim is denied in whole or in part, the
Administrator shall give the claimant written notice of such denial within
ninety (90) days after the filing of such claim, which notice shall
specifically set forth:
(a) The reasons for the denial;
(b) The pertinent Plan provisions on which the denial was
based;
(c) Any additional material or information necessary for the
claimant to perfect the claim and an explanation of why such material or
information is needed; and
(d) An explanation of the Plan's procedure for review of the
denial of the claim.
In the event that the claim is not granted and notice of denial of a claim
is not furnished by the ninetieth (90th) day after such claim was filed,
the claim shall be deemed to have been denied on that day for the purpose
of permitting the claimant to request review of the claim.
Section 11.6. Claims Review Procedure.
(a) Any person whose claim filed pursuant to Section 11.5 has
been denied in whole or in part by the Administrator may request review of
the claim by the Employer, by filing a written request with the
Administrator. The claimant shall file such request (including a
statement of his position) with the Employer no later than sixty (60) days
after the mailing or delivery of the written notice of denial provided for
in Section 11.5, or, if such notice is not provided, within sixty (60)
days after such claim is deemed denied pursuant to Section 10.5. The
claimant shall be permitted to review pertinent documents. A decisions
shall be rendered by the Employer and communicated to the claimant not
later than sixty (60) days after receipt of claimant's written request for
review. However, if the Employer finds it necessary, due to special
circumstances (for example, the need to hold a hearing), to extend this
period and so notifies the claimant in writing, the decision shall be
rendered as soon as practicable, but in no event later than one hundred
and twenty (120) days after the claiman'ts request for review. The
employer's decision shall be in writing and shall specifically set forth:
(i) The reasons for the decision; and
(ii) The pertinent Plan provisions on
which the decision is based.
Any such decision of the Employer shall bind the claimant and the
Employer, and the Administrator shall take appropriate action to carry out
such decision.
(b) Any person whose claim has been denied in whole or in part
must exhaust the administrative review procedures provided in subsection
(a) above prior to initiating any claim for judicial review.
ARTICLE XII
AMENDMENT AND CONTINUATION OF ORIGINAL PLAN
Notwithstanding any of the foregoing provisions of the Plan to
the contrary, an employer that has previously established an Original Plan
may, in accordance with the provisions of the Original Plan, amend and
continue the Original Plan in the form of this Plan and become an Employer
hereunder, subject to the following:
(a) subject to the conditions and limitations of the Plan, each
person who is a Participant under the Original Plan immediately prior to
the effective date of the amendment and continuation thereof in the form
of this Plan will continue as a Participant in this Plan;
(b) no election may be made in the Adoption Agreement if such
election would reduce the benefits of a Participant under the Original
Plan to less than the benefits to which he would have been entitled if he
had resigned from the employ of the Employer on the date of the Amendment
and continuation of the Original Plan in the form of this Plan;
(c) the amounts, if any, of a Participant's or former
Participant's Accounts immediately prior to the effective date of the
amendment and continuation of the Original Plan in the form of this Plan
shall be reduced to cash, deposited with the Custodian and constitute the
opening balances in such Participant's Account under this Plan;
(d) amounts being paid to individuals in accordance with the
provisions of the Original Plan shall continue to be paid under this Plan,
but in the form that they were being paid under the Original Plan;
(e) any Beneficiary designation in effect under the Original
Plan immediately before its amendment and continuation in the form of this
Plan which effectively meets the requirements contained in Section 2.3
hereof shall be deemed to be a valid Beneficiary designation pursuant to
Section 2.3 of this Plan, unless and until the Participant or former
Participant revokes such Beneficiary designation or makes a new
Beneficiary designation under this Plan. If the Beneficiary designation
form does not meet the requirements of Section 2.3 hereunder, the
Participant's spouse shall be deemed to be his Beneficiary. If the
Participant is unmarried, or his spouse does not survive him, his estate
shall be deemed his Beneficiary.
(f) if the Original Plan's vesting schedule (or this Plan's
vesting schedule) or the Plan is amended or changed in any way that
directly or indirectly affects the computation of a Participant's
nonforfeitable interest in his Account derived from Employer
contributions, each such Participant with at least three (3) Years of
Service with the Employer may elect, within a reasonable period after the
adoption of the amendment or change, to have his nonforfeitable percentage
computed under the Plan without regard for the amendment or change. For
any Participant who does not have at least one (1) Hour of Service in any
Plan Year beginning after December 31, 1988, the preceding sentence shall
be applied by substituting "five (5) Years of Service" for "three (3)
Years of Service" where such language appears therein. Any such election
must be made during the period commencing on the date of the amendment or
change and ending on the latest of: (i) sixty (60) days after that date;
(ii) sixty (60) days after the effective date of the amendment or change;
or (iii) sixty (60) days after such Participant is issued written notice
of the amendment or change by the Plan Administrator or Employer.
ARTICLE XIII
TOP-HEAVY PROVISIONS
Section 13.1. Effect of Top-Heavy Status. The Plan shall be a
"Top-Heavy Plan" for any Plan Year commencing after December 31, 1983, if
any of the following conditions exist:
(a) If the Top-Heavy Ratio for this Plan exceeds sixty percent
(60%) and this Plan is not part of any Required Aggregation Group or
Permissive Aggregation Group.
(b) If this Plan is a part of a Required Aggregation Group but
not part of a Permissive Aggregation Group and the Top-Heavy Ratio for the
group of plans exceeds sixty percent (60%).
(c) If this Plan is a part of a Required Aggregation Group and
part of a Permissive Aggregation Group and the Top-Heavy Ratio for the
Permissive Aggregation Group exceeds sixty percent (60%).
If the Plan is a Top-Heavy Plan in any Plan Year beginning after December
31, 1983, the provisions of Sections 13.3 through 13.6 shall supersede any
conflicting provisions of the Plan or the Adoption Agreement.
Section 13.2. Additional Definitions. Solely for purposes of
this Article, the following terms shall have the meanings set forth below:
(a) "Key Employee" means any Employee or former Employee (and
the Beneficiaries of such Employee) who at any time during the
Determination Period was an officer of the Employer if such individual's
annual compensation exceeds 50 percent of the dollar limitation under Code
Section 415(b)(1) (A), an owner (or considered an owner under Code Section
318) of one of the ten largest interests in the Employer if such
individual's compensation exceeds 100 percent (100%) of the dollar
limitation under Code Section 415(c)(1)(A), a five percent (5%) owner of
the Employer, or one percent (1%) owner of the Employer who has an annual
compensation of more than $150,000. Annual compensation means
compensation as defined in Code Section 415(c)(3), of the Code, but
including amounts contributed by the Employer pursuant to a salary
reduction agreement which are excludible from the Employee's gross income
under Code Sections 125, 402(a)(8), 402(h) or 403(b). The determination
period is the plan year containing the Determination Date and the four (4)
preceding Plan Years.
The determination of who is a Key Employee will be made in accordance with
Code Section 416(i)(1) and the Regulations thereunder.
(b) "Determination Date" means the last day of the preceding
Plan Year. For the first Plan Year of the Plan Determination Date shall
mean the last day of that year.
(c) "Top-Heavy Ratio" means:
(i) If the Employer maintains one or more defined contribution
plans (including any simplified employee pension plan) and the Employer
has not maintained any defined benefit plan which during the five (5) year
period ending on the Determination Date(s) has or has had accrued
benefits, the Top-Heavy Ratio for this plan alone or for the Required or
Permissive Aggregation Group as appropriate is a fraction, the numerator
of which is the sum of the account balances of all Key Employees as of the
determination date(s) (including any part of any account balance
distributed in the five (5) year period ending on the Determination
Date(s)), and the denominator of which is the sum of all account balances
(including any part of any account balance distributed in the five (5)
year period ending on the Determination Date(s)), both computed in
accordance with Code Section 416 and the Regulations thereunder. Both the
numerator and denominator of the Top-Heavy Ratio are increased to reflect
any contribution not actually made as of the Determination Date, but which
is required to be taken into account on that date under Code Section 416
and the Regulations thereunder.
(ii) If the Employer maintains one or more defined contribution
plans (including any simplified employee pension plan) and the Employer
maintains or has maintained one or more defined benefit plans which during
the five (5) year period ending on the Determination Date(s) has or has
had any accrued benefits, the Top-Heavy Ratio for any Required or
Permissive Aggregation Group as appropriate is a fraction, the numerator
of which is the sum of account balances under the aggregated defined
contribution plan or plans for all Key Employees, determined in accordance
with (i) above, and the present value of accrued benefits under the
aggregated defined benefit plan or plans for all Key Employees as of the
Determination Date(s), and the denominator of which is the sum of the
account balances under the aggregated defined contribution plan or plans
for all participants, determined in accordance with (i) above, and the
present value of accrued benefits under the defined benefit plan or plans
for all participants as of the Determination Date(s), all determined in
accordance with Code Section 416 and the Regulations thereunder. The
accrued benefits under a defined benefit plan in both the numerator and
denominator of the Top-Heavy Ratio are increased for any distribution of
an accrued benefit made in the five (5) year period ending on the
Determination Date.
(iii) For purposes of (i) and (ii) above the value of
account balances and the present value of accrued Valuation Date that
falls within or ends with the twelve (12) month period ending on the
Determination Date, except as provided in Code Section 416 and the
Regulations thereunder for the first and second plan years of a defined
benefit plan. The account balances and accrued benefits of a participant
(A) who is not a Key Employee but who was a Key Employee in a prior year,
or (B) who has not been credited with at least one (1) hour of service
with any employer maintaining the plan at any time during the five (5)
year period ending on the Determination Date will be disregarded. The
calculation of the Top-Heavy Ratio, and the extent to which distributions,
rollovers, and transfers are taken into account will be made in accordance
with Code Section 416 and the Regulations thereunder. Deductible employee
contributions will not be taken into account for purposes of computing the
Top-Heavy Ratio. When aggregating plans the value of account balances and
accrued benefits will be calculated with reference to the determination
dates that fall within the same calendar year.
(iv) The accrued benefit of a participant other than a Key
Employee shall be determined under (i) the method, if any, that uniformly
applies for accrual purposes under all defined benefit plans maintained by
the employer, or (ii) if there is no such method, as if such benefit
accrued not more rapidly than the slowest accrual rate permitted under the
fractional rule of Code Section 411(b)(1)(C).
(d) "Permissive Aggregation Group" means the Required
Aggregation Group of plans plus any other plan or plans of the Employer
which, when considered as a group with the Required Aggregation Group,
would continue to satisfy the requirements of Code Sections 401(a)(4) and
410.
(e) "Required Aggregation Group" means (i) each qualified plan
of the Employer in which at least one Key Employee participates or
participated at any time during the five (5) year period ending on the
Determination Date (regardless of whether the plan has terminated), and
(ii) any other qualified plan of the Employer which enables a plan
described in (i) to meet the requirements of Code Sections 401(a)(4) or
410.
(f) "Valuation Date" means (i) in the case of a defined
contribution plan, the Determination Date, and (ii) in the case of a
defined benefit plan, the date as of which funding calculations are
generally made within the twelve (12) month period ending on the
Determination Date.
(g) "Employer" means the employer or employers whose employees
are covered by this Plan and any other employer which must be aggregated
with any such employer under Code Sections 414(b), (c), (m) and (o).
(h) "Present Value" means the value based on an interest rate
of five percent (5%) and mortality assumptions based on the 1971 GAM
Mortality Table or such other interest rate or mortality assumptions as
may be specified in the Adoption Agreement.
Section 13.3. Minimum Allocations. (a) For any year in which
the Plan is a Top-Heavy Plan, each Participant who is not a Key Employee
and who is not separated from service at the end of the Plan Year shall
receive allocations of Employer contributions and forfeitures under this
Plan at least equal to three percent (3%) of Compensation (as defined in
Section 2.6) for such year or, if less, the largest percentage of the
first two hundred thousand dollars ($200,000) of compensation allocated on
behalf of the Key Employee for the Plan Year where the Employer has no
defined benefit plan which designates this Plan to satisfy Code Section
401. This minimum allocation shall be determined without regard for any
Social Security contribution and shall be provided even though under other
provisions the Participant would not otherwise be entitled to receive an
allocation or would have received a lesser allocation because of (i) the
Participant's failure to complete One Thousand (1,000) Hours of Service
(or any equivalent provided in the Plan), or (ii) the Participant's
failure to make mandatory Employee contributions to the Plan, or (iii)
Compensation less than a stated amount.
(b) The provision in (a) above shall not apply to any
Participant to the extent the Participant is covered under any other plan
or plans of the employer and the employer has provided in the Adoption
Agreement that the minimum allocation or benefit requirement applicable to
top-heavy plans will be met in the other plan or plans.
(c) The minimum allocation required (to the extent required to
be nonforfeitable under Section 416(b)) may not be forfeited under Code
Sections 411(a)(3)(B) or 411(a)(3)(D).
(d) For purposes of subsection (a) above, neither Elective
Deferrals nor Employer Matching Contributions shall be taken into account
for the purposes of satisfying the minimum top-heavy benefits requirement.
Section 13.4. Benefit Limit Change. If the Employer maintains
both the Plan and a defined benefit plan which cover one or more of the
same Key Employees and the plans are Top-Heavy in a Plan Year, then
Section 6.5(c) and (j) hereof shall be amended to substitute "one hundred
percent (100%)" for the number "one hundred and twenty-five percent
(125%)" where the latter appears therein.
ARTICLE XIV
MISCELLANEOUS
Section 14.1. Rights of Employees and Participants. No Employee
or Participant shall have any right or claim to any benefit under the Plan
except in accordance with the provisions of the Plan, and then only to the
extent that there are funds available therefor in the hands of the
Custodian. The establishment of the Plan shall not be construed as
creating any contract of employment between the Employer and any Employee
or otherwise conferring upon any Employee or other person any legal right
to continuation of employment, nor as limiting or qualifying the right of
the Employer to discharge any Employee without regard to the effect that
such discharge might have upon his rights under the Plan.
Section 14.2. Merger With Other Plans. The Plan shall not be
merged or consolidated with, nor transfer its assets or liabilities to,
any other plan unless each Participant, Beneficiary and other person
entitled to benefits, would (if the Plan then terminated) receive a
benefit immediately after the merger, consolidation or transfer which is
equal to or greater than the benefit he would have been entitled to
receive if the Plan had terminated immediately prior to the merger,
consolidation or transfer.
Section 14.3. Non-Alienation of Benefits. The right to receive
a benefit under the Plan shall not be subject in any manner to
anticipation, alienation, or assignment, nor shall such right be liable
for or subject to debts, contracts, liabilities or torts, either
voluntarily or involuntarily. Any attempt by the Participant, Beneficiary
or other person to anticipate, alienate or assign his interest in or right
to a benefit or any claim against him seeking to subject such interest or
right to legal or equitable process shall be null and void for all
purposes hereunder to the extent permitted by ERISA and the Code.
Notwithstanding the foregoing or any other provision of the Plan, the
Administrator shall recognize and give effect to a qualified domestic
relations order with respect to child support, alimony payments or marital
property rights if such order is determined by the Administrator to meet
the applicable requirements of Code Section 414(p). If any such order so
directs, distribution of benefits to the alternate payee may be made at
any time, even if the Participant is not then entitled to a distribution.
The Administrator shall establish reasonable procedures relating to notice
to the Participant and determinations respecting the qualified status of
any domestic relations order.
Section 14.4. Failure to Qualify. Notwithstanding anything in
this Plan to the contrary, all contributions under the Plan made prior to
the receipt by the Employer of a determination by the Internal Revenue
Service to the effect that the Plan is qualified under Code Section 401
shall be made on the express condition that such a determination will be
received, and in the event that the Internal Revenue Service determines
upon initial application for a determination that the Plan is not so
qualified or tax exempt, all contributions made by the Employer or
Participants prior to the date of determination must be returned within
one (1) year from the date of such determination, but only if the
application for qualification is made by the time prescribed by law for
filing the Employer's return for the taxable year in which the Plan is
adopted or such later date as the Secretary of the Treasury may prescribe.
Section 14.5. Mistake of Fact; Disallowance of Deduction.
Notwithstanding anything in this Plan to the contrary, any contributions
made by the Employer which are conditioned on the deductibility of such
amount under Code Section 404, to the extent of the amount disallowed, or
which are made because of a mistake of fact must be returned to the
Employer within one year after such disallowance or such mistaken
contribution.
Section 14.6. Participation under Prototype Plan. If the Plan
as adopted by the Employer either fails to attain or maintain
qualification under the Code, such Plan will no longer participate in this
prototype plan and will be considered an individually designed plan.
Section 14.7. Gender. Where the context admits, words used in
the singular include the plural, words used in the plural include the
singular, and the masculine gender shall include the feminine and neuter
genders.
Section 14.8. Headings. The headings of Sections are included
solely for convenience of reference, and if there is any conflict between
such headings and the text of the Plan, the text shall control.
Section 14.9. Governing Law. Except to the extent governed by
ERISA and any other applicable federal law, the Plan shall be construed,
administered and enforced according to the laws of the state in which the
Employer has its principal place of business.
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<PER-SHARE-NII> (0.04)
<PER-SHARE-GAIN-APPREC> 6.69
<PER-SHARE-DIVIDEND> 0.01
<PER-SHARE-DISTRIBUTIONS> 1.90
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.74
<EXPENSE-RATIO> 2.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
