Registration Nos.: 2-15184
811-881
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 99 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 40 [X]
COLONIAL TRUST III
(Exact Name of Registrant as Specified in Charter)
One Financial Center, Boston, Massachusetts 02lll
(Address of Principal Executive Offices)
617-426-3750
(Registrant's Telephone Number, including Area Code)
Name and Address
of Agent for Service Copy to
- -------------------- -------
Michael H. Koonce, Esq. John M. Loder, Esq.
Colonial Management Ropes & Gray
Associates, Inc. One International Place
One Financial Center Boston, Massachusetts 02110-2624
Boston, Massachusetts 02111
It is proposed that the filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[X] on December 29, 1997 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485
[ ] 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>
COLONIAL TRUST III
Cross Reference Sheet (Colonial Federal Securities Fund)
Item Number Prospectus Location or Caption
of Form N-1A ------------------------------
- ------------
Part A
- ------
1. Cover Page
2. Summary of Expenses
3. The Funds' Financial History
4. Organization and History; The Funds' Investment Objectives; How
the Funds Pursues Their Objectives and Certain Risk Factors
5. Cover Page; How the Funds are Managed; Organization and
History; Back Cover
6. Organization and History; Distributions and Taxes; How to Buy
Shares
7. Summary of Expenses; How to Buy Shares; How the Funds Value
Their Shares; Cover Page; 12b-1 Plans; Back Cover
8. Summary of Expenses; How to Sell Shares; How to Exchange
Shares; Telephone Transactions
9. Not Applicable
<PAGE>
December 29, 1997
COLONIAL SHORT DURATION
U.S. GOVERNMENT FUND
COLONIAL INTERMEDIATE U.S. GOVERNMENT FUND
COLONIAL FEDERAL
SECURITIES FUND
PROSPECTUS
BEFORE YOU INVEST
Colonial Management Associates, Inc. (Adviser) and your full-service financial
adviser want you to understand both the risks and benefits of mutual fund
investing.
While mutual funds offer significant opportunities and are professionally
managed, they also carry risks including possible loss of principal. Unlike
savings accounts and certificates of deposit, mutual funds are not insured or
guaranteed by any financial institution or government agency, including the
FDIC.
Please consult your full-service financial adviser to determine how investing in
these mutual funds may suit your unique needs, time horizon, and risk tolerance.
Each of Colonial Short Duration U.S. Government Fund (Short Duration Fund) and
Colonial Intermediate U.S. Government Fund (Intermediate Fund) is a diversified
portfolio of Colonial Trust II (Trust II), an open-end management investment
company. Colonial Federal Securities Fund (Federal Securities Fund) is a
diversified portfolio of Colonial Trust III (Trust III), also an open-end
management investment company. Any reference to "a Trust" shall mean the trust
of which a specific Fund is a portfolio, unless the context requires otherwise.
The Short Duration Fund seeks as high a level of current income as is consistent
with very low volatility by investing primarily in U.S. government securities
and maintaining a weighted average portfolio duration of 3 years or less.
The Intermediate Fund seeks as high a level of current income and total return
as is consistent with prudent risk by investing primarily in U.S. government
securities.
The Federal Securities Fund seeks as high a level of current income and total
return, as is consistent with prudent longer-term investing, by investing
primarily in U.S. government securities.
Each Fund is managed by the Adviser, an investment adviser since 1931.
This Prospectus explains concisely what you should know before investing in the
Funds. Read it carefully and retain it for future reference. More detailed
information about the Funds is in the December 29, 1997 Statement of Additional
Information, which has been filed with the Securities and Exchange Commission
and is obtainable free of charge by calling the Adviser at 1-800-426-3750. The
Statement of Additional Information is incorporated by reference in (which means
it is considered to be a part of) this Prospectus.
Each Fund offers three classes of shares. Class A shares are offered at net
asset value plus a sales charge imposed at the time of purchase; Class B shares
are offered at net asset value and are subject to an annual distribution fee and
a declining contingent deferred sales charge on redemptions made within four
years after purchase for the Short Duration Fund and six years after purchase
for the Intermediate Fund and the Federal Securities Fund; and Class C shares
are offered at net asset value and are subject to an annual distribution fee and
a contingent deferred sales charge on redemptions made within one year after
purchase. Class B shares automatically convert to Class A shares after
approximately eight years. See "How to Buy Shares."
Contents Page
Summary of Expenses
The Funds' Financial History
The Funds' Investment Objectives
How the Funds Pursue Their Objectives and Certain
Risk Factors
How the Funds Measure Their Performance
How the Funds are Managed
How the Funds Value Their Shares
Distributions and Taxes
How to Buy Shares
How to Sell Shares
How to Exchange Shares
Telephone Transactions
12b-1 Plans
Organization and History
- ----------------------------- --------------------------
NOT FDIC-INSURED MAY LOSE VALUE
NO BANK GUARANTEE
- ----------------------------- --------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
SUMMARY OF EXPENSES
Expenses are one of several factors to consider when investing in a Fund. The
following tables summarize your maximum transaction costs and your annual
expenses for an investment in each Class of each Fund's shares. See "How the
Funds are Managed" and "12b-1 Plans" for more complete descriptions of the
Funds' various costs and expenses.
Shareholder Transaction Expenses (1)(2)
<TABLE>
<CAPTION>
Short Duration Fund
Class A Class B Class C
<S> <C> <C> <C>
Maximum Initial Sales Charge Imposed on a Purchase (as a % of offering price)(3) 3.25% 0.00%(5) 0.00%(5)
Maximum Contingent Deferred Sales Charge (as a % of offering price)(3) 1.00%(4) 4.00% 1.00%
Intermediate Fund and
Federal Securities Fund
Class A Class B Class C
<S> <C> <C> <C>
Maximum Initial Sales Charge Imposed on a Purchase (as a % of offering price)(3) 4.75% 0.00%(5) 0.00%(5)
Maximum Contingent Deferred Sales Charge (as a % of offering price)(3) 1.00%(4) 5.00% 1.00%
</TABLE>
(1) For accounts less than $1,000 an annual fee of $10 may be deducted. See
"How to Buy Shares."
(2) Redemption proceeds exceeding $500 sent via federal funds wire will be
subject to a $7.50 charge per transaction.
(3) Does not apply to reinvested distributions.
(4) Only with respect to any portion of purchases of $1 million to $5 million
redeemed within approximately 18 months after purchase. See "How to Buy
Shares."
(5) Because of the distribution fee applicable to Class B and Class C shares,
long-term Class B and Class C shareholders may pay more in aggregate sales
charges than the maximum initial sales charge permitted by the National
Association of Securities Dealers, Inc. However, because each Fund's Class
B shares automatically convert to Class A shares after approximately 8
years, this is less likely for Class B shares than for a class without a
conversion feature.
Annual Operating Expenses (as a % of average net assets)
<TABLE>
<CAPTION>
Short Duration Fund
Class A Class B Class C
<S> <C> <C> <C>
Management fee (after fee waiver)(6) 0.00% 0.00% 0.00%
12b-1 fees 0.20 0.85 0.40
Other expenses (after fee waiver)(6) 0.60 0.60 0.60
---- ---- ----
Total operating expenses (after fee waiver)(6) 0.80% 1.45% 1.00%
==== ==== ====
Intermediate Fund Federal Securities Fund
Class A Class B Class C Class A Class B Class C
<S> <C> <C> <C> <C> <C> <C>
Management fee 0.59% 0.59% 0.59% 0.60% 0.60% 0.60%
12b-1 fees (after fee waiver) 0.25 1.00 0.85 (8) 0.25 1.00 0.85 (8)
Other expenses 0.29 0.29 0.29 (9) 0.29 0.29 0.29 (9)
---- ----- ---- ---- ---- ----
Total operating expenses
(after fee waiver) 1.13% (7) 1.88% (7) 1.73% (7)(10) 1.14% 1.89% 1.74% (10)
==== ===== ==== ==== ==== ====
</TABLE>
(6) Effective January 1, 1998, "Total operating expenses" (excluding brokerage,
interest, taxes, 12b-1 distribution and service fees and extraordinary
expenses) are , until further notice, voluntarily limited by the Adviser to
0.60% per annum (0.30% until January 1, 1998) of the Short Duration Fund's
average net assets. The Adviser may terminate the fee waiver at any time
without shareholder approval. Absent such voluntary fee waiver, the
"Management fee" would have been 0.55% for each Class, "Other expenses"
would have been 1.51% for each Class and "Total operating expenses" would
have been 2.26% for Class A shares, 2.91% for Class B shares and 2.46% for
Class C shares. See "How the Funds are Managed" for other fees paid to the
Adviser and its affiliates.
(7) "Total operating expenses" (excluding brokerage, interest, taxes, 12b-1
distribution and service fees and extraordinary expenses) are, until
further notice, voluntarily limited by the Adviser to 1.00% of the
Intermediate Fund's average net assets.
(8) The Distributor has voluntarily agreed to waive 0.15% of the Class C share
Rule 12b-1 fee. Absent such waiver, the Rule 12b-1 fee would have been
1.00%. The Distributor may terminate the fee waiver at any time without
shareholder approval. See "12b-1 Plans."
(9) Class C share "Other expenses" are estimated based on the annual operating
expenses of Class A and Class B shares and the Rule 12b-1 fee differential.
(10) "Total operating expenses" would be 1.88% and 1.89% for the
Intermediate Fund and the Federal Securities Fund, respectively, without
the Rule 12b-1 fee waiver discussed above.
<PAGE>
Example
The following Example shows the cumulative transaction and operating expenses
attributable to a hypothetical $1,000 investment in each Class of shares of each
Fund for the periods specified, assuming a 5% annual return and, unless
otherwise noted, redemption at period end. The 5% return and expenses used in
this Example should not be considered indicative of actual or expected Fund
performance or expenses, both of which will vary:
Short Duration Fund
Class A Class B Class C
Period: (11) (12) (11) (12)
1 year $ 40 $ 15 $ 55 $ 10 $ 20
3 years 57 46 66 30 30(13)
5 years 75 79 79 53 53
10 years 128 156(14) 156(14) 117 117
Intermediate Fund
Class A Class B Class C
Period: (11) (12) (11) (12)
1 year $ 58 $ 19 $ 69 $ 18 $ 28
3 years 82 59 89 54 54(13)
5 years 107 102 122 94 94
10 years 178 201(14) 201(14) 204 204
Federal Securities Fund
Class A Class B Class C
Period: (11) (12) (11) (12)
1 year $ 59 $ 19 $ 69 $ 18 $ 28
3 years 82 59 89 55 55(13)
5 years 107 102 122 94 94
10 years 180 202(14) 202(14) 205 205
(11) Assumes no redemption.
(12) Assumes redemption at period end.
(13) Class C shares do not incur a contingent deferred sales charge on
redemptions made after one year.
(14) Class B shares convert to Class A shares after approximately 8 years;
therefore, years 9 and 10 reflect Class A share expenses.
<PAGE>
THE FUNDS' FINANCIAL HISTORY
The following financial highlights for a share outstanding throughout each
period have been audited by Price Waterhouse LLP, independent accountants. Their
unqualified report is included in the Funds' 1997 Annual Report and is
incorporated by reference into the Statement of Additional Information. The data
presented for the Short Duration Fund represent operations under investment
objectives and investment policies which changed on December 27, 1996. The
Federal Securities Fund adopted its current investment objective and investment
policies on November 30, 1994. The data presented below for the periods prior to
November 30, 1994 represent operations under an earlier investment objective and
investment policies.
<TABLE>
<CAPTION>
Short Duration Fund
------------------------------------------------------------------
Class A
------------------------------------------------------------------
Year ended Period ended
August 31 August 31
------------------------------------------------ --------------
1997 1996 1995 1994 1993(b)
---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
Net asset value - Beginning of period $9.820 $9.850 $9.670 $9.950 $10.000
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a) 0.561 0.568 0.514 0.473 0.434
Net realized and unrealized gain (loss) 0.090 (0.032) 0.152 (0.356) (0.061)
------ ------- ------ ------- -------
Total from Investment Operations 0.651 0.536 0.666 0.117 0.373
------ ------ ------ ------ -----
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.551) (0.566) (0.486) (0.397) (0.406)
In excess of net investment income --- --- --- --- (0.015)
From net realized gains --- --- --- --- (0.002)
--- --- --- --- -------
Total Distributions Declared to Shareholders (0.551) (0.566) (0.486) (0.397) (0.423)
------- ------- ------- ------- -------
Net asset value - End of period $9.920 $9.820 $9.850 $9.670 $9.950
======= ======= ======= ======= ======
Total return(c)(d) 6.79% 5.57% 7.08% 1.20% 3.82%(e)
===== ===== ===== ===== ====
RATIOS TO AVERAGE NET ASSETS
Expenses 0.50%(f) 0.50%(f) 0.50% 0.50% 0.50%(g)
Net investment income 5.64%(f) 5.99%(f) 5.50% 4.84% 4.70%(g)
Fees and expenses waived or borne by the Adviser 1.76%(f) 1.48%(f) 1.14% 1.16% 1.68%(g)
Portfolio turnover 73% 51% 36% 69% 25%(g)
Net assets at end of period (000) $6,858 $6,136 $9,934 $16,168 $7,866
- ------------------------------------------------
(a) Net of fees and expenses waived or
borne by the Adviser which amounted to $0.169 $0.136 $0.107 $0.114 $0.155
(b) The Fund commenced investment operations on October 1, 1992. Class A per
share amounts reflect activity from that date.
(c) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(d) Had the Adviser not waived or reimbursed a portion of expenses, total
return would have been reduced.
(e) Not annualized.
(f) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
(g) Annualized.
<PAGE>
THE FUNDS' FINANCIAL HISTORY (CONT'D)
<CAPTION>
Short Duration Fund
--------------------------------------------------------------------------------------
Class B Class C
--------------------------------------------------------------------------------------
Year ended Period ended Year ended
August 31 August 31 August 31
------------------------------------- ----------- -------------------------------
1997 1996 1995 1994 1993(b) 1997 1996 1995(c)
---- ---- ---- ---- ------- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of period $9.820 $9.850 $9.670 $9.950 $9.940 $9.820 $9.850 $9.550
------- ------- ------- ------- ------- ------- ------- ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a) 0.497 0.504 0.451 0.409 0.237 0.542 0.549 0.334
Net realized and unrealized gain (loss) 0.090 (0.032) 0.152 (0.356) (0.003) 0.090 (0.032) 0.280
------ ------- ------ ------- ------- ------ ------- -----
Total from Investment Operations 0.587 0.472 0.603 0.053 0.234 0.632 0.517 0.614
------ ------ ------ ------ ------ ------ ------ -----
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.487) (0.502) (0.423) (0.333) (0.215) (0.532) (0.547) (0.314)
In excess of net investment income --- --- --- --- (0.008) --- --- ---
From net realized gains --- --- --- --- (0.001) --- --- ---
--- --- --- --- --- --- --- ---
Total Distributions Declared to Shareholders (0.487) (0.502) (0.423) (0.333) (0.224) (0.532) (0.547) (0.314)
------- ------- ------- ------- ------- ------- ------- -------
Net asset value - End of period $9.920 $9.820 $9.850 $9.670 $9.950 $9.920 $9.820 $9.850
======= ======= ======= ======= ======= ======= ======= ======
Total return(d)(e) 6.11% 4.89% 6.39% 0.55% 2.38%(f) 6.59% 5.36% 6.50%(f)
===== ===== ===== ===== ==== ===== ===== ====
RATIOS TO AVERAGE NET ASSETS
Expenses 1.15%(g) 1.15%(g) 1.15% 1.15% 1.15%(h) 0.70%(g) 0.70%(g) 0.70%(h)
Net investment income 4.99%(g) 5.34%(g) 4.85% 4.19% 4.05%(h) 5.44%(g) 5.79%(g) 5.30%(h)
Fees and expenses waived or borne by
the Adviser 1.76%(g) 1.48%(g) 1.14% 1.16% 1.68%(h) 1.76%(g) 1.48%(g) 1.14%
Portfolio turnover 73% 51% 36% 69% 25%(h) 73% 51% 36%
Net assets at end of period (000) $4,233 $4,004 $3,968 $4,176 $1,675 $575 $461 $385
- ---------------------------------------------
(a) Net of fees and expenses waived or
borne by the Adviser which amounted to $0.169 $0.136 $0.107 $0.114 $0.092 $0.169 $0.136 $0.107
(b) Class B shares were initially offered on February 1, 1993. Class B per
share amounts reflect activity from that date.
(c) Class C shares were initially offered on January 4, 1995. Class C per share
amounts reflect activity from that date.
(d) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(e) Had the adviser not waived or reimbursed a portion of expenses, total
return would have been reduced.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
(h) Annualized.
<PAGE>
THE FUNDS' FINANCIAL HISTORY (CONT'D)
Intermediate Fund
---------------------------------------------------------------------------
Class A
---------------------------------------------------------------------------
Year ended August 31
---------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990
---- ---- ----- ----- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of period $6.370 $6.550 $6.420 $6.880 $6.980 $7.020 $6.950 $7.130
------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a) 0.393 0.390 0.447 0.415 0.541 0.614 0.699 0.711
Net realized and unrealized gain (loss) 0.145 (0.161) 0.100 (0.452) (0.130) (0.043) 0.069 (0.171)
----- ----- ----- ----- ----- ----- ----- -----
Total from Investment Operations 0.538 0.229 0.547 (0.037) 0.411 0.571 0.768 0.540
----- ----- ----- ----- ----- ----- ----- -----
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.398) (0.391) (0.417) (0.400) (0.511) (0.611) (0.698) (0.720)
In excess of net investment income --- (0.018) --- --- --- --- --- ---
From capital paid in --- --- --- (0.023) --- --- --- ---
----- ----- ----- ----- ----- ----- ----- -----
Total Distributions Declared to Shareholders (0.398) (0.409) (0.417) (0.423) (0.511) (0.611)(c) (0.698) (0.720)(c)
----- ----- ----- ----- ----- ----- ----- -----
Net asset value - End of period $6.510 $6.370 $6.550 $6.420 $6.880 $6.980 $7.020 $6.950
===== ===== ===== ===== ===== ===== ===== =====
Total return(d) 8.64% 3.51% 8.88% (0.53)% 6.15% 8.46% 11.54% 7.95%(e)
==== ==== ==== ==== ==== ==== ===== ====
RATIOS TO AVERAGE NET ASSETS
Expenses 1.13%(h) 1.11%(h) 1.11% 1.11% 1.10% 1.09% 1.16% 1.25%
Fees and Expenses waived or borne by the --- --- --- --- --- --- --- 0.15%
Net investment income 6.43%(h) 6.45%(h) 7.51% 8.14% 7.85% 8.55% 9.68% 10.09%
Portfolio turnover 61% 123% 140% 291% 162% 132% 129% 82%
Net assets at end of period (in millions) $731 $921 $1,164 $758 $1,202 $1,102 $444 $95
(a) Net of fees and expenses waived or borne
by the Adviser which amounted to: --- --- --- --- --- --- --- $0.010
<CAPTION>
Intermediate Fund
--------------------------------
Class A
--------------------------------
Year Period ended
ended August 31 August 31
----------------- -----------
1989 1988(b)
---- ------
<S> <C> <C>
Net asset value - Beginning of period $7.200 $7.140
------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a) 0.702 0.639
Net realized and unrealized gain (loss) (0.074) 0.054
----- -----
Total from Investment Operations 0.628 0.693
----- -----
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.698) (0.633)
----- -----
Total Distributions Declared to Shareholders (0.698)(c) (0.633)
----- -----
Net asset value - End of period $7.130 $7.200
===== =====
Total return(d) 9.14%(e) 9.89%(e)(f)
==== ====
RATIOS TO AVERAGE NET ASSETS
Expenses 1.23% 0.56%(g)
Fees and Expenses waived or borne by the 0.16% 1.05%(g)
Net investment income 9.88% 9.85%(g)
Portfolio turnover 124% 49%(g)
Net assets at end of period (in millions) $57 $39
(a) Net of fees and expenses waived or borne
by the Adviser which amounted to: $0.012 $0.068
(b) The Fund commenced investment operations on October 13, 1987. Per share
amounts reflect activity from that date.
(c) Because of differences between book and tax basis accounting, approximately
$0.056 in 1992, $0.044 in 1990 and $0.036 in 1989 were a return of capital
for federal income tax purposes.
(d) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge
(e) Had the Adivser not waived or reimbursed a portion of expenses, total
returns would have been reduced.
(f) Not annualized.
(g) Annualized.
(h) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
<PAGE>
THE FUNDS' FINANCIAL HISTORY (CONT'D)
<CAPTION>
Intermediate Fund
----------------------------------------------------------------------------------
Class B Class C(a)
----------------------------------------------------------------------------------
Year ended
Year ended August 31 August 31
----------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992(b) 1997
---- ---- ---- ---- ---- ------ ----
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of period $6.370 $6.550 $6.420 $6.880 $6.980 $6.950 $6.590
------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.344 0.341 0.399 0.365 0.490 0.122 0.032
Net realized and unrealized gain (loss) 0.145 (0.161) 0.100 (0.452) (0.130) 0.029 (0.082)
----- ----- ----- ----- ----- ----- -----
Total from Investment Operations 0.489 0.180 0.499 (0.087) 0.360 0.151 (0.050)
----- ----- ----- ----- ----- ----- -----
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.349) (0.344) (0.369) (0.352) (0.460) (0.121) (0.030)
In excess of net investment income --- (0.016) --- --- --- --- ---
From capital paid in --- --- --- (0.021) --- --- ---
----- ----- ----- ----- ----- ----- -----
Total Distributions Declared to Shareholders (0.349) (0.360) (0.369) (0.373) (0.460) (0.121)(c) (0.030)
----- ----- ----- ----- ----- ----- -----
Net asset value - End of period $6.510 $6.370 $6.550 $6.420 $6.880 $6.980 $6.510
===== ===== ===== ===== ===== ===== =====
Total return(d) 7.83% 2.74% 8.07% (1.28)% 5.36% 2.19% (e) (0.77)%(e)
==== ==== ==== ==== ==== ==== ====
RATIOS TO AVERAGE NET ASSETS
Expenses 1.88% (f) 1.86% (f) 1.86% 1.86% 1.85% 1.84% (g) 1.78%(f)(g)
Net investment income 5.68% (f) 5.70% (f) 6.76% 7.39% 7.10% 7.80% (g) 5.85%(f)(g)
Portfolio turnover 61% 123% 140% 291% 162% 132% 61%
Net assets at end of period (in millions) $461 $572 $701 $836 $978 $343 --- (h)
(a) Class C shares were initially offered on August 1, 1997. Per share amounts
reflect activity from that date.
(b) Class B shares were initially offered on June 8, 1992. Per share amounts
reflect activity from that date.
(c) Because of differences between book and tax basis accounting, approximately
$0.014 was a return of capital for federal income tax purposes.
(d) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(e) Not annualized.
(f) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
(g) Annualized.
(h) Rounds to less than one million.
<PAGE>
THE FUNDS' FINANCIAL HISTORY (CONT'D)
<CAPTION>
Federal Securities Fund
---------------------------------------------------------------------------------
Class A
---------------------------------------------------------------------------------
Period
ended Year ended
August 31(a) October 31
------------- --------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of period $10.530 $10.830 $9.950 $11.460 $10.750 $10.800 $10.420
-------- -------- ------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.580 0.696 0.710 0.821 0.819 0.796 0.854
Net realized and unrealized gain (loss) (0.038) (0.300) 0.907 (1.560) 0.739 0.157 0.671
------- ------- ------ ------- ------ ------ ------
Total from Investment Operations 0.542 0.396 1.617 (0.739) 1.558 0.953 1.525
------ ------ ------ ------- ------ ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.552) (0.684) (0.709) (0.771) (0.781) (0.796) (0.854)
From net realized gains --- --- (0.028) --- (0.067) --- ---
From capital paid in --- (0.012) --- --- --- (0.207) (c) (0.291) (c)
--- ------- --- --- --- ------- -------
Total Distributions Declared to (0.552) (0.696) (0.737) (0.771) (0.848) (1.003) (1.145)
------- ------- ------- ------- ------- ------- -------
Shareholders
Net asset value - End of period $10.520 $10.530 $10.830 $9.950 $11.460 $10.750 $10.800
======== ======== ======== ======= ======== ======== ========
Total return(d) 5.31% (e) 3.88% 16.82% (6.57)% 14.94% 9.15% 15.33%
===== ===== ====== ======= ====== ===== ======
RATIOS TO AVERAGE NET ASSETS
Expenses 1.19% (f)(g) 1.18% (g) 1.17% 1.16% 1.17% 1.24% 1.21%
Net investment income 6.71% (f)(g) 6.62% (g) 7.04% 7.80% 7.37% 7.36% 8.05%
Portfolio turnover 79% (e) 125% 171% 121% 252% 18% 11%
Net assets at end of period (in millions) $888 $1,026 $1,201 $1,278 $1,736 $1,809 $2,028
<CAPTION>
Federal Securities Fund
-------------------------------------------------------------
Class A
-------------------------------------------------------------
Period Year
Year ended ended ended
October 31 Oct. 31(b) Sept. 30
------------------------------------ ------------ ---------
1990 1989 1988 1987 1987
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value - Beginning of period $11.330 $11.220 $11.130 $10.820 $12.660
-------- -------- -------- -------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.917 0.958 0.882 0.075 0.844
Net realized and unrealized gain (loss) (0.627) 0.352 0.407 0.365 (1.204)
------- ------ ------ ------ -------
Total from Investment Operations 0.290 1.310 1.289 0.440 (0.360)
------ ------ ------ ------ -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.917) (0.958) (0.916) (0.070) (0.830)
From net realized gains --- --- (0.129) (0.060) (0.650)
From capital paid in (0.283) (c) (0.242) (c) (0.154) (c) --- ---
------- ------- ------- --- ---
Total Distributions Declared to (1.200) (1.200) (1.199) (0.130) (1.480)
------- ------- ------- ------- -------
Shareholders
Net asset value - End of period $10.420 $11.330 $11.220 $11.130 $10.820
======== ======== ======== ======== =======
Total return(d) 2.85% 12.42% 12.17% (1.17)% (e) (3.52)%
===== ====== ====== ======= =======
RATIOS TO AVERAGE NET ASSETS
Expenses 1.16% 1.14% 1.13% 1.13% (f) 1.09%
Net investment income 8.55% 8.56% 7.90% 8.05% (f) 7.06%
Portfolio turnover 6% 55% 66% 87% (f) 140%
Net assets at end of period (in millions) $2,186 $2,675 $3,079 $3,640 $3,624
(a) The Fund changed its fiscal year from October 31 to August 31. Information
presented is for the period November 1, 1996 through August 31, 1997.
(b) The Fund changed its fiscal year from September 30 to October 31.
(c) Because of differences between book and tax basis accounting, approximately
$0.247, $0.315, $0.300, $0.272 and $0.055, respectively, were a return of
capital for federal income tax purposes.
(d) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(e) Not annualized.
(f) Annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
<PAGE>
THE FUNDS' FINANCIAL HISTORY (CONT'D)
<CAPTION>
Federal Securities Fund
--------------------------------------------------------------------------------------
Class B Class C(a)
------------------------------------------------------------------------ -------------
Period ended Year ended Period ended
August 31 October 31 August 31
------------- ------------------------------------------------------ -------------
1997 1996 1995 1994 1993 1992(b) 1997
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of period $10.530 $10.830 $9.950 $11.460 $10.750 $10.730 $10.710
-------- -------- ------- -------- -------- -------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.515 0.617 0.633 0.741 0.737 0.286 0.058
Net realized and unrealized gain (loss) (0.038) (0.300) 0.907 (1.560) 0.739 0.095 (0.198)
------- ------- ------ ------- ------ ------ -------
Total from Investment Operations 0.477 0.317 1.540 (0.819) 1.476 0.381 (0.140)
------ ------ ------ ------- ------ ------ -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.487) (0.606) (0.632) (0.691) (0.706) (0.286) (0.050)
From net realized gains --- --- (0.028) --- (0.060) --- ---
From capital paid in --- (0.011) --- --- --- (0.075)(c) ---
------ ------- --- --- --- ------- ---
Total Distributions Declared to Shareholders(0.487) (0.617) (0.660) (0.691) (0.766) (0.361) (0.050)
------- ------- ------- ------- ------- ------- -------
Net asset value - End of period $10.520 $10.530 $10.830 $9.950 $11.460 $10.750 $10.520
======== ======== ======== ======= ======== ======== =======
Total return(d) 4.66% (e) 3.11% 15.96% (7.28)% 14.11% 3.47%(e) (1.31)% (e)
===== ===== ====== ======= ====== ===== =======
RATIOS TO AVERAGE NET ASSETS
Expenses 1.94% (f)(g) 1.93% (g) 1.92% 1.91% 1.92% 1.99%(f) 1.82% (f)(g)
Net investment income 5.96% (f)(g) 5.87% (g) 6.29% 7.05% 6.62% 6.61%(f) 6.55% (f)(g)
Portfolio turnover 79% (e) 125% 171% 121% 252% 18% 79% (e)
Net assets at end of period (in million $64 $73 $79 $70 $68 $28 --- (h)
(a) Class C shares were initially offered on August 1, 1997. Per share amounts
reflect activity from that date.
(b) Class B shares were initially offered on June 8, 1992. Per share amounts
reflect activity from that date.
(c) Because of differences between book and tax basis accounting, approximately
$0.095 was a return of capital for federal income tax purposes.
(d) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(e) Not annualized.
(f) Annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
(h) Rounds to less than one million.
</TABLE>
Further performance information is contained in each Fund's Annual Report to
shareholders, which may be obtained without charge by calling 1-800-426-3750.
<PAGE>
THE FUNDS' INVESTMENT OBJECTIVES
The Short Duration Fund seeks as high a level of current income as is consistent
with very low volatility by investing primarily in U.S. government securities
and maintaining a weighted average portfolio duration of 3 years or less.
The Intermediate Fund seeks as high a level of current income and total return
as is consistent with prudent risk by investing primarily in U.S. government
securities.
The Federal Securities Fund seeks as high a level of current income and total
return, as is consistent with prudent longer-term investing, by investing
primarily in U.S. government securities.
HOW THE FUNDS PURSUE THEIR OBJECTIVES AND CERTAIN RISK FACTORS
Each Fund invests primarily in U.S. government securities. U.S. government
securities include (1) U.S. treasury obligations, or (2) obligations issued or
guaranteed by U.S. government agencies and instrumentalities (agency securities)
that are supported by: (a) the full faith and credit of the U.S. government, (b)
the right of the issuing agency to borrow under a line of credit with the U.S.
treasury, (c) the discretionary power of the U.S. government to purchase
obligations of the agency, or (d) the credit of the agency.
Agency securities include securities commonly referred to as mortgage-backed
securities, the principal and interest on which are paid from principal and
interest payments made on pools of mortgage loans. These include securities
commonly referred to as "pass-throughs," "collateralized mortgage obligations"
(CMOs), and "real estate mortgage investment conduits" (REMICs).
Each Fund invests primarily in debt securities. Therefore, the value of an
investment in each Fund generally will fall as prevailing interest rates rise
and will rise as prevailing interest rates fall. The Adviser attempts to control
the magnitude of such fluctuations by managing each Fund's duration. Duration
measures how quickly the principal and interest of a bond is expected to be
paid. Investment managers use duration to predict how much a bond's value will
fluctuate given a change in interest rates. Generally, when interest rates
change, the shorter the duration, the less a bond's market value would be
expected to change. The Short Duration Fund generally maintains a duration of 3
years or less; the Intermediate Fund generally maintains a duration of less than
7 1/2 years; and the Federal Securities Fund generally maintains a duration of
less than 10 years. Declines in interest rates may also mean that a Fund will
pay lower income distributions.
Mortgage-Backed Securities. Mortgage-backed securities, including CMOs and
REMICs, evidence ownership in a pool of mortgage loans made by certain financial
institutions that may be insured or guaranteed by the U.S. government or its
agencies. CMOs are obligations issued by special-purpose trusts, secured by
mortgages. REMICs are entities that own mortgages and elect REMIC status under
the Internal Revenue Code. Both CMOs and REMICs issue one or more classes of
securities of which one (the Residual) is in the nature of equity. The Funds
will not invest in the Residual class. Principal on mortgage-backed securities,
CMOs or REMICs may be prepaid if the underlying mortgages are prepaid.
Prepayment rates for mortgage-backed securities tend to increase as interest
rates decline (effectively shortening the security's life) and decrease as
interest rates rise (effectively lengthening the security's life). Because of
the prepayment feature, these securities may not increase in value as much as
other debt securities when interest rates fall. A Fund may be able to invest
prepaid principal only at lower yields. The prepayment of such securities
purchased at a premium may result in losses equal to the premium.
Variable Rate Securities. Each Fund may purchase U.S. government securities that
pay fixed, floating or adjustable interest rates. Interest rates on variable
rate securities change periodically based on some index or interest rate change,
reducing, but not eliminating, the securities' volatility. The securities' value
may fluctuate from changes in market interest rates because the rate change may
lag the market or there may be limits on the rate change.
Stripped Securities. Each Fund may invest in stripped securities (e.g., zero
coupon securities) which are issued at a significant discount from face value
and pay interest only at maturity rather than at intervals during the life of
the security and in certificates representing undivided interests in the
interest or principal of mortgage-backed securities (interest only/principal
only), which tend to be more volatile than other types of securities. The Funds
will accrue and distribute income from stripped securities and certificates on a
current basis and may have to sell securities to generate cash for
distributions.
When-Issued Securities and Forward Commitments. Each Fund may purchase
"when-issued" securities and "forward commitments." "When-issued" securities and
"forward commitments" are contracts to purchase securities for a fixed price on
a date beyond the customary settlement time with no interest accruing until
settlement. If made through a dealer, the contract is dependent on the dealer's
consummation of the transaction. A dealer's failure could deprive a Fund of
advantageous yields. These contracts also involve the risk that the value of the
underlying security may change prior to settlement. The Funds currently will not
purchase "when-issued" securities and "forward commitments" more than 120 days
prior to settlement. Each Fund will segregate with its custodian cash or liquid
securities equal in value to its obligations under the contract.
Mortgage Dollar Rolls. Each Fund may also engage in so-called "mortgage dollar
roll" transactions. In a mortgage dollar roll, a Fund sells a mortgage-backed
security and simultaneously enters into a commitment to purchase a similar
security at a later date. As with any forward commitment, mortgage dollar rolls
involve the risk that the counterparty will fail to deliver the new security on
the settlement date, which may deprive a Fund of a beneficial investment. In
addition, the security to be delivered in the future may turn out to be inferior
to the security sold upon entering into the transaction. Finally, the
transaction costs may exceed the return earned by a Fund from the transaction.
Financial Futures; Options. The Federal Securities Fund and the Intermediate
Fund may (i) buy or sell financial futures contracts (futures) and (ii) purchase
and write call and put options on futures and securities. A Fund will enter into
such transactions for hedging purposes or to adjust its duration. A futures
contract obliges the seller to deliver and the buyer to accept a financial
instrument at the time and in the amount specified in the contract. Although
futures call for delivery (or acceptance) of the specified instrument, futures
are usually closed out before the settlement date through the purchase (sale) of
a comparable contract. If the price of the initial sale of the future exceeds
(or is less than) the price of the offsetting purchase, the Fund realizes a gain
(or loss). A call option represents the right, but not the obligation, to buy,
and a put option represents the right, but not the obligation, to sell, a
particular security or futures contract at a specified price during a specified
period of time. Transactions in futures involve the following risks: (i)
imperfect correlation between the price movement of the contracts and the
underlying securities; (ii) the possible absence of a liquid secondary market at
any point in time; and (iii) if the Adviser's prediction on interest rates is
inaccurate, a Fund may be worse off than if it had not hedged. With respect to
options, if a purchased option expires unexercised, a Fund will lose the price
paid for the option. A Fund may not purchase or sell futures contracts or
purchase related options if immediately thereafter the sum of the amount of
deposits for initial margin or premiums on the existing futures and related
options positions would exceed 5% of the market value of that Fund's total
assets.
Other Investments. The Federal Securities Fund may invest up to 35% of its total
assets in: (i) REMICs, CMOs and other mortgage-backed securities not issued or
guaranteed by an agency but for which the underlying mortgages are guaranteed by
an agency; (ii) similar non-agency "investment-grade" mortgage- and asset-backed
securities for which the underlying mortgages are not guaranteed by an agency
(such as residential mortgage loans, manufactured housing loans, home equity
loans or commercial loans); or (iii) "investment-grade" corporate debt
securities. In determining whether a security is "investment-grade," the Fund
will rely on the ratings published by Moody's Investors Service, Inc., Standard
& Poor's Corporation, Fitch Investors Service, and Duff & Phelps Corporation
(the "rating services"). The Federal Securities Fund will not purchase a
security unless at the time of purchase (i) the security is rated
"investment-grade" by each rating service that has assigned a rating to the
security, or (ii) if a rating service has assigned the security a rating lower
than "investment-grade," at least two other rating services have assigned an
"investment-grade" rating. The minimum "investment-grade" ratings of the rating
services are: Moody's Investors Service, Inc.: Baa3; Standard & Poor's
Corporation, BBB-; Fitch Investors Service, BBB-; and Duff & Phelps Corporation,
BBB-. Certain non-agency and mortgage-backed or corporate debt securities in the
lowest investment grade may be considered to have "speculative characteristics."
For a description of the rating systems of the four rating services and a
discussion of certain of the risks of these securities, see "Appendix I" and
"Lower Rated Bonds," respectively, in Part 2 of the Statement of Additional
Information. If the Fund purchases non-agency securities backed by underlying
mortgages and the issuer defaults or enters bankruptcy, the Fund may experience
costs and delays in liquidating the collateral and may experience a loss. The
Fund will limit its investments in corporate debt securities so that not more
than 25% of its assets are invested in any one industry.
Temporary/Defensive Investments. Temporarily available cash may be invested in
repurchase agreements. Some or all of each Fund's assets also may be invested in
such investments during periods of unusual market conditions.
Under a repurchase agreement, a Fund buys a security from a bank or dealer,
which is obligated to buy it back at a fixed price and time. The security is
held in a separate account by each Fund's custodian and constitutes each Fund's
collateral for the bank's or dealer's repurchase obligation. Additional
collateral will be added so that the obligation will at all times be fully
collateralized. However, if the bank or dealer defaults or enters bankruptcy, a
Fund may experience costs and delays in liquidating the collateral and may
experience a loss if it is unable to demonstrate its right to the collateral in
a bankruptcy proceeding. Not more than 15% of the net assets of the Short
Duration Fund and not more than 10% of net assets of the Intermediate Fund and
Federal Securities Fund, will be invested in repurchase agreements maturing in
more than seven days and other illiquid assets.
Each Fund may enter into reverse repurchase agreements, which are contracts
under which a Fund sells a security and agrees to buy it back at a fixed price
and time. Each Fund will segregate with its custodian U.S. government securities
equal in value to the Fund's obligations under the reverse repurchase
agreements.
Borrowing of Money. Each Fund may borrow money from banks for temporary or
emergency purposes up to 10% of its net assets. However, a Fund will not
purchase additional portfolio securities while borrowings exceed 5% of net
assets.
Other. Each Fund may not always achieve its investment objective. Each Fund's
investment objective and non-fundamental investment policies may be changed
without shareholder approval. Each Fund's fundamental investment policies listed
in the Statement of Additional Information cannot be changed without the
approval of a majority of that Fund's outstanding voting securities. Each Fund
will notify investors in connection with any material change in its investment
objective. If there is a change in a Fund's investment objective or investment
policies, shareholders should consider whether that Fund remains an appropriate
investment in light of their financial position and needs. Shareholders may
incur a contingent deferred sales charge if shares are redeemed in response to a
change in an investment objective or investment policies. Additional information
concerning certain of the securities and investment techniques described above
is contained in the Statement of Additional Information.
The Short Duration Fund intends to qualify as an eligible investment for federal
credit unions and national banks. The Fund will strictly limit its investments
and investment transactions to those that are legal for federal credit unions
under regulations adopted by the National Credit Union Administration.
HOW THE FUNDS MEASURE THEIR PERFORMANCE
Performance may be quoted in sales literature and advertisements. Each Class's
average annual total returns are calculated in accordance with the Securities
and Exchange Commission's formula and assume the reinvestment of all
distributions, the maximum initial sales charge of 3.25% for the Short Duration
Fund and 4.75% for the Intermediate Fund and the Federal Securities Fund on
Class A shares and the contingent deferred sales charge applicable to the time
period quoted on Class B and Class C shares. Other total returns differ from the
average annual total return only in that they may relate to different time
periods, may represent aggregate as opposed to average annual total returns, and
may not reflect the initial or contingent deferred sales charges.
Each Class's yield, which differs from total return because it does not consider
changes in net asset value, is calculated in accordance with the Securities and
Exchange Commission's formula. Each Class's distribution rate is calculated by
dividing the most recent month's distributions, annualized, by the maximum
offering price of that Class at the end of the period. Each Class's performance
may be compared to various indices. Quotations from various publications may be
included in sales literature and advertisements. See "Performance Measures" in
the Statement of Additional Information. All performance information is
historical and does not predict future results.
HOW THE FUNDS ARE MANAGED
The Trustees formulate each Fund's general policies and oversee each Fund's
affairs as conducted by the Adviser.
Liberty Financial Investments, Inc. (Distributor), a subsidiary of the Adviser,
serves as the distributor for each Fund's shares. Colonial Investors Service
Center, Inc. (Transfer Agent), an affiliate of the Adviser, serves as the
shareholder services and transfer agent for each Fund. Each of the Adviser, the
Distributor and the Transfer Agent is an indirect subsidiary of Liberty
Financial Companies, Inc. which in turn is an indirect subsidiary of Liberty
Mutual Insurance Company (Liberty Mutual). Liberty Mutual is considered to be
the controlling entity of the Adviser and its affiliates. Liberty Mutual is an
underwriter of workers' compensation insurance and a property and casualty
insurer in the U.S.
The Adviser furnishes each Fund with investment management, accounting and
administrative personnel and services, office space and other equipment and
services at the Adviser's expense. The Short Duration Fund did not pay the
Adviser a management fee in fiscal year 1997 due to the fee waiver in effect.
The Intermediate Fund paid the Adviser 0.59% of its average net assets in fiscal
year 1997. The Federal Securities Fund paid the Adviser 0.65% of its average net
assets in fiscal year 1997.
Ann T. Peterson, Vice President of the Adviser, currently is the manager for the
Short Duration Fund. Ms. Peterson also serves, as of the date of this
Prospectus, as co-manager of the Intermediate Fund and since 1993 has served as
a manager or co-manager of various Colonial taxable income funds. Prior to 1993,
she was a taxable bond analyst with the Adviser.
Leslie W. Finnemore, Vice President of the Adviser, is currently the lead
manager for the Intermediate Fund and has managed the Fund since its inception.
Ms. Finnemore has managed the Federal Securities Fund since 1993 and other
Colonial taxable income funds since 1987.
The Adviser also provides pricing and bookkeeping services to each Fund for a
monthly fee of $2,250 plus a percentage of each Fund's average net assets over
$50 million. The Transfer Agent provides transfer agency and shareholder
services to each Fund for a fee of 0.18% annually of average net assets plus
certain out-of-pocket expenses. Commencing in October, 1997, the fee for such
transfer agency and shareholder services began to be reduced through twelve
successive monthly reductions. After such reductions, the fee will be 0.17%
annually of average net assets plus certain out-of pocket expenses.
Each of the foregoing fees is subject to any fee waiver or reimbursement to
which the Adviser may agree.
The Adviser places all orders for the purchase and sale of portfolio securities.
In selecting broker-dealers, the Adviser may consider research and brokerage
services furnished by such broker-dealers to the Adviser and its affiliates. In
recognition of the research and brokerage services provided, the Adviser may
cause a Fund to pay the selected broker-dealer a higher commission than would
have been charged by another broker-dealer not providing such services. Subject
to seeking best execution, the Adviser may consider sales of shares of a Fund
(and of certain other mutual funds advised by the Adviser and its affiliates,
Stein Roe & Farnham Incorporated and Newport Fund Management, Inc.) in selecting
broker-dealers for portfolio security transactions.
HOW THE FUNDS VALUE THEIR SHARES
Per share net asset value is calculated by dividing the total value of each
Class's net assets by its number of outstanding shares. Shares of the Funds are
valued as of the close (normally 4:00 p.m. Eastern time) of the New York Stock
Exchange (Exchange) each day the Exchange is open. Portfolio securities for
which market quotations are readily available are valued at current market
value. Short-term investments maturing in 60 days or less are valued at
amortized cost when the Adviser determines, pursuant to procedures adopted by
the Trustees, that such cost approximates current market value. All other
securities and assets are valued at their fair value following procedures
adopted by the Trustees.
DISTRIBUTIONS AND TAXES
Each Fund intends to qualify as a "regulated investment company" under the
Internal Revenue Code and to distribute to shareholders net income monthly and
any net realized gain at least annually. Each Fund generally declares
distributions daily and makes distributions monthly.
At times each Fund's distributions may exceed its actual investment returns for
the year, causing a portion of the distributions to be deemed a "return of
capital." A return of capital reduces the cost basis of an investor's share and
is similar to a partial redemption of the investment (on which a sales charge
may have been paid).
Each Fund reinvests distributions in additional shares of the same Class of that
Fund at net asset value unless the shareholder elects to receive cash.
Regardless of the shareholder's election, distributions of $10 or less will not
be paid in cash to shareholders but will be invested in additional shares of the
same Class of that Fund at net asset value. If a shareholder has elected to
receive dividends and/or capital gain distributions in cash and the postal or
other delivery service selected by the Transfer Agent is unable to deliver
checks to the shareholder's address of record, such shareholder's distribution
option will automatically be converted to having all dividend and other
distributions reinvested in additional shares. No interest will accrue on
amounts represented by uncashed distribution or redemption checks. To change
your election, call the Transfer Agent for information. Whether you receive
distributions in cash or in additional Fund shares, you must report them as
taxable income unless you are a tax-exempt institution. Each January,
information on the amount and nature of distributions for the prior year is sent
to shareholders.
Each Fund's distributions may, to the extent they consist of interest from
certain U.S. government securities, be exempt from certain state and local
income taxes. Annually, shareholders are informed of that portion of the
distribution which might qualify for the exemption.
Because of realized and unrealized losses during past periods, the Intermediate
Fund and the Federal Securities Fund expect to have sufficient capital loss
carryforwards to offset any net capital gains that either Fund realizes in the
near future. If either Fund realizes and distributes to shareholders capital
gains that are so offset, those distributions will be taxable to shareholders as
ordinary income. If either Fund were to retain rather than distribute the gains,
the gains would not be taxable to the Fund or its shareholders.
HOW TO BUY SHARES
Shares of the Funds are offered continuously. Orders received in good form prior
to the time at which the Funds value their shares (or placed with a financial
service firm before such time and transmitted by the financial service firm
before a Fund processes that day's share transactions) will be processed based
on that day's closing net asset value, plus any applicable initial sales charge.
The minimum initial investment is $1,000; subsequent investments may be as small
as $50. The minimum initial investment for the Colonial Fundamatic program is
$50, and the minimum initial investment for a Colonial retirement account is
$25. Certificates will not be issued for Class B or Class C shares, and there
are some limitations on the issuance of Class A share certificates. The Funds
may refuse any purchase order for their shares. See the Statement of Additional
Information for more information.
Class A Shares. Class A shares are offered at net asset value plus an initial
sales charge as follows:
Short Duration Fund
Initial Sales Charge
Retained
by
Financial
Service
Firm as
as % of % of
Amount Offering Offering
Amount Purchased Invested Price Price
Less than $100,000 3.36% 3.25% 3.00%
$100,000 to less than $250,000 2.56% 2.50% 2.25%
$250,000 to less than $500,000 2.04% 2.00% 1.75%
$500,000 to less than $1,000,0001.52% 1.50% 1.25%
$1,000,000 or more 0.00% 0.00% 0.00%
Intermediate Fund and
Federal Securities Fund
Initial Sales Charge
Retained by
Financial
Service
Firm as
as % of % of
Amount Offering Offering
Amount Purchased Invested Price Price
Less than $50,000 4.99% 4.75% 4.25%
$50,000 to less than $100,000 4.71% 4.50% 4.00%
$100,000 to less than $250,000 3.90% 3.50% 3.00%
$250,000 to less than $500,000 3.09% 2.50% 2.00%
$500,000 to less than $1,000,000 2.04% 2.00% 1.75%
$1,000,000 or more 0.00% 0.00% 0.00%
On purchases of $1 million or more of each Fund, the Distributor pays the
financial service firm a cumulative commission as follows:
Amount Purchased Commission
First $3,000,000 1.00%
Next $2,000,000 0.50%
Over $5,000,000 0.25% (1)
(1) Paid over 12 months but only to the extent the shares remain outstanding.
In determining the sales charge and commission applicable to a new purchase
under the above schedules, the amount of the current purchase is added to the
current value of shares previously purchased and still held by the investor. If
a purchase results in an account having a value from $1 million to $5 million,
then the portion of the shares purchased that causes the account's value to
exceed $1 million will be subject to a 1.00% contingent deferred sales charge,
payable to the Distributor, if redeemed within 18 months from the first day of
the month following the purchase. If the purchase results in an account having a
value in excess of $5 million, the contingent deferred sales charge will not
apply to the portion of the purchased shares comprising such excess amount.
Class B Shares. Class B shares are offered at net asset value, without an
initial sales charge and, are subject to an annual distribution fee of 0.65% for
the Short Duration Fund and 0.75% for the Intermediate Fund and the Federal
Securities Fund for approximately eight years (at which time they automatically
convert to Class A shares not bearing a distribution fee) and a declining
contingent deferred sales charge if redeemed within four years after purchase
for the Short Duration Fund and within six years after purchase for the
Intermediate Fund and the Federal Securities Fund. As shown below, the amount of
the contingent deferred sales charge depends on the number of years after
purchase that the redemption occurs:
Short Duration Fund
Years Contingent Deferred
After Purchase Sales Charge
0-1 4.00%
1-2 3.00%
2-3 2.00%
3-4 1.00%
More than 4 0.00%
Intermediate Fund and
Federal Securities Fund
Years Contingent Deferred
After Purchase Sales Charge
0-1 5.00%
1-2 4.00%
2-3 3.00%
3-4 3.00%
4-5 2.00%
5-6 1.00%
More than 6 0.00%
Year one ends one year after the end of the month in which the purchase was
accepted and so on. The Distributor pays financial service firms a commission of
3.00% for the Short Duration Fund and 4.00% for the Intermediate Fund and the
Federal Securities Fund on Class B share purchases.
Class C Shares. Class C shares are offered at net asset value and are subject to
a 0.15% annual distribution fee for the Short Duration Fund and a 0.75% annual
distribution fee for the Intermediate Fund and the Federal Securities Fund, and
a 1.00% contingent deferred sales charge on redemptions made within one year
after the end of the month in which the purchase was accepted. The Distributor
has voluntarily agreed to waive 0.15% of the Intermediate Fund's and the Federal
Securities Fund's distribution fee. This waiver may be terminated by the
Distributor at any time without shareholder approval.
The Distributor pays financial service firms an initial commission of 1.00% on
Class C share purchases and an ongoing commission of 0.10% for the Short
Duration Fund and 0.55% for the Intermediate Fund and the Federal Securities
Fund annually commencing after the shares have been outstanding for one year.
Payment of the ongoing commission is conditioned on receipt by the Distributor
of the distribution fees referred to above. The commission may be reduced or
eliminated if the distribution fee paid by a Fund is reduced or eliminated for
any reason.
General. All contingent deferred sales charges are deducted from the amount
redeemed, not the amount remaining in the account, and are paid to the
Distributor. Shares issued upon distribution reinvestment and amounts
representing appreciation are not subject to a contingent deferred sales charge.
The contingent deferred sales charge is imposed on redemptions which result in
the account value falling below its Base Amount (the total dollar value of
purchase payments (including initial sales charge, if any) in the account
reduced by prior redemptions on which a contingent deferred sales charge was
paid and any exempt redemptions). When a redemption subject to a contingent
deferred sales charge is made, generally, older shares will be redeemed first
unless the shareholder instructs otherwise. See the Statement of Additional
Information for more information.
Which Class is more beneficial to an investor depends on the amount and intended
length of the investment. Large investments, qualifying for a reduced Class A
sales charge, avoid the distribution fee. Investments in Class B shares have
100% of the purchase invested immediately. Investors investing for a relatively
short period of time might consider Class C shares. Purchases of $250,000 or
more must be for Class A or Class C shares. Purchases of $1,000,000 or more must
be for Class A shares. Consult your financial service firm.
Financial service firms may receive different compensation rates for selling
different classes of shares. The Distributor may pay additional compensation to
financial service firms which have made or may make significant sales. See the
Statement of Additional Information for more information.
Special Purchase Programs. The Funds allow certain investors or groups of
investors to purchase shares with reduced or without initial or contingent
deferred sales charges. The programs are described in the Statement of
Additional Information under "Programs for Reducing or Eliminating Sales
Charges."
Shareholder Services and Account Fees. A variety of shareholder services are
available. For more information about these services or your account, call
1-800-345-6611. Some services are described in the attached account application.
A shareholder's manual explaining all available services will be provided upon
request.
In June of any year, a Fund may deduct $10 (payable to the Transfer Agent) from
accounts valued at less than $1,000 unless the account value has dropped below
$1,000 solely as a result of share value depreciation. Shareholders will receive
60 days' written notice to increase the account value before the fee is
deducted. A Fund may also deduct annual maintenance and processing fees (payable
to the Transfer Agent) in connection with certain retirement plan accounts. See
"Special Purchase Programs/Investor Services" in the Statement of Additional
Information for more information.
HOW TO SELL SHARES
Shares of the Funds may be sold on any day the Exchange is open, either directly
to a Fund or through your financial service firm. Sale proceeds generally are
sent within seven days (usually on the next business day after your request is
received in good form). However, for shares recently purchased by check, a Fund
will delay sending proceeds for 15 days in order to protect a Fund against
financial losses and dilution in net asset value caused by dishonored purchase
payment checks. To avoid delay in payment, investors are advised to purchase
shares unconditionally, such as by certified check or other immediately
available funds.
Selling Shares Directly To A Fund. Send a signed letter of instruction or stock
power form to the Transfer Agent, along with any certificates for shares to be
sold. The sale price is the net asset value (less any applicable contingent
deferred sales charge) next calculated after a Fund receives the request in
proper form. Signatures must be guaranteed by a bank, a member firm of a
national stock exchange or another eligible guarantor institution. Stock power
forms are available from financial service firms, the Transfer Agent and many
banks. Additional documentation is required for sales by corporations, agents,
fiduciaries, surviving joint owners and individual retirement account holders.
For details contact:
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Selling Shares Through Financial Service Firms. Financial service firms must
receive requests prior to the time at which a Fund values its shares to receive
that day's price, are responsible for furnishing all necessary documentation to
the Transfer Agent, and may charge for this service.
General. The sale of shares is a taxable transaction for income tax purposes and
may be subject to a contingent deferred sales charge. The contingent deferred
sales charge may be waived under certain circumstances. See the Statement of
Additional Information for more information. Under unusual circumstances, a Fund
may suspend repurchases or postpone payment for up to seven days or longer, as
permitted by federal securities law. No interest will accrue on amounts
represented by uncashed distribution or redemption checks.
HOW TO EXCHANGE SHARES
Except as described below with respect to money market funds, a Fund's shares
may be exchanged at net asset value for shares of other mutual funds distributed
by the Distributor, including funds advised by the Adviser and its affiliates,
Stein Roe & Farnham Incorporated and Newport Fund Management, Inc. Generally,
such exchanges must be between the same classes of shares.. Consult your
financial service firm or the Transfer Agent for information regarding what
funds are available.
Shares will continue to age without regard to the exchange for purposes of
conversion and in determining the contingent deferred sales charge, if any, upon
redemption. Carefully read the prospectus of the fund into which the exchange
will go before submitting the request. Call 1-800-426-3750 to receive a
prospectus and an exchange authorization form. Call 1-800-422-3737 to exchange
shares by telephone. An exchange is a taxable capital transaction. The exchange
service may be changed, suspended or eliminated on 60 days' written notice. Each
Fund will terminate the exchange privilege as to a particular shareholder if the
Adviser determines, in its sole and absolute discretion, that the shareholder's
exchange activity is likely to adversely impact the Adviser's ability to manage
a Fund's investments in accordance with its investment objective or otherwise
harm a Fund or its remaining shareholders.
Class A Shares. An exchange from a money market fund into a non-money market
fund will be at the applicable offering price next determined (including sales
charge), except for amounts on which an initial sales charge was paid and on
reinvested distributions on such amounts. Non-money market fund shares must be
held for five months before qualifying for exchange to a fund with a higher
sales charge, after which exchanges are made at the net asset value next
determined.
Class B Shares. Exchanges of Class B shares are not subject to the contingent
deferred sales charge. However, if shares are redeemed within four years after
the original purchase for the Short Duration Fund or six years after the
original purchase for the Intermediate Fund and the Federal Securities Fund, a
contingent deferred sales charge will be assessed using the schedule of the fund
into which the original investment was made.
Class C Shares. Exchanges of Class C shares are not subject to the contingent
deferred sales charge. However, if shares are redeemed within one year after the
original purchase, a 1.00% contingent deferred sales charge will be assessed.
Only one "roundtrip" exchange of a Fund's Class C shares may be made per
three-month period, measured from the date of the initial purchase. For example,
an exchange from Fund A to Fund B and back to Fund A would be permitted only
once during each three-month period.
TELEPHONE TRANSACTIONS
All shareholders and/or their financial advisers are automatically eligible to
exchange each Fund's shares and redeem up to $50,000 of a Fund's shares by
calling 1-800-422-3737 toll-free any business day between 9:00 a.m. and the time
at which the Fund values its shares. Telephone redemption privileges may be
elected on the account application. The Transfer Agent will employ reasonable
procedures to confirm that instructions communicated by telephone are genuine
and may be liable for losses related to unauthorized or fraudulent transactions
in the event reasonable procedures are not employed. Such procedures include
restrictions on where proceeds of telephone redemptions may be sent, limitations
on the ability to redeem by telephone shortly after an address change, recording
of telephone lines and requirements that the redeeming shareholder and/or his or
her financial adviser provide certain identifying information. Shareholders
and/or their financial advisers wishing to redeem or exchange shares by
telephone may experience difficulty in reaching a Fund at its toll-free
telephone number during periods of drastic economic or market changes. In that
event, shareholders and/or their financial advisers should follow the procedures
for redemption or exchange by mail as described above under "How to Sell
Shares." The Adviser, the Transfer Agent and each Fund reserve the right to
change, modify or terminate the telephone redemption or exchange services at any
time upon prior written notice to shareholders. Shareholders and/or their
financial advisers are not obligated to transact by telephone.
12B-1 PLANS
Under their 12b-1 Plans, the Short Duration Fund pays the Distributor monthly a
service fee at an annual rate of 0.20% of net assets attributed to Class A and
Class B shares and 0.25% of net assets attributed to Class C shares, and the
Intermediate Fund and the Federal Securities Fund each pay the Distributor
monthly a service fee at an annual rate of 0.25% of net assets attributed to
Class A, Class B and Class C shares. Pursuant to its Plan, each Fund also pays
the Distributor monthly a distribution fee at an annual rate of 0.65% (for the
Short Duration Fund) or 0.75% (for the Intermediate Fund and the Federal
Securities Fund) of average daily net assets attributed to Class B shares. The
Short Duration Fund pays the Distributor monthly a distribution fee at an annual
rate of 0.15% of average daily net assets attributed to Class C shares;the
Intermediate Fund and the Federal Securities Fund each pay the Distributor
monthly a distribution fee at an annual rate of 0.75% of average daily net
assets attributed to Class C shares. The Distributor has voluntarily agreed to
0.15% of the Intermediate Fund's and the Federal Securities Fund's Class C share
distribution fee. The Distributor may terminate this waiver at any time without
shareholder approval. Because Class B and Class C shares bear the additional
distribution fee, their dividends will be lower than those of Class A shares.
Class B shares automatically convert to Class A shares, approximately eight
years after the Class B shares were purchased. Class C shares do not convert.
The multiple class structure could be terminated should certain Internal Revenue
Service rulings be rescinded. See the Statement of Additional Information for
more information. The Distributor uses the fees to defray the cost of
commissions and service fees paid to financial service firms which have sold a
Fund's shares, and to defray other expenses such as sales literature, prospectus
printing and distribution, shareholder servicing costs and compensation to
wholesalers. Should the fees exceed the Distributor's expenses in any year, the
Distributor would realize a profit. The Plans also authorize other payments to
the Distributor and its affiliates (including the Adviser) which may be
construed to be indirect financing of sales of each Fund's shares.
ORGANIZATION AND HISTORY
Trust II is a Massachusetts business trust organized in 1980. Trust III is a
Massachusetts business trust organized in 1986. Each Fund represents the entire
interest in a separate portfolio of its respective Trust.
Neither Trust is required to hold annual shareholder meetings, but special
meetings may be called for certain purposes. Shareholders receive one vote for
each Fund share. Shares of a Trust vote together except when required by law to
vote separately by fund or by class. Shareholders owning in the aggregate ten
percent of a Trust's shares may call meetings to consider removal of Trustees.
Under certain circumstances, a Trust will provide information to assist
shareholders in calling such a meeting. See the Statement of Additional
Information for more information.
It is possible that one Trust's Fund(s) might become liable for misstatements,
inaccuracies or incomplete disclosures in this Prospectus or in the Statement of
Additional Information that relate to the other Trust's Fund(s).
<PAGE>
Investment Adviser
Colonial Management Associates, Inc.
One Financial Center
Boston, MA 02111-2621
Distributor
Liberty Financial Investments, Inc.
One Financial Center
Boston, MA 02111-2621
Custodian
Boston Safe Deposit and Trust Company
One Boston Place
Boston, MA 02108-2624
Custodian (Effective January, 1998)
The Chase Manhattan Bank
4 Chase MetroTech Center
Brooklyn, NY 11245
Shareholder Services and Transfer Agent
Colonial Investors Service Center, Inc.
One Financial Center
Boston, MA 02111-2621
1-800-345-6611
Independent Accountants
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110-2624
Legal Counsel
Ropes & Gray
One International Place
Boston, MA 02110-2624
Your financial service firm is:
Printed in U.S.A.
December 29, 1997
COLONIAL SHORT DURATION
U.S. GOVERNMENT FUND
COLONIAL INTERMEDIATE U.S. GOVERNMENT FUND
COLONIAL FEDERAL SECURITIES FUND
PROSPECTUS
Colonial Short Duration U.S. Government Fund seeks as high a level of current
income as is consistent with very low volatility by investing primarily in U.S.
government securities and maintaining a weighted average portfolio duration of 3
years or less.
Colonial Intermediate U. S. Government Fund seeks as high a level of current
income and total return as is consistent with prudent risk by investing
primarily in U.S. government securities.
Colonial Federal Securities Fund seeks as high a level of current income and
total return, as is consistent with prudent longer-term investing, by investing
primarily in U.S. government securities.
For more detailed information about the Funds, call the Adviser at
1-800-426-3750 for the December 29, 1997 Statement of Additional Information.
- ----------------------------- --------------------------
NOT FDIC-INSURED MAY LOSE VALUE
NO BANK GUARANTEE
- ----------------------------- --------------------------
Colonial Mutual Funds
Please send your completed application to:
Colonial Investors Service Center, Inc. (CISC)
P.O. Box 1722
Boston, Massachusetts 02105-1722
New A, B & C Shares Account Application/Revision to Existing Account
To open a new account, complete sections 1, 2, 3, & 7.
To apply for special services for a new or existing account, complete sections
4, 5, 6, or 8 as appropriate.
___ Please check here if this is a revision.
1-----------Account ownership--------------
Please choose one of the following.
__Individual: Print your name, Social Security #, U.S. citizen status.
__Joint Tenant: Print all names, the Social Security # for the first person,
and his/her U.S. citizen status.
__Uniform Gift to Minors: Names of custodian and minor, minor's Social Security
#, minor's U.S. citizen status.
__Corporation, Association, Partnership: Include full name, Taxpayer I.D. #.
__Trust: Name of trustee, trust title & date, and trust's Taxpayer I.D. #.
______________________________________
Name of account owner
______________________________________
Name of joint account owner
______________________________________
Street address
______________________________________
Street address
______________________________________
City, State, and Zip
______________________________________
Daytime phone number
______________________________________
Social Security # or Taxpayer I.D. #
Are you a U.S. citizen? ___Yes ___No
______________________________________
If no, country of permanent residence
______________________________________
Account Owner's date of birth
______________________________________
Account number (if existing account)
2 -----Colonial fund(s) you are purchasing--------
Your investment will be made in Class A shares if no class is indicated.
Certificates are not available for Class B or C shares. If no distribution
option is selected, distributions will be reinvested in additional fund
shares. Please consult your financial adviser to determine which class of
shares best suits your needs.
Fund Fund Fund
________________ ___________________ _____________________
Name of Fund Name of Fund Name of Fund
$_______________ $__________________ $____________________
Amount Amount Amount
Class
___ A Shares ___ B Shares (less than $250,000) ___ C Shares (less than
$1,000,000)
Method of Payment Choose one
___Check payable to the Fund ___Bank wired on ____/____/____ (Date)
Wire/Trade confirmation #_____________
Ways to receive your distributions
Choose one (If none chosen, dividends and capital gains will be reinvested)
Distributions of $10.00 or less will automatically be reinvested in additional
fund shares.
___Reinvest dividends and capital gains
___Dividends and capital gains in cash
___Dividends in cash; reinvest capital gains
___Automatic Dividend Diversification See section 5A, inside
___Direct Deposit via Colonial Cash Connection Complete Bank information
in section 4B. I understand that my bank must be a member of the
Automated Clearing House System.
3---Your signature & taxpayer I.D. number certification----
Each person signing on behalf of an entity represents that his/her actions are
authorized. I have received and read each appropriate fund prospectus and
understand that its terms are incorporated by reference into this application.
I understand that this application is subject to acceptance. I understand that
certain redemptions may be subject to a contingent deferred sales charge. It
is agreed that the fund, The Colonial Group, Inc. and its affiliates and their
officers, directors, agents, and employees will not be liable for any loss,
liability, damage, or expense for relying upon this application or any
instruction believed genuine.
I certify, under penalties of perjury, that:
1. The Social Security # or Taxpayer I.D. # provided is correct.
You must cross out Item 2a, b or c below only if you have been notified by the
Internal Revenue Service (IRS) that you are currently subject to back-up
withholding because of under-reporting interest or dividends on you tax return.
2. I am not subject to back-up withholding because: (a) I am exempt from back-
up withholding, or (b) I have not been notified by the IRS that I am
subject to back-up withholding as a result of a failure to report all
interest or dividends, or (c) the IRS has notified me that I am no longer
subject to back-up withholding.
The Internal Revenue Service does not require your consent to any provision of
this document other than the certifications required to avoid backup
withholdings.
X______________________________________________
Signature
_______________________________________________
Capacity, if applicable Date
X______________________________________________
Signature
_______________________________________________
Capacity, if applicable Date
4--------Ways to withdraw from your fund-------
It may take up to 30 days to activate the following features. Complete only
the sections that apply to the features you would like.
A. Systematic Withdrawal Plan (SWP)
You can receive monthly, quarterly, or semiannual checks from your account in
any amount you select, with certain limitations. Your redemption checks can
be sent to you at the address of record for your account, to your bank
account, or to another person you choose. The value of the shares in your
account must be at least $5,000 and you must reinvest all of your
distributions. Checks will be processed on the 10th calendar day of the month
or the preceding business day if the 10th falls on a non-business day. If you
receive your SWP payment via electronic funds transfer (EFT), you may request
it to be processed any day of the month. Withdrawals in excess of 12% annually
of your current account value will not be accepted. Redemptions made in
addition to SWP payments may be subject to a contingent deferred sales charge
for Class B or C shares. Please consult your financial or tax adviser before
electing this option.
Funds for withdrawal:
___________________
Name of fund
Withdrawal amount
Redeem shares from account as follows:
Dollar amount of payment $___________
or
Total annual %_________
Frequency (choose one)
__Monthly __Quarterly __Semiannually
I would like payments to begin _____/_____ (day, if indicating EFT, month).
___________________
Name of fund
Withdrawal Amount
Redeem shares from account as follows:
Dollar amount of payment $___________
or
Total annual %_________
Frequency (choose one)
__Monthly __Quarterly __Semiannually
I would like payments to begin _____/_____ (day,if indicating EFT, month).
Payment instructions
Send the payment to (choose one):
__My address of record.
__My bank account via EFT. Please complete the Bank Information section below.
All EFT transactions will be made two business days after the processing date.
Your bank must be a member of the Automated Clearing House System.
__The payee listed at right. If more than one payee, provide the name,
address, payment amount, and frequency for other payees (maximum of 5) on
a separate sheet. If you are adding this service to an existing account,
please sign below and have your signature(s) guaranteed.
______________________________________________
Name of payee
______________________________________________
Address of payee
______________________________________________
City
______________________________________________
State Zip
______________________________________________
Payee's bank account number, if applicable
B. Telephone withdrawal pptions
All telephone transaction calls are recorded. These options are not available
for retirement accounts. Please sign below and have your signature(s)
guaranteed.
1. Fast Cash
You are automatically eligible for this service. You or your financial
adviser can withdraw up to $50,000 from your account and have it sent to your
address of record. For your protection, this service is only available on
accounts that have not had an address change within 30 days of the redemption
request.
2. Telephone Redemption
__I would like the Telephone Redemption privilege either by federal fund wire
or EFT. Telephone redemptions over $500 will be sent via federal fund wire,
usually on the next business day ($7.50 will be deducted). Redemptions of
$500 or less will be sent by check to your designated bank.
3. On-Demand EFT Redemption
__I would like the On-Demand EFT Redemption Privilege. Proceeds paid via EFT
will be credited to your bank account two business days after the process
date. You or your financial adviser may withdraw shares from your fund account
by telephone and send your money to your bank account. If you are adding this
service to an existing account, complete the Bank Information section below
and have all shareholder signatures guaranteed.
Colonial Investor Service Center, Inc. (CISC) and the fund's liability is
limited when following telephone instructions; a shareholder may suffer a loss
from an unauthorized transaction reasonably believed by CISC to have been
authorized.
Bank Information (For Sections A and B Above)
I authorize deposits to the following bank account:
____________________________________________________________
Bank name City Bank account number
____________________________________________________________
Bank street address State Zip Bank routing # (your bank
can provide this)
X__________________________________
Signature of account owner(s)
X__________________________________
Signature of account owner(s) Place signature guarantee here.
5-----Ways to make additional investments--------
These services involve continuous investments regardless of varying share
prices. Please consider your ability to continue purchases through periods of
price fluctuations. Dollar cost averaging does not assure a profit or protect
against loss in declining markets.
A. Automatic Dividend Diversification
Please diversify my portfolio by investing distributions from one fund into
another Colonial, Newport or Stein Roe Advisor fund. These investments will
be made in the same share class and without sales charges. Accounts must be
identically registered. I have carefully read the prospectus for the
fund(s) listed below.
____________________________
From fund
____________________________
Account number (if existing)
____________________________
To fund
____________________________
Account number (if existing)
____________________________
From fund
____________________________
Account number (if existing)
____________________________
To fund
____________________________
Account number (if existing)
B. Automated Dollar Cost Averaging
This program allows you to automatically have money from any Colonial, Newport
or Stein Roe Advisor fund in which you have a balance of at least $5,000
exchanged into the same share class of up to four other identically registered
Colonial accounts, on a monthly basis. The minimum amount for each exchange is
$100. Please complete the section below.
____________________________________
Fund from which shares will be sold
$_________________________
Amount to redeem monthly
____________________________________
Fund to invest shares in
$_________________________
Amount to invest monthly
____________________________________
Fund to invest shares in
$_________________________
Amount to invest monthly
C. Fundamatic/On-Demand EFT Purchase
Fundamatic automatically transfers the specified amount from your bank
checking account to your Colonial, Newport or Stein Roe Advisor fund
account on a regular basis. The On-Demand EFT Purchase program moves money
from your bank checking account to your Colonial, Newport or Stein Roe
Advisor fund account by electronic funds transfer based on your
telephone request. You will receive the applicable price two
business days after the receipt of your request. Your bank needs to be a
member of the Automated Clearing House System. Please attach a blank check
marked "VOID." (Deposit slips are not a substitution). Also, complete the
section below. Please allow 3 weeks for CISC to establish these services
with your bank.
____________________________________
Fund name
_________________________________
Account number
$_____________________ _________________
Amount to transfer Month to start
___________________________________
Fund name
________________________________
Account number
$_____________________ _________________
Amount to transfer Month to start
__On-Demand Purchase (will be automatically established if you choose
Fundamatic)
__Fundamatic Frequency
__Monthly or __Quarterly
Check one:
__EFT- Choose any day of the month_____________________
__Paper Draft-Choose either the:
__5th day of the month
__20th day of the month
Authorization to honor checks drawn by Colonial Investors Service Center,
Inc. (CISC) Do Not Detach. Make sure all depositors on the bank account sign
to the far right. Please attach a blank check marked "VOID" here. (Deposit
slips are not a substitution). See reverse for bank instructions.
I authorize CISC to draw on my bank account, by check or electronic funds
transfer, for an investment in a Colonial, Newport or Stein Roe Advisor fund.
CISC and my bank are not liable for any loss arising from delays or dishonored
draws. If a draw is not honored, I understand that notice may not be given and
CISC may reverse the purchase and charge my account $15.
______________________________________
Bank name
______________________________________
Bank street address
______________________________________
Bank street address
______________________________________
City State Zip
______________________________________
Bank account number
______________________________________
Bank routing #
X_____________________________________
Depositor's Signature(s)
Exactly as appears on bank records
X_____________________________________
Depositor's Signature(s)
Exactly as appears on bank records
6------------Ways to reduce your sales charges------------
These services can help you reduce your sales charge while increasing your
share balance over the long term.
A. Right of Accumulation
If you, your spouse or your children own any other shares in other
Colonial, Newport or Stein Roe Advisor funds, you may be eligible for a reduced
sales charge. The combined value of your accounts must be $50,000 or more.
Class A shares of money market funds are not eligible unless purchased by
exchange from another Colonial, Newport or Stein Roe Advisor fund.
The sales charge for your purchase will be based on the sum of the purchase(s)
added to the value of all shares in other Colonial, Newport or Stein Roe
Advisor funds at the previous day's public offering price.
__Please link the accounts listed below for Right of Accumulation privileges,
so that this and future purchases will receive any discount for which they
are eligible.
_____________________________________
Name on account
_____________________________________
Account number
_____________________________________
Name on account
_____________________________________
Account number
B. Statement of Intent
If you agree in advance to invest at least $50,000 within 13 months, you'll
pay a lower sales charge on every dollar you invest. If you sign a Statement
of Intent within 90 days after you establish your account, you can receive a
retroactive discount on prior investments. The amount required to receive a
discount varies by fund; see the sales charge table in the "How to Buy Shares"
section of your fund prospectus.
__I want to reduce my sales charge.
I agree to invest $ _______________ over a 13-month period starting
______/______/ 19______ (not more than 90 days prior to this application). I
understand an additional sales charge must be paid if I do not complete this
Statement of Intent.
7-------------Financial service firm---------------------
To be completed by a Representative of your financial service firm.
This application is submitted in accordance with our selling agreement with
Liberty Financial Investments, Inc. (LFII), the Fund's prospectus, and this
application. We will notify LFII, of any purchase made under a Statement
of Intent, Right of Accumulation, or Sponsored Arrangement. We guarantee the
signatures on this application and the legal capacity of the signers.
_____________________________________
Representative's name
_____________________________________
Representative's number
_____________________________________
Representative's phone number
_____________________________________
Account # for client at financial
service firm
_____________________________________
Branch office address
_____________________________________
City
_____________________________________
State Zip
_____________________________________
Branch office number
_____________________________________
Name of financial service firm
_____________________________________
Main office address
_____________________________________
Main office address
_____________________________________
City
_____________________________________
State Zip
X____________________________________
Authorized signature
8----------Request for a combined quarterly statement mailing-----------
CISC can mail all of your quarterly statements in one envelope. This
option simplifies your record keeping and helps reduce fund expenses.
__I want to receive a combined quarterly mailing for all my accounts. Please
indicate account numbers or tax I.D. numbers of accounts to be linked.
________________________________________________________________________
Fundamatic (See reverse side)
Applications must be received before the start date for processing.
This program's deposit privilege can be revoked by CISC without prior
notice if any check is not paid upon presentation. CISC has no obligation
to notify the shareholder of non-payment of any draw. This program may be
discontinued by Colonial by written notice at least 30 business days prior
to the due date of any draw or by the shareholder at any time.
To the Bank Named on the Reverse Side:
Your depositor has authorized Colonial Investors Service Center, Inc. (CISC) to
collect amounts due under an investment program from his/her personal checking
account. When you pay and charge the draws to the account of your depositor
executing the authorization payable to the order of CISC, CISC, hereby
indemnifies and holds you harmless from any loss (including reasonable
expenses) you may suffer from honoring such draw, except any losses due to your
payment of any draw against insufficient funds.
Liberty Financial Investments, Inc., Distributor SH-185E-0997
COLONIAL TRUST III
Cross Reference Sheet (Colonial Federal Securities Fund)
Item Number of Location or Caption in the Statement of Additional Information
Form N-1A --------------------------------------------------------------
- ---------
Part B
- ------
10. Cover Page
11. Table of Contents
12. Not Applicable
13. Investment Objectives and Policies; Fundamental Investment
Policies; Other Investment Policies; Portfolio Turnover;
Miscellaneous Investment Practices
14. Fund Charges and Expenses; Management of the Funds
15. Fund Charges and Expenses
16. Fund Charges and Expenses; Management of the Funds
17. Fund Charges and Expenses; Management of the Funds
18. Shareholder Meetings; Shareholder Liability
19. How to Buy Shares; Determination of Net Asset Value; Suspension
of Redemptions; Special Purchase Programs/Investor Services;
Programs for Reducing or Eliminating Sales Charge; How to Sell
Shares; How to Exchange Shares
20. Taxes
21. Fund Charges and Expenses; Management of the Colonial Funds
22. Fund Charges and Expenses; Investment Performance; Performance
Measures
23. Independent Accountants
<PAGE>
COLONIAL SHORT DURATION U.S. GOVERNMENT FUND
COLONIAL INTERMEDIATE U.S. GOVERNMENT FUND
COLONIAL FEDERAL SECURITIES FUND
Statement of Additional Information
December 29, 1997
This Statement of Additional Information (SAI) contains information which may be
useful to investors but which is not included in the Prospectus of Colonial
Short Duration U.S. Government Fund, Colonial Intermediate U.S. Government Fund
and Colonial Federal Securities Fund (each, a Fund and collectively, the Funds).
This SAI is not a prospectus and is authorized for distribution only when
accompanied or preceded by the Prospectus of the Funds dated December 29, 1997 .
This SAI should be read together with the Prospectus and the Funds' most recent
Annual Report dated August 31, 1997. Investors may obtain a free copy of the
Prospectus and the Annual Report from Liberty Financial Investments, Inc., One
Financial Center, Boston, MA 02111-2621.
Part 1 of this SAI contains specific information about the Funds. Part 2
includes information about the Colonial funds generally and additional
information about certain securities and investment techniques described in the
Funds' Prospectus.
TABLE OF CONTENTS
Part 1 Page
Definitions
Investment Objectives and Policies
Fundamental Investment Policies
Other Investment Policies
Portfolio Turnover
Fund Charges and Expenses
Investment Performance
Custodian
Independent Accountants
Part 2
Miscellaneous Investment Practices
Taxes
Management of the Colonial Funds
Determination of Net Asset Value
How to Buy Shares
Special Purchase Programs/Investor Services
Programs for Reducing or Eliminating Sales Charges
How to Sell Shares
Distributions
How to Exchange Shares
Suspension of Redemptions
Shareholder Liability
Shareholder Meetings
Performance Measures
Appendix I
Appendix II
GF--1297
<PAGE>
Part 1
COLONIAL SHORT DURATION U.S. GOVERNMENT FUND
COLONIAL INTERMEDIATE U.S. GOVERNMENT FUND
COLONIAL FEDERAL SECURITIES FUND
Statement of Additional Information
December 29, 1997
DEFINITIONS
"Trust II" Colonial Trust II
"Trust III" Colonial Trust III
"Fund" or "Short Duration Fund" Colonial Short Duration U.S. Government Fund
"Fund" or "Intermediate Fund" Colonial Intermediate U.S. Government Fund
"Fund"or "Federal Securities Fund" Colonial Federal Securities Fund
"Adviser" Colonial Management Associates, Inc., the
Funds' investment adviser
"LFII" Liberty Financial Investments, Inc. the
Funds' distributor
"CISC" Colonial Investors Service Center, Inc.,
the Funds' shareholder services and
transfer agent
INVESTMENT OBJECTIVES AND POLICIES
The Funds' Prospectus describes each Fund's investment objective and investment
policies. Part 1 of this SAI includes additional information concerning, among
other things, the fundamental investment policies of each Fund. Part 2 contains
additional information about the following securities and investment techniques
that are described or referred to in the Prospectus:
Short-Term Trading
Forward Commitments ("When-Issued" Securities)
Repurchase Agreements
Reverse Repurchase Agreements
Stripped Securities
Mortgage Dollar Rolls
Options on Securities (Intermediate Fund and Federal Securities Fund)
Futures Contracts and Related Options (Intermediate Fund and Federal
Securities Fund)
Money Market Instruments
Except as indicated below under "Fundamental Investment Policies," each Fund's
investment policies are not fundamental, and the Trustees may change the
policies without shareholder approval. Effective December 27, 1996, the Short
Duration Fund changed its name from "Colonial Adjustable Rate U.S. Government
Fund" to its current name. Effective April 30, 1997, the Intermediate Fund
changed its name from "Colonial U.S. Government Fund" to its current name.
FUNDAMENTAL INVESTMENT POLICIES
The Investment Company Act of 1940 (Act) provides that a "vote of a majority of
the outstanding voting securities" means the affirmative vote of the lesser of
(1) more that 50% of the outstanding shares of each Fund, or (2) 67% or more of
the shares present at a meeting if more than 50% of the outstanding shares are
represented at the meeting in person or by proxy. The following fundamental
investment policies cannot be changed without such a vote.
Total assets and net assets are determined at current value for purposes of
compliance with investment restrictions and policies. All percentage limitations
will apply at the time of investment and are not violated unless an excess or
deficiency occurs as a result of such investment. For the purpose of the Act's
diversification requirement, an issuer is the entity whose revenues support the
security.
Each Fund may:
1. Issue senior securities only through borrowing from banks for temporary or
emergency purposes up to 10% of its net assets; however, the Fund will not
purchase additional portfolio securities while borrowings exceed 5% of net
assets;
2. Invest up to 5% of its net assets in real estate only as a result of owning
securities (Short Duration Fund);
3. Only own real estate acquired as the result of owning securities; and not
more than 5% of total assets (Intermediate Fund and Federal Securities
Fund);
4. Purchase and sell futures contracts and related options so long as the total
initial margin and premiums on the contracts does not exceed 5% of its total
assets;
5. Underwrite securities issued by others only when disposing of portfolio
securities;
<PAGE>
6. Make loans through lending of securities not exceeding 30% of total assets,
through the purchase of debt instruments or similar evidences of
indebtedness typically sold privately to financial institutions and through
repurchase agreements;
7. Not concentrate more than 25% of its total assets in any one industry, or
with respect to 75% of total assets purchase any security (other than
obligations of the U.S. government and cash items including receivables) if
as a result more than 5% of its total assets would then be invested in
securities of a single issuer, or purchase voting securities of an issuer
if, as a result of such purchase, the Fund would own more than 10% of the
outstanding voting shares of such issuer; and
8. Invest up to 10% of its net assets in illiquid assets (Intermediate Fund
and Federal Securities Fund).
OTHER INVESTMENT POLICIES
As non-fundamental investment policies which may be changed without a
shareholder vote, each Fund may not:
1. Purchase securities on margin, but it may receive short-term credit to clear
securities transactions and may make initial or maintenance margin deposits
in connection with futures transactions;
2. Have a short securities position, unless the Fund owns, or owns rights
(exercisable without payment) to acquire, an equal amount of such
securities;
3. Invest more than 15% of its assets in illiquid assets (Short Duration Fund);
and
4. Invest in or write futures and options (Short Duration Fund).
PORTFOLIO TURNOVER
Portfolio turnover for the last two fiscal years is included in the Prospectus
under "The Funds' Financial History." High portfolio turnover may cause a Fund
to realize capital gains which, if realized and distributed by that Fund, may be
taxable to shareholders as ordinary income. High portfolio turnover in a Fund's
portfolio may result in correspondingly greater brokerage commissions and other
transaction costs, which would be borne directly by that Fund.
FUND CHARGES AND EXPENSES
Under the Short Duration Fund's Management Agreement, the Fund pays the Adviser
a monthly fee based on the average daily net assets of the Fund, determined at
the close of each business day during the month, at the annual
rate of 0.55% (subject to any voluntary reductions that the Adviser may agree to
periodically).
Under the Intermediate Fund's Management Agreement, the Fund pays the Adviser a
monthly fee based on the average daily net assets of the Fund, determined at
the close of each business day during the month, at the following annual rates:
0.60% of the first $1 billion, 0.55% of the next $500 million and 0.50% of any
excess over $1.5 billion (subject to any voluntary reductions as the Adviser may
agree to periodically).
Under the Federal Securities Fund's Management Agreement, the Fund, effective
October 1, 1997, pays the Adviser a monthly fee based on the average daily net
assets of the Fund, determined at the close of each business day during the
month (subject to any voluntary reductions that the Adviser may
agree to periodically), as follows:
Average Daily Net Assets Annual Fee Rate
First $1 billion 0.60%
Next $1 billion 0.55%
Next $1 billion 0.50%
Over $3 billion 0.40%
Under the Funds' transfer agency and shareholder servicing agreement, each Fund
pays CISC a monthly fee at the annual rate of 0.18% of average daily net assets,
plus certain out-of-pocket expenses. In October 1997, each Fund's fee for such
transfer agency and shareholder services began reducing monthly and will
continue to do so through September 1998, until the fee reaches 0.17% of each
Fund's average daily net assets, plus certain out-of-pocket expenses.
Recent Fees paid to the Adviser, LFII and CISC (dollars in thousands)
Short Duration Fund
Years ended August 31
---------------------
1997 1996 1995
---- ---- ----
Management fee $60 $68 $102
Bookkeeping fee 27 27 27
Shareholder service and
transfer agent fee 24 25 38
12b-1 fees:
Service fee (Classes A, B and C)(a) 22 25 37
Distribution fee (Class B) 26 27 29
Distribution fee (Class C)(a) 1 1 (b)
Fees and expenses waived or borne
by the Adviser (192) (183) (211)
(a) Class C shares were initially offered on January 4, 1995.
(b) Rounds to less than one.
Intermediate Fund
Years ended August 31
---------------------
1997 1996 1995
---- ---- ----
Management fee $7,913 $9,755 $9,630
Bookkeeping fee 446 536 525
Shareholder service and
transfer agent fee 2,939 3,657 3,588
12b-1 fees:
Service fee (Classes A, B and C)(c) 3,360 4,245 4,117
Distribution fee (Class B) 3,882 4,856 5,595
Distribution fee (Class C)(c) (d) --- ---
(c) Class C shares were initially offered on August 1, 1997.
(d) Rounds to less than one.
Federal Securities Fund
Period ended August 31 Years ended October 31
---------------------- ----------------------
1997(e) 1996 1995 1994
------- ---- ---- ----
Management fee $5,535 $7,614 $8,424 $9,805
Bookkeeping fee 304 406 440 497
Shareholder service and
transfer agent fee 1,902 2,576 2,881 3,322
12b-1 fees:
Service fee (Classes A, B
and C)(f) 2,135 2,959 3,298 3,870
Distribution fee (Class B) 451 573 558 543
Distribution fee (Class C)(f) (g) --- --- ---
(e) The Fund changed its fiscal year end from October 31 to August 31.
Information presented is for the period November 1, 1996 through August 31,
1997.
(f) Class C shares were initially offered on August 1, 1997.
(g) Rounds to less than one.
Brokerage Commissions (dollars in thousands)
The Short Duration Fund and Intermediate Fund did not pay any brokerage
commissions for the fiscal years ended August 31, 1997, 1996 and 1995.
Federal Securities Fund
Period ended August 31 Years ended October 31
---------------------- ----------------------
1997(i) 1996 1995 1994
---- ---- ---- ----
Total commissions $1 $11 $52 $115
Directed transactions(h) 0 0 0 0
Commissions on directed
transactions 0 0 0 0
(h) See "Management of the Colonial Funds-Portfolio Transactions-Brokerage and
research services" in Part 2 of this SAI.
(i) The Fund changed its fiscal year end from October 31 to August 31.
Information presented is for the period November 1, 1996 through August 31,
1997.
d
<PAGE>
Trustees and Trustee Fees
For the fiscal year ended August 31, 1997 and the calendar year ended December
31, 1996, the Trustees received the following compensation for serving as
Trustees (j):
<TABLE>
<CAPTION>
Aggregate Aggregate
Aggregate Compensation Compensation Total Compensation
Compensation From The Aggregate From The Federal From Trust II and
From The Short Intermediate Compensation From The Securities Fund Trust III And Fund
Duration Fund Fund For The Federal Securities For The Complex Paid To The
For Fiscal Year Fiscal Year Fund For The Period Fiscal Year Trustees For The
Ended Ended Ended Ended Calendar Year Ended
Trustee August 31, 1997 August 31, 1997 August 31, 1997(k) October 31, 1996 December 31, 1996(l)
- ------- --------------- --------------- ------------------ ---------------- --------------------
<S> <C> <C> <C> <C> <C>
Robert J. Birnbaum $719 $5,295 $4,236 $5,874 $ 92,000
Tom Bleasdale 828(m) 6,041(n) 4,833(o) 6,562(p) 104,500(q)
Lora S. Collins 719 5,296 4,232 5,834 92,000
James E. Grinnell 727(r) 5,343(s) 4,272(t) 5,894 93,000
William D. Ireland, Jr. 782 5,762 4,604 7,159 109,000
Richard W. Lowry 726 5,342 4,266 5,998 95,000
William E. Mayer 688 5,062 4,046 5,776 91,000
James L. Moody, Jr. 758(u) 5,585(v) 4,465(w) 6,728(x) 106,500(y)
John J. Neuhauser 726 5,359 4,282 5,971 94,500
George L. Shinn 798 5,882 4,703 6,723 105,500
Robert L. Sullivan 772 5,663 4,526 6,407 102,000
Sinclair Weeks, Jr. 784 5,759 4,605 6,949 110,000
</TABLE>
(j) The Funds do not currently provide pension or retirement plan benefits to
the Trustees.
(k) The Fund changed its fiscal year end from October 31 to August 31.
Information presented is for the period November 1, 1996 through August 31,
1997.
(l) At December 31, 1996, the Colonial Funds complex consisted of
38 open-end and 5 closed-end management investment company portfolios.
(m) Includes $484 payable in later years as deferred compensation.
(n) Includes $3,491 payable in later years as deferred compensation.
(o) Includes $2,801 payable in later years as deferred compensation.
(p) Includes $2,962 payable in later years as deferred compensation.
(q) Includes $51,500 payable in later years as deferred compensation.
(r) Includes $57 payable in later years as deferred compensation.
(s) Includes $437 payable in later years as deferred compensation.
(t) Includes $348 payable in later years as deferred compensation.
(u) Total compensation of $758 payable in later years as deferred compensation.
(v) Total compensation of $5,585 will be payable in later years as deferred
compensation.
(w) Total compensation of $4,465 will be payable in later years as deferred
compensation.
(x) Total compensation of $6,728 will be payable in later years as deferred
compensation.
(y) Total compensation of $106,500 will be payable in later years as deferred
compensation.
The following table sets forth the amount of compensation paid to Messrs.
Birnbaum, Grinnell and Lowry in their capacities as Trustees or Directors of the
Liberty All-Star Equity Fund and of the Liberty All-Star Growth Fund, Inc.
(formerly known as The Charles Allmon Trust, Inc.) (together, Liberty Funds) for
service during the calendar year ended December 31, 1996:
Total Compensation
From Liberty Funds For The
Calendar Year Ended
Trustee December 31, 1996 (z)
Robert J. Birnbaum $ 25,000
James E. Grinnell 25,000
Richard W. Lowry 25,000
(z) The Liberty Funds are advised by Liberty Asset Management Company
(LAMCO). LAMCO is an indirect wholly-owned subsidiary of Liberty
Financial Companies, Inc., an intermediate parent of the Adviser.
e
<PAGE>
Ownership of the Fund
At November 28, 1997, the Trustees and officers of the Funds owned less than 1%
of the then outstanding shares of each Class of shares of each Fund.
As of record on December 5, 1997, the following shareholders owned more than 5%
of the referenced Class of shares of each Fund:
Class A shares of the Short Duration Fund: Arban & Carosi, Inc., 13800 Dawson
Beach Road, Woodbridge, VA 22191 (99,823.212 shares, 14.50%); Boatman & Magnani,
Inc., 600 Ritchie Road, Capital Heights, MD 20743 (51,193.599 shares, 7.44%).
Class B shares of the Short Duration Fund: Merrill Lynch, Pierce, Fenner &
Smith, Attn: Book Entry, Mutual Fund Operations, 4800 Deer Lake Drive, East, 3rd
Floor, Jacksonville, FL 32216 (108,824.000 shares, 26.58%).
Class C shares of the Short Duration Fund: Colonial Management Associates, Inc.,
One Financial Center, Boston, MA 02111 (30,197.242 shares, 24.12%); St. Marys
Hospital Physician Fund, Practice Fund, 56 Franklin Street, Waterbury, CT 06706
(65,825.726 shares, 52.59%).
Class B shares of the Intermediate Fund: Merrill Lynch, Pierce, Fenner & Smith,
Inc., Mutual Funds Operation, 4800 Deer Lake Drive East 3rd, Jacksonville, FL
32216 (4,592,064.149 shares, 6.88%).
Class C shares of the Intermediate Fund: Colonial Management Associates, Inc.,
One Financial Center, Boston, MA 02111-2621 (15,448.883 shares, 21.74%); Milton
Tzanatos & Vaso Tzanatos JTWROS, 723 Timuguana Lane, Palm Harbor, FL 34683
(4,557.627 shares, 6.41%); James Keith & Elizabeth Keith TTEES, Keith Family
Living Trust, 1 Thompson Avenue W. #231, W. St. Paul, MN 55118 (13,485.412
shares, 18.98%).
Class B shares of the Intermediate Fund: Merrill Lynch, Pierce, Fenner & Smith,
Inc., Mutual Funds Operation, 4800 Deer Lake Drive East 3rd, Jacksonville, FL
32216 (4,592,064.149 shares, 6.88%).
Class B shares of the Federal Securities Fund: Merrill Lynch, Pierce, Fenner &
Smith, Inc. for the Sole Benefit of its Customers, Attn: Fund Administration,
4800 Deer Lake Drive East 3rd, Jacksonville, FL 32246 (908,536.000 shares,
15.45%).
Class C shares of the Federal Securities Fund: Colonial Management Associates,
Inc., One Financial Center, Boston, MA 02111-2621 (9,468.280 shares, 35.14%);
Merrill Lynch, Pierce, Fenner & Smith, Inc. for the Sole Benefit of its
Customers, Attn: Fund Administration, 4800 Deer Lake Drive East 3rd,
Jacksonville, FL 32246 (4,789.000 shares, 17.77%); Helen M. Rowe & Melville C.
Rowe JT Ten TOD Robert J. Rowe, 1270 Bidwell Avenue, West St. Paul, MN 55118
(2,100.840 shares, 7.80%).
At November 30, 1997, there were 154 Class A, 309 Class B and 18 Class C record
holders of the Short Duration Fund.
At November 30, 1997, there were 35,467 Class A, 20,398 Class B and 28 Class C
record holders of the Intermediate Fund.
At November 30, 1997, there were 41,686 Class A, 3,400 Class B and 11 Class C
record holders of the Federal Securities Fund.
Sales Charges (dollars in thousands)
Short Duration Fund
Class A Shares
Years ended August 31
---------------------
f
<PAGE>
1997 1996 1995
---- ---- ----
Aggregate initial sales charges on Fund share
sales $5 $21 $15
Initial sales charges retained by LFII 2 4 1
Intermediate Fund
Class A Shares
Years ended August 31
---------------------
1997 1996 1995
---- ---- ----
Aggregate initial sales charges on Fund share
sales $262 $390 $476
Initial sales charges retained by LFII 30 46 55
<TABLE>
<CAPTION>
Federal Securities Fund
Class A Shares
Period ended August 31 Years ended October 31
---------------------- ----------------------
1997(a)(a) 1996 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Aggregate initial sales charges on Fund share
sales $164 $389 $425 $691
Initial sales charges retained by LFII 20 46 49 80
</TABLE>
<TABLE>
<CAPTION>
Short Duration Fund
Class B Shares
Years ended August 31
---------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Aggregate contingent deferred sales charges (CDSC)
on Fund redemptions retained by LFII $13 $19 $46
</TABLE>
<TABLE>
<CAPTION>
Intermediate Fund
Class B Shares
Years ended August 31
---------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Aggregate contingent deferred sales charges (CDSC)
on Fund redemptions retained by LFII $1,865 $2,453 $4,044
</TABLE>
<TABLE>
<CAPTION>
Federal Securities Fund
Class B Shares
Period ended August 31 Years ended October 31
---------------------- ----------------------
1997(a)(a) 1996 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Aggregate contingent deferred sales charges (CDSC)
on Fund redemptions retained by LFII $234 $274 $316 $273
</TABLE>
(a)(a) The Fund changed its fiscal year end from October 31 to August 31.
Information presented is for the period November 1, 1996 through August
31, 1997.
There were no CDSCs for any of the Funds' Class C shares.
12b-1 Plans, CDSC and Conversion of Shares
The Funds offer three classes of shares - Classes A, B and C. The Funds may in
the future offer other classes of shares. The Trustees have approved a 12b-1
plan (Plan) for each Fund pursuant to Rule 12b-1 under the Act. Under the
respective Plans, the Short Duration Fund pays LFII monthly a service fee at the
annual rate of 0.20%, 0.20%, and 0.25% of the net assets of its Class A, Class B
and Class C shares, respectively. The Short Duration Fund also pays LFII monthly
a distribution fee at the annual rate of 0.65% and 0.15% of the average daily
net assets of its Class B and Class C shares, respectively. Each of the
Intermediate Fund and the Federal Securities Fund pays LFII monthly a service
fee at an annual rate of 0.25% of the net assets attributed to each Class of
shares and a distribution fee at the annual rate of 0.75% of the average daily
net assets attributed to its Class B and Class C shares. LFII has voluntarily
agreed to waive 0.15% of the Intermediate Fund's and the Federal Securities
Fund's Class C share distribution fees. LFII may terminate this waiver at
any time without shareholder approval. LFII may use the entire amount of such
fees to defray the costs of commissions and service fees paid to financial
services firms (FSFs) and for certain other purposes. Since the distribution
and service fees are payable regardless of the amount of LFII's expenses, LFII
may realize a profit from the fees.
The Plans authorize any other payments by each Fund to LFII and its affiliates
(including the Adviser) to the extent that such payments might be construed to
be indirect financing of the distribution of each Fund's shares.
g
<PAGE>
The Trustees believe the Plans could be a significant factor in the growth and
retention of each Fund's assets resulting in a more advantageous expense ratio
and increased investment flexibility which could benefit each class of each
Fund's shareholders. The Plans will continue in effect from year to year so long
as continuance is specifically approved at least annually by a vote of the
Trustees, including the Trustees who are not interested persons of Trust II and
Trust III and have no direct or indirect financial interest in the operation of
the Plans or in any agreements related to the Plans (Independent Trustees), cast
in person at a meeting called for the purpose of voting on the Plans. The Plans
may not be amended to increase the fee materially without approval by vote of a
majority of the outstanding voting securities of the relevant class of shares
and all material amendments of the Plans must be approved by the Trustees in the
manner provided in the foregoing sentence. The Plans may be terminated at any
time by vote of a majority of the independent Trustees or by vote of a majority
of the outstanding voting securities of the relevant class of shares. The
continuance of the Plans will only be effective if the selection and nomination
of the Trustees of Trust II and Trust III who are not interested persons of
Trust II and Trust III are effected by such disinterested Trustees.
Class A shares are offered at net asset value plus varying sales charges which
may include a CDSC. Class B shares are offered at net asset value subject to a
CDSC if redeemed within four years after purchase for the Short Duration Fund or
six years after purchase for the Intermediate Fund and the Federal Securities
Fund. Class C shares are offered at net asset value and are subject to a 1.00%
CDSC on redemptions within one year after purchase. The CDSCs are described in
the Prospectus.
No CDSC will be imposed on shares derived from reinvestment of distributions or
amounts representing capital appreciation. In determining the applicability and
rate of any CDSC, it will be assumed that a redemption is made first of shares
representing capital appreciation, next of shares representing reinvestment of
distributions and finally of other shares held by the shareholder for the
longest period of time.
Eight years after the end of the month in which a Class B share is purchased,
such share and a pro rata portion of any shares issued on the reinvestment of
distributions will be automatically converted into Class A shares, which are not
subject to the distribution fee, having an equal value. Class C shares do not
convert.
Sales-related expenses (dollars in thousands) of LFII relating to the Funds
were:
<TABLE>
<CAPTION>
Short Duration Fund
Year ended August 31, 1997
--------------------------
Class A Shares Class B Shares Class C Shares
<S> <C> <C> <C>
Fees to FSFs $ 22 $24 $1
Cost of sales material relating to the Fund (including
printing and mailing expenses) 20 7 4
Allocated travel, entertainment and other promotional
expenses (including advertising) 12 2 (b)(b)
</TABLE>
<TABLE>
<CAPTION>
Intermediate Fund
Year ended August 31, 1997
--------------------------
Class A Shares Class B Shares Class C Shares
<S> <C> <C>
Fees to FSF $2,046 $1,631 (b)(b)
Cost of sales material relating to the Fund
(including printing and mailing expenses) 52 46 (b)(b)
Allocated travel, entertainment and other
promotional expenses (including advertising) 40 40 (b)(b)
</TABLE>
<TABLE>
<CAPTION>
Federal Securities Fund
Period ended August 31, 1997(c)(c)
----------------------------
Class A Shares Class B Shares Class C Shares
<S> <C> <C> <C>
Fees to FSFs $2,384 $315 $0
Cost of sales material relating to the Fund
(including printing and mailing expenses) 43 19 0
Allocated travel, entertainment and other
promotional expenses (including advertising) 36 16 0
</TABLE>
h
<PAGE>
<TABLE>
<CAPTION>
Federal Securities Fund
Year ended October 31, 1996
Class A Shares Class B Shares
<S> <C> <C>
Fees to FSFs $2,779 $558
Cost of sales material relating to the Fund
(including printing and mailing expenses) 73 25
Allocated travel, entertainment and other
promotional expenses (including advertising) 50 29
</TABLE>
(b)(b) Rounds to less than one.
(c)(c) The Fund changed its fiscal year end from October 31 to August 31.
Information presented is for the period November 1, 1996 through
August 31, 1997.
INVESTMENT PERFORMANCE
The Short Duration Fund's Class A, Class B and Class C yields and adjusted
yields for the month ended August 31, 1997 were 3.97% and 3.44%, and 3.95%
and 5.57%, and 5.09% and 5.61%, respectively.
The Intermediate Fund's Class A, Class B and Class C yields for the month ended
August 31, 1997 were 5.77%, 5.29% and 5.46%, respectively.
The Federal Securities Fund's Class A, Class B and Class C yields for the month
ended August 31, 1997 were 6.23%, 5.77% and 5.98%, respectively.
The Funds' Class A and Class B average annual total returns at August 31, 1997
were:
Short Duration Fund
Class A Shares
<TABLE>
<CAPTION>
Period October 1, 1992
(commencement of investment
1 Year operations) through August 31, 1997
------ -----------------------------------
<S> <C> <C>
With sales charge of 3.25% 3.32% 4.25%
Without sales charge 6.79% 4.95%
</TABLE>
Intermediate Fund
Class A Shares
<TABLE>
<CAPTION>
Period October 13, 1987
(commencement of investment
1 Year 5 Years operations) through August 31, 1997
------ ------- -----------------------------------
<S> <C> <C> <C>
With sales charge of 4.75% 3.48% 4.25% 6.86%
Without sales charge 8.64% 5.27% 7.39%
</TABLE>
<TABLE>
<CAPTION>
Federal Securities Fund
Class A Shares
1 Year 5 Years 10 Years
------ ------- --------
<S> <C> <C> <C>
With sales charge of 4.75% 5.01% 5.53% 7.95%
Without sales charge 10.25% 6.57% 8.47%
</TABLE>
i
<PAGE>
Short Duration Fund
Class B Shares
<TABLE>
<CAPTION>
Period February 1, 1993
(commencement of investment operations)
1 Year through August 31, 1997
------ -----------------------
<S> <C> <C>
With applicable CDSC 2.11% (4.00% CDSC) 4.41% (0.00% CDSC)
Without CDSC 6.11% 4.41%
</TABLE>
Intermediate Fund
Class B Shares
<TABLE>
<CAPTION>
Period June 8, 1992
(commencement of investment
1 Year 5 Years operations) through August 31, 1997
------ ------- -----------------------------------
<S> <C> <C> <C>
With applicable CDSC 2.83% (5.00% CDSC) 4.17% (1.86% CDSC)(d)(d) 4.56% (0.94% CDSC) (d)(d)
Without CDSC 7.83% 4.49% 4.71%
</TABLE>
Federal Securities Fund
Class B Shares
<TABLE>
<CAPTION>
Period June 8, 1992
(commencement of investment operations)
1 Year 5 Years through August 31, 1997
------ ------- -----------------------
<S> <C> <C> <C>
With applicable CDSC 4.43% (5.00% CDSC) 5.45% (1.94% CDSC)(d)(d) 6.07% (0.98% CDSC)(d)(d)
Without CDSC 9.43% 5.76% 6.21%
</TABLE>
The Short Duration Fund's Class C average annual total returns at August 31,
1997 were:
Short Duration Fund
Class C Shares
<TABLE>
<CAPTION>
Period January 4, 1995
(commencement of investment operations)
1 Year through August 31, 1997
------ -----------------------
<S> <C> <C>
With applicable CDSC 5.59% (1.00% CDSC) 6.96% (0.00% CDSC)
Without CDSC 6.59% 6.96%
</TABLE>
The Intermediate Fund's and the Federal Securities Fund's Class C total returns
at August 31, 1997 were:
Intermediate Fund
Class C Shares
Period August 1, 1997
(commencement of investment operations)
through August 31, 1997
With applicable CDSC (1.75)% (0.98% CDSC)(d)(d)
Without CDSC 2.38% (0.77)%
Federal Securities Fund
Class C Shares
Period August 1, 1997
(commencement of investment operations)
through August 31, 1997
With applicable CDSC (2.29)% (0.98% CDSC)(d)(d)
Without CDSC (1.31)%
(d)(d) Due to a decrease in net asset value during the period indicated, the
CDSC was adjusted. See "How to Buy Shares" in the Prospectus.
The Funds' distribution rates at August 31, 1997, which are based on the latest
month's distribution, annualized, and the maximum offering price at the end of
the month were:
<PAGE>
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares
<S> <C> <C> <C>
Short Duration Fund 5.27% 4.79% 5.24%
Intermediate Fund 5.76% 5.29% 5.44%
Federal Securities Fund 5.97% 5.50% 5.66%
</TABLE>
See Part 2 of this SAI, "Performance Measures," for how calculations are made.
CUSTODIAN
Boston Safe Deposit and Trust Company is the Funds' custodian. Effective
January 1998, the Funds' custodian will be The Chase Manhattan Bank. The
custodian is responsible for safeguarding and controlling each Fund's cash and
securities, receiving and delivering securities and collecting each Fund's
interest and dividends.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP are the Funds' independent accountants providing audit
services, tax return preparation services and assistance and consultation in
connection with the review of various Securities and Exchange Commission
filings. The financial statements incorporated by reference in this SAI have
been so incorporated, and the financial highlights included in the Prospectus
have been so included, in reliance upon the report of Price Waterhouse LLP given
on the authority of said firm as experts in accounting and auditing.
The financial statements and Report of Independent Accountants appearing in the
August 31, 1997 Annual Report of the Short Duration Fund, Intermediate Fund and
the Federal Securities Fund are incorporated in this SAI by reference.
STATEMENT OF ADDITIONAL INFORMATION
PART 2
The following information applies generally to most Colonial funds. "Colonial
funds" or "funds" include each series of Colonial Trust I, Colonial Trust II,
Colonial Trust III, Colonial Trust IV, Colonial Trust V, Colonial Trust VI and
Colonial Trust VII. In certain cases, the discussion applies to some but not all
of the Colonial funds, and you should refer to your Fund's Prospectus and to
Part 1 of this SAI to determine whether the matter is applicable to your Fund.
You will also be referred to Part 1 for certain data applicable to your Fund.
MISCELLANEOUS INVESTMENT PRACTICES
Part 1 of this Statement lists on page b which of the following investment
practices are available to your Fund. If an investment practice is not listed in
Part 1 of this SAI, it is not applicable to your Fund.
Short-Term Trading
In seeking the fund's investment objective, the Adviser will buy or sell
portfolio securities whenever it believes it is appropriate. The Adviser's
decision will not generally be influenced by how long the fund may have owned
the security. From time to time the fund will buy securities intending to seek
short-term trading profits. A change in the securities held by the fund is known
as "portfolio turnover" and generally involves some expense to the fund. These
expenses may include brokerage commissions or dealer mark-ups and other
transaction costs on both the sale of securities and the reinvestment of the
proceeds in other securities. If sales of portfolio securities cause the fund to
realize net short-term capital gains, such gains will be taxable as ordinary
income. As a result of the fund's investment policies, under certain market
conditions the fund's portfolio turnover rate may be higher than that of other
mutual funds. The fund's portfolio turnover rate for a fiscal year is the ratio
of the lesser of purchases or sales of portfolio securities to the monthly
average of the value of portfolio securities, excluding securities whose
maturities at acquisition were one year or less. The fund's portfolio turnover
rate is not a limiting factor when the Adviser considers a change in the fund's
portfolio.
Lower Rated Bonds
Lower rated bonds are those rated lower than Baa by Moody's, BBB by S&P, or
comparable unrated debt securities. Relative to debt securities of higher
quality,
1. an economic downturn or increased interest rates may have a more significant
effect on the yield, price and potential for default for lower rated bonds;
2. the secondary market for lower rated bonds may at times become less liquid or
respond to adverse publicity or investor perceptions, increasing the
difficulty in valuing or disposing of the bonds;
3. the Adviser's credit analysis of lower rated bonds may have a greater impact
on the fund's achievement of its investment objective and
4. lower rated bonds are less sensitive to interest rate changes, but are more
sensitive to adverse economic developments.
In addition, certain lower rated bonds do not pay interest in cash on a current
basis. However, the fund will accrue and distribute this interest on a current
basis, and may have to sell securities to generate cash for distributions.
Small Companies
Smaller, less well established companies may offer greater opportunities for
capital appreciation than larger, better established companies, but may also
involve certain special risks related to limited product lines, markets, or
financial resources and dependence on a small management group. Their securities
may trade less frequently, in smaller volumes, and fluctuate more sharply in
value than securities of larger companies.
1
<PAGE>
Foreign Securities
The fund may invest in securities traded in markets outside the United States.
Foreign investments can be affected favorably or unfavorably by changes in
currency rates and in exchange control regulations. There may be less publicly
available information about a foreign company than about a U.S. company, and
foreign companies may not be subject to accounting, auditing and financial
reporting standards comparable to those applicable to U.S. companies. Securities
of some foreign companies are less liquid or more volatile than securities of
U.S. companies, and foreign brokerage commissions and custodian fees may be
higher than in the United States. Investments in foreign securities can involve
other risks different from those affecting U.S. investments, including local
political or economic developments, expropriation or nationalization of assets
and imposition of withholding taxes on dividend or interest payments. Foreign
securities, like other assets of the fund, will be held by the fund's custodian
or by a subcustodian or depository. See also "Foreign Currency Transactions"
below.
The fund may invest in certain Passive Foreign Investment Companies (PFICs)
which may be subject to U.S. federal income tax on a portion of any "excess
distribution" or gain (PFIC tax) related to the investment. The PFIC tax is the
highest ordinary income rate, and it could be increased by an interest charge on
the deemed tax deferral.
The fund may possibly elect to include in its income its pro rata share of the
ordinary earnings and net capital gain of PFICs. This election requires certain
annual information from the PFICs which in many cases may be difficult to
obtain. An alternative election would permit the fund to recognize as income any
appreciation (but not depreciation) on its holdings of PFICs as of the end of
its fiscal year. See "Taxation" below.
Stripped Securities (Strips)
The fund may invest in stripped securities (e.g. zero coupon securities) which
are securities issued at a significant discount from face value and pay
interest only at maturity rather than at intervals during the life of the
security and in certificates representing undivided interests in the interest
or principal of mortgage-backed securities (interest only/principal only),
which tend to be more volatile than other types of securities. The Fund will
accrue and distribute income from stripped securities and certificates on a
current basis and may have to sell securities to generate cash for
distributions.
Step Coupon Bonds (Steps)
The fund may invest in debt securities which do not pay interest for a stated
period of time and then pay interest at a series of different rates for a series
of periods. In addition to the risks associated with the credit rating of the
issuers, these securities are subject to the volatility risk of zero coupon
bonds for the period when no interest is paid.
Tender Option Bonds
A tender option bond is a municipal security (generally held pursuant to a
custodial arrangement) having a relatively long maturity and bearing interest at
a fixed rate substantially higher than prevailing short-term tax-exempt rates,
that has been coupled with the agreement of a third party, such as a bank,
broker-dealer or other financial institution, pursuant to which such institution
grants the security holders the option, at periodic intervals, to tender their
securities to the institution and receive the face value thereof. As
consideration for providing the option, the financial institution receives
periodic fees equal to the difference between the Municipal Security's fixed
coupon rate and the rate, as determined by a remarketing or similar agent at or
near the commencement of such period, that would cause the securities, coupled
with the tender option, to trade at par on the date of such determination. Thus,
after payment of this fee, the security holder effectively holds a demand
obligation that bears interest at the prevailing short-term tax-exempt rate. The
Adviser will consider on an ongoing basis the creditworthiness of the issuer of
the underlying Municipal Securities, of any custodian, and of the third-party
provider of the tender option. In certain instances and for certain tender
option bonds, the option may be terminable in the event of a default in payment
of principal or interest on the underlying Municipal Securities and for other
reasons.
Pay-In-Kind (PIK) Securities
The fund may invest in securities which pay interest either in cash or
additional securities at the issuer's option. These securities are generally
high yield securities and in addition to the other risks associated with
investing in high yield securities are subject to the risks that the interest
payments which consist of additional securities are also subject to the risks of
high yield securities.
Money Market Instruments
Government obligations are issued by the U.S. or foreign governments, their
subdivisions, agencies and instrumentalities. Supranational obligations are
issued by supranational entities and are generally designed to promote economic
improvements. Certificates of deposits are issued against deposits in a
commercial bank with a defined return and maturity. Banker's acceptances are
used to finance the import, export or storage of goods and are "accepted" when
guaranteed at maturity by a bank. Commercial paper is promissory notes issued by
businesses to finance short-term needs (including those with floating or
variable interest rates, or including a frequent interval put feature).
Short-term corporate obligations are bonds and notes (with one year or less to
maturity at
2
<PAGE>
the time of purchase) issued by businesses to finance long-term
needs. Participation Interests include the underlying securities and any related
guaranty, letter of credit, or collateralization arrangement which the fund
would be allowed to invest in directly.
Securities Loans
The fund may make secured loans of its portfolio securities amounting to not
more than the percentage of its total assets specified in Part 1 of this SAI,
thereby realizing additional income. The risks in lending portfolio securities,
as with other extensions of credit, consist of possible delay in recovery of the
securities or possible loss of rights in the collateral should the borrower fail
financially. As a matter of policy, securities loans are made to banks and
broker-dealers pursuant to agreements requiring that loans be continuously
secured by collateral in cash or short-term debt obligations at least equal at
all times to the value of the securities on loan. The borrower pays to the fund
an amount equal to any dividends or interest received on securities lent. The
fund retains all or a portion of the interest received on
investment of the cash collateral or receives a fee from the borrower. Although
voting rights, or rights to consent, with respect to the loaned securities pass
to the borrower, the fund retains the right to call the loans at any time on
reasonable notice, and it will do so in order that the securities may be voted
by the fund if the holders of such securities are asked to vote upon or consent
to matters materially affecting the investment. The fund may also call such
loans in order to sell the securities involved.
Forward Commitments ("When-Issued" and "Delayed Delivery" Securities)
The fund may enter into contracts to purchase securities for a fixed price at a
future date beyond customary settlement time ("forward commitments" and "when
issued securities") if the fund holds until the settlement date, in a segregated
account, cash or liquid securities in an amount sufficient to meet the purchase
price, or if the fund enters into offsetting contracts for the forward sale of
other securities it owns. Forward commitments may be considered securities in
themselves, and involve a risk of loss if the value of the security to be
purchased declines prior to the settlement date. Where such purchases are made
through dealers, the fund relies on the dealer to consummate the sale. The
dealer's failure to do so may result in the loss to the fund of an advantageous
yield or price. Although the fund will generally enter into forward commitments
with the intention of acquiring securities for its portfolio or for delivery
pursuant to options contracts it has entered into, the fund may dispose of a
commitment prior to settlement if the Adviser deems it appropriate to do so. The
fund may realize short-term profits or losses upon the sale of forward
commitments.
Mortgage Dollar Rolls
In a mortgage dollar roll, the fund sells a mortgage-backed security and
simultaneously enters into a commitment to purchase a similar security at a
later date. The fund either will be paid a fee by the counterparty upon entering
into the transaction or will be entitled to purchase the similar security at a
discount. As with any forward commitment, mortgage dollar rolls involve the risk
that the counterparty will fail to deliver the new security on the settlement
date, which may deprive the fund of obtaining a beneficial investment. In
addition, the security to be delivered in the future may turn out to be inferior
to the security sold upon entering into the transaction. Also, the transaction
costs may exceed the return earned by the fund from the transaction.
Repurchase Agreements
The fund may enter into repurchase agreements. A repurchase agreement is a
contract under which the fund acquires a security for a relatively short period
(usually not more than one week) subject to the obligation of the seller to
repurchase and the fund to resell such security at a fixed time and price
(representing the fund's cost plus interest). It is the fund's present intention
to enter into repurchase agreements only with commercial banks and registered
broker-dealers and only with respect to obligations of the U.S. government or
its agencies or instrumentalities. Repurchase agreements may also be viewed as
loans made by the fund which are collateralized by the securities subject to
repurchase. The Adviser will monitor such transactions to determine that the
value of the underlying securities is at least equal at all times to the total
amount of the repurchase obligation, including the interest factor. If the
seller defaults, the fund could realize a loss on the sale of the underlying
security to the extent that the proceeds of sale including accrued interest are
less than the resale price provided in the agreement including interest. In
addition, if the seller should be involved in bankruptcy or insolvency
proceedings, the fund may incur delay and costs in selling the underlying
security or may suffer a loss of principal and interest if the fund is treated
as an unsecured creditor and required to return the underlying collateral to the
seller's estate.
Reverse Repurchase Agreements
In a reverse repurchase agreement, the fund sells a security and agrees to
repurchase the same security at a mutually agreed upon date and price. A reverse
repurchase agreement may also be viewed as the borrowing of money by the fund
and, therefore, as a form of leverage. The fund will invest the proceeds of
borrowings under reverse repurchase agreements. In addition, the fund will enter
into a reverse repurchase agreement only when the interest income expected to be
earned from the investment of the proceeds is greater than the interest expense
of the transaction. The fund will not invest the proceeds of a reverse
repurchase agreement for a period which exceeds the duration of the reverse
repurchase agreement. The fund may not enter into reverse repurchase agreements
exceeding in the aggregate one-third of the market value of its total assets,
less liabilities other than the obligations created by reverse repurchase
agreements. Each fund will establish and maintain with its custodian a separate
account with a segregated portfolio of securities in an amount at least equal to
its purchase obligations under its reverse repurchase agreements. If interest
rates rise during the term of a reverse repurchase agreement, entering into the
reverse repurchase agreement may have a negative impact on a money market fund's
ability to maintain a net asset value of $1.00 per share.
3
<PAGE>
Options on Securities
Writing covered options. The fund may write covered call options and covered put
options on securities held in its portfolio when, in the opinion of the Adviser,
such transactions are consistent with the fund's investment objective and
policies. Call options written by the fund give the purchaser the right to buy
the underlying securities from the fund at a stated exercise price; put options
give the purchaser the right to sell the underlying securities to the fund at a
stated price.
The fund may write only covered options, which means that, so long as the fund
is obligated as the writer of a call option, it will own the underlying
securities subject to the option (or comparable securities satisfying the cover
requirements of securities exchanges). In the case of put options, the fund will
hold cash and/or high-grade short-term debt obligations equal to the price to be
paid if the option is exercised. In addition, the fund will be considered to
have covered a put or call option if and to the extent that it holds an option
that offsets some or all of the risk of the option it has written. The fund may
write combinations of covered puts and calls on the same underlying security.
The fund will receive a premium from writing a put or call option, which
increases the fund's return on the underlying security if the option expires
unexercised or is closed out at a profit. The amount of the premium reflects,
among other things, the relationship between the exercise price and the current
market value of the underlying security, the volatility of the underlying
security, the amount of time remaining until expiration, current interest rates,
and the effect of supply and demand in the options market and in the market for
the underlying security. By writing a call option, the fund limits its
opportunity to profit from any increase in the market value of the underlying
security above the exercise price of the option but continues to bear the risk
of a decline in the value of the underlying security. By writing a put option,
the fund assumes the risk that it may be required to purchase the underlying
security for an exercise price higher than its then-current market value,
resulting in a potential capital loss unless the security subsequently
appreciates in value.
The fund may terminate an option that it has written prior to its expiration by
entering into a closing purchase transaction in which it purchases an offsetting
option. The fund realizes a profit or loss from a closing transaction if the
cost of the transaction (option premium plus transaction costs) is less or more
than the premium received from writing the option. Because increases in the
market price of a call option generally reflect increases in the market price of
the security underlying the option, any loss resulting from a closing purchase
transaction may be offset in whole or in part by unrealized appreciation of the
underlying security.
If the fund writes a call option but does not own the underlying security, and
when it writes a put option, the fund may be required to deposit cash or
securities with its broker as "margin" or collateral for its obligation to buy
or sell the underlying security. As the value of the underlying security varies,
the fund may have to deposit additional margin with the broker. Margin
requirements are complex and are fixed by individual brokers, subject to minimum
requirements currently imposed by the Federal Reserve Board and by stock
exchanges and other self-regulatory organizations.
Purchasing put options. The fund may purchase put options to protect its
portfolio holdings in an underlying security against a decline in market value.
Such hedge protection is provided during the life of the put option since the
fund, as holder of the put option, is able to sell the underlying security at
the put exercise price regardless of any decline in the underlying security's
market price. For a put option to be profitable, the market price of the
underlying security must decline sufficiently below the exercise price to cover
the premium and transaction costs. By using put options in this manner, the fund
will reduce any profit it might otherwise have realized from appreciation of the
underlying security by the premium paid for the put option and by transaction
costs.
Purchasing call options. The fund may purchase call options to hedge against an
increase in the price of securities that the fund wants ultimately to buy. Such
hedge protection is provided during the life of the call option since the fund,
as holder of the call option, is able to buy the underlying security at the
exercise price regardless of any increase in the underlying security's market
price. In order for a call option to be profitable, the market price of the
underlying security must rise sufficiently above the exercise price to cover the
premium and transaction costs. These costs will reduce any profit the fund might
have realized had it bought the underlying security at the time it purchased the
call option.
Over-the-Counter (OTC) options. The Staff of the Division of Investment
Management of the Securities and Exchange Commission has taken the position that
OTC options purchased by the fund and assets held to cover OTC options written
by the fund are illiquid securities. Although the Staff has indicated that it is
continuing to evaluate this issue, pending further developments, the fund
intends to enter into OTC options transactions only with primary dealers in U.S.
Government Securities and, in the case of OTC options written by the fund, only
pursuant to agreements that will assure that the fund will at all times have the
right to repurchase the option written by it from the dealer at a specified
formula price. The fund will treat the amount by which such formula price
exceeds the amount, if any, by which the option may be "in-the-money" as an
illiquid investment. It is the present policy of the fund not to enter into any
OTC option transaction if, as a result, more than 15% (10% in some cases, refer
to your fund's Prospectus) of the fund's net assets would be invested in (i)
illiquid investments (determined under the foregoing formula) relating to OTC
options written by the fund, (ii) OTC options
4
<PAGE>
purchased by the fund, (iii) securities which are not readily marketable, and
(iv) repurchase agreements maturing in more than seven days.
Risk factors in options transactions. The successful use of the fund's options
strategies depends on the ability of the Adviser to forecast interest rate and
market movements correctly.
When it purchases an option, the fund runs the risk that it will lose its entire
investment in the option in a relatively short period of time, unless the fund
exercises the option or enters into a closing sale transaction with respect to
the option during the life of the option. If the price of the underlying
security does not rise (in the case of a call) or fall (in the case of a put) to
an extent sufficient to cover the option premium and transaction costs, the fund
will lose part or all of its investment in the option. This contrasts with an
investment by the fund in the underlying securities, since the fund may continue
to hold its investment in those securities notwithstanding the lack of a change
in price of those securities.
The effective use of options also depends on the fund's ability to terminate
option positions at times when the Adviser deems it desirable to do so. Although
the fund will take an option position only if the Adviser believes there is a
liquid secondary market for the option, there is no assurance that the fund will
be able to effect closing transactions at any particular time or at an
acceptable price.
If a secondary trading market in options were to become unavailable, the fund
could no longer engage in closing transactions. Lack of investor interest might
adversely affect the liquidity of the market for particular options or series of
options. A marketplace may discontinue trading of a particular option or options
generally. In addition, a market could become temporarily unavailable if unusual
events -- such as volume in excess of trading or clearing capability -- were to
interrupt normal market operations.
A marketplace may at times find it necessary to impose restrictions on
particular types of options transactions, which may limit the fund's ability to
realize its profits or limit its losses.
Disruptions in the markets for the securities underlying options purchased or
sold by the fund could result in losses on the options. If trading is
interrupted in an underlying security, the trading of options on that security
is normally halted as well. As a result, the fund as purchaser or writer of an
option will be unable to close out its positions until options trading resumes,
and it may be faced with losses if trading in the security reopens at a
substantially different price. In addition, the Options Clearing Corporation
(OCC) or other options markets may impose exercise restrictions. If a
prohibition on exercise is imposed at the time when trading in the option has
also been halted, the fund as purchaser or writer of an option will be locked
into its position until one of the two restrictions has been lifted. If a
prohibition on exercise remains in effect until an option owned by the fund has
expired, the fund could lose the entire value of its option.
Special risks are presented by internationally-traded options. Because of time
differences between the United States and various foreign countries, and because
different holidays are observed in different countries, foreign options markets
may be open for trading during hours or on days when U.S. markets are closed. As
a result, option premiums may not reflect the current prices of the underlying
interest in the United States.
Futures Contracts and Related Options
Upon entering into futures contracts, in compliance with the Securities and
Exchange Commission's requirements, cash or liquid securities, equal in value to
the amount of the fund's obligation under the contract (less any applicable
margin deposits and any assets that constitute "cover" for such obligation),
will be segregated with the fund's custodian.
A futures contract sale creates an obligation by the seller to deliver the type
of instrument called for in the contract in a specified delivery month for a
stated price. A futures contract purchase creates an obligation by the purchaser
to take delivery of the type of instrument called for in the contract in a
specified delivery month at a stated price. The specific instruments delivered
or taken at settlement date are not determined until on or near that date. The
determination is made in accordance with the rules of the exchanges on which the
futures contract was made. Futures contracts are traded in the United States
only on commodity exchange or boards of trade -- known as "contract markets"
- -approved for such trading by the Commodity Futures Trading Commission (CFTC),
and must be executed through a futures commission merchant or brokerage firm
which is a member of the relevant contract market.
Although futures contracts by their terms call for actual delivery or acceptance
of commodities or securities, the contracts usually are closed out before the
settlement date without the making or taking of delivery. Closing out a futures
contract sale is effected by purchasing a futures contract for the same
aggregate amount of the specific type of financial instrument or commodity with
the same delivery date. If the price of the initial sale of the futures contract
exceeds the price of the offsetting purchase, the seller is paid the
5
<PAGE>
difference and realizes a gain. Conversely, if the price of the offsetting
purchase exceeds the price of the initial sale, the seller realizes a loss.
Similarly, the closing out of a futures contract purchase is effected by the
purchaser's entering into a futures contract sale. If the offsetting sale price
exceeds the purchase price, the purchaser realizes a gain, and if the purchase
price exceeds the offsetting sale price, the purchaser realizes a loss.
Unlike when the fund purchases or sells a security, no price is paid or
received by the fund upon the purchase or sale of a futures contract, although
the fund is required to deposit with its custodian in a segregated account in
the name of the futures broker an amount of cash and/or U.S. government
securities. This amount is known as "initial margin." The nature of initial
margin in futures transactions is different from that of margin in security
transactions in that futures contract margin does not involve the borrowing of
funds by the fund to finance the transactions. Rather, initial margin is in the
nature of a performance bond or good faith deposit on the contract that is
returned to the fund upon termination of the futures contract, assuming all
contractual obligations have been satisfied. Futures contracts also involve
brokerage costs.
Subsequent payments, called "variation margin," to and from the broker (or the
custodian) are made on a daily basis as the price of the underlying security or
commodity fluctuates, making the long and short positions in the futures
contract more or less valuable, a process known as "marking to market."
The fund may elect to close some or all of its futures positions at any time
prior to their expiration. The purpose of making such a move would be to reduce
or eliminate the hedge position then currently held by the fund. The fund may
close its positions by taking opposite positions which will operate to terminate
the fund's position in the futures contracts. Final determinations of variation
margin are then made, additional cash is required to be paid by or released to
the fund, and the fund realizes a loss or a gain. Such closing transactions
involve additional commission costs.
Options on futures contracts. The fund will enter into written options on
futures contracts only when, in compliance with the SEC's requirements, cash or
liquid securities equal in value to the commodity value (less any applicable
margin deposits) have been deposited in a segregated account of the fund's
custodian. The fund may purchase and write call and put options on futures
contracts it may buy or sell and enter into closing transactions with respect to
such options to terminate existing positions. The fund may use such options on
futures contracts in lieu of writing options directly on the underlying
securities or purchasing and selling the underlying futures contracts. Such
options generally operate in the same manner as options purchased or written
directly on the underlying investments.
As with options on securities, the holder or writer of an option may terminate
his position by selling or purchasing an offsetting option. There is no
guarantee that such closing transactions can be effected.
The fund will be required to deposit initial margin and maintenance margin with
respect to put and call options on futures contracts written by it pursuant to
brokers' requirements similar to those described above.
Risks of transactions in futures contracts and related options. Successful use
of futures contracts by the fund is subject to the Adviser's ability to predict
correctly movements in the direction of interest rates and other factors
affecting securities markets.
Compared to the purchase or sale of futures contracts, the purchase of call or
put options on futures contracts involves less potential risk to the fund
because the maximum amount at risk is the premium paid for the options (plus
transaction costs). However, there may be circumstances when the purchase of a
call or put option on a futures contract would result in a loss to the fund when
the purchase or sale of a futures contract would not, such as when there is no
movement in the prices of the hedged investments. The writing of an option on a
futures contract involves risks similar to those risks relating to the sale of
futures contracts.
There is no assurance that higher than anticipated trading activity or other
unforeseen events might not, at times, render certain market clearing facilities
inadequate, and thereby result in the institution, by exchanges, of special
procedures which may interfere with the timely execution of customer orders.
To reduce or eliminate a hedge position held by the fund, the fund may seek to
close out a position. The ability to establish and close out positions will be
subject to the development and maintenance of a liquid secondary market. It is
not certain that this market will develop or continue to exist for a particular
futures contract. Reasons for the absence of a liquid secondary market on an
exchange include the following: (i) there may be insufficient trading interest
in certain contracts or options; (ii) restrictions may be imposed by an exchange
on opening transactions or closing transactions or both; (iii) trading halts,
suspensions or other restrictions may be imposed with respect to particular
classes or series of contracts or options, or underlying securities; (iv)
unusual or unforeseen circumstances may interrupt normal operations on an
exchange; (v) the facilities of an exchange or a clearing corporation may not at
all times be adequate to handle current trading volume; or (vi) one or more
exchanges could, for economic or other reasons, decide or be compelled at some
future date to discontinue the trading of contracts or options (or a particular
class or series of contracts or options), in which event the secondary market on
that exchange (or in the class or series of contracts or options) would cease to
exist, although outstanding contracts or options
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on the exchange that had been issued by a clearing corporation as a result of
trades on that exchange would continue to be exercisable in accordance with
their terms.
Use by tax-exempt funds of U.S. Treasury security futures contracts and options.
The funds investing in tax-exempt securities issued by a governmental entity may
purchase and sell futures contracts and related options on U.S. Treasury
securities when, in the opinion of the Adviser, price movements in Treasury
security futures and related options will correlate closely with price movements
in the tax-exempt securities which are the subject of the hedge. U.S. Treasury
securities futures contracts require the seller to deliver, or the purchaser to
take delivery of, the type of U.S. Treasury security called for in the contract
at a specified date and price. Options on U.S. Treasury security futures
contracts give the purchaser the right in return for the premium paid to assume
a position in a U.S. Treasury futures contract at the specified option exercise
price at any time during the period of the option.
In addition to the risks generally involved in using futures contracts, there is
also a risk that price movements in U.S. Treasury security futures contracts and
related options will not correlate closely with price movements in markets for
tax-exempt securities.
Index futures contracts. An index futures contract is a contract to buy or sell
units of an index at a specified future date at a price agreed upon when the
contract is made. Entering into a contract to buy units of an index is commonly
referred to as buying or purchasing a contract or holding a long position in the
index. Entering into a contract to sell units of an index is commonly referred
to as selling a contract or holding a short position. A unit is the current
value of the index. The fund may enter into stock index futures contracts, debt
index futures contracts, or other index futures contracts appropriate to its
objective(s). The fund may also purchase and sell options on index futures
contracts.
There are several risks in connection with the use by the fund of index futures
as a hedging device. One risk arises because of the imperfect correlation
between movements in the prices of the index futures and movements in the prices
of securities which are the subject of the hedge. The Adviser will attempt to
reduce this risk by selling, to the extent possible, futures on indices the
movements of which will, in its judgment, have a significant correlation with
movements in the prices of the fund's portfolio securities sought to be hedged.
Successful use of index futures by the fund for hedging purposes is also subject
to the Adviser's ability to predict correctly movements in the direction of the
market. It is possible that, where the fund has sold futures to hedge its
portfolio against a decline in the market, the index on which the futures are
written may advance and the value of securities held in the fund's portfolio may
decline. If this occurs, the fund would lose money on the futures and also
experience a decline in the value in its portfolio securities. However, while
this could occur to a certain degree, the Adviser believes that over time the
value of the fund's portfolio will tend to move in the same direction as the
market indices which are intended to correlate to the price movements of the
portfolio securities sought to be hedged. It is also possible that, if the fund
has hedged against the possibility of a decline in the market adversely
affecting securities held in its portfolio and securities prices increase
instead, the fund will lose part or all of the benefit of the increased values
of those securities that it has hedged because it will have offsetting losses in
its futures positions. In addition, in such situations, if the fund has
insufficient cash, it may have to sell securities to meet daily variation margin
requirements.
In addition to the possibility that there may be an imperfect correlation, or no
correlation at all, between movements in the index futures and the securities of
the portfolio being hedged, the prices of index futures may not correlate
perfectly with movements in the underlying index due to certain market
distortions. First, all participants in the futures markets are subject to
margin deposit and maintenance requirements. Rather than meeting additional
margin deposit requirements, investors may close futures contracts through
offsetting transactions which would distort the normal relationship between the
index and futures markets. Second, margin requirements in the futures market are
less onerous than margin requirements in the securities market, and as a result
the futures market may attract more speculators than the securities market.
Increased participation by speculators in the futures market may also cause
temporary price distortions. Due to the possibility of price distortions in the
futures market and also because of the imperfect correlation between movements
in the index and movements in the prices of index futures, even a correct
forecast of general market trends by the Adviser may still not result in a
successful hedging transaction.
Options on index futures. Options on index futures are similar to options on
securities except that options on index futures give the purchaser the right, in
return for the premium paid, to assume a position in an index futures contract
(a long position if the option is a call and a short position if the option is a
put), at a specified exercise price at any time during the period of the option.
Upon exercise of the option, the delivery of the futures position by the writer
of the option to the holder of the option will be accompanied by delivery of the
accumulated balance in the writer's futures margin account which represents the
amount by which the market price of the index futures contract, at exercise,
exceeds (in the case of a call) or is less than (in the case of a put) the
exercise price of the option on the index future. If an option is exercised on
the last trading day prior to the expiration date of the option, the settlement
will be made entirely in cash equal to the difference between the exercise price
of the option and the closing level of the index on which the future is based on
the expiration date. Purchasers of options who fail to exercise their options
prior to the exercise date suffer a loss of the premium paid.
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Options on indices. As an alternative to purchasing call and put options on
index futures, the fund may purchase call and put options on the underlying
indices themselves. Such options could be used in a manner identical to the use
of options on index futures.
Foreign Currency Transactions
The fund may engage in currency exchange transactions to protect against
uncertainty in the level of future currency exchange rates.
The fund may engage in both "transaction hedging" and "position hedging." When
it engages in transaction hedging, the fund enters into foreign currency
transactions with respect to specific receivables or payables of the fund
generally arising in connection with the purchase or sale of its portfolio
securities. The fund will engage in transaction hedging when it desires to "lock
in" the U.S. dollar price of a security it has agreed to purchase or sell, or
the U.S. dollar equivalent of a dividend or interest payment in a foreign
currency. By transaction hedging the fund attempts to protect itself against a
possible loss resulting from an adverse change in the relationship between the
U.S. dollar and the applicable foreign currency during the period between the
date on which the security is purchased or sold, or on which the dividend or
interest payment is declared, and the date on which such payments are made or
received.
The fund may purchase or sell a foreign currency on a spot (or cash) basis at
the prevailing spot rate in connection with the settlement of transactions in
portfolio securities denominated in that foreign currency. The fund may also
enter into contracts to purchase or sell foreign currencies at a future date
("forward contracts") and purchase and sell foreign currency futures contracts.
For transaction hedging purposes the fund may also purchase exchange-listed and
over-the-counter call and put options on foreign currency futures contracts and
on foreign currencies. Over-the-counter options are considered to be illiquid by
the SEC staff. A put option on a futures contract gives the fund the right to
assume a short position in the futures contract until expiration of the option.
A put option on currency gives the fund the right to sell a currency at an
exercise price until the expiration of the option. A call option on a futures
contract gives the fund the right to assume a long position in the futures
contract until the expiration of the option. A call option on currency gives the
fund the right to purchase a currency at the exercise price until the expiration
of the option.
When it engages in position hedging, the fund enters into foreign currency
exchange transactions to protect against a decline in the values of the foreign
currencies in which its portfolio securities are denominated (or an increase in
the value of currency for securities which the fund expects to purchase, when
the fund holds cash or short-term investments). In connection with position
hedging, the fund may purchase put or call options on foreign currency and
foreign currency futures contracts and buy or sell forward contracts and foreign
currency futures contracts. The fund may also purchase or sell foreign currency
on a spot basis.
The precise matching of the amounts of foreign currency exchange transactions
and the value of the portfolio securities involved will not generally be
possible since the future value of such securities in foreign currencies will
change as a consequence of market movements in the value of those securities
between the dates the currency exchange transactions are entered into and the
dates they mature.
It is impossible to forecast with precision the market value of portfolio
securities at the expiration or maturity of a forward or futures contract.
Accordingly, it may be necessary for the fund to purchase additional foreign
currency on the spot market (and bear the expense of such purchase) if the
market value of the security or securities being hedged is less than the amount
of foreign currency the fund is obligated to deliver and if a decision is made
to sell the security or securities and make delivery of the foreign currency.
Conversely, it may be necessary to sell on the spot market some of the foreign
currency received upon the sale of the portfolio security or securities if the
market value of such security or securities exceeds the amount of foreign
currency the fund is obligated to deliver.
Transaction and position hedging do not eliminate fluctuations in the underlying
prices of the securities which the fund owns or intends to purchase or sell.
They simply establish a rate of exchange which one can achieve at some future
point in time. Additionally, although these techniques tend to minimize the risk
of loss due to a decline in the value of the hedged currency, they tend to limit
any potential gain which might result from the increase in value of such
currency.
Currency forward and futures contracts. Upon entering into such contracts, in
compliance with the SEC's requirements, cash or liquid securities, equal in
value to the amount of the fund's obligation under the contract (less any
applicable margin deposits and any assets that constitute "cover" for such
obligation), will be segregated with the fund's custodian.
A forward currency contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract as agreed by the parties, at a price set at the time of
the contract. In the case of a cancelable contract, the holder has the
unilateral right to cancel the contract at maturity by paying a specified fee.
The contracts are traded in the interbank market conducted directly between
currency traders (usually large commercial banks) and their customers. A
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contract generally has no deposit requirement, and no commissions are charged at
any stage for trades. A currency futures contract is a standardized contract for
the future delivery of a specified amount of a foreign currency at a future date
at a price set at the time of the contract. Currency futures contracts traded in
the United States are designed and traded on exchanges regulated by the CFTC,
such as the New York Mercantile Exchange.
Forward currency contracts differ from currency futures contracts in certain
respects. For example, the maturity date of a forward contract may be any fixed
number of days from the date of the contract agreed upon by the parties, rather
than a predetermined date in a given month. Forward contracts may be in any
amounts agreed upon by the parties rather than predetermined amounts. Also,
forward contracts are traded directly between currency traders so that no
intermediary is required. A forward contract generally requires no margin or
other deposit.
At the maturity of a forward or futures contract, the fund may either accept or
make delivery of the currency specified in the contract, or at or prior to
maturity enter into a closing transaction involving the purchase or sale of an
offsetting contract. Closing transactions with respect to forward contracts are
usually effected with the currency trader who is a party to the original forward
contract. Closing transactions with respect to futures contracts are effected on
a commodities exchange; a clearing corporation associated with the exchange
assumes responsibility for closing out such contracts.
Positions in currency futures contracts may be closed out only on an exchange or
board of trade which provides a secondary market in such contracts. Although the
fund intends to purchase or sell currency futures contracts only on exchanges or
boards of trade where there appears to be an active secondary market, there is
no assurance that a secondary market on an exchange or board of trade will exist
for any particular contract or at any particular time. In such event, it may not
be possible to close a futures position and, in the event of adverse price
movements, the fund would continue to be required to make daily cash payments of
variation margin.
Currency options. In general, options on currencies operate similarly to options
on securities and are subject to many similar risks. Currency options are traded
primarily in the over-the-counter market, although options on currencies have
recently been listed on several exchanges. Options are traded not only on the
currencies of individual nations, but also on the European Currency Unit
("ECU"). The ECU is composed of amounts of a number of currencies, and is the
official medium of exchange of the European Economic Community's European
Monetary System.
The fund will only purchase or write currency options when the Adviser believes
that a liquid secondary market exists for such options. There can be no
assurance that a liquid secondary market will exist for a particular option at
any specified time. Currency options are affected by all of those factors which
influence exchange rates and investments generally. To the extent that these
options are traded over the counter, they are considered to be illiquid by the
SEC staff.
The value of any currency, including the U.S. dollars, may be affected by
complex political and economic factors applicable to the issuing country. In
addition, the exchange rates of currencies (and therefore the values of currency
options) may be significantly affected, fixed, or supported directly or
indirectly by government actions. Government intervention may increase risks
involved in purchasing or selling currency options, since exchange rates may not
be free to fluctuate in respect to other market forces.
The value of a currency option reflects the value of an exchange rate, which in
turn reflects relative values of two currencies, the U.S. dollar and the foreign
currency in question. Because currency transactions occurring in the interbank
market involve substantially larger amounts than those that may be involved in
the exercise of currency options, investors may be disadvantaged by having to
deal in an odd lot market for the underlying currencies in connection with
options at prices that are less favorable than for round lots. Foreign
governmental restrictions or taxes could result in adverse changes in the cost
of acquiring or disposing of currencies.
There is no systematic reporting of last sale information for currencies and
there is no regulatory requirement that quotations available through dealers or
other market sources be firm or revised on a timely basis. Available quotation
information is generally representative of very large round-lot transactions in
the interbank market and thus may not reflect exchange rates for smaller odd-lot
transactions (less than $1 million) where rates may be less favorable. The
interbank market in currencies is a global, around-the-clock market. To the
extent that options markets are closed while the markets for the underlying
currencies remain open, significant price and rate movements may take place in
the underlying markets that cannot be reflected in the options markets.
Settlement procedures. Settlement procedures relating to the fund's investments
in foreign securities and to the fund's foreign currency exchange transactions
may be more complex than settlements with respect to investments in debt or
equity securities of U.S. issuers, and may involve certain risks not present in
the fund's domestic investments, including foreign currency risks and local
custom and usage. Foreign currency transactions may also involve the risk that
an entity involved in the settlement may not meet its obligations.
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Foreign currency conversion. Although foreign exchange dealers do not charge a
fee for currency conversion, they do realize a profit based on the difference
(spread) between prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to the fund at one rate,
while offering a lesser rate of exchange should the fund desire to resell that
currency to the dealer. Foreign currency transactions may also involve the risk
that an entity involved in the settlement may not meet its obligation.
Municipal Lease Obligations
Although a municipal lease obligation does not constitute a general obligation
of the municipality for which the municipality's taxing power is pledged, a
municipal lease obligation is ordinarily backed by the municipality's covenant
to budget for, appropriate and make the payments due under the municipal lease
obligation. However, certain lease obligations contain "non-appropriation"
clauses which provide that the municipality has no obligation to make lease or
installment purchase payments in future years unless money is appropriated for
such purpose on a yearly basis. Although "non-appropriation" lease obligations
are secured by the leased property, disposition of the property in the event of
foreclosure might prove difficult. In addition, the tax treatment of such
obligations in the event of non-appropriation is unclear.
Determinations concerning the liquidity and appropriate valuation of a municipal
lease obligation, as with any other municipal security, are made based on all
relevant factors. These factors include, among others: (1) the frequency of
trades and quotes for the obligation; (2) the number of dealers willing to
purchase or sell the security and the number of other potential buyers; (3) the
willingness of dealers to undertake to make a market in the security; and (4)
the nature of the marketplace trades, including the time needed to dispose of
the security, the method of soliciting offers, and the mechanics of the
transfer.
Participation Interests
The fund may invest in municipal obligations either by purchasing them directly
or by purchasing certificates of accrual or similar instruments evidencing
direct ownership of interest payments or principal payments, or both, on
municipal obligations, provided that, in the opinion of counsel to the initial
seller of each such certificate or instrument, any discount accruing on such
certificate or instrument that is purchased at a yield not greater than the
coupon rate of interest on the related municipal obligations will be exempt from
federal income tax to the same extent as interest on such municipal obligations.
The fund may also invest in tax-exempt obligations by purchasing from banks
participation interests in all or part of specific holdings of municipal
obligations. Such participations may be backed in whole or part by an
irrevocable letter of credit or guarantee of the selling bank. The selling bank
may receive a fee from the fund in connection with the arrangement. The fund
will not purchase such participation interests unless it receives an opinion of
counsel or a ruling of the Internal Revenue Service that interest earned by it
on municipal obligations in which it holds such participation interests is
exempt from federal income tax.
Stand-by Commitments
When the fund purchases municipal obligations it may also acquire stand-by
commitments from banks and broker-dealers with respect to such municipal
obligations. A stand-by commitment is the equivalent of a put option acquired by
the fund with respect to a particular municipal obligation held in its
portfolio. A stand-by commitment is a security independent of the municipal
obligation to which it relates. The amount payable by a bank or dealer during
the time a stand-by commitment is exercisable, absent unusual circumstances
relating to a change in market value, would be substantially the same as the
value of the underlying municipal obligation. A stand-by commitment might not be
transferable by the fund, although it could sell the underlying municipal
obligation to a third party at any time.
The fund expects that stand-by commitments generally will be available without
the payment of direct or indirect consideration. However, if necessary and
advisable, the fund may pay for stand-by commitments either separately in cash
or by paying a higher price for portfolio securities which are acquired subject
to such a commitment (thus reducing the yield to maturity otherwise available
for the same securities.) The total amount paid in either manner for outstanding
stand-by commitments held in the fund portfolio will not exceed 10% of the value
of the fund's total assets calculated immediately after each stand-by commitment
is acquired. The fund will enter into stand- by commitments only with banks and
broker-dealers that, in the judgment of the Trust's Board of Trustees, present
minimal credit risks.
Inverse Floaters
Inverse floaters are derivative securities whose interest rates vary inversely
to changes in short-term interest rates and whose values fluctuate inversely to
changes in long-term interest rates. The value of certain inverse floaters will
fluctuate substantially more in response to a given change in long-term rates
than would a traditional debt security. These securities have investment
characteristics similar to leverage, in that interest rate changes have a
magnified effect on the value of inverse floaters.
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Rule 144A Securities
The fund may purchase securities that have been privately placed but that are
eligible for purchase and sale under Rule 144A under the Securities Act of 1933
(1933 Act). That Rule permits certain qualified institutional buyers, such as
the fund, to trade in privately placed securities that have not been registered
for sale under the 1933 Act. The Adviser, under the supervision of the Board of
Trustees, will consider whether securities purchased under Rule 144A are
illiquid and thus subject to the fund's investment restriction on illiquid
securities. A determination of whether a Rule 144A security is liquid or not is
a question of fact. In making this determination, the Adviser will consider the
trading markets for the specific security, taking into account the unregistered
nature of a Rule 144A security. In addition, the Adviser could consider the (1)
frequency of trades and quotes, (2) number of dealers and potential purchasers,
(3) dealer undertakings to make a market, and (4) nature of the security and of
marketplace trades (e.g., the time needed to dispose of the security, the method
of soliciting offers, and the mechanics of transfer). The liquidity of Rule 144A
securities will be monitored and, if as a result of changed conditions, it is
determined by the Adviser that a Rule 144A security is no longer liquid, the
fund's holdings of illiquid securities would be reviewed to determine what, if
any, steps are required to assure that the fund does not invest more than its
investment restriction on illiquid securities allows. Investing in Rule 144A
securities could have the effect of increasing the amount of the fund's assets
invested in illiquid securities if qualified institutional buyers are unwilling
to purchase such securities.
TAXES
In this section, all discussions of taxation at the shareholder level relate to
federal taxes only. Consult your tax adviser for state and local tax
considerations and for information about special tax considerations that may
apply to shareholders that are not natural persons.
Alternative Minimum Tax. Distributions derived from interest which is exempt
from regular federal income tax may subject corporate shareholders to or
increase their liability under the corporate alternative minimum tax (AMT). A
portion of such distributions may constitute a tax preference item for
individual shareholders and may subject them to or increase their liability
under the AMT.
Dividends Received Deductions. Distributions will qualify for the corporate
dividends received deduction only to the extent that dividends earned by the
fund qualify. Any such dividends are, however, includable in adjusted current
earnings for purposes of computing corporate AMT. The dividends received
deduction for eligible dividends is subject to a holding period requirement
imposed pursuant to the Taxpayer Relief Act of 1997 (the "1997 Act").
Return of Capital Distributions. To the extent that a distribution is a return
of capital for federal tax purposes, it reduces the cost basis of the shares on
the record date and is similar to a partial return of the original investment
(on which a sales charge may have been paid). There is no recognition of a gain
or loss, however, unless the return of capital reduces the cost basis in the
shares to below zero.
Funds that invest in U.S. Government Securities. Many states grant tax-free
status to dividends paid to shareholders of mutual funds from interest income
earned by the fund from direct obligations of the U.S. government. Investments
in mortgage-backed securities (including GNMA, FNMA and FHLMC Securities) and
repurchase agreements collateralized by U.S. government securities do not
qualify as direct federal obligations in most states. Shareholders should
consult with their own tax advisers about the applicability of state and local
intangible property, income or other taxes to their fund shares and
distributions and redemption proceeds received from the fund.
Fund Distributions. Distributions from the fund (other than exempt-interest
dividends, as discussed below) will be taxable to shareholders as ordinary
income to the extent derived from the fund's investment income and net
short-term gains. Pursuant to the 1997 Act, two different tax rates apply to net
capital gains (that is, the excess of net gains from capital assets held for
more than one year over net losses from capital assets held for not more than
one year). One rate (generally 28%) generally applies to net gains on capital
assets held for more than one year but not more than 18 months ("mid-term
gains") and a second, preferred rate (generally 20%) applies to the balance of
such net capital gains ("adjusted net capital gains"). Distributions of net
capital gains will be treated in the hands of shareholders as mid-term gains to
the extent designated by the fund as deriving from net gains from assets held
for more than one year but not more than 18 months, and the balance will be
treated as adjusted net capital gains. Distributions of mid-term gains and
adjusted net capital gains will be taxable to shareholders as such, regardless
of how long a shareholder has held the shares in the fund. Distributions will be
taxed as described above whether received in cash or in fund shares.
Distributions from Tax-Exempt Funds. Each tax-exempt fund will have at least 50%
of its total assets invested in tax-exempt bonds at the end of each quarter so
that dividends from net interest income on tax-exempt bonds will be exempt from
Federal income tax when received by a shareholder. The tax-exempt portion of
dividends paid will be designated within 60 days after year-end based upon the
ratio of net tax-exempt income to total net investment income earned during the
year. That ratio may be substantially different from the ratio of net tax-exempt
income to total net investment income earned during any particular portion of
the year. Thus, a shareholder who holds shares for only a part of the year may
be allocated more or less tax-exempt dividends than would be the case if the
allocation were based on the ratio of net tax-exempt income to total net
investment income actually earned while a shareholder.
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The Tax Reform Act of 1986 makes income from certain "private activity bonds"
issued after August 7, 1986, a tax preference item for the AMT at the maximum
rate of 28% for individuals and 20% for corporations. If the fund invests in
private activity bonds, shareholders may be subject to the AMT on that part of
the distributions derived from interest income on such bonds. Other provisions
of the Tax Reform Act affect the tax treatment of distributions for
corporations, casualty insurance companies and financial institutions; interest
on all tax-exempt bonds is included in corporate adjusted current earnings when
computing the AMT applicable to corporations. Seventy- five percent of the
excess of adjusted current earnings over the amount of income otherwise subject
to the AMT is included in a corporation's alternative minimum taxable income.
Dividends derived from any investments other than tax-exempt bonds and any
distributions of short-term capital gains are taxable to shareholders as
ordinary income. Any distributions of net long-term gains will in general be
taxable to shareholders as long-term capital gains regardless of the length of
time fund shares are held.
A tax-exempt fund may at times purchase tax-exempt securities at a discount and
some or all of this discount may be included in the fund's ordinary income which
will be taxable when distributed.
Any market discount recognized on a tax-exempt bond purchased after April 30,
1993 with a term at time of issue of one year or more is taxable as ordinary
income. A market discount bond is a bond acquired in the secondary market at a
price below its "stated redemption price" (in the case of a bond with original
issue discount, its"revised issue price").
Shareholders receiving social security and certain retirement benefits may be
taxed on a portion of those benefits as a result of receiving tax-exempt income,
including tax-exempt dividends from the fund.
Special Tax Rules Applicable to Tax-Exempt Funds. Income distributions to
shareholders who are substantial users or related persons of substantial users
of facilities financed by industrial revenue bonds may not be excludable from
their gross income if such income is derived from such bonds. Income derived
from the fund's investments other than tax-exempt instruments may give rise to
taxable income. The fund's shares must be held for more than six months in order
to avoid the disallowance of a capital loss on the sale of fund shares to the
extent of tax-exempt dividends paid during that period. A shareholder who
borrows money to purchase the fund's shares will not be able to deduct the
interest paid with respect to such borrowed money.
Sales of Shares. The sale, exchange or redemption of fund shares may give rise
to a gain or loss. In general, any gain realized upon a taxable disposition of
shares will be treated as mid-term capital gain if the shares have been held for
more than 12 months but not more than 18 months, and as adjusted net capital
gains if the shares have been held for more than 18 months. Otherwise the gain
on the sale, exchange or redemption of fund shares will be treated as short-term
capital gain. In general, any loss realized upon a taxable disposition of shares
will be treated as short-term loss if the shares have been held for less than 12
months, mid-term loss if shares have been held for more than 12 months but not
more than 18 months, and as adjusted net capital loss if shares have been held
for more than 18 months. However, any loss realizedupon a taxable disposition
of shares held for six months or less will be treated as long-term, rather than
short-term, capital loss to the extent of any long-term capital gain
distributions received by the shareholder with respect to those shares. All or
a portion of any loss realized upon a taxable disposition of shares will be
disallowed if other shares are purchased within 30 days before or after the
disposition. In such a case, the basis of the newly purchased shares will be
adjusted to reflect the disallowed loss.
Backup Withholding. Certain distributions and redemptions may be subject to a
31% backup withholding unless a taxpayer identification number and certification
that the shareholder is not subject to the withholding is provided to the fund.
This number and form may be provided by either a Form W-9 or the accompanying
application. In certain instances, CISC may be notified by the Internal Revenue
Service that a shareholder is subject to backup withholding.
Excise Tax. To the extent that the fund does not annually distribute
substantially all taxable income and realized gains, it is subject to an excise
tax. The Adviser intends to avoid this tax except when the cost of processing
the distribution is greater than the tax.
Tax Accounting Principles. To qualify as a "regulated investment company," the
fund must (a) derive at least 90% of its gross income from dividends, interest,
payments with respect to securities loans, gains from the sale or other
disposition of stock securities or foreign currencies or other income (including
but not limited to gains from options, futures or forward contracts) derived
with respect to its business of investing in such stock securities or
currencies; (b) derive less than 30% of its gross income from the sale or other
disposition
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of certain assets held less than three months for tax years beginning on or
before August 5, 1997; (c) diversify its holdings so that, at the close of each
quarter of its taxable year, (i) at least 50% of the value of its total assets
consists of cash, cash items, U.S. Government securities, and other securities
limited generally with respect to any one issuer to not more than 5% of the
total assets of the fund and not more than 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of its total
assets is invested in the securities of any issuer (other than U.S. Government
securities).
Hedging Transactions. If the fund engages in hedging transactions, including
hedging transactions in options, futures contracts, and straddles, or other
similar transactions it will be subject to special tax rules (including
constructive sale, mark-to-market, straddle, wash sale, and short sale rules),
the effect of which may be to accelerate income to the fund, defer losses to the
fund, cause adjustments in the holding periods of the fund's securities, or
convert short-term capital losses into long-term capital losses. These rules
could therefore affect the amount, timing and character of distributions to
shareholders.
Foreign Currency-Denominated Securities and Related Hedging Transactions. The
fund's transactions in foreign currencies, foreign currency-denominated debt
securities, certain foreign currency options, futures contracts and forward
contracts (and similar instruments) may give rise to ordinary income or loss to
the extent such income or loss results from fluctuations in the value of the
foreign currency concerned.
If more than 50% of the fund's total assets at the end of its fiscal year are
invested in stock or securities of foreign corporate issuers, the fund may make
an election permitting its shareholders to take a deduction or credit for
federal tax purposes for their portion of certain qualified foreign taxes paid
by the fund. The Adviser will consider the value of the benefit to a typical
shareholder, the cost to the fund of compliance with the election, and
incidental costs to shareholders in deciding whether to make the election. A
shareholder's ability to claim such a foreign tax credit will be subject to
certain limitations imposed by the Code (including a holding period requirement
imposed pursuant to the 1997 Act), as a result of which a shareholder may not
get a full credit for the amount of foreign taxes so paid by the fund.
Shareholders who do not itemize on their federal income tax returns may claim a
credit (but no deduction) for such foreign taxes.
Investment by the fund in certain "passive foreign investment companies" could
subject the fund to a U.S. federal income tax (including interest charges) on
distributions received from the company or on proceeds received from the
disposition of shares in the company, which tax cannot be eliminated by making
distributions to fund shareholders. However, the fund may elect to treat a
passive foreign investment company as a "qualified electing fund," in which case
the fund will be required to include its share of the company's income and net
capital gain annually, regardless of whether it receives any distribution from
the company. The fund also may make an election to mark the gains (and to a
limited extent losses) in such holdings "to the market" as though it had sold
and repurchased its holdings in those passive foreign investment companies on
the last day of the fund's taxable year. Such gains and losses are treated as
ordinary income and loss. The qualified electing fund and mark-to-market
elections may have the effect of accelerating the recognition of income (without
the receipt of cash) and increase the amount required to be distributed for the
fund to avoid taxation. Making either of these elections therefore may require a
fund to liquidate other investments (including when it is not advantageous to do
so) to meet its distribution requirement, which also may accelerate the
recognition of gain and affect a fund's total return.
MANAGEMENT OF THE COLONIAL FUNDS (in this section, and the following sections
entitled "Trustees and Officers," "The Management Agreement," "Administration
Agreement," "The Pricing and Bookkeeping Agreement," "Portfolio Transactions,"
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<PAGE>
"Investment decisions," and "Brokerage and research services," the "Adviser"
refers to Colonial Management Associates, Inc.) The Adviser is the investment
adviser to each of the Colonial funds (except for Colonial Municipal Money
Market Fund, Colonial Global Utilities Fund, Colonial Newport Tiger Fund,
Colonial Newport Tiger Cub Fund, Newport Japan Opportunities Fund and Newport
Greater China Fund - see Part I of each Fund's respective SAI for a description
of the investment adviser). The Adviser is a subsidiary of The Colonial Group,
Inc. (TCG), One Financial Center, Boston, MA 02111. TCG is a direct subsidiary
of Liberty Financial Companies, Inc. (Liberty Financial), which in turn is a
direct subsidiary of LFC Holdings, Inc., which in turn is a direct subsidiary of
Liberty Mutual Equity Corporation, which in turn is a wholly-owned subsidiary of
Liberty Mutual Insurance Company (Liberty Mutual). Liberty Mutual is an
underwriter of workers' compensation insurance and a property and casualty
insurer in the U.S. Liberty Financial's address is 600 Atlantic Avenue, Boston,
MA 02210. Liberty Mutual's address is 175 Berkeley Street, Boston, MA 02117.
Trustees and Officers (this section applies to all of the Colonial funds)
<TABLE>
<CAPTION>
Name and Address Age Position with Fund Principal Occupation
<S> <C> <C> <C>
Robert J. Birnbaum 69 Trustee Retired (formerly Special Counsel, Dechert Price &
313 Bedford Road Rhoads from September, 1998 to December 1993).
Ridgewood, NJ 07450
Tom Bleasdale 66 Trustee Retired (formerly Chairman of the Board and Chief
102 Clubhouse Drive #275 Executive Officer, Shore Bank & Trust Company from 1992-
Naples, FL 34105 1993), is a Director of The Empire Company since June 1995.
Lora S. Collins 61 Trustee Attorney (formerly Attorney, Kramer, Levin, Naftalis,
1175 Hill Road Nessen, Kamin & Franklin from September, 1986 to November, 1996).
Southold, NY 11971
James E. Grinnell 67 Trustee Private Investor since November, 1988.
22 Harbor Avenue
Marblehead, MA 01945
William D. Ireland, Jr. 73 Trustee Retired, is a Trustee of certain charitable and non-charitable
103 Springline Drive organizations since February, 1990.
Vero Beach, FL 32963
Richard W. Lowry 61 Trustee Private Investor since August, 1987.
10701 Charleston Drive
Vero Beach, FL 32963
William E. Mayer* 56 Trustee Partner, Development Capital, LLP (formerly Dean, College of
500 Park Avenue, 5th Floor Business and Management, University of Maryland from
New York, NY 10022 October, 1992 to November, 1996, (Dean, Simon
Graduate School of Busines, University of Rochester from
October, 1991 to July, 1992).
James L. Moody, Jr. 65 Trustee Retired (formerly Chairman of the Board, Hannaford Bros. Co.
P.O. Box 1000 from May, 1994 to May, 1997 and Chief Executive Officer,
Portland, ME 04104 Hannaford Bros. Co. from May, 1973 to May, 1992).
John J. Neuhauser 53 Trustee Dean, Boston College School of Management since 1978.
140 Commonwealth Avenue
Chestnut Hill, MA 02167
14
<PAGE>
George L. Shinn 74 Trustee Financial Consultant since 1989.
Credit Suisse First Boston
Corp.
Eleven Madison Avenue
25th Floor
New York, NY 10010-3629
Robert L. Sullivan 69 Trustee Retired Partner, Peat Marwick Main & Co.
7121 Natelli Woods Lane
Bethesda, MD 20817
Sinclair Weeks, Jr. 73 Trustee Chairman of the Board, Reed & Barton Corporation since 1987.
Bay Colony Corporate Ctr.
Suite 4550
1000 Winter Street
Waltham, MA 02154
Harold W. Cogger 61 President (formerly President of Colonial funds since March, 1996 (formerly
Vice President Vice President from July, 1993 to March, 1996); is
Director, since March, 1984 and Chairman of the Board
since March, 1996 of the Adviser (formerly President
from July, 1993 to December, 1996, Chief Executive Officer
from March, 1995 to December, 1996 and Executive Vice
President from October, 1989 to July, 1993); Director since
October, 1991 and Chairman of the Board since March, 1996
of TCG (formerly President from October, 1994 to December,
1996 and Chief Executive Officer from March, 1995 to December,
1996); Executive Vice President and Director since March, 1995,
Liberty Financial; Director since November, 1996 of Stein Roe &
Farnham Incorporated.
Timothy J. Jacoby 44 Treasurer and Treasurer and Chief Financial Officer of Colonial funds since
Chief Financial October, 1996, is Senior Vice President of the Adviser since
and Accounting September, 1996 (formerly Senior Vice President, Fidelity
Officer Accounting and Custody Services from September, 1993 to
September, 1996 and Assistant Treasurer to the Fidelity
Group of Funds from August, 1990 to September, 1993).
Michael H. Koonce 37 Secretary Secretary of Colonial funds since 1997 (formerly Assistant
Secretary from June, 1992 to July, 1997), is Senior Vice
President, General Counsel, Clerk and Secretary of the
Adviser (formerly Vice President, Counsel, Assistant Secretary
and Assistant Clerk from June, 1992 to July, 1997), Vice
President - Legal and Clerk of TCG (formerly Assistant
Clerk from April, 1993 to July, 1997).
15
<PAGE>
Davey S. Scoon 50 Vice President Vice President of Colonial funds since June, 1993, is Executive
Vice President since July, 1993 and Director since March, 1985 of
the Adviser (formerly Senior Vice President and Treasurer of the
Adviser from March, 1985 to July, 1993); Executive Vice President
and Chief Operating Officer, TCG since March, 1995 (formerly Vice
President - Finance and Administration of TCG from November, 1985
to March, 1995).
</TABLE>
* A Trustee who is an "interested person" (as defined in the Investment Company
Act of 1940) of the fund or the Adviser.
The address of the officers of each Colonial Fund is One Financial Center,
Boston, MA 02111.
The Trustees serve as trustees of all Colonial funds for which each Trustee will
receive an annual retainer of $45,000 and attendance fees of $7,500 for each
regular joint meeting and $1,000 for each special joint meeting. Committee
chairs receive an annual retainer of $5,000. Committee members receive an annual
retainer of $1,000 and $1,000 for each special meeting attended. Two-thirds of
the Trustee fees are allocated among the Colonial funds based on each fund's
relative net assets and one-third of the fees are divided equally among the
Colonial funds.
The Adviser and/or its affiliate, Colonial Advisory Services, Inc. (CASI), has
rendered investment advisory services to investment company, institutional and
other clients since 1931. The Adviser currently serves as investment adviser and
administrator for 38 open- end and 5 closed-end management investment company
portfolios, and is the administrator for 5 open-end management investment
company portfolios (collectively, Colonial funds). Trustees and officers of the
Trust, who are also officers of the Adviser or its affiliates, will benefit from
the advisory fees, sales commissions and agency fees paid or allowed by the
Trust. More than 30,000 financial advisers have recommended Colonial funds to
over 800,000 clients worldwide, representing more than $16.3 billion in assets.
The Agreement and Declaration of Trust (Declaration) of the Trust provides that
the Trust will indemnify its Trustees and officers against liabilities and
expenses incurred in connection with litigation in which they may be involved
because of their offices with the Trust but that such indemnification will not
relieve any officer or Trustee of any liability to the Trust or its shareholders
by reason of willful misfeasance,
16
<PAGE>
bad faith, gross negligence or reckless disregard of his or her duties. The
Trust, at its expense, provides liability insurance for the benefit of its
Trustees and officers.
The Management Agreement (this section does not apply to the Colonial Municipal
Money Market Fund, Colonial Global Utilities Fund, Colonial Newport Tiger Fund,
Newport Japan Opportunities Fund, Colonial Newport Tiger Cub Fund or Newport
Greater China Fund)
Under a Management Agreement (Agreement), the Adviser has contracted to furnish
each fund with investment research and recommendations or fund management,
respectively, and accounting and administrative personnel and services, and with
office space, equipment and other facilities. For these services and facilities,
each Colonial fund pays a monthly fee based on the average of the daily closing
value of the total net assets of each fund for such month. Under the Agreement,
any liability of the Adviser to the Trust, a fund and/or its shareholders is
limited to situations involving the Adviser's own willful misfeasance, bad
faith, gross negligence or reckless disregard of its duties.
The Agreement may be terminated with respect to the fund at any time on 60 days'
written notice by the Adviser or by the Trustees of the Trust or by a vote of a
majority of the outstanding voting securities of the fund. The Agreement will
automatically terminate upon any assignment thereof and shall continue in effect
from year to year only so long as such continuance is approved at least annually
(i) by the Trustees of the Trust or by a vote of a majority of the outstanding
voting securities of the fund and (ii) by vote of a majority of the Trustees who
are not interested persons (as such term is defined in the 1940 Act) of the
Adviser or the Trust, cast in person at a meeting called for the purpose of
voting on such approval.
The Adviser pays all salaries of officers of the Trust. The Trust pays all
expenses not assumed by the Adviser including, but not limited to, auditing,
legal, custodial, investor servicing and shareholder reporting expenses. The
Trust pays the cost of printing and mailing any Prospectuses sent to
shareholders. LFII pays the cost of printing and distributing all other
Prospectuses.
Administration Agreement (this section applies only to the Colonial Municipal
Money Market Fund, Colonial Global Utilities Fund, Colonial Newport Tiger Fund,
Newport Japan Opportunities Fund, Colonial Newport Tiger Cub Fund and Newport
Greater China Fund and their respective Trusts).
Under an Administration Agreement with each Fund named above, the Adviser, in
its capacity as the Administrator to each Fund, has contracted to perform the
following administrative services:
(a) providing office space, equipment and clerical personnel;
(b) arranging, if desired by the respective Trust, for its Directors,
officers and employees to serve as Trustees, officers or agents of each
Fund;
(c) preparing and, if applicable, filing all documents required for
compliance by each Fund with applicable laws and regulations;
(d) preparation of agendas and supporting documents for and minutes of
meetings of Trustees, committees of Trustees and shareholders;
(e) coordinating and overseeing the activities of each Fund's other
third-party service providers; and
(f) maintaining certain books and records of each Fund.
17
<PAGE>
With respect to the Colonial Municipal Money Market Fund, the Administration
Agreement for this Fund provides for the following services in addition to the
services referenced above:
(g) monitoring compliance by the Fund with Rule 2a-7 under the Investment
Company Act of 1940 (the "1940 Act") and reporting to the Trustees from
time to time with respect thereto; and
(h) monitoring the investments and operations of the SR&F Municipal Money
Market Portfolio (Municipal Money Market Portfolio) in which Colonial
Municipal Money Market Fund is invested and the LFC Utilities Trust (LFC
Portfolio) in which Colonial Global Utilities Fund is invested and
reporting to the Trustees from time to time with respect thereto.
The Adviser is paid a monthly fee at the annual rate of average daily net assets
set forth in Part 1 of this Statement of Additional Information.
The Pricing and Bookkeeping Agreement
The Adviser provides pricing and bookkeeping services to each Colonial fund
pursuant to a Pricing and Bookkeeping Agreement. The Adviser, in its capacity as
the Administrator to each of Colonial Municipal Money Market Fund and Colonial
Global Utilities Fund, is paid an annual fee of $18,000, plus 0.0233% of average
daily net assets in excess of $50 million. For each of the other Colonial funds
(except for Colonial Newport Tiger Fund, Newport Japan Opportunities Fund,
Colonial Newport Tiger Cub Fund and Newport Greater China Fund), the Adviser is
paid monthly a fee of $2,250 by each fund, plus a monthly percentage fee based
on net assets of the fund equal to the following:
1/12 of 0.000% of the first $50 million;
1/12 of 0.035% of the next $950 million;
1/12 of 0.025% of the next $1 billion; 1/12
of 0.015% of the next $1 billion; and 1/12
of 0.001% on the excess over $3 billion
The Adviser provides pricing and bookkeeping services to Colonial Newport Tiger
Fund, Newport Japan Opportunities Fund, Colonial Newport Tiger Cub Fund and
Newport Greater China Fund for an annual fee of $27,000, plus 0.035% of each
Fund's average daily net assets over $50 million.
Stein Roe & Farnham Incorporated, the investment adviser of each of the
Municipal Money Market Portfolio and LFC Portfolio, provides pricing and
bookkeeping services to each Portfolio for a fee of $25,000 plus 0.0025%
annually of average daily net assets of each Portfolio over $50 million.
Portfolio Transactions
The following sections entitled "Investment decisions" and "Brokerage and
research services" do not apply to Colonial Municipal Money Market Fund, and
Colonial Global Utilities Fund. For each of these funds, see Part 1 of its
respective SAI. The Adviser of Colonial Newport Tiger Fund, Newport Japan
Opportunities Fund, Colonial Newport Tiger Cub Fund and Newport Greater China
Fund follows the same procedures as those set forth under "Brokerage and
research services."
Investment decisions. The Adviser acts as investment adviser to each of the
Colonial funds (except for the Colonial Municipal Money Market Fund, Colonial
Global Utilities Fund, Colonial Newport Tiger Fund, Newport Japan Opportunities
Fund, Colonial Newport Tiger Cub Fund and Newport Greater China Fund, each of
which is administered by the Adviser. The Adviser's affiliate, CASI, advises
other institutional, corporate, fiduciary and individual clients for which CASI
performs various services. Various officers and Trustees of the Trust also serve
as officers or Trustees of other Colonial funds and the other corporate or
fiduciary clients of the Adviser. The Colonial funds and clients advised by the
Adviser or the funds administered by the Adviser sometimes invest in securities
in which the Fund also invests and sometimes engage in covered option writing
programs and enter into transactions utilizing stock index options and stock
index and financial futures and related options ("other instruments"). If the
Fund, such other Colonial funds and such other clients desire to buy or sell the
same portfolio securities, options or other instruments at about the same time,
the purchases and sales are normally made as nearly as practicable on a pro rata
basis in proportion to the amounts desired to be purchased or sold by each.
Although in some cases these practices could have a detrimental effect on the
price or volume of the securities, options or other instruments as far as the
Fund is concerned, in most cases it is believed that these practices should
produce better executions. It is the opinion of the Trustees that the
desirability of retaining the Adviser as investment adviser to the Colonial
funds outweighs the disadvantages, if any, which might result from these
practices.
18
<PAGE>
The portfolio managers of Colonial International Fund for Growth, a series of
Colonial Trust III, will use the trading facilities of Stein Roe & Farnham
Incorporated, an affiliate of the Adviser, to place all orders for the purchase
and sale of this fund's portfolio securities, futures contracts and foreign
currencies.
Brokerage and research services. Consistent with the Rules of Fair Practice of
the National Association of Securities Dealers, Inc., and subject to seeking
"best execution" (as defined below) and such other policies as the Trustees may
determine, the Adviser may consider sales of shares of the Colonial funds as a
factor in the selection of broker-dealers to execute securities transactions for
a Colonial fund.
The Adviser places the transactions of the Colonial funds with broker-dealers
selected by the Adviser and, if applicable, negotiates commissions.
Broker-dealers may receive brokerage commissions on portfolio transactions,
including the purchase and writing of options, the effecting of closing purchase
and sale transactions, and the purchase and sale of underlying securities upon
the exercise of options and the purchase or sale of other instruments. The
Colonial funds from time to time also execute portfolio transactions with such
broker-dealers acting as principals. The Colonial funds do not intend to deal
exclusively with any particular broker-dealer or group of broker-dealers.
It is the Adviser's policy generally to seek best execution, which is to place
the Colonial funds' transactions where the Colonial funds can obtain the most
favorable combination of price and execution services in particular transactions
or provided on a continuing basis by a broker-dealer, and to deal directly with
a principal market maker in connection with over-the-counter transactions,
except when it is believed that best execution is obtainable elsewhere. In
evaluating the execution services of, including the overall reasonableness of
brokerage commissions paid to, a broker-dealer, consideration is given to, among
other things, the firm's general execution and operational capabilities, and to
its reliability, integrity and financial condition.
Securities transactions of the Colonial funds may be executed by broker-dealers
who also provide research services (as defined below) to the Adviser and the
Colonial funds. The Adviser may use all, some or none of such research services
in providing investment advisory services to each of its investment company and
other clients, including the fund. To the extent that such services are used by
the Adviser, they tend to reduce the Adviser's expenses. In the Adviser's
opinion, it is impossible to assign an exact dollar value for such services.
The Trustees have authorized the Adviser to cause the Colonial funds to pay a
broker-dealer which provides brokerage and research services to the Adviser an
amount of commission for effecting a securities transaction, including the sale
of an option or a closing purchase transaction, for the Colonial funds in excess
of the amount of commission which another broker-dealer would have charged for
effecting that transaction. As provided in Section 28(e) of the Securities
Exchange Act of 1934, "brokerage and research services" include advice as to the
value of securities, the advisability of investing in, purchasing or selling
securities and the availability of securities or purchasers or sellers of
securities; furnishing analyses and reports concerning issues, industries,
securities, economic factors and trends and portfolio strategy and performance
of accounts; and effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement). The Adviser must
determine in good faith that such greater commission is reasonable in relation
to the value of the brokerage and research services provided by the executing
broker-dealer viewed in terms of that particular transaction or the Adviser's
overall responsibilities to the Colonial funds and all its other clients.
The Trustees have authorized the Adviser to utilize the services of a clearing
agent with respect to all call options written by Colonial funds that write
options and to pay such clearing agent commissions of a fixed amount per share
(currently 1.25 cents) on the sale of the underlying security upon the exercise
of an option written by a fund.
The Adviser may use the services of AlphaTrade Inc. (ATI), its registered
broker-dealer subsidiary, when buying or selling equity securities for a Fund's
portfolio, pursuant to procedures adopted by the Trustees and Investment Company
Act Rule 17e-1. Under the Rule, the Adviser must ensure that commissions a Fund
pays ATI on portfolio transactions are reasonable and fair compared to
commissions received by other broker-dealers in connection with comparable
transactions involving similar securities being bought or sold at about the same
time. The Adviser will report quarterly to the Trustees on all securities
transactions placed through ATI so that the Trustees may consider whether such
trades complied with these procedures and the Rule. ATI employs electronic
trading methods by which it seeks to obtain best price and execution for the
Fund, and will use a clearing broker to settle trades.
19
<PAGE>
Principal Underwriter
LFII is the principal underwriter of the Trust's shares. LFII has no obligation
to buy the Colonial funds' shares, and purchases the Colonial funds' shares only
upon receipt of orders from authorized FSFs or investors.
Investor Servicing and Transfer Agent
CISC is the Trust's investor servicing agent (transfer, plan and dividend
disbursing agent), for which it receives fees which are paid monthly by the
Trust. The fee paid to CISC is based on the average daily net assets of each
Colonial fund plus reimbursement for certain out-of-pocket expenses. See "Fund
Charges and Expenses" in Part 1 of this SAI for information on fees received by
CISC. The agreement continues indefinitely but may be terminated by 90 days'
notice by the Fund to CISC or generally by 6 months' notice by CISC to the Fund.
The agreement limits the liability of CISC to the Fund for loss or damage
incurred by the Fund to situations involving a failure of CISC to use reasonable
care or to act in good faith in performing its duties under the agreement. It
also provides that the Fund will indemnify CISC against, among other things,
loss or damage incurred by CISC on account of any claim, demand, action or suit
made on or against CISC not resulting from CISC's bad faith or negligence and
arising out of, or in connection with, its duties under the agreement.
DETERMINATION OF NET ASSET VALUE
Each Colonial fund determines net asset value (NAV) per share for each Class as
of the close of the New York Stock Exchange (Exchange) (generally 4:00 p.m.
Eastern time, 3:00 p.m. Chicago time) each day the Exchange is open. Currently,
the Exchange is closed Saturdays, Sundays and the following holidays: New Year's
Day, Presidents' Day, Good Friday, Memorial Day, the Fourth of July, Labor Day,
Thanksgiving and Christmas. Funds with portfolio securities which are primarily
listed on foreign exchanges may experience trading and changes in NAV on days on
which such Fund does not determine NAV due to differences in closing policies
among exchanges. This may significantly affect the NAV of the Fund's redeemable
securities on days when an investor cannot redeem such securities. The net asset
value of the Municipal Money Market Portfolio will not be determined on days
when the Exchange is closed unless, in the judgment of the Municipal Money
Market Portfolio's Board of Trustees, the net asset value of the Municipal Money
Market Portfolio should be determined on any such day, in which case the
determination will be made at 3:00 p.m., Chicago time. Debt securities generally
are valued by a pricing service which determines valuations based upon market
transactions for normal, institutional- size trading units of similar
securities. However, in circumstances where such prices are not available or
where the Adviser deems it appropriate to do so, an over-the-counter or exchange
bid quotation is used. Securities listed on an exchange or on NASDAQ are valued
at the last sale price. Listed securities for which there were no sales during
the day and unlisted securities are valued at the last quoted bid price. Options
are valued at the last sale price or in the absence of a sale, the mean between
the last quoted bid and offering prices. Short-term obligations with a maturity
of 60 days or less are valued at amortized cost pursuant to procedures adopted
by the Trustees. The values of foreign securities quoted in foreign currencies
are translated into U.S. dollars at the exchange rate for that day. Portfolio
positions for which there are no such valuations and other assets are valued at
fair value as determined by the Adviser in good faith under the direction of the
Trust's Trustees.
Generally, trading in certain securities (such as foreign securities) is
substantially completed each day at various times prior to the close of the
Exchange. Trading on certain foreign securities markets may not take place on
all business days in New York, and trading on some foreign securities markets
takes place on days which are not business days in New York and on which the
Fund's NAV is not calculated. The values of these securities used in determining
the NAV are computed as of such times. Also, because of the amount of time
required to collect and process trading information as to large numbers of
securities issues, the values of certain securities (such as convertible bonds,
U.S. government securities, and tax-exempt securities) are determined based on
market quotations collected earlier in the day at the latest practicable time
prior to the close of the Exchange. Occasionally, events affecting the value of
such securities may occur between such times and the close of the Exchange which
will not be reflected in the computation of each Colonial fund's NAV. If events
materially affecting the value of such securities occur during such period, then
these securities will be valued at their fair value following procedures
approved by the Trust's Trustees.
(The following two paragraphs are applicable only to Colonial Newport Tiger
Fund, Newport Japan Opportunities Fund, Colonial Newport Tiger Cub Fund and
Newport Greater China Fund - "Adviser" in these two paragraphs refers to each
fund's Adviser, Newport Fund Management, Inc.)
Trading in securities on stock exchanges and over-the-counter markets in the Far
East is normally completed well before the close of the business day in New
York. Trading on Far Eastern securities markets may not take place on all
business days in New York, and trading on some Far Eastern securities markets
does take place on days which are not business days in New York and on which the
Fund's NAV is not calculated.
The calculation of the Fund's NAV accordingly may not take place
contemporaneously with the determination of the prices of the Fund's portfolio
securities used in such calculations. Events affecting the values of portfolio
securities that occur between the time their prices are determined and the close
of the Exchange (when the Fund's NAV is calculated) will not be reflected in the
Fund's calculation of NAV unless the Adviser, acting under procedures
established by the Board of Trustees of the Trust, deems that the particular
event would
20
<PAGE>
materially affect the Fund's NAV, in which case an adjustment will be made.
Assets or liabilities initially expressed in terms of foreign currencies are
translated prior to the next determination of the NAV of the Fund's shares into
U.S. dollars at prevailing market rates.
Amortized Cost for Money Market Funds (this section currently applies only to
Colonial Government Money Market Fund, a series of Colonial Trust II - see
"Amortized Cost for Money Market Funds" under "Other Information Concerning the
Portfolio" in Part 1 of the SAI of Colonial Municipal Money Market Fund for
information relating to the Municipal Money Market Portfolio)
Money market funds generally value their portfolio securities at amortized cost
according to Rule 2a-7 under the 1940 Act.
Portfolio instruments are valued under the amortized cost method, whereby the
instrument is recorded at cost and thereafter amortized to maturity. This method
assures a constant NAV but may result in a yield different from that of the same
portfolio under the market value method. The Trust's Trustees have adopted
procedures intended to stabilize a money market fund's NAV per share at $1.00.
When a money market fund's market value deviates from the amortized cost of
$1.00, and results in a material dilution to existing shareholders, the Trust's
Trustees will take corrective action that may include: realizing gains or
losses; shortening the portfolio's maturity; withholding distributions;
redeeming shares in kind; or converting to the market value method (in which
case the NAV per share may differ from $1.00). All investments will be
determined pursuant to procedures approved by the Trust's Trustees to present
minimal credit risk.
See the Statement of Assets and Liabilities in the shareholder report of the
Colonial Government Money Market Fund for a specimen price sheet showing the
computation of maximum offering price per share of Class A shares.
HOW TO BUY SHARES
The Prospectus contains a general description of how investors may buy shares of
the Fund and tables of charges. This SAI contains additional information which
may be of interest to investors.
The Fund will accept unconditional orders for shares to be executed at the
public offering price based on the NAV per share next determined after the order
is placed in good order. The public offering price is the NAV plus the
applicable sales charge, if any. In the case of orders for purchase of shares
placed through FSFs, the public offering price will be determined on the day the
order is placed in good order, but only if the FSF receives the order prior to
the time at which shares are valued and transmits it to the Fund before the Fund
processes that day's transactions. If the FSF fails to transmit before the Fund
processes that day's transactions, the customer's entitlement to that day's
closing price must be settled between the customer and the FSF. If the FSF
receives the order after the time at which the Fund values its shares, the price
will be based on the NAV determined as of the close of the Exchange on the next
day it is open. If funds for the purchase of shares are sent directly to CISC,
they will be invested at the public offering price next determined after receipt
in good order. Payment for shares of the Fund must be in U.S. dollars; if made
by check, the check must be drawn on a U.S. bank.
The Fund receives the entire NAV of shares sold. For shares subject to an
initial sales charge, LFII's commission is the sales charge shown in the Fund's
Prospectus less any applicable FSF discount. The FSF discount is the same for
all FSFs, except that LFII retains the entire sales charge on any sales made to
a shareholder who does not specify a FSF on the Investment Account Application
("Application"). LFII generally retains 100% of any asset-based sales charge
(distribution fee) or contingent deferred sales charge. Such charges generally
reimburse LFII for any up-front and/or ongoing commissions paid to FSFs.
Checks presented for the purchase of shares of the Fund which are returned by
the purchaser's bank or checkwriting privilege checks for which there are
insufficient funds in a shareholder's account to cover redemption will subject
such purchaser or shareholder to a $15 service fee for each check returned.
Checks must be drawn on a U.S. bank and must be payable in U.S. dollars.
CISC acts as the shareholder's agent whenever it receives instructions to carry
out a transaction on the shareholder's account. Upon receipt of instructions
that shares are to be purchased for a shareholder's account, the designated FSF
will receive the applicable sales commission. Shareholders may change FSFs at
any time by written notice to CISC, provided the new FSF has a sales agreement
with LFII.
Shares credited to an account are transferable upon written instructions in good
order to CISC and may be redeemed as described under "How to Sell Shares" in the
Prospectus. Certificates will not be issued for Class A shares unless
specifically requested and no certificates will be issued for Class B, C, T or Z
shares. The Colonial money market funds will not issue certificates.
Shareholders may send any certificates which have been previously acquired to
CISC for deposit to their account.
SPECIAL PURCHASE PROGRAMS/INVESTOR SERVICES
The following special purchase programs/investor services may be changed or
eliminated at any time.
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Fundamatic Program. As a convenience to investors, shares of most Colonial funds
advised by Colonial, Newport Fund Management, Inc. and Stein Roe & Farnham
Incorporated may be purchased through the Colonial Fundamatic Program.
Preauthorized monthly bank drafts or electronic funds transfer for a fixed
amount of at least $50 are used to purchase a Colonial fund's shares at the
public offering price next determined after LFII receives the proceeds from
the draft (normally the 5th or the 20th of each month, or the next business
day thereafter). If your Fundamatic purchase is by electronic funds transfer,
you may request the Fundamatic purchase for any day. Further information and
application forms are available from FSFs or from LFII.
Automated Dollar Cost Averaging (Classes A, B and C). Colonial's Automated
Dollar Cost Averaging program allows you to exchange $100 or more on a monthly
basis from any Colonial fund advised by Colonial, Newport Fund Management,
Inc. and Stein Roe & Farnham Incorporated in which you have a current
balance of at least $5,000 into the same class of shares of up to four
other Colonial funds. Complete the Automated Dollar Cost Averaging section
of the Application. The designated amount will be exchanged on the third
Tuesday of each month. There is no charge for exchanges made pursuant to the
Automated Dollar Cost Averaging program. Exchanges will continue so long as
your Colonial fund balance is sufficient to complete the transfers. Your
normal rights and privileges as a shareholder remain in full force and effect.
Thus you can buy any fund, exchange between the same Class of shares of funds
by written instruction or by telephone exchange if you have so elected and
withdraw amounts from any fund, subject to the imposition of any applicable
CDSC.
Any additional payments or exchanges into your Colonial fund will extend the
time of the Automated Dollar Cost Averaging program.
An exchange is a capital sale transaction for federal income tax purposes.
You may terminate your program, change the amount of the exchange (subject to
the $100 minimum), or change your selection of funds, by telephone or in
writing; if in writing by mailing your instructions to Colonial Investors
Service Center, Inc. P.O. Box 1722, Boston, MA 02105-1722.
You should consult your FSF or investment adviser to determine whether or not
the Automated Dollar Cost Averaging program is appropriate for you.
LFII offers several plans by which an investor may obtain reduced initial or
contingent deferred sales charges . These plans may be altered or discontinued
at any time. See "Programs For Reducing or Eliminating Sales Charges" for more
information.
Tax-Sheltered Retirement Plans. LFII offers prototype tax-qualified plans,
including Individual Retirement Accounts (IRAs), and Pension and Profit-Sharing
Plans for individuals, corporations, employees and the self-employed. The
minimum initial Retirement Plan investment is $25. The First National Bank of
Boston is the Trustee of LFII prototype plans and charges a $10 annual fee.
Detailed information concerning these Retirement Plans and copies of the
Retirement Plans are available from LFII.
Participants in non-Colonial prototype Retirement Plans (other than IRAs) also
are charged a $10 annual fee unless the plan maintains an omnibus account with
CISC. Participants in Colonial prototype Plans (other than IRAs) who liquidate
the total value of their account will also be charged a $15 close-out processing
fee payable to CISC. The fee is in addition to any applicable CDSC. The fee will
not apply if the participant uses the proceeds to open a Colonial IRA Rollover
account in any fund, or if the Plan maintains an omnibus account.
Consultation with a competent financial and tax adviser regarding these Plans
and consideration of the suitability of fund shares as an investment under the
Employee Retirement Income Security Act of 1974 or otherwise is recommended.
Telephone Address Change Services. By calling CISC, shareholders or their FSF of
record may change an address on a recorded telephone line. Confirmations of
address change will be sent to both the old and the new addresses. Telephone
redemption privileges are suspended for 30 days after an address change is
effected.
Colonial Cash Connection. Dividends and any other distributions, including
Systematic Withdrawal Plan (SWP) payments, may be automatically deposited to a
shareholder's bank account via electronic funds transfer. Shareholders wishing
to avail themselves of this electronic transfer procedure should complete the
appropriate sections of the Application.
Automatic Dividend Diversification. The automatic dividend diversification
reinvestment program (ADD) generally allows shareholders to have all
distributions from a fund automatically invested in the same class of shares of
another Colonial fund. An ADD account must be in the same name as the
shareholder's existing open account with the particular fund. Call CISC for more
information at 1-800-422-3737.
PROGRAMS FOR REDUCING OR ELIMINATING SALES CHARGES
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Right of Accumulation and Statement of Intent (Class A and Class T shares only)
(Class T shares can only be purchased by the shareholders of Colonial Newport
Tiger Fund who already own Class T shares). Reduced sales charges on Class A and
T shares can be effected by combining a current purchase with prior purchases of
Class A, B, C, T and Z shares of the Colonial funds advised by Colonial, Newport
Fund Management, Inc. and Stein Roe & Farnham Incorporated. The applicable sales
charge is based on the combined total of:
1. the current purchase; and
2. the value at the public offering price at the close of business on the
previous day of all Colonial funds' Class A shares held by the shareholder
(except shares of any Colonial money market fund, unless such shares were
acquired by exchange from Class A shares of another Colonial fund other than
a money market fund and Class B, C, T and Z shares).
LFII must be promptly notified of each purchase which entitles a shareholder to
a reduced sales charge. Such reduced sales charge will be applied upon
confirmation of the shareholder's holdings by CISC. A Colonial fund may
terminate or amend this Right of Accumulation.
Any person may qualify for reduced sales charges on purchases of Class A and T
shares made within a thirteen-month period pursuant to a Statement of Intent
("Statement"). A shareholder may include, as an accumulation credit toward the
completion of such Statement, the value of all Class A, B, C, T and Z shares
held by the shareholder on the date of the Statement in Colonial funds (except
shares of any Colonial money market fund, unless such shares were acquired by
exchange from Class A shares of another non-money market Colonial fund). The
value is determined at the public offering price on the date of the Statement.
Purchases made through reinvestment of distributions do not count toward
satisfaction of the Statement.
During the term of a Statement, CISC will hold shares in escrow to secure
payment of the higher sales charge applicable to Class A or T shares actually
purchased. Dividends and capital gains will be paid on all escrowed shares and
these shares will be released when the amount indicated has been purchased. A
Statement does not obligate the investor to buy or a fund to sell the amount of
the Statement.
If a shareholder exceeds the amount of the Statement and reaches an amount which
would qualify for a further quantity discount, a retroactive price adjustment
will be made at the time of expiration of the Statement. The resulting
difference in offering price will purchase additional shares for the
shareholder's account at the applicable offering price. As a part of this
adjustment, the FSF shall return to LFII the excess commission previously paid
during the thirteen-month period.
If the amount of the Statement is not purchased, the shareholder shall remit to
LFII an amount equal to the difference between the sales charge paid and the
sales charge that should have been paid. If the shareholder fails within twenty
days after a written request to pay such difference in sales charge, CISC will
redeem that number of escrowed Class A shares to equal such difference. The
additional amount of FSF discount from the applicable offering price shall be
remitted to the shareholder's FSF of record.
Additional information about and the terms of Statements of Intent are available
from your FSF, or from CISC at 1-800-345-6611.
Colonial Asset Builder Investment Program (this section currently applies only
to the Class A shares of Colonial Growth Shares Fund and The Colonial Fund, each
a series of Colonial Trust III). A reduced sales charge applies to a purchase of
certain Colonial funds' Class A shares under a Statement of Intent for the
Colonial Asset Builder Investment Program. The Program offer may be withdrawn at
any time without notice. A completed Program may serve as the initial investment
for a new Program, subject to the maximum of $4,000 in initial investments per
investor. Shareholders in this program are subject to a 5% sales charge. CISC
will escrow shares to secure payment of the additional sales charge on amounts
invested if the Program is not completed. Escrowed shares are credited with
distributions and will be released when the Program has ended. Shareholders are
subject to a 1% fee on the amount invested if they do not complete the Program.
Prior to completion of the Program, only scheduled Program investments may be
made in a Colonial fund in which an investor has a Program account. The
following services are not available to Program accounts until a Program has
ended:
Systematic Withdrawal Plan Share Certificates
Sponsored Arrangements Exchange Privilege
$50,000 Fast Cash Colonial Cash Connection
Right of Accumulation Automatic Dividend Diversification
Telephone Redemption Reduced Sales Charges for any "person"
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Statement of Intent
*Exchanges may be made to other Colonial funds offering the Program.
Because of the unavailability of certain services, this Program may not be
suitable for all investors.
The FSF receives 3% of the investor's intended purchases under a Program at the
time of initial investment and 1% after the 24th monthly payment. LFII may
require the FSF to return all applicable commissions paid with respect to a
Program terminated within six months of inception, and thereafter to return
commissions in excess of the FSF discount applicable to shares actually
purchased.
Since the Asset Builder plan involves continuous investment regardless of the
fluctuating prices of funds shares, investors should consult their FSF to
determine whether it is appropriate. The Plan does not assure a profit nor
protect against loss in declining markets.
Reinstatement Privilege. An investor who has redeemed Class A, B, C or T shares
may, upon request, reinstate within one year a portion or all of the proceeds of
such sale in shares of the same Class of any Colonial fund at the NAV next
determined after CISC receives a written reinstatement request and payment. Any
CDSC paid at the time of the redemption will be credited to the shareholder upon
reinstatement. The period between the redemption and the reinstatement will not
be counted in aging the reinstated shares for purposes of calculating any CDSC
or conversion date. Investors who desire to exercise this privilege should
contact their FSF or CISC. Shareholders may exercise this Privilege an unlimited
number of times. Exercise of this privilege does not alter the Federal income
tax treatment of any capital gains realized on the prior sale of fund shares,
but to the extent any such shares were sold at a loss, some or all of the loss
may be disallowed for tax purposes. Consult your tax adviser.
Privileges of Colonial Employees or Financial Service Firms (in this section,
the "Adviser" refers to Colonial Management Associates, Inc. in its capacity as
the Adviser or Administrator to the Colonial Funds). Class A shares of certain
funds may be sold at NAV to the following individuals whether currently employed
or retired: Trustees of funds advised or administered by the Adviser; directors,
officers and employees of the Adviser, LFII and other companies affiliated with
the Adviser; registered representatives and employees of FSFs (including their
affiliates) that are parties to dealer agreements or other sales arrangements
with LFII; and such persons' families and their beneficial accounts.
Sponsored Arrangements. Class A and Class T shares (Class T shares can only be
purchased by the shareholders of Colonial Newport Tiger Fund who already own
Class T shares) of certain funds may be purchased at reduced or no sales charge
pursuant to sponsored arrangements, which include programs under which an
organization makes recommendations to, or permits group solicitation of, its
employees, members or participants in connection with the purchase of shares of
the fund on an individual basis. The amount of the sales charge reduction will
reflect the anticipated reduction in sales expense associated with sponsored
arrangements. The reduction in sales expense, and therefore the reduction in
sales charge, will vary depending on factors such as the size and stability of
the organization's group, the term of the organization's existence and certain
characteristics of the members of its group. The Colonial funds reserve the
right to revise the terms of or to suspend or discontinue sales pursuant to
sponsored plans at any time.
Class A and Class T shares (Class T shares can only be purchased by the
shareholders of Colonial Newport Tiger Fund who already own Class T shares) of
certain funds may also be purchased at reduced or no sales charge by clients of
dealers, brokers or registered investment advisers that have entered into
agreements with LFII pursuant to which the Colonial funds are included as
investment options in programs involving fee-based compensation arrangements,
and by participants in certain retirement plans.
Waiver of Contingent Deferred Sales Charges (CDSCs) (in this section, the
"Adviser" refers to Colonial Management Associates, Inc. in its capacity as the
Adviser or Administrator to the Colonial Funds) (Classes A, B, and C) CDSCs may
be waived on redemptions in the following situations with the proper
documentation:
1. Death. CDSCs may be waived on redemptions within one year following the
death of (i) the sole shareholder on an individual account, (ii) a joint
tenant where the surviving joint tenant is the deceased's spouse, or (iii)
the beneficiary of a Uniform Gifts to Minors Act (UGMA), Uniform Transfers
to Minors Act (UTMA) or other custodial account. If, upon the occurrence of
one of the foregoing, the account is transferred to an account registered in
the name of the deceased's estate, the CDSC will be waived on any redemption
from the estate account occurring within one year after the death. If the
Class B shares are not redeemed within one year of the death, they will
remain subject to the applicable CDSC, when
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redeemed from the transferee's account. If the account is transferred
to a new registration and then a redemption is requested, the applicable
CDSC will be charged.
2. Systematic Withdrawal Plan (SWP). CDSCs may be waived on redemptions
occurring pursuant to a monthly, quarterly or semi-annual SWP established
with CISC, to the extent the redemptions do not exceed, on an annual basis,
12% of the account's value, so long as at the time of the first SWP
redemption the account had had distributions reinvested for a period at
least equal to the period of the SWP (e.g., if it is a quarterly SWP,
distributions must have been reinvested at least for the three month period
prior to the first SWP redemption); otherwise CDSCs will be charged on SWP
redemptions until this requirement is met; this requirement does not apply
if the SWP is set up at the time the account is established, and
distributions are being reinvested. See below under "Investor Services -
Systematic Withdrawal Plan."
3. Disability. CDSCs may be waived on redemptions occurring within one year
after the sole shareholder on an individual account or a joint tenant on a
spousal joint tenant account becomes disabled (as defined in Section
72(m)(7) of the Internal Revenue Code). To be eligible for such waiver, (i)
the disability must arise after the purchase of shares and (ii) the disabled
shareholder must have been under age 65 at the time of the initial
determination of disability. If the account is transferred to a new
registration and then a redemption is requested, the applicable CDSC will be
charged.
4. Death of a trustee. CDSCs may be waived on redemptions occurring upon
dissolution of a revocable living or grantor trust following the death of
the sole trustee where (i) the grantor of the trust is the sole trustee and
the sole life beneficiary, (ii) death occurs following the purchase and
(iii) the trust document provides for dissolution of the trust upon the
trustee's death. If the account is transferred to a new registration
(including that of a successor trustee), the applicable CDSC will be charged
upon any subsequent redemption.
5. Returns of excess contributions. CDSCs may be waived on redemptions required
to return excess contributions made to retirement plans or individual
retirement accounts, so long as the FSF agrees to return the applicable
portion of any commission paid by Colonial.
6. Qualified Retirement Plans. CDSCs may be waived on redemptions required to
make distributions from qualified retirement plans following (i) normal
retirement (as stated in the Plan document) or (ii) separation from service.
CDSCs also will be waived on SWP redemptions made to make required minimum
distributions from qualified retirement plans that have invested in Colonial
funds for at least two years.
The CDSC also may be waived where the FSF agrees to return all or an agreed upon
portion of the commission earned on the sale of the shares being redeemed.
HOW TO SELL SHARES
Shares may also be sold on any day the Exchange is open, either directly to the
Fund or through the shareholder's FSF. Sale proceeds generally are sent within
seven days (usually on the next business day after your request is received in
good form). However, for shares recently purchased by check, the Fund will send
proceeds only after the check has cleared (which may take up to 15 days).
To sell shares directly to the Fund, send a signed letter of instruction or
stock power form to CISC, along with any certificates for shares to be sold. The
sale price is the net asset value (less any applicable contingent deferred sales
charge) next calculated after the Fund receives the request in proper form.
Signatures must be guaranteed by a bank, a member firm of a national stock
exchange or another eligible guarantor institution. Stock power forms are
available from FSFs, CISC, and many banks. Additional documentation is required
for sales by corporations, agents, fiduciaries, surviving joint owners and
individual retirement account holders. Call CISC for more information
1-800-345-6611.
FSFs must receive requests before the time at which the Fund's shares are valued
to receive that day's price, are responsible for furnishing all necessary
documentation to CISC and may charge for this service.
Systematic Withdrawal Plan
If a shareholder's account balance is at least $5,000, the shareholder may
establish a SWP. A specified dollar amount or percentage of the then current net
asset value of the shareholder's investment in any Colonial fund designated by
the shareholder will be paid monthly, quarterly or semi-annually to a designated
payee. The amount or percentage the shareholder specifies generally may not, on
an annualized basis, exceed 12% of the value, as of the time the shareholder
makes the election, of the shareholder's investment. Withdrawals from Class B
and Class C shares of the fund under a SWP will be treated as redemptions of
shares purchased through the reinvestment of fund distributions, or, to the
extent such shares in the shareholder's account are insufficient to cover Plan
payments, as redemptions from the earliest purchased shares of such fund in the
shareholder's account. No CDSCs apply to a redemption pursuant to a SWP of 12%
or less, even if, after giving effect to the redemption, the shareholder's
account balance is less than the
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shareholder's base amount. Qualified plan participants who are required by
Internal Revenue Service regulation to withdraw more than 12%, on an annual
basis, of the value of their Class B and Class C share account may do so but
will be subject to a CDSC ranging from 1% to 5% of the amount withdrawn. If a
shareholder wishes to participate in a SWP, the shareholder must elect to have
all of the shareholder's income dividends and other fund distributions payable
in shares of the fund rather than in cash.
A shareholder or a shareholder's FSF of record may establish a SWP account by
telephone on a recorded line. However, SWP checks will be payable only to the
shareholder and sent to the address of record. SWPs from retirement accounts
cannot be established by telephone.
A shareholder may not establish a SWP if the shareholder holds shares in
certificate form. Purchasing additional shares (other than through dividend and
distribution reinvestment) while receiving SWP payments is ordinarily
disadvantageous because of duplicative sales charges. For this reason, a
shareholder may not maintain a plan for the accumulation of shares of the fund
(other than through the reinvestment of dividends) and a SWP at the same time.
SWP payments are made through share redemptions, which may result in a gain or
loss for tax purposes, may involve the use of principal and may eventually use
up all of the shares in a shareholder's account.
A fund may terminate a shareholder's SWP if the shareholder's account balance
falls below $5,000 due to any transfer or liquidation of shares other than
pursuant to the SWP. SWP payments will be terminated on receiving satisfactory
evidence of the death or incapacity of a shareholder. Until this evidence is
received, CISC will not be liable for any payment made in accordance with the
provisions of a SWP.
The cost of administering SWPs for the benefit of shareholders who participate
in them is borne by the fund as an expense of all shareholders.
Shareholders whose positions are held in "street name" by certain FSFs may not
be able to participate in a SWP. If a shareholder's Fund shares are held in
"street name," the shareholder should consult his or her FSF to determine
whether he or she may participate in a SWP.
Telephone Redemptions. All Colonial fund shareholders and/or their FSFs (except
for Colonial Newport Tiger Cub Fund, Colonial Newport Japan Fund and Newport
Greater China Fund) are automatically eligible to redeem up to $50,000 of the
fund's shares by calling 1-800-422-3737 toll-free any business day between 9:00
a.m. and the close of trading of the Exchange (normally 4:00 p.m. Eastern time).
Transactions received after 4:00 p.m. Eastern time will receive the next
business day's closing price. Telephone redemption privileges for larger amounts
and for the Colonial Newport Tiger Cub Fund, Newport Japan Opportunities Fund
and the Newport Greater China Fund may be elected on the Application. CISC will
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine. Telephone redemptions are not available on accounts with
an address change in the preceding 30 days and proceeds and confirmations will
only be mailed or sent to the address of record unless the redemption proceeds
are being sent to a pre- designated bank account. Shareholders and/or their FSFs
will be required to provide their name, address and account number. FSFs will
also be required to provide their broker number. All telephone transactions are
recorded. A loss to a shareholder may result from an unauthorized transaction
reasonably believed to have been authorized. No shareholder is obligated to
execute the telephone authorization form or to use the telephone to execute
transactions.
Checkwriting (in this section, the "Adviser" refers to Colonial Management
Associates, Inc. in its capacity as the Adviser or Administrator of the Colonial
Funds) (Available only on the Class A shares of certain Colonial funds) Shares
may be redeemed by check if a shareholder has previously completed an
Application and Signature Card. CISC will provide checks to be drawn on The
First National Bank of Boston (the "Bank"). These checks may be made payable to
the order of any person in the amount of not less than $500 nor more than
$100,000. The shareholder will continue to earn dividends on shares until a
check is presented to the Bank for payment. At such time a sufficient number of
full and fractional shares will be redeemed at the next determined net asset
value to cover the amount of the check. Certificate shares may not be redeemed
in this manner.
Shareholders utilizing checkwriting drafts will be subject to the Bank's rules
governing checking accounts. There is currently no charge to the shareholder for
the use of checks. The shareholder should make sure that there are sufficient
shares in his or her open account to cover the amount of any check drawn since
the net asset value of shares will fluctuate. If insufficient shares are in the
shareholder's open account, the check will be returned marked "insufficient
funds" and no shares will be redeemed; the shareholder will be charged a $15
service fee for each check returned. It is not possible to determine in advance
the total value of an open account because prior redemptions and possible
changes in net asset value may cause the value of an open account to change.
Accordingly, a check redemption should not be used to close an open account. In
addition, a check redemption, like any other redemption, may give rise to
taxable capital gains.
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Non Cash Redemptions. For redemptions of any single shareholder within any
90-day period exceeding the lesser of $250,000 or 1% of a Colonial fund's net
asset value, a Colonial fund may make the payment or a portion of the payment
with portfolio securities held by that Colonial fund instead of cash, in which
case the redeeming shareholder may incur brokerage and other costs in selling
the securities received.
DISTRIBUTIONS
Distributions are invested in additional shares of the same Class of the fund at
net asset value unless the shareholder elects to receive cash. Regardless of the
shareholder's election, distributions of $10 or less will not be paid in cash,
but will be invested in additional shares of the same Class of the Fund at net
asset value. Undelivered distribution checks returned by the post office will be
reinvested in your account. If a shareholder has elected to receive dividends
and/or capital gain distributions in cash and the postal or other delivery
service selected by the Transfer Agent is unable to deliver checks to the
shareholder's address of record, such shareholder's distribution option will
automatically be converted to having all dividend and other distributions
reinvested in additional shares. No interest will accrue on amounts represented
by uncashed distribution or redemption checks.
Shareholders may reinvest all or a portion of a recent cash distribution without
a sales charge. A shareholder request must be received within 30 calendar days
of the distribution. A shareholder may exercise this privilege only once. No
charge is currently made for reinvestment.
Shares of most funds that pay daily dividends will normally earn dividends
starting with the date the fund receives payment for the shares and will
continue through the day before the shares are redeemed, transferred or
exchanged. The daily dividends for Colonial Municipal Money Market Fund will be
earned starting with the day after that fund receives payments for the shares.
HOW TO EXCHANGE SHARES
Shares of the Fund may be exchanged for the same class of shares of the other
continuously offered Colonial funds (with certain exceptions) on the basis of
the NAVs per share at the time of exchange. Class T and Z shares may be
exchanged for Class A shares of the other Colonial funds. The prospectus of each
Colonial fund describes its investment objective and policies, and shareholders
should obtain a prospectus and consider these objectives and policies carefully
before requesting an exchange. Shares of certain Colonial funds are not
available to residents of all states. Consult CISC before requesting an
exchange.
By calling CISC, shareholders or their FSF of record may exchange among accounts
with identical registrations, provided that the shares are held on deposit.
During periods of unusual market changes or shareholder activity, shareholders
may experience delays in contacting CISC by telephone to exercise the telephone
exchange privilege. Because an exchange involves a redemption and reinvestment
in another Colonial fund, completion of an exchange may be delayed under unusual
circumstances, such as if the fund suspends repurchases or postpones payment for
the fund shares being exchanged in accordance with federal securities law. CISC
will also make exchanges upon receipt of a written exchange request and, share
certificates, if any. If the shareholder is a corporation, partnership, agent,
or surviving joint owner, CISC will require customary additional documentation.
Prospectuses of the other Colonial funds are available from the Colonial
Literature Department by calling 1-800-426-3750.
A loss to a shareholder may result from an unauthorized transaction reasonably
believed to have been authorized. No shareholder is obligated to use the
telephone to execute transactions.
You need to hold your Class A and Class T shares for five months before
exchanging to certain funds having a higher maximum sales charge. Consult your
FSF or CISC. In all cases, the shares to be exchanged must be registered on the
records of the fund in the name of the shareholder desiring to exchange.
Shareholders of the other Colonial open-end funds generally may exchange their
shares at NAV for the same class of shares of the fund.
An exchange is a capital sale transaction for federal income tax purposes. The
exchange privilege may be revised, suspended or terminated at any time.
SUSPENSION OF REDEMPTIONS
A Colonial fund may not suspend shareholders' right of redemption or postpone
payment for more than seven days unless the Exchange is closed for other than
customary weekends or holidays, or if permitted by the rules of the SEC during
periods when trading on the Exchange is restricted or during any emergency which
makes it impracticable for the fund to dispose of its securities or to determine
fairly the value of its net assets, or during any other period permitted by
order of the SEC for the protection of investors.
SHAREHOLDER LIABILITY
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Under Massachusetts law, shareholders could, under certain circumstances, be
held personally liable for the obligations of the Trust. However, the
Declaration disclaims shareholder liability for acts or obligations of the fund
and the Trust and requires that notice of such disclaimer be given in each
agreement, obligation, or instrument entered into or executed by the fund or the
Trust's Trustees. The Declaration provides for indemnification out of fund
property for all loss and expense of any shareholder held personally liable for
the obligations of the fund. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances (which are
considered remote) in which the fund would be unable to meet its obligations and
the disclaimer was inoperative.
The risk of a particular fund incurring financial loss on account of another
fund of the Trust is also believed to be remote, because it would be limited to
circumstances in which the disclaimer was inoperative and the other fund was
unable to meet its obligations.
SHAREHOLDER MEETINGS
As described under the caption "Organization and History" in the Prospectus of
each Colonial fund, the fund will not hold annual shareholders' meetings. The
Trustees may fill any vacancies in the Board of Trustees except that the
Trustees may not fill a vacancy if, immediately after filling such vacancy, less
than two-thirds of the Trustees then in office would have been elected to such
office by the shareholders. In addition, at such times as less than a majority
of the Trustees then in office have been elected to such office by the
shareholders, the Trustees must call a meeting of shareholders. Trustees may be
removed from office by a written consent signed by a majority of the outstanding
shares of the Trust or by a vote of the holders of a majority of the outstanding
shares at a meeting duly called for the purpose, which meeting shall be held
upon written request of the holders of not less than 10% of the outstanding
shares of the Trust. Upon written request by the holders of 1% of the
outstanding shares of the Trust stating that such shareholders of the Trust, for
the purpose of obtaining the signatures necessary to demand a shareholders'
meeting to consider removal of a Trustee, request information regarding the
Trust's shareholders, the Trust will provide appropriate materials (at the
expense of the requesting shareholders). Except as otherwise disclosed in the
Prospectus and this SAI, the Trustees shall continue to hold office and may
appoint their successors.
At any shareholders' meetings that may be held, shareholders of all series would
vote together, irrespective of series, on the election of Trustees or the
selection of independent accountants, but each series would vote separately from
the others on other matters, such as changes in the investment policies of that
series or the approval of the management agreement for that series.
PERFORMANCE MEASURES
Total Return
Standardized average annual total return. Average annual total return is the
actual return on a $1,000 investment in a particular class of shares of the
fund, made at the beginning of a stated period, adjusted for the maximum sales
charge or applicable CDSC for the class of shares of the fund and assuming that
all distributions were reinvested at NAV, converted to an average annual return
assuming annual compounding.
Nonstandardized total return. Nonstandardized total returns may differ from
standardized average annual total returns in that they may relate to
nonstandardized periods, represent aggregate rather than average annual total
returns or may not reflect the sales charge or CDSC.
Yield
Money market. A money market fund's yield and effective yield is computed in
accordance with the SEC's formula for money market fund yields.
Non-money market. The yield for each class of shares of a fund is determined by
(i) calculating the income (as defined by the SEC for purposes of advertising
yield) during the base period and subtracting actual expenses for the period
(net of any reimbursements), and (ii) dividing the result by the product of the
average daily number of shares of the fund that were entitled to dividends
during the period and the maximum offering price of the fund on the last day of
the period, (iii) then annualizing the result assuming semi-annual compounding.
Tax-equivalent yield is calculated by taking that portion of the yield which is
exempt from income tax and determining the equivalent taxable yield which would
produce the same after-tax yield for any given federal and state tax rate, and
adding to that the portion of the yield which is fully taxable. Adjusted yield
is calculated in the same manner as yield except that expenses voluntarily borne
or waived by Colonial have been added back to actual expenses.
Distribution rate. The distribution rate for each class of shares of a fund is
calculated by annualizing the most current period's distributions and dividing
by the maximum offering price on the last day of the period. Generally, the
fund's distribution rate reflects total amounts actually paid to shareholders,
while yield reflects the current earning power of the fund's portfolio
securities (net of the fund's expenses). The fund's yield for any period may be
more or less than the amount actually distributed in respect of such period.
The fund may compare its performance to various unmanaged indices published by
such sources as are listed in Appendix II.
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The fund may also refer to quotations, graphs and electronically transmitted
data from sources believed by the Adviser to be reputable, and publications in
the press pertaining to a fund's performance or to the Adviser or its
affiliates, including comparisons with competitors and matters of national and
global economic and financial interest. Examples include Forbes, Business Week,
Money Magazine, The Wall Street Journal, The New York Times, The Boston Globe,
Barron's National Business & Financial Weekly, Financial Planning, Changing
Times, Reuters Information Services, Wiesenberger Mutual Funds Investment
Report, Lipper Analytical Services Corporation, Morningstar, Inc., Sylvia
Porter's Personal Finance Magazine, Money Market Directory, SEI Funds Evaluation
Services, FTA World Index and Disclosure Incorporated.
All data are based on past performance and do not predict future results.
29
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APPENDIX I
DESCRIPTION OF BOND RATINGS
STANDARD & POOR'S CORPORATION (S&P)
The following descriptions are applicable to municipal bond funds:
AAA bonds have the highest rating assigned by S&P. Capacity to pay interest and
repay principal is extremely strong.
AA bonds have a very strong capacity to pay interest and repay principal, and
they differ from AAA only in small degree.
A bonds have a strong capacity to pay interest and repay principal, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB bonds are regarded as having an adequate capacity to pay interest and repay
principal. Whereas they normally exhibit adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal than for bonds in the A
category.
BB, B, CCC, CC and C bonds are regarded as having predominantly speculative
characteristics with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and C the highest degree. While such debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or large exposures to adverse conditions.
BB bonds have less near-term vulnerability to default than other speculative
issues. However, they face major ongoing uncertainties or exposure to adverse
business, financial, or economic conditions which could lead to inadequate
capacity to meet timely interest and principal payments. The BB rating category
is also used for debt subordinated to senior debt that is assigned an actual or
implied BBB- rating.
B bonds have a greater vulnerability to default but currently have the capacity
to meet interest payments and principal repayments. Adverse business, financial,
or economic conditions will likely impair capacity or willingness to pay
interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
CCC bonds have a currently identifiable vulnerability to default, and are
dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, the bonds are not likely to have
the capacity to pay interest and repay principal. The CCC rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied B or B- rating.
CC rating typically is applied to debt subordinated to senior debt that is
assigned an actual or implied CCC rating.
C rating typically is applied to debt subordinated to senior debt which assigned
an actual or implied CCC- debt rating. The C rating may be used to cover a
situation where a bankruptcy petition has been filed, but debt service payments
are continued.
CI rating is reserved for income bonds on which no interest is being paid.
D bonds are in payment default. The D rating category is used when interest
payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
Plus(+) or minus(-) ratings from AA to CCC may be modified by the addition of a
plus or minus sign to show relative standing within the major rating categories.
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Provisional Ratings. The letter "p" indicates that the rating is provisional. A
provisional rating assumes the successful completion of the project being
financed by the debt being rated and indicates that payment of debt service
requirements is largely or entirely dependent upon the successful and timely
completion of the project. This rating, however, although addressing credit
quality subsequent to completion of the project, makes no comments on the
likelihood of, or the risk of default upon failure of, such completion. The
investor should exercise his own judgment with respect to such likelihood and
risk.
Municipal Notes:
SP-1. Notes rated SP-1 have very strong or strong capacity to pay principal and
interest. Those issues determined to possess overwhelming safety characteristics
are designated as SP-1+.
SP-2. Notes rated SP-2 have satisfactory capacity to pay principal and interest.
Notes due in three years or less normally receive a note rating. Notes maturing
beyond three years normally receive a bond rating, although the following
criteria are used in making that assessment:
Amortization schedule (the larger the final maturity relative to other
maturities, the more likely the issue will be rated as a note).
Source of payment (the more dependent the issue is on the market for
its refinancing, the more likely it will be rated as a note).
Demand Feature of Variable Rate Demand Securities:
S&P assigns dual ratings to all long-term debt issues that have as part of their
provisions a demand feature. The first rating addresses the likelihood of
repayment of principal and interest as due, and the second rating addresses only
the demand feature. The long-term debt rating symbols are used for bonds to
denote the long-term maturity, and the commercial paper rating symbols are
usually used to denote the put (demand) option (for example, AAA/A-1+).
Normally, demand notes receive note rating symbols combined with commercial
paper symbols (for example, SP-1+/A-1+).
Commercial Paper:
A. Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are further refined with
the designations 1, 2, and 3 to indicate the relative degree to safety.
A-1. This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are designed A-1+.
Corporate Bonds:
The description of the applicable rating symbols and their meanings is
substantially the same as the Municipal Bond ratings set forth above.
The following descriptions are applicable to equity and taxable bond funds:
AAA bonds have the highest rating assigned by S&P. The obligor's capacity to
meet its financial commitment on the obligation is extremely strong.
AA bonds differ from the highest rated obligations only in small degree. The
obligor's capacity to meet its financial commitment on the obligation is very
strong.
A bonds are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than obligations in higher rated
categories. However, the obligor's capacity to meet its financial commitment on
the obligation is still strong.
BBB bonds exhibit adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity of the obligor to meet its financial commitment on the obligation.
BB, B, CCC and CC bonds are regarded, as having significant speculative
characteristics. BB indicates the least degree of speculation and C the highest.
While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.
BB bonds are less vulnerable to non-payment than other speculative issues.
However, they face major ongoing uncertainties or exposure to adverse business,
financial, or economic conditions which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.
B bonds are more vulnerable to nonpayment than obligations rated BB, but the
obligor currently has the capacity to meet its financial commitment on the
obligation. Adverse business, financial, or economic conditions will likely
impair the obligor's capacity or willingness to meet its financial commitment on
the obligation.
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CCC bonds are currently vulnerable to nonpayment, and are dependent upon
favorable business, financial, and economic conditions for the obligor to meet
its financial commitment on the obligation. In the event of adverse business,
financial, or economic conditions, the obligor is not likely to have the
capacity to meet its financial commitment on the obligation.
CC bonds are currently highly vulnerable to nonpayment.
C ratings may be used to cover a situation where a bankruptcy petition has been
filed or similar action has been taken, but payments on the obligation are being
continued.
D bonds are in payment default. The D rating category is used when payments on
an obligation are not made on the date due even if the applicable grace period
has not expired, unless S&P believes that such payments will be made during such
grace period. The D rating also will be used upon the filing of a bankruptcy
petition or the taking of a similar action if payments on an obligation are
jeopardized.
Plus (+) or minus(-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
r This symbol is attached to the rating of instruments with significant
noncredit risks. It highlights risks to principal or volatility of expected
returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk, such as interest-only or
principal-only mortgage securities; and obligations with unusually risky
interest terms, such as inverse floaters.
MOODY'S INVESTORS SERVICE, INC. (MOODY'S)
Aaa bonds are judged to be of the best quality. They carry the smallest degree
of investment risk and are generally referred to as "gilt edge". Interest
payments are protected by a large or by an exceptionally stable margin and
principal is secure. While various protective elements are likely to change,
such changes as can be visualized are most unlikely to impair a fundamentally
strong position of such issues.
Aa bonds are judged to be of high quality by all standards. Together with Aaa
bonds they comprise what are generally known as high-grade bonds. They are rated
lower than the best bonds because margins of protection may not be as large in
Aaa securities or fluctuation of protective elements may be of greater amplitude
or there may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
Those bonds in the Aa through B groups that Moody's believes possess the
strongest investment attributes are designated by the symbol Aa1, A1 and Baa1.
A bonds possess many favorable investment attributes and are to be considered as
upper-medium-grade obligations. Factors giving security to principal and
interest are considered adequate, but elements may be present that suggest a
susceptibility to impairment sometime in the future.
Baa bonds are considered as medium grade obligations, i.e., they are neither
highly protected nor poorly secured. Interest payments and principal security
appear adequate for the present but certain protective elements may be lacking
or may be characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact, have speculative
characteristics as well.
Ba bonds are judged to have speculative elements: their future cannot be
considered as well secured. Often, the protection of interest and principal
payments may be very moderate, and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position characterizes bonds in
this class.
B bonds generally lack characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the contract
over any long period of time may be small.
Caa bonds are of poor standing. Such issues may be in default or there may be
present elements of danger with respect to principal or interest.
Ca bonds represent obligations which are speculative in a high degree. Such
issues are often in default or have other marked shortcomings.
C bonds are the lowest rated class of bonds and issues so rated can be regarded
as having extremely poor prospects of ever attaining any real investment
standing.
Conditional Ratings. Bonds for which the security depends upon the
completion of some act or the fulfillment of some condition are rated
conditionally. These are bonds secured by (a) earnings of projects under
construction, (b) earnings of projects unseasoned in operating experience,
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(c) rentals which begin when facilities are completed, or (d) payments to which
some other limiting conditions attach. Parenthetical rating denotes probable
credit stature upon completion of construction or elimination of basis of
condition.
Note: Those bonds in the Aa, A, Baa, Ba, and B groups which Moody's believes
possess the strongest investment attributes are designated by the symbols Aa 1,
A 1, Baa 1, Ba 1, and B 1.
Municipal Notes:
MIG 1. This designation denotes best quality. There is present strong protection
by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.
MIG 2. This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
MIG 3. This designation denotes favorable quality. All security elements are
accounted for, but there is lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well established.
Demand Feature of Variable Rate Demand Securities:
Moody's may assign a separate rating to the demand feature of a variable rate
demand security. Such a rating may include:
VMIG 1. This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.
VMIG 2. This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
VMIG 3. This designation denotes favorable quality. All security elements are
accounted for, but there is lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well established.
Commercial Paper:
Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment capacity of rated issuers:
Prime-1 Highest Quality
Prime-2 Higher Quality
Prime-3 High Quality
If an issuer represents to Moody's that its Commercial Paper obligations are
supported by the credit of another entity or entities, Moody's, in assigning
ratings to such issuers, evaluates the financial strength of the indicated
affiliated corporations, commercial banks, insurance companies, foreign
governments, or other entities, but only as one factor in the total rating
assessment.
Corporate Bonds:
The description of the applicable rating symbols (Aaa, Aa, A) and their meanings
is identical to that of the Municipal Bond ratings as set forth above, except
for the numerical modifiers. Moody's applies numerical modifiers 1, 2, and 3 in
the Aa and A classifications of its corporate bond rating system. The modifier 1
indicates that the security ranks in the higher end of its generic rating
category; the modifier 2 indicates a midrange ranking; and the modifier 3
indicates that the issuer ranks in the lower end of its generic rating category.
FITCH INVESTORS SERVICES
Investment Grade Bond Ratings
AAA bonds are considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and/or
dividends and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA bonds are considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated 'AAA'. Because bonds rated in the
'AAA' and 'AA' categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated 'F-1+'.
A bonds are considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than debt securities with higher ratings.
BBB bonds are considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest or dividends and repay principal
is considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse
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impact on these securities and, therefore, impair timely payment. The likelihood
that the ratings of these bonds will fall below investment grade is higher than
for securities with higher ratings.
Conditional
A conditional rating is premised on the successful completion of a project or
the occurrence of a specific event.
Speculative-Grade Bond Ratings
BB bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified, which could assist the
obligor in satisfying its debt service requirements.
B bonds are considered highly speculative. While securities in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC bonds have certain identifiable characteristics that, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C bonds are in imminent default in payment of interest or principal.
DDD, DD, and D bonds are in default on interest and/or principal payments. Such
securities are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. 'DDD'
represents the highest potential for recovery on these securities, and 'D'
represents the lowest potential for recovery.
DUFF & PHELPS CREDIT RATING CO.
AAA - Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+, AA, AA - High credit quality. Protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic conditions.
A+, A, A - Protection factors are average but adequate. However, risk factors
are more available and greater in periods of economic stress.
BBB+, BBB, BBB - Below average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles.
BB+, BB, BB - Below investment grade but deemed likely to meet obligations when
due. Present or prospective financial protection factors fluctuate according to
industry conditions or company fortunes. Overall quality may move up or down
frequently within this category.
B+, B, B - Below investment grade and possessing risk that obligations will not
be met when due. Financial protection factors will fluctuate widely according to
economic cycles, industry conditions and/or company fortunes. Potential exists
for frequent changes in the rating within this category or into a higher or
lower rating grade.
CCC - Well below investment grade securities. Considerable uncertainty exists as
to timely payment of principal, interest or preferred dividends. Protection
factors are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company developments.
DD - Defaulted debt obligations. Issuer failed to meet scheduled principal
and/or interest payments.
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APPENDIX II
1996
SOURCE CATEGORY RETURN (%)
- ------ -------- ----------
Donoghue Tax-Free Funds 4.95
Donoghue U.S. Treasury Funds 4.71
Dow Jones & Company Industrial Index 28.91
Morgan Stanley Capital International EAFE Index 6.05
Morgan Stanley Capital International EAFE GDP Index 7.63
Libor Six-month Libor N/A
Lipper Short U.S. Government Funds 4.36
Lipper California Municipal Bond Funds 3.65
Lipper Connecticut Municipal Bond Funds 3.48
Lipper Closed End Bond Funds 8.13
Lipper Florida Municipal Bond Funds 3.00
Lipper General Bond Fund 6.16
Lipper General Municipal Bonds 3.30
Lipper Global Funds 16.51
Lipper Growth Funds 19.24
Lipper Growth & Income Funds 20.78
Lipper High Current Yield Bond Funds 13.67
Lipper High Yield Municipal Bond Debt 4.17
Lipper Fixed Income Funds 10.24
Lipper Insured Municipal Bond Average 2.83
Lipper Intermediate Muni Bonds 3.70
Lipper Intermediate (5-10) U.S. Government Funds 2.68
Lipper Massachusetts Municipal Bond Funds 3.39
Lipper Michigan Municipal Bond Funds 3.17
Lipper Mid Cap Funds 18.10
Lipper Minnesota Municipal Bond Funds 3.11
Lipper U.S. Government Money Market Funds 4.75
Lipper New York Municipal Bond Funds 3.15
Lipper North Carolina Municipal Bond Funds 2.78
Lipper Ohio Municipal Bond Funds 3.35
Lipper Small Company Growth Funds 20.20
Lipper U.S. Government Funds 1.72
Lipper Pacific Region Funds-Ex-Japan 11.11
Lipper Pacific Region (4.45)
Lipper International Funds 11.78
Lipper Balanced Funds 13.76
Lipper Tax-Exempt Money Market 2.93
Shearson Lehman Composite Government Index 2.77
Shearson Lehman Government/Corporate Index 2.90
Shearson Lehman Long-term Government Index (0.84)
S&P S&P 500 Index 22.95
S&P Utility Index 3.12
S&P Barra Growth 23.98
S&P Barra Value 21.99
S&P Midcap 400 19.20
First Boston High Yield Index 12.40
Swiss Bank 10 Year U.S. Government (Corporate Bond) 0.30
Swiss Bank 10 Year United Kingdom (Corporate Bond) 19.10
Swiss Bank 10 Year France (Corporate Bond) 7.80
Swiss Bank 10 Year Germany (Corporate Bond) 1.00
Swiss Bank 10 Year Japan (Corporate Bond) (3.40)
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SOURCE CATEGORY RETURN (%)
- ------ -------- ----------
Swiss Bank 10 Year Canada (Corporate Bond) 10.5
Swiss Bank 10 Year Australia (Corporate Bond) 20.6
Morgan Stanley
Capital International 10 Year Hong Kong (Equity) 21.87
Morgan Stanley
Capital International 10 Year Belgium (Equity) 15.16
Morgan Stanley
Capital International 10 Year Austria (Equity) 7.65
Morgan Stanley
Capital International 10 Year France (Equity) 10.35
Morgan Stanley
Capital International 10 Year Netherlands (Equity) 16.90
Morgan Stanley
Capital International 10 Year Japan (Equity) 3.39
Morgan Stanley
Capital International 10 Year Switzerland (Equity) 13.14
Morgan Stanley
Capital International 10 Year United Kingdom (Equity) 15.06
Morgan Stanley
Capital International 10 Year Germany (Equity) 8.16
Morgan Stanley
Capital International 10 Year Italy (Equity) 0.53
Morgan Stanley
Capital International 10 Year Sweden (Equity) 16.42
Morgan Stanley
Capital International 10 Year United States (Equity) 14.39
Morgan Stanley
Capital International 10 Year Australia (Equity) 11.44
Morgan Stanley
Capital International 10 Year Norway (Equity) 13.23
Morgan Stanley
Capital International 10 Year Spain (Equity) 11.55
Morgan Stanley
Capital International World GDP Index 11.50
Morgan Stanley
Capital International Pacific Region Funds Ex-Japan 20.54
Bureau of
Labor Statistics Consumer Price Index (Inflation) 3.32
FHLB-San Francisco 11th District Cost-of-Funds Index N/A
Federal Reserve Six-Month Treasury Bill N/A
Federal Reserve One-Year Constant-Maturity Treasury Rate N/A
Federal Reserve Five-Year Constant-Maturity Treasury Rate N/A
Frank Russell & Co. Russell 2000 16.50
Frank Russell & Co. Russell 1000 Value 21.64
Frank Russell & Co. Russell 1000 Growth 11.26
Bloomberg NA NA
Credit Lyonnais NA NA
Statistical Abstract
of the U.S. NA NA
World Economic
Outlook NA NA
*in U.S. currency
36
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<PAGE>
PART C OTHER INFORMATION
- ------ -----------------
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Part A
Summary of Expenses
The Fund's Financial History
Incorporated by reference into Part B are the financial statements
contained in the Annual Report for the Registrant's series dated August 31, 1997
(which were previously filed electronically pursuant to Section 30(b)(2) of the
Investment Company Act of 1940):
Fund Accession Number
---- ----------------
Colonial Federal Securities Fund 0000883163-97-000034
The Financial Statements contained in the series' Annual Report are as
follows:
Investment Portfolio
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
Independent Auditors' Report
(b) Exhibits:
1 Amendment No. 3 to the Agreement and Declaration of Trust
(13)
2 By-Laws (13)
3 Not Applicable
4 Form of Specimen of share certificate (incorporated herein
by reference to Exhibit 4 to Post-Effective Amendment No. 25
to the Registration Statement of Colonial Trust II,
Registration Nos. 2-66976 and 811-3009, filed with the
Commission on March 20, 1996.)
5(a) Form of Management Agreement (12)
5(b) Form of Amendment No. 1 to Management Agreement
6(a) Form of Distributor's Contract with Liberty Financial
Investments, Inc. (incorporated herein by reference to
Exhibit 6(a) to Post-Effective Amendment No. 44 to the
Registration Statement of Colonial Trust I, Registration
Nos. 2-41251 and 811-2214, filed with the Commission on or
about July 24, 1997)
6(b) Form of Selling Agreement with Liberty Financial
Investments, Inc. (incorporated herein by reference to
Exhibit 6(b) to Post-
<PAGE>
Effective Amendment No. 10 to the Registration Statement of
Colonial Trust VI, Registration Nos. 33-45117 and 811-6529,
filed with the Commission on September 27, 1996)
6(c) Form of Bank and Bank Affiliated Selling Agreement
(incorporated herein by reference to Exhibit 6(c) to
Post-Effective Amendment No. 10 to the Registration
Statement of Colonial Trust VI, Registration Nos. 33-45117
and 811-6529, filed with the Commission on September 27,
1996)
6(d) Form of Asset Retention Agreement (incorporated herein by
reference to Exhibit 6(d) to Post-Effective Amendment No. 10
to the Registration Statement of Colonial Trust VI,
Registration Nos. 33-45117 and 811-6529, filed with the
Commission on September 27, 1996)
7 Not Applicable
8(a) Custodian Agreement with Boston Safe Deposit and Trust
Company (incorporated herein by reference to Exhibit 8 to
Post-Effective Amendment No. 10 to the Registration
Statement of Colonial Trust VI, Registration Nos. 33-45117
and 811-6529, filed with the Commission on September 27,
1996)
8(b) Amendment to Custody Agreement with Boston Safe Deposit and
Trust Company (incorporated herein by reference to Exhibit
8(a) to Post-Effective Amendment No. 10 to the Registration
Statement of Colonial Trust VI, Registration Nos. 33-45117
and 811-6529, filed with the Commission on September 27,
1996) (TCF, CFSF, CGEF, CSVF, CIHF, CIFfG and CSBF)
8(c) Custody Agreement with The Chase Manhattan Bank
(incorporated herein by reference to Exhibit 8. to
Post-Effective Amendment No. 13 to the Registration
Statement of Colonial Trust VI, Registration Nos. 33-45117
and 811-6529, filed with the Commission on or about October
24, 1997)
9(a) Amended and Restated Shareholders' Servicing and Transfer
Agent Agreement as amended with Colonial Investors Service
Center, Inc.(incorporated herein by reference to Exhibit
9.(a) to Post-Effective Amendment No. 10 to the Registration
Statement of Colonial Trust VI, Registration Nos. 33-45117
and 811-6529, filed with the Commission on September 27,
1996)
9(a)(i) Amendment No. 10 to Schedule A of Amended and Restated
Shareholders' Servicing and Transfer Agent Agreement dated
October 1, 1997 (incorporated herein by reference to Exhibit
9(a)(ii) to Post-Effective Amendment No.13 to the
Registration Statement of Colonial Trust VI, Registration
Nos. 33-45117 and 811-6529, filed with the Commission on or
about October 24, 1997)
<PAGE>
9(a)(ii) Amendment No. 15 to Appendix I of Amended and Restated
Shareholders' Servicing and Transfer Agent Agreement as
amended (incorporated herein by reference to Exhibit
9(a)(ii) to Post-Effective Amendment No.13 to the
Registration Statement of Colonial Trust VI, Registration
Nos. 33-45117 and 811-6529, filed with the Commission on or
about October 24, 1997)
9(b) Pricing and Bookkeeping Agreement with Colonial Management
Associates, Inc. (incorporated herein by reference to
Exhibit 9(b) to Post-Effective Amendment No. 10 to the
Registration Statement of Colonial Trust VI, Registration
Nos. 33-45117 and 811-6529, filed with the Commission on
September 27, 1996)
9(b)(i) Amendment to Appendix I of Pricing and Bookkeeping Agreement
(13)
9(c) Investment Account Application (incorporated herein by
reference to Prospectus)
9(d) Form of Agreement and Plan of Reorganization (13)
9(e) Credit Agreement (incorporated by reference to Exhibit 9.(f)
of Post-Effective Amendment No. 19 to the Registration
Statement of Colonial Trust V filed with the Commission on
May 20, 1996)
9(f) Form of Amendment No. 1 to the Credit Agreement
9(g) Form of Amendment No. 2 to the Credit Agreement
9(h) Form of Amendment No. 3 to the Credit Agreement
10 Opinion and Consent of Counsel (13)
11 Consent of Independent Accountants
12 Not Applicable
13 Not Applicable
14(a) Form of Colonial Mutual Funds Money Purchase Pension and
Profit Sharing Plan Document and Employee Communications Kit
14(b) Form of Colonial Mutual Funds Money Purchase Pension and
Profit Sharing Plan Establishment Booklet
14(c) Form of Colonial IRA Application, Forms, Custodial Agreement
and Disclosure Statement and Distribution Form
14(d) Form of IRA Application and Fact Kit
14(e) Form of Colonial Mutual Funds Simplified Employee Pension
Plan and Salary Reduction Simplified Employee Pension Plan
Application and Fact Kit
14(f) Form of Colonial Mutual Funds 401(k) Plan Document, Trust
Agreement and IRS Opinion Letter (incorporated herein by
reference to Exhibit 14.(v) to Post-Effective Amendment No.
27
<PAGE>
to the Registration Statement of Colonial Trust II,
Registration Nos. 2-66976 and 811-3009, filed with the
Commission on November 18, 1996)
14(g) Form of Colonial Mutual Funds 401(k) Plan Establishment
Booklet and Employee Communications Kit (incorporated herein
by reference to Exhibit 14.(vi) to Post-Effective Amendment
No. 27 to the Registration Statement of Colonial Trust II,
Registration Nos. 2-66976 and 811-3009, filed with the
Commission on November 18, 1996)
14(h) Form of Colonial 401(k) Beneficiary Designation and
Participant Enrollment Forms
15 Distribution Plan adopted pursuant to Section 12b-1 of the
Investment Company Act of 1940, incorporated by reference to
the Distributor's Contracts filed as Exhibit 6(a) hereto
16(a) Calculation of Performance Information (Classes A and B)
(12)
16(b) Calculation of Performance Information (Class C)
16(c) Calculation of Yield
17(a) Financial Data Schedule (Class A)
17(b) Financial Data Schedule (Class B)
17(c) Financial Data Schedule (Class C)
18(a) Power of Attorney for: Robert J. Birnbaum, Tom Bleasdale,
Lora S. Collins, James E. Grinnell, William D. Ireland, Jr.,
Richard W. Lowry, William E. Mayer, James L. Moody, Jr.,
John J. Neuhauser, George L. Shinn, Robert L. Sullivan and
Sinclair Weeks, Jr.
18(b) Plan pursuant to Rule 18f-3(d) under the Investment Company
Act of 1940(incorporated herein by reference to Exhibit
18(b) to Post-Effective Amendment No. 44 to the Registration
Statement of Colonial Trust I, Registration Nos. 2-41251 and
811-2214, filed with the Commission on or about July 24,
1997)
- ---------------
Not all footnotes will be applicable to this filing.
(1) Incorporated by reference to Post-Effective Amendment No. 70
to Form N-1A filed on or about June 2, 1986
(2) Incorporated by reference to Post-Effective Amendment No. 71
to Form N-1A filed on or about August 27, 1986
(3) Incorporated by reference to Post-Effective Amendment No. 78
to Form N-1A filed on or about December 17, 1991.
(4) Incorporated by reference to Post-Effective Amendment No. 79
to Form N-1A filed on or about February 11, 1992.
(5) Incorporated by reference to Post-Effective Amendment No. 80
to Form N-1A filed on or about July 13, 1992.
<PAGE>
(6) Incorporated by reference to Post-Effective Amendment No. 81
to Form N-1A filed on or about November 19, 1992.
(7) Incorporated by reference to Post-Effective Amendment No. 85
to Form N-1A filed on or about July 30, 1993.
(8) Incorporated by reference to Post-Effective Amendment No. 87
to Form N-1A filed on or about February 9, 1994.
(9) Incorporated by reference to Post-Effective Amendment No. 90
to Form N-1A filed on or about December 21, 1994.
(10) Incorporated by reference to Post-Effective Amendment No. 94
to Form N-1A filed on or about July 28, 1995.
(11) Incorporated by reference to Post-Effective Amendment NO. 95
to Form N-1A filed on or about December 29, 1995.
(12) Incorporated by reference to Post-Effective Amendment No. 96
to Form N-1A filed on or about February 28, 1996.
(13) Incorporated by reference to Post-Effective Amendment No. 97
to Form N-1A filed on or about February 13, 1997.
Item 25. Persons Controlled by or under Common Group Control with
Registrant
None
Item 26. Number of Holders of Securities
(1) (2)
Number of Record Holders
Title of Class as of November 30, 1997
-------------- -----------------------
Shares of Beneficial Interest 41,686 - Class A record holders
3,400 - Class B record holders
11 - Class C record holders
Item 27. Indemnification
See Article VIII of Amendment No. 3 to the Agreement and
Declaration of Trust filed as Exhibit 1 hereto.
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
The following sets forth business and other connections of
each director and officer of Colonial Management
Associates, Inc. (see next page):
ITEM 28.
- --------
Registrant's investment adviser/administrator, Colonial Management
Associates, Inc. ("Colonial"), is registered as an investment adviser under
the Investment Advisers Act of 1940 (1940 Act). Colonial Advisory Services,
Inc. (CASI), an affiliate of Colonial, is also registered as an investment
adviser under the 1940 Act. As of the end of its fiscal year, December
31, 1996, CASI had one institutional, corporate or other account under
management or supervision, the market value of which was approximately $42.0
million. As of the end of its fiscal year, December 31, 1996, Colonial
was the investment adviser, sub-adviser and/or administrator to 49 Colonial
mutual funds (including funds sub-advised by Colonial, the market value of
which investment companies was approximately $17,165.0 million. Liberty
Financial Investments, Inc., a subsidiary of Colonial Management Associates,
Inc., is the principal underwriter and the national distributor of all of
the funds in the Colonial Mutual Funds complex, including the Registrant.
The following sets forth the business and other connections of each
director and officer of Colonial Management Associates, Inc.:
(1) (2) (3) (4)
Name and principal
business
addresses* Affiliation
of officers and with Period is through 11/01/97. Other
directors of investment business, profession, vocation or
investment adviser adviser employment connection Affiliation
- ------------------ ---------- -------------------------------- -----------
Allard, Laurie V.P.
Archer, Joseph A. V.P.
Ballou, William J. V.P., Colonial Trusts I through VII Asst. Sec.
Asst. Colonial High Income
Sec., Municipal Trust Asst. Sec.
Counsel Colonial InterMarket Income
Trust I Asst. Sec.
Colonial Intermediate High
Income Fund Asst. Sec.
Colonial Investment Grade
Municipal Trust Asst. Sec.
Colonial Municipal Income
Trust Asst. Sec.
LFC Utilities Trust Asst. Sec.
Berliant, Allan V.P.
Bertocci, Bruno V.P. Stein Roe Global Capital Mngmt. Principal
Boatman, Bonny E. Sr.V.P.; Colonial Advisory Services, Inc. Exec. V.P.
IPC Mbr.
Bunten, Walter V.P.
Campbell, Kimberly V.P.
Carnabucci,
Dominick V.P.
Carroll, Sheila A. Sr.V.P.;
Citrone, Frank V.P.
Cogger, Harold W. Dir.; The Colonial Group, Inc. Dir.;
Chairman; Chrm.
IPC Mbr.; Colonial Trusts I through VII Pres.
Colonial High Income
Municipal Trust Pres.
Colonial InterMarket Income
Trust I Pres.
Colonial Intermediate High
Income Fund Pres.
Colonial Investment Grade
Municipal Trust Pres.
Colonial Municipal Income
Trust Pres.
LFC Utilities Trust Pres.
Liberty Financial Exec V.P.;
Companies, Inc. Dir.
Stein Roe & Farnham Dir.
Incorporated
Conlin, Nancy V.P.; Colonial Investors Service
Asst. Center, Inc. Asst. Clerk
Sec.; The Colonial Group, Inc. Asst. Clerk
Asst Colonial Advisory Services,
Clerk and Inc. Asst. Clerk
Counsel Liberty Financial Investments,
Inc. Asst. Clerk
AlphaTrade Inc. Asst. Clerk
Colonial Trusts I through VII Asst. Sec.
Colonial High Income
Municipal Trust Asst. Sec.
Colonial InterMarket Income
Trust I Asst. Sec.
Colonial Intermediate High
Income Fund Asst. Sec.
Colonial Investment Grade
Municipal Trust Asst. Sec.
Colonial Municipal Income
Trust Asst. Sec.
LFC Utilities Trust Asst. Sec.
Daniszewski, V.P.
Joseph J.
Desilets, Marian V.P. Liberty Financial Investments,
Inc. V.P.
DiSilva, Linda V.P. Colonial Advisory Services, Compliance
IPC Mbr. Inc. Officer
Ericson, Carl C. Sr.V.P. Colonial Intermediate High
IPC Mbr. Income Fund V.P.
Colonial Advisory Services,
Inc. Exec. V.P.
Evans, C. Frazier Sr.V.P. Liberty Financial Investments,
Inc. Mng. Director
Feingold, Andrea S. V.P. Colonial Intermediate High
Income Fund V.P.
Colonial Advisory Services,
Inc. Sr. V.P.
Feloney, Joseph L. V.P.
Asst. Treasurer
Finnemore, V.P. Colonial Advisory Services,
Leslie W. Inc. Sr. V.P.
Franklin, Sr. V.P. AlphaTrade Inc. President
Fred J. IPC Mbr.
Gibson, Stephen E. Dir.; Pres.; The Colonial Group, Inc. Dir.;
CEO; Pres.; CEO;
Exec. Cmte.
Mbr.
Liberty Financial Investments, Dir.; Chm.
Inc.
Colonial Advisory Services, Dir.; Chm.
Inc.
Colonial Investors Service Dir.; Chm.
Center, Inc.
AlphaTrade Inc. Dir.
Harasimowicz, V.P.
Stephen
Harris, David V.P. Stein Roe Global Capital Mngmt Principal
Hartford, Brian V.P.
Haynie, James P. V.P. Colonial Advisory Services,
Inc. Sr. V.P.
Hill, William V.P.
Iudice, Jr. Philip V.P.; The Colonial Group, Inc. Controller,
Controller CAO, Asst.
Asst. Treas.
Treasurer Liberty Financial Investments, CFO,
Inc. Treasurer
Colonial Advisory Services,
Inc. Controller;
Asst. Treas.
AlphaTrade Inc. CFO, Treas.
Jacoby, Timothy J. Sr. V.P.; The Colonial Group, Inc. V.P., Treasr.,
CFO; CFO
Treasurer Colonial Trusts I through VII Treasr.,CFO
Controller
Colonial High Income Treasr.,CFO
Municipal Trust Controller
Colonial InterMarket Income Controller;
Trust I Treasr.,CFO
Colonial Intermediate High Controller;
Income Fund Treasr.,CFO
Colonial Investment Grade Controller;
Municipal Trust Treasr.,CFO
Colonial Municipal Income Controller;
Trust Treasr.,CFO
LFC Utilities Trust Controller;
Treasr.,CFO
Colonial Advisory Services,
Inc. CFO, Treasr.
Johnson, Gordon V.P.
Knudsen, Gail V.P.
Koonce, Michael H. Sr. V.P.; Colonial Trusts I through VII Secretary
Sec.; Clerk Colonial High Income
IPC Mbr.; Municipal Trust Secretary
Dir; Gen. Colonial InterMarket Income
Counsel Trust I Secretary
Colonial Intermediate High
Income Fund Secretary
Colonial Investment Grade
Municipal Trust Secretary
Colonial Municipal Income
Trust Secretary
LFC Utilities Trust Secretary
Liberty Financial Investments,
Inc. Dir., Clerk
Colonial Investors Service
Center, Inc. Clerk, Dir.
The Colonial Group, Inc. V.P., Gen.
Counsel and
Clerk
Colonial Advisory Services,
Inc. Dir., Clerk
AlphaTrade Inc. Dir., Clerk
Lennon, John E. V.P. Colonial Advisory Services,
Inc. V.P.
Lenzi, Sharon V.P.
Lessard, Kristen V.P.
Loring, William C. V.P.
MacKinnon,
Donald S. Sr.V.P.
Newman, Maureen V.P.
Ostrander, Laura V.P.
Peters, Helen F. Sr.V.P.; Colonial Advisory Services, Pres.,
IPC Mbr. Inc. CEO
Peterson, Ann T. V.P. Colonial Advisory Services,
Inc. V.P.
Rao, Gita V.P.
Reading, John V.P.; Colonial Investors Service
Asst. Center, Inc. Asst. Clerk
Sec.; The Colonial Group, Inc. Asst. Clerk
Asst Colonial Advisory Services,
Clerk and Inc. Asst. Clerk
Counsel Liberty Financial Investments,
Inc. Asst. Clerk
AlphaTrade Inc. Asst. Clerk
Colonial Trusts I through VII Asst. Sec.
Colonial High Income
Municipal Trust Asst. Sec.
Colonial InterMarket Income
Trust I Asst. Sec.
Colonial Intermediate High
Income Fund Asst. Sec.
Colonial Investment Grade
Municipal Trust Asst. Sec.
Colonial Municipal Income
Trust Asst. Sec.
LFC Utilities Trust Asst. Sec.V.P.
Rega, Michael V.P. Colonial Advisory Services
Inc. Vice President
Scoon, Davey S. Dir.; Colonial Advisory Services,
Exe.V.P.; Inc. Dir.
IPC Mbr.; Colonial High Income
Municipal Trust V.P.
Colonial InterMarket Income
Trust I V.P.
Colonial Intermediate High
Income Fund V.P.
Colonial Investment Grade
Municipal Trust V.P.
Colonial Municipal Income
Trust V.P.
Colonial Trusts I through VII V.P.
LFC Utilities Trust V.P.
Colonial Investors Service Dir; Pres.
Center, Inc.
The Colonial Group, Inc. COO; Ex. V.P.
Liberty Financial Investments,
Inc. Director
AlphaTrade Inc. Director
Seibel, Sandra L. V.P.
Spanos, Gregory Sr. V.P.
Stern, Arthur O. Exe.V.P.; The Colonial Group, Inc. Exec. V.P.
Steck, Nicholas V.P.
Stevens, Richard V.P.
Stoeckle, Mark V.P. Colonial Advisory Services,
Inc. V.P.
Swayze, Gary V.P.
Wallace, John V.P.
Asst.Treasurer
- ------------------------------------------------
*The Principal address of all of the officers and directors of the investment
adviser is One Financial Center, Boston, MA 02111.
<PAGE>
Item 29 Principal Underwriter
- ------- ---------------------
(a) Liberty Financial Investments, Inc. (LFII), a subsidiary of Colonial
Management Associates, Inc., is the Registrant's principal
underwriter. LFII acts in such capacity for Colonial Trust I,
Colonial Trust II, Colonial Trust III, Colonial Trust IV,
Colonial Trust V, Colonial Trust VI and Colonial Trust VII. LFII
is the sponsor for Colony Growth Plans (public offering of which
were discontinued June 14, 1971).
(b) The table below lists each director or officer of the principal
underwriter named in the answer to Item 21.
(1) (2) (3)
Position and Offices Positions and
Name and Principal with Principal Offices with
Business Address* Underwriter Registrant
- ------------------ ------------------- --------------
Anderson, Judith V.P. None
Babbitt, Debra V.P. and None
Comp. Officer
Ballou, Rich Regional V.P. None
Balzano, Christine R. V.P. None
Bartlett, John Managing Director None
Brown, Beth V.P. None
Burtman, Tracy V.P. None
Campbell, Patrick V.P. None
Carroll, Greg Regional V.P. None
Chrzanowski, Regional V.P. None
Daniel
Claiborne, Regional V.P. None
Douglas
Clapp, Elizabeth A. Sr. V.P. None
Crossfield, Andrew Regional V.P. None
Daniszewski, V.P. None
Joseph J.
Davey, Cynthia Regional Sr. V.P. None
Desilets, Marian V.P. None
Devaney, James Regional V.P. None
DiMaio, Steve V.P. None
Donovan, John Regional V.P. None
Downey, Christopher V.P. None
Eckelman, Bryan Sr. V.P. None
Emerson, Kim P. Regional V.P. None
Erickson, Cynthia G. Sr. V.P. None
Evans, C. Frazier Managing Director None
Feldman, David Sr. V.P. None
Fifield, Robert Regional V.P. None
Gerokoulis, Sr. V.P. None
Stephen A.
Gibson, Stephen E. Director; Chairman None
of the Board
Goldberg, Matthew Regional V.P. None
Guenard, Brian Regional V.P. None
Harrington, Tom Sr. Regional V.P. None
Hodgkins, Joseph Sr. Regional V.P. None
Iudice, Jr., Philip Treasurer and CFO None
Jones, Cynthia V.P. None
Karagiannis, Managing Director None
Marilyn
Kelley, Terry M. Regional V.P. None
Kelson, David W. Sr. V.P. None
Koonce, Michael H. Dir.; Clerk Secretary
Libutti, Chris Regional V.P. None
McCombs, Gregory Regional Sr. V.P. None
McKenzie, Mary V.P. None
Menchin, Catherine V.P. None
Moberly, Ann R. Regional Sr. V.P. None
Morner, Patrick V.P. None
Nerney, Andrew Regional V.P. None
Nolin, Kevin V.P. None
O'Shea, Kevin Managing Director None
Predmore, Tracy Regional V.P. None
Quirk, Frank V.P. None
Reed, Christopher B. Sr. Regional V.P. None
Scarlott, Rebecca V.P. None
Schulman, David Regional V.P. None
Scoon, Davey Director V.P.
Scott, Michael W. Sr. V.P. None
Sideropoulos, Lou V.P. None
Smith, Darren Regional V.P. None
Spanos, Gregory J. Sr. V.P. None
Studer, Eric Regional V.P. None
Sutton, R. Andrew Regional V.P. None
Tambone, James CEO None
Tasiopoulos, Lou President None
VanEtten, Keith H. Sr. V.P. None
Villanova, Paul Regional V.P. None
Wallace, John V.P. None
Welsh, Stephen Treasurer Asst. Treasurer
Wess, Valerie Regional V.P. None
Young, Deborah V.P. None
- --------------------------
* The address for each individual is One Financial Center, Boston, MA
02111.
<PAGE>
Item 30. Location of Accounts and Records
Registrant's accounts and records required to be
maintained by Section 31(a) of the Investment Company Act
of 1940 and the Rules thereunder are in the physical
possession of the following:
Registrant
Rule 31a-1 (b) (4)
Rule 31a-2 (a) (1)
Colonial Management Associates, Inc.
One Financial Center, Boston, Massachusetts 02111
Rule 31a-1 (b) (1), (2), (3), (5), (6), (7), (8), (9),
(10), (11), (12)
Rule 31a-1 (d), (f)
Rule 31a-2 (a) (1), (2), (c), (e)
Liberty Financial Investments, Inc.
One Financial Center, Boston, Massachusetts 02111
Rule 31a-1 (d)
Rule 31a-2 (c)
Boston Safe Deposit and Trust Company
One Boston Place, Boston, Massachusetts 02108
Rule 31a-1 (b), (2), (3)
Rule 31a-2 (a) (2)
Colonial Investors Service Center, Inc.
P. O. Box 1722, Boston, Massachusetts 02105-1722
Rule 31a-1 (b) (2)
Rule 31a-1 (a) (2)
Item 31. Management Services
See Item 5, Part A and Item 16, Part B
Item 32. Undertakings
(a) Not Applicable
(b) The Registrant hereby undertakes to promptly call a
meeting of shareholders for the purpose of voting upon
the question of removal of any trustee when requested
in writing to do so by the record holders of not less
than 10 per cent of the Registrant's outstanding shares
and to assist its shareholders in the communicating
with other shareholders in accordance with the
requirements of Section 16(c) of the Investment Company
Act of 1940.
(c) The Registrant hereby undertakes to furnish free of
charge to each person to whom a prospectus is
delivered, a copy of the applicable series' annual
report to shareholders containing the information
required by Item 5A of Form N-1A.
<PAGE>
NOTICE
A copy of the Agreement and Declaration of Trust, as amended, of Colonial Trust
III is on file with the Secretary of The Commonwealth of Massachusetts and
notice is hereby given that the instrument has been executed on behalf of the
Trust by an officer of the Trust as an officer and by the Trust's Trustees as
trustees and not individually and the obligations of or arising out of the
instrument are not binding upon any of the Trustees, officers or shareholders
individually but are binding only upon the assets and property of the Trust.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of the Registration Statement pursuant to Rule
485(b) and has duly caused this Post-Effective Amendment No. 99 to its
Registration Statement under the Securities Act of 1933 and the Post-Effective
Amendment No. 40 under the Investment Company Act of 1940, to be signed in this
City of Boston, and The Commonwealth of Massachusetts on this 19th day of
December, 1997.
COLONIAL TRUST III
By: HAROLD W. COGGER
--------------------
Harold W. Cogger
President
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment to its Registration Statement has been signed below by the following
persons in their capacities as officers and Trustees of Colonial Trust III, and
on the date indicated.
SIGNATURES TITLE DATE
HAROLD W. COGGER President (chief December 19, 1997
- -------------------- executive officer)
Harold W. Cogger
TIMOTHY J. JACOBY Treasurer and December 19, 1997
- -------------------- Controller (chief
Timothy J. Jacoby accounting and
financial officer)
<PAGE>
ROBERT J. BIRNBAUM*
- --------------------- Trustee
Robert J. Birnbaum
TOM BLEASDALE*
- --------------------- Trustee
Tom Bleasdale
LORA S. COLLINS*
- --------------------- Trustee
Lora S. Collins
JAMES E. GRINNELL*
- --------------------- Trustee
James E. Grinnell
WILLIAM D. IRELAND, JR.*
- ----------------------- Trustee
William D. Ireland, Jr.
RICHARD W. LOWRY*
- --------------------- Trustee
Richard W. Lowry
WILLIAM E. MAYER*
- --------------------- Trustee
William E. Mayer
JAMES L. MOODY, JR.*
- --------------------- Trustee *MICHAEL H. KOONCE
James L. Moody, Jr. ------------------
Michael H. Koonce
Attorney-in-fact
December 19, 1997
JOHN J. NEUHAUSER*
- --------------------- Trustee
John J. Neuhauser
GEORGE L. SHINN*
- --------------------- Trustee
George L. Shinn
ROBERT L. SULLIVAN*
- --------------------- Trustee
Robert L. Sullivan
SINCLAIR WEEKS, JR.*
- --------------------- Trustee
Sinclair Weeks, Jr.
<PAGE>
EXHIBIT INDEX
Exhibit
-------
5(b) Form of Amendment No. 1 to Management Agreement
9(f) Form of Amendment No. 1 to the Credit Agreement
9(g) Form of Amendment No. 2 to the Credit Agreement
9(h) Form of Amendment No. 3 to the Credit Agreement
11 Consent of Independent Accountants
14(a) Form of Colonial Mutual Funds Money Purchase Pension and
Profit Sharing Plan Document and Employee Communications Kit
14(b) Form of Colonial Mutual Funds Money Purchase Pension and
Profit Sharing Plan Establishment Booklet
14(c) Form of Colonial IRA Application, Forms, Custodial Agreement
and Disclosure Statement and Distribution Form
14(d) Form of IRA Application and Fact Kit
14(e) Form of Colonial Mutual Funds Simplified Employee Pension
Plan and Salary Reduction Simplified Employee Pension Plan
Application and Fact Kit
14(h) Form of Colonial 401(k) Beneficiary Designation and
Participant Enrollment Forms
16(b) Calculation of Performance Information (Class C)
16(c) Calculation of Yield
17(a) Financial Data Schedule (Class A)
<PAGE>
17(b) Financial Data Schedule (Class B)
17(c) Financial Data Schedule (Class C)
18(a) Power of Attorney for: Robert J. Birnbaum, Tom Bleasdale,
Lora S. Collins, James E. Grinnell, William D. Ireland, Jr.,
Richard W. Lowry, William E. Mayer, James L. Moody, Jr.,
John J. Neuhauser, George L. Shinn, Robert L. Sullivan and
Sinclair Weeks, Jr.
AMENDMENT NO. 1 TO THE
MANAGEMENT AGREEMENT
Effective October 1, 1997, Section 5. of the Management Agreement dated as of
March 27, 1995, between COLONIAL TRUST III with respect to COLONIAL FEDERAL
SECURITIES FUND (Fund) and COLONIAL MANAGEMENT ASSOCIATES, INC. (Adviser) is
hereby amended to read in its entirety as follows:
5. The Fund shall pay the Adviser monthly a fee at the annual rate of 0.60%
of the first $1 billion of the average daily net assets of the Fund,
0.55% in excess of $1 billion, 0.50% in excess of $2 billion and 0.40%
in excess of $3 billion.
COLONIAL TRUST III on behalf of
COLONIAL FEDERAL SECURITIES FUND
By: _____________________________
Title: Controller
COLONIAL MANAGEMENT ASSOCIATES, INC.
By: _____________________________
Title: Senior Vice President
FORM OF FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT, dated as of October 9, 1996
(this "Amendment"), amends the Credit Agreement, dated as of April 29, 1996 (the
"Credit Agreement"), among certain investment companies (each, a "Trust"), the
various financial institutions parties thereto (collectively, the "Banks") and
Bank of America National Trust and Savings Association, as agent (the "Agent")
for the Banks. Terms defined in the Credit Agreement are, unless otherwise
defined herein or the context otherwise requires, used herein as defined
therein.
WHEREAS, the parties hereto have entered into the Credit Agreement,
which provides for the Banks to extend certain credit facilities to the Trusts
from time to time; and
WHEREAS, the parties hereto desire to amend the Credit Agreement in
certain respects as hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration (the receipt and sufficiency of which are hereby
acknowledged), the parties hereto agree as follows:
SECTION 1 AMENDMENTS. Effective as of October 9, 1996,
Section 6.17(ii)(a) of the Credit Agreement shall be amended to state in
its entirety as follows:
"for any reason other than Indebtedness arising from a failed trade,
the lesser of $1,000,000 and 10% of its then-current Net Asset Value
(provided that for a period of no more than one Business Day at a time,
such $1,000,000 may be increased to (1) $5,000,000 or (2) in the case
of a Fund with a Net Asset Value in excess of $1,000,000,000, an amount
equal to 1/2 of 1% of its Net Asset Value.)"
SECTION 2 CONDITIONS PRECEDENT. This Amendment shall become
effective when each of the conditions precedent set forth in this Section 2
shall have been satisfied, and notice thereof shall have been given by the Agent
to the Trusts and the Banks.
SECTION 2.1 Receipt of Documents. The Agent shall have received this
Amendment, duly executed by the Trusts, the Agent and the Majority Banks, dated
the date hereof or such other date as shall be acceptable to the Agent, and in
form and substance satisfactory to the Agent.
SECTION 2.2 Compliance with Warranties, No Default, etc. Both before and
after giving effect to the effectiveness of this Amendment, the following
statements by the Trusts shall be true and correct (and the Trusts, by their
execution of this Amendment, hereby represent and warrant to the Agent and each
Bank that such statements are true and correct as at such times):
(a) the representations and warranties set forth in
Article V of the Credit Agreement shall be true and correct with the
same effect as if then made (unless stated to relate solely to an
earlier date, in which case such representations and warranties shall
be true and correct as of such earlier date); and
(b) no Default shall have then occurred and be
continuing.
SECTION 3 MISCELLANEOUS.
SECTION 3.1 Continuing Effectiveness, etc. This Amendment shall be
deemed to be an amendment to the Credit Agreement, and the Credit Agreement, as
amended hereby, shall remain in full force and effect and is hereby ratified,
approved and confirmed in each and every respect. After the effectiveness of
this Amendment in accordance with its terms, all references to the Credit
Agreement in the Loan Documents or in any other document, instrument, agreement
or writing shall be deemed to refer to the Credit Agreement as amended hereby.
SECTION 3.2 Payment of Costs and Expenses. The Trusts agree to pay on
demand all expenses of the Agent (including the fees and out-of-pocket expenses
of counsel to the Agent) in connection with the negotiation, preparation,
execution and delivery of this Amendment.
SECTION 3.3 Execution in Counterparts. This Amendment may be
executed by the parties hereto in several counterparts, each of which shall be
deemed to be an original and all of which shall constitute together but one and
the same agreement.
SECTION 3.4 Governing Law. THIS AMENDMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF ILLINOIS.
SECTION 3.5 Successors and Assigns. This Amendment shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns.
SECTION 3.6 Disclaimer. None of the shareholders, trustees, officers,
employees and other agents of any Trust or Fund shall be personally bound by or
liable for any indebtedness, liability or obligation hereunder or under the
Notes, nor shall resort be had to their private property for the satisfaction
of any obligation or claim hereunder. Nothing in this Section 3.6 shall
affect the Bank's rights against Adviser Persons as provided in Section 1.5 of
the Credit Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
COLONIAL TRUST I ON BEHALF OF
COLONIAL INCOME FUND, COLONIAL HIGH
YIELD SECURITIES FUND AND COLONIAL
STRATEGIC INCOME FUND
By _____________________________
Title __________________________
COLONIAL TRUST II ON BEHALF OF
COLONIAL ADJUSTABLE RATE U.S.
GOVERNMENT FUND
By _____________________________
Title __________________________
COLONIAL TRUST III ON BEHALF OF
COLONIAL GLOBAL EQUITY FUND, COLONIAL
GLOBAL NATURAL RESOURCES FUND,
COLONIAL GROWTH SHARES FUND, THE
COLONIAL FUND, COLONIAL GLOBAL
UTILITIES FUND, COLONIAL STRATEGIC
BALANCED FUND AND COLONIAL
INTERNATIONAL FUND FOR GROWTH
By _____________________________
Title __________________________
COLONIAL TRUST IV ON BEHALF OF
COLONIAL INTERMEDIATE TAX EXEMPT AND,
COLONIAL HIGH YIELD MUNICIPAL FUND,
COLONIAL UTILITIES FUND, COLONIAL
SHORT TERM TAX EXEMPT FUND, COLONIAL
TAX EXEMPT INSURED FUND AND COLONIAL
TAX EXEMPT FUND
By _____________________________
Title __________________________
<PAGE>
COLONIAL TRUST V ON BEHALF OF
COLONIAL CALIFORNIA TAX EXEMPT FUND,
COLONIAL CONNECTICUT TAX EXEMPT FUND,
COLONIAL FLORIDA TAX EXEMPT FUND,
COLONIAL MASSACHUSETTS TAX EXEMPT
FUND, COLONIAL MICHIGAN TAX EXEMPT
FUND, COLONIAL MINNESOTA TAX EXEMPT
FUND, COLONIAL NEW YORK TAX EXEMPT
FUND, COLONIAL NORTH CAROLINA TAX
EXEMPT FUND AND COLONIAL OHIO TAX
EXEMPT FUND
By _____________________________
Title __________________________
COLONIAL TRUST VI ON BEHALF OF
COLONIAL SMALL STOCK FUND AND
COLONIAL U.S. FUND FOR GROWTH
By _____________________________
Title __________________________
COLONIAL TRUST VII ON BEHALF OF
COLONIAL NEWPORT TIGER FUND
By _____________________________
Title __________________________
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By__________________________________
Title_______________________________
<PAGE>
BANK OF AMERICA ILLINOIS, as a Bank
By__________________________________
Title_______________________________
ABN AMRO BANK N.V., NEW YORK BRANCH
By__________________________________
Title Authorized Signature
By__________________________________
Title Authorized Signature
CREDIT LYONNAIS NEW YORK BRANCH
By__________________________________
Title_______________________________
FLEET BANK, N.A.
By__________________________________
Title_______________________________
MELLON BANK, N.A.
By__________________________________
Title_______________________________
FORM OF SECOND AMENDMENT TO CREDIT AGREEMENT
This SECOND AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as
of April 28, 1997 (the "Amendment Effective Date"), by and among the Funds
identified on Annex I hereto (the "Funds"), the undersigned Banks, and BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as agent (in such capacity, the
"Agent") for the Banks.
WHEREAS, the Funds, the Banks and the Agent have previously entered
into a certain Credit Agreement, dated as of April 29, 1996 (as in effect
immediately prior to the Amendment Effective Date, the "Existing Credit
Agreement" and, as amended or otherwise modified hereby, the "Credit Agreement";
terms defined therein having the same respective meanings herein); and
WHEREAS, the parties hereto wish to amend the Existing Credit Agreement
in certain respects as hereinafter provided;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration (the receipt, adequacy and sufficiency of which are
hereby acknowledged), the parties hereto, intending legally to be bound hereby,
agree as follows:
SECTION 1.Credit Agreement Amendments. The Existing Credit Agreement
is hereby amended on and from the Amendment Effective Date as follows.
1.1 The definition of "Commitment Termination Date" in
Schedule I to the Existing Credit Agreement is amended to read in its entirety
as follows:
"Commitment Termination Date" means, with respect to any Fund, the
earliest to occur of:
a) the Scheduled Commitment Termination Date;
b) the date on which the Commitments terminate
in accordance with the provisions of this Agreement; and
c) the date on which any Event of Default with
respect to that Fund described in Section 7.1(e) or Section 7.1(f) occurs.
1.2 The following definition is added to Schedule
I to the Existing Credit Agreement in appropriate alphabetical order:
"Scheduled Commitment Termination Date" means April 27, 1998;
provided that the Scheduled Commitment Termination Date may be extended
for successive 364-day periods upon the written request of the Trusts
therefor received by the Agent and the Banks not less than 45 days
prior to the then-existing Scheduled Commitment Termination Date, and
the receipt by the Trusts within 20 days of such existing Scheduled
Commitment Termination Date of the agreement by the Agent and the Banks
(which shall be entirely at the sole discretion of the Agent and each
Bank, none of whom has any obligation regarding such extension) to such
requested extension. No agreement regarding any particular extension
shall create any obligation of the Agent or any Bank regarding any
subsequent extension.
1.3 Section 6.1(c) of the Existing Credit Agreement
is deleted in its entirety and replaced with the following:
(c) Within 15 days after the end of each calendar quarter, a
certificate substantially in the form of Exhibit 6.1 ("Borrowing Base
Certificate") setting forth (A) its borrowing base (as calculated in
the manner contemplated by the form of Borrowing Base Certificate)
("Borrowing Base"), (B) its Asset Coverage Ratio as of the last day of
such calendar quarter and (C) a statement to the effect that, to the
best of the knowledge of the Authorized Officer signing the Borrowing
Base Certificate, no Default has occurred and is continuing or, if an
Event of Default has occurred and is continuing, the steps being taken
to remedy the same;
1.4 Exhibit 6.1 of the Existing Credit Agreement is
deleted in its entirety and replaced with the form of Exhibit 6.1 appended
hereto.
SECTION 2. New Notes. Each of Colonial Short Duration U.S. Government
Fund, Colonial International Horizons Fund, Colonial Select Value Fund, Colonial
Small Cap Value Fund and Colonial U.S. Stock Fund shall deliver its Note to the
Agent for the account of each Bank (each a "New Note") on or before the
Amendment Effective Date. Upon receipt by the Agent of the New Notes of Colonial
Short Duration U.S. Government Fund, Colonial International Horizons Fund,
Colonial Select Value Fund, Colonial Small Cap Value Fund and Colonial U.S.
Stock Fund, the corresponding Notes of Colonial Adjustable Rate U.S. Government
Fund, Colonial Global Natural Resources Fund, Colonial Growth Shares Fund,
Colonial Small Stock Fund and Colonial U.S. Fund for Growth, respectively,
previously delivered to the Banks shall cease to be of further force and effect.
<PAGE>
SECTION 3. Other Matters.
3.1 The Funds, the Banks and the Agent acknowledge that:
3.1.1 the name of Colonial Adjustable Rate U.S. Government
Fund has been changed to Colonial Short Duration U.S. Government Fund;
3.1.2 the name Colonial Global Natural Resources Fund has
been changed to Colonial International Horizons Fund;
3.1.3 the name of Colonial Growth Shares Fund has been
changed to Colonial Select Value Fund;
3.1.4 the name of Colonial Small Stock Fund has been changed
to Colonial Small Cap Value Fund; and
3.1.5 the name of Colonial U.S. Fund for Growth has been
changed to Colonial U.S. Stock Fund.
3.2 The Funds, the Banks and the Agent acknowledge that the
existence of the Colonial Short Term Tax Exempt Fund has been terminated and is
therefore no longer a party to the Credit Agreement.
SECTION 4. Conditions to Effectiveness. This Amendment shall become
effective when each of the conditions precedent set forth in this Section 4
shall have been satisfied and notice thereof shall have been given by the Agent
to the Trusts and the Banks.
4.1 The Agent shall have received:
4.1.1 counterparts hereof duly executed and delivered by the
Trusts on behalf of the Funds and evidence of the execution of
counterparts hereof by all of the Banks;
4.1.2 the New Notes duly executed and delivered on behalf of
each of Colonial Short Duration U.S.Government Fund, Colonial
International Horizons Fund, Colonial Select Value Fund, Colonial Small
Cap Value Fund and Colonial U.S. Stock Fund;
4.1.3 a revised Allocation Notice; and
4.1.4 a form FR U-1 of the Board of Governors of the Federal
Reserve System duly executed and completed by each of Colonial Short
Duration U.S. Government Fund, Colonial International Horizons Fund,
Colonial Select Value Fund, Colonial Small Cap Value Fund and Colonial
U.S. Stock Fund.
SECTION 5. Miscellaneous.
5.1 Except as amended hereby, the Existing Credit Agreement and
each other Credit Document remains in full force and effect and each Trust
hereby ratifies and confirms its respective representations, warranties,
covenants and agreements contained in, and obligations and liabilities
under, the Credit Agreement and the other Credit Documents.
5.2 On and from the Amendment Effective Date, reference
to the Existing Credit Agreement in any Credit Document shall be deemed to
include a reference to the Credit Agreement, as amended by this Amendment,
whether or not reference is made to this Amendment.
5.3 The Trusts shall pay or reimburse the Agent for the fees
and expenses of the Agent (including reasonable Agent's counsel fees and
disbursements and the allocated costs of internal counsel) incurred in
connection with the transactions contemplated hereby and by any of the Credit
Documents.
5.4 This Amendment shall be deemed to be a contract made under
and governed by the laws of the State of Illinois, without regard to its
principles of conflicts of laws.
5.5 This Amendment may be executed in counterparts, each of
which shall be deemed an original but all of which when taken together shall
constitute a single agreement.
[Signatures begin on the next page]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
COLONIAL TRUST I ON BEHALF OF COLONIAL
INCOME FUND, COLONIAL HIGH YIELD
SECURITIES FUND AND COLONIAL STRATEGIC
INCOME FUND
By:_____________________________
Title:__________________________
Address: One Financial Center
Boston, MA 02111-2621
Facsimile No.: (617) 772-3148
Attention: Fund Accounting
with a copy to:
Address: One Financial Center
Boston, MA 02111-2621
Facsimile No.: (617) 345-0919
Attention: Legal
COLONIAL TRUST II ON BEHALF OF
COLONIAL SHORT DURATION U.S.
GOVERNMENT FUND (f/k/a
COLONIAL ADJUSTABLE RATE U.S.
GOVERNMENT FUND)
By:_____________________________
Title:__________________________
Address: One Financial Center
Boston, MA 02111-2621
Facsimile No.: (617) 772-3148
Attention: Fund Accounting
with a copy to:
Address: One Financial Center
Boston, MA 02111-2621
Facsimile No.: (617) 345-0919
Attention: Legal
COLONIAL TRUST III ON BEHALF OF
COLONIAL GLOBAL EQUITY FUND,
COLONIAL INTERNATIONAL HORIZONS
FUND (f/k/a COLONIAL GLOBAL NATURAL
RESOURCES FUND), COLONIAL SELECT
VALUE FUND (f/k/a COLONIAL GROWTH
SHARES FUND), THE COLONIAL FUND,
COLONIAL GLOBAL UTILITIES FUND,
COLONIAL STRATEGIC BALANCED FUND
AND COLONIAL INTERNATIONAL FUND FOR
GROWTH
By:_____________________________
Title:__________________________
Address: One Financial Center
Boston, MA 02111-2621
Facsimile No.: (617) 772-3148
Attention: Fund Accounting
with a copy to:
Address: One Financial Center
Boston, MA 02111-2621
Facsimile No.: (617) 345-0919
Attention: Legal
COLONIAL TRUST IV ON BEHALF OF
COLONIAL INTERMEDIATE TAX EXEMPT
FUND, COLONIAL HIGH YIELD
MUNICIPAL FUND, COLONIAL UTILITIES
FUND, COLONIAL TAX EXEMPT INSURED
FUND AND COLONIAL TAX EXEMPT FUND
By:_____________________________
Title:__________________________
Address: One Financial Center
Boston, MA 02111-2621
Facsimile No.: (617) 772-3148
Attention: Fund Accounting
with a copy to:
Address: One Financial Center
Boston, MA 02111-2621
Facsimile No.: (617) 345-0919
Attention: Legal
COLONIAL TRUST V ON BEHALF OF
COLONIAL CALIFORNIA TAX EXEMPT
FUND, COLONIAL CONNECTICUT TAX
EXEMPT FUND, COLONIAL FLORIDA TAX
EXEMPT FUND, COLONIAL MASSACHUSETTS
TAX EXEMPT FUND, COLONIAL MICHIGAN
TAX EXEMPT FUND, COLONIAL MINNESOTA
TAX EXEMPT FUND, COLONIAL NEW YORK
TAX EXEMPT FUND, COLONIAL NORTH
CAROLINA TAX EXEMPT FUND AND
COLONIAL OHIO TAX EXEMPT FUND
By:_____________________________
Title:__________________________
Address: One Financial Center
Boston, MA 02111-2621
Facsimile No.: (617) 772-3148
Attention: Fund Accounting
with a copy to:
Address: One Financial Center
Boston, MA 02111-2621
Facsimile No.: (617) 345-0919
Attention: Legal
COLONIAL TRUST VI ON BEHALF OF
COLONIAL SMALL CAP VALUE FUND
(f/k/a COLONIAL SMALL STOCK
FUND) AND COLONIAL U.S. STOCK FUND
(f/k/a COLONIAL U.S. FUND FOR
GROWTH)
By:_____________________________
Title:__________________________
Address: One Financial Center
Boston, MA 02111-2621
Facsimile No.: (617) 772-3148
Attention: Fund Accounting
with a copy to:
Address: One Financial Center
Boston, MA 02111-2621
Facsimile No.: (617) 345-0919
Attention: Legal
COLONIAL TRUST VII ON BEHALF OF
COLONIAL NEWPORT TIGER FUND
By:_____________________________
Title:__________________________
Address: One Financial Center
Boston, MA 02111-2621
Facsimile No.: (617) 772-3148
Attention: Fund Accounting
with a copy to:
Address: One Financial Center
Boston, MA 02111-2621
Facsimile No.: (617) 345-0919
Attention: Legal
<PAGE>
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By:_______________________________
Title:____________________________
Address for Payments:
Agency Management Services #5596
1455 Market Street, 12th Floor
San Francisco, California 94103
Account No: 1233-15041
ABA No: 1210-0035-8
Reference: Colonial Management Associates
Attention: Dana Tom
Telephone: (415) 436-3433
Facsimile: (415) 436-2700
<PAGE>
BANK OF AMERICA ILLINOIS
By:_______________________________
Title:____________________________
<PAGE>
ABN AMRO BANK N.V., NEW YORK BRANCH
By:_______________________________
Title: Authorized Signature
By:_______________________________
Title: Authorized Signature
<PAGE>
CREDIT LYONNAIS NEW YORK BRANCH
By:_______________________________
Title:____________________________
<PAGE>
FLEET NATIONAL BANK
(f/k/a FLEET BANK, N.A.)
By:_______________________________
Title:____________________________
<PAGE>
MELLON BANK, N.A.
By:_______________________________
Title:____________________________
<PAGE>
ANNEX I
Funds
Colonial Trust I on behalf of Colonial Income Fund, Colonial High Yield
Securities Fund and Colonial Strategic Income Fund
Colonial Trust II on behalf of Colonial Short Duration U.S. Government Fund
(f/k/a Colonial Adjustable Rate U.S. Government Fund)
Colonial Trust III on behalf of Colonial Global Equity Fund, Colonial
International Horizons Fund (f/k/a Colonial Global Natural Resources Fund),
Colonial Select Value Fund (f/k/a Colonial Growth Shares Fund), The Colonial
Fund, Colonial Global Utilities Fund, Colonial Strategic Balanced Fund and
Colonial International Fund for Growth
Colonial Trust IV on behalf of Colonial Intermediate Tax Exempt Fund, Colonial
High Yield Municipal Fund, Colonial Utilities Fund, Colonial Short Term Tax
Exempt Fund, Colonial Tax Exempt Insured Fund and Colonial Tax Exempt Fund
Colonial Trust V on behalf of Colonial California Tax Exempt Fund, Colonial
Connecticut Tax Exempt Fund, Colonial Florida Tax Exempt Fund, Colonial
Massachusetts Tax Exempt Fund, Colonial Michigan Tax Exempt Fund, Colonial
Minnesota Tax Exempt Fund, Colonial New York Tax Exempt Fund, Colonial North
Carolina Tax Exempt Fund and Colonial Ohio Tax Exempt Fund
Colonial Trust VI on behalf of Colonial Small Cap Value Fund (f/k/a Colonial
Small Stock Fund) and Colonial U.S. Stock Fund (f/k/a Colonial U.S. Fund for
Growth)
Colonial Trust VII on behalf of Colonial Newport Tiger Fund
<PAGE>
EXHIBIT 6.1
FORM OF BORROWING BASE CERTIFICATE
Reference is made to that certain Credit Agreement, dated as of April
29, 1996 (the "Credit Agreement"), among certain investment companies party
thereto, various financial institutions party thereto and Bank of America
National Trust and Savings Association, as Agent. Capitalized terms used herein
and not otherwise defined shall have the meanings given to such terms in the
Credit Agreement.
Pursuant to the terms of the Credit Agreement, the undersigned, on
behalf of and with respect to the [Name of Fund] (the "Fund"), hereby represents
and certifies to the Agent and the Banks that as of __________ __, 199_, (i) the
Borrowing Base of the Fund was the amount shown in subparagraph (e) below and
(ii) the Asset Coverage Ratio was the ratio set forth in subparagraph (f) below,
each calculated as follows:
(a) Net Asset Value ______________
(b) minus (without duplication)
value of Assets subject
to Liens (including, without
limitation, margin and asset
allocation arrangements) _______________
(c) Adjusted Net Asset Value
((a) minus (b)) ______________
(d) Indebtedness ______________
(e) Borrowing Base ((c) times 10%) ______________
(f) Asset Coverage Ratio ((c) divided
by (d)) ______________
The Asset Coverage Ratio of the Fund as set forth in its prospectus is
not more restrictive than 10 to 1.
[To the best knowledge of the undersigned Authorized Officer, no
Default with respect to the Fund has occurred and is continuing.]
[Describe Event of Default and actions being taken to remedy it.]
A copy of the Agreement and Declaration of Trust of the below-named
trust (the "Trust") is on file with the Secretary of State of The Commonwealth
of Massachusetts and the Clerk of the City of Boston, and notice is hereby given
that none of the shareholders, trustees, officers, employees and other agents of
the Trust or the Fund shall be personally bound by or liable for any
indebtedness, liability or obligation arising hereunder, nor shall resort be had
to their private property for the satisfaction of any obligations or claim
arising hereunder.
Date: ____________________ __________, on behalf of
[Name of Fund]
By:
Title: [Must be an Authorized
Officer]
FORM OF THIRD AMENDMENT TO CREDIT AGREEMENT
This THIRD AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as
of October 24, 1997 (the "Amendment Effective Date"), by and among the Funds
identified on Annex I hereto listed under the heading Original Funds (the
"Original Funds"), the persons identified on Annex I hereto listed under the
heading New Funds (the "New Funds", and, together with the Original Funds, the
"Funds"), the undersigned Banks, and BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as agent (in such capacity, the "Agent") for the Banks.
WHEREAS, the Original Funds, the Banks and the Agent have previously
entered into a certain Credit Agreement, dated as of April 29, 1996 (as in
effect immediately prior to the Amendment Effective Date, the "Existing Credit
Agreement" and, as amended or otherwise modified hereby, the "Credit Agreement";
terms defined therein having the same respective meanings herein); and
WHEREAS, the parties hereto wish to add the New Funds as parties to the
Credit Agreement;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration (the receipt, adequacy and sufficiency of which are
hereby acknowledged), the parties hereto, intending legally to be bound hereby,
agree as follows:
SECTION 1. Credit Agreement Amendments. The Existing Credit Agreement
is hereby amended on and from the Amendment Effective Date by adding the New
Funds as additional parties to the Credit Agreement.
SECTION 2. Additional Notes. Each New Fund shall deliver its
Note to the Agent for the account of each Bank (each an "Additional Note") on or
before the Amendment Effective Date.
SECTION 3. Conditions to Effectiveness. This Amendment shall become
effective when each of the conditions precedent set forth in this Section 3
shall have been satisfied and notice thereof shall have been given by the Agent
to the Trusts and the Banks.
3.1 The Agent shall have received:
3.1.1 counterparts hereof duly executed and delivered by
the Trusts on behalf of the Funds and
evidence of the execution of counterparts hereof by all of the Banks;
3.1.2 the Additional Notes duly executed and delivered on
behalf of the New Funds;
3.1.3 with respect to each New Fund, from the applicable
Trust, a certificate of its Secretary or Assistant Secretary as to:
a) resolutions of its board of trustees then in full
force and effect authorizing the execution, delivery and performance of
this Amendment, the Additional Notes and each other Credit Document to
be executed by it;
b) the incumbency and signatures of those of its
officers or agents authorized to act with respect to this Amendment,
the Additional Notes and each other Credit Document executed by it;
c) such Trust's valid existence as evidenced by a
certificate issued by the Secretary of State of The Commonwealth of
Massachusetts and appended to the relevant certificate of its Secretary
or Assistant Secretary; and
d) the fact that the agreements delivered by the
Trusts pursuant to Section 4.1.9 of the Credit Agreement constitute all
such agreements between the Trusts and the Adviser,
upon which certificates the Agent and each Bank may conclusively rely
until they shall have received a further certificate from the relevant
Trust canceling or amending such prior certificate;
3.1.4 an opinion, dated the date hereof and addressed to the
Agent and all Banks, from Ropes & Gray, counsel to the New Funds,
substantially in the form of Exhibit 4.1(c)-1, which Colonial Trust II
and Colonial Trust III expressly authorize and instruct such counsel to
prepare and deliver;
3.1.5 an initial Borrowing Base Certificate for each New Fund;
3.1.6 a revised Allocation Notice;
3.1.7 copies of the most recent prospectus and statement of
additional information for each New Fund;
3.1.8 a form FR U-1 of the Board of Governors of the Federal
Reserve System duly executed and completed by the New Funds; and
3.1.9 copies of each investment advisory agreement between each
New Fund and the Adviser, together with all sub-advisory agreements,
if any.
SECTION 4. Miscellaneous.
4.1 Except as amended hereby, the Existing Credit
Agreement and each other Credit Document remains in full force and effect and
each Trust hereby ratifies and confirms its respective representations,
warranties, covenants and agreements contained in, and obligations and
liabilities under, the Credit Agreement and the other Credit Documents.
4.2 On and from the Amendment Effective Date,
reference to the Existing Credit Agreement in any Credit Document shall be
deemed to include a reference to the Credit Agreement whether or not reference
is made to this Amendment.
4.3 The Trusts shall pay or reimburse the Agent for
the fees and expenses of the Agent (including reasonable Agent's counsel fees
and disbursements and the allocated costs of internal counsel) incurred in
connection with the transactions contemplated hereby and by any of the Credit
Documents.
4.4 This Amendment shall be deemed to be a contract
made under and governed by the laws of the State of Illinois, without regard to
its principles of conflicts of laws.
4.5 This Amendment may be executed in counterparts,
each of which shall be deemed an original but all of which when taken together
shall constitute a single agreement.
[Signatures begin on the next page]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
COLONIAL TRUST I ON BEHALF OF
COLONIAL INCOME FUND, COLONIAL HIGH
YIELD SECURITIES FUND, COLONIAL
STRATEGIC INCOME FUND AND COLONIAL
TAX MANAGED GROWTH FUND
By:_____________________________
Title:__________________________
Address: One Financial Center
Boston, MA 02111-2621
Facsimile No.: (617) 772-3148
Attention: Fund Accounting
with a copy to:
Address: One Financial Center
Boston, MA 02111-2621
Facsimile No.: (617) 345-0919
Attention: Legal
COLONIAL TRUST II ON BEHALF OF
COLONIAL SHORT DURATION U.S.
GOVERNMENT FUND, NEWPORT GREATER
CHINA FUND, COLONIAL NEWPORT JAPAN
FUND AND COLONIAL NEWPORT TIGER CUB
FUND
By:_____________________________
Title:__________________________
Address: One Financial Center
Boston, MA 02111-2621
Facsimile No.: (617) 772-3148
Attention: Fund Accounting
with a copy to:
Address: One Financial Center
Boston, MA 02111-2621
Facsimile No.: (617) 345-0919
Attention: Legal
<PAGE>
COLONIAL TRUST III ON BEHALF OF
COLONIAL GLOBAL EQUITY FUND,
COLONIAL INTERNATIONAL HORIZONS
FUND, COLONIAL SELECT VALUE FUND,
THE COLONIAL FUND, COLONIAL GLOBAL
UTILITIES FUND, COLONIAL STRATEGIC
BALANCED FUND AND COLONIAL
INTERNATIONAL FUND FOR GROWTH
By:_____________________________
Title:__________________________
Address: One Financial Center
Boston, MA 02111-2621
Facsimile No.: (617) 772-3148
Attention: Fund Accounting
with a copy to:
Address: One Financial Center
Boston, MA 02111-2621
Facsimile No.: (617) 345-0919
Attention: Legal
COLONIAL TRUST IV ON BEHALF OF
COLONIAL INTERMEDIATE TAX EXEMPT
FUND, COLONIAL HIGH YIELD
MUNICIPAL FUND, COLONIAL UTILITIES
FUND, COLONIAL TAX EXEMPT INSURED
FUND AND COLONIAL
TAX EXEMPT FUND
By:_____________________________
Title:__________________________
Address: One Financial Center
Boston, MA 02111-2621
Facsimile No.: (617) 772-3148
Attention: Fund Accounting
with a copy to:
Address: One Financial Center
Boston, MA 02111-2621
Facsimile No.: (617) 345-0919
Attention: Legal
<PAGE>
COLONIAL TRUST V ON BEHALF OF
COLONIAL CALIFORNIA TAX EXEMPT
FUND, COLONIAL CONNECTICUT TAX
EXEMPT FUND, COLONIAL FLORIDA TAX
EXEMPT FUND, COLONIAL MASSACHUSETTS
TAX EXEMPT FUND, COLONIAL MICHIGAN
TAX EXEMPT FUND, COLONIAL MINNESOTA
TAX EXEMPT FUND, COLONIAL NEW YORK
TAX EXEMPT FUND, COLONIAL NORTH
CAROLINA TAX EXEMPT FUND AND
COLONIAL OHIO TAX EXEMPT FUND
By:_____________________________
Title:__________________________
Address: One Financial Center
Boston, MA 02111-2621
Facsimile No.: (617) 772-3148
Attention: Fund Accounting
with a copy to:
Address: One Financial Center
Boston, MA 02111-2621
Facsimile No.: (617) 345-0919
Attention: Legal
COLONIAL TRUST VI ON BEHALF OF
COLONIAL SMALL CAP VALUE FUND AND
COLONIAL U.S. STOCK FUND
By:_____________________________
Title:__________________________
Address: One Financial Center
Boston, MA 02111-2621
Facsimile No.: (617) 772-3148
Attention: Fund Accounting
with a copy to:
Address: One Financial Center
Boston, MA 02111-2621
Facsimile No.: (617) 345-0919
Attention: Legal
<PAGE>
COLONIAL TRUST VII ON BEHALF OF
COLONIAL NEWPORT TIGER FUND
By:_____________________________
Title:__________________________
Address: One Financial Center
Boston, MA 02111-2621
Facsimile No.: (617) 772-3148
Attention: Fund Accounting
with a copy to:
Address: One Financial Center
Boston, MA 02111-2621
Facsimile No.: (617) 345-0919
Attention: Legal
<PAGE>
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By:______________________________
Title:___________________________
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By:______________________________
Title:___________________________
ABN AMRO BANK N.V., NEW YORK BRANCH
By:_____________________________
Title: Authorized Signature
By:______________________________
Title: Authorized Signature
CREDIT LYONNAIS NEW YORK BRANCH
By:_______________________________
Title:____________________________
FLEET NATIONAL BANK
By:_______________________________
Title:____________________________
MELLON BANK, N.A.
By:_______________________________
Title:____________________________
<PAGE>
ANNEX I
Original Funds
Colonial Trust I on behalf of Colonial Income Fund, Colonial High Yield
Securities Fund and Colonial Strategic Income Fund
Colonial Trust II on behalf of Colonial Short Duration U.S. Government Fund
Colonial Trust III on behalf of Colonial Global Equity Fund, Colonial
International Horizons Fund, Colonial Select Value Fund, The Colonial Fund,
Colonial Global Utilities Fund, Colonial Strategic Balanced Fund and Colonial
International Fund for Growth
Colonial Trust IV on behalf of Colonial Intermediate Tax Exempt Fund, Colonial
High Yield Municipal Fund, Colonial Utilities Fund, Colonial Short Term Tax
Exempt Fund, Colonial Tax Exempt Insured Fund and Colonial Tax Exempt Fund
Colonial Trust V on behalf of Colonial California Tax Exempt Fund, Colonial
Connecticut Tax Exempt Fund, Colonial Florida Tax Exempt Fund, Colonial
Massachusetts Tax Exempt Fund, Colonial Michigan Tax Exempt Fund, Colonial
Minnesota Tax Exempt Fund, Colonial New York Tax Exempt Fund, Colonial North
Carolina Tax Exempt Fund and Colonial Ohio Tax Exempt Fund
Colonial Trust VI on behalf of Colonial Small Cap Value Fund and Colonial U.S.
Stock Fund
Colonial Trust VII on behalf of Colonial Newport Tiger Fund
New Funds
Colonial Trust I on behalf of Colonial Tax Managed Growth Fund
Colonial Trust II on behalf of Colonial Newport Tiger Cub Fund
Colonial Trust II on behalf of Colonial Newport Japan Fund
Colonial Trust II on behalf of Newport Greater China Fund
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Statement of
Additional Information constituting part of this Post-Effective Amendment No. 99
to the registration statement on Form N-1A (the "Registration Statement") of our
report dated October 13, 1997, relating to the financial statements and
financial highlights appearing in the August 31, 1997 Annual Report to
Shareholders of Colonial Federal Securities Fund, a series of Colonial Trust
III, which are also incorporated by reference into the Registration Statement.
We also consent to the references to us under the heading "The Funds' Financial
History" in the Prospectus, and "Independent Accountants" in the Statement of
Additional Information.
PRICE WATERHOUSE LLP
Boston, Massachusetts
December 17, 1997
EXHIBIT 14(A)
The Colonial
Money Purchase Pension
and Profit Sharing Plan
Document and Employee
Communications Kit
Plan Document
Trust Agreement
IRS Opinion Letters
Notice to Interested Parties
Model Summary Plan Descriptions
Enclosed Are
Your Plan Legal Documents
and Employee Communications
Table of Contents
Plan Document
Article No.
1. General 1
2. Definitions 1
3. Eligibility and Years of Service 4
4. Contributions 4
5. Allocations 5
6. Limitations on Allocations 6
7. Trust Fund 9
8. Vesting 9
9. Joint and Survivor Annuity Requirements 10
10. Distribution Provisions 12
11. Timing and Modes of Distribution 13
12. Withdrawals 16
13. Loans 16
14. Insurance 17
15. Administration 19
16. Amendment, Termination and Merger 20
17. Miscellaneous 21
Trust Agreement
Article No.
I. Accounts 23
II. Receipt of Contributions 23
III. Investment Powers of the Trustee 23
IV. Distributions from a Participant's Account 25
V. Reports of the Trustee and the Plan Administrator 25
VI. Trustee's Fees and Expenses of the Trust 25
VII. Duties of the Employer and the Plan Administrator 25
VIII. Liability of the Trust 25
IX. Delegation of Powers 26
X. Amendment 26
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XI. Resignation or Removal of Trustee 26
XII. Termination of the Trust 27
XIII. Miscellaneous 27
IRS Opinion Letters 28
Important Employee Communications
Notice to Interested Parties A1
Rights of Interested Parties A1
Request for Comments by the Department of Labor A1
Comments to the Internal Revenue Service A1
Additional Information A2
Key District Offices A2
IRS Model Summary Plan Description
Money Purchase Pension Plan
I. Introduction B1
II. Description of Plan Benefits and Requirements B1
III. Claims Procedure B5
IV. Changes to the Plan B5
V. General Information B5
VI. Non-Application of Pension Benefit Guarantee
Corporation Guarantees B6
VII. Special Rights Under ERISA B6
Model Summary Plan Description
Profit Sharing Plan
I. Introduction C1
II. Description of Plan Benefits and Requirements C1
III. Claims Procedure C6
IV. Changes to the Plan C6
V. General Information C6
VI. Non-Application of Pension Benefit Guarantee
Corporation Guarantees C7
VII. Special Rights Under ERISA C7
Plan Document
Money Purchase Pension and Profit Sharing
Article 1: General
1.1 Purpose. The Employer hereby establishes this Plan to provide retirement,
death and disability benefits for eligible employees and their Beneficiaries.
This Plan is a standardized prototype paired defined contribution plan and is
designed to permit adoption of profit sharing provisions, money purchase pension
provisions, or both. The provisions herein and the selections made by the
Employer by execution of the money purchase pension or profit sharing Adoption
Agreement or Agreements, shall constitute the Plan. It is intended that the Plan
and Trust qualify under sections 401 and 501 of the Internal Revenue Code of
1986, as amended and that it comply with the provisions of the Employee
Retirement Income Security Act of 1974, as amended.
1.2 Trust. The Employer has simultaneously adopted a Trust to receive, invest,
and distribute funds in accordance with the Plan.
Article 2: Definitions
2.1 Account. The aggregate of the individual bookkeeping sub-accounts
established for each Participant, as provided in section 5.1.
<PAGE>
2.2 Adoption Agreement. The written agreement or agreements of the Employer and
the Trustee by which the Employer establishes this Plan and adopts the Trust
Agreement forming a part hereof, as the same may be amended from time to time.
The Adoption Agreement contains all the options that may be selected by the
Employer. The information set forth in the Adoption Agreement executed by the
Employer shall be deemed to be a part of this Plan as if set forth in full
herein.
2.3 Affiliated Employers. The Employer and any corporation which is a member of
a controlled group of corporations (as defined in section 414(b) of the Code)
which includes the Employer, any trade or business (whether or not incorporated)
which is under common control (as defined in section 414(c) of the Code) with
the Employer, or any service organization (whether or not incorporated) which is
a member of an affiliated service group (as defined in sections 414(m) and (o)
of the Code) which includes the Employer.
2.4 Beneficiary. The person or persons (natural or otherwise) designated by a
Participant in accordance with section 11.6 to receive any undistributed amounts
credited to the Participant's Account under the Plan at the time of the
Participant's death. 2.5 Break in Service. An Eligibility Computation Period or
Vesting Computation Period in which an Employee fails to complete more that five
hundred (500) Hours of Service.
2.6 Code. The Internal Revenue Code of 1986, as amended from time to time, or
any successor statute.
2.7 Compensation.
(a) Compensation will mean all of each Participant's W-2 earnings.
(b) For any self-employed individual covered under the Plan, Compensation will
mean Earned Income.
(c) Compensation shall include only that Compensation that is actually paid to
the Participant during the Plan Year.
(d) Notwithstanding the above, if elected by the Employer in the Adoption
Agreement, Compensation shall include any amount which is contributed by the
Employer pursuant to a salary reduction agreement and which is not includable in
the gross income of the Employee under sections 125, 402(e)(3), 402(h)(1)(B) or
403(b) of the Code. The effective date of this subsection shall be elected by
the Employer in the Adoption Agreement.
(e) The annual Compensation of each Participant taken into account under the
Plan for any year shall not exceed one hundred fifty thousand dollars
($150,000), as adjusted by the Secretary at the same time and in the same manner
as under section 415(d) of the Code. In determining the Compensation of a
Participant for purposes of this limitation, the rules of section 414(q)(6) of
the Code shall apply, except in applying such rules, 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 the
year. If, as a result of the application of such rules, the adjusted one hundred
fifty thousand dollars ($150,000) limitation is exceeded, then (except for
purposes of determining the portion of Compensation up to the Integration Level
to the extent this 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 a determination period consists of fewer than
12 months, the annual compensation limit is an amount equal to the otherwise
applicable annual compensation limit multiplied by a fraction, the numerator of
which is the number of months in the short determination period, and the
denominator of which is 12.
(f) The effective date of this subsection shall be the first Plan Year beginning
on or after January 1, 1989.
2.8 Covered Compensation. Compensation after a person shall have become a
Participant in the Plan.
2.9 Determination Date. With respect to any Plan Year subsequent to the first
Plan Year, the last day of the preceding Plan Year. For the first Plan Year of
the Plan, the last day of that Plan Year.
2.10 Early Retirement Date. The first day of the month coincident with or next
following the date upon which the Participant satisfies the early retirement age
and service requirements in the Adoption Agreement; provided, however, such
requirements may not be less than age fifty-five (55), nor more than fifteen
(15) Years of Service.
2.11 Earned Income. The net earnings from self-employment in the trade or
business with respect to which the Plan is established, for which personal
services of the individual are a material income-producing factor. Net earnings
will be determined without regard to items not included in gross income and the
deductions allocable
<PAGE>
to such items. Net earnings are reduced by contributions to a qualified plan to
the extent deductible under section 404 of the Code. Net earnings shall be
determined with regard to the deduction allowed to the Employer by section
164(f) of the Code for taxable years beginning after December 31, 1989.
2.12 Effective Date. The first day of the first Plan Year for which the Plan is
effective as specified in the Adoption Agreement.
2.13 Eligibility Computation Period. For purposes of determining Years of
Service and Breaks in Service for eligibility to participate, the initial
Eligibility Computation Period shall be the twelve (12) consecutive month period
beginning with the day the Employee first performs an Hour of Service for the
Employer (employment commencement date). The succeeding twelve (12) consecutive
month periods commence with the first anniversary of the Employee's employment
commencement date.
2.14 Employee. Any person, including a Self-Employed Individual, who is employed
by the Employer maintaining the Plan or any other employer required to be
aggregated with such Employer under sections 414(b), (c), (m) or (o) of the
Code. The term "Employee" shall also include any Leased Employee deemed to be an
Employee of any Employer described above as provided in sections 414(n) or (o)
of the Code.
2.15 Employer. The corporation, proprietorship, partnership or other
organization that adopts the Plan by execution of an Adoption Agreement.
2.16 Employer Contributions. The contribution of the Employer to the Plan and
Trust as set forth in section 4.1 and the Adoption Agreement.
2.17 Entry Dates. The Effective Date shall be the first Entry Date. Thereafter,
the Entry Dates shall be the first day of each Plan Year and the first day of
the seventh month of each Plan Year.
2.18 ERISA. The Employee Retirement Income Security Act of 1974, as amended.
2.19 Hour of Service.
(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 only for the computation period or periods 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 to an Employee on
account of any single, continuous period during which the Employee performs no
duties (whether or not such period occurs in a single computation period). Hours
under this paragraph will be calculated and credited pursuant to section
2530.200b-2 of the Department of Labor regulations which are incorporated herein
by this reference.
(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 paragraph (a) or paragraph (b), as the case may be, and
under this paragraph (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 an Employee has a Break in
Service, Hours of Service shall also include an uncompensated authorized leave
of absence not in excess of two (2) years, or military leave while the
Employee's reemployment rights are protected by law or such additional or other
periods as granted by the Employer as military leave (credited on the basis of
forty (40) Hours of Service per each week or eight (8) Hours of Service per
working day), provided the Employee returns to employment at the end of his
leave of absence or within ninety (90) days of the end of his military leave,
whichever is applicable.
(e) Hours of Service will be credited for employment with other members of an
affiliated service group (under section 414(m)), a controlled group of
corporations (under section 414(b)), or a group of trades or businesses under
common control (under section 414(c)) of which the adopting Employer is a
member, and any other entity required to be aggregated with the Employer
pursuant to section 414(o) and the regulations thereunder. Hours of
<PAGE>
Service will also be credited for any individual considered an Employee for
purposes of this Plan under section 414(n) or section 414(o) and the regulations
thereunder.
(f) Solely for purposes of determining whether an Employee has a Break in
Service, Hours of Service shall also include absence from work for maternity or
paternity reasons, if the absence begins on or after the first day of the first
Plan Year beginning after 1984. During this absence, the Employee shall be
credited with the Hours of Service which would have been credited but for the
absence, or, if such hours cannot be determined with eight (8) hours per day. An
absence from work for maternity or paternity reasons means an absence:
(i) by reason of the pregnancy of an Employee;
(ii) by reason of the birth of a child of the Employee;
(iii) by reason of the placement of a child with the Employee in connection with
adoption; or
(iv) for purposes of caring for such a child for a period immediately following
such birth or placement. These Hours of Service shall be credited in the
computation period following the computation period in which the absence begins,
except as necessary to prevent a Break in Service in the computation period in
which the absence begins. However, no more than five hundred one (501) Hours of
Service will be credited for purposes of any such maternity or paternity absence
from work.
(g) The Employer may elect to compute Hours of Service by the use of one of the
service equivalencies in the Adoption Agreement. Only one method may be
selected. If selected, the service equivalency must be applied to all Employees
covered under the Plan.
(h) If the Employer amends the method of crediting service from the elapsed time
method described in section 1.410(a)-7 of the Treasury regulations to the Hours
of Service computation method by the adoption of this Plan, or an Employee
transfers from a plan under which service is determined on the basis of elapsed
time, the following rules shall apply for purposes of determining the Employee's
service under this Plan up to the time of amendment or transfer:
(i) the Employee shall receive credit, as of the date of amendment or transfer,
for a number of Years of Service equal to the number of one (1) year periods of
service credited to the Employee as of the date of the amendment or transfer;
and
(ii) the Employee shall receive credit in the applicable computation period
which includes the date of amendment or transfer, for a number of Hours of
Service determined by applying the weekly service equivalency specified in
paragraph (g) to any fractional part of a year credited to the Employee under
this paragraph (h) as of the date of amendment or transfer. The use of the
weekly service equivalency shall apply to all Employees who formerly were
credited with service under the elapsed time method.
2.20 Integration Level. The Taxable Wage Base or such lesser amount elected by
the Employer in the Adoption Agreement.
2.21 Key Employee.
(a) 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 is
such individual's annual Compensation exceeds fifty percent (50%) of the dollar
limitation under section 415(b)(1)(A) of the Code; an owner (or considered an
owner under section 318 of the Code) of one of the ten (10) largest interests in
the Employer if such individual's Compensation exceeds one hundred percent
(100%) of the dollar limitation under section 415(c)(1)(A) of the Code; a Five
Percent (5%) Owner of the Employer; or a one percent (1%) owner of the Employer
who has annual Compensation of more than one hundred fifty thousand dollars
($150,000).
(b) For purposes of this section, annual Compensation means compensation as
defined in section 415 (c)(3) of the Code but including amounts contributed by
the Employer pursuant to a salary reduction agreement which are excludable from
the Employee's gross income under sections 125, 402(e)(3), 402(h)(1)(B) or
403(b) of the Code.
(c) For purposes of this section, determination period is the Plan Year
containing the Determination Date and the four (4) preceding Plan Years.
2.22 Leased Employee.
<PAGE>
(a) Any person (other than an Employee of any of the Affiliated Employers) who,
pursuant to an agreement between any of the Affiliated Employers and any other
person ("leasing organization"), has performed service for any of the Affiliated
Employers (or for any of the Affiliated Employers and related persons determined
in accordance with section 414(n)(6) of the Code) on a substantially full-time
basis for a period of at least one (1) year and such services are of a type
historically performed by employees in the Affiliated Employer's business field.
Contributions or benefits provided a Leased Employee by the leasing organization
which are attributable to services performed for the Affiliated Employer shall
be treated as provided by the Affiliated Employer.
(b) A Leased Employee shall not be considered an Employee of an Affiliated
Employer if:
(i) such employee is covered by a money purchase pension plan providing:
(1) a nonintegrated employer contribution rate of at least ten percent (10%) of
compensation (as defined in section 415(c)(3) of the Code), but including
amounts contributed pursuant to a salary reduction agreement which are
excludable from the employee's gross income under sections 125, 402(e)(3),
402(h)(1)(B) or 403(b) of the Code;
(2) immediate participation; and
(3) full and immediate vesting and
(ii) Leased Employees do not constitute more than twenty percent (20%) of the
Affiliated Employer's non-Highly-Compensated work force.
(c) The determination of whether a person is a Leased Employee will be made
pursuant to section 414(n) of the Code.
2.23 Maximum Disparity Rate. The lesser of:
(a) five and seven-tenths percent (5.7%);
(b) the applicable percentage determined in accordance with the table below:
If the Integration Level is:
More But Not The Applicable
Than More Than Percentage Is:
$0 X* 5.7%
X of TWB 80% of TWB 4.3%
80% of TWB Y** 5.4%
*X = the greater of $10,000 or 20% of the Taxable Wage Base.
**Y = any amount more than 80% of the Taxable Wage Base but less than 100% of
the Taxable Wage Base.
"TWB" means the Taxable Wage Base.
If the Integration Level used is equal to the Taxable Wage Base, the applicable
percentage is five and seven-tenths percent (5.7%).
2.24 Maximum Profit Sharing Disparity Rate. The lesser of:
(a) two and seven-tenths percent (2.7%);
(b) the applicable percentage determined in accordance with the table below:
If the Integration Level is:
More But Not The Applicable
Than More Than Percentage Is:
- ---- --------- --------------
$0 X* 2.7%
X of TWB 80% of TWB 1.3%
80% of TWB Y** 2.4%
*X = the greater of $10,000 or 20% of the Taxable Wage Base.
**Y = any amount more than 80% of the Taxable Wage Base but less than 100% of
the Taxable Wage Base.
"TWB" means the Taxable Wage Base.
If the Integration Level used is equal to the Taxable Wage Base, the applicable
percentage is two and seven-tenths percent (2.7%).
<PAGE>
2.25 Non-Key Employee. Any Employee or former Employee who is not a Key
Employee. In addition, any Beneficiary of a Non-Key Employee shall be treated as
a Non-Key Employee.
2.26 Normal Retirement Age. The age selected in the Adoption Agreement, but not
less than age fifty-five (55). If the Employer enforces a mandatory retirement
age, the Normal retirement Age is the lesser of that mandatory age or the age
specified in the Adoption Agreement.
2.27 Owner-Employee. 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
a partnership.
2.28 Participant. A person who has met the eligibility requirements of section
3.1 and whose Account hereunder has been neither completely forfeited nor
completely distributed.
2.29 Plan. The prototype paired defined contribution profit sharing and money
purchase pension plan provided under this basic plan document. References to the
Plan shall refer to the profit sharing provisions, the money purchase pension
provisions, or both, as the context may require.
2.30 Plan Administrator. The person, persons or entity appointed by the Employer
pursuant to Article 15 to manage and administer the Plan.
2.31 Plan Year. The twelve (12) consecutive month period designated by the
Employer in the Adoption Agreement.
2.32 Self-Employed Individual. An individual who has Earned Income for the
taxable year from the trade or business for which the Plan is established, or an
individual who would have had Earned Income for the taxable year but for the
fact that the trade or business had no net profits for the taxable year.
2.33 Shares. Shares of stock in any regulated investment company registered
under the Investment Company Act of 1940 that are made available for investment
purposes as an investment option under this Plan.
2.34 Sponsor. The sponsor designated in the Adoption Agreement which has made
this Plan available to the Employer.
2.35 Taxable Wage Base. The contribution and benefit base under section 230 of
the Social Security Act at the beginning of the Plan Year.
2.36 Total and Permanent Disability. The inability of the Participant to engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment, which condition, in the opinion of a physician
chosen by the Plan Administrator, can be expected to result in death or which
has lasted or can be expected to last for a continuous period of not less than
twelve (12) months.
2.37 Trust. The fund maintained by the Trustee for the investment of Plan assets
in accordance with the terms and conditions of the Trust Agreement.
2.38 Trust Agreement. The agreement between the Employer and the Trustee under
which the assets of the Plan are held, administered, and managed. The provisions
of the Trust Agreement shall be considered an integral part of this Plan as if
set forth fully herein.
2.39 Trustee. The individual or corporate Trustee or Trustees under the Trust
Agreement as they may be constituted from time to time.
2.40 Valuation Date. The last day of each Plan Year and such other dates as may
be determined by the Plan Administrator, as provided in section 5.6 for valuing
the Trust assets.
2.41 Vesting Computation Period. The Plan Year.
2.42 Year of Service. An Eligibility Computation Period, Vesting Computation
Period, or Plan Year, whichever is applicable, during which an Employee has
completed at least one thousand (1,000) Hours of Service (whether or not
continuous). The Employer may, in the Adoption Agreement, specify a fewer number
of hours.
Article 3: Eligibility and Years of Service
3.1 Eligibility Requirements.
(a) Each Employee of the Affiliated Employers shall become a Participant in the
Plan as of the first Entry Date after the date on which the Employee has
satisfied the minimum age and service requirements specified in the Adoption
Agreement.
<PAGE>
(b) The Employer may elect in the Adoption Agreement to exclude from
participation:
(i) Employees included in a unit of employees covered by a collective bargaining
agreement between the Employer and employee representatives, if retirement
benefits were the subject of good faith bargaining and if two percent or less of
the employees who are covered pursuant to that agreement are professionals as
defined in section 1.410(b)-9 of the regulations. For this purpose, the term
"employee representatives" does not include any organization more than half of
whose members are Employees who are owners, officers, or executives of the
Employer; and (ii) Employees who are nonresident aliens (within the meaning of
section 7701(b)(1)(B) of the Code) and who receive no earned income (within the
meaning of section 911(d)(2) of the Code) from the Employer which constitutes
income from sources within the United States (within the meaning of section
861(a)(3) of the Code.)
Subsection ii was deleted
3.2 Participation and Service Upon Reemployment. Upon the reemployment of any
Employee, the following rules shall determine his eligibility to participate in
the Plan and his credit for prior service.
(a) Participation. If the reemployed Employee was a Participant in the Plan
during his prior period of employment he shall be eligible upon reemployment to
resume participation in the Plan. If the reemployed Employee was not a
Participant in the Plan, he shall be considered a new Employee and required to
meet the requirements of section 3.1 in order to be eligible to participate in
the Plan, subject to the reinstatement of credit for prior service under
paragraph (b) below.
(b) Credit for Prior Service. In the case of any Employee who is reemployed
before or after incurring a Break in Service, any Hour of Service and Year of
Service credited to the Employee at the end of his prior period of employment
shall be reinstated as of the date of his reemployment.
3.3 Predecessor Employers. If specified in the Adoption Agreement, Years of
Service with a predecessor employer will be treated as service for the Employer
for eligibility purposes; provided, however, if the Employer maintains the plan
of a predecessor employer, Years of Service with such employer will be treated
as service with the Employer without regard to any election.
Article 4: Contributions
4 .1 Employer Contributions.
(a) Money Purchase Pension Contributions. For each Plan Year, the Employer shall
contribute to the Trust an amount equal to such uniform percentage of
Compensation of each eligible Participant as may be determined by the Employer
in accordance with the money purchase pension contribution formula specified in
the Adoption Agreement. Subject to the limitations of section 5.4, the money
purchase pension contribution formula may be integrated with Social Security, as
set forth in the Adoption Agreement.
(b) Profit Sharing Contribution. For each Plan Year, the Employer shall
contribute to the Trust an amount as may be determined by the Employer in
accordance with the profit sharing formula set forth in the Adoption Agreement.
(c) Eligible Participants. Subject to the Minimum Allocation rules of section
5.2 and the exclusions specified in this section, each Participant shall be
eligible to share in the Employer Contribution. An Employer may elect in the
Adoption Agreement that Participants who terminate employment during the Plan
Year with not more than five hundred (500) Hours of Service and who are not
Employees as of the last day of the Plan Year (other than Participants who die,
retire or become totally and Permanently Disabled during the Plan Year) shall
not be eligible to share in the Employer Contribution. An Employer may further
elect in the Adoption Agreement to allocate a contribution on behalf of a
Participant who completes fewer than five hundred (500) Hours of Service and is
otherwise ineligible to share in the Employer Contribution. If the Employer
fails to specify in the Adoption Agreement the number of Hours of Service
required to share in the employer Contribution, the number shall be five hundred
(500) Hours of Service.
<PAGE>
(d) Contribution Limitation. In no event shall any Employer Contribution exceed
the maximum amount deductible from the Employer's income under section 404 of
the Code, or the maximum limitations under section 415 of the Code provided in
Article 6.
4.2 Payment.
All Employer Contributions to the Trust for any Plan Year shall be made either
in one lump-sum or in installments in U.S. currency, by check, or in Shares
within the time prescribed by law, including extensions granted by the Internal
Revenue Service, for filing the Employer's federal income tax return for the
taxable year with or within which such Plan Year ends. All Employer
Contributions to the Trust for a money purchase pension plan for any Plan Year
shall be made within the time prescribed by regulations under section 412(c)(10)
of the Code.
4.3 Nondeductible Voluntary Contributions by Participants.
(a) This Plan will not accept nondeductible Employee contributions for Plan
Years beginning after the Plan Year in which this Plan is adopted by the
Employer. Employee contributions made with respect to Plan years beginning after
December 31, 1986 will be limited so as to meet the nondiscrimination test of
section 401(m).
(b) A separate account shall be maintained by the Trustee for the nondeductible
Employee contributions of each Participant.
(c) Employee contributions and earnings thereon shall be fully vested and
nonforfeitable at all times.
(d) The provisions of this section shall apply to Employee contributions made
prior to the first Plan Year after the Plan Year in which the Employer adopts
this Plan.
4.4 Rollovers.
(a) Subject to the approval of the Plan Administrator, a participant who has
participated in any other qualified plan described in section 401(a) of the Code
or in a qualified annuity plan described in section 403(a) of the Code shall be
permitted to make a rollover contribution in the form of cash to the Trustee of
an amount received by the Participant that is attributable to participation in
such other plan (reduced by any nondeductible voluntary contributions he made to
the plan), provided that the rollover contribution complies with all
requirements of sections 402(c) or 403(a)(4) of the Code, whichever is
applicable.
(b) Before approving such a Participant rollover, the Plan Administrator may
request from the Participant or the Employer any documents which the Plan
Administrator, in its discretion, deems necessary for such rollover.
(c) Any rollover contribution to the Trust shall be credited to the
Participant's rollover subaccount established under section 5.1 and separately
accounted for.
4.5 Direct Transfers.
(a) The Plan shall accept a transfer of assets directly from another
plan qualified under sections 401(a) or 403(a) of the Code only if the Plan
Administrator, in its sole discretion, agrees to accept such a transfer. In
determining whether to accept such a transfer the Plan Administrator shall
consider the administrative inconvenience engendered by such a transfer and any
risks to the continued qualification of the Plan under section 401(a) of the
Code. Acceptance of any such transfer shall not preclude the Plan Administrator
from refusing any subsequent such transfers.
(b) Any transfer of assets accepted under this section shall be credited to the
Participant's direct transfer subaccount and shall be separately accounted for
at all times and shall remain subject to the provisions of the transfer or plan
(as it existed at the time of such transfer) to the extent required by section
411(d)(6) of the Code (including, but not limited to, any rights to Qualified
Joint and Survivor Annuities and qualified pre-retirement survivor annuities) as
if such provisions were part of the Plan. In all other respects, however, such
transferred assets will be subject to the provisions of the Plan.
(c) Assets accepted under this section shall be fully vested and nonforfeitable.
(d) Before approving such a direct transfer, the Plan Administrator may request
from the Participant or the Employer (or the prior employer) any documents the
Plan Administrator, in its discretion, deems necessary for such direct transfer.
Article 5: Allocations
5.1 Individual Accounts. The Plan Administrator shall establish and maintain an
Account in the name of each Participant. The Account shall contain the following
subaccounts:
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(a) A money purchase pension contribution subaccount to which shall
be credited each such Participant's share of (i) Employer Contributions under
section 4.1(a); (ii) the net earnings or net losses on the investment of the
assets of the Trust; (iii) distributions; and (iv) dividends, capital gain
distributions and other earnings received on any Shares credited to the
Participant's subaccount;
(b) A profit sharing contribution subaccount to which shall be credited each
such Participant's share of (i) Employer Contributions under section 4.1 (b);
(ii) forfeitures; (iii) the net earnings or net losses on the investment of the
assets of the trust; (iv) distributions; and (v) dividends, capital gain
distributions and other earnings received on any Shares credited to the
Participant's subaccount;
(c) A nondeductible voluntary contribution subaccount to which shall be credited
(i) nondeductible voluntary contributions by the Participant under section 4.3;
(ii) the net earnings or net losses on the investment of the assets of the
Trust; (iii) distributions; and (iv) dividends, capital gain distributions and
other earnings received on any Shares credited to the Participant's subaccount;
(d) A direct transfer subaccount to which shall be credited (i) contributions to
the Trust accepted under section 4.5(a); (ii) the net earnings or net losses on
the investment of the assets of the Trust; (iii) distributions; and (iv)
dividends, capital gain distributions and other earnings received on any Shares
credited to the Participant's subaccount;
(e) A rollover subaccount to which shall be credited (i) contributions to the
Trust accepted under section 4.4(a); (ii) the net earnings or net losses on the
investment of the assets of the Trust; (iii) distributions; and (iv) dividends,
capital gain distributions and other earnings received on any Shares credited to
the Participant's subaccount.
5.2 Minimum Allocation.
(a) Except as otherwise provided in this section, the Employer
Contributions and forfeitures allocated on behalf of any Participant who is not
a Key Employee shall not be less than the lesser of three percent (3%) of such
Participant's Compensation or in the case where the Employer has no defined
benefit plan which designates this Plan to satisfy section 401 of the Code, the
largest percentage of Employer Contributions and forfeitures, as a percentage of
the first two hundred thousand dollars ($200,000) of the Key Employee's
Compensation, allocated on behalf of any Key Employee for that year. The minimum
allocation is determined without regard to any Social Security contribution.
This minimum allocation shall be made even though, under other Plan provisions,
the Participant would not otherwise be entitled to receive an allocation, or
would have received a lesser allocation for the year 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. For purposes of this subsection, all defined contribution plans
required to be included in an aggregation group under section 416(g)(2)(A) (i)
shall be treated as a single plan.
(b) For purposes of computing the minimum allocation, Compensation shall mean
Compensation as defined in section 6.5(b) of the Plan.
(c) The provision in subsection (a) above shall not apply to any Participant who
was not employed by the Employer on the last day of the Plan Year.
(d) The provision in subsection (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.
(e) The minimum allocation required (to the extent required to be nonforfeitable
under section 416(b)) may not be forfeited under section 411(a)(3)(B) or
411(a)(3)(D).
5.3 Allocation of Employer Contributions and Forfeitures.
(a) All money purchase pension contributions for a given Plan Year shall be
allocated to the Account of the Participant for whom such contribution was made.
Any forfeiture from a Participant's money purchase pension contribution
subaccount arising under the Plan for a given Plan Year shall be applied as
specified in the adoption Agreement, either: (i) to reduce the Employer
Contribution in that year, or if in excess of the Employer
<PAGE>
Contribution for such Plan Year, the excess amounts shall be used to reduce the
Employer Contribution in the next succeeding Plan Year or Years or (ii) to be
added to the Employer Contributions and allocated accordingly.
(b) All profit sharing contributions and forfeitures from a Participant's profit
sharing contribution subaccount will be allocated to the account of each
Participant in the ratio that such Participant's Covered Compensation bears to
the Covered Compensation of all Participants. However, if the profit sharing
contribution formula selected in the Adoption Agreement is integrated with
Social Security, profit sharing contributions for the Plan Year plus any
forfeitures will be allocated to Participants' Accounts as follows:
(i) Step One. Contributions and forfeitures will be allocated to each
Participant's Account in the ratio that each Participant's total Covered
Compensation bears to all Participants' total Covered Compensation, but not in
excess of three percent (3%) of each Participant's Covered Compensation. (Step
One is not applicable if the Employer enters into the money purchase pension
Adoption Agreement.)
(ii) Step Two. Any contributions and forfeitures remaining after the allocation
in Step One (if any) will be allocated to each Participant's Account in the
ratio that each Participant's Covered Compensation for the Plan Year in excess
of the Integration Level bears to the excess Covered Compensation of all
Participants, but not in excess of three percent (3%) of excess Covered
Compensation. (Step Two is not applicable if the Employer enters into the money
purchase pension Adoption Agreement.)
(iii) Step Three. Any contributions and forfeitures remaining after the
allocation in Step Two (if any) will be allocated to each Participant's Account
in the ratio that the sum of each Participant's total Covered Compensation and
Covered Compensation in excess of the Integration Level bears to the sum of all
Participants' total Covered Compensation and Covered Compensation in excess of
the Integration Level, (but not in excess of Covered Compensation) by whichever
of the following is applicable:
(i) if the Employer has not adopted the money purchase pension Adoption
Agreement, then the Maximum Profit Sharing Disparity Rate; or
(ii) if the Employer has adopted the money purchase pension Adoption Agreement,
then the amount specified therein.
(iv) Step Four. Any remaining contributions or forfeitures will be allocated to
each Participant's Account in the ratio that each Participant's total Covered
Compensation for the Plan Year bears to all Participants' total Covered
Compensation for that year.
(c) Notwithstanding anything in (a) or (b) above to the contrary, forfeitures
arising under a Participant's money purchase pension contribution subaccount
will only be used to reduce the contributions of the Participant's Employer who
adopted this Plan, and forfeitures arising under a Participant's profit sharing
contribution subaccount will be reallocated only for the benefit of Employees of
the Participant's Employer who adopted this Plan.
5.4 Coordination of Social Security Integration. If the Employer maintains plans
involving integration with Social Security other than this Plan, and if any
Participant is eligible to participate in more than one of such plans, all such
plans will be considered to be integrated if the extent of the integration of
all such plans does not exceed one hundred percent (100%). For purposes of the
preceding sentence, the extent of integration of a plan is the ratio (expressed
as a percentage) which the actual benefits, benefit rate, offset rate, or
Employer Contribution rate under the plan bears to the integration limitation
applicable to such plan. If the Employer enters into both the money purchase
pension Adoption Agreement and the profit sharing Adoption Agreement under this
Plan, integration with Social Security may only be selected in one Adoption
Agreement. Annual overall permitted disparity limit: Notwithstanding the
preceding paragraphs, for any Plan Year this Plan benefits any Participant who
benefits under another qualified plan or simplified employee pension, as defined
in section 408(k) of the Code maintained by the Employer that provides for
permitted disparity (or imputes disparity), Employer contributions and
forfeitures will be allocated to the account of each Participant who either
completes more than 500 hours of service during the Plan Year or who is employed
on the last day of the Plan Year in the ratio that such Participant's total
Covered Compensation bears to the total Covered Compensation of all
Participants.
Cumulative permitted disparity limit: Effective for Plan Years beginning on or
after January 1, 1995, the cumulative permitted disparity limit for a
Participant is 35 total cumulative permitted disparity years. Total cumulative
permitted years means the number of years credited to the Participant for
allocation or accrual
<PAGE>
purposes under this Plan, any other qualified plan or simplified employee
pension plan (whether or not terminated) ever maintained by the Employer. For
purposes of determining the Participant's cumulative permitted disparity limit,
all years ending in the same calendar year are treated as the same year. If the
Participant has not benefited under a defined benefit or target benefit plan for
any year beginning on or after January 1, 1994, the Participant has no
cumulative disparity limit.
5.5 Withdrawals and Distributions. Any distribution to a Participant or his
Beneficiary, any amount transferred from a Participant's Account directly to the
Trustee of any other qualified plan described in section 401(a) of the Code or
to a qualified annuity plan described in section 403(a) of the Code, or any
withdrawal by a Participant shall be charged to the appropriate subaccount(s) of
the Participant as of the date of the distribution or the withdrawal.
5.6 Determination of Value of Trust Fund and of Net Earnings or Losses. As of
each Valuation Date the Trustee shall determine for the period then ended the
sum of the net earnings or losses of the Trust (excluding with respect to Shares
and other assets specifically allocated to a specific Participant's subaccount,
(i) dividends and capital gain distributions from Shares, (ii) receipts or
income attributable to insurance policies, (iii) income gains and/or losses
attributable to a Participant's loans made pursuant to ARTICLE 13 or to any
other assets) which shall reflect accrued but unpaid interest, dividends, gains,
or losses realized from the sale, exchange or collection of assets, other income
received, appreciation in the fair market value of assets, depreciation in the
fair market of assets, administration expenses, and taxes and other expenses
paid. Gains or losses realized and adjustments for appreciation or depreciation
in fair market value shall be computed with respect to the difference between
such value as of the preceding Valuation Date or date of purchase, whichever is
applicable, and the value as of the date of disposition or the current Valuation
Date, whichever is applicable.
5.7 Allocation of Net Earnings or Losses.
(a) As of each Valuation Date the net earnings or losses of the Trust (excluding
with respect to Shares and other assets specifically allocated to a specific
Participant's subaccount, (i) dividends and capital gain distributions from
Shares, (ii) dividends or credits attributable to insurance policies, (iii)
income gains and/or losses attributable to a Participant's loans made pursuant
to ARTICLE 13 or to any other assets, all of which shall be allocated to such
Participant's subaccount, for the valuation period then ending shall be
allocated to the Accounts of all Participants (or Beneficiaries) having credits
in the fund both on such date and at the beginning of such valuation period.
Such allocation shall be made by the application of a fraction, the numerator of
which is the value of the Account of a specific Participant (or Beneficiary) as
of the immediately preceding Valuation Date, reduced by any distributions
therefrom since such preceding Valuation Date, and the denominator of which is
the total value of all such Accounts as of the preceding Valuation Date, reduced
by any distributions therefrom since such preceding Valuation Date.
(b) To the extent that Shares and other assets are specifically allocated to a
specific Participant's subaccount:
(i) dividends and capital gain distributions from Shares; (ii) dividends or
credits attributable to insurance policies; and (iii) income gains and/or losses
attributable to a Participant's loans made pursuant to ARTICLE 13 or to any
other assets, all shall be allocated to such Participant's subaccount.
5.8 Responsibilities of the Plan Administrator. The Plan Administrator shall
maintain accurate records with respect to the contributions made by or on behalf
of Participants under the Plan, and shall furnish the Trustee with written
instructions directing the Trustee to allocate all Plan contributions to the
Trust among the separate Accounts of Participants in accordance with section 5.1
above. In making any such allocation, the Trustee shall be fully entitled to
rely on the instructions furnished by the Plan Administrator, and shall be under
no duty to make any inquiry or investigation with respect thereto.
Article 6: Limitations on Allocations
6.1 Employers Who Do Not Maintain Other Qualified Plans.
(a) If the Participant does not participate in, and has never participated in
another qualified plan or a simplified employee pension, as defined in section
408(k) of the Code, or a welfare benefit fund, as defined in section 419(e) of
the Code, maintained by the Employer, or an individual medical account, as
defined in section 415(l)(2) of the Code, maintained by the Employer, which
provides an Annual Addition as defined in section 6.5(a), the amount of Annual
Additions that may be credited to the Participant's Account for any Limitation
<PAGE>
Year will not exceed the lesser of the Maximum Permissible Amount or any other
limitation contained in this Plan. If the Employer 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 determining the Participant's actual Compensation for the
Limitation Year, the Employer may determine the Maximum Permissible Amount for a
Participant on the basis of a reasonable estimation of the Participant's
Compensation for the Limitation Year, uniformly determined for all Participants
similarly situated.
(c) As soon as is administratively feasible after the end of the Limitation
Year, the Maximum Permissible Amount for the Limitation Year will be determined
on the basis of the Participant's actual Compensation for the Limitation Year.
(d) If, pursuant to subsection (c) or as a result of the allocation of
forfeitures, there is an Excess Amount, the excess will be disposed of as
follows:
(i) Any nondeductible voluntary Employee contributions, to the extent they would
reduce the Excess Amount, will be returned to the Participant;
(ii) If after the application the application of paragraph (i) an Excess Amount
still exists, and the Participant is covered by the Plan at the end of the
Limitation Year, the Excess Amount in the Participant's Account will be used to
reduce Employer Contributions (including any allocation of forfeitures) for such
Participant in the next Limitation Year, and each succeeding Limitation Year if
necessary;
(iii) If after the application of paragraph (i) an Excess Amount still exists,
and the Participant is not covered by the Plan at the end of the Limitation
Year, the Excess Amount will be held unallocated in a suspense account. The
suspense account will be applied to reduce future Employer Contributions
(including allocation of any forfeitures) for all remaining Participants in the
next Limitation Year, and each succeeding Limitation Year if 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 the
Trust's investment gains and losses. If a suspense account is in existence at
any time during a particular Limitation Year, all amounts in the suspense
account must be allocated and reallocated to Participants' Accounts before any
Employer or any Employee contributions may be made to the Plan for that
Limitation Year. Excess amounts may not be distributed to Participants or former
Participants.
6.2 Employers Who Maintain Other Qualified Master or Prototype Defined
Contribution Plans.
(a) This section applies if, in addition to this Plan, the Participant is
covered under another qualified master or prototype defined contribution plan
maintained by the Employer, a simplified employee pension, as defined in section
408(k) of the Code, a welfare benefit fund, as defined in section 419(e) of the
Code maintained by the Employer or an individual medical account, as defined in
section 415(l)(2) of the Code, maintained by the Employer which provides an
Annual Addition as defined in section 6.5(a), during any Limitation Year. The
Annual Additions that may be credited to a Participant's Account under this Plan
for any such Limitation Year will not exceed the Maximum Permissible Amount
reduced by the Annual Additions credited to a Participant's Account under the
other plans, simplified employee pension and welfare benefit funds for the same
Limitation Year. If the Annual Additions with respect to the Participant under
other defined contribution plans, simplified employee pension 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, simplified employee pension 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, simplified employee
pension 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
determining the Participant's actual Compensation for the Limitation Year, the
Employer may determine the Maximum Permissible Amount for a Participant in the
manner described in
<PAGE>
section 6.1(b).
(c) As soon as is administratively feasible after the end of the Limitation
Year, the Maximum Permissible Amount for the Limitation Year will be determined
on the basis of the Participant's actual Compensation for the Limitation Year.
(d) If, pursuant to section 6.2(c), or as a result of the allocation of
forfeitures, a Participant's Annual Additions under this Plan and such other
plans would result in an Excess Amount for a Limitation Year, the Excess Amount
will 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, times
(ii) the ratio of (1) the Annual Additions allocated to the Participant for the
Limitation Year as of such date under this Plan to (2) the total Annual
Additions allocated to the Participant for the Limitation Year as of such date
under this and all the other qualified master or prototype defined contribution
plans.
(f) Any Excess Amount attributed to this Plan will be disposed of in the manner
described in section 6.1(d).
6.3 Employers Who, in Addition to this Plan, Maintain Other Qualified Plans
Which Are Defined Contribution Plans Other than Master or Prototype Plans. If
the Participant is covered under another qualified defined contribution plan
maintained by the Employer which is not a Master or Prototype Plan, Annual
Additions which may be credited to the Participant's Account under this Plan for
any Limitation Year will be limited in accordance with section 6.2 as though the
other plan were a Master or Prototype Plan unless the Employer provides other
limitations in the Adoption Agreement.
6.4 Employers Who, in Addition to this Plan, Maintain a Qualified Defined
Benefit Plan. If the Employer maintains, or at any time maintained, a qualified
defined benefit plan covering any Participant in this Plan, the sum of the
Participant's Defined Benefit Fraction and Defined Contribution Fraction 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.
6.5 Definitions. Unless otherwise expressly provided herein, for purposes of
this ARTICLE only, the following definitions and rules of interpretation shall
apply:
(a) Annual Additions. The sum of the following amounts credited to a
Participant's Account for the Limitation Year:
(i) Employer Contributions;
(ii) Employee Contributions;
(iii) forfeitures; and
(iv) amounts allocated under a simplified employee pension; and
(v) amounts allocated to an individual medical account, as defined in section
415(1)(2) of the Code, which is part of a pension or annuity plan maintained by
the Employer; are treated as Annual Additions to a defined contribution plan.
Also, amounts derived from contributions which are attributable to
post-retirement medical benefits allocated to the separate account of a key
employee, as defined in section 419A(d)(3) of the Code, under a welfare benefit
fund, as defined in section 419(e) of the Code, maintained by the Employer; are
treated as Annual Additions to a defined contribution plan.
For this purpose, any Excess Amount applied under sections 6.1(d) or 6.2(f) in
the Limitation Year to reduce Employer Contributions will be considered Annual
Additions for such Limitation Year.
(b) Compensation. A Participant's earned income, wages, salaries, and fees for
professional services and other amounts received for personal services actually
rendered in the course of employment with the Employer maintaining the Plan
including, but not limited to, commissions paid salesmen, compensation for
services on the basis of a percentage of profits, commissions on insurance
premiums, tips and bonuses, fringe benefits, and
<PAGE>
reimbursements or other expense allowances under a nonaccountable plan, as
described in section 1.62-2(c), and excluding the following:
(i) Employer contributions to a plan of deferred compensation which are not
includable in the Employee's gross income for the taxable year in which
contributed, or Employer Contributions under a simplified employee pension plan
to the extent such contributions are excluded from the Employee's gross income,
or any distributions from a plan of deferred compensation;
(ii) Amounts realized from the exercise of a nonqualified stock option, or when
restricted stock (or property) held by the Employee either becomes freely
transferable or is no longer subject to a substantial risk of forfeiture;
(iii) Amounts realized from the sale, exchange or other disposition of stock
acquired under a qualified stock option; and
(iv) Other amounts which received special tax benefits, or contributions made by
the Employer (whether or not under a salary reduction agreement) towards the
purchase of an annuity described in section 403(b) of the Code (whether or not
the amounts are actually excludable from the gross income of the Employee).
For purposes of applying the limitations of this ARTICLE, Compensation for a
Limitation Year is the Compensation actually paid or includable in gross income
during such year.
Notwithstanding the preceding sentence, Compensation for a Participant in a
defined contribution plan who is Totally and Permanently Disabled (as defined in
section 22(e)(3) of the Code) 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 the disabled Participant may be taken into account
only if the Participant is not a Highly-Compensated Employee (as defined in
section 414(q) of the Code without regard to any available election), 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
the Participant's Projected Annual Benefits under all the defined benefit plans
(whether or not terminated) maintained by the Employer, and the denominator of
which is the lesser of one hundred percent (100%) of the dollar limitation
determined for the Limitation Year under sections 415(b) and (d) of the Code or
one hundred forty percent (140%) of highest average compensation, including any
adjustments under section 415(b) of the Code.
Notwithstanding the above, if the Participant was a Participant as of the first
day 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 one hundred
twenty-five (125%) of the sum of the annual benefits under such plans which the
Participant had accrued as of the close of the last Limitation Year beginning
before 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
section 415 of the Code for all Limitation Years beginning before January 1,
1987.
(d) Defined Contribution Dollar Limitation. Thirty thousand dollars ($30,000)
or, if greater, one-fourth (1/4) of the defined benefit dollar limitation set
forth in section 415(b)(1) of the Code as in effect for the Limitation Year.
(e) Defined Contribution Fraction. A fraction, the numerator of which is the sum
of the Annual Additions to the Participant's Account under all the defined
contribution plans and simplified employee pensions (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 nondeductible
voluntary contributions to all defined benefit plans, whether or not terminated,
maintained by the Employer, and the Annual Additions attributable to all welfare
benefit funds, as defined in section 419(e) of the Code and individual medical
accounts, as defined in section 415(l)(2) of the Code, 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 one hundred percent (100%) of the dollar
<PAGE>
limitation in effect under section 415(c)(1)(A) of the Code or thirty-five
percent (35%) of the Participant's Compensation for such year.
If the Participant 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 6,
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 (1)
the excess of the sum of the fractions over 1.0 times (2) 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 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 recomputed to
treat all Employee contributions as Annual Additions.
(f) Employer. For purposes of this ARTICLE, Employer shall mean the employer
that adopts this Plan, and all members of a controlled group of corporations (as
defined in section 414(b) of the Code as modified by section 415(h) of the
Code), all commonly controlled trades or businesses (as defined in section
414(c) of the Code as modified by section 415(h) of the Code), or affiliated
service groups (as defined in section 414(m) of the Code) of which the adopting
Employer is a part and any other entity required to be aggregated with the
Employer pursuant to regulations under section 414(o) of the Code.
(g) Excess Amount. The excess of the Participant's Annual Addition for the
Limitation Year over the Maximum Permissible Amount.
(h) Highest Average Compensation. The average compensation for the three
consecutive Plan Years that produce the highest average.
(i) Limitation Year. A Plan Year, or the twelve (12) consecutive month period
elected by the Employer in the Adoption Agreement. All qualified plans
maintained by the Employer must use the same Limitation Year. If the Limitation
Year is amended to a different twelve (12) consecutive month period, the new
Limitation Year must begin on a date within the Limitation Year in which the
amendment is made.
(j) Master or Prototype Plan. A plan the form of which is the subject of a
favorable opinion letter from the Internal Revenue Service.
(k) Maximum Permissible Amount. The maximum Annual Addition that may be
contributed or allocated to a Participant's Account under the Plan for any
Limitation Year shall not exceed the lesser of:
(a) the Defined Contribution Dollar Limitation; or
(b) twenty-five percent (25%) of the Participant's Compensation for the
Limitation Year.
The Compensation limitation referred to in subsection (b) shall not apply to any
contribution for medical benefits (within the meaning of section 401(h) or
section 419A(f)(2) of the Code) which is otherwise treated as an Annual Addition
under section 415(l)(1) or section 419A(d)(2) of the Code.
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 will not exceed the Defined Contribution Dollar Limitation
multiplied by the following fraction:
Number of Months in the Short Limitation Year: / 12
(1) Projected Annual Benefit. The annual retirement benefit (adjusted to an
actuarially equivalent straight life annuity if such benefit is expressed in a
form other than a straight life annuity or Qualified Joint and Survivor Annuity)
to which the Participant would be entitled under the terms of the Plan assuming:
(i) the Participant will continue employment until Normal Retirement Age under
the Plan (or current age, if later), and
(ii) the Participant's Compensation for the current Limitation Year and all
other relevant factors used to determine benefits under the Plan will remain
constant for all future Limitation Years.
Article 7: Trust Fund
<PAGE>
7.1 Receipt of Contributions by Trustee. All contributions to the Trust that are
received by the Trustee, together with any earnings thereon, shall be held,
managed and administered by the Trustee named in the Adoption Agreement in
accordance with the terms and conditions of the Trust Agreement and the Plan.
The Trustee may use a Custodian designated by the Sponsor to perform
recordkeeping and custodial functions. The Trustee shall be subject to the
proper directions of the Employer or the Plan Administrator made in accordance
with the terms of the Plan and ERISA.
7.2 Investment Responsibility.
(a) If the Employer elects in the Adoption Agreement to exercise investment
authority and responsibility, the selection of the investments in which assets
of the Trust are invested shall be the responsibility of the Plan Administrator
and each Participant will have a ratable interest in all assets of the Trust.
(b) If the Adoption Agreement so provides and the Employer elects to permit each
Participant or Beneficiary to select the investments in his Account, no person,
including the Trustee and the Plan Administrator, shall be liable for any loss
or for any breach of fiduciary duty which results from such Participant's or
Beneficiary's exercise of control.
(c) If the Adoption Agreement so provides and the Employer elects to permit each
Participant or Beneficiary to select the investments in his Account, the
Employer or the Plan Administrator must complete a schedule of Participant
designations.
(d) If Participants and Beneficiaries are permitted to select the investment in
their Accounts, all investment related expenses, including administrative fees
charged by brokerage houses, will be charged against the Accounts of the
Participants.
(e) The Plan Administrator may at any time change the selection of investments
in which the assets of the Trust are invested, or subject to such reasonable
restrictions as may be imposed by the Sponsor for administrative convenience,
may submit an amended schedule of Participant designations. Such amended
documents may provide for a variance in the percentages of contributions to any
particular investment or a request that Shares in the Trust be reinvested in
whole or in part in other Shares.
7.3 Investment Limitations. The Sponsor may impose reasonable investment
limitations on the Employer and the Plan Administrator relating to the type of
permissible investments in the Trust or the minimum percentage of Trust assets
to be invested in Shares.
Article 8: Vesting
8.1 Nondeductible Voluntary Contributions and Earnings. The Participant's
nondeductible voluntary contribution subaccount shall be fully vested and
nonforfeitable at all times and no forfeitures will occur as a result of an
Employee's withdrawal of nondeductible voluntary contributions.
8.2 Rollovers, Transfers and Earnings. The Participant's rollover subaccounts
and direct transfer subaccount shall be fully vested and nonforfeitable at all
times.
8.3 Employer Contributions and Earnings. Notwithstanding the vesting schedule
elected by the Employer in the Adoption Agreement, the Participant's money
purchase pension contribution subaccount and profit sharing contribution
subaccount shall be fully vested and nonforfeitable upon the Participant's
death, disability, attainment of Normal Retirement Age, or, if the Adoption
Agreement provides for an Early Retirement Date, attainment of the required age
and completion of the required service. In the absence of any of the preceding
events, the Participant's money purchase contribution subaccount and his profit
sharing contribution subaccount shall vest in accordance with a minimum vesting
schedule specified in the Adoption Agreement. The schedule must be at least as
favorable to Participants as either schedule (a) or (b) below.
(a) Graduated vesting according to the following schedule:
Years of Service Vested Percentage
---------------- -----------------
1 year 0%
2 years 20%
3 years 40%
4 years 60%
5 years 80%
<PAGE>
6 or more years 100%
(b) Full one hundred percent (100%) vesting after three (3) Years of Service.
8.4 Amendments to Vesting Schedule.
(a) If the Plan's vesting schedule is amended, or the Plan is amended in any way
that directly or indirectly affects the computation of the Participant's
nonforfeitable percentage or if the plan is deemed amended by an automatic
change to or from a top-heavy vesting schedule, each 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 the nonforfeitable
percentage computed under the Plan without regard to such amendment or change.
For any Participants who do 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.
(b) The period during which the election may be made shall commence with the
date the amendment is adopted or deemed to be made and shall end on the latest
of:
(i) sixty (60) days after the amendment is adopted;
(ii) sixty (60) days after the amendment becomes effective; or
(iii) sixty (60) days after the Participant is issued written notice of the
amendment by the Employer or Plan Administrator.
(c) No amendment to the Plan shall be effective to the extent that it has the
effect of decreasing a Participant's accrued benefit. Notwithstanding the
preceding sentence, a participant's Account balance may be reduced to the extent
permitted under section 412(c)(8) of the Code. For purposes of this paragraph, 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.
8.5 Determination of Years of Service. For purposes of determining the vested
and nonforfeitable percentage of the Participant's Employer Contribution
subaccounts, all of the Participant's Years of Service with the Employer or an
Affiliated Employer shall be taken into account. If specified in the Adoption
Agreement, Years of Service with a predecessor employer will be treated as
service for the Employer, provided, however, if the Employer maintains the plan
of a predecessor employer, Years of Service with such predecessor employer will
be treated as service with the Employer with regard to any election.
8.6 Forfeiture of Nonvested Amounts.
(a) For Plan Years beginning before 1985, any portion of a Participant's Account
that is not vested shall be forfeited by him as of the last day of the Plan Year
in which a Break in Service occurs. For Plan Years beginning after 1984, any
portion of a Participant's Account that is not vested shall be forfeited by him
as of the last day of the Plan Year in which his fifth consecutive Break in
Service occurs. Any amounts thus forfeited shall be reallocated as provided in
ARTICLE 5 and shall not be considered part of a Participant's Account in
computing his vested interest. The remaining portion of the Participant's
Account will be nonforfeitable.
(b) If a distribution is made at a time when a Participant has a vested right to
less than one hundred percent (100%) of the value of the Participant's Account
attributable to Employer Contributions and forfeitures, as determined in
accordance with the provisions of section 8.3, and the nonvested portion of the
Participant's Account has not yet been forfeited in accordance with paragraph
(a) above:
(i) a separate remainder subaccount shall be established for the Participant's
interest in the Plan as of the time of the distribution, and
<PAGE>
(ii) at any relevant time the Participant's vested portion of the separate
remainder subaccount shall be equal to an amount ("X") determined by the
following formula:
X = P [AB + (R x D)] - (R x D)
For purposes of applying the formula: P is the vested 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. 8.7 Reinstatement of Benefit. 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.
Article 9: Joint and Survivor
Annuity Requirements
9.1 General. The provisions of this ARTICLE shall apply to any Participant who
is credited with at least one (1) Hour of Service with the Employer on or after
August 23, 1984, and such other Participants as provided in section 9.7.
9.2 Qualified Joint and Survivor Annuity. Unless an optional form of benefit is
selected pursuant to a Qualified Election within the ninety (90) day period
ending on the Annuity Starting Date, a married Participant's Vested Account
Balance will be paid in the form of a Qualified Joint and Survivor Annuity and
an unmarried Participant's Vested Account Balance will be paid in the form of a
life annuity. The Participant may elect to have such annuity distributed upon
attainment of the Earliest Retirement Age under the Plan.
9.3 Qualified Preretirement Survivor Annuity. Unless an optional form of benefit
has been selected within the Election Period pursuant to a Qualified Election,
if a Participant dies before the Annuity Starting Date, then the Participant's
Vested Account Balance shall be applied toward the purchase of an annuity 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.
9.4 Definitions.
(a) Election Period.
(i) The period which begins on the first day of the Plan Year in which the
Participant attains age thirty-five (35) and ends on the date of the
Participant's death. If a Participant separates from service prior to the first
day of the Plan Year in which age thirty-five (35) is attained, with respect to
the Account balance as of the date of separation, the Election Period shall
begin on the date of separation.
(ii) A Participant who has not yet attained age thirty-five (35) as of the end
of any current Plan Year may make a special Qualified Election to waive the
qualified preretirement survivor annuity for the period beginning on the date of
such election and ending on the first day of the Plan Year in which the
Participant will attain age thirty-five (35). Such election shall not be valid
unless the Participant receives a written explanation of the qualified
preretirement survivor annuity in such terms as are comparable to the
explanation required under section 9.5. Qualified preretirement survivor annuity
coverage will be automatically reinstated as of the first day of the Plan Year
in which the Participant attains age thirty-five (35). Any new waiver on or
after such date shall be subject to the full requirements of this ARTICLE.
(b) Earliest Retirement Age. The earliest date on which, under the Plan, the
Participant could elect to receive retirement benefits.
(c) Qualified Election.
(i) A waiver of a Qualified Joint and Survivor Annuity or a qualified
preretirement survivor annuity. Any waiver of a Qualified Joint and Survivor
Annuity or a qualified preretirement survivor annuity shall not be effective
unless:
(1) the Participant's Spouse consents in writing to the election;
<PAGE>
(2) 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);
(3) the Spouse's consent acknowledges the effect of the election; and
(4) the Spouse's consent is witnessed by a Plan representative or notary public.
Additionally, a Participant's waiver of the Qualified 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.
(ii) Any consent by a Spouse obtained under this provision (or establishment
that the consent of 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
waiver 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 has received notice as provided in section 9.5.
(d) Qualified Joint and Survivor Annuity. An immediate annuity for the life of
the Participant with a survivor annuity for the life of the Spouse which equals
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.
(e) Spouse (Surviving Spouse). The Spouse or Surviving Spouse of the
Participant, provided that a former spouse will be treated as the Spouse or
Surviving Spouse and a current Spouse will not be treated as the Spouse or
Surviving Spouse to the extent provided under a qualified domestic relations
order as described in section 414(p) of the Code.
(f) Annuity Starting Date. The first day of the first period for which an amount
is paid as an annuity or any other form.
(g) Vested Account Balance. The aggregate value of the Participant's Vested
Account Balances derived from Employer and Employee contributions (including
rollovers and direct transfers), whether vested before or upon death, including
the proceeds of insurance contracts if any, on the Participant's life. The
provisions of this ARTICLE shall apply to a Participant who is vested in amounts
attributable to Employer contributions, Employee contributions (or both) at the
time of death or distribution.
9.5 Notice Requirements.
(a) In the case of a Qualified Joint and Survivor Annuity, the Plan
Administrator shall no less than thirty (30) days and no more than ninety (90)
days prior to the Annuity Starting Date, provide each Participant a written
explanation of:
(i) the terms and conditions of a Qualified Joint and Survivor Annuity;
(ii) the Participant's right to make and the effect of an election to waive the
Qualified Joint and Survivor Annuity form of benefit;
(iii) the rights of a Participant's Spouse; and
(iv) the right to make, and the effect of, a revocation of a previous election
to waive the Qualified Joint and Survivor Annuity.
(b) In the case of a qualified preretirement survivor annuity as described in
section 9.3, the Plan Administrator shall provide each Participant within the
applicable period for such Participant a written explanation of the qualified
preretirement survivor annuity in such terms and in such manner as would be
comparable to the explanation provided for meeting the requirements of
subsection (a) applicable to a Qualified Joint and Survivor Annuity.
(c) The applicable period for a Participant is whichever of the following
periods ends last:
<PAGE>
(i) the period beginning with the first day of the Plan Year in which the
Participant attains age thirty-two (32) and ending with the close of the Plan
Year preceding the Plan Year in which the Participant attains age thirty-five
(35);
(ii) a reasonable period ending after the individual becomes a Participant;
(iii) a reasonable period ending after subsection (e) ceases to apply to the
Participant;
(iv) 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 thirty-five (35).
(d) For purposes of applying subsection (c), a reasonable period ending after
the enumerated events described above in subsections (ii), (iii) and (iv) is the
end of the two-year period beginning one (1) year prior to the date the
applicable event occurs, and ending one (1) year after that date. In the case of
a Participant who separates from service before the Plan Year in which age
thirty-five (35) is attained, notice shall be provided within the two (2) year
period beginning one (1) year prior to separation and ending one (1) year after
separation. If such a Participant thereafter returns to employment with the
Employer, the applicable period for such Participant shall be redetermined.
(e) Notwithstanding the other requirements of this section, the respective
notices prescribed by this section need not be given to a Participant if:
(i) the Plan "fully subsidizes" the cost of a Qualified Joint and Survivor
Annuity or qualified preretirement survivor annuity; and
(ii) the Plan does not allow the Participant to waive the Qualified Joint and
Survivor Annuity or qualified preretirement survivor annuity and does not allow
a married Participant to designate a nonspouse Beneficiary. For purposes of this
subsection, a plan fully subsidizes the costs of a benefit if no increase in
cost, or decrease in benefits to the Participant may result from the
Participant's failure to elect another benefit.
9.6 Safe Harbor Rules.
(a) This section shall apply to a Participant in a profit sharing plan, and to
any distribution, made on or after the first day of the first Plan year
beginning after December 31, 1988, from or under a separate account attributable
solely to accumulated deductible Employee contributions, as defined in section
72(o)(5)(B) of the Code, and maintained on behalf of a Participant in a money
purchase pension plan (including a target benefit plan) if the following
conditions are satisfied:
(i) the Participant does not or cannot elect payments in the form of a life
annuity; and
(ii) on the death of a Participant, the Participant's Vested Account Balance
will be paid to the Participant's Surviving Spouse, but if there is no Surviving
Spouse, or if the Surviving Spouse has consented in a manner conforming to a
Qualified Election, then to the Participant's Designated Beneficiary.
(b) The Surviving Spouse may elect to have distribution of the Vested Account
Balance commence within the ninety (90) day period following the date of the
Participant's death. The Account balance shall be adjusted for gains or losses
occurring after the Participant's death in accordance with the provisions of the
Plan governing the adjustment of Account balances for other types of
distributions.
(c) This section shall not be operative with respect to a Participant in a
profit sharing plan if the plan is a direct or indirect transferee of a defined
benefit plan, money purchase plan, a target benefit plan, stock bonus, or profit
sharing plan which is subject to the survivor annuity requirements of sections
401(a)(11) and 417 of the Code. If this section is operative, then the
provisions of this ARTICLE, other than section 9.7, shall be inoperative.
(d) The Participant may waive the spousal death benefit described in this
section at any time provided that no such waiver shall be effective unless it
satisfies the conditions of section 9.4(c) (other than the notification
requirement referred to therein) that would apply to the Participant's waiver of
the qualified preretirement survivor annuity.
(e) For purposes of this section, Vested Account Balance shall mean, in the case
of a money purchase pension plan or a target benefit plan, the Participant's
separate Account balance attributable solely to accumulated deductible Employee
contributions within the meaning of section 72(o)(5)(B) of the Code. In the case
of a profit sharing plan, Vested Account Balance shall have the same meaning as
provided in section 9.4(g).
<PAGE>
9.7 Transitional Rules.
(a) Any living participant not receiving benefits on August 23, 1984, who would
otherwise not receive the benefits prescribed by the previous sections of this
ARTICLE must be given the opportunity to elect to have the prior sections of
this ARTICLE apply if such Participant is credited with at least one (1) Hour of
Service under this Plan or a predecessor plan in a Plan Year beginning on or
after January 1, 1976, and such Participant had least ten (10) years of vesting
service when he or she separated from service.
(b) Any living Participant not receiving benefits on August 23, 1984, who was
credited with at least one (1) Hour of Service under this Plan or a predecessor
plan on or after September 2, 1974, and who is not otherwise credited with any
service in a Plan Year beginning on or after January 1, 1976, must be given the
opportunity to have his or her benefits paid in accordance with subsection (d).
(c) The respective opportunities to elect (as described in subsections (a) and
(b) above) must be afforded to the appropriate Participants during the period
commencing on August 23, 1984, and ending on the date benefits would otherwise
commence to said Participants.
(d) Any Participant who has elected pursuant to subsection (b) and any
Participant who does not elect under subsection (a) or who meets the
requirements of subsection (a) except that such Participant does not have at
least ten (10) years of vesting service when he or she separates from service,
shall have his or her benefits distributed in accordance with all of the
following requirements if benefits would have been payable in the form of a life
annuity:
(i) Automatic Joint and Survivor Annuity. If benefits in the form of a life
annuity become payable to a married Participant who:
(1) begins to receive payments under the Plan on or after Normal Retirement Age;
or
(2) dies on or after Normal Retirement Age while still working for the Employer;
or
(3) begins to receive payments on or after the qualified early retirement age;
or
(4) separates from service on or after attaining Normal Retirement Age (or the
qualified early retirement age) and after satisfying the eligibility
requirements for the payment of benefits under the Plan and thereafter dies
before beginning to receive such benefits; then such benefits will be received
under this Plan in the form of a Qualified Joint and Survivor Annuity, unless
the Participant has elected otherwise during the Election Period. The Election
Period must begin at least six (6) months before the Participant attains
qualified early retirement age and end not more than ninety (90) days before the
commencement of benefits. Any election hereunder will be in writing and may be
changed by the Participant at any time.
(ii) Election of Early Survivor Annuity. A Participant who is employed after
attaining the qualified early retirement age will be given the opportunity to
elect, during the Election Period, to have a survivor annuity payable on death.
If the Participant elects the survivor annuity, payments under such annuity must
not be less than the payments which would have been made to the Spouse under the
Qualified Joint and Survivor Annuity if the Participant had retired on the day
before his or her death. Any election under this provision will be in writing
and may be changed by the Participant at any time. The Election Period begins on
the later of (1) the 90th day before the Participant attains the qualified early
retirement age; or (2) the date on which participation begins, and ends on the
date the Participant terminates employment.
(e) The following terms shall have the meanings specified herein:
(i) Qualified Early Retirement Age. The latest of:
(1) the earliest date, under the Plan, on which the Participant may elect to
receive retirement benefits;
(2) the first day of the 120th month beginning before the Participant reaches
Normal Retirement Age; or
(3) the date the Participant begins participation.
(ii) Qualified Joint and Survivor Annuity. An annuity for the life of the
Participant with a survivor annuity for the life of the Spouse as described in
section 9.4(d).
Article 10: Distribution Provisions
10.1 Vesting on Distribution before Break in Service.
(a) If an Employee terminates service, and the value of the Employee's Vested
Account Balance derived from Employer and Employee contributions is not greater
than three thousand five hundred dollars ($3,500), the
<PAGE>
Employee will receive a distribution of the value of the entire vested portion
of such Account balance and the nonvested portion will be treated as a
forfeiture. 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 section 72(o)(5)(B) of the Code for Plan Years beginning prior to
January 1, 1989.
(b) If an Employee terminates service and elects, in accordance with this
ARTICLE, to receive the value of his Vested Account Balance, the nonvested
portion will be treated as a forfeiture. If the Employee elects to have
distributed less than the entire vested portion of the 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.
(c) If an Employee receives a distribution pursuant to this section and the
Employee resumes employment covered under this Plan, the Employee's
Employer-derived Account balance will be restored to the amount on the date of
distribution if the Employee repays to the Plan the full amount on the
distribution attributable to Employer Contributions before the earlier of five
(5) years after the first date on which the Participant is subsequently
reemployed by the Employer, or the date the Participant incurs five (5)
consecutive one (1) year Breaks in Service following the date of the
distribution. If an Employee is deemed to receive a distribution pursuant to
this section, and the Employee resumes employment covered under this Plan before
the date the Participant incurs five (5) consecutive one (1) year Breaks in
Service, upon the reemployment of such Employee, the Employer-derived Account
balance of the Employee will be restored to the amount on the date of such
deemed distribution.
10.2 Restrictions on Immediate Distributions.
(a) If the value of a Participant's Vested Account Balance derived from Employer
and Employee contributions exceeds (or at the time of any prior distribution
exceeded) three thousand five hundred dollars ($3,500) and the Account balance
is immediately distributable, the Participant and the Participant's Spouse (or
where either the Participant or the Spouse has died, the survivor) must consent
to any distribution of such Account balance. 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 Plan 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 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.
(b) Notwithstanding the provisions of subsection (a), 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 9.6 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 section 401(a)(9) or section 415 of the
Code. In addition, upon termination of this Plan if the Plan does not offer an
annuity option (purchased from a commercial provider), 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 section 4975(e)(7) of the Code)
within the same controlled group.
<PAGE>
(c) 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 Normal
Retirement Age or age sixty-two (62).
(d) 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, the Participant's Vested Account Balance
shall not include amounts attributable to accumulated deductible Employee
contributions within the meaning of section 72(o)(5)(B) of the Code.
10.3 Commencement of Benefits.
(a) Unless the Participant elects otherwise, distribution of benefits will begin
no later than the 60th day after the latest of the close of the Plan Year in
which:
(i) the Participant attains age sixty-five (65) (or Normal Retirement Age, if
earlier);
(ii) the 10th anniversary of the year in which the
Participant commenced participation in the Plan occurs; or
(iii) the Participant terminates service with the Employer.
(b) Notwithstanding the foregoing, the failure of a Participant and Spouse to
consent to a distribution while a benefit is immediately distributable, within
the meaning of section 10.2 of the Plan, shall be deemed to be an election to
defer commencement of payment of any benefit sufficient to satisfy this section.
10.4 Early Retirement with Age and Service Requirement. If a participant
separates from service before satisfying the age requirement for early
retirement, but has satisfied the service requirement, the Participant will be
entitled to elect an early retirement benefit upon satisfaction of such age
requirement.
10.5 Nontransferability of Annuities. Any annuity contract distributed here from
must be nontransferable.
10.6 Conflicts with Annuity Contracts. The terms of any annuity contract
purchased and distributed by the Plan to a Participant or Spouse shall comply
with the requirements of this Plan.
Article 11: Timing and Modes of Distribution
11.1 General Rules.
(a) Subject to ARTICLE 9, the requirements of this ARTICLE shall apply to any
distribution of a Participant's interest and will take precedence over any
inconsistent provisions of this Plan. Unless otherwise specified, the provisions
of this ARTICLE apply to calendar years beginning after December 31, 1984.
(b) All distributions required under this ARTICLE shall be determined and made
in accordance with the income tax regulations under section 401(a)(9) of the
Code, including the minimum distribution incidental benefit requirement of
section 1.401(a)(9)-2 of the proposed regulations.
11.2 Required Beginning Date. The entire interest of a Participant must be
distributed or begin to be distributed no later than the Participant's Required
Beginning Date.
11.3 Limits on Distribution Periods. As of the first Distribution Calendar Year,
distributions, if not made in a single-sum, may only be made over one of the
following periods (or a combination thereof):
(a) the life of the participant;
(b) the life of the participant and a Designated Beneficiary;
(c) a period certain not extending beyond the Life Expectancy of the
Participant; or
(d) a period certain not extending beyond the joint and last survivor expectancy
of the Participant and a Designated Beneficiary.
11.4 Determination of Amount to be Distributed Each Year.
(a) Individual Account.
(i) If a Participant's Benefit is to be distributed over (1) a period not
extending beyond the Life Expectancy of the Participant or the joint life and
last survivor expectancy of the Participant and the Participant's Designated
Beneficiary or (2) a period not extending beyond the Life Expectancy of the
Designated Beneficiary, the amount required to be 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.
<PAGE>
(ii) 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.
(iii) For calendar years beginning after December 31, 1988, the amount to be
distributed each year, beginning with distributions for the first Distribution
Calendar Year shall not be less than the quotient obtained by dividing the
Participant's Benefit by the lesser of (1) the Applicable Life Expectancy or (2)
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 proposed regulations. Distributions after the death of the Participant shall
be distributed using the Applicable Life Expectancy in subsection (a)(i) above
as the relevant divisor without regard to proposed regulations section
1.401(a)(9)-2.
(iv) The minimum distribution required for the Participant's first Distribution
Calendar Year must be made on or before the Participant's Required Beginning
Date. The minimum distribution for other calendar years, including the minimum
distribution for the Distribution Calendar Year in which the Employee's Required
Beginning Date occurs, must be made on or before December 31, of that
Distribution Calendar Year.
(b) Other Forms. If the Participant's Benefit is distributed in the form of an
annuity purchased from an insurance company, distributions thereunder shall be
made in accordance with the requirements of section 401(a)(9) of the Code and
the proposed regulations thereunder.
11.5 Death Distribution Provisions.
(a) Distribution Beginning Before Death. If the Participant dies after
distribution of his or her interest has begun, the remaining portion of such
interest will continue to be distributed at least as rapidly as under the method
of distribution being used prior to the Participant's death.
(b) Distribution Beginning After Death. If the Participant dies before
distribution of his or her interest begins, distribution of the Participant's
entire interest shall be completed by December 31 of the calendar year
containing the fifth anniversary of the Participant's death except to the extent
that an election is made to receive distributions in accordance with (i) or (ii)
below:
(i) 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:
(ii) if the Designated Beneficiary is the Participant's Surviving Spouse, the
date distributions are required to begin in accordance with (i) above shall not
be earlier than the later of (1) December 31 of the calendar year immediately
following the calendar year in which the Participant died and (2) December 31 of
the calendar year in which the participant would have attained age seventy and
one-half (70-1/2).
(c) If the Participant has not made an election pursuant to this section by the
time of his or her death, the Participant's Designated Beneficiary must elect
the method of distribution no later than the earlier of (1) December 31 of the
calendar year in which distributions would be required to begin under this
section; or (2) 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 must be
completed by December 31 of the calendar year containing the fifth anniversary
of the Participant's death.
(d) For purposes of subsection (b) above, if the Surviving Spouse dies after the
Participant, but before payments to such Spouse begin, the provisions of
subsection (b), with the exception of paragraph (ii) therein, shall be applied
as if the Surviving Spouse were the Participant.
(e) For purposes of this section, 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.
<PAGE>
(f) For the purposes of this section, distribution of a Participant's interest
is considered to begin on the Participant's Required Beginning Date (or, if
subsection (d) above is applicable, the date distribution is required to begin
to the Surviving Spouse pursuant to subsection (b) above). If distribution in
the form of an annuity described in section 11.4(b) above irrevocably commences
to the Participant before the Required Beginning Date, the date distribution is
considered to begin is the date distribution actually commences.
11.6 Designation of Beneficiary. Subject to the rules of ARTICLE 9, a
Participant (or former Participant) may designate from time to time any person
or persons (who may be designated contingently or successively and may be an
entity other than a natural person) as his Beneficiary who will be entitled to
receive any undistributed amounts credited to the Participant's separate Account
under the Plan at the time of the Participant's death. Any such Beneficiary
designation by a participant shall be made in writing in the manner prescribed
by the Plan Administrator, and shall be effective only when filed with the Plan
Administrator during the Participant's lifetime. A Participant may change or
revoke his Beneficiary designation at any time in the manner prescribed by the
Plan Administrator. If any portion of the Participant's Account is invested in
insurance pursuant to ARTICLE 14, the Beneficiary of the benefits under the
insurance policy shall be the person or persons designated under the policy. If
the Designated Beneficiary (or each of the Designated Beneficiaries) predeceases
the Participant, the Participant's Beneficiary designation shall be ineffective.
If no Beneficiary designation is in effect at the time of the Participant's
death, his Beneficiary shall be his estate.
11.7 Definitions.
(a) Applicable Life Expectancy. The Life Expectancy (or joint and last survivor
expectancy) calculated using the attained age of the Participant (or Designated
Beneficiary) as of the Participant's (or Designated Beneficiary's) birthday in
the applicable calendar year reduced by one (1) 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. If annuity payments commence in accordance with
section 11.4(b) before the Required Beginning Date, the applicable calendar year
is the year such payments commence. If distribution is in the form of an
immediate annuity purchased after the Participant's death with the Participant's
remaining interest, the applicable calendar year is the year of purchase.
(b) Designated Beneficiary. The individual who is designated as the Beneficiary
under the Plan in accordance with section 401(a)(9) and the proposed regulations
thereunder.
(c) Distribution Calendar Year. 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 section 11.5 above.
(d) Life Expectancy.
(i) Life Expectancy and joint and last survivor 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.
(ii) Unless otherwise elected by the Participant (or Spouse, in the case of
distributions described in section 11.5(b)(ii) above) 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 non-Spouse Beneficiary may not
be recalculated.
(e) Participant's Benefit.
(i) The Account balance as of the last valuation date in the calendar year
immediately preceding the Distribution Calendar Year (valuation calendar year)
increased by the amount of any contributions or forfeitures allocated to
<PAGE>
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.
(ii) For purposes of subsection (i) above, 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.
(f) Required Beginning Date.
(i) General Rule. The Required Beginning Date of a Participant is the first day
of April of the calendar year following the calendar year in which the
Participant attains age seventy and one-half (70-1/2).
(ii) Transitional Rules. The Required Beginning Date of a Participant who
attains age seventy and one-half (70-1/2) before January 1, 1988, shall be
determined in accordance with (1) or (2) below:
(1) Non-Five-Percent Owners. The Required Beginning Date of a Participant who is
not a Five Percent (5%) 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.
(2) Five Percent Owners. The Required Beginning Date of a Participant who is a
Five Percent (5%) Owner during any year beginning after December 31, 1979, is
the first day of April following the later of: (B) the earlier of the calendar
year with or within which ends the Plan Year in which the Participant becomes a
Five Percent (5%) Owner, or the calendar year in which the Participant retires.
The Required Beginning Date of a Participant who is not a Five Percent (5%)
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.
(iii) Five Percent Owner. A Participant is treated as a Five Percent (5%) Owner
for purposes of this section if such Participant is Five Percent (5%) Owner as
defined in section 416(i) of the Code (determined in accordance with 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 year.
(iv) Once distributions have begun to a Five Percent (5%) Owner under this
section, they must continue to be distributed, even if the Participant ceases to
be a Five Percent (5%) Owner in a subsequent year.
11.8 Transitional Rule.
(a) Notwithstanding the other requirements of this ARTICLE and subject to the
requirements of ARTICLE 9, distribution on behalf of any Employee, including a
Five Percent (5%) Owner, may be made in accordance with all of the following
requirements (regardless of when such distribution commences):
(i) The distribution by the Plan is one which would not have disqualified the
Plan under section 401(a)(9) of the Internal Revenue Code as in effect prior to
amendment by the Deficit Reduction Act of 1984.
(ii) The distribution is in accordance with a method of distribution designated
by the Employee whose interest in the Plan is being distributed or, if the
Employee is deceased, by a Beneficiary of such Employee.
(iii) Such designation was in writing, was signed by the Employee or the
Beneficiary, and was made before January 1, 1984.
(iv) The Employee had accrued a benefit under the Plan as of December 31, 1983.
(v) The method of distribution designated by the Employee or the Beneficiary
specifies the time at which distributions will be made, and in the case of any
distribution upon the Employee's death, the Beneficiaries of the Employee listed
in order of priority.
(b) A distribution upon death will not be covered by this transitional rule
unless the information in the designation contains the required information
described above with respect to the distributions to be made upon the death of
the Employee.
(c) For any distribution which commences before January 1, 1984,
but continues after December 31, 1983, the Employee, or the Beneficiary, to whom
such distribution is being made, will be presumed to have designated the method
of distribution under which the distribution is being made if the method of
distribution was specified in writing
<PAGE>
and the distribution satisfies the requirements in subsections (a)(i) and
(a)(v).
(d) If a designation is revoked, any subsequent distribution must satisfy the
requirements of section 401(a)(9) of the Code and the proposed regulations
thereunder. If a designation is revoked subsequent to the date distributions are
required to begin, the Trust 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 section 401(a)(9) of the Code and the regulations thereunder but for the
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 proposed 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).
In the case in which an amount is transferred or rolled over from one plan to
another plan, the rules in Q&A J-2 and Q&A J-3 shall apply.
11.9 Optional Forms of Benefit.
(a) Except to the extent benefits are required to be paid in the form of an
automatic joint and survivor annuity under ARTICLE 9, any amount which a
Participant shall be entitled to receive under the Plan shall be distributed in
one or a combination of the following ways:
(i) in a lump-sum payment of cash, the amount of which shall be determine by
redeeming all Shares credited to the Participant's Account under the Plan as of
the date of distribution;
(ii) in a lump-sum payment including a distribution in kind of all Shares
credited to the Participant's Account under the Plan as of the date of
distribution;
(iii) in substantially equal monthly, quarterly, or annual installment payments
of cash, or the distribution of Shares in kind, over a period certain not to
exceed the Life Expectancy of the Participant or the joint and last survivor
Life Expectancy of the Participant and his Beneficiary, determined in each case
as of the earlier of: (1) the end of the Plan Year in which occurs the event
entitling the Participant to a distribution of benefits, or (2) the date such
installments commence;
(iv) if permitted by the Sponsor, in monthly, quarterly, or annual
installment payments of cash, or the distribution of Shares in kind, so that the
amount distributed in each Plan Year equals the quotient obtained by dividing
the Participant's Account at the beginning of that Plan Year by the joint and
last survivor Life Expectancy of the Participant and the Beneficiary for that
Plan Year. The Life Expectancy will be computed using the recomputation method
described in section 11.7(d). Unless the Spouse of the retired Participant is
the Beneficiary, the actuarial present value of all expected payments to the
retired Participant must be more than fifty percent (50%) of the actuarial
present value of payments to the retired Participant and the Beneficiary; or
(v) by application of the Participant's vested Account to the purchase of a
nontransferable immediate or deferred annuity contract, on an individual or
group basis. Unless the Spouse of the retired Participant is the Beneficiary,
the actuarial present value of all expected payments to the retired Participant
must be more than fifty percent (50%) of the actuarial present value of payments
to the retired Participant and the Beneficiary.
(b) If the Participant fails to select a method of distribution, except as may
be required by ARTICLE 9, all amounts which he is entitled to receive under the
Plan shall be distributed to him in a lump-sum payment.
11.10 Direct Rollover: 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 section, a Distributee
may elect, at the time and in the manner prescribed by the Plan 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. For
purposes of this section only, the following definitions and rules of
interpretation shall apply:
(a) Distributee is an Employee or former Employee. In addition, the Employee or
former Employee's surviving spouse and the Employee or former Employee's spouse
or former spouse who is the alternative payee under a qualified domestic
relations order as defined is section 414(p) of the Code, are Distributees with
regard to the interest of the spouse or former spouse.
<PAGE>
(b) Direct Rollover is a payment by the Plan to the Eligible Retirement Plan
specified by the Distributee.
(c) 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 or another qualified plan, 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 only.
(d) 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: 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; any distribution to
the extent such distribution is required under section 401(a)(9) of the Code;
and 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).
Article 12: Withdrawals
12.1 Withdrawal of Nondeductible Voluntary Contributions. Subject to the
Qualified Election requirements of ARTICLE 9 and section 12.3, any Participant
who has made nondeductible voluntary contributions may, upon thirty (30) days
notice in writing filed with the Plan Administrator, have paid to him all or any
portion of the fair market value of his nondeductible voluntary contribution
subaccount.
12.2 Hardship Withdrawals. If the Adoption Agreement so provides and the
Employer elects, this section applies only to the profit sharing contribution
subaccount and only if the profit sharing allocation formula selected in the
Adoption Agreement is not integrated with Social Security.
(a) Demonstration of Need. Subject to the Qualified Election requirements of
ARTICLE 9 and section 12.3, if a Participant establishes an immediate and heavy
financial need for funds because of a hardship resulting from the purchase or
renovation of a primary residence, the education of the Participant or a member
of his immediate family (including special education), the medical or personal
expenses of the Participant or a member of his immediate family, or other
demonstrable emergency as determined by the Plan Administrator on a uniform and
nondiscriminatory basis, the Participant shall be permitted, subject to the
limitations of subsection (b) below, to make a hardship withdrawal of an amount
credited to his profit sharing contribution subaccount under the Plan.
(b) Amount of Hardship Withdrawal. The amount of any hardship withdrawal by a
Participant under subsection (a) above shall not exceed the amount required to
meet the immediate financial need created by the hardship and not reasonably
available from other resources of the Participant.
(c) Prior Withdrawal of Nondeductible Voluntary Participant Contributions. A
Participant shall not be permitted to make a hardship withdrawal under
subsection (a) unless he has already withdrawn, in accordance with section 12.1,
any amount credited to his nondeductible voluntary contributions subaccount.
12.3 Manner of Making Withdrawals. Any withdrawal by a Participant under the
Plan shall be made only after the Participant files a written request with the
Plan Administrator specifying the nature of the withdrawal (and the reasons
therefore, if a hardship withdrawal), and the amount of funds requested to be
withdrawn. Upon approving any withdrawal, the Plan Administrator shall furnish
the Trustee with written instructions directing the Trustee to make the
withdrawal in a lump-sum payment of cash to the Participant. In making any
withdrawal payment, the Trustee shall be fully entitled to rely on the
instructions furnished by the Plan Administrator, and shall be under no duty to
make any inquiry or investigation with respect thereto. Unless section 9.6 is
applicable, if the Participant is married, his Spouse must consent to the
withdrawal pursuant to a Qualified Election (as defined in section 9.4(c))
within the ninety (90) day period ending on the date of the withdrawal.
12.4 Limitations on Withdrawals.
The Plan Administrator may prescribe uniform and nondiscriminating rules and
procedures limiting the number of times a Participant may make a withdrawal
under the Plan during any Plan Year, and the minimum amount a Participant may
withdraw on any single occasion.
<PAGE>
Article 13: Loans
13.1 General Provisions.
(a) If the Adoption Agreement so provides and the Employer so elects, loans
shall be made available to any Participant or Beneficiary who is a
party-in-interest (as defined in section 3(14) of ERISA) on a reasonably
equivalent basis. A Participant or Beneficiary who is not a party-in-interest
(as defined in section 3(14) of ERISA) shall not be eligible to receive a loan
under this ARTICLE.
(b) Loans shall not be made available to Highly-Compensated Employees (as
defined in section 414(q) of the Code without regard to any available election)
in an amount greater than the amount made available to other Employees.
(c) Loans must be adequately secured and bear a reasonable interest rate.
(d) No Participant loan shall exceed the present value of the
Participant's Vested Account Balance.
(e) Unless section 9.6 is applicable, a Participant must obtain the consent of
his or her Spouse, if any, to use of the Account balance as security for the
loan. Spousal consent shall be obtained no earlier than the beginning of the
ninety (90) day period that ends on the date on which the loan is to be so
secured. The consent must be in writing, must acknowledge the effect of the
loan, and must be witnessed by a Plan representative or notary public. Such
consent shall thereafter be binding with respect to the consenting Spouse or any
subsequent Spouse with respect to that loan. A new consent shall be required if
the Account balance is used for renegotiation, extension, renewal or other
revision of the loan.
(f) In the event of default, foreclosure on the note and attachment of security
will not occur until a distributable event occurs under the Plan.
(g) Loans will not be made to any shareholder-employee or Owner-Employee. For
purposes of this requirement, a shareholder-employee means an Employee or
officer of an electing small business (subchapter S) corporation who owns (or is
considered as owning within the meaning of section 318(a)(1) of the Code), on
any day during the taxable year of such corporation, more than five percent (5%)
of the outstanding stock of the corporation.
(h) If a valid spousal consent has been obtained in accordance with subsection
(e), then, notwithstanding any other provision of this Plan, the portion of the
Participant's Vested Account Balance used as a security interest held by the
Plan by reason of a loan outstanding to the Participant shall be taken into
account for purposes of determining the amount of the Account balance payable at
the time of death or distribution, but only if the reduction is used as
repayment of the loan. If less than one hundred percent (100%) of the
Participant's Vested Account Balance (determined without regard to the preceding
sentence) is payable to the Surviving Spouse, then the Account balance shall be
adjusted by first reducing the Vested Account Balance by the amount of the
security used as repayment of the loan, and then determining the benefit payable
to the Surviving Spouse.
13.2 Administration of Loan Program.
(a) The Plan's loan program will be administered by the Plan Administrator.
(b) Loan requests shall be made on a form prescribed by the Plan Administrator
and shall comply with section 13.4.
(c) Loan requests that comply with all the requirements of this ARTICLE shall be
approved by the Plan Administrator.
(d) The rate of interest to be charged on loans shall be determined under
section 13.5.
(e) The only collateral that may be used as security for a loan, and the
limitations and requirements applicable, are determined under section 13.6.
(f) The rules regarding defaults are set forth in section 13.9.
13.3 Amount of Loan. Loans to any Participant or Beneficiary will not be made to
the extent that such loan, when added to the outstanding balance of all other
loans to the Participant or Beneficiary, would exceed the lesser of:
<PAGE>
(a) Fifty thousand dollars ($50,000) reduced by the excess (if any) of the
highest outstanding balance of loans during the one (1) year period ending on
the day before the loan is made, over the outstanding balance of loans from the
Plan on the date the loan is made; or
(b) One-half (1/2) the present value of the nonforfeitable accrued benefit of
the Participant.
(c) For the purpose of the above limitation, all loans from all plans of the
Employer and other members of a group of employers described in sections 414(b),
414(c) and 414(m) of the Code are aggregated.
13.4 Manner of Making Loans. A request by a Participant for a loan shall be made
in writing to the Plan Administrator and shall specify the amount of the loan,
and the subaccount(s) or Shares of the Participant from which the loan should be
made. The terms and conditions on which the Plan Administrator shall approve
loans under the Plan shall be applied on a uniform and nondiscriminatory basis
with respect to all Participants. If a Participant's request for a loan is
approved by the Plan Administrator, the Plan Administrator shall furnish the
Trustee with written instructions directing the Trustee to make the loan in a
lump-sum payment of cash to the Participant. In making any loan payment under
this ARTICLE, the Trustee shall be fully entitled to rely on the instructions
furnished by the Plan Administrator and shall be under no duty to make any
inquiry or investigation with respect thereto.
13.5 Terms of Loan. Loans shall be made on such terms and subject to such
limitations as the Plan Administrator may prescribe. Furthermore, any loan
shall, by its terms, require that repayment (principal and interest) be
amortized in level payments, not less frequently than quarterly, over a period
not extending beyond five (5) years from the date of the loan, unless such loan
is used to acquire a dwelling unit which, within a reasonable time(determined at
the time the loan is made) will be used as the principal residence of the
Participant. The rate of interest to be charged shall be determined by the Plan
Administrator in accordance with the rates quoted by representative financial
institutions in the local area for similar loans.
13.6 Security for Loans. Any loan to a Participant under the Plan shall be
secured by the pledge of all the Participant's right, title, and interest in the
Trust. Such pledge shall be evidenced by the execution of a promissory note by
the Participant which shall provide that, in the event of any default by the
Participant on a loan repayment, the Plan Administrator shall be authorized (to
the extent permitted by law) to deduct the amount of the loan outstanding and
any unpaid interest due thereon from the Participant's wages or salary to be
thereafter paid by the Employer, and to take any and all other actions necessary
and appropriate to enforce collection of the unpaid loan. An assignment or
pledge of any portion of the Participant's interest in the Plan and a loan,
pledge or assignment with respect to any insurance contract purchased under the
Plan, will be treated as a loan under this section. In the event the value of
the Participant's vested Account at any time is less than one hundred
twenty-five percent (125%) of the outstanding loan balance, the Plan
Administrator shall request additional collateral of sufficient value to
adequately secure the repayment of the loan. Failure to provide such additional
collateral upon a request of the Plan Administrator shall constitute an event of
default.
13.7 Segregated Investment. Loans shall be considered a Participant directed
investment and, for the limited purposes of allocating earnings and losses
pursuant to ARTICLE 5, shall not be considered a part of the common fund under
the Trust.
13.8 Repayment of Loan. The Plan Administrator shall have the sole
responsibility for ensuring that a Participant timely makes all loan repayments,
and for notifying the Trustee in the event of any default by the Participant on
the loan. Each loan repayment shall be paid to the Trustee and shall be
accompanied by written instructions from the Plan Administrator that identify
the Participant on whose behalf the loan repayment is being made.
13.9 Default on Loan.
(a) In the event of a termination of the Participant's employment with the
Affiliated Employers or a default by a Participant on a loan repayment, all
remaining payments on the loan shall be immediately due and payable. The
Employer shall, upon the direction of the Plan Administrator, to the extent
permitted by law, deduct the total amount of the loan outstanding and any unpaid
interest due thereon from the wages or salaries payable to the Participant by
the Employer in accordance with the Participant's promissory note. In addition,
the Plan Administrator shall take any and all other actions necessary and
appropriate to enforce collection of the unpaid
<PAGE>
loan. However, attachment of the Participant's Account pledged as security will
not occur until a distributable event occurs under the Plan.
(b) For purposes of this section, the term "default" shall mean failure, by a
period of at least ten (10) days, to make any loan payment (whether principal or
interest or both) that is due and payable. Neither the Plan Administrator nor
any other fiduciary is required to give any written or oral notice of default.
13.10 Unpaid Amounts. Upon the occurrence of a Participant's retirement or
death, or upon a Participant's fifth consecutive Break in Service or earlier
distribution, the unpaid balance of any loan, including any unpaid interest,
shall be deducted from any payment or distribution from the Trust to which such
Participant or his Beneficiary may be entitled. If after charging the
Participant's Account with the unpaid balance of the loan, including any unpaid
interest, there still remains an unpaid balance of any such loan and interest,
than the remaining unpaid balance of such loan and interest shall be charged
against any property pledged as security with respect to such loan.
Article 14: Insurance
14.1 Insurance. If the Adoption Agreement so provides and the Employer elects to
allocate or permit Participants to allocate a portion of their Accounts to
purchase life insurance, the ensuing subsections of this ARTICLE shall apply.
14.2 Policies. The Plan Administrator shall instruct the Trustee to procure one
or more life insurance policies on the Participant's life, the terms of which
shall conform to the requirements of the Plan and the Code. The policies and the
companies which write them shall be subject to the approval of the Plan
Administrator and the Trustee. The Trustee shall procure and hold such policies
in its name or the name of the nominee. The Trustee shall be the sole owner of
all contracts purchased hereunder, and it shall be so designated in each policy
and application therefore.
14.3 Beneficiary. The Participant shall have the right to name the Beneficiary
and to choose the benefit option under the policy for the Beneficiary. The
Trustee shall designate the Beneficiary of all such policies in accordance with
the written directions of the Plan Administrator and the policy terms. Such
designations may be outlined in the original application as forwarded to the
issuing company. However, the Plan Administrator shall have available and shall
furnish the Participant with the necessary forms for any Beneficiary designation
or change of Beneficiary and it will keep a copy of all executed designations as
part of its records. Upon a Participant's death, the Plan Administrator will
promptly furnish the Trustee a copy of the last designation and shall authorize
the Trustee to complete such forms as the insurance company may require in order
to effect the benefit option.
14.4 Payment of Premiums. Subject to the provisions of sections 7.3 and 14.5,
premium payments to the insurer may be made only by the Trustee with respect to
any insurance policy purchased on behalf of a Participant and shall constitute
first an investment of a portion of the funds of the Participant's Employer
Contribution subaccounts up to the maximum amount of such subaccounts permitted
to be applied toward such premium payments, as provided in section 14.5. If a
Participant's subaccounts lack sufficient assets to pay premiums on a life
insurance policy due on his behalf, the Trustee, at the direction of the Plan
Administrator, acting upon the request of the Participant, shall borrow under
the policy loan provisions, if any, the amount necessary to pay such premiums,
using the cash value of the insurance as security, or the Trustee may liquidate
assets held in the Participant's Account, in the same order, of sufficient value
to pay such premiums. Any loans shall be repaid by the application of earnings,
contributions, or forfeitures to the Account of the Participant insured by such
policy. In the absence of the Plan Administrator's direction to borrow or to
liquidate assets to pay premiums, the life insurance policy shall be put on a
paid-up basis or, if it has no cash value, canceled.
14.5 Limitation on Insurance Premiums. The Trustee shall not pay, nor shall
anyone on behalf of the Trustee pay, any life insurance premium for any
Participant out of the Participant's Employer Contribution subaccounts unless
the amount of such payment, plus all premiums previously so paid on behalf of
the Participant, is less than fifty percent (50%) of the Employer Contributions
and forfeitures allocated to the Participant's Employer Contribution subaccounts
as determined on the date such premium is paid with respect to reserve life
insurance policies and shall be less than twenty-five percent (25%)
<PAGE>
thereof with respect to nonreserve (term) policies, or, if both reserve life and
term insurance are purchased on the life of any Participant, the sum of the term
insurance premium plus one-half (1/2) of the reserve life premiums may not
exceed twenty-five percent (25%) of the Employer Contributions made on behalf of
such Participant. For purposes of these incidental insurance provisions, reserve
life insurance contracts are contracts with both nondecreasing death benefits
and nonincreasing premiums. Dividends received on life insurance policies shall
be considered a reduction of premiums paid in such computations.
If payment of premiums on a Participant's life insurance policy is prohibited
because of the limitation, the Trustee, as directed by the Plan Administrator,
shall permit the Participant to maintain that part of the coverage made
available by the prohibited premiums, either by payment of the amount of the
prohibited premium by the participant from sources other than the Trust or by
distributing the policy to the extent of the Participant's vested interest to
the Participant and eliminating it from the Trust.
Nothing contained in the foregoing provisions of section 14.4 and this section
shall be deemed to authorize the payment of any premiums for any Participant
which would result in a failure to maintain any mandatory investment in Shares
required by the Sponsor in the Account or subaccounts of any such Participant.
14.6 Insurance Company. No insurance company which may issue any policies for
the purposes of the Plan shall be required to take or permit any action contrary
to the provisions of said policies, nor shall such insurance company be deemed
to be a party to, or responsible for the validity of, this Plan for any purpose.
No such insurance company shall be required to look into the terms of this Plan
or question any action of the Trustee hereunder, nor be responsible to see that
any action of the Trustee is authorized by the terms of this Plan. Any such
issuing insurance company shall be fully discharged from any and all liability
for any amount paid to the Trustee or paid in accordance with the direction of
the Trustee, as the case may be, or for any change made or action taken by such
insurance company upon such direction and no such insurance company shall be
obliged to see to the distribution or further application of any monies paid by
it. The certificate of the Trustee signed by one of its trust officers,
assistant secretary, or other authorized representative thereof, may be received
by any insurance company as conclusive evidence of any of the matters mentioned
in this Plan and any insurance company shall be fully protected in taking or
permitting any action on the faith thereof and shall incur no liability or
responsibility for so doing.
14.7 Distribution of Policies. Upon a Participant's death, the Trustee, upon
direction of the Plan Administrator, shall procure the payment of the proceeds
of any policy held by the participant in accordance with its terms and this
Plan. The Trustee shall be required to pay over all the proceeds of any policy
to the Participant's Designated Beneficiary in accordance with the distribution
provisions of this Plan. A Participant's Spouse will be the Designated
Beneficiary unless a Qualified Election has been made in accordance with section
9.4(c) of the Plan. Under no circumstances shall the Trust retain any part of
the proceeds. Subject to the joint and survivor annuity requirements of ARTICLE
9, the policies shall be converted or distributed upon commencement of benefits
in accordance with the provisions of this section. Upon a Participant's
retirement at or after his Normal Retirement Age, unless there is a single sum
distribution in which case any policy shall be distributed, any such policy
shall be converted to a paid-up contract and delivered to the Participant but
the Plan Administrator may, with the Participant's consent, direct that a
portion or all of such cash value of the policy be converted to provide
retirement income as permitted within the terms of the policy and this Plan.
Upon a Participant's retirement due to Total and Permanent Disability, any such
policy shall be held for his account and assigned or delivered to the
Participant in addition to any other benefits provided by this Plan. Upon a
Participant's termination of employment for reasons other than death, Total and
Permanent Disability, or retirement as stated above, to the extent of life
insurance purchased by Employer Contributions, he shall be entitled to a vested
interest in any policy held for his account as his interest is vested in the
remainder of his Employer Contribution subaccounts (exclusive of any such
policy). Whenever the Participant is entitled to one hundred percent (100%)
vesting, then such policy shall be assigned and delivered to the Participant in
accordance with its terms and the terms of the Plan. Whenever the Participant is
entitled to vesting of less than one hundred (100%), then the Participant shall
be entitled to a vested interest of the cash surrender value of any such policy
equal to his percent of vested interest in his Employer Contribution
subaccounts, exclusive of the policy, and one of the following distribution
procedures shall apply:
<PAGE>
(a) If the nonvested portion of the cash surrender value of all policies held
for the Participant's Account is less than the amount of this vested termination
benefit exclusive of the policies, then, such policy shall be assigned to the
Participant and the remainder of the Participant's vested interest in the
Participant's Employer Contribution subaccounts shall be reduced by the cash
surrender value of the nonvested portion of all policies, after which it shall
be paid or distributed to the Participant in accordance with the terms of the
Plan; or
(b) If the nonvested portion of the cash surrender value of all policies held
for the Participant's Account exceeds the Participant's vested interest in the
Employer Contribution subaccount exclusive of such policies, the participant
shall be given the opportunity to purchase such policies by paying to the
Trustee the amount of such excess within thirty (30) days after notice to him of
the amount to be paid. Upon receipt of such payment said policy shall be
assigned and delivered to the Participant to the full satisfaction of all
termination benefits under this Plan. Any such policy not so purchased shall be
surrendered by the Trustee for its cash value and the proceeds thereof deposited
in the Trust for reallocation pursuant to ARTICLE 5.
It is the intention hereof that the total termination benefit of a Participant
whose interest is not fully vested shall be equal to the sum of the vested
percentage of his Employer Contribution subaccounts exclusive of all such
policies and the same percentage of the cash value of all such policies held for
his Account. To the extent possible under the foregoing provisions, such total
termination benefits shall be satisfied by the transfer and delivery to the
Participant of one or more such policies with the balance, if any, to be paid in
cash or in kind.
14.8 Policy Features. The Trustee shall arrange, where possible, that all
policies purchased for the benefit of a Participant shall have the same dividend
option which shall be on the premium reduction plan, and as nearly as may be
possible all policies issued under the Plan shall have the same anniversary
date. To the extent any dividends or credits earned on insurance policies are
not applied toward the next premiums due, they shall be allocated to the
Participant's Employer Contribution subaccount in the same manner as a
Participant's directed investment.
14.9 Changed Conditions. From time to time because of changed conditions, the
Trustee, acting at the direction of the Plan Administrator upon the election of
the Participant concerned, shall obtain an additional contract or policy or make
such change in the contracts or policies maintained by the Trustee on the life
of the Participant as may be required by such changed conditions, within the
limits permitted by the insurance company which issued or is requested to issue
a contract and the limits established by this Plan.
14.10 Conflicts. In the event of any conflict between the terms of the Plan and
the provisions of any contract issued hereunder, the terms of the Plan shall
control.
Article 15: Administration
15.1 Duties and Responsibilities of Fiduciaries; Allocation of Fiduciary
Responsibility. A fiduciary of the Plan shall have only specific powers, duties,
responsibilities, and obligations as are explicitly given him under the Plan and
Trust Agreement. In general, the Employer shall have the sole responsibility for
making contributions to the Plan required under ARTICLE 4; appointing the
Trustee and the Plan Administrator; and determining the funds available for
investment under the Plan. The Plan Administrator shall have the sole
responsibility for the administration of the Plan, as more fully described in
section 15.2. It is intended that each fiduciary shall be responsible only for
the proper exercise of his own powers, duties, responsibilities, and obligations
under the Plan and Trust Agreement, and shall not be responsible for any act or
failure to act of another fiduciary. A fiduciary may serve in more than one
fiduciary capacity with respect to the Plan.
15.2 Powers and Responsibilities of the Plan Administrator.
(a) Administration of the Plan. The Plan Administrator shall have all powers
necessary to administer the Plan, including the power to construe and interpret
the Plan documents; to decide all questions relating to an individual's
eligibility to participate in the Plan; to determine the amount, manner, and
timing of any distribution of benefits or withdrawal under the Plan; to approve
and ensure the repayment of any loan to a Participant under the Plan; to resolve
any claim for benefits in accordance with section 15.7; and to appoint or employ
advisors, including legal counsel; to render advice with respect to any of the
Plan Administrator's responsibilities under the Plan. Any construction,
interpretation, or application of the Plan by the Plan
<PAGE>
Administrator shall be final, conclusive, and binding. All actions by the Plan
Administrator shall be taken pursuant to uniform standards applied to all
persons similarly situated. The Plan Administrator shall have no power to add
to, subtract from, or modify any of the terms of the Plan, or to change or add
to any benefits provided by the Plan, or to waive or fail to apply any
requirements of eligibility for a benefit under the Plan.
(b) Records and Reports. The Plan Administrator shall be responsible for
maintaining sufficient records to reflect the Eligibility Computation Periods in
which an Employee is credited with one or more Years of Service for purposes of
determining his eligibility to participate in the Plan, and the Compensation of
each Participant for purposes of determining the amount of contributions that
may be made by or on behalf of the Participant under the Plan. The Plan
Administrator shall be responsible for submitting all required reports and
notifications relating to the Plan to Participants or their Beneficiaries, the
Internal Revenue Service and the Department of Labor.
(c) Furnishing Trustee with Instructions. The Plan Administrator shall be
responsible for furnishing the Trustee with written instructions regarding all
contributions to the Trust, all distributions to Participants in accordance with
ARTICLE 10, all withdrawals by Participants in accordance with ARTICLE 12, all
loans to Participants in accordance with ARTICLE 13 and all purchases of life
insurance in accordance with ARTICLE 14. In addition, the Plan Administrator
shall be responsible for furnishing the Trustee with any further information
respecting the Plan which the Trustee may request for the performance of its
duties or for the purpose of making any returns to the Internal Revenue Service
or Department of Labor as may be required of the Trustee.
(d) Rules and Decisions. The Plan Administrator may adopt such rules as it deems
necessary, desirable, or appropriate in the administration of the Plan. All
rules and decisions of the Plan Administrator shall be applied uniformly and
consistently to all Participants in similar circumstances. When making a
determination or calculation, the Plan Administrator shall be entitled to rely
upon information furnished by a Participant or Beneficiary, the Employer, the
legal counsel of the Employer, or the Trustee.
(e) Application and Forms for Benefits. The Plan Administrator may require a
participant or Beneficiary to complete and file with it an application for a
benefit, and to furnish all pertinent information requested by it. The Plan
Administrator may rely upon all such information so furnished to it, including
the Participant's or Beneficiary's current mailing address.
(f) Facility of Payment. Whenever, in the Plan Administrator's opinion, a person
entitled to receive a payment of a benefit or installment thereof is under a
legal disability or is incapacitated in any way so as to be unable to manage his
financial affairs, as determined by a court of competent jurisdiction, it may
direct the Trustee to make payments to such person or to the legal
representative or to a relative or friend of such person for that person's
benefit, or it may direct the Trustee to apply the payment for the benefit of
such person in such manner as it considers advisable.
15.3 Allocation of Duties and Responsibilities. The Plan Administrator may, by
written instrument, allocate among its members or employees any of its duties
and responsibilities not already allocated under the Plan or may designate
persons other than members or employees to carry out any of the Plan
Administrator's duties and responsibilities under the Plan. Any such duties or
responsibilities thus allocated must be described in the written instrument. If
a person other than an Employee of the Employer is so designated, such person
must acknowledge in writing his acceptance of the duties and responsibilities
allocated to him.
15.4 Appointment of the Plan Administrator. The Employer shall designate in the
Adoption Agreement the Plan Administrator who shall administer the Employer's
Plan. Such Plan Administrator may consist of an individual, a committee of two
or more individuals, whether or not, in either such case, the individual or any
of such individuals are Employees of the Employer, a consulting firm or other
independent agent, the Trustee (with its consent), or the Employer itself. The
Plan Administrator shall be charged with the full power and the responsibility
for administering the Plan in all its details. If no Plan Administrator has been
appointed by the Employer, or if the person designated as Plan Administrator by
the Employer is not serving as such for any reason, the Employer shall be deemed
to be the Plan Administrator of the Plan. The Plan Administrator may be removed
by the Employer, or may resign by giving
<PAGE>
notice in writing to the Employer, and in the event of the removal, resignation,
or death, or other termination of service by the Plan Administrator, the
Employer shall, as soon as practicable, appoint a successor Plan Administrator,
such successor thereafter to have all of the rights, privileges, duties, and
obligations of the predecessor Plan Administrator.
15.5 Expenses. The Employer shall pay all expenses authorized and incurred by
the Plan Administrator in the administration of the Plan except to the extent
such expenses are paid from the Trust.
15.6 Liabilities. The Plan Administrator and each person to whom duties and
responsibilities have been allocated pursuant to section 15.3 may be indemnified
and held harmless by the Employer with respect to any alleged breach of
responsibilities performed or to be performed hereunder. The Employer and each
Affiliated Employer shall indemnify and hold harmless the Sponsor against all
claims, liabilities, fines, and penalties, and all expenses reasonably incurred
by or imposed upon him (including, but not limited to, reasonable attorney's
fees) which arise as a result of actions or failure to act in connection with
the operation and administration of the Plan.
15.7 Claims Procedure.
(a) Filing a Claim. Any Participant or Beneficiary under the Plan may file a
written claim for a Plan benefit with the Plan Administrator or with a person
named by the Plan Administrator to receive claims under the Plan.
(b) Notice of Denial of Claim. In the event of a denial or limitation of any
benefit or payment due to or requested by any Participant or Beneficiary under
the Plan ("claimant"), claimant shall be given a written notification containing
specific reasons for the denial or limitation of his benefit. The written
notification shall contain specific reference to the pertinent Plan provisions
on which the denial or limitation of his benefit is based. In addition, it shall
contain a description of any other material or information necessary for the
claimant to perfect a claim, and an explanation of why such material or
information is necessary. The notification shall further provide appropriate
information as to the steps to be taken if the claimant wishes to submit his
claim for review. This written notification shall be given to a claimant within
ninety (90) days after receipt of his claim by the Plan Administrator unless
special circumstances require an extension of time for processing the claim. If
such an extension of time for processing is required, written notice of the
extension shall be furnished to the claimant prior to the termination of said
(90) day period, and such notice shall indicate the special circumstances which
make the postponement appropriate.
(c) Right of Review. In the event of a denial or limitation of his benefit, the
claimant or his duly authorized representative shall be permitted to review
pertinent documents and to submit to the Plan Administrator issues and comments
in writing. In addition, the claimant or his duly authorized representative may
make a written request for a full and fair review of his claim and its denial by
the Plan Administrator; provided, however, that such written request must be
received by the Plan Administrator (or its delegate to receive such requests)
within sixty (60) days after receipt by the claimant of written notification of
the denial or limitation of the claim. The sixty (60) day requirement may be
waived by the Plan Administrator in appropriate cases.
(d) Decision on Review. A decision shall be rendered by the Plan Administrator
within sixty (60) days after the receipt of the request for review, provided
that where special circumstances require an extension of time for processing the
decision, it may be postponed on written notice to the claimant (prior to the
expiration of the initial sixty (60) day period) for an additional sixty (60)
days, but in no event shall the decision be rendered more than one hundred
twenty (120) days after the receipt of such request for review. Any decision by
the Plan Administrator shall be furnished to the claimant in writing and shall
set forth the specific reasons for the decision and the specific Plan provisions
on which the decision is based.
(e) Court Action. No Participant or Beneficiary shall have the right to seek
judicial review of a denial of benefits, or to bring any action in any court to
enforce a claim for benefits prior to filing a claim for benefits or exhausting
his rights to review under this section.
Article 16: Amendment, Termination and Merger
16.1 Sponsor's Power to Amend. The Sponsor may amend any part of the Plan. For
purposes of Sponsor's amendments, the mass submitter shall be recognized as the
agent of the Sponsor. If the Sponsor does not adopt
<PAGE>
the amendments made by the mass submitter, it will no longer be identical to or
a minor modifier of the mass submitter plan.
16.2 Amendment by Adopting Employer.
(a) The Employer may:
(i) change the choice of options in the Adoption Agreement;
(ii) add overriding language in the Adoption Agreement when such language is
necessary to satisfy section 415 or section 416 of the Code because of the
required aggregation of multiple plans; and
(iii) 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 individually designed.
(b) An Employer that amends the Plan for any other reason, including a waiver of
the minimum funding requirement under section 412(d) of the Code, will no longer
participate in this prototype plan and will be considered to have an
individually designed plan.
16.3 Vesting Upon Plan Termination. In the event of the termination or partial
termination of the Plan, the Account balance of each affected Participant will
be nonforfeitable.
16.4 Vesting Upon Complete Discontinuance of Contributions. In the event of a
complete discontinuance of contributions under the Plan, the Account balance of
each affected Participant will be nonforfeitable.
16.5 Maintenance of Benefits Upon Merger. In the event of a merger or
consolidation with, or transfer of assets to any other plan, each Participant
will receive a benefit immediately after such merger, consolidation or transfer
(if the Plan then terminated) which is at least equal to the benefit the
Participant was entitled to immediately before such merger, consolidation or
transfer (if the Plan had been terminated).
16.6 Special Amendments. The Employer may from time to time make any amendment
to the Plan that may be necessary to satisfy section 415 or 416 of the Code. Any
such amendment will be adopted by the Employer by completing overriding Plan
language in the Adoption Agreement. In the event of such an amendment, the
Employer must obtain a separate determination letter from the Internal Revenue
Service to continue reliance on the Plan's qualified status.
Article 17: Miscellaneous
17.1 Exclusive Benefit of Participants and Beneficiaries.
(a) All assets of the Trust shall be retained for the exclusive benefit of
Participants and their Beneficiaries, and shall be used only to pay benefits to
such persons or to pay the fees and expenses of the Trust. The assets of the
Trust shall not revert to the benefit of the Employer, except as otherwise
specifically provided in section 17.1(b).
(b) To the extent permitted or required by ERISA and the Code, contributions to
the Trust under this Plan are subject to the following conditions:
(i) If a contribution or any part thereof is made to the Trust by the Employer
under a mistake of fact, such contribution or part thereof shall be returned to
the Employer within one (1) year after the date the contribution is made.
(ii) In the event the Plan is determined not to meet the initial qualification
requirements of section 401 of the Code, contributions made in respect of any
period for which such requirements are not met shall be returned to the Employer
within one (1) year after the Plan is determined not to meet such requirements,
but only if the application for the 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.
(iii) Contributions to the Trust are specifically conditioned on their
deductibility under the Code and, to the extent a deduction is disallowed for
any such contribution, such amount shall be returned to the Employer within one
(1) year after the date of the disallowance of the deduction.
<PAGE>
17.2 Nonguarantee of Employment.
Nothing contained in this Plan shall be construed as a contract of employment
between the Employer and any Employee, or as a right of any Employee to be
continued in the employment of the Employer, or as a limitation of the right of
the Employer to discharge any of its Employees, with or without cause.
17.3 Rights to Trust Assets.
No Employee, Participant, or Beneficiary shall have any right to, or interest
in, any assets of the Trust upon termination of employment or otherwise, except
as provided under the Plan. All payments of benefits under the Plan shall be
made solely out of the assets of the Trust.
17.4 Nonalienation of Benefits.
No benefit or interest available hereunder will be subject to assignment or
alienation, either voluntarily or involuntarily. The preceding sentence shall
also apply to the creation, assignment, or recognition of a right to any benefit
payable with respect to a Participant pursuant to a domestic relations order,
unless such order is determined to be a qualified domestic relations order, as
defined in section 414(p) of the Code, or any domestic relations order entered
before January 1, 1985.
17.5 Aggregation Rules.
(a) Except as provided in ARTICLE 6, all Employees of the Employer or any
Affiliated Employer will be treated as employed by a single employer.
(b) If this Plan provides contributions or benefits for one or more
Owner-Employees who control both the business for which this Plan is established
and one or more other trades or businesses, this Plan and the plan established
for other trades or businesses must, when looked at as a single plan, satisfy
sections 401(a) and (d) of the Code for the Employees of this and all other
trades or businesses.
(c) If the Plan provides contributions or benefits for one or more
Owner-Employees who control one or more other trades or businesses, the
employees of the other trades or businesses must be included in a plan which
satisfies sections 401(a) and (d) of the Code and which provides contributions
and benefits not less favorable than provided for Owner-Employees under this
Plan.
(d) If an individual is covered as an Owner-Employee under the plans of two or
more trades or businesses which are not controlled and the individual controls a
trade or business, then the contributions or benefits of the employees under the
plan of the trades or businesses which are controlled must be as favorable as
those provided for him under the most favorable plan of the trade or business
which is not controlled.
(e) For purposes of paragraphs (b), (c) and (d), an Owner-Employee, or two or
more Owner-Employees, will be considered to control a trade or business if the
Owner-Employee, or two or more Owner-Employees together:
(i) own the entire interest in an unincorporated trade or business; or
(ii) in the case of a partnership, own more than fifty percent (50%) of either
the capital interest or the profits interest in the partnership. For purposes of
the preceding sentence, an Owner-Employee, or two or more Owner-Employees shall
be treated as owning an 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.
17.6 Failure of Qualification. If the Employer's plan fails to attain or retain
qualification, such plan will no longer participate in this master/prototype
plan and will be considered an individually designed plan.
17.7 Applicable Law. Except to the extent otherwise required by ERISA, as
amended, this Plan shall be construed and enforced in accordance with the laws
of the state in which the Employer's principal place of business is located, as
specified in the Adoption Agreement.
Trust Agreement
Money Purchase Pension and Profit Sharing Plan
The Employer has established a Plan for the benefit of Participants therein
pursuant to section 401 of the Internal Revenue Code of 1986. As part of the
Plan, the Employer has requested such person or persons
<PAGE>
(individual, corporate, or other entity), as may be designated in the Adoption
Agreement, to serve as Trustee pursuant to the Trust established for the
investment of contributions under the Plan upon the terms and conditions set
forth in this Trust Agreement. Unless the context of this Trust Agreement
clearly indicates otherwise, the terms defined in ARTICLE 2 of the Plan entered
into by the Employer, of which this Trust Agreement forms a part, shall, when
used herein, have the same meaning as in the Plan.
Article I: Accounts
1.1 Establishing Accounts. The Trustee shall open and maintain a Trust account
for the Plan and, as part thereof, Participants' Accounts for such individuals
as the Plan Administrator shall, from time to time, give written notice to the
Trustee as being Participants in the Plan. The Trustee shall also open and
maintain such other subaccounts as may be appropriate or desirable to aid in the
administration of the Plan. Separate subaccounts shall be maintained for each
Participant and shall be credited with the contributions made by the Employer
and with forfeitures allocated to each such Participant pursuant to the Plan
(and all earnings thereon). If non-deductible voluntary contributions by
Participants are permitted by the Plan, the Trustee shall open and maintain as a
part of the Trust a separate subaccount for each Participant who makes such
nondeductible voluntary contributions, each such subaccount to be credited with
the Participant's voluntary contributions (and all earnings attributable to such
contributions). If trustee transfers or rollover contributions for another
qualified plan are received, the Trustee shall open and maintain a separate
rollover subaccount for each Participant, each such subaccount to be credited
with the Participant's trustee transfers or rollover contributions (and all
earnings attributable to such contributions).
1.2 Charges Against Accounts. Upon receipt of written instructions from the
Administrator, the Trustee shall charge the appropriate subaccount of the
Participant for any withdrawals or distributions made under the Plan and any
forfeiture, which may be required under the Plan, of unvested interests
attributable to Employer Contributions. The Plan Administrator will give written
instructions to the Trustee specifying the manner in which Employer
Contributions and any forfeiture of the nonvested portion of Accounts, as
allocated by the Plan Administrator in accordance with the provisions of the
Plan, are to be credited to the various Accounts maintained for the
Participants.
1.3 Prospectus to be Provided. The Plan Administrator shall ensure that a
Participant who makes a nondeductible voluntary contribution has previously
received or receives a copy of the then current prospectus relating to the
Shares. Delivery of such a nondeductible voluntary contribution, pursuant to the
provisions of the plan by the Plan Administrator to the Trustee shall entitle
the Trustee to assume that the Participant has received such a prospectus.
Article II: Receipt of Contributions
The Trustee shall accept and hold in the Trust contributions made by the
Employer and Participants under the Plan. The Administrator shall give written
instructions to the Trustee specifying the Participants' Accounts to which
contributions are to be credited, the amount of each such credit which is
attributable to Employer Contributions, and the amount, if any, which is
attributable to the Participant's nondeductible voluntary contributions. If
written instructions are not received by the Trustee, or if such instructions
are received but are deemed by the Trustee to be unclear, upon notice to the
Employer, the Trustee may elect to hold all or part of any such contribution in
cash, without liability for rising security prices or distributions made,
pending receipt by it from the Plan Administrator of written instructions or
other clarification, or the Trustee may return the contribution to the Employer.
If any contributions or earnings are less than any minimum which the then
current prospectus for the Shares requires, the Trustee may hold the specified
portion of contributions or earnings in cash, without interest, until such time
as the proper amount has been contributed or earned so that the investment in
the Shares required under the Plan may be made. All payments to the Trust shall
be remitted in U.S. currency or other property to the Trustee at the address
specified by it. Any payments not in U.S. currency may, in the sole discretion
of the Trustee, be refused.
<PAGE>
Article III: Investment Powers of the Trustee
3.1 Investment of Account Assets. The Trustee shall invest the amount of each
contribution made hereunder and all earnings on the Trust in full and fractional
Shares in accordance with the current prospectus for such Shares, in such
amounts and proportions as shall from time to time be designated by the Plan
Administrator on forms provided by the Sponsor, and shall credit such Shares to
the Accounts of each Participant on whose behalf or by whom the contributions
are made and any forfeitures are allocated. All dividends and capital gain
distributions received on the Shares held by the Trustee in each Account, shall,
if received in cash, be reinvested in such Shares in accordance with the current
prospectus for such Shares and shall in any event be credited to such Account.
If any distribution on Shares may be received at the election of the shareholder
in additional Shares, the Trustee shall so elect. The Trustee shall deliver, or
cause to be executed and delivered, to the Plan Administrator, all notices,
prospectuses, financial statements, proxies, and proxy soliciting materials
relating to Shares held hereunder. The Trustee shall not vote any of the Shares
held hereunder, except in accordance with the written instructions of the Plan
Administrator. If no such written instructions are received, such Shares shall
not be voted. The obligations of the Trustee hereunder may be delegated by it as
provided in sections 9.1 and 9.2.
The Trustee shall sell Shares and purchase Shares to accomplish any change in
investments desired by the Employer as indicated on any amended Adoption
Agreement or other instructions in accordance with the terms of the Plan.
Notwithstanding the above, if periodic payments are being made to a Participant
pursuant to ARTICLE IV hereof, any dividends received on Shares held in such
Participant's Account, which dividends are invested at an offering price which
includes a sales charge, need not be invested in additional Shares but may be
held for distributions to the Participant in periodic payments. In such
instances, the Trustee may make any election necessary to receive any such
dividends in cash.
3.2 Directed Investments. When so instructed by the Plan Administrator, the
Trustee shall invest all or any portion of the individual Account of any
Participant in accordance with the direction of the Employer or such Participant
in lieu of participation in the general assets of the Trust. Such directed
investments shall be accounted for separately for each Participant. Except as
otherwise provided herein, the Trustee shall not have any discretion, and is
specifically prohibited from exercising any control or discretion, with respect
to such directed investments. Each Participant who directs the investment of his
Account shall be solely and absolutely responsible for the investment or
reinvestment of all directed investment assets held on his behalf in Trust, and,
except as otherwise provided herein, the Trustee shall not question any such
direction, review any securities or other such assets, or make suggestions with
respect to the investment, retention or disposition of any such assets; provided
that:
(a) If any contributions are transmitted to or otherwise received or held
as directed investment assets without investment directions from the
Participant, the Trustee may retain such amounts in a noninterest-bearing
savings account in a federally insured institution for the benefit of the
Participant.
(b) The Trustee may establish such reasonable rules and
regulations, applied on a uniform basis to all Participants, with respect to the
requirements for, and the form and manner of, effectuating any transaction with
respect to directed investment assets including, without limitation, minimum
amounts, rules applicable to conversion of directed investments into general
assets of the Trust, and appropriate adjustments (based on fair market values)
to Accounts to reflect any such conversion, as the Trustee shall determine to be
consistent with the purposes of the Plan. Any such rules and regulations shall
be binding upon all persons interested in the Trust.
(c) The Trustee may establish a procedure for the periodic review of directed
investment assets to determine, in light of the facts and circumstances
reasonably known to it, whether any actual or proposed investment of such assets
constitutes or would constitute a prohibited transaction as that term is defined
in sections 406-408 of
<PAGE>
ERISA and the corresponding provisions of the Code. If the Trustee determines
that any investment constitutes or would constitute a prohibited transaction,
the Trustee shall promptly communicate this determination to the Plan
Administrator, and shall recommend that the investment be prevented or disposed
of, as the case may be, and may recommend any other action authorized or
required by law, to prevent or remedy the transaction.
(d) In accordance with and pursuant to uniform and nondiscriminatory rules
established under and in accordance with the Plan, the Trustee may deny the Plan
Administrator's application to allow a directed investment proposed by a
Participant.
(e) Notwithstanding anything herein to the contrary, in no event shall the
Trustee engage in any transaction that would be prohibited under ERISA.
3.3 General Investment Powers. Subject to any investment limitations or minimum
requirements for investments in Shares imposed by the Sponsor, and subject to
investment instructions given by the Employer, the Trustee shall be authorized
and empowered to invest and reinvest all or any part of the Trust in any
property, real or personal or mixed, including, but not being limited to,
capital or common stock (whether voting or nonvoting or whether or not currently
paying a dividend), preferred or preference stock (whether voting or nonvoting
or whether or not currently paying a dividend), shares of regulated investment
companies, convertible securities, corporate and governmental obligations,
leaseholds, ground rents, mortgages and other interests in realty, trust and
participation certificates, oil, mineral or gas properties, royalty interests or
rights, including equipment pertaining thereto, notes and other evidences of
indebtedness or ownership, secured or unsecured, contracts, chooses in action,
and warrants, and other instruments entitling the owner thereof to subscribe to
or purchase any of the aforesaid. Subject to any investment limitations or
requirements imposed by the Sponsor relating to the type of permissible
investments in the Trust or the minimum percentage of Trust assets to be
invested in Shares, and subject to the provisions of ARTICLE VIII hereof, in
making and retaining such investments and reinvestments pursuant hereto, the
Trustee shall not be bound as to the character of any investments by any
statute, rule of court, or custom governing the investment of Trust funds.
3.4 Investment in Combined Funds. If the Trustee is a banking institution,
subject to any investment limitations or minimum requirements for investment in
Shares imposed by the Sponsor, and subject to investment instructions given by
the Employer, it may, subject to the election of the Sponsor or the Employer,
cause funds of this Trust to be invested in its commingled funds for qualified
employee benefit plan trusts and such commingled funds are hereby adopted and
made a part of the Plan of which this Trust is a part, and any funds of this
Trust invested in any such commingled funds shall be subject to all the
provisions hereof, as the same may be amended from time to time.
3.5 Other Powers of the Trustee. The Trustee is authorized and empowered with
respect to the Trust:
(a) Subject to any investment limitations or minimum requirements for
investment in Shares imposed by the Sponsor, and subject to investment
instructions given by the Employer, to sell, exchange, convey, transfer, or
otherwise dispose of, either at public or private sale, any property, real or
personal or mixed, at any time held by it, for such consideration and on such
terms and conditions as to credit or otherwise as the Trustee may deem best.
(b) Subject to the provisions of section 3.1, to vote in person or by proxy any
stocks, bonds, or other securities held by it; to exercise any options
appurtenant to any stocks, bonds, or other securities, or to exercise any rights
to subscribe for additional stocks, bonds, or other securities, and to make any
and all necessary payments therefor, to join in, or to dissent from, and to
oppose, the reorganizations, consolidation, liquidation, sale, or merger of
corporations, or properties in which it may be interested as Trustee, upon such
terms and conditions as it may deem wise.
(c) To make, execute, acknowledge, and deliver any and all documents of transfer
and conveyance and any and all other instruments that may be necessary or
appropriate to carry out the powers herein granted.
(d) To register any investment held in the Trust in the name of the Trust or in
the name of a nominee, and to hold any investment in bearer form, but the books
and records of the Trustee shall at all times show that all such investments are
part of the Trust.
(e) To employ suitable agents and counsel (who may also be agents and/or counsel
for the Employer or the Sponsor) and to pay their reasonable expenses and
compensation.
<PAGE>
(f) To borrow or raise monies for the purpose of the Trust from any source and,
for any sum so borrowed to issue its promissory note as Trustee and to secure
the repayment thereof by pledging all or any part of the Trust fund, but nothing
herein contained shall obligate the Trustee to render itself liable individually
for the amount of any such borrowing; and no person loaning money to the Trustee
shall be bound to see to the application of money loaned or to inquire into the
validity or propriety of any such borrowing. Each and all of the foregoing
powers may be exercised without a court order or approval. No one dealing with
the Trustee need inquire concerning the validity or propriety of anything that
is done or need see to the application of any money paid or property transferred
to or upon the order of the Trustee.
3.6 General Powers. The Trustee shall have all of the powers necessary or
desirable to do all acts, take all such proceedings, and exercise all such
rights and privileges, whether or not expressly authorized herein, which it may
deem necessary or proper for the administration and protection of the property
of the Trust and to accomplish any action provided for in the Plan.
3.7 Valuation of Trust. The Trustee, as of the Valuation Date, and at such other
time or times as it determines, shall determine the net worth of the assets of
the Trust. In determining such net worth, the assets of the Trust shall be
evaluated at their fair market value and all expenses shall be deducted. The
Trustee may adopt such methods of valuation as it deems advisable.
3.8 Bonding. Except to the extent otherwise required by law, the Trustee shall
not be required to obtain any bonds in connection with its duties hereunder. The
cost of any bond obtained may be charged as an expense of the Trust, but if not
so charged, shall be paid by the Employer. 3.9 Duties not Assigned. The duties
of the Trustee with respect to the Plan are limited to those assumed by the
Trustee by the terms of this Trust. The Trustee shall not be deemed, by virtue
hereof, to be the administrator or sponsor of the Plan, and shall not be
responsible for filing reports, returns or disclosures with any government
agency except as may otherwise be required by its duties as Trustee under
applicable law.
Article IV: Distributions from a Participant's Account
Distributions from the Trust shall be made by the Trustee in accordance with
proper written directions of the Plan Administrator in accordance with the
provisions of section 15.2 of the Plan, and the Plan Administrator shall have
the sole responsibility for determining that the directions given conform to
provisions of the Plan and applicable law, including (without limitation)
responsibility for calculating the vested interests of the Participant, for
calculating the amounts payable to a Participant pursuant to ARTICLE II of the
Plan, and for determining the proper person to whom benefits are payable under
the Plan. Except to the extent otherwise provided in the Plan, the interest of
Participants and Beneficiaries in the Trust and in the net earnings and profits
thereof may not be assigned or used by a Participant or Beneficiary as
collateral for a loan and shall not be subject to garnishment, attachment, levy
or execution of any kind for the debts or defaults of the Trustee or of any
person, natural or legal, having interest in the Trust.
Article V: Reports of the Trustee and the Plan Administrator
The Trustee shall keep accurate and detailed records of all receipts,
investments, disbursements, and other transactions required to be performed
hereunder with respect to the Trust. The Trustee shall file with the Plan
Administrator a written report or reports reflecting the receipts,
disbursements, and other transactions effected by it with respect to the Trust
during such Plan Year and the assets and liabilities of the Trust at the close
of the Plan Year. Such report or reports shall be open to inspection by any
Participant for a period of one hundred eighty (180) days immediately following
the date on which it is filed with the Plan Administrator. Except as otherwise
prescribed by ERISA, upon the expiration of such one hundred eighty (180) day
period, the Trustee 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 Plan Administrator
shall have filed written objections with the
<PAGE>
Trustee within such one hundred eighty (180) day period, and except for willful
misconduct or lack of good faith on the part of the Trustee.
Article VI: Trustee's Fees and Expenses of the Trust
The Trustee's fees for performing its duties hereunder shall be such reasonable
amounts as shall be respectively established by it from time to time. The
Trustee shall furnish the Employer with its current schedule of fees and shall
give written notice to the Employer whenever its fees are changed or revised.
Such fees, any taxes of any kind whatsoever which may be levied or assessed upon
or in respect of the Trust, to the extent incurred by the Trustee and any and
all expenses incurred by the Trustee in the performance of its duties, including
fees for legal services rendered to the Trustee, shall, unless paid by the
Employer, be paid from the Trust in the manner provided in the Plan. Unless paid
by the Employer, all fees of the Trustee and taxes and other expenses charged to
a Participant's Account may be collected by the Trustee from the amount of any
contribution to be credited or distribution to be charged to such Account or may
be paid by redeeming or selling assets credited to such Account.
Article VII: Duties of the Employer and the Plan Administrator
7.1 Information and Data to be Furnished the Trustee. In addition to making the
contributions called for in ARTICLE II hereof, the Employer, through the Plan
Administrator, agrees to furnish the Trustee with such information and data
relative to the Plan as is necessary for the proper administration of the Trust
established hereunder.
7.2 Limitation of Duties. Neither the Employer nor any of its officers,
directors, or partners, nor the Plan Administrator shall have any duties or
obligations with respect to this Trust Agreement, except those expressly set
forth herein and in the Plan.
Article VIII: Liability of the Trust
8.1 Trustee's Liability.
(a) The Employer shall indemnify and save the Trustee (including its affiliates,
representatives and agents) harmless from and against any liability, cost or
other expense, including, but not limited to, the payment of attorney's fees
that the Trustee may incur in connection with this Trust Agreement or the Plan
unless such liability, cost or other expense (whether direct or indirect) arises
from the Trustee's own willful misconduct or gross negligence. The Employer
recognizes that a burden of litigation may be imposed upon the Trustee or a
result of some act or transaction for which it has no responsibility or over
which it has no control under this Trust Agreement. Therefore, the Employer
agrees to indemnify and hold harmless and, if requested, defend the Trustee
(including its affiliates, representatives and agents) from any expenses
(including counsel fees, liabilities, claims, damages, actions, suits or other
charges) incurred by the Trustee in prosecuting or defending against any such
litigation.
(b) The Trustee shall not be liable for, and the Employer will indemnify and
hold harmless the Trustee (including its affiliates, representatives and agents)
from and against all liability or expense (including counsel fees) because of
(i) any investment action taken or omitted by the Trustee in accordance with any
direction of the Employer or a Participant, or investment inaction in the
absence of directions from the Employer or a Participant or (ii) any investment
action taken by the Trustee pursuant to an order to purchase or sell securities
placed by the Employer or a Participant directly with a broker, dealer or
issuer. It is understood that although, when the Trustee is subject to the
direction of the Employer or a Participant the Trustee will perform certain
ministerial duties with respect to the portion of the Fund subject to such
direction (the "Directed Fund"), such duties do not involve the exercise of any
discretionary authority or other authority to manage and control assets of the
Directed Fund and will be performed in the normal course of business by officers
and employees of the Trustee or its affiliates, representatives or agents who
may be unfamiliar with investment management. It is agreed that the Trustee is
not undertaking any duty or obligation, express or implied, to review, and will
not be deemed to have any knowledge of or responsibility with respect to, any
transaction involving the investment of
<PAGE>
the Directed Fund as a result of the performance of its ministerial duties.
Therefore, in the event that "knowledge" of the Trustee shall be a prerequisite
to imposing a duty upon or determining liability of the Trustee under the Plan
or this Trust or any law or regulation regulating the conduct of the Trustee
with respect to the Directed Fund, as a result of any act or omission of the
Employer or any Participant, or as a result of any transaction engaged in by any
of them, then the receipt and processing of investment orders and other
documents relating to Plan assets by an officer or other employee of the Trustee
or its affiliates, representatives or agents engaged in the performance of
purely ministerial functions shall not constitute "knowledge" of the Trustee.
(c) Notwithstanding the foregoing provisions of this Trust Agreement, the
Trustee shall discharge its duties hereunder 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 a like character and with like aims. Any investments selected by
the Trustee without specific direction from the Employer shall be selected to
diversify the investments of the Trust fund so as to minimize the risk of large
losses, unless in the circumstances it is clearly prudent not to do so. The
Trustee shall perform its duties in accordance with this Trust Agreement insofar
as this Trust Agreement is consistent with the provisions of ERISA. To the
extent not prohibited by ERISA, the Trustee shall not be responsible in any way
for any action or omission of the Employer or the Plan Administrator with
respect to the performance of their duties and obligations set forth in the
Plan. To the extent not prohibited by ERISA, the Trustee shall not be
responsible for any action or omission of any of its agents, or with respect to
reliance upon advice of its counsel (whether or not such counsel is also counsel
to the Employer or to the Plan Administrator), provided that such agents or
counsel were prudently chosen by the Trustee and that the Trustee relied in good
faith upon the action of such agent or the advice of such counsel. The Trustee
shall be indemnified and held harmless by the Employer against liability or
losses occurring by reason of any act or omission of the Trustee under this
Trust Agreement, unless such act or omission is due to its own willful
nonfeasance, malfeasance, or misfeasance or other breach of duty under ERISA, to
the extent that such indemnification does not violate ERISA or any other federal
or state laws.
Article IX: Delegation of Powers
9.1 Delegation by the Trustee. With respect to Shares held by the Plan, the
Trustee hereby delegates to the custodian or other agent designated by the
Sponsor the functions designated in (a) through (d) hereunder, other than the
investment, management or control of the Trust assets. With respect to assets
other than Shares, the Trustee may delegate in writing pursuant to a procedure
permitted and established by the Sponsor, to a person (individual, corporate, or
other entity) designated by the Sponsor as an agent or custodian, any of the
powers or functions of the Trustee hereunder other than the investment,
management or control of the Trust assets, including (without limitation):
(a) custodianship of all or any part of the assets of the Trust;
(b) maintaining and accounting for the Trust and for Participants and other
Accounts as a part thereof;
(c) distribution of benefits as directed by the Plan Administrator; and
(d) preparation of the annual report on the status of the Trust. The agent or
custodian so appointed may act as agent for the Trustee, without investment
responsibility, for fees to be mutually agreed upon by the Employer and the
agent or custodian and paid in the same manner as Trustee's fees. The Trustee
shall not be responsible for any act or omission of the agent or custodian
arising from any such delegation, except to the extent provided in section 8.1.
9.2 Delegation with Employer Approval. The Trustee (whether or not a bank or
trust company) and the Employer may, by mutual agreement, arrange for the
delegation by the Trustee to the Plan Administrator or any agent of the Employer
of any powers or functions of the Trustee hereunder other than the investment
and custody of the Trust assets. The Trustee shall not be responsible for any
act or omission of such person or persons arising from any such delegation,
except to the extent provided in ARTICLE VIII.
Article X: Amendment
As provided in section 16.1 of the Plan, and subject to the limitations set
forth therein, the prototype Adoption Agreement, Plan and Trust Agreement may be
amended at any time, in whole or in part, by
<PAGE>
the Sponsor. The Trustee hereby delegates authority to the Sponsor, and to any
successor Sponsor, to so amend the prototype Adoption Agreement, Plan and Trust
Agreement and the Trustee hereby agrees that it shall be deemed to have
consented to any amendment so made which does not increase the duties of the
Trustee without its consent.
Article XI: Resignation or Removal of Trustee
The Trustee may resign at any time upon thirty (30) days notice in writing to
the Employer, and may be removed by the Sponsor or Employer at any time upon
thirty (30) days notice in writing to the Trustee. Upon such resignation or
removal, the Sponsor or Employer shall appoint a successor Trustee or Trustees.
Upon receipt by the Trustee of written acceptance of such appointment by the
successor Trustee, the Trustee shall transfer and pay over to such successor the
assets of the Trust and all records pertaining thereto, provided that any
successor Trustee shall agree not to dispose of any such records without the
Trustee's consent. The successor Trustee shall be entitled to rely on all
accounts, records, and other documents received by it from the Trustee, and
shall not incur any liability whatsoever for such reliance. The Trustee is
authorized, however, to reserve such sum of money or property as it may deem
advisable for payment of all its fee, compensation, costs, and expenses, or for
payment of any other liabilities constituting a charge on or against the assets
of the Trust or on or against the Trustee, with any balance of such reserve
remaining after the payment of all such items to be paid over to the successor
Trustee. Upon the assignment, transfer, and payment over of the assets of the
Trust, and obtaining a receipt thereof from the successor Trustee, the Trustee
shall be released and discharged from any and all claims, demands, duties, and
obligations arising out of the Trust and its management thereof, excepting only
claims based upon the Trustee's willful misconduct or lack of good faith. The
successor Trustee shall hold the assets paid over to it under terms similar to
those of this Trust Agreement under a trust that will qualify under section 401
of the Code. If within thirty (30) days after the Trustee's resignation or
removal, the Employer or Sponsor has not appointed a successor Trustee which has
accepted such appointment, the Trustee shall, unless it elects to terminate the
Trust pursuant to ARTICLE XII, appoint such successor itself.
Article XII: Termination of the Trust
12.1 Term of the Trust. This Trust shall continue as to the Employer so long as
the Plan is in full force and effect. If the Plan ceases to be in full force and
effect, this Trust shall thereupon terminate unless expressly extended by the
Employer.
12.2 Termination by the Trustee. The Trustee may elect to terminate the Trust if
within thirty (30) days after its resignation or removal pursuant to ARTICLE XI
the Employer or Sponsor has not appointed a successor Trustee which has accepted
such appointment. Termination of the Trust shall be effected by distributing all
assets thereof to the Participants or other persons entitled thereto pursuant to
the directions of the Plan Administrator (or, in the absence of such direction,
as determined by the Trustee) as provided in section 16.3 of the Plan, subject
to the Trustee's right to reserve funds as provided in ARTICLE XI hereof. Upon
the completion of such distribution, the Trustee shall be relieved from all
further liability with respect to all amounts so paid, other than any liability
arising out of the Trustee's willful misconduct.
Article XIII: Miscellaneous
13.1 No Diversion of Assets. At no time shall it be possible for any part of the
assets of the Trust to be used for or diverted to purposes other than for the
exclusive benefit of Participants and their Beneficiaries or revert to the
Employer, except as specifically provided in the Plan or this Trust Agreement.
13.2 Notices. Any notice from the Trustee to the Employer or from the Employer
to the Trustee provided for in the Plan and Trust shall be effective if sent by
first class mail to their respective last address of record.
13.3 Multiple Trustees. In the event that there shall be two (2) or more
Trustees serving hereunder, any action taken or decision made by any such
Trustee may be taken or made by a majority of them with the same effect as if
all had joined therein, if there be more than two (2), or unanimously if there
be two (2).
13.4 Conflict with Plan. In the event of any conflict between the provisions
<PAGE>
of the plan and those of this Trust Agreement, the Plan shall prevail.
13.5 Applicable Law. Except to the extent otherwise required by ERISA, as
amended, this Trust Agreement shall be construed in accordance with the laws of
the state where the Trustee has its principal place of business.
13.6 Returned Contributions.
(a) A contribution made by the Employer by a mistake of fact shall, if the
Administrator so directs, be returned to the Employer within one (1) year after
its payment. The Administrator shall, in its sole discretion, determine whether
the contribution was made by mistake of fact, based upon such evidence as it
deems appropriate.
(b) A contribution made by the Employer that is conditioned
on deductibility under section 404 of the Code shall, to the extent such
deduction is disallowed, be returned to the Employer within one (1) year after
the disallowance, if the Administrator so directs.
13.7 General Undertaking. All parties to this Trust and all persons claiming any
interest whatsoever hereunder agree to perform any and all acts and execute any
and all documents and papers which may be necessary or desirable for the
carrying out of the Trust or any of it provisions.
13.8 Invalidity of Certain Provisions. If any provision of this Trust shall be
held invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision hereof and the Trust shall be construed and enforced
as if such provisions had not been included.
13.9 Counterpart Originals. This Trust may be executed in one or more
counterpart originals. IN WITNESS WHEREOF, the Employer and the Trustee(s) have
signed this Trust effective as of the date specified in the Adoption Agreement.
Attest: [NAME OF EMPLOYER]
By:
Secretary President
TRUSTEE(S)
)
) ss
)
I, ,
a Notary Public in and for the jurisdiction above named, do hereby
certify that
did personally appear before me and do acknowledge that they
executed the foregoing trust as their free act and deed.
Subscribed and sworn to before me this day of ,
19 .
Notary Public
My Commission
Expires:
IRS Opinion Letters
Money Purchase Pension Plan
Serial Number: D251238b
<PAGE>
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Serial Number: D251237b
Colonial Money Purchase Pension Plan
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<PAGE>
[Colonial Flag Logo]
Important Employee
Communications for
The Colonial
Money Purchase Pension Plan
and Profit Sharing Plan
Notice to Interested Parties Page A1
Model Summary Plan Description
Money Purchase Pension Plan Page B1
Model Summary Plan Description
Profit Sharing Plan Page C1
Customize
the Enclosed Documents
for Your Plan -- Check Off Items
and Retype On Company Stationery
Congratulations on Establishing your Colonial Retirement Plan
This brochure includes samples of the employee communications you must provide.
Specific instructions accompany each document. The following is an overview of
requirements for your quick reference.
Notice to Interested Parties
Retype the notice on your company letterhead and fill in all the blanks. Post
the notice on the bulletin boards customarily used to display important notices,
hand distribute, or mail it to employees within 30 days after adopting the Plan
or amending the options chosen by you in the Adoption Agreement. The reverse
side of the notice shows the IRS key district office to which the notice should
be mailed.
Summary Plan Description (SPD)
The SPD is intended to provide employees with the information needed to properly
understand their rights under the Plan. There is a model SPD for each of the
plans, designed to follow the appropriate Adoption Agreement you completed. The
SPD must accurately reflect the provisions of the Plan, in accordance with the
choices you made in the Adoption Agreement. If you have changed the pre-checked
elections on the Adoption Agreement, you should make certain to change the SPD
accordingly. You may draft your own version of the SPD, as long as it meets IRS
regulations.
A copy of the SPD must be furnished to each participant covered
under the Plan and each beneficiary receiving benefits under the Plan on or
before the later of the following dates:
1. Within 90 days
(a) after the employee becomes a participant in the case of a participant
covered under the Plan, or
(b) after the beneficiary first receives benefits, in the case of a beneficiary
receiving benefits under the Plan, or
2. Within 120 days after the Plan becomes subject to the reporting and
disclosure requirements of ERISA. ERISA ss.104(b) and Reg. ss.2520.104(b)-2(a)
<PAGE>
A copy of the SPD must be filed with the Department of Labor by mailing it to:
SPD, Pension and Welfare Benefit Administration
Room N-5644
U.S. Department of Labor
200 Constitution Avenue, N.W.
Washington, D.C. 20210
on or before the last
date on which the SPD may be furnished to Plan participants and beneficiaries.
Reg. ss.2520.104a-3
When distributing summary plan descriptions to plan participants and
beneficiaries you must take measures to ensure they actually receive them.
If you need additional assistance or have questions regarding these forms,
please contact our Qualified Plans Department at 800-225-2365, ext. 6660.
Thank you for choosing a Colonial retirement plan.
Notice to
Interested Parties
Retype the following notice on your letterhead, filling in all blanks. Post the
notice on the bulletin boards customarily used to display notices concerning
employee benefit plans and other important employee issues, hand distribute, or
mail it to employees within 30 days after adopting the plan or amending the
options chosen by you in the Adoption Agreement.
Notice to Interested Parties
Current employees of ______________ (Name of Employer) are hereby notified that
__________ (Name of Employer) has adopted the ____________ (Name of Plan or
Plans) as its employee pension benefit plan on _____________(Date of Adoption).
All employees will be eligible to participate in this Plan with the exception of
_______________________ (Specify ineligible groups of employees, if any).
It is not expected that this Plan will be submitted to the Internal Revenue
Service for an advance determination as to whether or not the Plan meets the
qualification requirements of section 401(a) of the Internal Revenue Code,
because this Plan is a minor modification of a prototype plan on which the
Internal Revenue Service has previously issued a favorable opinion letter with
respect to the qualification of this Plan.
Rights of Interested Parties
As an interested party, you have the right to submit to the Key District
Director of the Internal Revenue Service, either individually or jointly with
other interested parties, your comments as to whether this Plan meets
qualification requirements of the Internal Revenue Code. You may also, either
individually or jointly with other interested parties, request that the
Department of Labor submit, on your behalf, comments to the Key District
Director regarding qualification of this Plan. If the Department of Labor
declines to comment on all or some of the matters you raise, you may,
individually, or jointly if your request was made to the Department jointly,
submit your comments on these matters directly to the Key District Director.
Request for Comments by the Department of Labor
The Department of Labor may not comment on behalf of interested parties unless
requested to do so by the lesser of 10 employees or 10% of the employees who
qualify as interested parties. The number of persons needed for the Department
of Labor to comment with respect to this Plan is_____(Insert applicable number).
If you request the Department to comment, your request must be in writing, must
specify the number of persons needed for the Department to comment, must specify
the matters upon which comments are requested and must include the name of the
adopting Employer, the name of the Plan, when it was adopted, the Plan number,
the Plan's Opinion Letter number, the name and address of the Sponsor, the
adopting Employer's EIN, the name and address of the Plan Administrator, and the
name and address of the IRS Key District Director having jurisdiction of the
Plan. This information can be found at the end of this Notice. A request to the
Department should be sent to the following address:
<PAGE>
Deputy Assistant Secretary Pension and Welfare Benefits Administration
U. S. Department of Labor
200 Constitution Avenue, N.W.
Washington, D. C. 20210
Attention: 3001 Comment Request
A request to the Department to comment must be received by it by
_____________ (Insert date 45 days after Plan is adopted), if you wish to
preserve your right to comment to the Key District Director, or by _________
(Insert date 55 days after Plan is adopted), if you wish to waive that right.
Comments to the Internal Revenue Service
You may also submit comments to the Key District Director and these must be in
writing and received by him by_______ (Insert date 75 days after plan is
adopted). However, if there are matters upon which you request the Department to
comment on your behalf, and the Department declines, you may submit comments on
these matters directly to the Key District Director to be received by him within
15 days from the time the Department notifies you that it will not comment on a
particular matter or by _______ (Insert date 75 days after Plan is adopted)
whichever is later, but not after __________ (Insert date 90 days after Plan is
adopted).
Additional Information
Detailed instructions regarding the requirements for notification of interested
parties may be found in Sections 17, 18, and 19 of Revenue Procedure 94-6.
Additional information concerning this Plan adoption (including, where
applicable, a description of the provisions of non-forfeitable benefits, a
description of the circumstances which may result in ineligibility or loss of
benefits, a description of the source of financing of the Plan, and copies of
Section 17 of Revenue Procedure 94-6 is available at _________________________
(Insert location) during the hours of _______________ (Insert hours) for
inspection or copying. There may be a nominal charge for copying and/or mailing.
The following information will be needed for correspondence with the Department
or the Key District Director.
Name of adopting employer
Name of plan or plans
Date adopted
Plan Identification Number(s)
Opinion Letter Number: Money Purchase Pension Plan: D251238b
Profit Sharing Plan: D251237b
Name of Sponsor
Address of Sponsor: Colonial Investment Services, Inc.
One Financial Center
Boston, MA 02111
Adopting Employer's EIN
Name of Plan Administrator
Address of Plan Administrator
City State Zip
Address of Key District Director
<PAGE>
City State Zip
Key District:
Internal Revenue Service
EP/EO Division
P.O. Box 1680, GPO
Brooklyn, NY 11202
Internal Revenue Service
EP/EO Division
P.O. Box 17288
Baltimore, MD 21203
Internal Revenue Service
EP/EO Division
P.O. Box 3159
Cincinnati, OH 45201
Internal Revenue Service
EP/EO Division
Mail Code 4950 DAL
1100 Commerce Street
Dallas, TX 75242
Internal Revenue Service
EP/EO Division
P.O. Box 941
Atlanta, GA 30370
Internal Revenue Service
EP Application
EP/EO Division
McCaslin Industrial Park
2 Cupania Circle
Monterey Park, CA 91754-7406
Internal Revenue Service
EP/EO Division
230 S. Dearborn DPN 20-6
Chicago, IL 60604
Employer Location:
Connecticut, Maine, Massachusetts,
New Hampshire, New York, Rhode Island, Vermont
Delaware, District of Columbia, Maryland, New Jersey, Pennsylvania, Virginia,
any U.S. possession or foreign country Indiana, Kentucky, Michigan, Ohio,
West Virginia
Arizona, Colorado, Kansas, Oklahoma, New Mexico, Texas, Utah, Wyoming
Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, North Carolina,
South Carolina, Tennessee Alaska, California, Hawaii, Idaho, Nevada, Oregon,
Washington
Illinois, Iowa, Minnesota, Missouri, Montana, Nebraska, North Dakota, South
Dakota, Wisconsin
<PAGE>
Model Summary Plan Description
Money Purchase
Pension Plan
Each employer who adopts the Prototype Money Purchase Pension Plan is required
by Department of Labor regulations to provide employees with a summary plan
description. A summary plan description is intended to provide employees with
the information they need to properly understand their rights under such a
retirement plan.
The employer must distribute a copy of the summary plan description to plan
participants and file it with the Department of Labor no later than 120 days
after adoption of the Colonial Prototype Money Purchase Pension Plan.
Thereafter, a copy of the summary plan description must be distributed to new
plan participants (and any summary of material modifications not yet
incorporated in the summary plan description) within 90 days after the person
becomes a plan participant (for a beneficiary, 90 days after benefits begin).
When distributing summary plan descriptions to plan participants and
beneficiaries, measures must be taken to ensure they actually receive them.
The summary plan description distributed to employees must accurately reflect
the provisions of the plan, in accordance with the choices made in the Adoption
Agreement. The model summary plan description was designed to assist in
producing such a document.
The model summary plan description contains several sections where the employer
must choose which language is appropriate, or whether language should be
included in the summary plan description at all. These decisions should be made
by looking at the Adoption Agreement and determining which language, if any, is
appropriate. Instructions are included wherever possible to help make these
decisions. Once the choices have been made, the employer simply checks off the
appropriate language in the spaces provided. Employers may then wish to have the
summary plan description retyped to delete those provisions which do not apply
to the Plan.
I. Introduction
_______________________________ (Insert name of employer) (the "Employer") is
pleased to be able to provide you with the _______________ (Insert name of
employer) Money Purchase Pension (the "Plan" or the "Pension Plan"). The Plan is
effective as of _________ (Insert effective date).
The Plan is a defined contribution plan, to which the Employer makes
contributions to an account held in your name. With this type of plan, the
retirement benefit you receive will depend on the investment performance of the
amounts that are in your account. The Plan is designed to provide retirement
income to employees who remain with the Employer until retirement and to those
who have a vested interest in their account when they terminate their employment
with the Employer.
Only the main features of the Plan are explained in this Summary Plan
Description. Any questions which are not answered here should be referred to
__________________________ (Insert name of department or personnel responsible
for participant information). If there is any inconsistency between the Plan as
described in this Summary Plan Description and the Plan document itself, the
terms of the Plan document will govern. Copies of the Plan document and the
Trust Agreement are available for your inspection during regular working hours.
Neither this summary nor any of its provisions form the basis or terms of a
contract of employment between you and _________________________(insert name of
employer).
II. Description of Plan Benefits and Requirements
A. Terms with Special Meanings
Certain words and terms used in this Summary have special
meanings. Many of these terms are defined in this section, while others are
explained in the text of the Summary. To assist you in identifying these terms
within the text, they are capitalized.
<PAGE>
1. Beneficiary. Your designated Beneficiary is the person you name to receive
your benefit distribution in the event of your death. If you are married, you
will need written consent from your spouse to name someone other than your
spouse as your Beneficiary.
2. Break in Service. A Break in Service occurs if you complete less than 501
Hours of Service with the Employer during a Plan Year.
3. Compensation. Compensation is the total compensation paid to you by the
Employer during any portion of a Plan Year during which you were a Plan
Participant. If you are self-employed, your Compensation is your earned income
less your deductible contributions to any qualified retirement plans. The amount
of your Compensation taken into account under the Plan for any year may not
exceed $150,000 or such other limit as set forth in the Internal Revenue Code.
4. Covered Compensation. Compensation after you have become a participant in the
Plan.
5. Hours of Service. Each hour for which you are paid or entitled to be paid by
the Employer. In addition, uncompensated authorized leaves of absence that do
not exceed two years, military leave while your reemployment rights are
protected by law, and absences from work for maternity or paternity reasons may
be credited as Hours of Service for the purpose of determining whether you had a
Break in Service. (Include the following paragraph if you are subject to the
Family and Medical Leave Act of 1993): You shall be credited with a Year of
Service under this Plan for any period of family or medical leave not otherwise
treated as a leave of absence under the Plan to the extent required by the
Family and Medical Leave Act of 1993. While you are on a family or medical
leave, you will participate in any Plan changes that become effective during
such period, to the extent required by law.
6. Participant. A participant is an employee who has met the requirements for
participating in this Plan, and whose account has been neither completely
forfeited nor distributed.
7. Plan Year. The Plan Year is the 12-month period ending on the date shown in
Section V of this Summary.
8. Sponsor. The Sponsor is the organization which has made this Plan available
to the Employer.
9. Trust. The Trust is a fund maintained by the Trustee for the investment of
Plan assets, including the amount in your account.
10. Year of Service. A Year of Service is the applicable
12-month period during which you complete 1000 (Insert number of hours) or more
Hours of Service. For eligibility purposes, the applicable 12-month period
begins on your date of employment or any anniversary. For vesting purposes, the
applicable 12-month period is the Plan Year.
Service before the Plan or a predecessor plan was adopted
[ ] Will count. [ ] Will not count.
B. Participation
You will be eligible to participate in the Plan after you have met the following
eligibility requirements: (Check all applicable items)
[ ] You have reached 21 (Insert age).
[ ] You have completed 1 (Insert number of years) Years of Service.
[ ] You have completed ______ (Insert number) months since your date of hire.
[ ] You are not a member of a collective bargaining unit.
[ ] You are not a nonresident alien.
The first entry date, or date in which you can first participate in the Plan if
you meet these requirements, is _____ (Insert effective date). Thereafter, the
entry date(s) will be ________ (Insert dates of the first day of the plan year
and the first day of the seventh month of the plan year) of each Plan Year.
Once you become a Participant, you will remain a Participant as long as you do
not incur a Break in Service. If you do incur a Break in Service, and are later
reemployed by the Employer, you will be reinstated as a Participant and any
previous Hours of Service will be reinstated as of the date of your
reemployment.
C. Individual Accounts
A separate account will be maintained for you within the Plan. This account will
be further divided into subaccounts, which will be credited with the different
types of contributions that are described in the next section. The sub-accounts
that will be maintained for you are as follows:
<PAGE>
1. Money Purchase Pension Contribution Subaccount. This sub-account will be
credited with your share of Employer Money Purchase Pension Contributions,
distributions from this subaccount, and the earnings and losses attributable to
this subaccount.
2. Trustee Transfer and Rollover Subaccounts. These sub-accounts will be
credited with any rollover contributions or transfer contributions you may make
to the Plan, any distributions from the subaccount, and the earnings and losses
attributable to the subaccount.
(Check the following item if your plan permits Voluntary Employee
Contributions):
3. n Nondeductible Voluntary Contribution Subaccount. This subaccount will be
credited with your Voluntary Employee Contributions, any distributions from this
subaccount, and the earnings and losses attributable to this subaccount.
D. Contributions
The Employer will make, or you will be permitted to make, the following types of
contributions. These contributions will be allocated to the appropriate
subaccounts within your account.
1. Employer Money Purchase Pension Contributions. The Employer will make Money
Purchase Pension Contributions to the Plan each Plan Year in accordance with a
formula based on your Compensation. This formula is given in the section on
"Allocations."
2. Rollover Contributions and Direct Transfers. If you have participated in
other pension or profit sharing plans, you will be permitted to make a rollover
contribution to the Plan of certain amounts you may receive from those other
plans.
You will also be permitted, with the approval of the Plan Administrator,
to authorize a direct transfer to the Plan of amounts that are attributable to
your participation in other pension or profit sharing plans.
(Check the following item if your plan permits Voluntary Employee
Contributions):
3. [ ] Voluntary Employee Contributions. To increase your retirement benefits
from this Plan, you may choose to make voluntary contributions to the Plan of up
to _____ (Insert maximum Voluntary Employee Contribution percentage) of your
Compensation. Such contributions will not be permitted, however, for Plan Years
beginning after _____ (the Plan Year in which the Plan is adopted). The minimum
contribution you must make if you choose to make voluntary contribution is as
follows:
(Check one of the following items):
[ ] The minimum voluntary contribution is _____ (Insert minimum Voluntary
Contribution percentage) of your Compensation.
[ ] There is no minimum voluntary contribution.
E. Allocations
1. Eligibility for Allocations. Each Plan Year the Employer will make a Money
Purchase Pension Contribution to the Plan in accordance with the formula based
on your Covered Compensation. Your account will be allocated a contribution.
[ ] Unless you terminate your employment during the Plan Year with not more than
500 (Insert Hours of Service requirement) Hours of Service and you are not an
employee as of the last day of the Plan Year. (You will receive an allocation,
however, if you die, retire, or become disabled during the Plan Year.)
Under some circumstances, special minimum allocation rules may result in your
receiving an allocation, even if you do not meet any of the requirements set
forth above.
2. Amount of Allocation. If you are eligible, your account will be credited with
a Money Purchase Pension Contribution as follows:
The Employer will make a contribution on your behalf equal to ________ (Insert
contribution percentage) of your Covered Compensation.
The Plan's Integration Level is equal to:
(Check one of the following items):
[ ] The taxable wage base, which is the annual earnings subject to Social
Security (FICA) tax.
[ ] A dollar amount equal to __________ (Insert dollar amount).
<PAGE>
[ ] ________% of the taxable wage base.
Under some circumstances, special minimum allocation rules may cause you to
receive a larger allocation than you normally would. The amount that can be
allocated to your account in any Plan Year is limited by rules applying to all
qualified plans.
F. Vesting
Vesting refers to the nonforfeitable interest you have in each of your
subaccounts. In other words, your vested interest in your account is the amount
you will receive when your account is distributed to you. You will always have a
100 percent vested and nonforfeitable interest in the amounts you have in your:
Trustee transfer and rollover subaccounts.
(Check the following item only if your plan permits Voluntary Employee
Contributions):
[ ] Nondeductible voluntary contribution subaccount.
You will earn a vested interest in your Money Purchase Contribution Subaccount
in accordance with the following:
(Check one of the following items):
[ ] You will always have a 100 percent vested and nonforfeitable interest in
your Money Purchase Pension Contribution Subaccount.
[ ] You will have a 100 percent vested and nonforfeitable interest in your Money
Purchase Pension Contribution Subaccount in the event of any of the
following:
[bullet] You reach your retirement date.
[bullet] You die or become disabled.
Otherwise, you will earn a vested interest in your Money Purchase Pension
Contribution Subaccount in accordance with the following schedule:
(Check one of the following items):
[ ] Years of Service Vested Percentage
1 year 0%
2 years 20%
3 years 40%
4 years 60%
5 years 80%
6 or more years 100%
For example, if you are employed for six years, you will be entitled to the
entire amount in your Money Purchase Pension Contribution Subaccount. However,
if you terminate employment with the Employer after only four years, even though
you return to employment with the Employer six years later, you will be entitled
to receive only 60 percent of that amount.
[ ] You will be 100 percent vested after ____ years of service. If you terminate
employment prior to ____ years you will not have any vested amount in your Money
Purchase Pension Contribution Subaccount.
[ ] Years of Service Vested Percentage
1 year ____%
2 years ____% (not less than 20)
3 years ____% (not less than 40)
4 years ____% (not less than 60)
5 years ____% (not less than 80)
6 or more years ____% (not less than 100)
Any portion of your Money Purchase Pension Contribution Subaccount in which you
do not have a vested interest will be forfeited by you as of the last day of the
Plan Year in which your fifth consecutive Break in Service occurs.
G. Forfeitures
(Check one of the following items):
<PAGE>
[ ] You have a 100 percent vested and nonforfeitable interest in the amounts in
your account at all times. You will therefore not be subject to forfeitures.
[ ] Forfeitures occur when you terminate employment before becoming fully vested
in your account, as explained in the section on "Vesting." Any portion of your
account that is not vested will be forfeited as of the last day of the Plan Year
in which your fifth consecutive Break in Service occurs. Forfeited amounts will
not be reinstated, even if you return to service with the Employer. Such
forfeitures either will be:
(Check one of the following items):
[ ] Used by the Employer as a credit against its future contributions to the
Plan; or
[ ] Reallocated among the accounts of remaining Participants in proportion to
their pay.
H. Distribution of Benefits
1. Eligibility for Distribution. You will be entitled to receive a distribution
of the vested amounts in your account upon occurrence of any of the following:
[bullet] Your termination of employment with the Employer for any reason.
[bullet] Your total and permanent disability.
[bullet] Your death.
[bullet] Termination of the Plan.
[bullet] Your attainment of normal retirement age, which is:
(Check one of the following items):
[ ] Age 65 (Insert Normal Retirement Age)
[ ] Age _____ (Insert Normal Retirement Age)or the ____ (Insert Anniversary
Date) of the day you commenced participation in the Plan.
(Check the following if your plan permits Early Retirement):
[ ] If you elect early retirement, attainment of your early retirement date,
which is the first day of the month coincident with or next following the date
you reach age ________ (Insert Early Retirement Age) and complete _________
(Insert number of years) Years of Service.
2. Timing of Distributions. You will begin receiving benefit distributions in
accordance with the following:
[bullet] Generally, benefit distributions will commence not later than 60 days
after the end of the Plan Year in which you become eligible to receive benefits.
[bullet] In the event of your death, your spouse, if you are married, will
generally be entitled to receive your benefit distribution. If you are
unmarried, or if your spouse has given written consent, your designated
Beneficiary will receive your benefit distribution. If you have no spouse or
designated Beneficiary, your benefit distribution will go to your estate.
[bullet] If you so elect, you may defer commencement of the distribution of your
benefit beyond the date you first become eligible to receive that distribution,
to a date which you may specify. The date you specify must not be later than the
April 1 following the close of your taxable year in which you attain age 70-1/2.
[bullet] If you attained age 70-1/2 before January 1, 1988, special rules apply
to your distributions. If you wish to receive benefit distributions before
attaining age 59-1/2, you may be subject to a penalty tax, and you must notify
the Plan Administrator in writing that you are aware of the consequences of this
tax.
3. Form of Distribution. If you are married, your benefit will automatically be
distributed in the form of a joint and survivor annuity, unless you elect
otherwise and your spouse consents in writing to one of the forms below. If you
are unmarried, your benefit will automatically be distributed in the form of a
life annuity, unless you elect any of the other distribution options listed
below.
[bullet] In a lump-sum payment of cash, or a lump-sum payment that includes an
in-kind distribution of all mutual fund shares credited to your account.
[bullet] In substantially equal monthly, quarterly, or annual installment
payments of cash or distributions in kind of the mutual fund shares credited to
your account, over a period of years not to exceed your life expectancy or the
joint and survivor life expectancies of you and your Beneficiary.
[bullet] In the form of an annuity, which is a level payment that you receive at
a fixed interval over a specified period of time. If you are married, the
annuity will automatically take the form of a joint and survivor annuity, unless
you elect otherwise, and your spouse consents in writing, as described above. A
joint and survivor annuity is an
<PAGE>
annuity paid over the lives of both you and your spouse. If your spouse survives
you, the annuity payment your spouse will receive will be at least 50 percent of
the annuity payment you received or would have received. (Check the following
item if your plan provides this form of distribution):
[ ] In monthly, quarterly, or annual installment payments of cash, or the
distribution of shares in kind, so that the amount you receive each Plan year is
equal to the amount in your account at the beginning of that Plan Year divided
by the joint and survivor life expectancy of you and your Beneficiary for that
Plan Year. Your joint and survivor life expectancy will be recalculated each
Plan Year so that benefit payments will continue through your life and that of
your Beneficiary.
You and your surviving spouse or former spouse may make a direct rollover to an
Individual Retirement Account or annuity. Distributions other than installments
for life or 10 or more years, required minimum distributions and certain
nontaxable distributions are eligible for direct rollover. Information about
direct rollover will be furnished when eligible distributions are made.
I. Investment of Plan Assets
All contributions made to the Plan are kept in the Trust. A separate account,
including all of the subaccounts described in the section on "Participant
Accounts," is maintained for you within that Trust. The assets of the Trust are
invested as follows:
(Check one of the following items):
[ ] The Employer directs the Plan Administator to invest the amounts in all your
subaccounts in specified investments by the Sponsor.
[ ] At least 50% of the assets of the Trust are invested in shares or other
investments offered by the Sponsor. The remaining assets are invested in such
other investments as are acceptable to the Trustee.
[ ] You shall (insert "may" or "shall") direct the Plan Administrator to invest
the amounts in the following subaccount(s) in specified investments offered by
the Sponsor.
(Check one or more of the following items):
[ ] The amounts in your Nondeductible Voluntary Contribution Subaccount.
[ ] The amounts in your Money Purchase Pension Contribution Subaccount.
[ ] The amounts in your trustee transfer and rollover
subaccounts.
(Check the following item if your plan permits Voluntary Employee
Contributions):
J. [ ] Withdrawals
If you have made Voluntary Employee Contributions to the Plan, you will be
permitted to withdraw the amounts in your Nondeductible Voluntary Contribution
Subaccount. If you are married, your spouse must consent to the withdrawal. In
order to make a withdrawal, you must notify the Plan Administrator in writing at
least thirty days prior to the date of withdrawal. (Check the following item if
your plan permits loans to participants):
K. [ ] Loans
The Plan contains provisions that permit you to borrow from the Plan part of
your vested interest in your account. Such a loan will not be made, however, if
the total of all outstanding loans to you for all pension and profit sharing
plans of the Employer exceed the lesser of $50,000 (taking into account the
highest principal balance of any loan outstanding at any time during the
preceding 12 months) or one-half of the value of your vested interest in your
account.
The Plan Administrator will set the terms of all loans. The maximum payment term
for any loan will generally be five years.
The interest rate will be determined by the Plan Administrator. Your account
will be security for the loan.
(Check the following item if your plan permits participants to purchase life
insurance):
L. [ ] Insurance
The Plan contains provisions permitting you to designate a portion of the
amounts in your Money Purchase Pension Contribution Subaccount to purchase life
insurance. The portion of your Money Purchase Pension Contribution Subaccount
which may be used to purchase life insurance is equal to _____ (Insert
percentage) of that subaccount.
<PAGE>
III. Claims
Procedure
You or your Beneficiary may file a written claim for benefits under this Plan
with the Plan Administrator at any time. If your claim is denied to any extent
by the Plan Administrator, a written notification must be sent to you within 90
days. If you choose to appeal the decision, a request for review must be made in
writing to the Plan Administrator within 60 days of receipt of written
notification of the denial. Within 60 days after the appeal is filed, or within
120 days, if there are special circumstances involved, the Plan Administrator
will issue a written decision. If you have exhausted your remedies under the
claims procedure, you may contest the decision of the Plan Administrator only by
bringing suit in a court of law. Your suit must be brought within one year from
the date the Plan Administrator notifies you of (his/her/its) decision on
appeal.
IV. Changes to the Plan
A. Amendment of the Plan
The Employer, together with the Sponsor, reserves the right to amend the Plan at
any time. You will be kept informed of any material amendments to the Plan by
updates to this Summary Plan Description. The Employer and Sponsor act through
their respective Boards of Directors.
B. Termination of the Plan
The Employer intends to continue this Plan indefinitely. However, the Employer
reserves the right to terminate the Plan at any time. If a termination takes
place, or if the Employer discontinues making contributions to the Plan, you
will have a 100 percent vested and nonforfeitable interest in all of the amounts
in your account. These amounts may be distributed to you at that time, or may be
distributed in accordance with the benefit distribution rules.
C. Merger, Consolidation or Transfer of the Plan
In the event of the merger, consolidation or transfer of assets or liabilities
of the Plan to any other plan, your benefits will not be decreased from what
they would have been prior to such an event.
V. General Information
Money Purchase Pension Plan
Name of Plan
Employer
Employer's Address
City State Zip
Employer's Phone
Type of Plan: Money Purchase Pension Plan
Type of Administration: Trusteed
Employer's Fiscal Year
Plan Year End
Plan Administrator
Plan Administrator's Address
City State Zip
Plan Administrator's Phone
Trustee Name, Title
<PAGE>
Trustee's Address
City State Zip
Trustee's Phone
Agent for Service of Legal Process
Agent's Address
City State Zip
Agent's Phone
Employer Identification Number
Plan Number
Also, a complete list of the employers and employee organizations sponsoring the
Plan may be obtained by participants and beneficiaries upon written request to
the Plan Administrator, and is available for examination by participants and
beneficiaries, as required by Labor Reg. ss.2520.104b-1 and ss.2520.104b-30.
VI. Non-Application of PBGC Guarantees
Because this Plan is a defined contribution plan, the benefits you will receive
are exempt from and not insured by the Pension Benefit Guarantee Corporation.
VII. Special Rights Under ERISA
As a participant in the ________________________________ (Insert name of
employer) Money Purchase Pension Plan, you are entitled to certain rights and
protections under the Employee Retirement Income Security Act of 1974 (ERISA).
ERISA provides that all Plan Participants shall be entitled to:
[bullet] Examine, without charge, at the Plan Administrator's office and at
other specified locations, all Plan documents, including insurance contracts,
affecting the individual making the request, and copies of all documents filed
by the Plan with the U.S. Department of Labor, such as detailed annual reports
and Plan descriptions.
[bullet] Obtain copies of all Plan documents and other Plan information upon
written request to the Plan Administrator. The Plan Administrator may make a
reasonable charge for the copies.
[bullet] Receive a summary of the Plan's annual financial report. The Plan
Administrator is required by law to furnish each Participant with a copy of this
Summary Annual Report.
[bullet] Obtain a statement of the total value of your account under the Plan
and your vested (nonforfeitable) portion of this account. This statement must be
requested in writing and is not required to be given more than once a year. The
Plan will provide the statement free of charge.
In addition to creating rights for Plan participants, ERISA imposes duties upon
the people who are responsible for the operation of the Plan . These people who
operate your plan, called "fiduciaries" of the Plan, have a duty to do so
prudently and in the interest of you and other Plan Participants and
Beneficiaries. No one, including your Employer, or any other person, may fire
you or otherwise discriminate against you in any way to prevent you from
obtaining a benefit under this Plan or exercising your rights under ERISA. If
your claim for a benefit is denied in whole or in part, you must receive a
written explanation of the reason for the denial. You have the right to have the
Plan review and reconsider your claim.
Under ERISA, there are steps you can take to enforce the above rights. For
instance, if you request materials from the Plan and do not receive them within
30 days, you may file suit in a federal court. In such a case, the
<PAGE>
court may require the Plan Administrator to provide the materials and pay you up
to $100 a day until you receive the materials unless the materials were not sent
because of reasons beyond the control of the Plan Administrator. If you have a
claim for benefits which is denied or ignored, in whole or in part, you may file
suit in a state or federal court. If it should happen that Plan fiduciaries
misuse the Plan's money, or if you are discriminated against for asserting your
rights, you may seek assistance from the U.S. Department of Labor, or you may
file suit in a federal court. The court will decide who should pay court costs
and legal fees. If you lose, the court may order you to pay these costs and
fees, for example, if it finds your claim is frivolous. If you have any
questions about your Plan, you should contact the Plan Administrator. If you
have any questions about this statement or about your rights under ERISA, you
should contact the nearest Area Office of the U.S. Labor-Management Services
Administration, Department of Labor.
Model Summary
Plan Description
Profit Sharing Plan
Each employer who adopts the Prototype Profit Sharing Plan is required by
Department of Labor regulations to provide employees with a summary plan
description. A summary plan description is intended to provide employees with
the information they need to properly understand their rights under such a
retirement plan. The employer must distribute a copy of the summary plan
description to plan participants and file it with the Department of Labor no
later than 120 days after adoption of the Colonial Prototype Profit Sharing
Plan. Thereafter, a copy of the summary plan description must be distributed to
new plan participants (and any summary of material modifications not yet
incorporated in the summary plan description) within 90 days after the person
becomes a plan participant (for a beneficiary, 90 days after benefits begin).
When distributing summary plan descriptions to plan participants and
beneficiaries, measures must be taken to ensure they actually receive them.
The summary plan description distributed to employees must accurately reflect
the provisions of the Plan, in accordance with the choices made in the Adoption
Agreement. The model summary plan description was designed to assist you in
producing such a document.
The model summary plan description contains several sections where the employer
must choose which language is appropriate, or whether language should be
included in the summary plan description at all. These decisions should be made
by looking at the Adoption Agreement and determining which language, if any, is
appropriate. Instructions are included wherever possible to help you make these
decisions. Once the choices have been made, the employer checks off the
appropriate language in the spaces provided. Employers may then wish to have the
summary plan description retyped to delete those provisions which do not apply
to the Plan.
I. Introduction
___________________ (Insert name of employer) (the "Employer") is pleased to be
able to provide you with the ______________ (Insert name of employer) Profit
Sharing Plan (the "Plan" or the "Profit Sharing Plan"). The Plan is effective as
of __________ (Insert effective date). The Plan is a defined contribution plan,
to which the Employer makes contributions to an account held in your name. With
this type of plan, the retirement benefit you receive will depend on the
investment performance of the amounts that are in your account. The Plan is
designed to provide retirement income to employees who remain with the Employer
until retirement and to those who have a vested interest in their account when
they terminate their employment with the Employer. Only the main features of the
Plan are explained in this Summary Plan Description. Any questions which are not
answered here should be referred to ____________________ (Insert name of
department or personnel responsible for participant information). If there is
any inconsistency between the Plan as described in this Summary Plan Description
and the Plan document itself, the terms of the Plan document will govern. Copies
of the Plan document and the Trust Agreement are available for your inspection
during regular working hours. Neither this summary nor any of its provisions
forms the basis or terms of a contract of employment between you and
_________________________
<PAGE>
________________ (insert name of employer).
II. Description of Plan Benefits and Requirements
A. Terms with Special Meanings Certain words and terms used in this Summary have
special meanings. Many of these terms are defined in this section, while others
are explained in the text of the Summary. To assist you in identifying these
terms within the text, they are capitalized.
1. Beneficiary. Your designated Beneficiary is the person you name to receive
your benefit distribution in the event of your death. If you are married, you
will need written consent from your spouse to name someone other than your
spouse as your Beneficiary.
2. Break in Service. A Break in Service occurs if you complete less than 501
Hours of Service with the Employer during a Plan Year.
3. Compensation. Compensation is the total compensation paid to you by the
Employer during any portion of a Plan Year during which you were a Plan
Participant. If you are self-employed, your Compensation is your earned income
less your deductible contributions to any qualified retirement plans. The amount
of your Compensation taken into account under the Plan for any year may not
exceed $150,000 or such other limit as set forth in the Internal Revenue Code.
4. Covered Compensation. Compensation after you have become a Participant in the
Plan.
5. Hours of Service. Each hour for which you are paid or entitled to be paid by
the Employer. In addition, uncompensated authorized leaves of absence that do
not exceed two years, military leave while your reemployment rights are
protected by law, and absences from work for maternity or paternity reasons may
be credited as Hours of Service for the purpose of determining whether you had a
Break in Service. (Include the following paragraph if you are subject to the
Family and Medical Leave Act 1993): You shall be credited with a Year of Service
under this Plan for any period of family or medical leave not otherwise treated
as a leave of absence under the Plan to the extent required by the Family and
Medical Leave Act of 1993. While you are on a family or medical leave, you will
participate in any Plan changes that become effective during such period, to the
extent required by law.
6. Participant. A participant is an employee who has met the requirements for
participating in this Plan, and whose account has been neither completely
forfeited nor distributed.
7. Plan Year. The Plan Year is the 12-month period ending on the date shown in
Section V of the Summary.
8. Sponsor. The Sponsor is the organization which has made this Plan available
to the Employer.
9. Trust. The Trust is a fund maintained by the Trustee for the investment of
Plan assets, including the amount in your account.
10. Year of Service. A Year of Service is the applicable 12-month period during
which you complete 1000 (Insert number of hours) or more Hours of Service. For
eligibility purposes, the applicable 12-month period begins on your date of
employment or any anniversary. For vesting purposes, the applicable 12-month
period is the Plan Year.
Service before the Plan or a predecessor plan was adopted
[ ] Will Count [ ] Will not count
B. Participation
You will be eligible to participate in the Plan after you have met the following
eligibility requirements: (Check all applicable items)
[ ] You have reached 21 (Insert age).
[ ] You have completed 1 (Insert number of years) Years of Service.
[ ] You have completed _____ (insert number) months since your date of hire.
[ ] You are not a member of a collective bargaining unit.
[ ] You are not a nonresident alien.
The first entry date, or date in which you can first participate in the Plan if
you meet these requirements, is _________ (Insert effective date). Thereafter,
the entry date(s) will be ________ (Insert dates of the first day of the plan
year and the first day of the seventh month of the plan year) of each Plan Year.
<PAGE>
Once you become a Participant, you will remain a Participant as long as you do
not incur a Break in Service. If you do incur a Break in Service, and are later
reemployed by the Employer, you will be reinstated as a Participant and any
previous Hours of Service will be reinstated as of the date of your
reemployment.
C. Individual Accounts
A separate account will be maintained for you within the Plan. This account will
be further divided into subaccounts, which will be credited with the different
types of contributions that are described in the next section. The subaccounts
that will be maintained for you are as follows:
1. Profit Sharing Contribution Subaccount. This subaccount will be credited with
your share of Employer Profit Sharing Contributions, forfeitures (if any),
distributions from this subaccount, and the earnings and losses attributable to
this subaccount.
2. Trustee Transfer and Rollover Subaccounts. These subaccounts will be credited
with any rollover contributions or transfer contributions you may make to the
Plan, any distributions from the subaccount, and the earnings and losses
attributable to the subaccount.
(Check the following item if your plan permits Voluntary Employee
Contributions):
3. [ ] Nondeductible Voluntary Contribution Subaccount. This subaccount will be
credited with your Voluntary Employee Contributions, any distributions from this
subaccount, and the earnings and losses attributable to this subaccount.
D. Contributions
1. Employer Profit Sharing Contributions. The Employer will make Profit Sharing
Contributions to the Plan each Plan Year in accordance with the following
contribution formula:
(Check one of the following):
[ ] Contributions will be made in an amount to be determined each year by the
Employer.
[ ] Contributions will be made in an amount equal to_____ (Insert contribution
percentage) of each Participant's Compensation, plus any discretionary amount
the Employer may choose to contribute.
2. Rollover Contributions and Direct Transfers. If you have participated in
other pension or profit sharing plans, you will be permitted to make a rollover
contribution to the Plan of certain amounts you may receive from those other
plans. You will also be permitted, with the approval of the Plan Administrator,
to authorize a direct transfer to the plan of amounts that are attributable to
your participation in other pension or profit sharing plans. (Check the
following item if your plan permits Voluntary Employee Contributions):
3.[ ] Voluntary Employee Contributions. Voluntary contributions will not be
permitted for Plan Years beginning after _________ (the Plan Year in which the
plan is adopted).
E. Allocations
Eligibility for Allocations. Each Plan Year the Employer will make a Profit
Sharing Contribution to the Plan in accordance with the formula described in the
previous section. Your account will be allocated a share of that contribution.
[ ] Unless you terminate your employment during the Plan Year with not more than
500 (Insert Hours of Service requirement) Hours of Service and you are not an
employee as of the last day of the Plan Year. (You will receive an allocation,
however, if you die, retire or become disabled during the Plan Year.)
Under some circumstances, special minimum allocation rules may result in your
receiving an allocation, even if you do not meet any of the requirements set
forth above.
Amount of Allocation. If you are eligible, your account will be credited with a
portion of the Profit Sharing Contribution (and any forfeitures) as follows:
(Check one of the following items):
[ ] Your account will be credited with a portion of the Profit Sharing
Contribution that is equal to the ratio of your Covered Compensation to the
Covered Compensation of all Participants for such year.
For example, if your Covered Compensation for a Plan Year was $10,000 and the
aggregate Covered Compensation of all Participants was $100,000, your account
would be credited with $10,000/$100,000 = 1/10 of the total contribution made by
the Employer for that Plan Year.
(Choose if your Plan is integrated with Social Security and you have not adopted
the Money Purchase Pension Plan)
<PAGE>
[ ] Profit Sharing Contributions will be allocated to eligible Participants as
follows:
Step One: Your account will be credited with a portion of the Profit Sharing
Contribution that is equal to the ratio of your Covered Compensation to the
Covered Compensation of all Participants for such year (just as if the Plan were
not integrated with Social Security), but only up to a maximum of three percent
of each Participant's Covered Compensation.
Step Two: Your account will be credited with a portion of the balance of the
Profit Sharing Contribution (after the allocation in Step One) that is equal to
the ratio of your Covered Compensation in excess of the Plan's Integration Level
to the Covered Compensation in excess of the Plan's Integration Level of all
Participants for such year, but only up to a maximum of three percent of any
Participant's Covered Compensation in excess of the Plan's Integration Level.
For example, if the Plan's Integration Level were $61,200 and your Covered
Compensation were $71,200, your Covered Compensation in excess of the
Integration Level would be $10,000. If the total Covered Compensation in excess
of the Integration Level of all Participants were $80,000, your account would be
credited with $10,000/$80,000 =1/8 of the total allocation made under Step Two
(but only up to a maximum of three percent of your Covered Compensation in
excess of the Plan's Integration Level, or $300).
Step Three: Your account will be credited with a portion of the balance of the
Profit Sharing Contribution (after the allocations in Step One and Step Two)
that is equal to the ratio that the sum of your Covered Compensation plus your
Covered Compensation in excess of the Plan's Integration Level bears to the sum
of all Participants' Compensation plus their Covered Compensation in excess of
the Plan's Integration Level for such year, up to a maximum of the Maximum
Profit Sharing Disparity Rate.
The Maximum Profit Sharing Disparity Rate is 2.7 percent if the Integration
Level equals the annual earnings subject to Social Security (FICA) tax (the
Taxable Wage Base). If the Integration Level is lower (see top right), then the
Maximum Profit Sharing Disparity Rate is determined by the following formula:
If the Integration Level is:
More But Not The Applicable
Than More Than Percentage Is:
$0 X* 2.7%
X of TWB* 80% of TWB 1.3%
80% of TWB Y** 2.4%
*X = the greater of $10,000 or 20% of the Taxable Wage Base
**Y = any amount more than 80% of the Taxable Wage Base but less than 100% of
the Taxable Wage Base
* "TWB" means the Taxable Wage Base
For example, Maximum Profit Sharing Disparity Rate is 2.7 percent, your Covered
Compensation is $71,200, the Plan's Integration Level is $61,200, the total
Covered Compensation of all Participants is $800,000 and the Covered
Compensation of all Participants that is in excess of the Plan's Integration
Level is $80,000, then the ratio applied under Step Three would be:
(71,200 + 10,000) / (800,000 + 80,000) = 9.23%
However, this exceeds the Maximum Profit Sharing Disparity Rate, so 2.7% is
applicable instead.
Step Four: Your account will be credited with a portion of the balance of the
Profit Sharing Contribution (after the allocations in Step One, Step Two, and
Step Three) that is equal to the ratio of your Covered Compensation to the
Covered Compensation of all Participants for such year.
(Choose if your Plan is Integrated with Social Security and you have adopted the
Money Purchase Pension Plan)
[ ] Profit Sharing Contributions will be allocated to eligible Participants as
follows:
Step One: Your account will be credited with a portion of the Profit
Sharing Contribution that is equal to the ratio that the sum of your Covered
Compensation plus your Covered Compensation in excess of the Plan's Integration
Level bears to the sum of all Participants' Covered Compensation plus their
Covered Compensation in excess of the Plan's Integration level for such year, up
to the Maximum Disparity Rate times such compensation.
<PAGE>
The Maximum Disparity Rate is 5.7% if the Integration Level equals the annual
earnings subject to Social Security (FICA) tax (the Taxable Wage Base). If the
Integration Level is lower (see below), then the Maximum Disparity Rate is
determined by the following formula:
If the Integration Level is
More But Not The Applicable
Than More Than Percentage Is:
$0 X* 5.7%
X of TWB* 80% of TWB 4.3%
80% of TWB Y** 5.4%
*X = the greater of $10,000 or 20% of the Taxable Wage Base
**Y = any amount more than 80% of the Taxable Wage Base but less than 100% of
the Taxable Wage Base
*"TWB" means the Taxable Wage Base
For example, the Maximum Disparity Rate is 5.7%. Your Compensation is $71,200.
The Plan's Integration Level is $61,200. The total Covered Compensation of all
Participants is $800,000, and the Covered Compensation of all Participants in
excess of the Plan's Integration Level is $80,000. The ratio under Step One
would be:
($71,200 + $10,000)/($800,000 + $80,000) = 9.23%
However, this exceeds the Maximum Disparity Rate, so 5.7% is applicable instead.
Step Two: Your account will be credited with a portion of the Profit Sharing
Contribution (after the allocation in Step One) that is equal to the ratio of
your Compensation to the Compensation of all Participants for such year.
The Plan's Integration Level is equal to:
(Check one of the following items):
[ ] The taxable wage base, which is the annual earnings subject to Social
Security (FICA) tax.
[ ] A dollar amount equal to _________ (Insert dollar amount).
[ ] _________% of the Taxable Wage Base.
Under some circumstances, special minimum allocation rules may result in your
receiving a larger allocation than you normally would. The amount that can be
allocated to your account in any Plan Year, including forfeitures (if any), is
limited by rules applying to all qualified plans.
F. Vesting
Vesting refers to the nonforfeitable interest you have in each of your
subaccounts. In other words, your vested interest in your account is the amount
you will receive when your account is distributed to you. You will always have a
100 percent vested and nonforfeitable interest in the amounts you have in your:
Trustee transfer and rollover subaccounts.
(Check the following item only if your plan permits Voluntary Employee
Contributions):
[ ] Nondeductible voluntary contribution subaccount.
You will earn a vested interest in your Profit Sharing Contribution Subaccount
in accordance with the following:
(Check one of the following items):
[ ] You will always have a 100 percent vested and nonforfeitable interest in
your Profit Sharing Contribution Subaccount.
[ ] You will have a 100 percent vested and nonforfeitable interest in your
Profit Sharing Contribution Subaccount in the event of any of the following:
[bullet] You reach your retirement date.
[bullet] You die or become disabled.
Otherwise, you will earn a vested interest in your
Profit Sharing Contribution Subaccount in accordance with the following
schedule:
(Check one of the following items):
[ ] Years of Service Vested Percentage
1 year 0%
<PAGE>
2 years 20%
3 years 40%
4 years 60%
5 years 80%
6 or more years 100%
For example, if you are employed for six years, you will be entitled to the
entire amount in your Profit Sharing Contribution Subaccount. However, if you
terminate employment with the Employer after only four years, even though you
return to employment with the Employer six years later, you will be entitled to
receive only 60 percent of that amount.
[ ] You will be 100 percent vested after __ years of service. If you terminate
employment prior to __ years you will not have any vested amount in your Profit
Sharing Contribution Subaccount.
[ ] Years of Service Vested Percentage
1 year ___%
2 years ___% (not less than 20)
3 years ___% (not less than 40)
4 years ___% (not less than 60)
5 years ___% (not less than 80)
6 or more years ___% (not less than 100)
Any portion of your Profit Sharing Contribution subaccount in which you do not
have a vested interest will be forfeited by you as of the last day of the Plan
Year in which your fifth consecutive break in service occurs.
G. Forfeitures
(Check one of the following items):
[ ] You have a 100% vested and nonforfeitable interest in the amounts in your
account at all times. Your account therefore will not be subject to forfeitures.
[ ] Forfeitures occur when you terminate employment before becoming fully vested
in your account, as explained in the section on "Vesting." Any portion of your
account that is not vested will be forfeited as of the last day of the Plan Year
in which your fifth consecutive Break in Service occurs. Forfeited amounts will
not be reinstated, even if you return to service with the Employer. Such
forfeitures either will be allocated among the Accounts of other Participants in
the same manner as Profit Sharing Contributions or used to reduce the current
year's contribution.
H. Distribution of Benefits
1. Eligibility for Distribution. You will be entitled to receive a distribution
of the vested amounts in your account upon occurrence of any of the following:
[bullet] Your termination of employment with the Employer for any reason.
[bullet] Your total and permanent disability
[bullet] Your death.
[bullet] Termination of the Plan.
[bullet] Your attainment of normal retirement age, which is:
(Check one of the following items):
[ ] Age 65 (Insert Normal Retirement Age)
[ ] Age _____ (Insert Normal Retirement Age) or the _____ (Insert Anniversary
Date) of the day you commenced participation in the Plan.
(Check the following if your plan permits Early Retirement):
[ ] If you elect early retirement, attainment of your early retirement date,
which is the first day of the month coincident with or next following the
date you reach age _____ (Insert Early Retirement Age) and complete _______
(Insert Number of Years) Years of Service.
2. Timing of Distributions. You will begin receiving benefit distributions in
accordance with the following:
[bullet] Generally, benefit distributions will commence not later than 60 days
after the end of the Plan Year in which you become eligible to receive
benefits.
<PAGE>
[bullet] In the event of your death, your spouse, if you are married, will
generally be entitled to receive your benefit distribution. If you are
unmarried, or if your spouse has given written consent, your designated
Beneficiary will receive your benefit distribution. If you have no
spouse or designated Beneficiary, your benefit distribution will go to
your estate.
[bullet] If you so elect, you may defer commencement of the distribution of your
benefit beyond the date you first become eligible to receive that
distribution, to a date which you may specify. The date you specify
must not be later than the April 1 following the close of your taxable
year in which you attain age 70-1/2.
[bullet] If you attained age 70-1/2 before January 1, 1988, special rules apply
to your distributions. If you wish to receive benefit distributions
before attaining age 59-1/2, you may be subject to a penalty tax, and
you must notify the Plan Administrator in writing that you are aware of
the consequences of this tax.
3. Form of Distribution. If you are married, your benefit will automatically be
distributed in the form of a joint and survivor annuity, unless you elect
otherwise and your spouse consents in writing to one of the forms below. If you
are unmarried, your benefit will automatically be distributed in the form of a
life annuity, unless you elect any of the other distribution options listed
below.
[bullet] In a lump-sum payment of cash, or a lump-sum payment that includes an
in-kind distribution of all mutual fund shares credited to your
account.
[bullet] In substantially equal monthly, quarterly, or annual installment
payments of cash or distributions in kind of the mutual fund shares
credited to your account, over a period of years not to exceed your
life expectancy or the joint and survivor life expectancies of you and
your Beneficiary.
[bullet] In the form of an annuity, which is a level payment that you receive at
a fixed interval over the specified period of time. If you are married,
the annuity will automatically take the form of a joint and survivor
annuity, unless you elect otherwise, and your spouse consents in
writing, as described above. A joint and survivor annuity is an annuity
paid over the lives of both you and your spouse. If your spouse
survives you, the annuity payment your spouse will receive will be at
least 50 percent of the annuity payment you received or would have
received.
(Check the following item if your plan provides this form of distribution):
[ ] In monthly, quarterly, or annual installment payments of cash, or the
distribution of shares in kind, so that the amount you receive each Plan year is
equal to the amount in your account at the beginning of that Plan Year divided
by the joint and survivor life expectancy of you and your Beneficiary for that
Plan Year. Your joint and survivor life expectancy will be recalculated each
Plan Year so that benefit payments will continue through your life and that of
your Beneficiary.
You or your surviving spouse or former spouse may make a direct rollover to an
Individual Retirement Account or Annuity. Distributions other than installments
for life or 10 or more years, required minimum distributions and certain
nontaxable distributions are eligible for direct rollover. Information about
direct rollover will be furnished when eligible distributions are made.
I. Investment of Plan Assets.
All contributions made to the Plan are kept in the Trust. A separate account,
including all of the subaccounts described in the section on "Participant
Accounts," is maintained for you within that Trust. The assets of the Trust are
invested as follows:
(Check one of the following items):
[ ] The Employer directs the Plan Administrator to invest the amounts in all
your subaccounts in specified investments offered by the Sponsor.
[ ] At least 50% of the assets are invested in shares or other investments
offered by the Sponsor. The remaining assets are invested in such other
investments as are acceptable to the Trustee.
[ ] You shall (insert "may" or "shall") direct the Plan Administrator to invest
the amounts in the following subaccounts in specified investments offered by the
Sponsor.
(Check one or more of the following items):
[ ] The amounts in your Nondeductible Voluntary Contribution Subaccount.
[ ] The amounts in your Profit Sharing Contribution Subaccount.
[ ] The amounts in your trustee transfer and rollover subaccounts.
(Check the following item if your plan permits Voluntary Employee
Contributions):
J. [ ] Withdrawals
<PAGE>
You may make the following types of withdrawals from your account, generally by
notifying the Plan Administrator in writing at least thirty days prior to the
date of withdrawal:
(Check all applicable items):
[ ] If you have made Voluntary Employee Contributions to the Plan, you will be
permitted to withdraw the amounts in your Nondeductible Voluntary Contribution
Subaccount. If you are married, your spouse must consent to the withdrawal.
[ ] In the event of an imminent and heavy financial need due to the purchase or
renovation of a primary residence, the educational, medical, or personal
expenses of you or a member of your immediate family, or other hardship, you
will be permitted to make a hardship withdrawal of amounts credited to your
Profit Sharing Contribution Subaccount.
All hardship withdrawals are subject to approval by the Plan Administrator. Such
withdrawals can only be made after prior withdrawal of all amounts in your
Nondeductible Voluntary Contribution Subaccount, and after exhausting all other
reasonable sources of funds. If you are married, your spouse must consent to any
withdrawals.
(Check the following item if Plan loans are permitted):
K. [ ] Loans
The Plan contains provisions that permit you to borrow (with consent of your
spouse) from the Plan part of your vested interest in your account. Such a loan
will not be made, however, if the total of all outstanding loans to you for all
pension and profit sharing plans of the Employer exceed the lesser of $50,000
(taking into account the highest principal balance of any loan outstanding at
any time during the preceding 12 months) or one-half of the value of your vested
interest in your account.
The Plan Administrator will set the terms of all loans. The maximum payment term
for any loan will generally be five years. The interest rate will be determined
by the Plan Administrator. Your account will be surety for the loan.
(Check the following item if your Plan permits participants to purchase life
insurance):
L. [ ] Insurance
The Plan contains provisions permitting you to designate a portion of the
amounts in your Profit Sharing Contribution Subaccount to purchase life
insurance. The portion of your Profit Sharing Contribution Subaccount which may
be used to purchase life insurance is equal to _____ (Insert percentage) of that
subaccount.
III. Claims Procedure
You or your Beneficiary may file a written claim for benefits under this Plan
with the Plan Administrator at any time.
If your claim is denied to any extent by the Plan Administrator, a written
notification must be sent to you within 90 days. If you choose to appeal the
decision, a request for review must be made in writing to the Plan Administrator
within 60 days of receipt of written notification of the denial. Within 60 days
after the appeal is filed, or within 120 days, if there are special
circumstances involved, the Plan Administrator will issue a written decision. If
you have exhausted your remedies under the claims procedure, you may contest the
decision of the Plan Administrator only by bringing suit in a court of law. Your
suit must be brought within one year from the date the Plan Administrator
notifies you of [his/her/its] decision on appeal.
IV. Changes to the Plan
A. Amendment of the Plan
The Employer, together with the Sponsor, reserves the right to amend the Plan at
any time. You will be kept informed of any material amendments to the Plan by
updates to this Summary Plan Description. The Employer and Sponsor act through
their respective Boards of Directors.
B. Termination of the Plan
The Employer intends to continue this Plan indefinitely. However, the Employer
reserves the right to terminate the Plan at any time. If a termination takes
place, or if the Employer discontinues making contributions to the Plan, you
will have a 100 percent vested and nonforfeitable interest in all of the amounts
in your account. These
<PAGE>
amounts may be distributed to you at that time, or may be distributed in
accordance with the benefit distribution rules.
C. Merger, Consolidation or Transfer of the Plan
In the event of the merger, consolidation or transfer of assets or liabilities
of the Plan to any other plan, your benefits will not be decreased from what
they would have been prior to such an event.
V. General Information
Profit Sharing Plan
Name of Plan
Employer
Employer's Address
City State Zip
Employer's Phone
Type of Plan: Profit Sharing Plan
Type of Administration: Trusteed
Employer's Fiscal Year
Plan Year End
Plan Administrator
Plan Administrator's Address
City State Zip
Plan Administrator's Phone
Trustee Name, Title
Trustee's Address
City State Zip
Trustee's Phone
Agent for Service of Legal Process
Agent's Address
City State Zip
Agent's Phone
Employer Identification Number
<PAGE>
Plan Number
Also, a complete list of the employers and employee organizations sponsoring the
Plan may be obtained by participants and beneficiaries upon written request to
the Plan Administrator, and is available for examination by participants and
beneficiaries, as required by Labor Reg. ss.1.2520.104b-1 and ss.2520.104b-30.
VI. Non-Application of PBGC Guarantees
Because this Plan is a defined contribution plan, the benefits you will receive
are exempt from and not insured by the Pension Benefit Guarantee Corporation.
VII. Special Rights Under ERISA
As a participant in the __________________________ (Insert name of employer)
Profit Sharing Plan, you are entitled to certain rights and protections under
the Employee Retirement Income Security Act of 1974 (ERISA). ERISA provides that
all Plan Participants shall be entitled to:
[bullet] Examine, without charge, at the Plan Administrator's office and at
other specified locations, all Plan documents, including insurance
contracts, affecting the individual making the request, and copies of
all documents filed by the Plan with the U.S. Department of Labor, such
as detailed annual reports and Plan descriptions.
[bullet] Obtain copies of all Plan documents and other Plan information upon
written request to the Plan Administrator. The Plan Administrator may
make a reasonable charge for the copies.
[bullet] Receive a summary of the Plan's annual financial report. The Plan
Administrator is required by law to furnish each Participant with a
copy of this Summary Annual Report.
[bullet] Obtain a statement of the total value of your account under the Plan
and your vested (nonforfeitable) portion of this account. This
statement must be requested in writing and is not required to be given
more than once a year. The Plan will provide the statement free of
charge.
In addition to creating rights for Plan participants, ERISA imposes duties upon
the people who are responsible for the operation of the Plan. These people who
operate your plan, called "fiduciaries" of the Plan, have a duty to do so
prudently and in the interest of you and other Plan Participants and
Beneficiaries. No one, including your Employer, or any other person, may fire
you or otherwise discriminate against you in any way to prevent you from
obtaining a benefit under this Plan or exercising your rights under ERISA. If
your claim for a benefit is denied in whole or in part, you must receive a
written explanation of the reason for the denial. You have the right to have the
Plan review and reconsider your claim.
Under ERISA, there are steps you can take to enforce the above rights. For
instance, if you request materials from the Plan and do not receive them within
30 days, you may file suit in a federal court. In such a case, the court may
require the Plan Administrator to provide the materials and pay you up to $100 a
day until you receive the materials unless the materials were not sent because
of reasons beyond the control of the Plan Administrator. If you have a claim for
benefits which is denied or ignored, in whole or in part, you may file suit in
a state or federal court. If it should happen that the Plan fiduciaries misuse
the Plan's money, or if you are disrcriminated against for asserting your
rights, you may seek assistance from the U.S. Department of Labor, or you may
file suit in federal court. The court will decide who should pay court costs
and legal fees. If you lose, the court may order you to pay these costs and
fees, for example, if it finds your claim is frivolous. If you have any
questions about your Plan, you should contact the Plan Administrator. If you
have any questions about this statement or about your rights under ERISA,
you should contact the nearest Area Office of the U.S. Labor-Management
Services Administration, Department of Labor.
EXHIBIT 14(B)
[Colonial Flag Logo]
The Colonial
Money Purchase Pension
and Profit Sharing Plan
[Photograph omitted]
Plan Establishment Booklet
Enclosed
Are All the Papers
Needed to Establish Your
Money Purchase Pension and Profit Sharing Plan
Table of Contents
Answers to Your Questions 1
About Your Participation 1
About Contributions You Make 1
About Your Distributions 2
About Your Records and Reports 2
Fees and Costs of the Plan 2
Adoption Agreement #001
Colonial Profit Sharing Plan 3
Steps You Need to Take 3
Pre-checked Adoption Agreement 3
About Adoption Agreement -
Colonial Profit Sharing Plan 3
General Reporting, Disclosure, and Fiduciary Information 3
Sample Profit Sharing Plan Corporate Resolution 4
Colonial Profit Sharing Plan Adoption Agreement #001 5
I. Sponsor Data 5
II. Employer Data 5
III. Eligibility 5
IV. Credited Service 5
V. Compensation 6
VI. Contributions 6
VII. Allocation of Employer Contributions 6
VIII. Distributions 6
IX. Optional Features 6
X. Vesting 7
XI. Investment Choices 7
XII. Investment Authority 7
<PAGE>
XIII. Top-Heavy Provisions 7
XIV. Allocation Limitations 7
XV. Administration 7
XVI. The Trustee 8
XVII. Employer Signature 8
Adoption Agreement #002
Colonial Money Purchase Pension Plan 9
Steps You Need to Take 9
Pre-checked Adoption Agreement 9
About Adoption Agreement -
Colonial Money Purchase Pension Plan 9
General Reporting, Disclosure, and Fiduciary Information 9
Sample Money Purchase Pension Plan Corporate Resolution 10
Colonial Money Purchase Pension Plan
Adoption Agreement #002 11
I. Sponsor Data 11
II. Employer Data 11
III. Eligibility 11
IV. Credited Service 11
V. Compensation 12
VI. Contributions 12
VII. Distributions 12
VIII. Optional Features 12
IX. Vesting 13
X. Investment Choices 13
XI. Investment Authority 13
XII. Top-Heavy Provisions 13
XIII. Allocation Limitations 13
XIV. Administration 13
XV. The Trustee 14
XVI. Employer Signature 14
Plan Form 15
Participant Enrollment Form 17
Beneficiary Designation Form 18
How To Transfer Your Qualified Retirement Plan to Colonial 19
Asset Transfer Form 20
Answers to Your Questions
About Your Participation
When is the deadline for establishing my Colonial Qualified Plan?
Your Plan must be established before the end of your fiscal tax year in order to
receive tax deductions for the year. For sole proprietors and firms operating on
a calendar basis, the fiscal year ends December 31.
<PAGE>
May I establish a Colonial Qualified Plan while currently maintaining another
Retirement Plan?
Yes. However, if you are maintaining additional retirement plans at other
financial institutions, you should consult your tax adviser to determine if it
is necessary to request an IRS Individual Determination Letter. An IRS
Individual Determination Letter is not required if you are maintaining both your
Money Purchase Pension and Profit Sharing Plans at Colonial.
Which employees are eligible to participate in my Colonial Qualified Plan?
By law, you are required to extend the Plan to each full-time employee (working
1,000 hours or more during a calendar year) who is over the age of 21 and has
completed 2 years of full-time service. You may choose to establish lower
limitations, such as 1 year of full-time service and 18 years of age. Employers
must meet the same eligibility requirements established for employees. Employees
of related businesses may also have to be covered by the Plan.
May I maintain a Colonial Qualified Plan and an IRA?
Yes. However, depending on your adjusted gross income and tax filing status,
your contributions to an IRA may not be tax-deductible. The earnings, however,
will be tax-deferred. For more information, refer to the Colonial IRA brochure.
May I transfer my current retirement plan to Colonial?
Certainly. Simply complete the following documents to amend your existing plan
and adopt a Colonial Qualified Plan.
1) The Colonial Money Purchase Pension or Profit Sharing Corporate Resolution
2) The Colonial Money Purchase Pension or Profit Sharing Adoption Agreement
3) Plan Form
4) Participant Enrollment form
5) Beneficiary Designation form completed by each participant
6) Asset Transfer form
About Contributions You Make
What Colonial funds are available for my retirement plan contribution?
You and your employees have a selection of 18 Colonial mutual funds for your
retirement plan contributions. You may invest in one or more of the Colonial
funds and exchange from fund to fund without tax liability. Your financial
adviser will give you the appropriate prospectuses and sales brochures.
When is the deadline for making annual contributions?
The sooner you make your contributions in the new year, the longer your money is
working tax-deferred for you and your employees. Contributions must be made by
your tax-filing deadline. The tax-filing date for companies operating on a
calendar year basis is April 15 for sole proprietors and partnerships, and March
15 for corporations. If you have
<PAGE>
received an extended tax deadline, you may make contributions up to the date of
the extended deadline. Employers must make contributions to Money Purchase
Pension Plans within eight and one-half months after the close of the plan year
to avoid an excise tax.
How much may I contribute for my employees?
How much you may contribute will depend upon the Plan you have selected. The
percentage of earnings you contribute for yourself must be the same percentage
of earnings you contribute for your employees. If desired, you may establish a
plan that is integrated with Social Security.
What method is used to calculate earned income?
For corporations and employees of sole proprietorships, partnerships, and
Subchapter S corporations, earned income is simply gross annual salary. Sole
proprietors and partners must reduce net profit and calculate their Adjusted Net
Business Income (ANBI):
ANBI = a-b
---
1+c
a = the self-employed owner's net profit from business*
b = 1/2 the amount paid by owner in self-employment taxes for the year
(determined on IRS Form 1040 Schedule SE)
c = the contribution percentage under the plan for this year
* Represents the owner's net profits from business after taking the deductions
for contributions made to the plan on behalf of the business's common-law
employees. Once the ANBI is determined, the owner's personal plan contribution
is figured by simply multiplying the ANBI by the contribution percentage for the
plan.
About Your Distributions
When can participants begin receiving distributions?
A participant may begin receiving distributions at age 59-1/2 and must start
taking distributions by age 70-1/2. Participants may also begin distributions
without penalty at retirement, at age 55 or later. In general, a 10% penalty
will be imposed by the IRS on distributions taken for events other than the ones
listed above.
What happens if a participant leaves the company?
In this case, a distribution is made to the participant. If the participant is
55 or older, the IRS will not penalize the distribution and the distribution
will be taxed as ordinary income. If under age 55, the participant may directly
roll over the distribution into an IRA, or his or her next employer's retirement
plan -- otherwise, the participant is subject to a 10% penalty assessed by the
IRS. Any distribution eligible for rollover made payable to the participant
would also be subject to 20% withholding.
Upon retirement how may my employees and I receive our distributions?
Participants in either Colonial Qualified Plan may elect installment payments,
or a distribution of the balance in their accounts (a "lump-sum" distribution).
If the
<PAGE>
participant elects installment payments, the established schedule of
installments may change within certain limits. Participants will receive
distributions in the form of an annuity, unless they elect installment payments
or a lump-sum distribution. Please refer to the plan document for more specific
information.
How are distributions taxed?
If you are under age 70-1/2 and elect to receive a lump-sum distribution, all or
a portion may be rolled over into an Individual Retirement Account to avoid
current taxes. Otherwise, most of your distribution may be rolled over. In
addition, as noted above, a 10% penalty will be imposed on distributions before
age 59-1/2 or, if you have left the company, age 55. You may also qualify for
special income averaging, which may lessen your tax burden on amounts not rolled
over. Installment payments are taxed as ordinary income. Any "non-periodic"
distribution, including a lump-sum distribution, that is not rolled over will
also be subject to 20% withholding.
About Your Records and Reports
What statements will my participants and I receive from Colonial?
You will receive consolidated participant statements and a consolidated fund
statement at least quarterly. Following each fund transaction, you will also
receive a transaction confirmation report.
Colonial also provides semiannual and annual reports to shareholders containing
financial and other information on individual funds.
What records and reports must I give to my participants?
You must distribute a Summary Plan Description to each participant and each of
the participant's beneficiary(ies). The Summary Plan Description is a brief
explanation of the Plan written in simple language designed to be understood by
all employees. Also, if you have participants who have no financial ownership
with the business, a Notice to Interested Parties must be distributed.
Periodically, you must also give participants statements of their accounts.
What reports must be filed with the IRS?
IRS Form 5500 must be filed by all employers who maintain a qualified retirement
plan, including a Colonial Qualified Plan. There are three types of Form 5500 --
the 5500, 5500-C/R, and 5500 EZ. These forms are available at your local IRS
office. The form you will need to complete will depend upon such variables as
the assets in your Plan and whether your Plan covers non-owner employees. If
your company operates on a calendar year, the Form 5500 must be filed by July
31. If the company operates on a fiscal year basis, the filing deadline is the
last day of the seventh month after your fiscal year end. Colonial will provide
you or your accountant/CPA free software accompanied by a diskette with your
plan information which can be used to prepare the appropriate IRS Form 5500
Series.
Colonial automatically files a Form 1099R with the IRS and the participant in
the event of a distribution from the Plan.
<PAGE>
Fees and Costs of the Plan
What does it cost to establish and maintain a Colonial Qualified Plan?
Once you have established a Colonial Qualified Plan, there is a $10 annual
maintenance charge per participant regardless of the number of Colonial Funds in
his/her retirement account. There are no plan set-up fees or plan close-out fees
with Colonial Qualified Plans.
Call our Qualified Plans Department for further information at 1-800-225-2365,
extension 6660.
[Colonial Flag Logo]
Adoption Agreement
#001
Colonial
Profit Sharing Plan
Steps You Need to Take
The forms in this booklet are the only forms you will need to complete in order
to adopt a Colonial Profit Sharing Plan. Employers must:
Step 1: Complete the Sample Corporate Resolution on page 4 and retain for your
files.
Step 2: Complete the Profit Sharing Plan Adoption Agreement which begins on page
5. The Colonial Profit Sharing Plan Adoption Agreement is used to adopt the
Colonial Profit Sharing Plan or to amend an existing Profit Sharing Plan.
Step 3: Fill out all sections in white.
Step 4: Complete the Plan Form on page 15.
Step 5: Each participant completes the Enrollment Form on page 17. (Photocopy
this form for completion by participants.)
Step 6: Each participant completes a Beneficiary Designation Form on page 18.
(Photocopy this form for completion by participants.)
Step 7: Complete the Asset Transfer Form on page 20.
Step 8: Photocopy the completed Adoption Agreement, Plan Form, and other forms
for your files, and send the originals to: Colonial Investors Service Center,
Inc., Attn.: Retirement Plan Services, P.O. Box 1722, Boston, MA 02105 -1722.
Step 9: Complete the Notice to Interested Parties and Summary Plan Description.
Distribute per the instructions in the Plan Document and Employee Communications
Kit.
Pre-checked Adoption Agreement
To make it easy for you, the employer, the Profit Sharing Plan Adoption
Agreement starting on page 5 has been marked to reflect the Profit Sharing Plan
provisions most frequently chosen. Solid boxes (n) in shaded sections indicate
an election. You are encouraged to review the details with your professional
advisers.
The key sections in this Adoption Agreement, which have been pre-checked for
you, mean that your plan will operate as follows:
- -All employees who are age 21 and who meet a one-year
<PAGE>
service requirement are eligible for contributions.
- -An employee who completes 1,000 hours of service is credited with a year of
service.
- -our employees will enter the plan on the plan establishment date or the date
which is six months subsequent to each plan anniversary date, after eligibility
requirements have been satisfied.
- -No fixed contribution formula. It is at your discretion each year to
contribute the amount you determine proper based upon a completed resolution.
- -Not integrated with Social Security.
- -Normal retirement age of 65.
- -No hardship withdrawals or loans are permitted.
- -Participants direct all contributions.
- -Trustee services provided by The First National Bank of Boston at a fee of $10
per participant per year.
- -Employer is the Plan Administrator.
Note: The elections that are pre-checked represent the most common elections
made by employers for this type of plan. Some sections have not been completed
because they are not required. However, you may make an election in any of these
sections by marking an "X" and initialing next to the election.
You may change any of these pre-checked elections by making the appropriate
change and placing your initials next to the section being changed.
About Adoption Agreement
Colonial Profit Sharing Plan
This is the Adoption Agreement for defined contribution plan #001 of basic plan
document #01, which is a prototype profit sharing plan. This plan is sponsored
by Colonial Investment Services, Inc.
Note: Before executing this Adoption Agreement, the employer should consult with
a tax adviser or attorney. Failure to properly complete this Adoption Agreement
may result in Plan disqualification.
The Employer hereby establishes a profit sharing plan and trust upon the
respective terms and conditions contained in the prototype defined contribution
plan (the "Plan") and the Trust Agreement annexed hereto and appoints as Trustee
of such trust the person(s) who have executed this Adoption Agreement evidencing
their acceptance of such appointment. The Plan, the Trust Agreement, and the
Custody Agreement, if applicable, shall be supplemented and modified by the
terms and conditions contained in this Adoption Agreement and shall be effective
on the Effective Date. The Sponsor will inform the Employer of any amendments
made to the Plan or the discontinuance or abandonment of the Plan.
Deadline: New Plans must be executed by the last day of the employer's fiscal
year.
General Reporting, Disclosure, and Fiduciary Information
Part of the administration of qualified plans includes the filing of various
reports with the Internal Revenue Service (IRS), and to the extent applicable,
with the Department of Labor (DOL), and the Pension Benefit Guaranty Corporation
(PBGC) (usually for Defined Benefit Plans only).
<PAGE>
An individual having or exercising discretionary authority or control over the
plan assets is considered to be a fiduciary and must be bonded by a corporate
surety company. This is done to insure against a breach of fiduciary duty or
mishandling of funds involving plan assets and/or operations. The amount of the
bond must equal 10% of the assets handled and must be no less than $1,000 and no
more than $500,000 or as directed by the Department of Labor.
We have provided you with the Notice to Interested Parties and Model Summary
Plan Description included in the Money Purchase Pension and Profit Sharing Plan
Document and Employee Communications Kit. Please follow the instructions
carefully and complete these within the prescribed time frames. You must review
these and any other reporting disclosure, and fiduciary responsibilities
thoroughly with your plan administrator, pension attorney, and/or tax adviser to
insure compliance with current pension law and to maintain your plan's tax
qualified status.
[Colonial Flag Logo]
Sample Corporate Resolution Colonial Profit Sharing Plans
The undersigned hereby certifies that he/she is Secretary of
________________________ (the "Corporation"), a corporation organized and
existing under the laws of ____________ (State or Commonwealth), and that the
following resolutions were duly adopted at a meeting of the Board of Directors
of the Corporation, duly called and held on _____________ (date) at which a
quorum was present and acted throughout, and that such resolutions have not been
amended or rescinded and are in full force and effect.
1. Resolved, that the Corporation hereby adopts the __________________________
(name of Colonial plan) as a ____________________(type of plan -- for example,
profit sharing) ("Plan") and agrees to enter into the Trust Agreement with The
First National Bank of Boston ("Trustee"), both as presented at this meeting,
effective ________________ (date); and it is further
OR
1. Resolved, that the Corporation hereby amends its current
_______________________ (name of current plan) by adopting the
________________________ (name of Colonial plan) as a _______________________
(type of plan -- for example, profit sharing) ("Plan") and agrees to enter into
the Trust Agreement with The First National Bank of Boston ("Trustee"), both as
presented at this meeting, effective _________________ (date); and it is further
2. Resolved, that the appropriate officers of the Corporation are hereby
authorized and directed on behalf of the Corporation to execute and deliver an
Adoption Agreement adopting the Plan and a Trust Agreement with the Trustee and
to do all other things which they may consider necessary or appropriate to
establish and maintain the Plan and the Trust Agreement, including, but not
limited to, amending the Plan or the Trust Agreement, making contributions from
the funds of the Corporation in accordance with the Adoption Agreement for the
purposes of the Plan, and giving the Trustee all notices,
<PAGE>
directions, instructions and other communications as appropriate and receiving
all notices, reports, accounts and other communications from the Trustee.
3. Resolved, that the following officers of the Corporation are authorized to
act severally/jointly (cross out one) on behalf of the Corporation with respect
to these matters.
Name & Title Signature
Name & Title Signature
Name & Title Signature
In witness whereof, the undersigned has hereto set his hand and corporate seal
of the aforesaid Corporation on this _________ day of ____________________,
19_____.
Secretary of Corporation Signature
(Corporate seal)
For Employer Use Only
Do not send to The First National Bank of Boston or Colonial Investors Service
Center, Inc.
Colonial Profit Sharing Plan
Adoption Agreement #001
I. Sponsor Data
Colonial Investment Services, Inc., One Financial Center,
Boston, MA 02111-2621. Telephone: 800-345-6611
II. Employer Data
Please complete A through G. If applicable, complete H and I.
A.
Name of Employer and Employer Identification Number
B.
Address
City State Zip
<PAGE>
C.
Telephone Number
D.
Employer's Taxable Year End
E.
Plan Year End
F. The Employer is :
[ ] corporate entity [ ] noncorporate entity
[ ] corporation electing to be taxed under Subchapter S
The "Effective Date" of this plan is the first day of the calendar year or the
fiscal year on which you operate.
G.
Effective Date (should be first day of a Plan Year)
H. If this is an amendment of an existing plan, complete the following:
Effective Date of Amendment (should be first day of a Plan Year)
Name of Prior Plan
Effective Date of Prior Plan
The "Limitation Year" will be December 31st, unless the company is operating on
a fiscal year basis. In that case the limitation year ends on the last day of
the fiscal year. The limitation year usually corresponds with the Plan Year.
I.
Limitation Year, if different from E, above
III. Eligibility
Your plan has pre-checked one year of service and the attainment of age 21 as
its eligibility requirements. If desired, you may choose up to two years of
service as an eligibility requirement; however, any time you choose greater than
one year, you must provide for 100% immediate vesting in Article X of the
Adoption Agreement. A. Employees shall be eligible to participate in the Plan
upon completion of the eligibility requirements (complete A and B) (Plan section
3.1):
1. Years of Service. The Employee must complete (check one):
[ ] One Year of Service
____ Months (not more than 12) after date of hire.
____ Years of Service. You can require less than or more than one Year of
Service, but not more than two (2). If you select more than one Year of Service,
the Employee must be 100% vested once he becomes eligible, and you must select
vesting schedule B in section X of this Adoption Agreement. If the Year of
Service is or includes a fractional year, an Employee will not be required to
complete any specified number of Hours of Service (section IVA of this Adoption
Agreement) to receive credit for such fractional year.
2. Age. The Employees must attain age 21 (not greater than age 21).
<PAGE>
B. The following Employees will not be eligible to participate in the Plan (Plan
section 3.1):
[ ] Union Employees. Employees included in a unit of employees covered by a
collective bargaining agreement between Employer and Employee representatives
(as defined in section 3.1(b)(i) of the Plan), if retirement benefits were the
subject of good faith bargaining and if two percent or less of the employees who
are covered pursuant to that agreement are professionals as defined in section
1.410(b)-9 of the regulations.
[ ] Nonresident Aliens. Employees who are nonresident aliens and who receive no
earned income from the Employer which constitutes income from sources within the
United States.
For purposes of this section III, the term "Employee" includes all employees of
this Employer or any employer aggregated with this Employer under sections
414(b), (c) or (m) or (o) of the Code and individuals who are Leased Employees
required to be considered Employees of any such employer under section 414(n) or
(o) of the Code.
IV. Credited Service
A. The Plan provides that a Year of Service requires 1,000 hours during any Plan
Year. If a lower number of hours is desired, state the number here: _____ (Plan
section 2.42)
B. The Plan permits Hours of Service to be determined by the use of service
equivalencies under one of the methods selected below (choose one method)(Plan
section 2.19):
1. [ ] On the basis of actual hours for which an Employee is paid or entitled to
payment.
2. [ ] On the basis of days worked. An employee will be credited with ten (10)
Hours of Service if under section 2.19 of the Plan such Employee would be
credited with at least one (1) Hour of Service during the day.
3. [ ] On the basis of weeks worked. An Employee will be credited with
forty-five (45) Hours of Service if under section 2.19 of the Plan such Employee
would be credited with at least one (1) Hour of Service during the week.
4. [ ] On the basis of semimonthly payroll periods. An Employee will be credited
with ninety-five (95) Hours of Service if under section 2.19 of the Plan such
Employee would be credited with at least one (1) Hour of Service during the
semimonthly payroll period.
- -or-
5. [ ] On the basis of months worked. An Employee will be credited with one
hundred ninety (190) Hours of Service if under section 2.19 of the Plan such
Employee would be credited with at least one (1) Hour of Service during the
month.
C. Service with a predecessor employer (choose 1 or 2) (Plan sections 3.3 and
8.5):
1. [ ] No credit will be given for service with a predecessor employer.
- - or -
2. [ ] Credit will be given for service with the following predecessor
employer(s):
D. Service before Plan (or predecessor plan) adopted (Plan section 2.42):
1. [ ] Full credit.
2. [ ] No credit.
Note: The Plan provides that if this is a continuation of a predecessor plan,
service under the predecessor plan must be counted.
V. Compensation
<PAGE>
A. Compensation (choose 1 or 2 ) (Plan section 2.7):
1. [ ] Shall include
- -or-
2. [ ] Shall not include
Employer Contributions made pursuant to a salary reduction agreement which are
not includible in the gross income of the Employee under sections 125,
402(e)(3), 402(h)(1)(B) or 403(b) of the Code.
B. The effective date of the election in A. above shall be ______ (but not
earlier than the first day of the first Plan Year beginning after 1986).
VI. Contributions
Please complete if you wish to contribute a stated % of each participant's
compensation, in years when no employer resolution is adopted. Otherwise, leave
blank.
A. Profit sharing plan formulas (choose 1 or 2) (Plan section 4.1(b)):
1. [ ] Discretionary pursuant to Employer resolution. If no resolution is
adopted, then_____% of Participants' compensation.
- -or-
2. [ ] ___% of Participants' Compensation, plus discretionary amount, if any, by
Employer resolution.
Note: Each of these formulas is subject to maximum limitations on contributions
as provided in the Plan and the Internal Revenue Code. In no event may the
Employer Contribution exceed 15% of the aggregated compensation of all
Participants for the year, plus up to 10% credit carryover in certain
circumstances. Additional limitations are included in the Plan where the
Employer also has another qualified retirement plan. An individual Participant's
limit on contributions and forfeitures, per year is generally the lesser of 25%
of compensation or $30,000.
VII. Allocation of Employer Contributions
Your plan may provide for employer contributions based upon amounts of
compensation below and above the Social Security Taxable Wage Base (TWB). For
1995, the TWB is $61,200 and is adjusted annually. Employers considering
integration of their plan should consult with a tax adviser. If adopting a Money
Purchase and a Profit Sharing Plan, only one plan can be integrated with Social
Security.
A. Formula (choose 1 or 2) (Plan section 5.3(a)).
Note: If you provide for hardship withdrawals you must use Formula 1.
1. [ ] Nonintegrated Plan - Employer contributions shall be allocated to the
accounts of all eligible Participants prorated upon Covered Compensation.
- -or-
2. [ ] Integrated Plan - Employer contributions and forfeitures shall be
integrated with Social Security and allocated in accordance with the provisions
of Plan section 5.3(a). The Plan's Integration Level shall be (choose (a), (b),
or (c)):
(a) Taxable Wage Base. The contribution and benefit base under section 230 of
the Social Security Act at the beginning of the Plan Year.
- -or-
(b) $_____ (a dollar amount not to exceed the Taxable Wage Base).
<PAGE>
- -or-
(c) _____% of the Taxable Wage Base (not to exceed 100%).
Note: If you maintain any other plan in addition to this Plan, only one plan may
be integrated with Social Security.
B. Contribution Eligibility (Plan section 4.1(c)):
The Plan provides that all Participants will share in Employer Contributions for
the Plan Year, except the following (if elected):
[ ] Participants who terminate employment during the Plan Year with not more
than 500 Hours of Service and who are not Employees as of the last day of the
Plan Year (other than Participants who die, retire, or become Totally and
Permanently Disabled). If a smaller number of hours than 500 is desired, state
the number here: ______
VIII. Distributions
A. Normal Retirement Age is (choose 1 or 2) (Plan section 2.26):
1. [ ] The date a Participant reaches age 65 (not more than 65 or less than 55).
If no age is indicated, normal retirement age shall be 65.
- -or-
2. [ ] The later of age _____ (not more than 65) or the____ (not more than 5th)
anniversary of the day the Participant commenced participation in the Plan. The
participation commencement date is the first day of the first Plan Year in which
the Participant commenced participation in the Plan.
B. Early Retirement (choose 1 or 2 )(Plan section 2.10)
1. [ ] Early Retirement Date is the first day of the month coincident with or
next following the date upon which a Partici-pant reaches age _____ (not less
than 55) and completes ______ years of service (not more than 15).
- -or-
2. [ ] Early Retirement will not be permitted under the Plan.
IX. Optional Features
The plan allows you the flexibility of permitting hardship withdrawals and loan
provisions. The plan also permits participants to designate a portion of their
account to purchase life insurance contracts on themselves. Note: If plan loans
are permitted, a trustee in addition to The First National Bank of Boston must
be appointed in section XVIB. The Plan may not provide hardship withdrawals if
integration with Social Security is elected in section VIIA 2.
A. Hardship withdrawals (choose 1 or 2) (Plan section 12.2):
1. [ ] The Plan permits hardship withdrawals.
- -or-
2. [ ] The Plan does not permit hardship withdrawals.
Note: The Plan may not provide hardship withdrawals if integration with Social
Security is elected in section VIIA 2.
B. Loans (choose 1 or 2) (Plan ARTICLE 13):
1. [ ] The Plan permits loans to Participants.
- -or-
2. [ ] The Plan does not permit loans to Participants.
<PAGE>
Note: The Plan may not permit loans to Owner-Employees of noncorporate entities
or to Shareholder-Employees of Subchapter S corporations. If Plan loans are
permitted, a Trustee in addition to The First National Bank of Boston must be
appointed in section XVIB.
C. Insurance (choose 1 or 2) (Plan ARTICLE 14):
1. [ ] The Plan permits Participants to designate a portion of their Account to
purchase life insurance contracts.
Note: If life insurance is permitted, a trustee in addition to The First
National Bank of Boston must be appointed in section XVIB. The percentage of the
Employer Contributions which may be applied to purchase life insurance contracts
shall be equal to____%.
- -or-
2. [ ] The Plan does not permit Participants to designate a portion of their
Account to purchase life insurance contracts. Note: Section 14.5 of the Plan
provides certain limits on the amount of Employer Contributions that can be
applied to purchase life insurance contracts.
X. Vesting
An employer may select any of the schedules outlined in this section. Choose the
vesting schedule you desire. Employee contributions are not subject to a vesting
schedule and are 100% non-forfeitable when made -- Employer Contributions and
Matching Contributions will become vested if the Participant terminates
employment for any reasons other than retirement, death, or disability pursuant
to the following schedule (choose A,B,C, or D) (Plan section 8.3):
A. [ ] Years of Service Vested Percentage
1 year 0%
2 years 20%
3 years 40%
4 years 60%
5 years 80%
6 or more years 100%
B. [ ] 100% vesting immediately after satisfaction of the eligibility
requirements.
Note: If a service requirement greater than one year was chosen for eligibility
in Article IIIA1 of this Adoption Agreement, vesting schedule B must be chosen.
C. [ ] 100% vesting after three Years of Service.
D. [ ] Years of Service Vested Percentage
1 year ____%
2 years ____%(not less than 20)
3 years ____%(not less than 40)
4 years ____%(not less than 60)
5 years ____%(not less than 80)
6 years ____%(not less than 100)
XI. Investment Choices
<PAGE>
The plan permits either 100% of the Plan's assets to be selected from shares of
Colonial Mutual Funds, or at least 50% to be selected from shares of Colonial
Mutual Funds, with the remainder being in such investments as may be acceptable
within the discretion of the Trustee. If you desire to invest plan assets only
in Colonial Mutual Funds, check "A." If you select "B," other investments not
offered by Colonial, at least 50% of plan assets must be invested in Colonial
Mutual Funds. The Trustee designated in section XVIB, will be the trustee for
any non-Colonial assets.
A. [ ] Investment of Trust assets may be selected only from shares or other
investments offered by the Sponsor.
B. [ ] 50% of the Trust assets must be invested in Shares or other investments
offered by the Sponsor with the remainder in such other investments as may be
acceptable within the discretion of the Trustee.
Note: If "B" above is selected, a Trustee in addition to The First National Bank
of Boston must be appointed in section XVIB. The Sponsor may impose additional
limitations relating to the type of permissible investments in the Trust (Plan
section 7.3).
XII. Investment Authority
Contributions to the Plan shall be invested by the Trustee in accordance with
instructions of the Employer or Plan Administrator except that (choose A or B)
(Plan section 7.2):
A. [ ] No exceptions; the Employer or Plan Administrator shall make all
investment selections.
- -or-
B. [ ] Each Participant may, [ ] shall direct that:
1. [ ] Amounts voluntarily contributed by such Participant pursuant to section
4.3 of the Plan, rollover contributions pursuant to section 4.4 of the Plan and
direct transfers pursuant to section 4.5 of the Plan, if any,
- -and/or-
2. [ ] Employer Contributions on the Participant's behalf shall be invested in
specified investments offered by the Sponsor. Participants may make or change
such directions by giving written notice to the Plan Administrator. Reasonable
restrictions may be imposed on this privilege by the Plan Administrator or the
Sponsor for purposes of administrative convenience.
XIII. Top-Heavy Provisions
Participants who are eligible to receive the minimum allocation provided by
section 5.2 of the Plan shall receive a minimum allocation of contributions and
forfeitures under this Plan equal to three percent (3%) of Compensation, or if
lesser, the largest percentage of Compensation allocated on behalf of any Key
Employee for the Plan Year. Note: If the Participant also participates in paired
defined contribution plan #002 (the money purchase pension plan), the required
minimum allocation must be made under paired defined contribution plan #002 (the
money purchase pension plan).
XIV. Allocation Limitations
Complete this section only if you maintain or ever maintained another qualified
plan (other than paired plan #002) in which any participant in this plan is (or
was) a participant or could become a participant. This section must also be
completed if the Employer
<PAGE>
maintains a welfare benefit fund, as defined in section 419(e) of the Code, or
an individual medical account, as defined in section 415(l)(2) of the Code,
under which amounts are treated as annual additions with respect to any
participant in this plan. A. If the Participant is covered under another
qualified defined contribution plan maintained by the Employer, other than the
master or prototype plan (choose 1 or 2) (Plan section 6.3):
1. [ ] The provisions of section 6.2 will apply as if the other plan were a
master or prototype plan.
- -or-
2. [ ] (On an attachment, provide the method under which plans will limit total
annual additions to the maximum permissible amount, and will properly reduce any
excess amounts, in a manner that precludes Employer discretion.)
B. If the Participant is or has ever been a participant in a defined benefit
plan maintained by the Employer, attach an explanation of the method under which
the plan involved will satisfy the 1.0 limitation in a manner that precludes
Employer discretion.
XV. Administration
The Plan Administrator will automatically be the Employer, unless otherwise
indicated in this section. Also list all named fiduciaries in this section. A.
The Plan Administrator of the Plan will be (choose 1, 2, or 3) (Plan sections
2.30 and 15.4):
1. [ ] The Employer
- -or-
2. [ ] An individual Plan Administrator designated by the Employer
Name
Address
City State Zip
- -or-
3. [ ] A committee of two or more Employees designated by the Employer:
Name & Title
Signature
Name & Title
Signature
Name & Title
Signature
<PAGE>
Note: If no Plan Administrator has been designated or is serving at any time,
the Employer will be deemed the Plan Administrator (Plan section 15.4). B. The
Plan Administrator (including all members of a committee, if a committee is
named) is a Named Fiduciary for the Plan. If other persons are also to be Named
Fiduciaries, their names and addresses are:
Name
Address
City State Zip
Name
Address
City State Zip
C. The Named Fiduciaries have all of the powers set forth in the Plan. If any
powers or duties are to be allocated among them, or delegated to third parties,
indicate below what the powers or duties are and to whom they are to be
delegated (Plan section 15.3):
XVI. The Trustee
The First National Bank of Boston has been appointed as Trustee for all Colonial
Mutual Funds held in Trust under this Plan.
A. The Employer hereby appoints the Sponsor's designated Trustee to serve as
Trustee: The First National Bank of Boston , 100 Federal Street, Boston, MA
02110. This plan shall be deemed to have been accepted by the Trustee, The First
National Bank of Boston, upon receipt by its Agent, Colonial Investors Service
Center, Inc., of all necessary documents and forms, properly completed.
Note: If you select optional features which permit loans or the purchase of life
insurance (Article IX) or if your choice of investments includes investments
other than those offered by the Sponsor (Article XI), then, in addition to the
Trustee appointed in A above, you must appoint another Trustee in Section XVIB.
The First National Bank of Boston will only serve as Trustee for Colonial Funds.
B. The Employer hereby appoints the following to serve as Trustee (Plan section
2.39):
Name
Address
City State Zip
Dated
X
<PAGE>
Signature of Trustee
XVII. Employer Signature
Read the employer acknowledgment and execute this section. Employer must execute
and date the Adoption Agreement. If the employer is a corporation, the
individual must be a corporate officer who is duly authorized, pursuant to a
corporate resolution, to act on behalf of the corporation. Any affiliated
employers also should execute the Adoption Agreement.
The Employer acknowledges receipt of the current prospectus of the investment
companies designated by the Employer for its initial investments under the Plan
and represents that it has delivered a copy thereof to each Participant in the
Plan, and that it will deliver to each Participant making contributions and each
new Participant, a copy of the then current prospectus of such investment
companies. The Employer further represents that the information in this Adoption
Agreement shall become effective only when approved and countersigned by the
Trustee. The right to reject the Adoption Agreement for any reason is reserved.
This Adoption Agreement must be used only in conjunction with basic plan
document #01.
Note: An Employer who has ever maintained or who later adopts any plan
(including, after December 31, 1985, a welfare benefit fund, as defined in
section 419(e) of the Code, which provides post-retirement medical benefits
allocated to separate accounts for Key Employees, as defined in section
419A(d)(3) of the Code, or an individual medical account, as defined in section
415(l)(2) of the Code), in addition to this Plan, may not rely on the opinion
letter issued by the National Office of the Internal Revenue Service as evidence
that this Plan is qualified under section 401 of the Internal Revenue Code. If
the Employer who adopts or maintains multiple plans wishes to obtain reliance
that the plans are qualified, application for a determination letter should be
made to the appropriate Key District Director of Internal Revenue.
The Employer may not rely on the opinion letter issued by the National Office of
the Internal Revenue Service as evidence that this Plan is qualified under
section 401 of the Code unless the terms of the Plan, as herein adopted or
amended, that pertain to the requirements of sections 401(a)(4), 401(a)(17),
401(1), 401(a)(5), 410(b) and 414(s) of the Code, as amended by the Tax Reform
Act of 1986 or later laws, (a) are made effective retroactively to the first day
of the first Plan Year beginning after December 31, 1988 (or such other date on
which these requirements first become effective with respect to this Plan); or
(b) are made effective no later than the first day on which the Employer is no
longer entitled, under regulations, to rely on a reasonable, good faith
interpretation of these requirements, and the prior provisions of the Plan
constitute such an interpretation. This Adoption Agreement consists of 4 pages.
IN WITNESS WHEREOF, the Employer has caused this Adoption Agreement to be
executed by its authorized officers this _______ day of -------------------.
Name of Employer
By: X
Name & Title
<PAGE>
Date
[Colonial Flag Logo]
Adoption Agreement #002
Colonial Money Purchase Pension Plan
Steps You Need to Take
The forms in this booklet are the only forms you will need to complete in order
to adopt a Colonial Money Purchase Pension Plan. Employers must:
Step 1: Complete the Sample Corporate Resolution on page 10 and retain for your
files.
Step 2: Complete the Money Purchase Pension Plan Adoption Agreement which begins
on page 11. The Colonial Money Purchase Pension Plan Adoption Agreement is used
to adopt the Colonial Money Purchase Pension Plan or to amend an existing Money
Purchase Pension Plan.
Step 3: Fill out all sections in white.
Step 4: Complete the Plan Form on page 15.
Step 5: Each participant completes the Enrollment Form on page 17. (Photocopy
this form for completion by each participant.)
Step 6: Each participant completes a Beneficiary Designation Form on page 18.
(Photocopy this form for completion by each participant.)
Step 7: Complete the Asset Transfer Form on page 20.
Step 8: Photocopy the completed Adoption Agreement, Plan Form, and other forms
for your files, and send the originals to: Colonial Investors Service Center,
Inc., Attn.: Retirement Plan Services, P.O. Box 1722, Boston, MA 02105 -1722.
Step 9: Complete the Notice to Interested Parties and Summary Plan Description.
Distribute per the instructions in the Plan Document and Employee Communications
Kit.
Pre-checked Adoption Agreement
To make it easy for you, the employer, the Money Purchase Pension Plan Adoption
Agreement starting on page 11 has been marked to reflect the Money Purchase
Pension plan provisions most frequently chosen. Solid boxes ([ ]) in shaded
sections indicate an election. You are encouraged to review the details with
your professional advisers. The key sections in this Adoption Agreement, which
have been pre-checked for you, mean that your plan will operate as follows:
[ ] All employees who are age 21 and who meet a one-year service requirement are
eligible for contributions.
[ ] An employee who completes 1,000 hours of service is credited with a year of
service.
[ ] Your employees will enter the plan on the plan anniversary date or the date
which is six months subsequent to each plan anniversary date, after eligibility
requirements have been satisfied.
[ ] Not integrated with Social Security.
[ ] Normal retirement age of 65.
<PAGE>
[ ] No hardship withdrawals or loans are permitted.
[ ] Participants direct all contributions.
[ ] Trustee services provided by The First National Bank of Boston at a fee of
$10 per participant per year.
[ ] Employer is the Plan Administrator.
Note: The elections that are pre-checked represent the most common elections
made by employers for this type of plan.
Some sections have not been completed because they are not required. However,
you may make an election in any of these sections by marking an "X" and
initialing next to the election.
You may change any of these pre-checked elections by making the appropriate
change and placing your initials next to the section being changed.
About Adoption Agreement
Colonial Money Purchase Pension
This is the Adoption Agreement for defined contribution plan #002 of basic plan
document #01, which is a prototype money purchase pension plan. This plan is
sponsored by Colonial Investment Services, Inc.
Note: Before executing this Adoption Agreement, the employer should consult with
a tax adviser or attorney. Failure to properly complete this Adoption Agreement
may result in Plan disqualification.
The Employer hereby establishes a money purchase pension plan and trust upon the
respective terms and conditions contained in the prototype defined contribution
plan (the "Plan") and the Trust Agreement annexed hereto and appoints as Trustee
of such trust the person(s) who have executed this Adoption Agreement evidencing
their acceptance of such appointment. The Plan, the Trust Agreement, and the
Custody Agreement, if applicable, shall be supplemented and modified by the
terms and conditions contained in this Adoption Agreement and shall be effective
on the Effective Date. The Sponsor will inform the Employer of any amendments
made to the Plan or the discontinuance or abandonment of the Plan.
Deadline: New Plans must be executed by the last day of the employer's fiscal
year.
General Reporting, Disclosure, and Fiduciary Information
Part of the administration of qualified plans includes the filing of various
reports with the Internal Revenue Service (IRS), and to the extent applicable,
with the Department of Labor (DOL), and the Pension Benefit Guaranty Corporation
(PBGC) (usually for Defined Benefit Plans only).
An individual having or exercising discretionary authority or control over the
plan assets is considered to be a fiduciary and must be bonded by a corporate
surety company. This is done to insure against a breach of fiduciary duty or
mishandling of funds involving plan assets and/or operations. The amount of the
bond must equal 10% of the assets handled and must be no less than $1,000 and no
more than $500,000 or as directed by the Department of Labor.
We have provided you with the Notice to Interested Parties and Model Summary
Plan Description included in the Money Purchase Pension and Profit Sharing Plan
Document
<PAGE>
and Employee Communications Kit. Please follow the instructions carefully and
complete these within the prescribed time frames. You must review these and any
other reporting disclosure, and fiduciary responsibilities thoroughly with your
plan administrator, pension attorney, and/or tax adviser to insure compliance
with current pension law and to maintain your plan's tax qualified status.
[Colonial Flag Logo]
Sample Corporate Resolution
Colonial Money
Purchase Pension Plans
The undersigned hereby certifies that he/she is Secretary of
________________________ (the "Corporation"), a corporation organized and
existing under the laws of ____________ (State or Commonwealth), and that the
following resolutions were duly adopted at a meeting of the Board of Directors
of the Corporation, duly called and held on _____________ (date) at which a
quorum was present and acted throughout, and that such resolutions have not been
amended or rescinded and are in full force and effect.
1. Resolved, that the Corporation hereby adopts the __________________________
(name of Colonial plan) as a ____________________(type of plan -- for example,
money purchase pension) ("Plan") and agrees to enter into the Trust Agreement
with The First National Bank of Boston ("Trustee"), both as presented at this
meeting, effective ________________ (date); and it is further
OR
1. Resolved, that the Corporation hereby amends its current
_______________________ (name of current plan) by adopting the
________________________ (name of Colonial plan) as a _______________________
(type of plan -- for example, money purchase pension) ("Plan") and agrees to
enter into the Trust Agreement with The First National Bank of Boston
("Trustee"), both as presented at this meeting, effective _________________
(date); and it is further
2. Resolved, that the appropriate officers of the Corporation are hereby
authorized and directed on behalf of the Corporation to execute and deliver an
Adoption Agreement adopting the Plan and a Trust Agreement with the Trustee and
to do all other things which they may consider necessary or appropriate to
establish and maintain the Plan and the Trust Agreement, including, but not
limited to, amending the Plan or the Trust Agreement, making contributions from
the funds of the Corporation in accordance with the Adoption Agreement for the
purposes of the Plan, and giving the Trustee all notices, directions,
instructions and other communications as appropriate and receiving all notices,
reports, accounts and other communications from the Trustee.
3. Resolved, that the following officers of the Corporation are authorized to
act severally/jointly (cross out one) on behalf of the Corporation with respect
to these matters.
<PAGE>
Name & Title Signature
Name & Title Signature
Name & Title Signature
In witness whereof, the undersigned has hereto set his hand and corporate seal
of the aforesaid Corporation on this _________ day of ____________________,
19_____.
Secretary of Corporation Signature
(Corporate seal)
For Employer Use Only
Do not send to The First National Bank of Boston or Colonial Investors Service
Center, Inc.
Colonial Money Purchase Pension Plan
Adoption Agreement #002
I. Sponsor Data
Colonial Investment Services, Inc., One Financial Center, Boston, MA 02111-2621.
Telephone: 800-345-6611
II. Employer Data
Please complete A through G. If applicable, complete H and I.
A.
Name of Employer and Employer Identification Number
B.
Address
City State Zip
C.
Telephone Number
D.
Employer's Taxable Year End
E.
Plan Year End
<PAGE>
F. The Employer is :
A corporate entity A noncorporate entity
A corporation electing to be taxed under Subchapter S
The "Effective Date" of this plan is the first day of the calendar year or the
fiscal year on which you operate.
G.
Effective Date (should be first day of a Plan Year)
H. If this is an amendment of an existing plan, complete the following:
Effective Date of Amendment (should be first day of a Plan Year)
Name of Prior Plan
Effective Date of Prior Plan
The "Limitation Year" will be December 31st, unless the company is operating on
a fiscal year basis. In that case the limitation year ends on the last day of
the fiscal year. The limitation year usually corresponds with the Plan Year.
I.
Limitation Year, if different from E, above
III. Eligibility
Your plan has pre-checked one year of service and the attainment of age 21 as
its eligibility requirements. If desired, you may choose up to 2 years service
as an eligibility requirement; however, any time you choose greater than one
year, you must provide 100% immediate vesting in Article IX of the Adoption
Agreement.
A. Employees shall be eligible to participate in the Plan upon completion of the
eligibility requirements (complete 1 and 2) (Plan section 3.1):
1. Years of Service. The Employee must complete (check one):
[ ] One Year of Service.
____ Months (not more than 12) after date of hire.
____ Years of Service. You can require less than or more than one Year of
Service, but not more than two (2). If you select more than one Year of Service,
the Employee must be 100% vested once he becomes eligible, and you must select
vesting schedule B in section IX of this Adoption Agreement. If the Year of
Service is or includes a fractional year, an Employee will not be required to
complete any specified number of Hours of Service (section IVA of this Adoption
Agreement) to receive credit for such fractional year.
2. Age. The Employee must attain age 21 (not greater than age 21).
B. The following Employees will not be eligible to participate in the Plan (Plan
section 3.1):
[ ] Union Employees. Employees included in a unit of employees covered by a
collective bargaining agreement between the Employer and Employee
representatives (as defined in section 3.1(b)(i) of the Plan), if retirement
benefits were the subject of good faith bargaining and if two percent or less of
the employees who are covered pursuant to that agreement are professionals as
defined in section 1.410(b)-9 of the regulations.
<PAGE>
[ ] Nonresident Aliens. Employees who are nonresident aliens and who receive no
earned income from the Employer which constitutes income from sources within the
United States.
For purposes of this section III, the term "Employee" includes all employees of
this Employer or any employer aggregated with this Employer under sections
414(b), (c), (m), or (o) of the Code and individuals who are Leased Employees
required to be considered Employees of any such employer under section 414(n) or
(o) of the Code.
IV. Credited Service
A. The Plan provides that a Year of Service requires at least 1,000 hours during
any Plan Year. If a lower number of hours is desired, state the number here:
______ (Plan section 2.42).
B. The Plan permits Hours of Service to be determined by the use of service
equivalencies under one of the methods selected below (choose one method) (Plan
section 2.19):
1. [ ] On the basis of actual hours for which an Employee is paid or entitled to
payment.
2. [ ] On the basis of days worked. An Employee will be credited with ten (10)
Hours of Service if under section 2.19 of the Plan such Employee would be
credited with at least one (1) Hour of Service during the day.
3. [ ] On the basis of weeks worked. An Employee will be credited with
forty-five (45) Hours of Service if under section 2.19 of the Plan such Employee
would be credited with at least one (1) Hour of Service during the week.
4. [ ] On the basis of semimonthly payroll periods. An Employee will be credited
with ninety-five (95) Hours of Service if under section 2.19 of the Plan such
Employee would be credited with at least one (1) Hour of Service during the
semimonthly payroll period.
- - or -
5. [ ] On the basis of months worked. An Employee will be credited with one
hundred ninety (190) Hours of Service if under section 2.19 of the Plan such
Employee would be credited with at least one (1) Hour of Service during the
month.
C. Service with a predecessor employer (choose 1 or 2) (Plan sections 3.3 and
8.5):
1. [ ] No credit will be given for service with a predecessor employer.
- - or -
2. [ ] Credit will be given for service with the following predecessor
employer(s):
Note: The Plan provides that if this is a continuation of a predecessor plan,
service under the predecessor plan must be counted.
D. Service before Plan (or predecessor plan) adopted (Plan section 2.42):
1. [ ] Full Credit
2. [ ] No Credit
V. Compensation
A. Compensation (choose 1 or 2)(Plan section 2.7):
1. [ ] Shall include
- - or -
2. [ ] Shall not include
Employer Contributions made pursuant to a salary reduction agreement which are
not includable in the gross income of
<PAGE>
the Employee under sections 125, 402(e)(3), 402(h)(1)(B), or 403(b) of the Code.
B. The effective date of the selection in A above shall be _________ (but not
earlier than the first day of the first Plan Year beginning after 1986).
VI. Contributions
Your plan may provide for the same contribution % of compensation for each
participant, up to 25%. This is a plan that is not integrated with Social
Security. If desired, however, you may select an integrated plan formula which
is designed to provide contributions based upon amounts of compensation below
and above the Social Security Taxable Wage Base (TWB).
Employers considering integration of their plans should consult with a tax
adviser. If adopting both Money Purchase and a Profit Sharing Plan, only one
plan can be integrated with Social Security.
Your plan has been pre-checked as a non-integrated plan. Indicate the % of
contribution for each participant you desire to contribute (maximum 25%).
A. Formulas (choose 1 or 2) (Plan section 4.1(a)):
1. [ ] Plan not integrated with Social Security.
The Employer will contribute _______% of Covered Compensation for each
Participant (not less than 3% if the profit sharing Adoption Agreement is also
adopted and, in any event, not more than 25%).
2. [ ] Integrated Plan -- The Employer will contribute an amount equal to
_______% (base contribution percentage, not less than 3%) of each Participant's
Covered Compensation (as defined in section 2.7 of the Plan) for the Plan Year,
up to the Integration Level plus _______% (not less than 3% and not to exceed
the base contribution percentage by more than the lesser of: (1) the base
contribution percentage, or (2) the Maximum Disparity Rate of such Participant's
Covered Compensation in excess of the Integration Level).
a. [ ] Taxable Wage Base. The contribution and benefit base under section 230 of
the Social Security Act at the beginning of the Plan Year.
- - or -
b. [ ] $_________ (a dollar amount not to exceed the Taxable Wage Base).
- - or -
c. [ ] ________% of the Taxable Wage Base (not to exceed 100%).
Note: If you maintain any other plan in addition to this Plan, only one plan may
be integrated with Social Security.
B. Forfeitures for a given Plan Year (choose 1 or 2) (Plan section 5.3(a)):
1. [ ] Shall be applied to reduce the Employer Contribution in that year, or if
in excess of the Employer Contribution for such Plan Year, the excess amounts
shall be used to reduce the Employer Contribution in the next succeeding Plan
Year or Years.
- - or -
2. [ ] Shall be added to the Employer Contribution and allocated accordingly.
C. Contribution Eligibility (Plan section 4.1(c)):
The Plan provides that all Participants will share in Employer Contributions for
the Plan Year, except the following (if elected):
[ ] Participants who terminate employment during the Plan Year with not more
than 500 Hours of Service and who are
<PAGE>
not Employees as of the last day of the Plan Year (other than Participants who
die, retire or become Totally and Permanently Disabled). If a fewer number of
hours than 500 is desired, state the number here: ________.
VII. Distributions
A. Normal Retirement Age is (choose 1 or 2) (Plan section 2.26):
1. [ ] The date a Participant reaches age 65 (not more than 65 or less than 55).
If no age is indicated, normal retirement age shall be 65.
- - or -
2. [ ] The later of age ____ (not more than 65) or the ____ (not more than 5th)
anniversary of the day the Participant commenced participation in the Plan. The
participation commencement date is the first day of the first Plan Year in which
the Participant commenced participation in the Plan.
B. Early Retirement (choose 1 or 2) (Plan section 2.10):
1. [ ] Early Retirement Date is the first day of the month coincident with or
next following the date upon which a Participant reaches age _______ (not less
than 55) and completes __________ years of service (not more than 15).
- - or -
2. [ ] Early Retirement will not be permitted under the Plan.
VIII. Optional Features
The Plan allows you the flexibility of choosing loan provisions. The plan also
permits participants to designate a portion of their account to purchase life
insurance contracts. Note: If plan loans are permitted, a trustee in addition to
The First National Bank of Boston must be appointed in section XVB.
A. Loans (choose 1 or 2) (Plan ARTICLE 13):
1. [ ] The Plan permits loans to Participants.
- - or -
2. [ ] The Plan does not permit loans to Participants.
Note: The Plan may not permit loans to Owner-Employees of noncorporate entities
or to Shareholder-Employees of subchapter S corporations. If Plan loans are
permitted, a Trustee in addition to The First National Bank of Boston must be
appointed in section XVB.
B. Insurance (choose 1 or 2) (Plan ARTICLE 14):
1. [ ] The Plan permits Participants to designate a portion of their Account to
purchase life insurance contracts.
Note: If life insurance is permitted, a trustee in addition to The First
National Bank of Boston must be appointed in section XVB. The percentage of the
Employer Contributions which may be applied to purchase life insurance contracts
shall be equal to ______%.
- - or -
2. [ ] The Plan does not permit Participants to designate a portion of their
Account to purchase life insurance contracts.
Note: Section 14.5 of the Plan provides certain limits on the amount of Employer
Contributions that can be applied to purchase life insurance contracts.
<PAGE>
IX. Vesting
An employer may select any of the schedules outlined in this section. Choose the
vesting schedule you desire. Employee contributions are not subject to a vesting
schedule and are 100% non-forfeitable when made. Employer Contributions will
become vested if the Participant terminates employment for any reasons other
than retirement, death, or disability pursuant to the following schedule (choose
A, B, C, or D) (Plan section 8.3):
A. [ ] Years of Service Vested Percentage
1 year 0%
2 years 20%
3 years 40%
4 years 60%
5 years 80%
6 or more years 100%
B. [ ] 100% vesting immediately after satisfaction of the eligibility
requirements. Note: If a service requirement greater than one year is chosen for
eligibility in section IIIA1 of this Adoption Agreement, vesting schedule B must
be chosen.
C. [ ] 100% vesting after ____ years of service (not to exceed three).
D. [ ] Years of Service Vested Percentage
1 year ____%
2 years ____% (not less than 20)
3 years ____% (not less than 40)
4 years ____% (not less than 60)
5 years ____% (not less than 80)
6 or more years ____% (not less than 100)
X. Investment Choices
The plan permits either 100% of the Plan's assets to be selected from shares of
Colonial Mutual Funds, or at least 50% to be selected from shares of Colonial
Mutual Funds, with the remainder being in such investments as may be acceptable
within the discretion of the Trustee. If you desire to invest plan assets only
in Colonial Mutual Funds, check "A." If you select "B," other investments not
offered by Colonial, at least 50% of plan assets must be invested in Colonial
Mutual Funds. The Trustee designated in section XVB, will be the trustee for any
non-Colonial assets.
A. [ ] Investment of Trust assets may be selected only from shares or other
investments offered by the Sponsor.
B. [ ] 50% of the Trust assets must be invested in Shares or other investments
offered by the Sponsor with the remainder in such other investments as may be
acceptable within the discretion of the Trustee.
Note: If "B" above is selected, a Trustee in addition to The First National Bank
of Boston must be appointed in section XVB. The Sponsor may impose additional
limitations relating to the type of permissible investments in the Trust (Plan
section 7.3).
XI. Investment Authority
Contributions to the Plan shall be invested by the Trustee in accordance with
instructions of the Employer or Plan Administrator except that (choose A or B)
(Plan section 7.2):
<PAGE>
A. [ ] No exceptions; the Employer or Plan Administrator shall make all
investment selections.
- - or -
B. [ ] Each Participant may, n shall direct that:
1. [ ] Amounts voluntarily contributed by such Participant pursuant to section
4.3 of the Plan, rollover contributions pursuant to section 4.4 of the Plan, and
direct transfers pursuant to section 4.5 of the Plan, if any,
- - and/or -
2. [ ] Employer Contributions on the Participant's behalf shall be invested in
specified investments offered by the Sponsor. Participants may make or change
such directions by giving written notice to the Plan Administrator. Reasonable
restrictions may be imposed on this privilege by the Plan Administrator or the
Sponsor for purposes of administrative convenience.
XII. Top-Heavy Provisions
Participants who are eligible to receive the minimum allocation provided by
section 5.2 of the Plan shall receive a minimum contribution under this Plan
equal to 3% of Compensation, or if lesser, the largest percentage of
Compensation allocated on behalf of any Key Employee for the Plan Year under
this Plan and paired defined contribution plan #001.
Note: If the Participant also participates in paired defined contribution plan
#001 (the profit sharing plan), the required minimum contribution must be made
under this Plan, even if the integrated plan combination formula is selected.
XIII. Allocation Limitations
Complete this section only if you maintain or ever maintained another qualified
plan (other than paired plan #001) in which any participant in this plan is (or
was) a participant or could become a participant. This section must also be
completed if the employer maintains a welfare benefit fund, as defined in
Section 419(e) of the Code, or an individual medical account, as defined in
Section 415(l)(2) of the Code, under which amounts are treated as annual
additions with respect to any participant in this plan.
A. If the Participant is covered under another qualified defined contribution
plan maintained by the Employer, other than a master or prototype plan (choose
either 1 or 2) (Plan section 6.3):
1. [ ] The provisions of section 6.2 will apply as if the other plan were a
master or prototype plan.
- - or -
2. [ ] (On an attachment, provide the method under which the plans will limit
total annual additions to the maximum permissible amount, and will properly
reduce any excess amounts, in a manner that precludes Employer discretion.)
B. If the Participant is or has ever been a participant in a defined benefit
plan maintained by the Employer attach an explanation of the method under which
the plan involved will satisfy the 1.0 limitation in a manner that precludes
Employer discretion.
XIV. Administration
<PAGE>
The plan administrator will automatically be the employer, unless otherwise
indicated in this section. Also list all named fiduciaries in this section.
A. The Plan Administrator of the Plan will be (choose 1, 2, or 3) (Plan sections
2.30 and 15.4):
1. [ ] The Employer
- -or-
2. [ ] An individual Plan Administrator designated by the Employer
Name
Address
City State Zip
- -or-
3. [ ] A committee of two or more Employees designated by the Employer:
Name & Title
Signature
Name & Title
Signature
Name & Title
Signature
Note: If no Plan Administrator has been designated or serving at any time, the
Employer will be deemed the Plan Administrator (Plan section 15.4).
B. The Plan Administrator (including all members of a committee, if a committee
is named) is a Named Fiduciary for the Plan. If other persons are also to be
Named Fiduciaries, their names and addresses are:
Name
Address
City State Zip
Name
Address
City State Zip
<PAGE>
Name
Address
City State Zip
C. The Named Fiduciaries have all of the powers set forth in the Plan. If any
powers or duties are to be allocated among them, or delegated to third parties,
indicate below what the powers or duties are and to whom they are to be
delegated (Plan section 15.3):
XV. The Trustee
The First National Bank of Boston has been appointed as Trustee for all Colonial
Mutual Funds held in Trust under this Plan.
A. The Employer hereby appoints the Sponsor's designated Trustee to serve as
Trustee:
The First National Bank of Boston, 100 Federal Street, P.O. Box 1722, Boston, MA
02110. This plan shall be deemed to have been accepted by the Trustee, The First
National Bank of Boston, upon receipt by its agent, Colonial Investors Service
Center, Inc., of all necessary documents and forms, properly completed. Note: If
you select optional features which permit loans or the purchase of life
insurance (Article VIII) or if your choice of investments includes investments
other than those offered by the Sponsor (Article X), then, in addition to the
Trustee appointed in paragraph A you must appoint another Trustee in Section
XVB. The First National Bank of Boston will only serve as Trustee of Colonial
Mutual Funds.
B. The Employer hereby appoints the following to serve as Trustee (Plan section
2.39):
Name
Address
City State Zip
Dated
Signature of Trustee
XVI. Employer Signature
Please read the employer acknowledgment, and execute this section. Employer must
execute and date the Adoption Agreement. If the employer is a corporation, the
individual must be a corporate officer who is duly authorized, pursuant to a
corporate resolution, to act on behalf of the corporation. Any affiliated
employers also should execute the Adoption Agreement.
The Employer acknowledges receipt of the current prospectus of the investment
companies designated by the Employer for its initial investments under the Plan
and represents that it has delivered a copy thereof to each Participant in the
Plan, and that it will deliver to each Participant making contributions and each
new Participant, a copy of the then current prospectus of such investment
companies. The Employer further
<PAGE>
represents that the information in this Adoption Agreement shall become
effective only when approved and countersigned by the Trustee. The right to
reject this Adoption Agreement for any reason is reserved.
This Adoption Agreement must be used only in conjunction with basic plan
document #01.
Note: An Employer who has ever maintained or who later adopts any plan
(including a welfare benefit fund, as defined in section 419(e) of the Code,
which provides post-retirement medical benefits allocated to separate accounts
for Key Employees, as defined in section 419A(d)(3) of the Code, or an
individual medical account as defined in section 415(l)(2) of the Code), in
addition to this Plan (other than paired plan #001), may not rely on the opinion
letter issued by the National Office of the Internal Revenue Service as evidence
that this Plan is qualified under section 401 of the Internal Revenue Code. If
the Employer who adopts or maintains multiple plans wishes to obtain reliance
that the plans are qualified, application for a determination letter should be
made to the appropriate Key District Director of Internal Revenue.
The Employer may not rely on the opinion letter issued by the National Office of
the Internal Revenue Service as evidence that this Plan is qualified under
section 401 of the Code unless the terms of the Plan, as herein adopted or
amended, that pertain to the requirements of sections 401(a)(4), 401(a)(17),
401(1), 401(a)(5), 410(b), and 414(s) of the Code, as amended by the Tax Reform
Act of 1986 or later laws, (a) are made effective retroactively to the first day
of the first Plan Year beginning after December 31, 1988 (or such other date on
which these requirements first become effective with respect to this Plan); or
(b) are made effective no later than the first day on which the Employer is no
longer entitled, under regulations, to rely on a reasonable, good faith
interpretation of these requirements, and the prior provisions of the Plan
constitute such an interpretation. This Adoption Agreement consists of 4 pages.
IN WITNESS WHEREOF, the Employer has caused this Adoption Agreement to be
executed by its authorized officers this ________ day of ------------------.
Name of Employer
By: X
Name & Title
Date
[Colonial Flag Logo]
Plan Form
Colonial
Retirement Plan
Section I: Employer Information (Please Print)
Name of Employer EIN#/Plan Tax Identification Number
<PAGE>
Address
City State Zip
Name of Plan Plan Year End
Section II: Plan Report/Software Request
A. Plan Reports: This section has been pre-checked to provide basic reports for
your plan. Please make any changes you desire.
If you indicate below, an additional copy of the Participant Statement will be
mailed as part of the Consolidated Plan Reports.*
Name of Report Prepared (Check One)
Immediately Monthly Quarterly Do Not Want
List Bill [checkmark]
Consolidated Plan Reports [checkmark]
Participant Statements [checkmark]
(automatically mailed to
address of record)
Send an additional copy of all plan reports to my plan administrator below:
Name of Administrator Telephone
Address
City State Zip
[ ] *Please send an additional Participant Statement to each participant at the
address of record as provided on the Participant Enrollment Form.
B. Plan Software: Complete the software section based upon your plan needs:
Do Not
Software Version Disk Size Want
5500 Reporting
Diskette [ ] DOS [ ] 3-1/2" Disk [ ] 5-1/4" Disk
[ ] Windows
Plan Manager
Diskette* [ ] Windows [ ] only 3-1/2" Disk
Plan Software is to be sent to: [ ] the Employer OR [ ] to the administrator
indicated above
The reverse of this form provides a review of the reports and software
available.
Section III: Fund Selection
The following Colonial Mutual Funds are to be used as funding choices for my
company's Money Purchase Pension and/or Profit Sharing plan. Additional funds
may be listed on an attachment to this form. Purchases or exchanges into other
Colonial funds
<PAGE>
will not be permitted without my written authorization or authorized telephone
transaction instructions.
1. 3. 5.
2. 4. 6.
All of the above fund purchases are to be made using n Class A shares n Class B
shares n Class D shares. If no selection is specified, the money will be
invested in Class A shares. Section IV: Signature
Employer Signature Date
Section V: Financial Service Firm (FSF)
FSF Name Branch Office Location Telephone
Main Office Address City State Zip
Representative's Last Name Signature
Computer Specifications for use of Plan Software
To take advantage of the software diskettes, you must have computer capability
as described below.
5500 EZ or 5500-C/R
This software assists in the preparation of the annual IRS form 5500 filing. A
supplemental data diskette accompanies the program so that certain fields on the
form are pre-filled. Simply verify this data and complete the form to easily
file your 5500 form each year.
IRS Form 5500 -- Windows Version
- -- IBM PC or compatible with 386, 486, or higher processor
- -- Microsoft Windows version 3.1 installed
- -- EGA, VGA, or higher video card
- -- Minimum of 7 MB of free disk space
- -- HP Laserjet Plus or compatible (proof mode), or any other Window's-supported
printer (draft mode)
IRS Form 5500 -- DOS Version
- -- IBM PC or compatible with XT286 or higher processor
- -- DOS 3.0 or higher
- -- Minimum of 400K RAM (after DOS)
- -- Minimum of 3 MB of free disk space
- -- HP Laserjet II or compatible
<PAGE>
Plan Manager Software -- Windows Only*
This software assists in the transmission of plan contributions via diskette or
modem communications. Allocations to participant accounts is simplified through
"automation". When contributions are transmitted/submitted, you may make changes
to participant or beneficiary data to more effectively manage your plan.
*Available in 1996. If software is not used, manual processing will result in
additional fees..
Plan Report/Software Available to Adopting Employers All plan reports will be
provided to the employer, unless otherwise indicated in Section II.
- -- List Bill -- A document that lists the name and Colonial account number(s) of
each plan participant. The employer may use the list bill as a transmittal
document for plan contributions made after the plan is initially funded, noting
on it any changes for action by Colonial Investors Service Center, Inc. The List
Bill can be produced automatically following plan contributions.
- --Consolidated Plan Reports -- Colonial will provide both a Consolidated
Participant Statement which summarizes transactions for each individual
participant, as well as a Consolidated Fund Summary that summarizes plan
contributions, redemptions, dividend/capital gains distributions, and current
values for all plan accounts for a specific time period. These reports will be
produced quarterly unless otherwise indicated.
- -- Participant Statements -- A consolidated statement of transactions for each
participant. These statements will be produced quarterly and are part of the
Consolidated Plan Reports. By checking the appropriate box in Section II A, an
additional copy of the Participant Statements will be mailed to each
participant's address of record, quarterly.
- -- Transaction Confirmation -- A statement confirming the most recent
transaction in any or all plan accounts. This statement is provided
automatically by Colonial as required by law.
Reports will be sent to the employer address entered in Section I unless
otherwise indicated in Section II.
Return this form to: Colonial Investors Service Center, Inc.
Attn: Retirement Plan Services
One Financial Center
Boston, MA 02111
[Colonial Flag Logo]
Participant Enrollment Form
Colonial
Retirement Plans
Plan Name Type of Plan [ ] Money Purchase Pension
[ ] Profit Sharing Plan
Section I: Employee Information (Please Print)
<PAGE>
Name
Address
City State Zip
Date of Birth Date of Hire Social Security #
Location
Section II: Investment Election
Indicate how you want your contribution allocated. Your total must equal 100%.
For information on the investments, please refer to the specific Fund
prospectus(es).
Fund Name(s) %
1.
2.
3.
4.
5.
Total = 100%
Section III: Signature
X
Employee Signature Date
I have carefully read the prospectus(es) of the Fund(s) listed above, which
contain(s) more complete information, including fees, risks, and expenses.
Section IV: Employer Certification
Name of Employer
X
Employee Signature Date
Each employer should photocopy this form for completion by participants. For
larger cases, please call Colonial's Literature Department at 1-800-248-2828 to
order additional copies of this form.
[Colonial Flag Logo]
Beneficiary Designation Form
Colonial
Retirement Plans
<PAGE>
Employer/Plan Name
Participant Name Social Security Number - -
Type of Plan: [ ] Money Purchase Pension [ ] Combination
Money Purchase Pension and Profit Sharing
(Check appropriate box) [ ] Profit Sharing
Notice of Preretirement Death Benefit
[ ] I am not married and I understand that if I die before my benefits under the
above Plan begin, my benefits will be paid to my estate UNLESS I designate a
beneficiary. If I want someone other than my estate to receive these
preretirement death benefits, I will designate this beneficiary below.
Complete for Money Purchase Pension Plan OR Combination Money Purchase Pension
and Profit Sharing Plan
[ ] I am married and I understand that if I die before my benefits under the
Plan begin, my benefits will be paid to my surviving spouse in the form of an
annuitized distribution, UNLESS I designate another beneficiary and my spouse
consents to this in writing. If I want someone other than my spouse to receive
these preretirement death benefits, I will designate this beneficiary below and
my spouse will consent to this in the Spousal Consent section of this form. I
also understand that if I am under 35 this beneficiary designation will be
effective only until the first day of the Plan Year in which I turn 35, and at
that time the qualified preretirement survivor annuity coverage payable to my
spouse will automatically be reinstated unless I again designate another
beneficiary and my spouse consents to this in writing.
Complete for Profit Sharing Plan
[ ] I am married and I understand that if I die before my benefits under the
above plan begin, my benefits will be paid to my surviving spouse, UNLESS I
designate another beneficiary and my spouse consents to this in writing. If I
want someone other than my spouse to receive these preretirement death benefits,
I will designate this beneficiary below and my spouse will consent to this in
the Spousal Consent section of this form.
Beneficiary Designation
Instead of my estate, if unmarried, or my spouse, if married, I designate the
following beneficiaries to receive the preretirement death benefits under my
Plan. This election shall revoke any previous elections made by me. In the event
of my death, pay any benefits I may have under said Plan in equal portions,
unless otherwise indicated, to the following Primary Beneficiary(ies):
Name Relationship % Date of Birth Social Security Number
If none of the above-named Primary Beneficiaries survives me, pay any benefits I
may have under the Plan in equal portions, unless otherwise indicated, to the
following alternative Beneficiary(ies) or the survivor(s) thereof:
Name Relationship % Date of Birth Social Security Number
<PAGE>
I understand that the beneficiaries named herein may be changed or revoked at
any time by filing a new beneficiary form and, if I am married, a new spousal
consent, and that this designation is effective only with my current spouse who
has signed below.
X
Signature of Participant Date Print Name of Participant
Spousal Consent
I have read the Notice of Preretirement Death Benefit and Beneficiary
Designation and consent to their terms. I acknowledge and understand that if my
spouse is a participant in a Colonial Money Purchase Pension Plan or Combination
Money Purchase Pension and Profit Sharing Plan, I am waiving my right to have my
spouse's Vested Account Balance under the Plan paid to me in an annuitized
distribution for my life. I further understand that this consent is irrevocable
unless my spouse revokes the Beneficiary Designation.
X
Signature of Spouse Date Print Name of Spouse
X
Signature of Witness Date Print Title of Witness
(Notary Public or Plan Administrator)
Notary Seal (If Applicable) Commission Expires
How to Transfer Your
Qualified Retirement Plan to Colonial
It's easy to transfer your Qualified Retirement Plan; and as long as the
transfer is made directly from one trustee to another, there is no change in the
tax status of your plan assets.
Step 1
If you are transferring your Retirement Plan assets to a new Colonial Qualified
Plan, follow the guidelines for adopting the new Colonial Qualified Plan.
Complete the Asset Transfer Form, appropriate Adoption Agreement, and related
forms.
Step 2
If you are transferring your Plan assets to an existing Colonial Qualified Plan,
it will not be necessary to complete a new Adoption Agreement. Complete the
Asset Transfer Form indicating the existing account number(s) to which the
transfer of assets is to be made.
Step 3
If you are transferring your Plan assets to an existing plan, but wish these
transferred assets to be deposited into a new account, complete the Asset
Transfer Form as well as the Participant Investment Form.
<PAGE>
Check to see if your resigning trustee or custodian requires your signature to
be guaranteed.
Step 4
Send the Asset Transfer Form as well as the completed Colonial Adoption
Agreement if establishing a new Colonial Qualified Plan to Colonial at the
address below. If you have any questions on this transfer form, please call
800-799-PLAN.
Mail To:
Colonial Investors Service Center, Inc., Attn: Retirement Plan Services, P.O.
Box 1722, Boston, MA 02105-1722
Upon receiving the completed Adoption Agreement and a copy of the transfer
letter to the original trustee, Colonial Investors Service Center, Inc., as
Agent will promptly send a letter to the original trustee indicating the
willingness of The First National Bank of Boston to accept the assets and to
serve as successor plan trustee.
[Colonial Flag Logo]
Asset Transfer Form
Colonial
Retirement Plans
Name and Address of Employer/Plan
Name EIN#/Plan Tax Identification Number
Business Address Telephone
City State Zip
Instructions to Present Trustee
Name
Address Telephone
City State Zip
Present Accounts #s
I request that the above-named Trustee of my present qualified retirement plan
transfer the assets of my retirement plan as indicated below to the First
National Bank of Boston, Trustee for my Colonial Qualified Plan:
[ ] Please transfer all of my present retirement plan assets and resign as
Trustee.
or
[ ] Please transfer $_________ or _______% of my present retirement plan assets
and retain the balance.
<PAGE>
Other instructions (e.g., make transfer upon maturity date of ____/____/____):
Assets will be invested based on current allocation information on file. If
pooled money, a separate accounting detailing the breakdown for each participant
should accompany the check. Total $
Employer Signature
Employer Signature Date
Financial Service Firm (FSF)
FSF Name Branch Office Location
Main Office Address Telephone Number (______)
City Branch No. Rep No.
State Zip Rep's Last Name
Authorized Signature
Send completed application and check made payable to The First National Bank of
Boston, Trustee, to:
Colonial Investors Service Center, Inc.
Attn: Retirement Plan Services
P.O. Box 1722 Boston, MA 02105-1722
Acceptance by New Trustee
The First National Bank of Boston accepts the appointment as successor trustee
of the Employer's Colonial Qualified Plan account(s) listed above and requests
the liquidation and transfer of assets as indicated above.
This plan shall be deemed to have been accepted by the Trustee, The First
National Bank of Boston, upon receipt by its Agent, Colonial Investors Service
Center, Inc., of all necessary forms, properly completed.
Notes
Colonial Money Purchase Pension Plan
Colonial Profit Sharing Plan
[checkmark] IRS-Approved Plans with Flexible Design Features and Options
[checkmark] Low Plan Cost and Investment Minimums
[checkmark] Free Computer Software for 5500 Report Preparation
[checkmark] Telephone Exchange Privileges
[checkmark] Convenient Account Services
[checkmark] Experienced Professional Management
[checkmark] Wide Selection of Funds
Colonial Investment Services, Inc. copyright 1995
One Financial Center, Boston, Massachusetts 02111-2621, 617-426-3750
<PAGE>
MP-032B-0995
EXHIBIT 14(C)
[Colonial Flag Logo]
The Colonial IRA
IRA Application, Forms, Custodial Agreement and Disclosure Statement
Follow the steps below to establish a:
New Colonial IRA
__Complete and sign the IRA Application on page 1.
__Send completed application and check made payable to the First National Bank
of Boston, Custodian, to: Colonial Investors Service Center, Inc. Attn:
Retirement Plan Services, P.O. Box 1722, Boston, MA 02105-1722.
Direct Rollover/IRA Transfer
__Complete and sign the IRA Application on page 1.
__Complete and sign the Transfer of Assets/Direct Rollover Form on page 3.
Please refer to page 4 for more specific instructions.
__Mail forms to: Colonial Investors Service Center, Inc. Attn: Retirement Plan
Services, P.O. Box 1722, Boston, MA 02105-1722.
Colonial will open an account and will ask the current trustee/custodian to
transfer the assets from the existing IRA.
Direct Rollover or Transfer to an Existing Colonial IRA
__For an IRA Transfer or Direct Rollover into an existing Colonial IRA, complete
and sign the Transfer of Assets/Direct Rollover Form on page 3.
__You can also rollover your IRA assets into a Colonial IRA within 60 days for
redeposit. Send check directly to Colonial at the address below.
__Mail completed for and/or check to: Colonial Investors Service Center, Inc.
Attn: Retirement Plan Services, P.O. Box 1722, Boston, MA 02105-1722.
Fundamatic Plan
Fundamatic transfers money directly from a bank checking account into a Colonial
account.
__Complete the On-Demand/EFT Purchase form on page 5.
__Attach a blank check marked "VOID" and mail to: Colonial Investors Service
Center, Inc., Attn: Retirement Plan Services, P.O. Box 1722, Boston, MA
02105-1722.
Colonial Investors Service Center, Inc., One Financial Center, Boston, MA
02111-2621 IR-031D-1196(12/96)
The Colonial IRA [Colonial Flag Logo] Account Application
This application must be accompanied or preceded by a current effective
prospectus of the appropriate Colonial fund(s). Depositor named below hereby
establishes an Individual Retirement Account ("IRA") by executing this
application and agrees to the provisions of the Colonial Individual Retirement
Account Agreement.
1. Your Name and Address -- Please Print
__ Check here if you are also establishing a Colonial IRA for your spouse --
attach a second IRA application for your spouse.
Name Date of Birth
Address Social Security Number - -
City State ZIP Telephone Number ( )
2. Type of IRA (Check only one)
__ (a) Contributory Amount Tax Year
__ Individual IRA Account or __ Spousal IRA Account $ 19____
<PAGE>
__ (b) Conduit/Rollover
__ From a qualified retirement plan $
__ From another IRA $
__ (c) Transfer of Assets from another IRA (Enter dollar
amount, if known) $
Annual Fee-$10, if you wish to prepay* $
Total Amount Enclosed $
Make check payable to The First National Bank of Boston, Custodian
*The annual fee is $10 per IRA; there is no additional fee charged for spousal
IRAs.
3. Investment Selection
The Depositor directs the Custodian to invest the initial contribution and
reinvest all dividends and capital gain distributions in shares of the following
funds unless otherwise specified in section 6 of this application. Future
contributions will be invested as instructed by the Depositor. If no share class
election is made, your investment will be made in Class A shares.
Share Class (check one)
Fund name(s) A B D $ or %*
*Figures must equal dollar total amount of initial contribution or 100%.
4 Beneficiary Designation
The following person(s) are designated to receive the balance of my IRA upon my
death. If no planned beneficiary survives me, or if I have not named a
beneficiary hereunder, any balance remaining in the plan will be payable to my
estate.
Primary Beneficiaries:
Name % Relationship Date of Birth Social Security Number
- -
- -
Contingent Beneficiary:
In the event that I die and no primary beneficiary listed above is alive,
distribute all funds in my IRA to the contingent beneficiary named below.
Name Relationship
Social Security Number _____ - ___ - ____ Date of Birth / /
5. Investment Privileges (Not applicable to Class B or Class D shares)
(a) Right of Accumulation (Lower sales charges if you or your spouse own other
Colonial funds.)
I have accounts in:
Fund Name Account Number
Fund Name Account Number
(b) Statement of Intent (Lower sales charges if you or your spouse plan to
invest more.) I agree to the provisions of the Statement of Intent set forth in
the prospectus of the designated fund(s), which I have received. I intend to
invest over a 13-month period beginning 19 , at least:
__ $50,000 __ $100,000 __ $250,000 __ $500,000 __ $1,000,000
If you or your spouse already have a Statement of Intent, check here __.
6. Automatic Dividend Diversification (ADD)
Check here to diversify your portfolio by investing your dividends/capital gains
into another Colonial fund with no sales charge. Dividends and/or capital gains
may pay from one fund to another fund in the same share class, not from one fund
to two or more other funds.
Name of Fund to receive distributions Fund Account Number, if existing account
Name of Fund to receive distributions Fund Account Number, if existing account
<PAGE>
7. Signature
The Depositor hereby:
(a) acknowledges that he/she has received and read the Colonial IRA Agreement
(IRS Form 5305-A and any attachments thereto) and the IRA Disclosure Statement;
(b) acknowledges that he/she has received and read a current prospectus of the
Fund(s) selected in item 3 of this Application;
(c) consents to the annual maintenance fee of $10 (subject to change as provided
in the IRA Agreement); and,
(d) certifies that contributions, including rollovers, are qualified for
contribution in this IRA. I hereby establish a Colonial IRA, appoint The First
National Bank of Boston as Custodian, direct that contributions to my IRA be
invested as specified by this application, and designate the above-named as my
beneficiary. I have received a current prospectus of the Fund(s) indicated. I
have received the Colonial IRA terms and conditions and have read its disclosure
statement. I understand that certain distributions from Colonial Class B or
Class D shares, or $1 million or more of Class A shares, may be subject to a
contingent deferred sales charge.
X___________________________________________ /___ /___
Depositor Signature Date
Custodian Acceptance
This plan shall be deemed to have been accepted by the Custodian, The First
National Bank of Boston, upon receipt by its Agent, Colonial Investors Service
Center, Inc., of all necessary forms, properly completed. The First National
Bank of Boston, Custodian:
You are hereby authorized and appointed on behalf of the below-signed financial
service firm to execute the purchase transactions in accordance with the terms
and conditions of this application, and to confirm each purchase and to forward
to the applicant a copy of each new prospectus of the designated funds or
supplements thereto, delivered to you for that purpose. With respect to each
purchase, the amount of any commissions due will be remitted to the financial
service firm, except that no commissions will be paid to the firm of any
transactions for which the firm's net sales commission is less than $1.00. The
financial service firm's representative also represents that he may lawfully
sell shares of the designated funds in the state designated as the applicant's
record address, and that he has entered into a dealer agreement with the
principal underwriter with respect to the sale of shares of the designated
fund(s).
8. Financial Service Firm (FSF)
FSF name Branch office location
Main office address Telephone number ( )
City Branch No. Rep. No.
State ZIP Rep's last name
Authorized signature
Send completed application and check made payable to The First National Bank of
Boston, Custodian, to: Colonial Investors Service Center, Inc., Attn: Retirement
Plan Services, P. O. Box 1722, Boston, MA 02105-1722.
IR-031D-1196(12/96)
<PAGE>
The Colonial IRA [Colonial Flag Logo} Transfer of Assets
Direct Rollover Form
This form must be accompanied or preceded by a Colonial fund prospectus
describing the fund's policies, sales charges, expenses, and other matters of
interest to prospective investors. To establish an account to receive a direct
rollover from your employer's retirement plan or to roll over or transfer your
IRA assets to Colonial Mutual Funds, please complete this form and send it with
your Colonial IRA application to: Colonial Investors Service Center, Inc., Attn:
Retirement Plan Services, P.O. Box 1722, Boston, MA 02105-1722.
1. Your Name and Address - Please Print
Name Social Security Number ______ - ___ - _____
Address Telephone Number ( )
City State ZIP
2. Existing Assets
Check one: __ Retirement plan distribution from employer __ Existing IRA*
Name(or Employer
Name, where applicable) Account Number
Address Account Number
City State ZIP
*Complete this section only if you are transferring funds from an existing IRA.
Type of existing IRA
__ Contributory IRA __ Conduit/Rollover IRA __ SEP-or SARSEP IRA
Type of Investment
__ Mutual Fund (Fund Name)
__ CD (Date of Maturity) __ Other
3. Where to Invest Your IRA
__ This is a new Colonial IRA. My investment choices are indicated on
the attached IRA application.
__ I already have a Colonial IRA. Please invest assets as follows.
__ I already have a Colonial IRA, but would like to invest in a new
fund as listed below.
Share Class (check one)
Fund name A B D Account # $ or %
4. Authorization for Direct Rollover or Transfer of Assets
To Resigning Trustee or Custodian:
I have established an Individual Retirement Account with Colonial Mutual Funds.
I want to initiate a:
__ Direct Rollover, or __ Transfer of Assets from my IRA with you
Please act on the instructions below. I would appreciate your prompt attention
to this request.
__ Liquidate __ all or __ part ($______________) of the account
indicated in Section 2 and send the proceeds in cash to
Colonial Mutual Funds __ at maturity (date) / / or __ immediately
Make the check payable to The First National Bank of Boston,
Custodian, FBO [your name]
I acknowledge that a penalty may apply for early withdrawals from certain types
of investments, such as certificates of deposit.
__ Transfer all my shares in kind, i.e. re-register, of the following Colonial
fund(s), account number(s), to The First National Bank of Boston. Please provide
The First National Bank of Boston with transfer instructions signed by an
authorized officer of your company/institution. (Please type or print clearly.)
Name _
Signature X Date Signature guarantee
of IRA Holder (By eligible guarantor if necessary as explained on reverse
side)*
Please do not fill out this portion of the form
The First National Bank of Boston has agreed to serve as Custodian for the
above-named person's Individual Retirement Account. As Custodian, The First
National Bank of Boston will accept the assets in the manner selected in Section
4 above
<PAGE>
upon receipt of properly completed paperwork. Please forward the assets on a
custodian/trustee-to-custodian basis and make the check payable to The First
National Bank of Boston, Custodian. Send the check, along with a copy of this
request, to: Colonial Investors Service Center, Inc., Attn: Retirement Plan
Services, P. O. Box 1722, Boston, MA 02105-1722.
Please include the following information on your check:
Colonial Account Number________________________ For the Benefit of (FBO)
Colonial Account Number________________________
Colonial Account Number________________________
This plan shall be deemed to have been accepted by the Custodian, The First
National Bank of Boston, upon receipt by its Agent, Colonial Investors Service
Center, Inc., of all necessary forms, properly completed.
How to Make a Direct Rollover with a Retirement Plan Distribution from Your
Employer
[bullet] Complete the Colonial Individual Retirement Account Application.
[bullet] Give it to your employer.
[bullet] Have your employer write a check for the amount of the
distribution; make the check payable to The First National Bank of Boston, FBO
[your name].
[bullet] Staple the check to your application.
[bullet] Mail the application and check to: Colonial Investors Service
Center, Inc., Attn: Retirement Plan Services, P. O. Box 1722,
Boston, MA 02105-1722.
NOTE: If the check is made payable to you, you will be subject to 20%
withholding.
If you need to establish an account to accept the rollover before your employer
sends the retirement assets, then you should:
[bullet] Complete a Colonial IRA Application, leaving the dollar amount
to be invested blank.
[bullet] Complete the Transfer of Assets/Direct Rollover Form.
[bullet] Send the Colonial IRA Application and Transfer of Assets/Direct
Rollover Form directly to: Colonial Investors Service Center,
Inc., Attn: Retirement Plan Services, P.O. Box 1722, Boston, MA
02105-1722.
[bullet] Colonial will open an account and will request that your
employer send the assets.
How to Transfer Assets from an Existing IRA
[bullet] Complete the Colonial IRA Application and Transfer of
Assets/Direct Rollover Form.
[bullet] Mail both forms to: Colonial Investors Service Center, Inc.,
Attn: Retirement Plan Services, P. O. Box 1722, Boston, MA
02105-1722.
[bullet] Colonial will open an account and will ask your current
trustee/custodian to transfer the assets from your existing IRA.
How to Roll Over Your IRA to Colonial
[bullet] Complete the Colonial IRA Application.
[bullet] Attach your check made payable to The First National Bank of
Boston, FBO [your name].
[bullet] Mail the application and check to: Colonial Investors Service
Center, Inc., Attn: Retirement Plan Services, P. O. Box 1722,
Boston, MA 02105-1722.
*The signature of the IRA planholder (depositor) may require a guarantee by a
bank, a trust company, a member of a domestic stock exchange, or any other
eligible guarantor institution. Notarization is not acceptable. Resigning
trustee/custodian or employer will inform you if this is necessary.
IR-031D-1196(12/96)
<PAGE>
On-Demand [Colonial Flag Logo] Colonial
EFT Purchase Fundamatic Plan
Fundamatic/On-Demand EFT Purchase
Fundamatic automatically transfers the specified amount from your bank checking
account to your Colonial fund account. The On-Demand EFT Purchaes program moves
money from your bank checking account to your Colonial fund account by
electronic funds transfer on any specified day of the month. You will receive
the applicable price two business days after the receipt of your request. Your
bank needs to be a member of the Automated Clearing House System. Please attach
a blank check marked "VOID". Also, complete the section below.
1
Fund Name
Account number
$ Amount to transfer
Month to start
2
Fund Name
Account number
$ Amount to transfer
Month to start
Frequency:
__ On-Demand Purchase (will be automatically established if you choose
Fundamatic)
__ Fundamatic Frequency
__ Monthly or __ Quarterly
Check One
__ EFT--Choose any day of the month ____________
__ Paper Draft--Choose either the:
__ 5th day of the month
__ 20th day of the month
Authorization to honor checks drawn by Colonial Investors Service Center, Inc.
Do Not Detach. Make sure all depositors on the bank account sign to the far
right. Please attach a blank check marked "VOID" here. See below for bank
instructions.
I authorize Colonial to draw on my bank account, by check or electronic funds
transfer, for an investment in a Colonial fund. Colonial and my bank are not
liable for any loss arising from delays or dishonored draws. If a draw is not
honored, I understand that notice may not be given and Colonial may reverse the
purchase and charge my account $15.
Bank name
Bank street address
<PAGE>
City State Zip
Bank account #
Bank routing #
X Depositor's Signature(s)
Exactly as appears on bank records
X Depositor's Signature(s)
Exactly as appears on bank records
Applications must be received before the start date for processing.
This program's deposit privilege can be revoked by Colonial without prior notice
if any check is not paid upon presentation. Colonial has no obligation to notify
the shareholder of non-payment of any draw. This program may be discontinued by
Colonial by written notice at least 30 business days prior to the due date of
any draw or by the shareholder at any time.
To the Bank Named Above:
Your depositor has authorized Colonial Investors Service Center, Inc. to collect
amounts due under an investment program from his/her personal checking account.
When you pay and charge the draws to the account of your depositor, executing
the authorization payable to the order of Colonial Investors Service Center,
Inc., Colonial Management Associates, Inc., hereby indemnifies and holds you
harmless from any loss (including reasonable expenses) you may suffer from
honoring such draw, except any losses due to your payment of any draw against
insufficient funds.
For complete information on any Colonial fund, including fees, risks and
expenses, please obtain the current prospectus from your full-service financial
adviser. Please read the prospectus carefully before you invest or send money.
Colonial Investors Service Center, Inc. IR-031D-1196(12/96)
<PAGE>
[Colonial Flag Logo]
Form 5305-A Colonial Individual Retirement Account Agreement
(Under Section 408(a) of the Internal Revenue Code)
(Rev. Oct. 1992)
Department of the Treasury Do Not File with
Internal Revenue Service Internal Revenue Service
This Agreement is by and between the Depositor whose name and signature appear
on the application (Depositor) and The First National Bank of Boston (Custodian)
having its principal place of business at Boston, Massachusetts. The Depositor
hereby establishes a custodial account qualified (under section 408(a) of the
Internal Revenue Code as an Individual Retirement Account) to provide for their
retirement and for the support of their beneficiaries after death. The Custodian
named herein has given to the Depositor a Disclosure Statement as required under
Regulations section 1.408-6.
The Depositor and the Custodian make the following Agreement.
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 Proposal 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.
<PAGE>
(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 designated beneficiary
as of their birthdays in the year the Depositor reaches age 70-1/2. In the case
of a distribution in accordance with 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 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 sections 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 the 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. Depositor appoints The First National Bank of Boston or any successor thereto
as Custodian of this custodial account. After deduction of all appropriate fees
and charges, the balance of Depositor's contributions shall be invested as
herein provided.
2. Depositor directs the Custodian to invest the custodial account in shares of
mutual funds distributed by Colonial Investment Services, Inc. (the "Sponsor"),
or investments otherwise authorized by the Sponsor for use under this Agreement.
All contributions shall be in CASH or in shares of mutual funds or other
investments authorized for use under this Agreement.
3. Custodian shall have no investment responsibility or discretion with respect
to this custodial account. Custodian may vote in any manner it deems fit any
fund shares with respect to which it has not timely received any written
directions from Depositor.
4. This document constitutes the entire agreement between Depositor and
Custodian and no representative of the Sponsor, any Colonial Mutual Fund or any
broker-dealer shall be deemed to be a representative of or acting on behalf of
Custodian, nor shall any representative have any authority to make
representations or to bind Custodian beyond the terms of this document.
5. Depositor shall have the right, only by written notice in a form acceptable
to the Custodian, to designate or to change a beneficiary to receive any benefit
to which the Depositor may be entitled in the event of his death prior to the
complete distribution of the Account. The Custodian may rely upon the last
written designation received at the Custodian's office which shall supersede all
prior designations. Unless specifically designated otherwise by the Depositor in
a form
<PAGE>
acceptable to the Custodian, death benefits shall be distributed equally among
all surviving primary beneficiaries or all surviving contingent beneficiaries
(should all primary beneficiaries predecease the Depositor). If no beneficiary
designation is in effect upon the Depositor's death, or if the Custodian
receives satisfactory proof that all such named beneficiaries have predeceased
the Depositor, then the Account shall be distributed to the Depositor's estate.
6. Neither Custodian, sponsor nor any Colonial Mutual Fund assumes any
responsibility to make any distribution unless and until Depositor specifies in
a form acceptable to the Custodian the occasion for such distribution, and the
manner of distribution. Custodian and Sponsor shall not be responsible to make
distributions in accordance with Article IV following the Depositor's attainment
of age 70-1/2 other than upon Depositor's express instructions. Neither
Custodian nor Sponsor assume any responsibility for the tax treatment of any
distribution from the custodial account; such responsibility accrues solely to
Depositor or beneficiary. Distributions shall not be made as described in
subsection (b) or (c) of section 3 of Article IV, but only as provided in
subsections (a), (d), and (e) of Article IV.
7. This Colonial IRA Agreement shall terminate upon the complete distribution of
the custodial account to Depositor or his beneficiaries, to successor individual
retirement accounts or annuities, or when no assets otherwise remain in the
custodial account and the Custodian shall be relieved from all further liability
with respect to the custodial account.
8. Depositor assumes full and sole responsibility for making sure that
contributions (including rollovers) are qualified for contribution to the
custodial account and that the sum of contributions during a taxable year do not
exceed those limits or violate those rules for tax-deductibility specified in
the Internal Revenue Code. If Depositor does contribute an amount greater than
that which may be claimed as a deduction, Depositor shall be entitled to
withdraw such excess, together with any earnings thereon, at any time prior to
the day prescribed by law (including extensions) for filing the Depositor's
Federal income tax return for such year. Depositor shall certify in writing the
full amount of the required withdrawal including earnings thereon, or the number
of shares, to be withdrawn and shall specify this amount should be distributed
to Depositor, or redesignated as the contribution for the succeeding taxable
year.
9. Sponsor may remove Custodian and appoint a successor custodian upon written
notice to Custodian and Depositor or any current beneficiary. Custodian may
resign upon written notice to Depositor or any current beneficiary. Upon its
resignation, Custodian may, but shall not be required to, appoint a successor
custodian. If a resigning Custodian does not appoint a successor custodian and
if no successor custodian is appointed, this Agreement shall be terminated and
all assets held in the custodial account distributed to Depositor or current
beneficiary. Any successor custodian appointed hereunder shall satisfy the
requirements of Section 408(a)2 of the Code. Upon any such successor's
acceptance of appointment, Custodian shall transfer the assets of the custodial
account together with copies of relevant books and records to such successor
custodian; provided, however, that Custodian is authorized to reserve such sum
of money or property as it may deem advisable for payment of any liabilities
constituting a charge on or against the assets of the custodial account or of
Custodian and where necessary may liquidate such assets. Custodian shall not be
liable for the acts or omissions of any successor custodian.
10. Custodian shall be entitled to compensation for its services hereunder in
accordance with its custodial account fees as may be published and amended from
time to time. Custodian shall also be entitled to reasonable compensation for
any extraordinary services rendered and to be reimbursed for any administrative
expenses incurred in the performance of its duties hereunder including fees for
legal services. All such fees and expenses of Custodian may be charged against
the custodial account in such manner as the Custodian may determine, or at the
Custodian's option, may be paid directly by the Depositor. Custodian may pay
from the custodial account any other costs, fees or expenses associated with the
maintenance or management of the custodial account on the written authorization
of Depositor. Custodian may employ agents and may subcontract in fulfilling its
obligations hereunder.
11. Sponsor may amend this Agreement as Sponsor determines in its discretion is
necessary or desirable, provided, however, that no such amendment may be made
which increases the duties of the Custodian without Custodian's consent.
12. This Colonial IRA Agreement shall be construed under the laws of
Commonwealth of Massachusetts, or if different, the state of the domicile of
Custodian, and shall become effective upon the date accepted by Custodian as
specified in the confirmation statement sent Depositor by the Sponsor as agent
for Custodian.
13. Acceptance of this Colonial IRA agreement by the Depositor is indicated by
the Depositor's signature in the related application.
14. Sponsor and Custodian may rely upon statements made by Depositor and
beneficiary. Depositor and beneficiary shall indemnify Sponsor and Custodian
against any loss or liability which may arise from this Agreement, except which
arises from the Custodian's negligence or willful misconduct.
Disclosure Statement
Introduction
The following information is being provided in accordance with the requirements
of the Internal Revenue Service and is based on the law as in effect on January
1, 1993, for the tax year 1992 and later. This disclosure statement should be
read together with the Colonial IRA application and the prospectus which you
have already received from your registered representative.
<PAGE>
Revocation
You may revoke this account at any time within seven calendar days after it is
established by mailing or delivering a written request for revocation to:
Colonial Investors Service Center, Inc., Agent, P.O. Box 1722, Boston MA
02105-1722. Mailed notice will be considered given on the date postmarked (or on
the date certified or registered if mailed by this method). Upon proper written
notification, you will receive a full refund of your initial contribution,
including sales commissions and/or administrative fees. If you have any
questions, please call 1-800-345-6611.
Eligibility
You are eligible to set up an IRA if you are younger than age 70-1/2 and if, at
any time during the year, you are an employee or are self-employed and receive
compensation or earned income that is includible in your gross income.
Additionally, regardless of your age, you may transfer funds from another IRA or
certain qualified plan distributions to a "Rollover" IRA described below.
Additionally, regardless of your age, you may contribute to a spousal IRA
described below until your spouse reaches age 70-1/2.
Limit on Annual Contributions
(a) You can make annual contributions to an individual IRA of up to $2,000 or
100% of your compensation or earned income, whichever is less. (b) If you and
your spouse both work and have compensation that is includible in your gross
income, each of you can annually contribute to your own IRA up to the lesser of
$2,000 or 100% of compensation or earned income. (c) If your spouse earns no
income, or earns $250 or less and elects to be treated as earning no income, you
can establish a separate "spousal IRA" if you file a joint Federal tax return.
The aggregate annual amount contributed to both IRAs each year cannot exceed the
lesser of $2,250 or 100% of your earned income or compensation. This amount is
divided between the two accounts as you direct, but not more than $2,000 may be
contributed to either account in any year. (d) If you are a divorced spouse, all
taxable alimony received by you under a decree of divorce or separate
maintenance will be treated as compensation for purposes of the IRA contribution
limit and the rules for annual contributions of up to the lesser of $2,000 or
100% of compensation or earned income (including taxable alimony).
Deductibility of Contributions
(a) You may deduct the full amount of your IRA contribution up to the annual
maximum limit if you are not an "active participant" in an employer-sponsored
retirement plan (including qualified plans, Simplified Employee Pension plans,
tax-sheltered annuity plans, and certain governmental plans) for any part of
such year. If you are married and you and your spouse file a joint return, you
will be deemed to be an active participant in an employer-sponsored retirement
plan if either you or your spouse is an active participant in such a plan. In
addition, even if you are an active participant in such a plan, you may deduct
the full amount of your IRA contribution up to the annual maximum limit if you
have modified adjusted gross income equal to or below a specified level, or if
you are married and file a separate Federal tax return, the amount of your IRA
contribution which is between $25,000 and $35,000 if you are a single taxpayer
and modified adjusted gross income of $10,000 and under if you are a married
taxpayer who files a separate return. If you are married and you and your spouse
file a joint return, if either you or your spouse is an active participant in an
employer-sponsored retirement plan, the amount of your IRA contribution which is
deductible will be phased out on the basis of your combined modified adjusted
gross income between $40,000 and $50,000. For this purpose, a husband and wife
who file separate tax returns for any year and live apart at all times during
the year are not considered to be married.
In general, the IRA deduction is phased out at a rate of $200 per $1,000 of
modified adjusted gross income in excess of the phase out amount ($25,000 for
single taxpayers, $40,000 for married taxpayers who file joint returns and $0
for married taxpayers who file separate returns). However, if you contribute to
a spousal IRA, your IRA deduction is phased out at a rate of $225 per $1,000 of
modified adjusted gross income in excess of $40,000. When calculating your
reduced IRA deduction limit, you always round up to the next highest $10.
Therefore, your deduction limit is always a multiple of $10. In addition, if
your modified adjusted gross income is within the phase-out range and your
reduced deduction limit is more than $0 but less than $200, you are permitted to
deduct up to $200 of your IRA contributions.
If your modified adjusted gross income exceeds the applicable level specified
above and you are an active participant in an employer-sponsored retirement plan
(or your spouse is an active participant in such a plan if you file a joint
return), then you may not deduct any portion of your IRA contribution. In
general, you are an active participant in a plan for a year during which you
accrue any additional benefit under the plan, whether due to employer
contribution, your contribution or forfeiture from other participants. Your Form
W-2 for the year should indicate your participation status. You should consult
your own tax or financial adviser if you should have any further questions.
(b) Even if you will not be able to deduct the full amount of your IRA
contribution under the rules described above, you can still contribute up to
your annual maximum amount with all or part of the contribution being a
non-tax-deductible contribution. Of course, the combined total of deductible and
non-deductible contributions must not exceed your annual
<PAGE>
maximum contribution limit amount. Any earnings on all your IRA contributions
(deductible and nondeductible) accumulate tax-free until you withdraw them.
Annual Contributions
Contributions to your IRA for a tax year must be made in cash on or before the
due date (not including extensions) for your Federal income tax return for that
tax year (April 15 for most individuals). If you intend to report contributions
made between January 1 and April 15 as contributions for your prior tax year,
you should notify Colonial Mutual Funds or the Custodian in writing that such
contributions have been made on account of such prior tax year. Otherwise, the
Custodian will assume the payment is for the current tax year.
Excess Contributions
If you contribute to your IRA more than the maximum limit allowed any year, the
excess contribution could be subject to a 6% nondeductible excise tax. The
excess is taxed in the year the excess contribution is made and each year that
the excess remains in your IRA at the end of the year. If, by accident, you
should contribute more than the maximum limit allowed, you can eliminate the
excess contribution as follows:
(a) You can avoid the 6% excise tax by withdrawing the excess contribution and
the net earnings attributable to it before the due date for filing your Federal
income tax return for the year the excess occurred. Upon removing an excess
contribution in this manner, the net earnings attributable to it are includible
in your income for the tax year in which the excess contribution was made, and
you may also have to pay an additional 10% premature distribution tax on the
amount of such net earnings. However, the excess contribution itself will not be
included in your taxable income and will not be subject to the 10% premature
distribution tax.
(b) If you elect not to withdraw an excess contribution, you can eliminate the
excess by contributing less than the maximum amount allowed to your IRA in a
later year. This is known as a "make-up" contribution and is allowed only to the
extent that you have under-contributed in the later year. Further, to the extent
that you have not contributed your full deductible amount for that later year,
the amount of the excess so eliminated may be deductible as a "make-up"
deduction. The 6% excise tax will, however, be imposed in the year you make the
excess contribution and each subsequent year until eliminated.
(c) If you do not withdraw an excess contribution on or before the due date for
filing your Federal income tax return and your contribution did not exceed
$2,250, you can withdraw the excess at any time as long as you have not deducted
it on your Federal tax return. The amount of the excess which you withdraw will
not be included in your gross income and will not be subject to regular Federal
income tax. However, the 6% excise tax will be imposed for the year in which you
make the excess contribution and each subsequent year, until the year of
withdrawal.
(d) If you do not withdraw an excess contribution on or before the due date for
filing your Federal income tax return and your contribution exceeded $2,250, you
must include in your gross income any excess amount which you withdraw even if
you have not deducted it on your Federal income tax return. You may also have to
pay a 10% premature distribution tax on the amount you withdraw. Additionally,
the 6% excise tax will be imposed for the year in which you make the excess
contribution and each subsequent year, until the year of withdrawal.
Rollovers
(a) If you receive a distribution from a qualified retirement plan and the
distribution is not a required minimum distribution and not one of a series of
distributions made for life, life expectancy or 10 or more years, you may
establish a "Rollover" IRA and place the portion of the distribution on which
you wish to defer tax into the "Rollover" IRA within 60 days after receiving the
distribution from the qualified retirement plan. Your own non-deductible
contributions to the qualified retirement plan cannot be included in the
rollover. Although the law permits you to contribute property to your "Rollover"
IRA, the Custodian will not accept any contribution which is not in the form of
cash. Therefore, if you should receive property other than cash in a
distribution from a qualified plan, you should sell part or all of the property
and contribute the sales proceeds to your "Rollover" IRA. If the distribution
comes directly from the qualified plan, it will not be subject to mandatory tax
withholding; but if it comes through you, 20% of the distribution will be
withheld. Please note: (i) the IRA you set up to receive "rollover" amounts
should be separate from an IRA you set up to receive annual contributions; (ii)
rollover amounts you receive may not be deposited in your spouse's IRA or
deducted on your Federal income tax return; (iii) if you establish a "Rollover"
IRA during the year in which you reach age 70-1/2, you must begin receiving
distributions from such IRA no later than April 1 of such following year; and
(iv) if you establish a "Rollover" IRA after the year in which you reach age
70-1/2, you must begin receiving distributions from such IRA immediately.
Distributions from Your IRA during Your Life
(a) You can make withdrawals from your IRA at any time. Call Colonial at
1-800-248-2828 to request a Colonial Funds IRA Distribution Form. Mail the
completed form to Colonial Investors Service Center, Inc., Attn: Retirement Plan
<PAGE>
Services, P. O. Box 1722, Boston, MA 02105-1722. The distribution form contains
descriptions and requirements for each type of IRA distribution. If you withdraw
any of the funds in your IRA before age 59-1/2, the amount includible in your
gross income is subject to a 10% non-deductible premature distribution tax
unless:
(i) the withdrawal is made because of your death or permanent disability;
(ii) the withdrawal is an exempt withdrawal of an excess contribution; or
(iii) the withdrawal is rolled over into another qualified plan or IRA.
You can also withdraw funds held in your IRA without any tax penalty before you
reach age 59-1/2 if the funds will be paid to your former spouse under a
qualified domestic relations order or if you choose to receive systematic
payments in substantially equal amounts over a period that does not exceed your
life expectancy or the life expectancy of you and your designated beneficiary.
You should be aware, however, that the 10% premature distribution tax will be
applied retroactively (with interest) to all systematic payments if you change
to a method of distribution that does not qualify for the exception either
before you attain age 59-1/2 or during the first five years of the distribution.
The 10% premature distribution tax discussed above does not apply to the portion
of your IRA distribution which is not includible in your gross income.
(b) When you reach age 70-1/2, you must elect to receive distributions in either
(a) systematic payments monthly, quarterly or annually, or (b) one lump sum
distribution of all the funds held in your IRA. The law requires that you begin
to receive distributions from your IRA no later than the April 1 following the
year in which you reach age 70-1/2 (the "Required Distribution Date:). If you
elect systematic payments, there is a minimum amount which you must withdraw by
the Required Distribution Date and by each December 31 thereafter. This could
result in two minimum distributions in one calendar year. This minimum amount is
determined by your life expectancy or the joint life and last survivor
expectancy of you and your designated beneficiary, subject to the minimum
distribution incidental death benefit rule. Your life expectancy (and your
spouse's life expectancy if your spouse is your designated beneficiary) will be
recalculated each year. The Custodian is not responsible to advise you in this
matter and will only make distributions to you from your IRA in accordance to
your specific instructions. If the amount distributed during a taxable year is
less than the minimum amount required to be distributed, the Internal Revenue
Service may impose a tax equal to 50% of the deficiency.
Payments from Your IRA after Your Death
If you die before all the funds held in your IRA have been distributed, the
remaining funds in the account will be distributed to your designated
beneficiary either outright or periodically, as selected by your beneficiary.
The Custodian will make distributions to your beneficiary in accordance to his
or her specific instructions. Your beneficiary should be aware that he or she is
subject to minimum distribution rules and it is his or her responsibility to
make sure that the rules are met. Under the post-death minimum distribution
rules, if you die after your Required Distribution Date, the funds remaining in
your IRA must continue to be distributed to your designated beneficiary at least
as rapidly as under the method of distribution in effect prior to your death. If
you die prior to your Required Distribution Date, all the funds in your IRA must
be completely distributed to your designated beneficiary by December 31 of the
year containing the fifth anniversary of your death unless your designated
beneficiary elects, no later than December 31 of the year following the year of
your death, to receive funds from your IRA over a fixed period that is no longer
than his or her life expectancy. If your beneficiary is your surviving spouse,
distribution of funds from your IRA can be made to him or her over a fixed
period that is no longer than his or her life expectancy and commencing at any
date prior to December 31 of the year in which you would have attained age
70-1/2. In all instances, your spousal beneficiary may also elect to roll over
the funds in your IRA into his or her own account or treat your IRA as his or
her own by making contributions to it. In this case, he or she is not required
to make withdrawals from the IRA until April 1 following the year in which he or
she reaches age 70-1/2.
The designation of a beneficiary to receive funds from your IRA at your death is
not considered a transfer subject to Federal gift taxes. However, any funds
remaining in your IRA at your death would be includible in your Federal gross
estate.
Federal Tax Returns
(a) Deductible and non-deductible IRA contributions are reported on IRA Form
1040 or Form 1040A. To the extent your contribution is not deductible, you must
designate it on Form 8606. There is a $100 penalty each time you overstate the
amount of your non-deductible contributions unless you can prove that the
overstatement was due to reasonable cause. You will also be required to give
additional information on Form 8606 in years you make a withdrawal from your
IRA. If you fail to file a required Form 8606, there is a $50 penalty for each
such failure unless you can prove the failure was due to reasonable cause.
(b) IRA Form 5329 is required as an attachment to Form 1040 (or separately if
you do not file a Form 1040) for any year the contribution limits in paragraph 2
are exceeded, a premature distribution takes place, less than the required
minimum amount is distributed, or a prohibited transaction takes place.
Federal Tax Consequences
<PAGE>
(a) Income on your IRA account is not taxed as it is earned, but only when it is
distributed to you.
(b) Amounts paid to you from your IRA (other than your non-deductible IRA
contributions) are taxable as ordinary income.
(c) Because non-deductible IRA contributions are made using income which has
already been taxed, the portion of the IRA distributions consisting on
non-deductible contributions will not be taxed again when received by you. The
non-taxable portion of each IRA distribution, if any, will be the ratio of your
previously unrecovered non-taxable contributions to the value in all of your IRA
accounts as of the end of the year plus any distributions taken from the account
during the year. All of your IRAs will be included in this calculation,
including regular IRAs, Simplified Employee Pension Plan (SEPs), and Rollover
IRAs.
(d) In general, if you receive distributions from your IRAs, Section 403
annuities and custodial accounts, and qualified plans which, in the aggregate,
exceed $150,000 in any calendar year, you may be subject to a 15% penalty tax on
the amount in excess of $150,000. If the total amount of your benefits payable
from such plans at your death exceeds a certain permissible level, a similar 15%
estate tax is imposed on the amount in excess of the permissible level. Special
rules apply in certain circumstances and you should consult your tax adviser if
you have any questions regarding this tax.
(e) If you engage in a so-called "prohibited transaction" as defined in the
Internal Revenue Code, your IRA will be disqualified and the entire balance in
your IRA will be taxed as ordinary income during the year in which such
transaction occurs. You may also have to pay the 10% penalty tax on premature
distributions. A "prohibited transaction" includes:
(i) the sale, exchange, or leasing of any property between your IRA account and
you;
(ii) the lending of money or other extension of credit between your IRA account
and you;
(iii) the furnishing of goods, services, or facilities between your IRA account
and you;
(iv) the transfer of assets of your IRA account for your use or for your
benefit.
(f) If you pledge all or part of your IRA as security for a loan, the amount so
pledged or invested is considered by the Internal Revenue Service to have been
distributed to you and will be taxed as ordinary income during the year in which
you make such pledge or investment. You may also have to pay the 10% premature
distribution tax.
Financial Disclosure
Because the assets held in your IRA are invested at your direction and will be
subject to market fluctuation, the value of your IRA can neither be guaranteed
nor projected. However, you will be provided with periodic statements of your
IRA, including current market values of investments. Information about the
shares of each mutual fund that you choose for investment through your IRA must
be furnished to you in the form of a prospectus governed by the rules of the
Securities and Exchange Commission. Please refer to the prospectus for detailed
information concerning the fund objectives, the sales charges and the income and
expenses of your mutual funds.
Miscellaneous
The proceeds from your IRA may be used as a rollover contribution to another
individual retirement account or individual retirement annuity. The form of your
IRA has been approved by the Internal Revenue Service. Such approval is a
determination only as to the form of the IRA and does not represent a
determination of the merits of the IRA. Further information regarding your IRA
is available in the Internal Revenue Service Publication 590. You may obtain
this publication from any district office of the Internal Revenue Service or by
calling the Internal Revenue Service Tax Forms Distribution Center toll-free
number, 1-800-829-3676.
Colonial Investment Services, Inc., Distributor c1996
One Financial Center, Boston, MA 02111-2621
IR-031D-1196(12/96)
<PAGE>
Colonial IRA Distribution Form
Name Date of Birth / /
Address Social Security Number _____________-_________-____________
City Telephone Number ( )
State_____________ ZIP IRA Account Number
Please provide your legal street address, including a foreign address, if
applicable, in accordance with IRS regulations; post office box addresses are
not acceptable.
If you have other Colonial IRAs from which you would like to take withdrawals,
please list them on a separate sheet and attach it to this Distribution Form.
Complete All Sections to Ensure Proper and TIMELY Processing of Your
Transactions
Section I Reason for Distribution (Check Only One)
1. [ ] Normal Distribution. I am age 59-1/2 or older. (Distributions must begin
by April 1st following the calendar year in which the individual attains age
70-1/2.)
2. [ ] Premature Distribution. I am under age 59-1/2 and I am not permanently
disabled. I intend to take a lump-sum or partial distribution. I understand that
the IRS may impose a retroactive penalty of 10% of the amounts of payment
includible in income.
3. [ ] Death Distribution. Attach a certified copy of the death certificate.
Beneficiary's signature must be guaranteed in Section V below.
4. [ ] Disability Distribution. I am unable to engage in any substantial,
gainful activity and condition is to be of long, continued, and indefinite
duration. (Statement on doctor's letterhead is required.).
5. [ ] Non-Penalized Distribution before attaining age 59-1/2 or becoming
disabled. I must take substantially equal periodic payments, based on my life
expectancy or my joint life expectancy with my beneficiary. I understand that if
I modify the payment plan (other than by reason of my death or disability)
before the later of five years or my attainment of age 59-1/2, the IRS may
impose a retroactive penalty of 10% on the amounts of payment includible in
income.
Section II Method of Distribution (Check Only One)
1. [ ] A lump-sum distribution, closing the IRA
2. [ ] A partial distribution: $ , or number of shares
3. [ ] Systematic Withdrawal Plan
a. Payment Frequency (Choose only one and indicate beginning month):
[ ] Monthly [ ] Quarterly [ ] Semiannually [ ] Annually
(For required minimum distributions only.)
Beginning month:
b. Method of Calculation (Choose only one):
[ ] Individual life expectancy. (We calculate this for you if
you are 70-1/2)
[ ] Joint life expectancy with designated beneficiary. (We
calculate this for you if you are 70-1/2)
Name of Beneficiary
Date of Birth Relationship
[ ] A fixed dollar amount - $
[ ] A fixed share amount -
[ ] A fixed number of years -
4. [ ] Income Distributions (Choose only one):
I understand that to be eligible to receive income distributions, I must be
either age 59-1/2 or older, or disabled. Income distributions are not available
in conjunction with Systematic Withdrawals and will be treated by the IRS as
ordinary income for tax purposes.
a. [ ] I elect to receive dividends in cash
b [ ] I elect to receive dividends and capital gains in cash
Section III Payee Information
1. [ ] Payment to be made to the Shareholder, using current name and
address on file,
2. [ ] I wish to have the distribution: [ ] mailed to the following
payee or payee bank
[ ] transferred via Automated Clearing House (ACH) to the
following payee bank (only allowed for systematic withdrawal plans and income
distributions, a voided check must be attached).
Name of Payee or Payee Bank Bank Account Number
<PAGE>
Street Address Tax Identification Number of Beneficiary (if applicable)
City State Zip Code
Note: I understand that if the payee or address is different from registered
shareholder, my signature must be guaranteed. I also understand that my bank
must be a member of the Automated Clearing House System (ACH). I authorize
deposits to the bank account listed above.
Section IV Taxes And Withholding Election
I acknowledge that unless I elect to have no withholding made from my IRA
distributions or I have a foreign address,* the Agent on behalf of the Custodian
will withhold a fixed 10% of the amounts to be paid to me and will immediately
remit the amount withheld to the IRS. Therefore, if you elect not to have
withholding apply to your payments, or if you do not have enough federal income
tax withheld from your payments, you may be responsible for payment of estimated
tax. You may also incur penalties under the estimated tax rules if your
withholding and estimated tax payments are not sufficient. You may, with respect
to future distributions, revoke or change your withholding election by
submitting written instructions to the Agent of the Trustee.
*You must provide your foreign address as required on front of this form. Choose
only one:
1. [ ] I elect not to have any amounts withheld from my IRA distributions.
2. [ ] I elect to have ________% (minimum of 10%) withheld from my IRA
distributions.
Section V Signature(s)
I hereby elect that the assets held by the Custodian in the above Individual
Retirement Account(s) be paid according to the instructions above. Although
these distributions are made in accordance with the law, they are revocable and
another plan may be substituted that is also in accordance with the law.
Additional amounts may be distributed from time to time upon presentation to the
Agent of the Custodian of written instructions in good order. I hereby release
the Agent and Custodian and indemnify them from any and all claims arising from
the Agent's or Custodian's actions hereunder.
Signature
of Recipient: X Date:
Note: In the case of death or any redemption amount requested for more than
$50,000 or for a special payee as noted in Section III, the signature of the
Shareholder/Beneficiary on this form must be guaranteed by a bank, a trust
company, a member of a domestic stock exchange, or any other eligible guarantor
institution. Notarization is not acceptable.
Send this completed Distribution Form to:
Colonial Investors Service Center, Inc.
Attn: Retirement Plan Services
P. O. Box 1722,
Boston, MA 02105-1722
EXHIBIT 14(D)
The Colonial
Individual Retirement Account
Application & Fact Kit
To Open, Transfer or
Roll Over to
The Colonial IRA
Mutual Funds are:
[ ] Not insured by the FDIC
[ ] Not deposits or obligations of, or guaranteed by, any depository institution
[ ] Subject to investment risk, including possible loss of principal
Enclosed Is
All the Information
You Need to Open a Colonial IRA
The Key to Successful Retirement Planning:
Your Individual Retirement Account (IRA)
Whether you dream of world travel or simply maintaining today's lifestyle, it's
important to take your retirement seriously before it becomes a reality.
Fortunately, there's a way to plan for a comfortable retirement and address
another major concern -- the income tax bite.
The answer is a Colonial Individual Retirement Account (IRA). An IRA lets you
invest up to $2,000 each year for your retirement, and some investors can still
deduct their contribution on their federal income tax return. And, with an IRA
for your spouse, the tax deductions can be even higher. Earnings in your IRA
compound tax-free until withdrawal, even if your contributions are not
deductible.
An IRA is an investment in the kind of retirement you deserve. You can't count
on Social Security the same way your parents did. With inflation, even the most
attractive pension plan may not assure employees of adequate retirement income.
Today, more and more people are retiring before age 65. Even if you don't plan
on retiring, think about the rising cost of health care. These are all good
reasons to prepare for tomorrow's needs today. Colonial is pleased to offer you
alternatives to help you achieve your objectives.
This booklet includes a Disclosure Statement that Internal Revenue Service
regulations require us to give each person who establishes an IRA. Please read
it and the Account Agreement carefully, along with the prospectuses for the
Colonial funds you select for your IRA investment. A Question & Answer section
is also included to address frequently asked questions (see pages 7-10).
How an IRA Works
You can set up an Individual Retirement Account now and place up to $2,000 from
your earned income in that account each year. If neither you nor your spouse is
covered by an employer-sponsored retirement plan, or if your combined income is
below a certain level, you may deduct your IRA contribution from your taxable
income. As a result, you can lower your taxable income and save money each year
you contribute to your IRA.
A Spousal IRA
If you wish to open an additional IRA for your non-wage-earning spouse, he or
she should fill out a second application and check "Spousal IRA." Contributions
for both accounts may not exceed $2,250, with no more than $2,000 allocated to
either spouse. If your spouse is employed, he or she is eligible for an
individual IRA and can make a contribution of up to $2,000. Your spouse must use
a second application to establish a separate IRA.
The Power of Compounding
Over the long term, tax-deferred compounding will significantly enhance your
earning power. All earnings are reinvested tax-free, so more of your money goes
to work for you. Depending on the performance of the investments you choose, you
could accumulate a very substantial amount by the time you retire. The chart
below shows how much more a tax-deferred IRA can earn over taxable investments
when a 31% tax rate is applied.
The Advantages of IRA Tax-Deferral over 15 and 25 Years
A Hypothetical $2000 Investment-Taxable vs. Tax-Deferred
The IRA Advantage:
$124,384
<PAGE>
IRA:
$216,362
Non-IRA:
$91,978
The IRA Advantage:
$33,111
IRA:
$69,898
Non-IRA:
$36,787
Assumes an annual IRA investment of $2,000 when a 31% federal tax rate is
applied. A taxable 10% return at a 31% tax rate is equivalent to a 6.9% return.
This chart is for illustrative purposes only and does not represent any
guarantee of future return in any Colonial fund. The value of fund shares will
fluctuate, and proceeds on sale may be more or less than your original cost.
The Right Fund for Your IRA
Your IRA will be invested in Colonial mutual funds that are well suited to a
wide range of retirement planning objectives. Colonial's approach to investing
has attracted more than $15.5 billion in managed assets, and has earned the
trust of over 800,000 investors. At Colonial, we are committed to providing you
with dependable products designed to meet your expectations. Our goal is to
achieve higher-than-average returns for your IRA investment, but with
lower-than-average risk.
Selecting Your IRA Investments
When you invest in a Colonial IRA, you enjoy an array of investment alternatives
to help you achieve your financial goals for retirement. Whether you're
beginning early and investing for long-term growth or you're older and more
income-oriented, there is a Colonial fund that's right for your IRA investment
strategy. Each Colonial fund has a different investment objective and reacts
differently to various economic conditions. In developing a well diversified
portfolio, your financial adviser can help you balance your desire to help
reduce risk with your need for growth to offset inflation. Colonial offers 18
bond funds and stock funds for your IRA.
Colonial Bond Funds:
Your Choice for Income
[ ]Colonial High Yield Securities Fund
[ ]Colonial Strategic Income Fund
[ ]Colonial Income Fund
[ ]Colonial Federal Securities Fund
[ ]Colonial U.S. Government Fund
[ ]Colonial Adjustable Rate U.S. Government Fund
[ ]Colonial Government Money Market Fund*
Colonial Stock Funds:
Your Opportunity for Growth
[ ]Colonial Global Natural Resources Fund
[ ]Colonial Newport Tiger Fund
[ ]Colonial International Fund for Growth
[ ]Colonial Small Stock Fund
[ ]Colonial Global Equity Fund
[ ]Colonial U.S. Fund for Growth
[ ]Colonial Growth Shares Fund
[ ]Colonial Global Utilities Fund
[ ]Colonial Utilities Fund
[ ]The Colonial Fund
[ ]Colonial Strategic Balanced Fund
*An investment in money market funds is neither insured nor guaranteed.
For a full description of any particular fund, ask your financial adviser for a
free brochure and prospectus containing more complete information, including
fees, risks, and expenses. Read the prospectus carefully before you invest.
<PAGE>
A Word about Investing in Mutual Funds
Colonial and your full-service financial adviser want you to understand both the
risks and benefits of mutual fund investing. While mutual funds offer
significant opportunities and are professionally managed, you should be aware
that, unlike savings accounts and certificates of deposit, mutual fund shares
are not insured or guaranteed by any financial institution or government agency,
including the FDIC. It is important to read the prospectus carefully before you
invest or send money. Please consult your full-service financial adviser to
determine how investing in specific Colonial funds may help you meet your unique
needs.
IRA Deductibility
Remember that if neither you nor your spouse is an active participant in a
qualified plan, your IRA contribution is fully deductible -- regardless of the
amount of income earned. The chart below can help participants in a qualified
plan determine if their IRA contributions will be fully deductible, partially
deductible, or non-deductible. Whether or not any part of your contribution is
deductible, all of your earnings will be free from federal income tax until you
take them out of the plan. When it's time to withdraw your earnings, in a
lump-sum or periodically, you'll have to pay income taxes on that money.
<TABLE>
<CAPTION>
Filing Status Modified Adjusted Allowable IRA Deduction
Gross Income*
<S> <C> <C>
Single Up to $24,999 Full Amount ($2,000)
$25,000 - $34,999 Partial Deduction --
Reduced by $200 for every $1,000 over $25,000
Married/Joint $35,000 or more No Deduction
Filing Up to $39,999 Full Amount ($4,000)
$40,000 - $49,999 Partial Deduction--
Reduced by $200 for every $1,000 over $40,000
Married/Separate $50,000 or more No Deduction
Filing Up to $9,999 Partial Deduction--
Reduced by $200 for every $1,000 of income
$10,000 or more No Deduction
</TABLE>
*Determined before reduction of any deductible contribution to an IRA.
Refer to IRS Publication 590 for further information.
You Should Remember These Key Points:
- - If you made non-deductible contributions to an IRA, you will not have to pay
income taxes on the money representing your cost basis.
- - If you made deductible contributions to an IRA, you will have to pay income
taxes on any money you withdraw.
- - If you made both deductible and non-deductible contributions, then, based
on the total amounts of non-deductible IRA contributions you had made and the
total value of all your IRA accounts (including IRAs and SEPs), a portion of any
distribution you receive will not be included in your income. That's the basic
IRA.
If you put the money aside and leave it in your account until you're 59-1/2, an
IRA can have two benefits: saving money on current taxes and providing tax-free
compounding.
Colonial IRAs
Why Should You Select the Colonial IRA?
Colonial has been helping investors achieve their financial goals since 1931. We
bring the same dedication to the establishment and maintenance of your IRA as we
do to all our efforts on behalf of our shareholders. The Colonial IRA is easy to
establish. This brochure contains specific instructions and easy-to-use forms
that make opening an IRS-approved Colonial IRA convenient. Our retirement plan
consultants are always available to answer any questions you may have. When you
call Colonial toll-free, you'll receive fast, accurate, and courteous service.
All IRA servicing is performed in-house to maintain our high standards of
quality.
<TABLE>
<CAPTION>
IRA Plan Checklist IRA Transfer of Direct Beneficiary Statement IRA Annual Fee
Application Assets Rollover Designation of Intent Distribution $10 per
Transaction (If desired) Form Depositor*
<S> <C> <C> <C> <C> <C> <C> <C>
Establish a new IRA check check check
Transfer existing
non-Colonial IRA
assets to a new
Colonial IRA check check check check
<PAGE>
Transfer existing
non-Colonial IRA
assets to an
existing Colonial IRA check
Change beneficiary
on an existing IRA check
Direct rollover from
an employer plan to
a Colonial IRA check check check
Request distribution
from a Colonial IRA check
</TABLE>
*The annual fee is $10 per IRA (no additional charge for spousal IRAs). If the
fee is not paid directly by you, in addition to any contributions for the
taxable year, it will be deducted from your account at year end.
Do IRAs Make Sense
Even if You Don't Get the Deduction?
Yes, if you are willing to make a long-term commitment toward increasing your
retirement income and you have the money to fund your IRA.
Another reason for making non-deductible contributions is that the amount of the
contribution will not be taxed when you begin to receive distributions during
retirement. If tax rates are higher in the future, then the benefit of those
non-taxable distributions will increase. Finally, consider that your IRA
generates investment earnings that are tax-deferred.
Rollovers of Lump-Sum Distributions
From Qualified Retirement Plans
An IRA rollover is a tax-sheltered way to move a "lump-sum" distribution from a
qualified retirement plan when you:
check Retire
check Change jobs, are faced with a layoff, or terminate employment
check Are employed by a company terminating its qualified plan, or
check Are a beneficiary of a spouse's plan distribution
Employee after-tax contributions to a qualified retirement plan may not be
rolled over. Since you have already paid taxes on any voluntary contributions,
they are returned tax-free to you before the rest of the distribution is rolled
over to an IRA.
Any distribution amount that is "rollover eligible" -- including a lump-sum
distribution -- is subject to 20% withholding, unless it is paid to an IRA or
another qualified retirement plan in a "direct rollover." To be a direct
rollover, the distribution check must be payable to the trustee/custodian of the
new IRA rollover or qualified retirement plan that will receive the money. The
check may be given to you to send to the new trustee/custodian for investment
within 60 days, or the plan administrator can mail it directly to the new
trustee/custodian's address.
If you later join a company with a retirement plan that accepts rollovers, you
can move your rollover IRA to that plan. Or, you may keep your rollover account
and let the earnings continue to grow tax-deferred. If desired, Colonial will
establish two separate accounts if you decide to invest a regular IRA and a
rollover IRA with money from a qualified plan distribution.
Combining a rollover of a lump-sum distribution from a qualified plan with a
regular contributory (individual/spousal) IRA removes your option to roll over
any portion of this account to a qualified retirement plan in the future. To
maintain the ability to avoid taxes through rollover, you should keep these
different IRAs separate.
Colonial Believes
The Investor Comes First
Since 1931, Colonial has worked to provide dependable products, reliable
results, and responsive service to investors. Our time-tested investment
approach has attracted more than $15.5 billion in fund assets and earned the
trust of over 800,000 shareholders worldwide.
Colonial Retirement Plan Services
We Make IRA Investing Easy
Our goal is to make retirement investing easy for you. We offer one of the most
extensive selections of shareholder services available for retirement plans. Ask
your financial adviser how Colonial's IRA service options can meet your needs.
Low Plan Cost and Investment Minimum
[bullet] No set-up fee.
[bullet] $10 annual maintenance charge.
[bullet] Open a Colonial IRA with as little as $25.
[bullet] No plan close-out fee.
<PAGE>
Easy Exchanges
[bullet] Exchange among Colonial funds when your retirement investment goals or
priorities change.*
24-Hour Account Information
[bullet] Call 1-800-345-6611 from your touch-tone phone whenever you like. You
can check your IRA balances, fund prices, and performance 24 hours a
day.
Easy Record Keeping
[bullet] You will receive an IRA statement each quarter, or at least annually,
showing contributions and earnings for the year to date.
[bullet] Confirmation statements reflect contributions and dividends or capital
gains reinvested in your IRA.
[bullet] We will send you an IRS Form 5498 each year in compliance with IRS
regulations.
When It's Time to Take Withdrawals*
[bullet] On request, Colonial will calculate your life expectancy, or joint life
expectancy, with a designated beneficiary, based on IRS rules.
[bullet] You can take your IRA periodic distributions through a Systematic
Withdrawal Plan that allows you to receive monthly, quarterly, or
semiannual checks.
*Redemptions and exchanges are made at the next determined net asset value after
the request is received by Colonial. Proceeds may be more or less than your
original cost. The exchange privilege may be terminated at any time. Investors
who purchase Class B or Class D shares, or $1 million or more of Class A shares,
may be subject to a contingent deferred sales charge. Some retirement plan
withdrawals are exempt from CDSC. Please refer to the specific fund's prospectus
for details.
"Colonial's IRA offers a variety of services that save me time and make it easy
to manage my retirement dollars effectively."
Commonly Asked Questions About:
Eligibility
Who can establish an IRA?
You can set up and make contributions to an IRA if you have compensation (earned
income or alimony) and have not reached age 70-1/2 during the tax year for which
your IRA contribution is made.
Is my non-wage-earning spouse eligible for a spousal IRA?
Yes, under certain conditions. A spousal IRA allows an unemployed individual to
have an IRA. In effect, the employed spouse is allowed an additional
contribution, if a joint return is filed and the non-wage-earning spouse did not
attain age 70-1/2 before the close of the tax year. An eligible person filing a
joint return may make contributions to a spousal IRA even if a contribution is
not made to his/her own IRA.
Can I still establish or continue to fund an IRA if I am covered by a retirement
plan?
Yes. However, your contribution may not be entirely deductible. If you're
covered by a government or union retirement program, an employer-sponsored
corporate or Keogh pension/profit sharing plan, SEP or TSA plan, or if you're
required to contribute to your employer's plan, you may still make your IRA
contributions but the amount of your deduction will depend on your modified
adjusted gross income. (See chart on page 3.)
Contributions
How much can I contribute to an IRA?
You can contribute 100% of your annual earned income up to $2,000. If you and
your spouse are both working, and if you both qualify, you can each establish
your own separate IRA and contribute up to the combined maximum total of $4,000,
based on your respective incomes.
How much can I contribute to a spousal IRA?
If you file a joint return and your spouse is non-wage-earning, you may
contribute a total of the lesser of 100% of earned income or $2,250. There is no
restriction on how the contribution is split between the two IRAs other than the
stipulation that the contribution to either IRA cannot exceed $2,000. The total
contribution cannot exceed $2,250. A spouse with less than $250 of earned income
may elect to be treated as having received no income for that tax year.
When can I make IRA contributions?
You may make an IRA contribution up to and including the date for filing your
income tax return, excluding extensions. You can open a 1995 IRA from January 1,
1995 to April 15, 1996. In addition, you may file income tax returns claiming
deductions for IRA contributions that have not yet been made, but that you will
make by the due date of the return, generally April 15th. By making
contributions early in the year, your account will have more time to grow. The
illustration below shows how you can put time on your side.
<PAGE>
Following The Early
Years Jan 1 July 1 Dec 31 April 15 Advantage*
15 $ 69,898 $ 66,647 $ 63,544 $ 61,805 8,093
20 126,004 120,141 114,549 111,411 14,593
25 216,362 206,295 196,693 191,303 25,059
*The amount you gain by making your investment at the earliest possible time
during the tax year. Chart assumes 10% annual return with the investor making a
$2,000 contribution at the same time each year. This hypothetical rate is for
illustrative purposes only. It is not meant to represent the return of any
specific Colonial fund.
What if my contribution exceeds the maximum allowable amount?
The Internal Revenue Service imposes penalties on excess contributions to IRAs.
However, you can avoid the penalty by withdrawing the excess amount, plus any
earnings it has accumulated, before you file your year-end tax return.
Moving or Changing Your IRA
Can I change my investment choice whenever I want?
Yes. One important feature Colonial offers is the exchange privilege, which
gives you the flexibility to exchange among other Colonial funds as your
investment goals change. You can make exchanges by telephone, using our
toll-free number, 1-800-345-6611.
How can I move my IRA investments to Colonial?
There are two ways to move your IRA to Colonial. Remember, the 20% federal
income tax withholding does not apply when moving or changing an IRA.
1. IRA-to-IRA Rollover Ask to receive your current assets in a check that is
payable to you. You may forward the check to Colonial for investment within 60
days or have it sent directly to Colonial from the current trustee/custodian.
Only one IRA-to-IRA rollover is permitted in any 12-month period.
2. Transfer of Assets Instruct your current financial institution to send the
assets to Colonial using the Transfer of Assets portion of the Transfer of
Assets/Direct Rollover form in this booklet. There is no limit on the number of
transfers that can be made in any year. Transfers are non-taxable.
I already have an IRA, but am not satisfied with its investment results. Can I
move it to a Colonial IRA?
Yes. You may move your IRA for any reason that's important to you. Simply direct
a Transfer of Assets as described above.
Tell me about rollover of a lump-sum distribution from my employer's qualified
retirement plan.
IRS rules have changed for plan participants who receive lump-sum distributions
from an employer's retirement plan. Any "rollover eligible" distribution must be
paid in a direct rollover to another IRA or qualified plan that will accept it.
20% of the distribution will be withheld for federal income tax if it is paid to
the participant. For more specific information, please see the "Transfer of
Assets/Direct Rollover" form in this booklet.
What is a lump-sum distribution?
A lump-sum distribution is a one-time, entire payment from a qualified
retirement plan to a participant or beneficiary. Lump sums are usually paid when
the participant retires, changes jobs, becomes permanently disabled, or dies.
What is a "rollover eligible" distribution?
All retirement plan distributions are considered "rollover eligible," except
periodic distributions (paid at least annually over a single or joint life
expectancy, or over a period of at least ten years) and required minimum
distributions (those amounts that must by law be withdrawn from retirement
plans).
Should I know more about rollover rules?
Since you may receive a plan distribution before you ever reach retirement age,
you should be well informed about rollover rules. Breaking the rules can cost
you money.
If you have a plan distribution made payable to you, not only does the plan
administrator send 20% to the federal government as withholding, so you only
receive 80% of your plan account(s), but the entire distribution becomes taxable
for the year in which you receive it. You still have 60 days to roll it over and
avoid current taxation, but you have to make up the "missing" 20% out of your
own pocket to do so. In that case, you might get the 20% withheld amount
refunded, but not until you file your income tax return for the year. And, if
you're under 59-1/2 when you receive the distribution, you may have to pay an
additional 10% penalty tax on any amount you don't roll over.
Taxes
Can I deduct the contributions made to my IRA on my tax return?
That depends. The Tax Reform Act of 1986 made changes to the rules regarding
deductibility of IRA contributions. The rules state that the deductibility is
based upon three factors: active participation in an employer-sponsored
retirement plan, modified adjusted gross income, and marital status.
<PAGE>
The basic rule is that if neither you nor your spouse is an active participant
under an employer-sponsored retirement plan (pension/profit sharing/TSA/401(k)/
SEP, etc.) then you can deduct your IRA contributions no matter how much you
earn.
If, however, either you or your spouse is an active participant in a retirement
plan, then deductibility of your contributions will depend upon your modified
adjusted gross income and marital status. The chart in the "IRA Deductibility"
section of this booklet will help you determine how much of your IRA
contribution will be deductible. Let's use an example: Bob and Laura Smith's
modified adjusted gross income is $44,000 married, filing jointly. Both are
active participants in qualified retirement plans, and each has income of at
least $2,000. As shown in the chart on page 3, income between $40,000 - $50,000
is only allowed partial deductibility.
Married/Joint Return (Phase-out Level) $50,000
Modified Adjusted Gross Income -44,000
-------
$ 6,000
Multiply by 20% (.20) and round to the
next highest multiple of $10 x .20
Deduction per spouse $1,200
The balance of $800 ($2,000 - $1,200) per spouse may be deposited to your IRA as
a non-deductible contribution.
Assuming I can deduct my IRA contribution, how much will I save in taxes?
It depends on your tax bracket. If you are in a 31% federal tax bracket, a
$2,000 contribution will reduce your tax bill by $620. Each state applies
different tax treatment, but some states do allow full or partial deductibility
of IRA contributions. Whether all or only a part of your IRA contribution is
deductible, you pay no current taxes on the income accumulating in your Colonial
IRA. The "Power of Compounding" illustration on page 1 shows the potential
benefit to your retirement investing program. When you begin taking withdrawals,
the amounts you receive will be subject to tax.
What about taxation of withdrawals?
If you wait until after age 59-1/2 to begin withdrawals, they are subject to
regular income tax. Before age 59-1/2, you may need to take withdrawals, but
they may be subject to a 10% penalty.
Withdrawing from Your IRA
When can I begin to take money out of my IRA without a penalty?
After you reach age 59-1/2 you can begin to take distributions from your IRA
without penalty. The amount withdrawn will be taxed as ordinary income, except
for that portion which came from your previous non-deductible contributions;
that amount is returned to you tax-free. Distributions must begin no later than
April 1st of the calendar year following the year in which you reach age 70-1/2.
Even if you are still working at age 59-1/2, you can take money out of your IRA
without penalty. If I need the money, can I withdraw it from my IRA before age
59-1/2?
Yes, the money you remove from your IRA before you are 59-1/2 (except the
portion which is a return of your non-deductible contributions) will be taxed by
the Internal Revenue Service as ordinary income. It may also be subject to a 10%
premature distribution penalty, except in the following circumstances.
The 10% penalty is waived in the event of death or disability. The 10% penalty
is also waived if withdrawals are taken in substantially equal periodic payments
over five years or until age 59-1/2, whichever is later. There is no 10% penalty
on distributions that are part of a series of substantially equal periodic
payments made for the life (or life expectancy) of the planholder or the joint
lives (or joint life expectancies) of the planholder and a designated
beneficiary.
If you want to take distributions before you reach 59-1/2, Colonial will, on
request, calculate your life and/or joint life expectancy figures, using the
three methods outlined in IRS Notice 89-25. The notice clarifies the meaning of
"substantially equal periodic payments" for IRA investors wishing to avoid the
10% premature distribution penalty. Call the Qualified Plan Sales department at
1-800-225-2565, extension 6660 for this estimate.
When I die, will IRA distributions to my beneficiaries be included in my taxable
estate?
Distributions will be part of your taxable estate. Inheritance taxes imposed by
the states are another matter. You should ask your tax adviser about the law in
your state. Your beneficiary will have to pay income taxes on the distribution
as it is received.
What if I withdraw less each year than IRS life expectancy tables say I should?
The Internal Revenue Service will impose a penalty of up to 50% of the
difference between the amount you should have taken and the amount you actually
received. However, the penalty may be waived if IRS feels you made a reasonable
error and is satisfied with the steps taken to correct the situation.
When must I begin to take distributions?
Distributions must begin by April 1 of the year after the year in which you
reach age 70-1/2. Payments must be taken regularly over a time period that is no
longer than your life expectancy or your joint life expectancy with your
designated beneficiary. The Internal Revenue Service provides tables that
calculate these periods for you in IRS Publication 590.
<PAGE>
Is my IRA subject to the 20% withholding rules?
No. The 20% withholding rules only apply to distributions from an employer's
qualified retirement plan, and only if the distribution is not treated as a
direct rollover.
Where can I get more information about Colonial funds?
For more complete information about any of the Colonial funds, including charges
and expenses, contact your financial adviser who will give you appropriate
reports and prospectuses. You may also obtain a prospectus directly from
Colonial by calling 1-800-248-2828, or by writing to: Colonial Investment
Services, Inc., One Financial Center, Boston, MA 02111-2621. Please read the
fund prospectus carefully before investing.
Form 5305-A Colonial Individual Retirement Account Agreement
(Under Section 408(a) of the Internal Revenue Code)
(Rev. Oct. 1992)
Department of the Treasury Do Not File with
Internal Revenue Service Internal Revenue Service
This Agreement is by and between the Depositor whose name and signature appear
on the application (Depositor) and The First National Bank of Boston (Custodian)
having its principal place of business at Boston, Massachusetts. The Depositor
hereby establishes a custodial account qualified (under section 408(a) of the
Internal Revenue Code as an Individual Retirement Account) to provide for their
retirement and for the support of their beneficiaries after death. The Custodian
named herein has given to the Depositor a Disclosure Statement as required under
Regulations section 1.408-6.
The Depositor and the Custodian make the following Agreement.
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 Proposal 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:
<PAGE>
(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 designated beneficiary
as of their birthdays in the year the Depositor reaches age 70-1/2. In the case
of a distribution in accordance with 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 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 sections 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 the 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. Depositor appoints The First National Bank of Boston or any successor thereto
as Custodian of this custodial account. After deduction of all appropriate fees
and charges, the balance of Depositor's contributions shall be invested as
herein provided.
2. Depositor directs the Custodian to invest the custodial account in shares of
mutual funds distributed by Colonial Investment Services, Inc. (the "Sponsor"),
or investments otherwise authorized by the Sponsor for use under this Agreement.
All contributions shall be in CASH or in shares of mutual funds or other
investments authorized for use under this Agreement.
3. Custodian shall have no investment responsibility or discretion with respect
to this custodial account. Custodian may vote in any manner it deems fit any
fund shares with respect to which it has not timely received any written
directions from Depositor.
4. This document constitutes the entire agreement between Depositor and
Custodian and no representative of the Sponsor, any Colonial Mutual Fund or any
broker-dealer shall be deemed to be a representative of or acting on behalf of
Custodian, nor shall any representative have any authority to make
representations or to bind Custodian beyond the terms of this document.
5. Depositor shall have the right, only by written notice in a form acceptable
to the Custodian, to designate or to change a beneficiary to receive any benefit
to which the Depositor may be entitled in the event of his death prior to the
complete distribution of the Account. The Custodian may rely upon the last
written designation received at the Custodian's office which shall supersede all
prior designations. Unless specifically designated otherwise by the Depositor in
a form acceptable to the Custodian, death benefits shall be distributed equally
among all surviving primary beneficiaries or all
<PAGE>
surviving contingent beneficiaries (should all primary beneficiaries predecease
the Depositor). If no beneficiary designation is in effect upon the Depositor's
death, or if the Custodian receives satisfactory proof that all such named
beneficiaries have predeceased the Depositor, then the Account shall be
distributed to the Depositor's estate.
6. Neither Custodian, sponsor nor any Colonial Mutual Fund assumes any
responsibility to make any distribution unless and until Depositor specifies in
a form acceptable to the Custodian the occasion for such distribution, and the
manner of distribution. Custodian and Sponsor shall not be responsible to make
distributions in accordance with Article IV following the Depositor's attainment
of age 70-1/2 other than upon Depositor's express instructions. Neither
Custodian nor Sponsor assume any responsibility for the tax treatment of any
distribution from the custodial account; such responsibility accrues solely to
Depositor or beneficiary. Distributions shall not be made as described in
subsection (b) or (c) of section 3 of Article IV, but only as provided in
subsections (a), (d), and (e) of Article IV.
7. This Colonial IRA Agreement shall terminate upon the complete distribution of
the custodial account to Depositor or his beneficiaries, to successor individual
retirement accounts or annuities, or when no assets otherwise remain in the
custodial account and the Custodian shall be relieved from all further liability
with respect to the custodial account.
8. Depositor assumes full and sole responsibility for making sure that
contributions (including rollovers) are qualified for contribution to the
custodial account and that the sum of contributions during a taxable year do not
exceed those limits or violate those rules for tax-deductibility specified in
the Internal Revenue Code. If Depositor does contribute an amount greater than
that which may be claimed as a deduction, Depositor shall be entitled to
withdraw such excess, together with any earnings thereon, at any time prior to
the day prescribed by law (including extensions) for filing the Depositor's
Federal income tax return for such year. Depositor shall certify in writing the
full amount of the required withdrawal including earnings thereon, or the number
of shares, to be withdrawn and shall specify this amount should be distributed
to Depositor, or redesignated as the contribution for the succeeding taxable
year.
9. Sponsor may remove Custodian and appoint a successor custodian upon written
notice to Custodian and Depositor or any current beneficiary. Custodian may
resign upon written notice to Depositor or any current beneficiary. Upon its
resignation, Custodian may, but shall not be required to, appoint a successor
custodian. If a resigning Custodian does not appoint a successor custodian and
if no successor custodian is appointed, this Agreement shall be terminated and
all assets held in the custodial account distributed to Depositor or current
beneficiary. Any successor custodian appointed hereunder shall satisfy the
requirements of Section 408(a)2 of the Code. Upon any such successor's
acceptance of appointment, Custodian shall transfer the assets of the custodial
account together with copies of relevant books and records to such successor
custodian; provided, however, that Custodian is authorized to reserve such sum
of money or property as it may deem advisable for payment of any liabilities
constituting a charge on or against the assets of the custodial account or of
Custodian and where necessary may liquidate such assets. Custodian shall not be
liable for the acts or omissions of any successor custodian.
10. Custodian shall be entitled to compensation for its services hereunder in
accordance with its custodial account fees as may be published and amended from
time to time. Custodian shall also be entitled to reasonable compensation for
any extraordinary services rendered and to be reimbursed for any administrative
expenses incurred in the performance of its duties hereunder including fees for
legal services. All such fees and expenses of Custodian may be charged against
the custodial account in such manner as the Custodian may determine, or at the
Custodian's option, may be paid directly by the Depositor. Custodian may pay
from the custodial account any other costs, fees or expenses associated with the
maintenance or management of the custodial account on the written authorization
of Depositor. Custodian may employ agents and may subcontract in fulfilling its
obligations hereunder.
11. Sponsor may amend this Agreement as Sponsor determines in its discretion is
necessary or desirable, provided, however, that no such amendment may be made
which increases the duties of the Custodian without Custodian's consent.
12. This Colonial IRA Agreement shall be construed under the laws of
Commonwealth of Massachusetts, or if different, the state of the domicile of
Custodian, and shall become effective upon the date accepted by Custodian as
specified in the confirmation statement sent Depositor by the Sponsor as agent
for Custodian.
13. Acceptance of this Colonial IRA agreement by the Depositor is indicated by
the Depositor's signature in the related application.
14. Sponsor and Custodian may rely upon statements made by Depositor and
beneficiary. Depositor and beneficiary shall indemnify Sponsor and Custodian
against any loss or liability which may arise from this Agreement, except which
arises from the Custodian's negligence or willful misconduct.
Disclosure Statement
Introduction
The following information is being provided in accordance with the requirements
of the Internal Revenue Service and is based on the law as in effect on January
1, 1993, for the tax year 1992 and later. This disclosure statement should be
read together with the Colonial IRA application and the prospectus which you
have already received from your registered representative.
Revocation
<PAGE>
You may revoke this account at any time within seven calendar days after it is
established by mailing or delivering a written request for revocation to:
Colonial Investors Service Center, Inc., Agent, P.O. Box 1722, Boston MA
02105-1722. Mailed notice will be considered given on the date postmarked (or on
the date certified or registered if mailed by this method). Upon proper written
notification, you will receive a full refund of your initial contribution,
including sales commissions and/or administrative fees. If you have any
questions, please call 1-800-345-6611.
Eligibility
You are eligible to set up an IRA if you are younger than age 70-1/2 and if, at
any time during the year, you are an employee or are self-employed and receive
compensation or earned income that is includible in your gross income.
Additionally, regardless of your age, you may transfer funds from another IRA or
certain qualified plan distributions to a "Rollover" IRA described below.
Additionally, regardless of your age, you may contribute to a spousal IRA
described below until your spouse reaches age 70-1/2.
Limit on Annual Contributions
(a) You can make annual contributions to an individual IRA of up to $2,000 or
100% of your compensation or earned income, whichever is less.
(b) If you and your spouse both work and have compensation that is includible in
your gross income, each of you can annually contribute to your own IRA up to the
lesser of $2,000 or 100% of compensation or earned income.
(c) If your spouse earns no income, or earns $250 or less and elects to be
treated as earning no income, you can establish a separate "spousal IRA" if you
file a joint Federal tax return. The aggregate annual amount contributed to both
IRAs each year cannot exceed the lesser of $2,250 or 100% of your earned income
or compensation. This amount is divided between the two accounts as you direct,
but not more than $2,000 may be contributed to either account in any year.
(d) If you are a divorced spouse, all taxable alimony received by you under a
decree of divorce or separate maintenance will be treated as compensation for
purposes of the IRA contribution limit and the rules for annual contributions of
up to the lesser of $2,000 or 100% of compensation or earned income (including
taxable alimony).
Deductibility of Contributions
(a) You may deduct the full amount of your IRA contribution up to the annual
maximum limit if you are not an "active participant" in an employer-sponsored
retirement plan (including qualified plans, Simplified Employee Pension plans,
tax-sheltered annuity plans, and certain governmental plans) for any part of
such year. If you are married and you and your spouse file a joint return, you
will be deemed to be an active participant in an employer-sponsored retirement
plan if either you or your spouse is an active participant in such a plan.
In addition, even if you are an active participant in such a plan, you may
deduct the full amount of your IRA contribution up to the annual maximum limit
if you have modified adjusted gross income equal to or below a specified level,
or if you are married and file a separate Federal tax return, the amount of your
IRA contribution which is between $25,000 and $35,000 if you are a single
taxpayer and modified adjusted gross income of $10,000 and under if you are a
married taxpayer who files a separate return. If you are married and you and
your spouse file a joint return, if either you or your spouse is an active
participant in an employer-sponsored retirement plan, the amount of your IRA
contribution which is deductible will be phased out on the basis of your
combined modified adjusted gross income between $40,000 and $50,000. For this
purpose, a husband and wife who file separate tax returns for any year and live
apart at all times during the year are not considered to be married.
In general, the IRA deduction is phased out at a rate of $200 per $1,000 of
modified adjusted gross income in excess of the phase out amount ($25,000 for
single taxpayers, $40,000 for married taxpayers who file joint returns and $0
for married taxpayers who file separate returns). However, if you contribute to
a spousal IRA, your IRA deduction is phased out at a rate of $225 per $1,000 of
modified adjusted gross income in excess of $40,000.
When calculating your reduced IRA deduction limit, you always round up to the
next highest $10. Therefore, your deduction limit is always a multiple of $10.
In addition, if your modified adjusted gross income is within the phase-out
range and your reduced deduction limit is more than $0 but less than $200, you
are permitted to deduct up to $200 of your IRA contributions.
If your modified adjusted gross income exceeds the applicable level specified
above and you are an active participant in an employer-sponsored retirement plan
(or your spouse is an active participant in such a plan if you file a joint
return), then you may not deduct any portion of your IRA contribution. In
general, you are an active participant in a plan for a year during which you
accrue any additional benefit under the plan, whether due to employer
contribution, your contribution or forfeiture from other participants. Your Form
W-2 for the year should indicate your participation status. You should consult
your own tax or financial adviser if you should have any further questions.
(b) Even if you will not be able to deduct the full amount of your IRA
contribution under the rules described above, you can still contribute up to
your annual maximum amount with all or part of the contribution being a
non-tax-deductible contribution. Of course, the combined total of deductible and
non-deductible contributions must not exceed your annual maximum contribution
limit amount. Any earnings on all your IRA contributions (deductible and
nondeductible) accumulate tax-free until you withdraw them.
Annual Contributions
Contributions to your IRA for a tax year must be made in cash on or before the
due date (not including extensions) for your Federal income tax return for that
tax year (April 15 for most individuals). If you intend to report contributions
<PAGE>
made between January 1 and April 15 as contributions for your prior tax year,
you should notify Colonial Mutual Funds or the Custodian in writing that such
contributions have been made on account of such prior tax year. Otherwise, the
Custodian will assume the payment is for the current tax year.
Excess Contributions
If you contribute to your IRA more than the maximum limit allowed any year, the
excess contribution could be subject to a 6% nondeductible excise tax. The
excess is taxed in the year the excess contribution is made and each year that
the excess remains in your IRA at the end of the year. If, by accident, you
should contribute more than the maximum limit allowed, you can eliminate the
excess contribution as follows:
(a) You can avoid the 6% excise tax by withdrawing the excess contribution and
the net earnings attributable to it before the due date for filing your Federal
income tax return for the year the excess occurred. Upon removing an excess
contribution in this manner, the net earnings attributable to it are includible
in your income for the tax year in which the excess contribution was made, and
you may also have to pay an additional 10% premature distribution tax on the
amount of such net earnings. However, the excess contribution itself will not be
included in your taxable income and will not be subject to the 10% premature
distribution tax.
(b) If you elect not to withdraw an excess contribution, you can eliminate the
excess by contributing less than the maximum amount allowed to your IRA in a
later year. This is known as a "make-up" contribution and is allowed only to the
extent that you have under-contributed in the later year. Further, to the extent
that you have not contributed your full deductible amount for that later year,
the amount of the excess so eliminated may be deductible as a "make-up"
deduction. The 6% excise tax will, however, be imposed in the year you make the
excess contribution and each subsequent year until eliminated.
(c) If you do not withdraw an excess contribution on or before the due date for
filing your Federal income tax return and your contribution did not exceed
$2,250, you can withdraw the excess at any time as long as you have not deducted
it on your Federal tax return. The amount of the excess which you withdraw will
not be included in your gross income and will not be subject to regular Federal
income tax. However, the 6% excise tax will be imposed for the year in which you
make the excess contribution and each subsequent year, until the year of
withdrawal.
(d) If you do not withdraw an excess contribution on or before the due date for
filing your Federal income tax return and your contribution exceeded $2,250, you
must include in your gross income any excess amount which you withdraw even if
you have not deducted it on your Federal income tax return. You may also have to
pay a 10% premature distribution tax on the amount you withdraw. Additionally,
the 6% excise tax will be imposed for the year in which you make the excess
contribution and each subsequent year, until the year of withdrawal.
Rollovers
(a) If you receive a distribution from a qualified retirement plan and the
distribution is not a required minimum distribution and not one of a series of
distributions made for life, life expectancy or 10 or more years, you may
establish a "Rollover" IRA and place the portion of the distribution on which
you wish to defer tax into the "Rollover" IRA within 60 days after receiving the
distribution from the qualified retirement plan. Your own non-deductible
contributions to the qualified retirement plan cannot be included in the
rollover.
Although the law permits you to contribute property to your "Rollover" IRA, the
Custodian will not accept any contribution which is not in the form of cash.
Therefore, if you should receive property other than cash in a distribution from
a qualified plan, you should sell part or all of the property and contribute the
sales proceeds to your "Rollover" IRA. If the distribution comes directly from
the qualified plan, it will not be subject to mandatory tax withholding; but if
it comes through you, 20% of the distribution will be withheld.
Please note: (i) the IRA you set up to receive "rollover" amounts should be
separate from an IRA you set up to receive annual contributions; (ii) rollover
amounts you receive may not be deposited in your spouse's IRA or deducted on
your Federal income tax return; (iii) if you establish a "Rollover" IRA during
the year in which you reach age 70-1/2, you must begin receiving distributions
from such IRA no later than April 1 of such following year; and (iv) if you
establish a "Rollover" IRA after the year in which you reach age 70-1/2, you
must begin receiving distributions from such IRA immediately.
Distributions from Your IRA during Your Life
(a) You can make withdrawals from your IRA at any time. Call Colonial at
1-800-248-2828 to request a Colonial Funds IRA Distribution Form. Mail the
completed form to Colonial Investors Service Center, Inc., Attn: Retirement Plan
Services, P. O. Box 1722, Boston, MA 02105-1722. The distribution form contains
descriptions and requirements for each type of IRA distribution. If you withdraw
any of the funds in your IRA before age 59-1/2, the amount includible in your
gross income is subject to a 10% non-deductible premature distribution tax
unless:
(i) the withdrawal is made because of your death or permanent disability;
(ii) the withdrawal is an exempt withdrawal of an excess contribution; or
(iii) the withdrawal is rolled over into another qualified plan or IRA.
You can also withdraw funds held in your IRA without any tax penalty before you
reach age 59-1/2 if the funds will be paid to your former spouse under a
qualified domestic relations order or if you choose to receive systematic
payments in substantially equal amounts over a period that does not exceed your
life expectancy or the life expectancy of you and your
<PAGE>
designated beneficiary. You should be aware, however, that the 10% premature
distribution tax will be applied retroactively (with interest) to all systematic
payments if you change to a method of distribution that does not qualify for the
exception either before you attain age 59-1/2 or during the first five years of
the distribution. The 10% premature distribution tax discussed above does not
apply to the portion of your IRA distribution which is not includible in your
gross income.
(b) When you reach age 70-1/2, you must elect to receive distributions in either
(a) systematic payments monthly, quarterly or annually, or (b) one lump sum
distribution of all the funds held in your IRA. The law requires that you begin
to receive distributions from your IRA no later than the April 1 following the
year in which you reach age 70-1/2 (the "Required Distribution Date:). If you
elect systematic payments, there is a minimum amount which you must withdraw by
the Required Distribution Date and by each December 31 thereafter. This could
result in two minimum distributions in one calendar year. This minimum amount is
determined by your life expectancy or the joint life and last survivor
expectancy of you and your designated beneficiary, subject to the minimum
distribution incidental death benefit rule. Your life expectancy (and your
spouse's life expectancy if your spouse is your designated beneficiary) will be
recalculated each year. The Custodian is not responsible to advise you in this
matter and will only make distributions to you from your IRA in accordance to
your specific instructions.
If the amount distributed during a taxable year is less than the minimum amount
required to be distributed, the Internal Revenue Service may impose a tax equal
to 50% of the deficiency.
Payments from Your IRA after Your Death
If you die before all the funds held in your IRA have been distributed, the
remaining funds in the account will be distributed to your designated
beneficiary either outright or periodically, as selected by your beneficiary.
The Custodian will make distributions to your beneficiary in accordance to his
or her specific instructions. Your beneficiary should be aware that he or she is
subject to minimum distribution rules and it is his or her responsibility to
make sure that the rules are met. Under the post-death minimum distribution
rules, if you die after your Required Distribution Date, the funds remaining in
your IRA must continue to be distributed to your designated beneficiary at least
as rapidly as under the method of distribution in effect prior to your death. If
you die prior to your Required Distribution Date, all the funds in your IRA must
be completely distributed to your designated beneficiary by December 31 of the
year containing the fifth anniversary of your death unless your designated
beneficiary elects, no later than December 31 of the year following the year of
your death, to receive funds from your IRA over a fixed period that is no longer
than his or her life expectancy. If your beneficiary is your surviving spouse,
distribution of funds from your IRA can be made to him or her over a fixed
period that is no longer than his or her life expectancy and commencing at any
date prior to December 31 of the year in which you would have attained age
70-1/2. In all instances, your spousal beneficiary may also elect to roll over
the funds in your IRA into his or her own account or treat your IRA as his or
her own by making contributions to it. In this case, he or she is not required
to make withdrawals from the IRA until April 1 following the year in which he or
she reaches age 70-1/2.
The designation of a beneficiary to receive funds from your IRA at your death is
not considered a transfer subject to Federal gift taxes. However, any funds
remaining in your IRA at your death would be includible in your Federal gross
estate.
Federal Tax Returns
(a) Deductible and non-deductible IRA contributions are reported on IRA Form
1040 or Form 1040A. To the extent your contribution is not deductible, you must
designate it on Form 8606. There is a $100 penalty each time you overstate the
amount of your non-deductible contributions unless you can prove that the
overstatement was due to reasonable cause. You will also be required to give
additional information on Form 8606 in years you make a withdrawal from your
IRA. If you fail to file a required Form 8606, there is a $50 penalty for each
such failure unless you can prove the failure was due to reasonable cause.
(b) IRA Form 5329 is required as an attachment to Form 1040 (or separately if
you do not file a Form 1040) for any year the contribution limits in paragraph 2
are exceeded, a premature distribution takes place, less than the required
minimum amount is distributed, or a prohibited transaction takes place.
Form 5305-A Colonial Individual Retirement Account Agreement
(Under Section 408(a) of the Internal Revenue Code)
(Rev. Oct. 1992)
Department of the Treasury Do Not File with
Internal Revenue Service Internal Revenue Service
This Agreement is by and between the Depositor whose name and signature appear
on the application (Depositor) and The First National Bank of Boston (Custodian)
having its principal place of business at Boston, Massachusetts. The Depositor
hereby establishes a custodial account qualified (under section 408(a) of the
Internal Revenue Code as an Individual Retirement Account) to provide for their
retirement and for the support of their beneficiaries after death. The Custodian
named herein has given to the Depositor a Disclosure Statement as required under
Regulations section 1.408-6.
<PAGE>
The Depositor and the Custodian make the following Agreement.
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 Proposal 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
<PAGE>
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 designated beneficiary as of their birthdays in the year the
Depositor reaches age 70-1/2. In the case of a distribution in accordance with
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 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 sections 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 the 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. Depositor appoints The First National Bank of Boston or any successor thereto
as Custodian of this custodial account. After deduction of all appropriate fees
and charges, the balance of Depositor's contributions shall be invested as
herein provided.
2. Depositor directs the Custodian to invest the custodial account in shares of
mutual funds distributed by Colonial Investment Services, Inc. (the "Sponsor"),
or investments otherwise authorized by the Sponsor for use under this Agreement.
All contributions shall be in CASH or in shares of mutual funds or other
investments authorized for use under this Agreement.
3. Custodian shall have no investment responsibility or discretion with respect
to this custodial account. Custodian may vote in any manner it deems fit any
fund shares with respect to which it has not timely received any written
directions from Depositor.
4. This document constitutes the entire agreement between Depositor and
Custodian and no representative of the Sponsor, any Colonial Mutual Fund or any
broker-dealer shall be deemed to be a representative of or acting on behalf of
Custodian, nor shall any representative have any authority to make
representations or to bind Custodian beyond the terms of this document.
5. Depositor shall have the right, only by written notice in a form acceptable
to the Custodian, to designate or to change a beneficiary to receive any benefit
to which the Depositor may be entitled in the event of his death prior to the
complete distribution of the Account. The Custodian may rely upon the last
written designation received at the Custodian's office which shall supersede all
prior designations. Unless specifically designated otherwise by the Depositor in
a form acceptable to the Custodian, death benefits shall be distributed equally
among all surviving primary beneficiaries or all surviving contingent
beneficiaries (should all primary beneficiaries predecease the Depositor). If no
beneficiary designation is in effect upon the Depositor's death, or if the
Custodian receives satisfactory proof that all such named beneficiaries have
predeceased the Depositor, then the Account shall be distributed to the
Depositor's estate.
6. Neither Custodian, sponsor nor any Colonial Mutual Fund assumes any
responsibility to make any distribution unless and until Depositor specifies in
a form acceptable to the Custodian the occasion for such distribution, and the
manner of distribution. Custodian and Sponsor shall not be responsible to make
distributions in accordance with Article IV following the Depositor's attainment
of age 70-1/2 other than upon Depositor's express instructions. Neither
Custodian nor Sponsor assume any responsibility for the tax treatment of any
distribution from the custodial account; such responsibility accrues solely to
Depositor or beneficiary. Distributions shall not be made as described in
subsection (b) or (c) of section 3 of Article IV, but only as provided in
subsections (a), (d), and (e) of Article IV.
7. This Colonial IRA Agreement shall terminate upon the complete distribution of
the custodial account to Depositor or his beneficiaries, to successor individual
retirement accounts or annuities, or when no assets otherwise remain in the
custodial account and the Custodian shall be relieved from all further liability
with respect to the custodial account.
<PAGE>
8. Depositor assumes full and sole responsibility for making sure that
contributions (including rollovers) are qualified for contribution to the
custodial account and that the sum of contributions during a taxable year do not
exceed those limits or violate those rules for tax-deductibility specified in
the Internal Revenue Code. If Depositor does contribute an amount greater than
that which may be claimed as a deduction, Depositor shall be entitled to
withdraw such excess, together with any earnings thereon, at any time prior to
the day prescribed by law (including extensions) for filing the Depositor's
Federal income tax return for such year. Depositor shall certify in writing the
full amount of the required withdrawal including earnings thereon, or the number
of shares, to be withdrawn and shall specify this amount should be distributed
to Depositor, or redesignated as the contribution for the succeeding taxable
year.
9. Sponsor may remove Custodian and appoint a successor custodian upon written
notice to Custodian and Depositor or any current beneficiary. Custodian may
resign upon written notice to Depositor or any current beneficiary. Upon its
resignation, Custodian may, but shall not be required to, appoint a successor
custodian. If a resigning Custodian does not appoint a successor custodian and
if no successor custodian is appointed, this Agreement shall be terminated and
all assets held in the custodial account distributed to Depositor or current
beneficiary. Any successor custodian appointed hereunder shall satisfy the
requirements of Section 408(a)2 of the Code. Upon any such successor's
acceptance of appointment, Custodian shall transfer the assets of the custodial
account together with copies of relevant books and records to such successor
custodian; provided, however, that Custodian is authorized to reserve such sum
of money or property as it may deem advisable for payment of any liabilities
constituting a charge on or against the assets of the custodial account or of
Custodian and where necessary may liquidate such assets. Custodian shall not be
liable for the acts or omissions of any successor custodian.
10. Custodian shall be entitled to compensation for its services hereunder in
accordance with its custodial account fees as may be published and amended from
time to time. Custodian shall also be entitled to reasonable compensation for
any extraordinary services rendered and to be reimbursed for any administrative
expenses incurred in the performance of its duties hereunder including fees for
legal services. All such fees and expenses of Custodian may be charged against
the custodial account in such manner as the Custodian may determine, or at the
Custodian's option, may be paid directly by the Depositor. Custodian may pay
from the custodial account any other costs, fees or expenses associated with the
maintenance or management of the custodial account on the written authorization
of Depositor. Custodian may employ agents and may subcontract in fulfilling its
obligations hereunder.
11. Sponsor may amend this Agreement as Sponsor determines in its discretion is
necessary or desirable, provided, however, that no such amendment may be made
which increases the duties of the Custodian without Custodian's consent.
12. This Colonial IRA Agreement shall be construed under the laws of
Commonwealth of Massachusetts, or if different, the state of the domicile of
Custodian, and shall become effective upon the date accepted by Custodian as
specified in the confirmation statement sent Depositor by the Sponsor as agent
for Custodian.
13. Acceptance of this Colonial IRA agreement by the Depositor is indicated by
the Depositor's signature in the related application.
14. Sponsor and Custodian may rely upon statements made by Depositor and
beneficiary. Depositor and beneficiary shall indemnify Sponsor and Custodian
against any loss or liability which may arise from this Agreement, except which
arises from the Custodian's negligence or willful misconduct.
Disclosure Statement
Introduction
The following information is being provided in accordance with the requirements
of the Internal Revenue Service and is based on the law as in effect on January
1, 1993, for the tax year 1992 and later. This disclosure statement should be
read together with the Colonial IRA application and the prospectus which you
have already received from your registered representative.
Revocation
You may revoke this account at any time within seven calendar days after it is
established by mailing or delivering a written request for revocation to:
Colonial Investors Service Center, Inc., Agent, P.O. Box 1722, Boston MA
02105-1722. Mailed notice will be considered given on the date postmarked (or on
the date certified or registered if mailed by this method). Upon proper written
notification, you will receive a full refund of your initial contribution,
including sales commissions and/or administrative fees. If you have any
questions, please call 1-800-345-6611.
Eligibility
You are eligible to set up an IRA if you are younger than age 70-1/2 and if, at
any time during the year, you are an employee or are self-employed and receive
compensation or earned income that is includible in your gross income.
Additionally, regardless of your age, you may transfer funds from another IRA or
certain qualified plan distributions to a "Rollover" IRA described below.
Additionally, regardless of your age, you may contribute to a spousal IRA
described below until your spouse reaches age 70-1/2.
Limit on Annual Contributions
(a) You can make annual contributions to an individual IRA of up to $2,000 or
100% of your compensation or earned income, whichever is less.
<PAGE>
(b) If you and your spouse both work and have compensation that is includible in
your gross income, each of you can annually contribute to your own IRA up to the
lesser of $2,000 or 100% of compensation or earned income.
(c) If your spouse earns no income, or earns $250 or less and elects to be
treated as earning no income, you can establish a separate "spousal IRA" if you
file a joint Federal tax return. The aggregate annual amount contributed to both
IRAs each year cannot exceed the lesser of $2,250 or 100% of your earned income
or compensation. This amount is divided between the two accounts as you direct,
but not more than $2,000 may be contributed to either account in any year.
(d) If you are a divorced spouse, all taxable alimony received by you under a
decree of divorce or separate maintenance will be treated as compensation for
purposes of the IRA contribution limit and the rules for annual contributions of
up to the lesser of $2,000 or 100% of compensation or earned income (including
taxable alimony).
Deductibility of Contributions
(a) You may deduct the full amount of your IRA contribution up to the annual
maximum limit if you are not an "active participant" in an employer-sponsored
retirement plan (including qualified plans, Simplified Employee Pension plans,
tax-sheltered annuity plans, and certain governmental plans) for any part of
such year. If you are married and you and your spouse file a joint return, you
will be deemed to be an active participant in an employer-sponsored retirement
plan if either you or your spouse is an active participant in such a plan.
In addition, even if you are an active participant in such a plan, you may
deduct the full amount of your IRA contribution up to the annual maximum limit
if you have modified adjusted gross income equal to or below a specified level,
or if you are married and file a separate Federal tax return, the amount of your
IRA contribution which is between $25,000 and $35,000 if you are a single
taxpayer and modified adjusted gross income of $10,000 and under if you are a
married taxpayer who files a separate return. If you are married and you and
your spouse file a joint return, if either you or your spouse is an active
participant in an employer-sponsored retirement plan, the amount of your IRA
contribution which is deductible will be phased out on the basis of your
combined modified adjusted gross income between $40,000 and $50,000. For this
purpose, a husband and wife who file separate tax returns for any year and live
apart at all times during the year are not considered to be married.
In general, the IRA deduction is phased out at a rate of $200 per $1,000 of
modified adjusted gross income in excess of the phase out amount ($25,000 for
single taxpayers, $40,000 for married taxpayers who file joint returns and $0
for married taxpayers who file separate returns). However, if you contribute to
a spousal IRA, your IRA deduction is phased out at a rate of $225 per $1,000 of
modified adjusted gross income in excess of $40,000. When calculating your
reduced IRA deduction limit, you always round up to the next highest $10.
Therefore, your deduction limit is always a multiple of $10. In addition, if
your modified adjusted gross income is within the phase-out range and your
reduced deduction limit is more than $0 but less than $200, you are permitted to
deduct up to $200 of your IRA contributions.
If your modified adjusted gross income exceeds the applicable level specified
above and you are an active participant in an employer-sponsored retirement plan
(or your spouse is an active participant in such a plan if you file a joint
return), then you may not deduct any portion of your IRA contribution. In
general, you are an active participant in a plan for a year during which you
accrue any additional benefit under the plan, whether due to employer
contribution, your contribution or forfeiture from other participants. Your Form
W-2 for the year should indicate your participation status. You should consult
your own tax or financial adviser if you should have any further questions.
(b) Even if you will not be able to deduct the full amount of your IRA
contribution under the rules described above, you can still contribute up to
your annual maximum amount with all or part of the contribution being a
non-tax-deductible contribution. Of course, the combined total of deductible and
non-deductible contributions must not exceed your annual maximum contribution
limit amount. Any earnings on all your IRA contributions (deductible and
nondeductible) accumulate tax-free until you withdraw them.
Annual Contributions
Contributions to your IRA for a tax year must be made in cash on or before the
due date (not including extensions) for your Federal income tax return for that
tax year (April 15 for most individuals). If you intend to report contributions
made between January 1 and April 15 as contributions for your prior tax year,
you should notify Colonial Mutual Funds or the Custodian in writing that such
contributions have been made on account of such prior tax year. Otherwise, the
Custodian will assume the payment is for the current tax year.
Excess Contributions
If you contribute to your IRA more than the maximum limit allowed any year, the
excess contribution could be subject to a 6% nondeductible excise tax. The
excess is taxed in the year the excess contribution is made and each year that
the excess remains in your IRA at the end of the year.
If, by accident, you should contribute more than the maximum limit allowed, you
can eliminate the excess contribution as follows:
(a) You can avoid the 6% excise tax by withdrawing the excess contribution and
the net earnings attributable to it before the due date for filing your Federal
income tax return for the year the excess occurred. Upon removing an excess
contribution in this manner, the net earnings attributable to it are includible
in your income for the tax year in which the
<PAGE>
excess contribution was made, and you may also have to pay an additional 10%
premature distribution tax on the amount of such net earnings. However, the
excess contribution itself will not be included in your taxable income and will
not be subject to the 10% premature distribution tax.
(b) If you elect not to withdraw an excess contribution, you can eliminate the
excess by contributing less than the maximum amount allowed to your IRA in a
later year. This is known as a "make-up" contribution and is allowed only to the
extent that you have under-contributed in the later year. Further, to the extent
that you have not contributed your full deductible amount for that later year,
the amount of the excess so eliminated may be deductible as a "make-up"
deduction. The 6% excise tax will, however, be imposed in the year you make the
excess contribution and each subsequent year until eliminated.
(c) If you do not withdraw an excess contribution on or before the due date for
filing your Federal income tax return and your contribution did not exceed
$2,250, you can withdraw the excess at any time as long as you have not deducted
it on your Federal tax return. The amount of the excess which you withdraw will
not be included in your gross income and will not be subject to regular Federal
income tax. However, the 6% excise tax will be imposed for the year in which you
make the excess contribution and each subsequent year, until the year of
withdrawal.
(d) If you do not withdraw an excess contribution on or before the due date for
filing your Federal income tax return and your contribution exceeded $2,250, you
must include in your gross income any excess amount which you withdraw even if
you have not deducted it on your Federal income tax return. You may also have to
pay a 10% premature distribution tax on the amount you withdraw. Additionally,
the 6% excise tax will be imposed for the year in which you make the excess
contribution and each subsequent year, until the year of withdrawal.
Rollovers
(a) If you receive a distribution from a qualified retirement plan and the
distribution is not a required minimum distribution and not one of a series of
distributions made for life, life expectancy or 10 or more years, you may
establish a "Rollover" IRA and place the portion of the distribution on which
you wish to defer tax into the "Rollover" IRA within 60 days after receiving the
distribution from the qualified retirement plan. Your own non-deductible
contributions to the qualified retirement plan cannot be included in the
rollover.
Although the law permits you to contribute property to your "Rollover" IRA, the
Custodian will not accept any contribution which is not in the form of cash.
Therefore, if you should receive property other than cash in a distribution from
a qualified plan, you should sell part or all of the property and contribute the
sales proceeds to your "Rollover" IRA. If the distribution comes directly from
the qualified plan, it will not be subject to mandatory tax withholding; but if
it comes through you, 20% of the distribution will be withheld.
Please note: (i) the IRA you set up to receive "rollover" amounts should be
separate from an IRA you set up to receive annual contributions; (ii) rollover
amounts you receive may not be deposited in your spouse's IRA or deducted on
your Federal income tax return; (iii) if you establish a "Rollover" IRA during
the year in which you reach age 70-1/2, you must begin receiving distributions
from such IRA no later than April 1 of such following year; and (iv) if you
establish a "Rollover" IRA after the year in which you reach age 70-1/2, you
must begin receiving distributions from such IRA immediately.
Distributions from Your IRA during Your Life
(a) You can make withdrawals from your IRA at any time. Call Colonial at
1-800-248-2828 to request a Colonial Funds IRA Distribution Form. Mail the
completed form to Colonial Investors Service Center, Inc., Attn: Retirement Plan
Services, P. O. Box 1722, Boston, MA 02105-1722. The distribution form contains
descriptions and requirements for each type of IRA distribution. If you withdraw
any of the funds in your IRA before age 59-1/2, the amount includible in your
gross income is subject to a 10% non-deductible premature distribution tax
unless:
(i) the withdrawal is made because of your death or permanent disability;
(ii) the withdrawal is an exempt withdrawal of an excess contribution; or
(iii) the withdrawal is rolled over into another qualified plan or IRA.
You can also withdraw funds held in your IRA without any tax penalty before you
reach age 59-1/2 if the funds will be paid to your former spouse under a
qualified domestic relations order or if you choose to receive systematic
payments in substantially equal amounts over a period that does not exceed your
life expectancy or the life expectancy of you and your designated beneficiary.
You should be aware, however, that the 10% premature distribution tax will be
applied retroactively (with interest) to all systematic payments if you change
to a method of distribution that does not qualify for the exception either
before you attain age 59-1/2 or during the first five years of the distribution.
The 10% premature distribution tax discussed above does not apply to the portion
of your IRA distribution which is not includible in your gross income.
(b) When you reach age 70-1/2, you must elect to receive distributions in either
(a) systematic payments monthly, quarterly or annually, or (b) one lump sum
distribution of all the funds held in your IRA. The law requires that you begin
to receive distributions from your IRA no later than the April 1 following the
year in which you reach age 70-1/2 (the "Required Distribution Date:). If you
elect systematic payments, there is a minimum amount which you must withdraw by
the Required Distribution Date and by each December 31 thereafter. This could
result in two minimum distributions in
<PAGE>
one calendar year. This minimum amount is determined by your life expectancy or
the joint life and last survivor expectancy of you and your designated
beneficiary, subject to the minimum distribution incidental death benefit rule.
Your life expectancy (and your spouse's life expectancy if your spouse is your
designated beneficiary) will be recalculated each year. The Custodian is not
responsible to advise you in this matter and will only make distributions to you
from your IRA in accordance to your specific instructions.
If the amount distributed during a taxable year is less than the minimum amount
required to be distributed, the Internal Revenue Service may impose a tax equal
to 50% of the deficiency.
Payments from Your IRA after Your Death
If you die before all the funds held in your IRA have been distributed, the
remaining funds in the account will be distributed to your designated
beneficiary either outright or periodically, as selected by your beneficiary.
The Custodian will make distributions to your beneficiary in accordance to his
or her specific instructions. Your beneficiary should be aware that he or she is
subject to minimum distribution rules and it is his or her responsibility to
make sure that the rules are met. Under the post-death minimum distribution
rules, if you die after your Required Distribution Date, the funds remaining in
your IRA must continue to be distributed to your designated beneficiary at least
as rapidly as under the method of distribution in effect prior to your death. If
you die prior to your Required Distribution Date, all the funds in your IRA must
be completely distributed to your designated beneficiary by December 31 of the
year containing the fifth anniversary of your death unless your designated
beneficiary elects, no later than December 31 of the year following the year of
your death, to receive funds from your IRA over a fixed period that is no longer
than his or her life expectancy. If your beneficiary is your surviving spouse,
distribution of funds from your IRA can be made to him or her over a fixed
period that is no longer than his or her life expectancy and commencing at any
date prior to December 31 of the year in which you would have attained age
70-1/2. In all instances, your spousal beneficiary may also elect to roll over
the funds in your IRA into his or her own account or treat your IRA as his or
her own by making contributions to it. In this case, he or she is not required
to make withdrawals from the IRA until April 1 following the year in which he or
she reaches age 70-1/2.
The designation of a beneficiary to receive funds from your IRA at your death is
not considered a transfer subject to Federal gift taxes. However, any funds
remaining in your IRA at your death would be includible in your Federal gross
estate.
Federal Tax Returns
(a) Deductible and non-deductible IRA contributions are reported on IRA Form
1040 or Form 1040A. To the extent your contribution is not deductible, you must
designate it on Form 8606. There is a $100 penalty each time you overstate the
amount of your non-deductible contributions unless you can prove that the
overstatement was due to reasonable cause. You will also be required to give
additional information on Form 8606 in years you make a withdrawal from your
IRA. If you fail to file a required Form 8606, there is a $50 penalty for each
such failure unless you can prove the failure was due to reasonable cause.
(b) IRA Form 5329 is required as an attachment to Form 1040 (or separately if
you do not file a Form 1040) for any year the contribution limits in paragraph 2
are exceeded, a premature distribution takes place, less than the required
minimum amount is distributed, or a prohibited transaction takes place.
Federal Tax Consequences
(a) Income on your IRA account is not taxed as it is earned, but only when it is
distributed to you.
(b) Amounts paid to you from your IRA (other than your non-deductible IRA
contributions) are taxable as ordinary income.
(c) Because non-deductible IRA contributions are made using income which has
already been taxed, the portion of the IRA distributions consisting on
non-deductible contributions will not be taxed again when received by you. The
non-taxable portion of each IRA distribution, if any, will be the ratio of your
previously unrecovered non-taxable contributions to the value in all of your IRA
accounts as of the end of the year plus any distributions taken from the account
during the year. All of your IRAs will be included in this calculation,
including regular IRAs, Simplified Employee Pension Plan (SEPs), and Rollover
IRAs.
(d) In general, if you receive distributions from your IRAs, Section 403
annuities and custodial accounts, and qualified plans which, in the aggregate,
exceed $150,000 in any calendar year, you may be subject to a 15% penalty tax on
the amount in excess of $150,000. If the total amount of your benefits payable
from such plans at your death exceeds a certain permissible level, a similar 15%
estate tax is imposed on the amount in excess of the permissible level. Special
rules apply in certain circumstances and you should consult your tax adviser if
you have any questions regarding this tax.
(e) If you engage in a so-called "prohibited transaction" as defined in the
Internal Revenue Code, your IRA will be disqualified and the entire balance in
your IRA will be taxed as ordinary income during the year in which such
transaction occurs. You may also have to pay the 10% penalty tax on premature
distributions. A "prohibited transaction" includes:
(i) the sale, exchange, or leasing of any property between your IRA account and
you;
(ii) the lending of money or other extension of credit between your IRA account
and you;
<PAGE>
(iii) the furnishing of goods, services, or facilities between your IRA account
and you;
(iv) the transfer of assets of your IRA account for your use or for your
benefit.
(f) If you pledge all or part of your IRA as security for a loan, the amount so
pledged or invested is considered by the Internal Revenue Service to have been
distributed to you and will be taxed as ordinary income during the year in which
you make such pledge or investment. You may also have to pay the 10% premature
distribution tax.
Financial Disclosure
Because the assets held in your IRA are invested at your direction and will be
subject to market fluctuation, the value of your IRA can neither be guaranteed
nor projected. However, you will be provided with periodic statements of your
IRA, including current market values of investments.
Information about the shares of each mutual fund that you choose for investment
through your IRA must be furnished to you in the form of a prospectus governed
by the rules of the Securities and Exchange Commission. Please refer to the
prospectus for detailed information concerning the fund objectives, the sales
charges and the income and expenses of your mutual funds.
Miscellaneous
The proceeds from your IRA may be used as a rollover contribution to another
individual retirement account or individual retirement annuity.
The form of your IRA has been approved by the Internal Revenue Service. Such
approval is a determination only as to the form of the IRA and does not
represent a determination of the merits of the IRA. Further information
regarding your IRA is available in the Internal Revenue Service Publication 590.
You may obtain this publication from any district office of the Internal Revenue
Service or by calling the Internal Revenue Service Tax Forms Distribution Center
toll-free number, 1-800-829-3676.
Example of IRA Payout
Using Life Expectancy Distributions
I. IRA Planholder: Age 70
- -IRA account value $160,000
- -Life expectancy: 16.0 years
Value of IRA / Life expectancy factor = minimum annual withdrawal.
$160,000 / 16.0 years = $10,000 minimum annual distribution or
$833.33 a month if taken over single expectancy.
II. IRA Planholder: Age 70
- -Spouse: Age 63
- -IRA account value: $160,000
- -Joint life expectancy: 24.3 years
Value of IRA / by Joint life expectancy factor = minimum annual withdrawal.
$160,000 / 24.3 years = $6,584.00 minimum annual distribution or $548.67 a
month, if taken over joint life expectancy.
As you can see, using the joint life expectancy approach reduces the minimum
distribution, and results in the minimum tax bite. Of course, you may elect to
take more than the minimum distribution, or combinations of lump-sum payout and
monthly income. Recalculation of the payout using your new life expectancy each
year will further reduce taxable income, and can be requested in writing once
every year.
Payments based on life expectancy will be determined from the appropriate IRS
annuity tables and distributed as requested on the Colonial IRA Distribution
Form. Starting with 1989 tax years, if an individual chooses a beneficiary other
than their spouse, the life expectancy factors used are adjusted, and payment is
based on hypothetical beneficiary not more than 10 years younger than the
individual IRA holder.
Colonial will provide these calculations on written request, as part of our
service to you as an IRA planholder.
Send your request to:
Colonial Investors Service Center, Inc., Attn: Retirement Plan Services
P. O. Box 1722, Boston, MA 02105-1722.
Retirement Plans Offered by
Colonial Mutual Funds:
Individual Retirement Accounts (IRA)
Rollover IRA
Simplified Employee Pension (SEP)
Salary Reduction SEP (SARSEP)
<PAGE>
Money Purchase Pension Plan
Profit Sharing Plan
401(k) Plan
For additional retirement plan information, ask your financial adviser or call
Colonial at 1-800-225-2365, ext. 6660. This brochure must be preceded or
accompanied by a current prospectus that contains more complete information,
including fees, risks, and expenses, for any Colonial mutual fund you consider
purchasing. Please read the prospectus carefully before you invest.
Colonial Investment Services, Inc. (C)1995
One Financial Center, Boston, MA 02111-2621
File Ref#X95-0718-003 IR-081B-0795
EXHIBIT 14(E)
New legislation was recently signed into law repealing SARSEPs effective 1/1/97
Colonial Mutual Funds
SEP -- Simplified Employee Pension
SARSEP -- Salary Reduction SEP
Today's employers can choose from many types of retirement plans for their
businesses. Colonial believes that SEP and SARSEP plans may be ideal for
employers concerned about complicated, time-consuming administration. Look over
the plan features below to see if a SEP can meet your company's needs.
Who may establish a plan: SEP: Self-employed individuals, partnerships, all
corporations. SARSEP: Same as SEP, except not available to non-profit
organizations, state and local governments, or companies with more than 25
eligible employees.
Note: SARSEPs not available effective 1/1/97. See reverse for more information.
Plan operation: 1. IRAs are established for employees.
2. SEP: Employers contribute to employees' IRAs.
SARSEP: Employers and/or employees contribute t
IRAs.
Coverage: SEP & SARSEP: Generally, all employees are covered.
However, the employer may specify exclusions when
establishing the plan. Permissible exclusions include
employees who:
- are under 21 years of age
- have not worked for the employer in at least three of
the past five calendar years
- are non-resident aliens
- are members of collective bargaining units
- earn less than: $400 (1996)
Participation: SEP: All eligible employees must participate. The
employer must establish the IRA for any employee who
does not do so.
SARSEP: At least 50% of eligible employees must elect to
defer income.
Set-up/ SEPs must be established by the filing date of the
contribution employer's federal income tax return, including any
deadline: extensions, and can be retroactive for the prior tax
year.
SARSEPs must be established on or before 12/31/96 and
may be maintained under current law. New employees may
participate in the plan.
Employee SEP: Not allowed.
contributions:
SARSEP: For 1996, employees may contribute "pre-tax" up
to the lesser of $9,500 or 15% of annual taxable
compensation. For federal tax purposes, current income
is reduced by the amount of the contribution.
Annual SEP: Employer determines level each year; annual
employer contribution not required by law.
contributions:
<PAGE>
SARSEP: May require the employer to make a minimum
contribution of 3% of compensation on behalf of eligible
employees, if the plan is considered top-heavy.
Top-heavy status results when a highly compensated group
of employees receives 60% or more of the benefits or
account balances of the plan.
Maximum SEP: Lesser of $22,500 or 15% of annual taxable
contributions: compensation; 13.043% for self-employed individuals.
SARSEP: Same total as SEP, including employee salary
reduction contribution. Salary reduction amounts for
highly compensated employees may be limited by a
non-discrimination test.
Employer SEP & SARSEP: 15% of total annual compensation for all
deductions: covered employees.
Plan reporting SEP & SARSEP: None.
to IRS:
Plan
communications: - plan establishment:
Employer gives each employee copies of SEP or SARSEP
adoption agreement, summary of plan information, IRA
application and disclosure statement, and, for SARSEP
only, participant salary reduction agreement.
- Annually:
Employer informs employees of any company contributions
made to the plan.
Discrimination SEP: None.
testing:
SARSEP: Plans may not discriminate in favor of highly
compensated employees; employer must test plan annually
to prevent over-contribution by highly compensated
employees.
Benefits of Colonial SEP & SARSEP Plans
- IRS-approved prototype plans
- Low cost -- annual maintenance fee of $10 per
participant
- Wide range of mutual funds to help meet your
employees' retirement goals
- Experienced management
- Convenient account services, including free telephone
exchange
- Colonial's retirement plan consultants are always
accessible at 1-800-225-2365, ext. 6660
If you believe that a SEP, SARSEP or SEP/SARSEP combination fits your situation,
contact your financial adviser today. You will receive additional detailed plan
information, along with appropriate Colonial Mutual Funds prospectuses that
provide more complete information, including fees, risks, and expenses. Please
read them carefully before you invest or send money.
Beginning January 1, 1997, small business owners wishing to establish a simple
employee pension plan using IRAs as investment vehicles will be limited to the
adoption of either a SEP or the new SIMPLE IRA Plan. Unlike SARSEPs, both SEPs
and the SIMPLE IRA Plan require a minimum annual employer contribution. With
SARSEPs (available for adoption until 12/31/96), an employer often has the
option -- but is not required by some prototype plans -- to make an annual
contribution on an employee's behalf.
<PAGE>
Colonial Investors Service Center, Inc. (C) 1996
One Financial Center, Boston, Massachusetts 02111-2621
SE-776C-0996 M (10/96)
[Colonial Flag Logo]
The Colonial
Simplified Employee Pension (SEP)
and Salary Reduction SEP (SARSEP)
Application and Fact Kit
[Photograph omitted]
To Establish a
Colonial SEP and/or SARSEP
Mutual Funds are:
- -Not insured by the FDIC
- -Not deposits or obligations of, or guaranteed by, any depository institution
- -Subject to investment risk, including possible loss of principal
Enclosed is all you need to open a Colonial SEP/SARSEP
SEP and SARSEP Retirement Plans
Made to Order for Small Businesses
A Simplified Employee Pension (SEP) plan allows employers to contribute to
employees' Individual Retirement Accounts instead of maintaining a complicated
qualified retirement plan. With SARSEPs (Salary Reduction SEPs), employees are
also able to add their own money to the plan to increase retirement savings and
defer taxes.
Here's how SEPs and SARSEPs work: First, the employer adopts a SEP program and
helps employees establish Individual Retirement Accounts. Then the employer may
contribute up to 15% of compensation for each employee, to a maximum of $22,500.
If the employer has established a SARSEP, an employee may add up to $9,240* in
deferred compensation. The total of employer and employee contributions cannot
exceed the 15%/$22,500 limit. For salary deferral contributions to be allowed,
the employer may not have had more than 25 eligible employees at any time during
the prior year. Additionally, at least half of the company's eligible employees
must elect to defer part of their compensation into the SARSEP. Finally,
employers must satisfy an anti-discrimination test: the deferral percentage for
each "highly compensated employee" must not exceed 125% of the average deferral
percentage for all other employees. (Definition of "highly compensated employee"
and other information can be found in the Commonly Asked Questions section of
this booklet.)
<PAGE>
Advantages of SEPs
Over Other Retirement Plans
SEPs and SARSEPs are available to self-employed individuals, partnerships, and
all kinds of corporations. (SARSEP programs are not available to nonprofit
organizations or state and local governments.) Many large and small companies
with no retirement programs have found SEPs ideal. Among the advantages of a SEP
over other retirement plans are:
[checkmark] Contribution flexibility. Contributions can vary, and the employer
is not required to continue the program.
[checkmark] Minimal administration cost. Reporting and disclosure requirements
are few. The employer simply gives employees copies of the SEP and
IRA agreements, SEP disclosure statement, and the Commonly Asked
Questions summary of SEP information. Then the employer tells
employees each year of any contributions made. If employee
contributions through salary deferral are permitted, the employer
must administer the deferrals and is responsible for satisfying the
anti-discrimination test.
[checkmark] Participant-directed investments. Employees control their own
accounts. They may change investment options as desired.
[checkmark] Withdrawals. Although an early withdrawal penalty often applies, it
is possible to take money out of a SEP plan before leaving a job.
All contributions are fully vested immediately.
Which Plan Is Best for You:
SEP or SARSEP?
SEPs allow employers to make tax-deductible contributions directly to Individual
Retirement Accounts (IRAs) established by participating employees.
SARSEPs permit employee contributions through salary deferral. The feature is
available only to employers with 25 or fewer eligible employees throughout the
preceding year. At least half of all eligible employees must participate each
year.
<TABLE>
<CAPTION>
Plan Features SEP SARSEP
<S> <C> <C>
Set-up and Date for filing employer's Date for filing employers
contribution deadline federal income tax return federal income tax return
including extensions including extensions
Employee pre-tax Not allowed. Up to the lesser of
contribution $9,240* or 15% of annual
compensation.
Annual employer Not required. Employer IRS-required minimum of
contribution determines level each 3% of compensation on
year. behalf of certain
employees may be
necessary to meet top-
heavy requirements.
<PAGE>
Maximum employer Lesser of $22,500 or 15% When combined with
contribution of annual taxable employee contributions:
compensation (13.043% same as SEP.
for self-employed
individuals).
Maximum employer 15% of total annual Not applicable.
deduction compensation for all
covered employees.
Employer could be subject
to an excise tax for
contributions in excess of the
15% limit.
Contribution level None. Amount deferred by each
requirements highly compensated
employee, expressed as a
percentage of annual
compensation, limited to
125% of average annual
deferral percentage of
all eligible non-highly
compensated employees.
Maximum eligibility Employees who have attained Employees who have
requirements 21 years of age, performed attained 21 years of age,
performed service with the performed service with
employer during the last 3 years, the employer during the
and received annual last 3 years, and received
compensation of at least $400* annual compensation of
from the employer. at least $400* from the
employer.
Annual $10 per participant. $10 per participant.
administrative fees
Early withdrawals Withdrawals before the age Withdrawals before the
of 59-1/2 are subject to regular age of 59-1/2 are subject
income tax as well as 10% to regular income tax as
penalty tax except in the event well as 10% penalty tax
of death, disability, or except in the event of
substantially equal periodic death, disability, or
payments. substantially equal
periodic payments.
<PAGE>
Distributions upon Participants may take lump-sum Participants may take
retirement distribution, or receive periodic lump-sum distribution,
payments through the or receive periodic
Colonial Systematic Withdrawal payments through the
Plan. All distributions are taxed Colonial Systematic
as regular income. Withdrawal Plan. All
distributions are taxed
as regular income.
</TABLE>
*Please note: All maximum contribution amounts, tax rates, and salary
requirements are for 1995 and may be subject to periodic adjustments based on
changes in the Cost of Living index.
The Best of Both Worlds:
SEP and SARSEP Together
Many businesses will want to offer both a SEP and a SARSEP. The SARSEP will
appeal to employees, reducing their taxes, and allowing them the opportunity to
build their retirement nest eggs. The SEP reduces the employer's tax liability
and may substantially increase the owner's retirement account since employees
with the highest compensation, i.e. the owner, receive the largest benefit. The
combined annual contribution to both plans for each eligible employee is limited
to 15% of taxable compensation or $22,500, whichever is less.
How to Establish a Colonial SEP or SARSEP
Review this Colonial SEP and SARSEP plan booklet including the plan agreement
and the SEP Commonly Asked Questions, as well as the Colonial Individual
Retirement Account Agreement and Disclosure Statement. Read the appropriate
prospectuses for the funds in which you plan to invest, then follow these simple
steps using the forms indicated. All necessary forms are bound into the center
of this booklet.
Step 1. Employer completes and signs the Colonial SEP/SARSEP Adoption
Agreement.
Step 2. Each participant completes and signs a Colonial SEP-IRA
application. The original is given to the employer. The
participant should keep a photocopy.
Note for SARSEPs Only: If the plan allows employee contributions
through salary deferral, each participant who wishes to make such
contributions completes a Participant Salary Reduction Agreement.
The agreement must be kept by the employer. (Refer to page 1 for
an explanation of SARSEP eligibility. Use the SARSEP worksheet
facing page nine of this booklet to determine contribution limits
for highly compensated employees.)
<TABLE>
<CAPTION>
Transfer
SEP/ of Assets/ Annual
SARSEP Direct Beneficiary Fee $10
SEP Plan Adoption SEP IRA Rollover Designation Distribution per
Checklist Agreement Application Form (if desired) Form Depositor*
<S> <C> <C> <C> <C> <C> <C>
Establish a
new SEP checkmark checkmark checkmark
or
SARSEP
Transfer
existing checkmark checkmark checkmark checkmark
non-
Colonial
IRA, SEP
or
SARSEP
assets to a
new SEP
or
SARSEP
Transfer
existing checkmark
non-
Colonial
IRA, SEP
or
SARSEP
assets to
an
existing
SEP or
SARSEP
Change
beneficiary checkmark
on any
existing
SEP or
SARSEP
Request a
distribution checkmark
from a
Colonial
SEP or
SARSEP
<PAGE>
Direct
rollover checkmark checkmark
from an
employer
plan to a
Colonial
IRA
</TABLE>
*The annual fee is $10 per SEP participant. If the fee is not paid directly, in
addition to any contributions for the taxable year, it will be deducted from
each participant's account at year end.
Step 3. Employer attaches a company check payable to The First
National Bank of Boston (Custodian of the Colonial IRA accounts).
Step 4. Employer notifies each participant of SEP establishment by providing:
--A copy of the executed SEP/SARSEP Adoption Agreement.
--A SEP/SARSEP Application and Fact Kit that contains the Plan
Agreement, Colonial Individual Retirement Account Agreement (IRS
Form 5305-A) and Disclosure Statement, and SEP/SARSEP Commonly
Asked Questions.
Step 5. Employer mails the following items to:
Colonial Investors Service Center, Inc.,
Attn: Retirement Plan Services
P.O. Box 1722, Boston, MA 02105-1722.
[bullet] Signed SEP/SARSEP Adoption Agreement (employer must keep a
file copy).
[bullet] One signed copy of each participant's SEP-IRA application.
[bullet] Check for the contributions, made payable to The First
National Bank of Boston.
Step 6. Employer provides participants with written notification each year of
any amounts contributed to the plan.
Selecting Your SEP or SARSEP Investments
When you invest in a Colonial SEP or SARSEP, you enjoy an array of investment
alternatives to help you achieve your financial goals for retirement. Whether
you're beginning early and investing for long-term growth or you're older and
more income-oriented, there is a Colonial fund that's right for your investment
strategy. Each Colonial fund has a different investment objective and reacts
differently to various economic conditions. In developing a well-diversified
portfolio, your financial adviser can help you and your employees balance a
desire for safety with the need for growth to offset inflation. Colonial offers
18 bond funds and stock funds for SEPs or SARSEPs.
Colonial Bond Funds:
Your Choice for Income
<PAGE>
[bullet] Colonial High Yield Securities Fund
[bullet] Colonial Strategic Income Fund
[bullet] Colonial Income Fund
[bullet] Colonial Federal Securities Fund
[bullet] Colonial U.S. Government Fund
[bullet] Colonial Adjustable Rate U.S. Government Fund
[bullet] Colonial Government Money Market Fund
Colonial Stock Funds:
Your Opportunity for Growth
[bullet] Colonial Global Natural Resources Fund
[bullet] Colonial Newport Tiger Fund
[bullet] Colonial International Fund for Growth
[bullet] Colonial Small Stock Fund
[bullet] Colonial Global Equity Fund
[bullet] Colonial U.S. Fund for Growth
[bullet] Colonial Growth Shares Fund
[bullet] Colonial Global Utilities Fund
[bullet] Colonial Utilities Fund
[bullet] The Colonial Fund
[bullet] Colonial Strategic Balanced Fund
For a full description of any particular fund, ask your financial adviser for a
free brochure and prospectus containing more complete information, including
fees, risks, and expenses. Please read the prospectus carefully before you
invest.
A Word about Investing in Mutual Funds
Colonial and your full-service financial adviser want you to understand both the
risks and benefits of mutual fund investing. While mutual funds offer
significant opportunities and are professionally managed, you should be aware
that, unlike savings accounts and certificates of deposit, mutual fund shares
are not insured or guaranteed by any financial institution or government agency,
including the FDIC. It is important to read the prospectus carefully before you
invest or send money. Please consult your full-service financial adviser to
determine how investing in specific Colonial funds may help you meet your unique
needs.
Colonial Believes
The Investor Comes First
Since 1931, we have built our reputation by responding to investor needs. Our
time-tested investment approach has attracted over $15.5 billion in assets and
earned the trust of more than 800,000 shareholders worldwide.
Colonial Retirement Plan Services
We Make Investing Easy
<PAGE>
Our goal is to make retirement investing easy for you. We offer an extensive
selection of shareholder services for retirement plans. Ask your financial
adviser how Colonial's SEP/SARSEP service options can help you meet your needs.
Low Plan Cost and Investment Minimum
- -No set-up charge.
- -$10 per participant annual maintenance fee.
- -Open a Colonial SEP with as little as $25 in each account.
- -No plan close-out fee.
Easy Exchanges*
- -Participants can contact Colonial directly to change their investment choices
at any time.
24-Hour Account
Information
- -Participants can call 1-800-345-6611 from a touch-tone phone to check account
balances, fund prices, and performance 24-hours a day.
Easy Record Keeping
- -On request, you will receive a statement for each participant account each
quarter, showing contributions and earnings for the year to date.
- -We will send each participant a confirmation statement that reflects
contributions, and dividends or capital gains reinvested.
- -We will send each participant an IRS Form 5498 or an approved equivalent every
year in compliance with IRS regulations.
When It's Time to
Take Withdrawals*
- -On request, Colonial will calculate participant's life expectancy or joint life
expectancy with a designated beneficiary, based on IRS rules.
- -SEP/SARSEP periodic distributions can be taken through a Systematic Withdrawal
Plan with monthly, quarterly, or semiannual checks.
*Redemptions and exchanges are made at the next determined net asset value after
the request is received by Colonial. Proceeds may be more or less than your
original cost. The exchange privilege may be terminated at any time. Investors
who purchase Class B, Class D, or $1 million or more of Class A shares, may be
subject to a contingent deferred sales charge (CDSC). Some retirement plan
withdrawals are exempt from CDSC. Please refer to the specific fund's prospectus
for details.
[Photograph: Automotive shop employee]
"Colonial offers a variety of services that save me time and make it easy to
manage my company's retirement plan effectively."
<PAGE>
Commonly Asked Questions About:
Definition of a SEP
What are Simplified Employee Pension Plans (SEPs)?
SEPs are plans that permit employers to make tax deductible contributions
directly to Individual Retirement Accounts (IRAs) established by participating
employees. Some plans, called SARSEPs (Salary Reduction SEPs), also allow for
employee contributions through salary deferral. These contributions are also
known as "elective deferrals." This feature is available only to employers with
25 or fewer eligible employees throughout the preceding year. In SARSEP plans,
at least half of all employees must participate each year.
Can I still establish or continue to fund an IRA if I am covered by a retirement
plan?
Yes. However, your contribution may not be entirely deductible. If you're
covered by a government or union retirement program, an employer-sponsored
corporate or Keogh pension/profit sharing plan, SEP or TSA plan, or if you're
required to contribute to your employer's plan, you may still make your IRA
contributions but the amount of your deduction will depend on your modified
adjusted gross income.
Establishment
How is a SEP or SARSEP established?
The employer must complete a SEP/SARSEP Adoption Agreement. Each eligible
employee (plan participant) must complete the SEP-IRA Application and, if SARSEP
is used, a Salary Reduction Agreement. When the SEP-IRA Application plus the
initial contribution are received by the Custodian, a SEP-IRA is established for
each plan participant. The employer must then give each plan participant copies
of the signed SEP/SARSEP Adoption Agreement and the IRA Agreement (Form 5305-A)
and Disclosure Statement. The IRA Agreement describes the employees' rights to
contributions and how withdrawals may be made.
By what date must the employer make contributions in order to take a deduction
for a given year?
For SEPs maintained on a taxable year basis, contributions are deductible if
made by the due date, including extensions, of the tax return for the taxable
year. Fiscal year employers maintaining SEPs on a calendar year basis can deduct
SEP contributions in the tax year within which the calendar year ends. For
example, an employer with a l0/31 fiscal year may deduct 1994 SEP IRA
contributions in the fiscal year ending 10/31/95, if made by the due date (plus
extensions) of the tax return for that tax year. This employer may deduct 1995
SEP contributions in the tax year ending 10/31/96 if the contribution is made by
the due date (plus extensions) of the tax return for that year. SARSEP
contributions, through salary deferrals, can be made at any time during the
year. The employer's payroll records must reflect amounts deferred from
compensation.
Can the employer establish a SEP in addition to another qualified retirement
plan?
<PAGE>
Yes. Total annual contributions to all the employer's defined contribution plans
cannot exceed the maximum limitations under the Internal Revenue Code; $30,000
or 15% of compensation (whichever is less) per employee. If an employee works
for several unrelated employers, he or she may be covered by one employer's SEP
and a pension, profit-sharing plan or even another SEP of a second employer.
Retirement programs maintained by different companies need not be aggregated
under the Code limitations, as long as the employee is not considered
self-employed and the involved companies are not considered part of a controlled
group.
Are there any restrictions on the SEP-IRA account selected by the employee for
Colonial SEP or SARSEP plan contributions?
Yes. Under the Adoption Agreement and Plan, contributions must be made to the
Colonial SEP-Individual Retirement Account. Other SEPs may provide different
rates of return and may have different terms concerning, among other things,
transfers and withdrawals.
Coverage
Must an employer include all employees in a SEP or SARSEP?
Generally, yes. But exceptions may be specified in the Adoption Agreement and
can include requiring a participant to be at least age 21 and/or to have worked
for the employer for at least three of the past five calendar years. Nonresident
aliens, collective bargaining employees, and employees who earn less than $400*
(in 1995) may also be excluded.
If the plan permits employee contributions through salary deferrals, all
eligible employees may defer. At least half of all eligible employees must make
such contributions. If fewer choose to contribute, no employee contributions are
allowed for that year.
What if an employee does not wish to participate?
If an employee does not wish to participate in a plan involving employer
contributions, the employer may execute any necessary forms and set up a
SEP-Individual Retirement Account in order to make the contribution. Plans that
accept only employee contributions may allow for up to 50% nonparticipation.
Employer Contributions (SEPs)
Must employers contribute?
No. Contributions are discretionary. But if a contribution is made, it may be
based on the same percentage of compensation, up to $150,000* (in 1995) for all
eligible employees. For example, if an employer decides to contribute 12%, the
contribution for an employee with annual compensation of $50,000 would be
$6,000. For an employee earning $10,000 a year, the contribution would be
$1,200. Plan contributions can also be computed using the Social Security
Taxable Wage Base in order to provide higher benefits for those participants
earning over $61,200 in 1995. This wage base changes annually.
<PAGE>
Are there any limitations on employer contributions?
The total contributions made by and for an employee may not exceed the lesser of
15% of the employee's compensation or $22,500. The employee can contribute no
more than $9,240* (in 1995), of that maximum.
In the case of a self-employed individual, the employer contribution is based on
earned income, which is net self-employment income less the amount of the
deductible plan contribution. The effect is to reduce the maximum percentage of
compensation that may be contributed from 15% to 13.043%. An instruction sheet,
"Calculating SEP Plan Contributions for Self-Employed Individuals," is included
in the application.
Can employers contribute for participants older than 70-1/2?
Yes.
Are employer contributions subject to Social Security tax?
No. Employer contributions are not included as income on the W-2, and are not
considered wages for the purpose of determining Social Security taxes.
Can Social Security be taken into consideration when determining the employer's
contributions?
Yes. Employers who do not maintain other integrated plans are permitted to
allocate contributions based on Social Security taxes paid on behalf of
participants.
*This figure may be adjusted periodically based on the Cost of Living index.
Employee Contributions (SARSEPs)
How much can an employee contribute?
Most employees will be able to contribute up to $9,240*(in 1995), provided that
these contributions -- when combined with those by the employer -- do not exceed
the lesser of 15% of salary or $22,500.
Regular IRA contributions do not count toward the maximums and these
contributions should not be made to the SEP. The limits are different for
"highly compensated employees."
Who is a "highly compensated employee?"
It's a person who at any time during the current or preceding year, was a 5%
owner of the sponsoring employer, or was paid more than $100,000,* or ranked in
the top 20% of employees by pay during the preceding year, and received more
than $66,000,* or was paid more than $60,000* as an officer of the business or
was the highest-ranking officer if no employee was paid more than $60,000.*
What is the contribution limit for a highly compensated employee?
It's the lesser of $9,240* (in 1995) or 125% of the average contribution by
employees not in the highly compensated group, including those who didn't
contribute anything. Employers should make any adjustments necessary by asking
highly compensated employees to revise their salary reduction agreements to
reduce contributions through
<PAGE>
salary deferrals. The amount that may be deferred by highly compensated
employees may be limited by the compensation of, and amounts deferred by, their
families. Note to Employers: The worksheet in the center of this book will help
you determine maximum allowable contributions by highly compensated employees.
What if contributions by and/or for an employee exceed the limits?
If contributions exceeded the $9,240* (in 1995) individual limitation, the
excess is taxed as ordinary income. In addition, if the excess and earnings are
not distributed by April 15 of the following year, the amounts will again be
subject to ordinary income tax and a 10% premature distribution penalty, when
applicable.
If a highly compensated individual contributes more than the average deferral
percentage, the participant is taxed on the excess. If the amount remains in the
account more than 2-1/2 months after the close of the following plan year, a 10%
penalty tax is imposed on the employer.
There are other compelling reasons for employers to guard against making or
allowing excess contributions:
- -They must withhold against those amounts for tax purposes.
- -The plan may lose its tax-deferred status if excess contributions are not
returned within the plan year following the year of deferral.
Are SARSEP contributions subject to Social Security taxes?
Yes. SARSEP contributions must be reported on the W-2.
*This figure may be adjusted periodically based on the Cost of Living index.
Withdrawals and Transfers
When is a SEP participant vested?
Immediately. All assets in the account belong to the employee at all times.
How are withdrawals taxed?
Withdrawals are subject to ordinary income taxes. There is no special income
averaging or capital gains treatment for SEP distributions. Additionally,
withdrawals made before age 59-1/2 are subject to a 10% "premature withdrawal"
penalty unless the employee dies, is disabled, or makes withdrawals in
substantially equal amounts over his or her life expectancy. Special rules apply
when making withdrawals on and after age 70-1/2. Refer to the Disclosure
Statement on page 17 of this booklet for further information regarding minimum
required distributions.
Can an employee move funds from a SEP to a regular IRA?
Yes. There are no limits on the number of direct transfers of money from one
trustee/custodian to another, as long as the employee never actually takes
possession of the funds.
<PAGE>
If the employee does actually receive money from a SEP, he or she must invest it
in another IRA within 60 days to avoid ordinary income taxes and a 10% penalty
tax. Only one such "rollover" is allowed in any twelve month period.
Who may withdraw money from SEPs?
Only employee-participants (or their beneficiaries, if applicable) may take
money out of SEPs. The employer may require that the employee withdraw excess
salary deferrals.
What happens if a participant dies?
The assets in the account go to his or her beneficiary under the terms of the
SEP-IRA.
Disclosure
What information must employers give employees?
The employer must provide each employee with a copy of the SEP Plan and
SEP/SARSEP Adoption Agreement, these Commonly Asked Questions, and the IRA
Agreement (IRS Form 5305-A) and Disclosure Statement. Whenever a plan is
amended, employers must provide each employee with a copy of the amendment
within 30 days. Additionally, each plan participant must receive an annual
account statement no later than January 31 of the following year or within 30
days of the last contribution.
Where can an employee obtain additional information about the Colonial SEP or
SARSEP plan?
Unless another person has been designated in writing, the employee should
contact the person whose name appears in Item 5 of the SEP/SARSEP Adoption
Agreement. See IRS Publication 590 -- "Individual Retirement Arrangements
(IRAs)" -- for a more complete explanation of disclosure requirements.
What reports can an employer receive from Colonial to simplify SEP
administration?
Using the Plan Report Request section of the SEP/SARSEP Adoption Agreement, an
employer may request a List Bill, Consolidated Participant Statement,
Consolidated Fund Summary and/or Transaction Confirmation. The SEP/SARSEP
Adoption Agreement explains the content and use of each of these reports.
Where can I get more information about Colonial's funds?
For more complete information about any of the Colonial funds, including charges
and expenses, you may obtain a prospectus from our Literature Department by
calling 1-800-248-2828, or by writing to:
Colonial Investment Services, Inc.,
One Financial Center, Boston, Massachusetts 02111-2621
Please read the prospectus carefully before you invest or send money.
Colonial Simplified Employee Pension Plan Agreement
Terms and Conditions
Article 1 -- Introduction
<PAGE>
The employer, by executing the related Adoption Agreement, has established a
Simplified Employee Pension Plan intended to be in accordance with Code Section
408(k). This Plan is sponsored by Colonial Investment Services, Inc., One
Financial Center, Boston, MA 02111-2621, 1-800-225-2365, and is to be used with
a Colonial Individual Retirement Account.
Article 2 -- Definitions
As used in this Plan and the Adoption Agreement, the following terms shall have
the meaning hereinafter set forth, unless a different meaning is plainly
required by the context:
2.1 "Account" means a Colonial Individual Retirement Account which meets the
requirements of Code Section 408(a) and is established by an IRS model IRA
custodial agreement or an IRS-approved prototype IRA agreement.
2.2 "Adoption Agreement" means the accompanying instrument executed by the
Employer which establishes a definite, written allocation formula and
participation 2.3 requirements and whereby the Plan is adopted.
2.3 "Code" means the Internal Revenue Code of 1986, as amended.
2.4 "Collective Bargaining Employees" means employees who are members of a
union with which the Employer has a collective bargaining agreement which
was preceded by good faith bargaining over retirement benefits.
2.5 "Compensation" means, for the purposes of the $300 limit of Code Section
408(k)(2)(C), Code Section 414(q)(7) compensation; for all other purposes,
Compensation shall mean all of a participant's information required to be
reported under Code Sections 6041 and 6051 (Wages, Tips and Other
Compensation Box on Form W-2). Compensation is defined as wages in Code
Section 3401(a) and all other payments of compensation to an 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
Code Sections 6041(d) and 6051(a)(3) . Compensation must be determined
without regard to any rules under Code Section 3401(a) that limit the
remuneration included in wages based on the nature or location of the
employment or the services performed (such as the exception for
agricultural labor in Code Section 3401(a)(2)). For any self-employed
individual covered under the Plan, compensation will mean earned income.
Compensation shall include only that compensation which is actually paid or
made available to the participant during the year. Compensation shall
include any amount which is contributed by the employer pursuant to a
salary reduction agreement and which is not includible in the gross income
of the employee under Code Sections 125, 401(a)(8), 402(h) or 403(b). The
annual compensation of each participant taken into account under the Plan
for any year shall not exceed $150,000. This limitation shall be adjusted
by the Secretary at the same time and in the same manner as under Code
Section 401(a) (17) (B). If a 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.
<PAGE>
2.6 "Deferred Percentage" means the ratio (expressed as a percentage) of the
sum of the Elective Deferrals under the Plan on behalf of an Employee for
the Plan Year to the 2.7 Employee's Compensation (as defined in Code
Section 414(a)) for the year.
2.7 "Employee" means any individual who is employed by the Employer.
2.8 "Employer" means the business named on the Adoption Agreement.
2.9 "Employer Contributions" means contributions made by the Employer which are
not Elective Deferrals.
2.10 "Elective Deferrals" means contributions made during the Plan Year by the
Employer, at the election of the Participant, in lieu of cash compensation
and shall include contributions made pursuant to a salary reduction
agreement.
2.11 "Family Member" means an individual who is related to a highly compensated
employee as a spouse, or as a lineal ascendant (such as a parent or
grandparent) or a descendant (such as a child or grandchild) or spouse of
either of those, in accordance with Code Section 414(q) and the regulations
thereunder.
2.12 "Highly Compensated Individual" means an individual described in Code
Section 414(q) who, during the current or preceding year: (a) Was a 5%
owner as defined in Code Section 416(i)(l)(B)(i); (b) Received compensation
in excess of $50,000, as adjusted pursuant to Code Section 415(d), and was
in the top-paid group (the top 20% of employees, by compensation); (c)
Received compensation in excess of $75,000, as adjusted pursuant to Code
Section 415(d); or (d) Was an officer and received compensation in excess
of 50% of the dollar limit under Code Section 415 for defined benefit
plans.
2.13 "IRA Application" means the form with which an Account is established.
2.14 "Integration Level" means the taxable wage base or such lesser amount
elected by the Employer in the Adoption Agreement. The taxable wage base is
the contribution and benefit base in effect under section 230 of the Social
Security Act at the beginning of the Plan Year.
2.15 "Key Employee" means any employee or former employee who at any time during
the Plan Year is:
(a) an officer of the Employer if such individual's annual Compensation
exceeds 150 percent of the dollar limitation under Code Section
415(c)(1)(A) or,
(b) 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 of the dollar limitation under Code Section
415(c)(1)(A), or
(c) a 5 percent owner of the Employer, or
(d) a 1 percent owner of the Employer who has an annual compensation of
more than $150,000. The determination of who is a Key Employee will be
made in accordance with Code Section 416(i)(1) and the regulations
thereunder.
2.16 "Non-Key Employee" means any Employee who is not a Key Employee.
2.17 "Non-Highly Compensated Employee" means an Employee of the Employer who is
neither a Highly Compensated Employee nor a Family Member.
2.18 "Nonresident Alien" means an Employee who is a nonresident alien and
receives no earned income from the Employer which constitutes income from
sources within the United States.
<PAGE>
2.19 "Owner-Employee" means an individual who owns more than 10% of either the
capital interest or profits interest of the Employer which is an
unincorporated business.
2.20 "Participant" means an Employee who meets the eligibility requirements
specified in the Adoption Agreement.
2.21 "Participant Salary Reduction Agreement" means the form executed by the
Employer and Participant whereby the Participant makes elective deferrals
as provided under section 3.3 of the Plan.
2.22 "Plan" means the Simplified Employee Pension Plan of the Employer as
established in accordance with the Adoption Agreement and which meets the
requirements of Code Section 408(k).
2.23 "Plan Year" means the calendar year ending each December 31, or, at the
election of the Employer, the Employer's fiscal year. The initial Plan Year
shall commence on the effective date of the Plan as set forth in the
Adoption Agreement.
2.24 "SARSEP" means a Plan wherein the Employer permits Employees to make
elective deferrals as provided in Section 3.3.
2.25 "SEP" means a Plan which provides for Employer Contributions and may
include a SARSEP.
2.26 "Service" means employment with the Employer as an Employee. For purposes
of determining whether an Employer satisfies the service requirements set
forth in the Adoption Agreement, service with any other business, whether
or not incorporated, which is under common control with the Employer,
within the meaning of Code Section 414(b) or (c) or service with any
organization which is a member of an affiliated service group within the
meaning of Code Section 414(m) or service by a leased employee who is not
an employee of the Employer but is required to be treated as an employee of
the Employer under Code Section 414(n), shall be treated as service with
the Employer.
2.27 "Taxable Wage Base" means the contribution and benefits base in effect at
the beginning of the Plan Year under Section 230 of the Social Security
Act.
Article 3 -- Contributions and Allocations
3.1 Establishment of Account
When a Participant first becomes eligible for contributions, the Employer shall
arrange for the Participant to establish an Account. The establishment of an
Account shall be made at or prior to the time a contribution is made by the
Employer. The Employer may execute any necessary documents on behalf of an
employee who is entitled to an Employer contribution if the Employee is unable
or unwilling to execute such documents or the Employer is unable to locate the
Employee. Contributions shall be made directly to the trustee or custodian so
specified by the Account.
3.2 Employer Contribution
For each Plan Year, the Employer shall contribute to the Account for each
Participant the amount determined in accordance with these terms and conditions
and the terms set forth in the Adoption Agreement; provided, however, that
Owner-Employees must elect to receive an Employer Contribution.
(a) Non-integrated Plan - Amounts shall be allocated to each Participant based
upon the proportionate share of the Employer Contribution that the Compensation
paid to such Participant during the Plan Year bears to the total Compensation
paid to all Participants.
(b) Integrated Plan
<PAGE>
(1) If a minimum allocation is required by Article 5, Employer contributions for
the Plan Year shall be allocated to Participants' Accounts as follows:
Step One: Contributions shall be allocated to each Participant's Account in the
ratio that each Participant's total Compensation bears to all Participants'
total Compensation, but not in excess of 3% of each Participant's Compensation.
Step Two: Any contributions remaining after the allocation in Step One shall be
allocated to each Participant's Account in the ratio that each Participant's
Compensation for the Plan Year in excess of the Integration Level bears to the
Excess Compensation of all Participants, but not in excess of 3%.
Step Three: Any contributions remaining after the allocation in Step Two shall
be allocated to each Participant's Account in the ratio that the sum of each
Participant's total Compensation and Compensation in excess of the Integration
Level bears to the sum of all Participants' total Compensation and Compensation
in excess of the Integration Level, but not in excess of the maximum disparity
rate.
Step Four: Any remaining Employer contributions shall be allocated to each
Participant's Account in the ratio that each Participant's total Compensation
for the Plan Year bears to all Participants' total Compensation for that year.
(2) If no minimum allocation is required by Article 5, Employer contributions
for the Plan Year shall be allocated to Participants' Accounts as follows:
Step One: Contributions shall be allocated to each Participant's Account in the
ratio that the sum of each Participant's total Compensation and Compensation in
excess of the Integration Level bears to the sum of all Participants' total
Compensation and Compensation in excess of the Integration Level, but not in
excess of the maximum disparity rate plus three percent.
Step Two: Any remaining Employer contributions will be allocated to each
Participant's Account in the ratio that each Participant's total Compensation
for the Plan Year bears to all Participants' total Compensation for that year.
(3) The maximum disparity rate is equal to the lesser of:
(a) 2.7%
(b) the applicable percentage determined in accordance with the table at the top
of page 11:
If the Integration Level: is more than but not more than the applicable
percentage is
$0 X* 2.7%
X* 80% of 1.3%
Taxable Wage Base
80% of Y** 2.4%
Taxable
Wage Base
*X = the greater of $10,000 or 20% of the Taxable Wage Base.
**Y = any amount more than 80% of the Taxable Wage Base
but less than 100% of the
Taxable Wage Base. If the Integration Level used is equal to the Taxable Wage
Base, the applicable percentage is 2.7%.
3.3 Elective Deferrals
<PAGE>
(a) In the Employer's discretion, each Participant may elect for any year to
have the Employer make a contribution under this Plan for that Participant
in lieu of cash payments, provided:
(1) the Employer did not have more than 25 Employees at any time during the
preceding year;
(2) elections are in effect for a least 50 percent of the Participants for that
year;
(3) the Deferral Percentage for each Highly Compensated Employee is not more
than the product of 1.25 times the average of the Deferral Percentages for
all Non-Highly Compensated Employees. For purposes of determining the
Deferral Percentage of a Participant who is a Highly Compensated Employee,
and who is either a 5% owner or one of the 10 most highly paid employees,
the Elective Deferrals and Compensation shall include the Elective
Deferrals and Compensation of Family Members, and such Family Members shall
be disregarded in determining the Deferral Percentage for Participants who
are Non-Highly Compensated Employees. Family members include spouse,
ascendants, descendants and spouses of ascendants and descendants. The
determination and treatment of the Elective Deferrals and Deferral
Percentage of any Participant shall satisfy such other requirements as may
be prescribed by the Secretary of the Treasury;
(4) such contribution shall not exceed $7,000 for the calendar year (or such
other amount as determined by the Secretary of the Treasury pursuant to
Code Section 402);
(5) The Employer does not have any leased employees within the meaning of Code
Section 414 (n) (2); and
(6) the Employer is not a State or local government or political subdivision
thereof, or an agency or instrumentality thereof, or a tax exempt
organization.
(b) (1) If the 50% requirement of Section 3.3(a)(2) is not satisfied as of the
end of any Plan Year, all the Elective Deferrals made by Participants for that
Plan Year shall be considered "disallowed deferrals", i.e., IRA contributions
that are not SEP-IRA contributions. The Employer shall notify each affected
Participant, within 1-1/2 months after the end of the Plan Year to which the
disallowed deferrals relate, that the deferrals are no longer considered SEP-IRA
contributions. Such notification shall specify the amount of the disallowed
deferrals and the calendar year of the employee in which they are includible in
income and must provide an explanation of applicable penalties if the disallowed
deferrals are not withdrawn in a timely fashion.
(2) The notice to each affected Participant must state specifically:
(A) The amount of the disallowed deferrals;
(B) That the disallowed deferrals are includible in the Participant's gross
income for the calendar year or years in which the amounts deferred would have
been received by the Participant in cash had he not made an election to defer
and that the income allocable to such disallowed deferrals is includible in the
year withdrawn from the IRA; and
(C) That the Participant must withdraw the disallowed deferrals (and allocable
income) from the SEP-IRA by April 15 following the calendar year of notification
by the Employer. Those disallowed deferrals not withdrawn by April 15 following
the year or notification will be subject to the IRA contribution limitations of
Code Sections 219 and 408 and thus may be considered an excess contribution
under Code Section 4973. If income allocable to a disallowed deferral is not
withdrawn by April 15 following the year of notification by the employer, the
income may be subject to the ten percent tax on early
<PAGE>
distributions under Code Section 72(t) when withdrawn. Disallowed deferrals
shall be reported in the same manner as are excess SEP contributions.
(c) The arrangement provided by Section 3.3 is intended to qualify as a Salary
Reduction Simplify Employee Pension (SAR-SEP) under Code Section 401(k)(6) and
the regulations thereunder. No Elective Deferrals may be based on compensation
an Employee could have received before execution of the Adoption Agreement by
the Employer and of the Participant Salary Reduction Agreement by the Employee.
3.4 Individual Retirement Account
Contributions In the discretion of Colonial Investment Services, Inc., a
Participant may voluntarily contribute an amount which does not exceed the
maximum dollar amount specified as a deduction under Code Section 219(b)(1).
Article 4 -- Limitations on Contributions
4.1 Contributions with respect to any Employee for any year shall be treated as
distributed or made available to such Employee and as contributions made by the
Employee to the extent such contributions exceed the lesser of (i) 15% of
Compensation (less SEP-IRA contributions), or (ii) the limitation under Code
Section 402(g). The deferral limit is 15% of Compensation (less SEP-IRA
contributions). Compute this amount using the following formula: Compensation
(before subtracting SEP-IRA contributions) x 13.0435%. If these limits are
exceeded on behalf of any Employee for any Plan Year, that Employee's Elective
Deferrals for the Plan Year must be reduced to the extent of the excess.
4.2 (a) Amounts in excess of the Deferral Percentage limitation will be deemed
excess SEP contributions on behalf of the affected Highly Compensated Employee.
The Employer shall notify each affected Highly Compensated Employee, within
2-1/2 months following the end of the Plan Year to which the excess SEP
contributions relate, of any excess SEP contributions to the Highly Compensated
Employee's SEP-IRA for the applicable year. Such notification shall specify the
amount of the excess SEP contributions and the calendar year in which the
contributions are includible in income and must provide an explanation of
applicable penalties if the excess contributions are not withdrawn in a timely
fashion.
(b) Excess SEP contributions are includible in the Participant's gross income on
the earliest dates any Elective Deferrals made on behalf of the Participant
during the Plan Year would have been received by the Participant had he
originally elected to receive the amounts in cash. However, if the excess SEP
contributions (not including allocable income) total less than $100, then the
excess contributions are includible in the employee's gross income in the year
of withdrawal from the IRA.
(c) If the Employer fails to notify any of the affected Participants within
2-1/2 months following the end of the Plan Year of an excess SEP contribution,
the Employer must pay a tax equal to 10% of the excess SEP contribution. If the
Employer fails to notify Participants by the end of the Plan Year following the
Plan Year in which the excess SEP contributions arose, the SEP no longer will be
considered to meet the requirements of Code Section 408(k)(6). If the SEP no
longer meets the requirements of Code Section 408(k)(6), then any contribution
to a Participant's Account will be subject to the IRA contribution limitations
of Code Sections 219 and 408 and thus may be considered an excess contribution
to the Participant's Account.
<PAGE>
(d) The notification to each affected employee of the excess SEP contributions
must specifically state in a manner calculated to be understood by the average
Participant:
(1) The amount of the excess SEP contributions attributable to that
Participant's elective deferrals;
(2) The calendar year in which the excess SEP contributions are includible in
gross income; and
(3) That the Participant must withdraw the excess SEP contributions (and
allocable income) from the Account by April 15 following the year of
notification by the Employer. Those excess contributions not withdrawn by April
15 following the year of notification will be subject to the IRA contribution
limitations of Code Sections 219 and 408 for the preceding calendar year and
thus may be considered an excess contribution to the employee's IRA. Such excess
contributions may be subject to the six percent tax on excess contributions
under Code Section 4983. If income allocable to an excess SEP contribution is
not withdrawn by April 15 following the year of notification by the employer,
the income may be subject to the ten percent tax on early distributions under
Code Section 72(t) when withdrawn.
Article 5 -- Minimum Allocation
5.1 Minimum Allocation
Except as provided in Section 5.2, the Employer Contribution for any Top Heavy
Year on behalf of any Participant who is a Non-Key Employee shall not be less
than the lesser of three percent (3%) of the Participant's Compensation or the
largest percentage of Compensation contributed on behalf of any Key Employee for
that year. The minimum allocation is determined without regard to any Social
Security contribution. If the Employer maintains any qualified defined benefit
plan in addition to this Plan, the minimum allocation is five percent (5%) of
Compensation, instead of three percent (3%).
5.2 Exceptions The Minimum
Allocation shall not apply to any Participant who was not employed by the
Employer on the last day of the Plan Year or to any Participant who received the
minimum allocation under the terms of another plan maintained by the Employer
and so specified in the Adoption Agreement.
5.3 Top-Heavy Year
Any Plan Year is a Top-Heavy Year 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 of plans.
(b) If this Plan is a part of a required aggregation group of Plans 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 of plans and the top-heavy ratio for the permissive
aggregation group exceeds sixty percent (60%).
5.4 Top-Heavy Ratio
(a) If the Employer maintains one or more defined contribution plans (including
this Plan) and the Employer has not maintained any defined benefit plan which
during the five-year period ending on the determination date has had accrued
benefits, the top-heavy ratio for this Plan alone or for the required or
permissive aggregation group as appropriate
<PAGE>
is a fraction, the numerator of which is the sum of the account balances of all
Key Employees as of the determination date (including any part of any account
balances distributed in the five-year period ending on the determination date)
and the denominator of which is the sum of all account balances (including any
part of any account balance distributed in the five-year period ending on the
determination date), 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.
(b) If the Employer maintains one or more defined contribution plans (including
this Plan) and the employer maintains or has maintained one or more defined
benefit plans which during the five-year period ending on the determination date
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 (a) 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, 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 (a) above and the
present value of accrued benefits under the defined benefit plan or plans for
all Participants as of the determination date, 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-year period ending on the determination date.
(c) For purposes of (a) and (b) above, the value of account balances and the
present value of accrued benefits will be determined as of the determination
date. The account balances and accrued benefits of a Participant (1) who is not
a Key Employee but who was a Key Employee in a prior year, or (2) who has not
been credited with at least one hour of service with any employer maintaining
the plan at any time during the five-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. The accrued benefit of a Non-Key Employee shall
be determined under (1) the method, if any, that uniformly applies for accrual
purposes under all defined benefit plans maintained by the Employer, or (2) 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).
5.5 Additional Top-Heavy Definitions
(a) Permissive aggregation group: 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.
(b) Required aggregation group: (1) Each qualified plan of the Employer in which
at least one Key Employee participates or participated at any time during the
determination
<PAGE>
period (regardless of whether the plan has terminated), and (2) any other
qualified plan of the Employer which enables a plan described in (1) to meet the
requirements of Code Sections 401(a)(4) or 410.
(c) Determination date: For any Plan Year subsequent to the first Plan Year, the
last day of the preceding Plan Year. For the first Plan Year of the Plan, the
last day of that Plan Year.
(d) Present value: Present value shall be based on the mortality table and the
interest rate specified in the Adoption Agreement.
Article 6 -- Payment of Benefits and Withdrawals
All requests for Plan benefits and all other forms of withdrawal of Plan assets
shall be made by the Participant or Beneficiary in accordance with the terms of
the Participant's Account. The Employer shall notify each Employee who makes
Elective Deferrals for a Plan Year that, notwithstanding the prohibition of
withdrawal restrictions contained in the Plan, any amount attributable on such
Elective Deferrals which is withdrawn or transferred before the earlier of 2-1/2
months after the end of the particular Plan Year and the date the Employer
notifies its Employees that the Deferral Percentage test has been calculated,
will be includible in income for purposes of Code Sections 72(t) and 408(d)(1).
Article 7 -- Miscellaneous
(a) Except for duties specifically delegated in accordance with the terms of any
Account, the Plan shall be administered by the Employer. The Employer may
delegate its Plan responsibilities to other qualified parties which receive and
accept in writing such designated duties.
(b) An Employer who has ever maintained a defined benefit plan which is now
terminated may not adopt the Plan. If, subsequent to adopting the Plan, any
defined benefit plan of the Employer terminates, the Employer will no longer
maintain the Plan and will be considered to have an individually designed plan.
(c) The Employer reserves the right to change the Plan by amending the Adoption
Agreement and may terminate the Plan at any time. Colonial Investment Services,
Inc. may also amend the Plan. All amendments shall be communicated to
Participants. At no time shall it be possible for any part of the assets of the
Plan or the Accounts to revert to the Employer or to be used for or diverted to
purposes other than the exclusive benefit of the Participants and their
beneficiaries.
(d) Neither the establishment of this Plan nor any modification thereof nor
contribution thereto shall be construed as giving to any Participant or other
person any legal or equitable right against the Employer, except as herein
provided; and in no event shall terms of employment of any Employee be modified
or in any way be affected hereby.
(e) Where the context so requires, the masculine shall include the feminine and
the singular, the plural.
(f) Contributions to the Plan are deductible by the Employer for the taxable
year with or within which the Plan Year ends. Contributions made for a
particular taxable year and contributed by the due date of the Employer's income
tax return, including extensions, are deemed made in that taxable year.
<PAGE>
Form 5305-A Colonial Individual Retirement Account Agreement
(Under Section 408(a) of the Internal Revenue Code)
(Rev. Oct. 1992)
Department of the Treasury Do Not File with
Internal Revenue Service Internal Revenue Service
This Agreement is by and between the Depositor whose name and signature appear
on the application (Depositor) and The First National Bank of Boston (Custodian)
having its principal place of business at Boston, Massachusetts.
The Depositor hereby establishes a custodial account qualified (under section
408(a) of the Internal Revenue Code as an Individual Retirement Account) to
provide for their retirement and for the support of their beneficiaries after
death.
The Custodian named herein has given to the Depositor a Disclosure Statement as
required under Regulations section 1.408-6.
The Depositor and the Custodian make the following Agreement.
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 Proposal 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
<PAGE>
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 t
(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 designated beneficiary
as of their birthdays in the year the Depositor reaches age 70-1/2. In the case
<PAGE>
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 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 sections 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 the 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. Depositor appoints The First National Bank of Boston or any successor thereto
as Custodian of this custodial account. After deduction of all appropriate fees
and charges, the balance of Depositor's contributions shall be invested as
herein provided.
2. Depositor directs the Custodian to invest the custodial account in shares of
mutual funds distributed by Colonial Investment Services, Inc. (the "Sponsor"),
or investments otherwise authorized by the Sponsor for use under this Agreement.
All contributions shall be in cash or in shares of mutual funds or other
investments authorized for use under this Agreement.
3. Custodian shall have no investment responsibility or discretion with respect
to this custodial account. Custodian may vote in any manner it deems fit any
fund shares with respect to which it has not timely received any written
directions from Depositor.
4. This document constitutes the entire agreement between Depositor and
Custodian and no representative of the Sponsor, any Colonial Mutual Fund or any
broker-dealer shall be deemed to be a representative of or acting on behalf of
Custodian, nor shall any representative have any authority to make
representations or to bind Custodian beyond the terms of this document.
5. Depositor shall have the right, only by written notice in a form acceptable
to the Custodian, to designate or to change a beneficiary to receive any benefit
to which the
<PAGE>
Depositor may be entitled in the event of his death prior to the complete
distribution of the Account. The Custodian may rely upon the last written
designation received at the Custodian's office which shall supersede all prior
designations. Unless specifically designated otherwise by the Depositor in a
form acceptable to the Custodian, death benefits shall be distributed equally
among all surviving primary beneficiaries or all surviving contingent
beneficiaries (should all primary beneficiaries predecease the Depositor). If no
beneficiary designation is in effect upon the Depositor's death, or if the
Custodian receives satisfactory proof that all such named beneficiaries have
predeceased the Depositor, then the Account shall be distributed to the
Depositor's estate.
6. Neither Custodian, sponsor nor any Colonial Mutual Fund assumes any
responsibility to make any distribution unless and until Depositor specifies in
a form acceptable to the Custodian the occasion for such distribution, and the
manner of distribution. Custodian and Sponsor shall not be responsible to make
distributions in accordance with Article IV following the Depositor's attainment
of age 70-1/2 other than upon Depositor's express instructions. Neither
Custodian nor Sponsor assume any responsibility for the tax treatment of any
distribution from the custodial account; such responsibility accrues solely to
Depositor or beneficiary. Distributions shall not be made as described in
subsection (b) or (c) of section 3 of Article IV, but only as provided in
subsections (a), (d), and (e) of Article IV.
7. This Colonial IRA Agreement shall terminate upon the complete distribution of
the custodial account to Depositor or his beneficiaries, to successor individual
retirement accounts or annuities, or when no assets otherwise remain in the
custodial account and the Custodian shall be relieved from all further liability
with respect to the custodial account.
8. Depositor assumes full and sole responsibility for making sure that
contributions (including rollovers) are qualified for contribution to the
custodial account and that the sum of contributions during a taxable year do not
exceed those limits or violate those rules for tax-deductibility specified in
the Internal Revenue Code. If Depositor does contribute an amount greater than
that which may be claimed as a deduction, Depositor shall be entitled to
withdraw such excess, together with any earnings thereon, at any time prior to
the day prescribed by law (including extensions) for filing the Depositor's
Federal income tax return for such year. Depositor shall certify in writing the
full amount of the required withdrawal including earnings thereon, or the number
of shares, to be withdrawn and shall specify this amount should be distributed
to Depositor, or redesignated as the contribution for the succeeding taxable
year.
9. Sponsor may remove Custodian and appoint a successor custodian upon written
notice to Custodian and Depositor or any current beneficiary. Custodian may
resign upon written notice to Depositor or any current beneficiary. Upon its
resignation, Custodian may, but shall not be required to, appoint a successor
custodian. If a resigning Custodian does not appoint a successor custodian and
if no successor custodian is appointed, this Agreement shall be terminated and
all assets held in the custodial account distributed to Depositor or current
beneficiary. Any successor custodian appointed hereunder shall satisfy the
requirements of Section 408(a)2 of the Code. Upon any such successor's
acceptance of appointment, Custodian shall transfer the assets of the custodial
account together with copies of relevant books and records to such successor
custodian; provided, however, that Custodian is authorized to reserve such sum
of money or property as it may
<PAGE>
deem advisable for payment of any liabilities constituting a charge on or
against the assets of the custodial account or of Custodian and where necessary
may liquidate such assets. Custodian shall not be liable for the acts or
omissions of any successor custodian. 10. Custodian shall be entitled to
compensation for its services hereunder in accordance with its custodial account
fees as may be published and amended from time to time. Custodian shall also be
entitled to reasonable compensation for any extraordinary services rendered and
to be reimbursed for any administrative expenses incurred in the performance of
its duties hereunder including fees for legal services. All such fees and
expenses of Custodian may be charged against the custodial account in such
manner as the Custodian may determine, or at the Custodian's option, may be paid
directly by the Depositor. Custodian may pay from the custodial account any
other costs, fees or expenses associated with the maintenance or management of
the custodial account on the written authorization of Depositor. Custodian may
employ agents and may subcontract in fulfilling its obligations hereunder.
11. Sponsor may amend this Agreement as Sponsor determines in its discretion is
necessary or desirable, provided, however, that no such amendment may be made
which increases the duties of the Custodian without Custodian's consent.
12. This Colonial IRA Agreement shall be construed under the laws of
Commonwealth of Massachusetts, or if different, the state of the domicile of
Custodian, and shall become effective upon the date accepted by Custodian as
specified in the confirmation statement sent Depositor by the Sponsor as agent
for Custodian.
13. Acceptance of this Colonial IRA agreement by the Depositor is indicated by
the Depositor's signature in the related application.
14. Sponsor and Custodian may rely upon statements made by Depositor and
beneficiary. Depositor and beneficiary shall indemnify Sponsor and Custodian
against any loss or liability which may arise from this Agreement, except which
arises from the Custodian's negligence or willful misconduct.
Disclosure Statement
Introduction
The following information is being provided in accordance with the requirements
of the Internal Revenue Service and is based on the law as in effect on January
1, 1993, for the tax year 1992 and later. This disclosure statement should be
read together with the Colonial IRA application and the prospectus which you
have already received from your registered representative.
Revocation
You may revoke this account at any time within seven calendar days after it is
established by mailing or delivering a written request for revocation to:
Colonial Investors Service Center, Agent, P.O. Box 1722, Boston MA 02105-1722.
Mailed notice will be considered given on the date postmarked (or on the date
certified or registered if mailed by this method). Upon proper written
notification, you will receive a full refund of your initial contribution,
including sales commissions and/or administrative fees. If you have any
questions, please call 1-800-345-6611.
<PAGE>
Eligibility
You are eligible to set up an IRA if you are younger than age 70-1/2 and if, at
any time during the year, you are an employee or are self-employed and receive
compensation or earned income that is includible in your gross income.
Additionally, regardless of your age, you may transfer funds from another IRA or
certain qualified plan distributions to a "Rollover" IRA described below.
Additionally, regardless of your age, you may contribute to a spousal IRA
described below until your spouse reaches age 70-1/2.
Limit on Annual Contributions
(a) You can make annual contributions to an individual IRA of up to $2,000 or
100% of your compensation or earned income, whichever is less.
(b) If you and your spouse both work and have compensation that is includible in
your gross income, each of you can annually contribute to your own IRA up to the
lesser of $2,000 or 100% of compensation or earned income.
(c) If your spouse earns no income, or earns $250 or less and elects to be
treated as earning no income, you can establish a separate "spousal IRA" if you
file a joint Federal tax return. The aggregate annual amount contributed to both
IRAs each year cannot exceed the lesser of $2,250 or 100% of your earned income
or compensation. This amount is divided between the two accounts as you direct,
but not more than $2,000 may be contributed to either account in any year.
(d) If you are a divorced spouse, all taxable alimony received by you under a
decree of divorce or separate maintenance will be treated as compensation for
purposes of the IRA contribution limit and the rules for annual contributions of
up to the lesser of $2,000 or 100% of compensation or earned income (including
taxable alimony).
Deductibility of Contributions
(a) You may deduct the full amount of your IRA contribution up to the annual
maximum limit if you are not an "active participant" in an employer-sponsored
retirement plan (including qualified plans, Simplified Employee Pension plans,
tax-sheltered annuity plans, and certain governmental plans) for any part of
such year. If you are married and you and your spouse file a joint return, you
will be deemed to be an active participant in an employer-sponsored retirement
plan if either you or your spouse is an active participant in such a plan.
In addition, even if you are an active participant in such a plan, you may
deduct the full amount of your IRA contribution up to the annual maximum limit
if you have modified adjusted gross income equal to or below a specified level,
or if you are married and file a separate Federal tax return, the amount of your
IRA contribution which is between $25,000 and $35,000 if you are a single
taxpayer and modified adjusted gross income of $10,000 and under if you are a
married taxpayer who files a separate return. If you are married and you and
your spouse file a joint return, if either you or your spouse is an active
participant in an employer-sponsored retirement plan, the amount of your IRA
contribution which is deductible will be phased out on the basis of your
combined modified adjusted gross income between $40,000 and $50,000. For this
purpose, a husband and wife who file separate tax returns for any year and live
apart at all times during the year are not considered to be married.
<PAGE>
In general, the IRA deduction is phased out at a rate of $200 per $1,000 of
modified adjusted gross income in excess of the phase out amount ($25,000 for
single taxpayers, $40,000 for married taxpayers who file joint returns and $0
for married taxpayers who file separate returns). However, if you contribute to
a spousal IRA, your IRA deduction is phased out at a rate of $225 per $1,000 of
modified adjusted gross income in excess of $40,000.
When calculating your reduced IRA deduction limit, you always round up to the
next highest $10. Therefore, your deduction limit is always a multiple of $10.
In addition, if your modified adjusted gross income is within the phase-out
range and your reduced deduction limit is more than $0 but less than $200, you
are permitted to deduct up to $200 of your IRA contributions.
If your modified adjusted gross income exceeds the applicable level specified
above and you are an active participant in an employer-sponsored retirement plan
(or your spouse is an active participant in such a plan if you file a joint
return), then you may not deduct any portion of your IRA contribution. In
general, you are an active participant in a plan for a year during which you
accrue any additional benefit under the plan, whether due to employer
contribution, your contribution or forfeiture from other participants. Your Form
W-2 for the year should indicate your participation status. You should consult
your own tax or financial adviser if you should have any further questions.
(b) Even if you will not be able to deduct the full amount of your IRA
contribution under the rules described above, you can still contribute up to
your annual maximum amount with all or part of the contribution being a
non-tax-deductible contribution. Of course, the combined total of deductible and
non-deductible contributions must not exceed your annual maximum contribution
limit amount. Any earnings on all your IRA contributions (deductible and
nondeductible) accumulate tax-free until you withdraw them.
Annual Contributions
Contributions to your IRA for a tax year must be made in cash on or before the
due date (not including extensions) for your Federal income tax return for that
tax year (April 15 for most individuals). If you intend to report contributions
made between January 1 and April 15 as contributions for your prior tax year,
you should notify Colonial Mutual Funds or the Custodian in writing that such
contributions have been made on account of such prior tax year. Otherwise, the
Custodian will assume the payment is for the current tax year.
Excess Contributions
If you contribute to your IRA more than the maximum limit allowed any year, the
excess contribution could be subject to a 6% nondeductible excise tax. The
excess is taxed in the year the excess contribution is made and each year that
the excess remains in your IRA at the end of the year.
If, by accident, you should contribute more than the maximum limit allowed, you
can eliminate the excess contribution as follows:
(a) You can avoid the 6% excise tax by withdrawing the excess contribution and
the net earnings attributable to it before the due date for filing your Federal
income tax return for the year the excess occurred. Upon removing an excess
contribution in this manner, the net earnings attributable to it are includible
in your income for the tax year in which the
<PAGE>
excess contribution was made, and you may also have to pay an additional 10%
premature distribution tax on the amount of such net earnings. However, the
excess contribution itself will not be included in your taxable income and will
not be subject to the 10% premature distribution tax.
(b) If you elect not to withdraw an excess contribution, you can eliminate the
excess by contributing less than the maximum amount allowed to your IRA in a
later year. This is known as a "make-up" contribution and is allowed only to the
extent that you have under-contributed in the later year. Further, to the extent
that you have not contributed your full deductible amount for that later year,
the amount of the excess so eliminated may be deductible as a "make-up"
deduction. The 6% excise tax will, however, be imposed in the year you make the
excess contribution and each subsequent year until eliminated.
(c) If you do not withdraw an excess contribution on or before the due date for
filing your Federal income tax return and your contribution did not exceed
$2,250, you can withdraw the excess at any time as long as you have not deducted
it on your Federal tax return. The amount of the excess which you withdraw will
not be included in your gross income and will not be subject to regular Federal
income tax. However, the 6% excise tax will be imposed for the year in which you
make the excess contribution and each subsequent year, until the year of
withdrawal.
(d) If you do not withdraw an excess contribution on or before the due date for
filing your Federal income tax return and your contribution exceeded $2,250, you
must include in your gross income any excess amount which you withdraw even if
you have not deducted it on your Federal income tax return. You may also have to
pay a 10% premature distribution tax on the amount you withdraw. Additionally,
the 6% excise tax will be imposed for the year in which you make the excess
contribution and each subsequent year, until the year of withdrawal.
Rollovers
(a) If you receive a distribution from a qualified retirement plan and the
distribution is not a required minimum distribution and not one of a series of
distributions made for life, life expectancy or 10 or more years, you may
establish a "Rollover" IRA and place the portion of the distribution on which
you wish to defer tax into the "Rollover" IRA within 60 days after receiving the
distribution from the qualified retirement plan. Your own non-deductible
contributions to the qualified retirement plan cannot be included in the
rollover.
Although the law permits you to contribute property to your "Rollover" IRA, the
Custodian will not accept any contribution which is not in the form of cash.
Therefore, if you should receive property other than cash in a distribution from
a qualified plan, you should sell part or all of the property and contribute the
sales proceeds to your "Rollover" IRA.
If the distribution comes directly from the qualified plan, it will not be
subject to mandatory tax withholding; but if it comes through you, 20% of the
distribution will be withheld.
Please note: (i) the IRA you set up to receive "rollover" amounts should be
separate from an IRA you set up to receive annual contributions; (ii) rollover
amounts you receive may not be deposited in your spouse's IRA or deducted on
your Federal income tax return; (iii) if you establish a "Rollover" IRA during
the year in which you reach age 70-1/2, you
<PAGE>
must begin receiving distributions from such IRA no later than April 1 of such
following year; and (iv) if you establish a "Rollover" IRA after the year in
which you reach age 70-1/2, you must begin receiving distributions from such IRA
immediately.
Distributions from Your IRA During Your Life
(a) You can make withdrawals from your IRA at any time. Call Colonial at
1-800-248-2828 to request a Colonial Funds IRA Distribution Form. Mail the
completed form to Colonial Investors Service Center, Inc., Attn: Retirement Plan
Services, P. O. Box 1722, Boston, MA 02105-1722. The distribution form contains
descriptions and requirements for each type of IRA distribution. If you withdraw
any of the funds in your IRA before age 59-1/2, the amount includible in your
gross income is subject to a 10% non-deductible premature distribution tax
unless:
(i) the withdrawal is made because of your death or permanent disability;
(ii) the withdrawal is an exempt withdrawal of an excess contribution; or
(iii) the withdrawal is rolled over into another qualified plan or IRA.
You can also withdraw funds held in your IRA without any tax penalty before you
reach age 59-1/2 if the funds will be paid to your former spouse under a
qualified domestic relations order or if you choose to receive systematic
payments in substantially equal amounts over a period that does not exceed your
life expectancy or the life expectancy of you and your designated beneficiary.
You should be aware, however, that the 10% premature distribution tax will be
applied retroactively (with interest) to all systematic payments if you change
to a method of distribution that does not qualify for the exception either
before you attain age 59-1/2 or during the first five years of the distribution.
The 10% premature distribution tax discussed above does not apply to the portion
of your IRA distribution which is not includible in your gross income.
(b) When you reach age 70-1/2, you must elect to receive distributions in either
(a) systematic payments monthly, quarterly or annually, or (b) one lump sum
distribution of all the funds held in your IRA. The law requires that you begin
to receive distributions from your IRA no later than the April 1 following the
year in which you reach age 70-1/2 (the "Required Distribution Date"). If you
elect systematic payments, there is a minimum amount which you must withdraw by
the Required Distribution Date and by each December 31 thereafter. This could
result in two minimum distributions in one calendar year. This minimum amount is
determined by your life expectancy or the joint life and last survivor
expectancy of you and your designated beneficiary, subject to the minimum
distribution incidental death benefit rule. Your life expectancy (and your
spouse's life expectancy if your spouse is your designated beneficiary) will be
recalculated each year. The Custodian is not responsible to advise you in this
matter and will only make distributions to you from your IRA in accordance to
your specific instructions. If the amount distributed during a taxable year is
less than the minimum amount required to be distributed, the Internal Revenue
Service may impose a tax equal to 50% of the deficiency.
Payments from Your IRA after Your Death
If you die before all the funds held in your IRA have been distributed, the
remaining funds in the account will be distributed to your designated
beneficiary either outright or periodically, as selected by your beneficiary.
The Custodian will make distributions to
<PAGE>
your beneficiary in accordance to his or her specific instructions. Your
beneficiary should be aware that he or she is subject to minimum distribution
rules and it is his or her responsibility to make sure that the rules are met.
Under the post-death minimum distribution rules, if you die after your Required
Distribution Date, the funds remaining in your IRA must continue to be
distributed to your designated beneficiary at least as rapidly as under the
method of distribution in effect prior to your death. If you die prior to your
Required Distribution Date, all the funds in your IRA must be completely
distributed to your designated beneficiary by December 31 of the year containing
the fifth anniversary of your death unless your designated beneficiary elects,
no later than December 31 of the year following the year of your death, to
receive funds from your IRA over a fixed period that is no longer than his or
her life expectancy. If your beneficiary is your surviving spouse, distribution
of funds from your IRA can be made to him or her over a fixed period that is no
longer than his or her life expectancy and commencing at any date prior to
December 31 of the year in which you would have attained age 70-1/2. In all
instances, your spousal beneficiary may also elect to roll over the funds in
your IRA into his or her own account or treat your IRA as his or her own by
making contributions to it. In this case, he or she is not required to make
withdrawals from the IRA until April 1 following the year in which he or she
reaches age 70-1/2. The designation of a beneficiary to receive funds from your
IRA at your death is not considered a transfer subject to Federal gift taxes.
However, any funds remaining in your IRA at your death would be includible in
your Federal gross estate.
Federal Tax Returns
(a) Deductible and non-deductible IRA contributions are reported on IRA Form
1040 or Form 1040A. To the extent your contribution is not deductible, you must
designate it on Form 8606. There is a $100 penalty each time you overstate the
amount of your non-deductible contributions unless you can prove that the
overstatement was due to reasonable cause. You will also be required to give
additional information on Form 8606 in years you make a withdrawal from your
IRA. If you fail to file a required Form 8606, there is a $50 penalty for each
such failure unless you can prove the failure was due to reasonable cause.
(b) IRA Form 5329 is required as an attachment to Form 1040 (or separately if
you do not file a Form 1040) for any year the contribution limits in paragraph 2
are exceeded, a premature distribution takes place, less than the required
minimum amount is distributed, or a prohibited transaction takes place.
Federal Tax Consequences
(a) Income on your IRA account is not taxed as it is earned, but only when it is
distributed to you.
(b) Amounts paid to you from your IRA (other than your non-deductible IRA
contributions) are taxable as ordinary income.
(c) Because non-deductible IRA contributions are made using income which has
already been taxed, the portion of the IRA distributions consisting on
non-deductible contributions will not be taxed again when received by you. The
non-taxable portion of each IRA distribution, if any, will be the ratio of your
previously unrecovered non-taxable contributions to the value in all of your IRA
accounts as of the end of the year
<PAGE>
plus any distributions taken from the account during the year. All of your IRAs
will be included in this calculation, including regular IRAs, Simplified
Employee Pension Plan (SEPs), and Rollover IRAs.
(d) In general, if you receive distributions from your IRAs, Section 403
annuities and custodial accounts, and qualified plans which, in the aggregate,
exceed $150,000 in any calendar year, you may be subject to a 15% penalty tax on
the amount in excess of $150,000. If the total amount of your benefits payable
from such plans at your death exceeds a certain permissible level, a similar 15%
estate tax is imposed on the amount in excess of the permissible level. Special
rules apply in certain circumstances and you should consult your tax adviser if
you have any questions regarding this tax.
(e) If you engage in a so-called "prohibited transaction" as defined in the
Internal Revenue Code, your IRA will be disqualified and the entire balance in
your IRA will be taxed as ordinary income during the year in which such
transaction occurs. You may also have to pay the 10% penalty tax on premature
distributions. A "prohibited transaction" includes:
(i) the sale, exchange, or leasing of any property between your IRA account and
you;
(ii) the lending of money or other extension of credit between your IRA account
and you;
(iii) the furnishing of goods, services, or facilities between your IRA account
and you;
(iv) the transfer of assets of your IRA account for your use or for your
benefit.
(f) If you pledge all or part of your IRA as security for a loan, the amount so
pledged or invested is considered by the Internal Revenue Service to have been
distributed to you and will be taxed as ordinary income during the year in which
you make such pledge or investment. You may also have to pay the 10% premature
distribution tax.
Financial Disclosure
Because the assets held in your IRA are invested at your direction and will be
subject to market fluctuation, the value of your IRA can neither be guaranteed
nor projected. However, you will be provided with periodic statements of your
IRA, including current market values of investments.
Information about the shares of each mutual fund that you choose for investment
through your IRA must be furnished to you in the form of a prospectus governed
by the rules of the Securities and Exchange Commission. Please refer to the
prospectus for detailed information concerning the fund objectives, the sales
charges and the income and expenses of your mutual funds.
Miscellaneous
The proceeds from your IRA may be used as a rollover contribution to another
individual retirement account or individual retirement annuity.
The form of your IRA has been approved by the Internal Revenue Service. Such
approval is a determination only as to the form of the IRA and does not
represent a determination of the merits of the IRA.
Further information regarding your IRA is available in the Internal Revenue
Service Publication 590. You may obtain this publication from any district
office of the Internal Revenue Service or by calling the Internal Revenue
Service Tax Forms Distribution Center toll-free number, 1-800-829-3676.
<PAGE>
Notes
IRS Opinion Letter
SEP
Serial Number: C410396A
[Photgraphic copy of IRS Opinion letter]
[Colonial Flag Logo]
Retirement Plans Offered by
Colonial Mutual Funds:
[checkmark] Individual Retirement Accounts (IRA)
[checkmark] Rollover IRA
[checkmark] Simplified Employee Pension (SEP)
[checkmark] Salary Reduction SEP (SARSEP)
[checkmark] Money Purchase Pension Plan
[checkmark] Profit Sharing Plan
[checkmark] 401(k) Plan
For additional retirement plan information, ask your financial adviser or call
Colonial at 1-800-225-2365, ext. 6660. This brochure must be preceded or
accompanied by a current prospectus that contains more complete information,
including fees, risks, and expenses, for any Colonial mutual fund you consider
purchasing. Please read the prospectus carefully before you invest.
Colonial Investment Services, Inc. copyright 1995
One Financial Center, Boston, Massachusetts 02111-2621, 617-426-3750
SE-927A-0795 Ref # X95-0714-002
EXHIBIT 14(H)
401(k)
Beneficiary Designation Form
Colonial Retirement Plan
Employer/Plan Name
Participant Name Social Security Number - -
Type of Plan: (Check appropriate box)
[ ] Money Purchase Pension
[ ] Combination Money Purchase Pension and Profit Sharing
[ ] Profit Sharing 401(k)
Notice of Preretirement Death Benefit
[ ] I am not married and I understand that if I die before my benefits under the
above Plan begin, my benefits will be paid to my estate UNLESS
I designate a beneficiary. If I want someone other than my estate to receive
these preretirement death benefits, I will designate this beneficiary below.
Complete for Money Purchase Pension Plan OR Combination Money Purchase Pension
and Profit Sharing Plan
[ ] I am married and I understand that if I die before my benefits under the
Plan begin, my benefits will be paid to my surviving spouse in the form of an
annuitized distribution, UNLESS I designate another beneficiary and my spouse
consents to this in writing. If I want someone other than my spouse to receive
these preretirement death benefits, I will designate this beneficiary below and
my spouse will consent to this in the Spousal Consent section of this form. I
also understand that if I am under 35, this beneficiary designation will be
effective only until the first day of the Plan Year in which I turn 35, and at
that time the qualified preretirement survivor annuity coverage payable to my
spouse will automatically be reinstated unless I again designate another
beneficiary and my spouse consents to this in writing.
Complete for either Profit Sharing OR 401(k) Plan
[ ] I am married and I understand that if I die before my benefits under the
above Plan begin, my benefits will be paid to my surviving spouse, UNLESS I
designate another beneficiary and my spouse consents to this in writing. If I
want someone other than my spouse to receive these preretirement death benefits,
I will designate this beneficiary below and my spouse will consent to this in
the Spousal Consent section of this form.
Beneficiary Designation
Instead of my estate, if unmarried, or my spouse, if married, I designate the
following beneficiaries to receive the preretirement death benefits under my
Plan. This election shall revoke any previous elections made by me. In the event
of my death, pay any benefits I may have under said Plan in equal portions,
unless otherwise indicated, to the following Primary Beneficiary(ies):
<TABLE>
<CAPTION>
Name Relationship % (no fractions) Date of Birth Social Security Number
<S> <C> <C> <C> <C>
- -
- -
</TABLE>
If none of the above-named Primary Beneficiaries survives me, pay any benefits I
may have under the Plan in equal portions, unless otherwise indicated, to the
following alternative Beneficiary(ies) or the survivor(s) thereof:
<TABLE>
<CAPTION>
Name Relationship % (no fractions) Date of Birth Social Security Number
<S> <C> <C> <C> <C>
- -
- -
</TABLE>
I understand that the beneficiaries named herein may be changed or revoked at
any time by filing a new beneficiary form and, if I am married, a new spousal
consent, and that this designation is effective only with my current spouse who
has signed below.
X
Signature of Participant Date Print Name of Participant
Spousal Consent
I have read the Notice of Preretirement Death Benefit and Beneficiary
Designation and consent to their terms. I acknowledge and understand that if my
spouse is a participant in a Colonial Money Purchase Pension Plan or Combination
Money Purchase Pension and Profit Sharing Plan, I am waiving my right to have my
spouse's Vested Account Balance under the Plan paid to me in an annuitized
distribution for my life. I further understand that this consent is irrevocable
unless my spouse revokes the Beneficiary Designation.
X
Signature of Spouse Date Print Name of Spouse
X
Signature of Witness Date Print Title of Witness
(Notary Public or Plan Administrator)
Notary Seal (If Applicable) Commission Expires
Colonial Investors Service Center, Inc. QK-030C-0496 (5/96)
<PAGE>
401(k)
Participant Enrollment Form
Participant Enrollment Form
Colonial
401(k) Retirement Plan
Plan Name
Section I: Employee Information (Please Print)
Name
Address
City State Zip
Date of Birth / / Date of Hire / /
Social Security # - -
[ ] I wish to participate in the 401(k) tax deferred savings plan and agree to
the terms of the plan.
[ ] I do not wish to participate in the 401(k) tax deferred savings plan. I
understand that I may participate at a future date, if eligible. (Complete
Section IV only)
Section II: Salary Reduction
As a participant in my employer's 401(k) plan, I authorize my employer to
withhold the amount indicated below from my compensation each pay period
following the date of this agreement. I also direct the employer to pay to the
trustee these amounts withheld for investment in my accounts selected in Section
III.
15%
14%
13%
12%
11%
10%
9%
8%
7%
6%
5%
4%
3%
2%
or $ _____________ per pay period.
<PAGE>
Note: The participant shall have the right to change, amend, or otherwise revoke
this agreement at least quarterly each plan year.
Section III: Investment Election
Indicate how you want your contribution from Section II allocated. Your total
must equal 100%. For information on the investments, please refer to the
specific Fund prospectus(es).
Fund Name(s) %
1.
2.
3.
4.
5.
Total = 100%
Section IV: Signature
X
Employee Signature Date
I have carefully read the prospectus(es) of the Fund(s) listed above, which
contain(s) more complete information, including fees, risks, and expenses.
Section V: Employer Certification
Name of Employer
X
Employer Signature Date
Colonial Investors Service Center, Inc. QK-030C-0496 (5/96)
How Do I Enroll?
Step 1 -- Complete this Enrollment Form
Section I -- All eligible employees should complete this section, providing
their employee information. Indicate whether or not you are participating in the
company 401(k) program.
If you are participating, complete the balance of this enrollment form.
If you are not participating, go to Section IV. Sign and date the form and give
it to your employer.
Section II -- If participating, indicate the amount of your salary reduction
either by checking (4) the appropriate percentage box or by completing the
dollar amount per pay period.
Section III -- Indicate what Colonial fund(s) you desire for your investments
based upon the funding choices made available for the plan by your employer.
Select whole percentages only, keeping in mind that they must total 100%.
Section IV -- Sign and date the enrollment form and give it to your employer.
Step 2 -- Complete the Beneficiary Form
Also included in the enrollment package is a Beneficiary Designation Form. If
desired, you may complete the form to name or change your beneficiary. Please be
advised that failure to complete the beneficiary form will result in automatic
defaults. Refer to the beneficiary form for further information.
Sign and date the beneficiary form and give it to your employer.
PERFORMANCE CALCULATION
COLONIAL FEDERAL SECURITIES
FUND - CLASS C
Fiscal Year
End: 8/31/97
Inception
Date: 8/1/97
SINCE INCEPTION
8/1/97 TO 8/31/97
Standard Non-Standard
Initial Inv. $1,000.00 $1,000.00
Amt. Invested $1,000.00 $1,000.00
Initial NAV $10.71 $10.71
Initial Shares 93.371 93.371
Shares From Dist. 0.440 0.440
End of Period NAV $10.52 $10.52
CDSC* 0.98%
Total Return -2.29% -1.31%
Average Annual
Total Return N/A N/A
* Due to the decrease in NAV from the beginning of the period,
the CDSC has been adjusted according to the prospectus.
COLONIAL FEDERAL SECURITIES FUND
FUND YIELD CALCULATION
(CALENDAR MONTH-END METHOD)
30-DAY BASE PERIOD ENDED 8/31/97
6
a-b
FUND YIELD = 2 ----- +1 -1
c-d
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
a = dividends and interest earned during
the month ................................ $5,708,486 $410,322 $626
b = expenses accrued during the month 890,657 104,436 142
c = average dividend shares outstanding
during the month ......................... 85,207,339 6,124,501 9,337
d = class maximum offering price per share
on the last day of the month ............. $11.04 $10.52 $10.52
YIELD............................. 6.23% 5.77% 5.98%
----- ----- -----
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000021847
<NAME> COLONIAL FEDERAL SECURITIES FUND, CLASS A
<SERIES>
<NUMBER> 4
<NAME> TRUST III
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> NOV-1-1996
<PERIOD-END> AUG-31-1997
<INVESTMENTS-AT-COST> 1194983
<INVESTMENTS-AT-VALUE> 1201529
<RECEIVABLES> 41036
<ASSETS-OTHER> 490
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1243055
<PAYABLE-FOR-SECURITIES> 282910
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7277
<TOTAL-LIABILITIES> 290187
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1116193
<SHARES-COMMON-STOCK> 84481
<SHARES-COMMON-PRIOR> 97444
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 7747
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 167117
<ACCUM-APPREC-OR-DEPREC> 6600
<NET-ASSETS> 952868
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 62915
<OTHER-INCOME> 4431
<EXPENSES-NET> 10642
<NET-INVESTMENT-INCOME> 56704
<REALIZED-GAINS-CURRENT> 5201
<APPREC-INCREASE-CURRENT> (10609)
<NET-CHANGE-FROM-OPS> 51296
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 50372
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3952
<NUMBER-OF-SHARES-REDEEMED> 19317
<SHARES-REINVESTED> 2402
<NET-CHANGE-IN-ASSETS> (146290)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 6119
<OVERDIST-NET-GAINS-PRIOR> 251620
<GROSS-ADVISORY-FEES> 5535
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10642
<AVERAGE-NET-ASSETS> 1023581
<PER-SHARE-NAV-BEGIN> 10.530
<PER-SHARE-NII> .580
<PER-SHARE-GAIN-APPREC> (.038)
<PER-SHARE-DIVIDEND> .552
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.520
<EXPENSE-RATIO> 1.19
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000021847
<NAME> COLONIAL FEDERAL SECURITIES CLASS B
<SERIES>
<NUMBER> 4
<NAME> TRUST III
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> AUG-31-1997
<INVESTMENTS-AT-COST> 1194983
<INVESTMENTS-AT-VALUE> 1201529
<RECEIVABLES> 41036
<ASSETS-OTHER> 490
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1243055
<PAYABLE-FOR-SECURITIES> 282910
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7277
<TOTAL-LIABILITIES> 290187
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1116193
<SHARES-COMMON-STOCK> 6113
<SHARES-COMMON-PRIOR> 6972
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 7747
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 167117
<ACCUM-APPREC-OR-DEPREC> 6600
<NET-ASSETS> 952868
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 62915
<OTHER-INCOME> 4431
<EXPENSES-NET> 10642
<NET-INVESTMENT-INCOME> 56704
<REALIZED-GAINS-CURRENT> 5201
<APPREC-INCREASE-CURRENT> (10609)
<NET-CHANGE-FROM-OPS> 51296
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3364
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1829
<NUMBER-OF-SHARES-REDEEMED> 2857
<SHARES-REINVESTED> 169
<NET-CHANGE-IN-ASSETS> (146290)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 6119
<OVERDIST-NET-GAINS-PRIOR> 251620
<GROSS-ADVISORY-FEES> 5535
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10642
<AVERAGE-NET-ASSETS> 1023581
<PER-SHARE-NAV-BEGIN> 10.53
<PER-SHARE-NII> .515
<PER-SHARE-GAIN-APPREC> .038
<PER-SHARE-DIVIDEND> .487
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.52
<EXPENSE-RATIO> 1.94
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000021847
<NAME> COLONIAL FEDERAL SECURITIES FUND, CLASS C
<SERIES>
<NUMBER> 4
<NAME> TRUST III
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> NOV-1-1996
<PERIOD-END> AUG-31-1997
<INVESTMENTS-AT-COST> 1194983
<INVESTMENTS-AT-VALUE> 1201529
<RECEIVABLES> 41036
<ASSETS-OTHER> 490
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1243055
<PAYABLE-FOR-SECURITIES> 282910
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7277
<TOTAL-LIABILITIES> 290187
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1116193
<SHARES-COMMON-STOCK> 9
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 7747
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 167117
<ACCUM-APPREC-OR-DEPREC> 6600
<NET-ASSETS> 952868
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 62915
<OTHER-INCOME> 4431
<EXPENSES-NET> 10642
<NET-INVESTMENT-INCOME> 56704
<REALIZED-GAINS-CURRENT> 5201
<APPREC-INCREASE-CURRENT> (10609)
<NET-CHANGE-FROM-OPS> 51296
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (146290)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 6119
<OVERDIST-NET-GAINS-PRIOR> 251620
<GROSS-ADVISORY-FEES> 5535
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10642
<AVERAGE-NET-ASSETS> 1023581
<PER-SHARE-NAV-BEGIN> 10.71
<PER-SHARE-NII> .058
<PER-SHARE-GAIN-APPREC> (.198)
<PER-SHARE-DIVIDEND> .050
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.52
<EXPENSE-RATIO> 1.82
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
POWER OF ATTORNEY FOR SIGNATURE
The undersigned constitutes William J. Ballou, Truman S. Casner,
Harold W. Cogger, Nancy L. Conlin, Ellen Harrington, Timothy J.
Jacoby, Michael H. Koonce and John M. Loder, individually, as my true
and lawful attorney, with full power to each of them to sign for me
and in my name, any and all registration statements and any and all
amendments to the registration statements filed under the Securities
Act of 1933 or the Investment Company Act of 1940 with the Securities
and Exchange Commission for the purpose of complying with such
registration requirements in my capacity as a trustee or officer of
certain mutual funds for which Liberty Finanical Investments, Inc.
serves as principal underwriter or Colonial Management Associates,
Inc. serves as investment manager or administrator (Colonial Mutual
Funds), or of the LFC Utilities Trust (LFC Trust). This Power of
Attorney supercedes any and all Powers of Attorney previously
executed by me, authorizes the above individuals to sign my name and
will remain in full force and effect until specifically rescinded by
me.
I specifically permit this Power of Attorney to be filed, as an
exhibit to a registration statement or amendment to a registration
statement of any or all Colonial Mutual Funds or the LFC Trust, with
the Securities and Exchange Commission and I request that this Power
of Attorney then constitutes authority to sign additional amendments
and registration statements by virtue of its incorporation by
reference into the registration statements and amendments for the
Colonial Mutual Funds and the LFC Trust.
In witness, I have signed this Power of Attorney on this 19th day of
December, 1997.
Robert J. Birnbaum
POWER OF ATTORNEY FOR SIGNATURE
The undersigned constitutes William J. Ballou, Truman S. Casner,
Harold W. Cogger, Nancy L. Conlin, Ellen Harrington, Timothy J.
Jacoby, Michael H. Koonce and John M. Loder, individually, as my true
and lawful attorney, with full power to each of them to sign for me
and in my name, any and all registration statements and any and all
amendments to the registration statements filed under the Securities
Act of 1933 or the Investment Company Act of 1940 with the Securities
and Exchange Commission for the purpose of complying with such
registration requirements in my capacity as a trustee or officer of
certain mutual funds for which Liberty Finanical Investments, Inc.
serves as principal underwriter or Colonial Management Associates,
Inc. serves as investment manager or administrator (Colonial Mutual
Funds), or of the LFC Utilities Trust (LFC Trust). This Power of
Attorney supercedes any and all Powers of Attorney previously
executed by me, authorizes the above individuals to sign my name and
will remain in full force and effect until specifically rescinded by
me.
I specifically permit this Power of Attorney to be filed, as an
exhibit to a registration statement or amendment to a registration
statement of any or all Colonial Mutual Funds or the LFC Trust, with
the Securities and Exchange Commission and I request that this Power
of Attorney then constitutes authority to sign additional amendments
and registration statements by virtue of its incorporation by
reference into the registration statements and amendments for the
Colonial Mutual Funds and the LFC Trust.
In witness, I have signed this Power of Attorney on this 19th day of
December, 1997.
Tom Bleasdale
POWER OF ATTORNEY FOR SIGNATURE
The undersigned constitutes William J. Ballou, Truman S. Casner,
Harold W. Cogger, Nancy L. Conlin, Ellen Harrington, Timothy J.
Jacoby, Michael H. Koonce and John M. Loder, individually, as my true
and lawful attorney, with full power to each of them to sign for me
and in my name, any and all registration statements and any and all
amendments to the registration statements filed under the Securities
Act of 1933 or the Investment Company Act of 1940 with the Securities
and Exchange Commission for the purpose of complying with such
registration requirements in my capacity as a trustee or officer of
certain mutual funds for which Liberty Finanical Investments, Inc.
serves as principal underwriter or Colonial Management Associates,
Inc. serves as investment manager or administrator (Colonial Mutual
Funds), or of the LFC Utilities Trust (LFC Trust). This Power of
Attorney supercedes any and all Powers of Attorney previously
executed by me, authorizes the above individuals to sign my name and
will remain in full force and effect until specifically rescinded by
me.
I specifically permit this Power of Attorney to be filed, as an
exhibit to a registration statement or amendment to a registration
statement of any or all Colonial Mutual Funds or the LFC Trust, with
the Securities and Exchange Commission and I request that this Power
of Attorney then constitutes authority to sign additional amendments
and registration statements by virtue of its incorporation by
reference into the registration statements and amendments for the
Colonial Mutual Funds and the LFC Trust.
In witness, I have signed this Power of Attorney on this 19th day of
December, 1997.
Lora S. Collins
POWER OF ATTORNEY FOR SIGNATURE
The undersigned constitutes William J. Ballou, Truman S. Casner,
Harold W. Cogger, Nancy L. Conlin, Ellen Harrington, Timothy J.
Jacoby, Michael H. Koonce and John M. Loder, individually, as my true
and lawful attorney, with full power to each of them to sign for me
and in my name, any and all registration statements and any and all
amendments to the registration statements filed under the Securities
Act of 1933 or the Investment Company Act of 1940 with the Securities
and Exchange Commission for the purpose of complying with such
registration requirements in my capacity as a trustee or officer of
certain mutual funds for which Liberty Finanical Investments, Inc.
serves as principal underwriter or Colonial Management Associates,
Inc. serves as investment manager or administrator (Colonial Mutual
Funds), or of the LFC Utilities Trust (LFC Trust). This Power of
Attorney supercedes any and all Powers of Attorney previously
executed by me, authorizes the above individuals to sign my name and
will remain in full force and effect until specifically rescinded by
me.
I specifically permit this Power of Attorney to be filed, as an
exhibit to a registration statement or amendment to a registration
statement of any or all Colonial Mutual Funds or the LFC Trust, with
the Securities and Exchange Commission and I request that this Power
of Attorney then constitutes authority to sign additional amendments
and registration statements by virtue of its incorporation by
reference into the registration statements and amendments for the
Colonial Mutual Funds and the LFC Trust.
In witness, I have signed this Power of Attorney on this 19th day of
December, 1997.
James E. Grinnell
POWER OF ATTORNEY FOR SIGNATURE
The undersigned constitutes William J. Ballou, Truman S. Casner,
Harold W. Cogger, Nancy L. Conlin, Ellen Harrington, Timothy J.
Jacoby, Michael H. Koonce and John M. Loder, individually, as my true
and lawful attorney, with full power to each of them to sign for me
and in my name, any and all registration statements and any and all
amendments to the registration statements filed under the Securities
Act of 1933 or the Investment Company Act of 1940 with the Securities
and Exchange Commission for the purpose of complying with such
registration requirements in my capacity as a trustee or officer of
certain mutual funds for which Liberty Finanical Investments, Inc.
serves as principal underwriter or Colonial Management Associates,
Inc. serves as investment manager or administrator (Colonial Mutual
Funds), or of the LFC Utilities Trust (LFC Trust). This Power of
Attorney supercedes any and all Powers of Attorney previously
executed by me, authorizes the above individuals to sign my name and
will remain in full force and effect until specifically rescinded by
me.
I specifically permit this Power of Attorney to be filed, as an
exhibit to a registration statement or amendment to a registration
statement of any or all Colonial Mutual Funds or the LFC Trust, with
the Securities and Exchange Commission and I request that this Power
of Attorney then constitutes authority to sign additional amendments
and registration statements by virtue of its incorporation by
reference into the registration statements and amendments for the
Colonial Mutual Funds and the LFC Trust.
In witness, I have signed this Power of Attorney on this 19th day of
December, 1997.
William D. Ireland, Jr.
POWER OF ATTORNEY FOR SIGNATURE
The undersigned constitutes William J. Ballou, Truman S. Casner,
Harold W. Cogger, Nancy L. Conlin, Ellen Harrington, Timothy J.
Jacoby, Michael H. Koonce and John M. Loder, individually, as my true
and lawful attorney, with full power to each of them to sign for me
and in my name, any and all registration statements and any and all
amendments to the registration statements filed under the Securities
Act of 1933 or the Investment Company Act of 1940 with the Securities
and Exchange Commission for the purpose of complying with such
registration requirements in my capacity as a trustee or officer of
certain mutual funds for which Liberty Finanical Investments, Inc.
serves as principal underwriter or Colonial Management Associates,
Inc. serves as investment manager or administrator (Colonial Mutual
Funds), or of the LFC Utilities Trust (LFC Trust). This Power of
Attorney supercedes any and all Powers of Attorney previously
executed by me, authorizes the above individuals to sign my name and
will remain in full force and effect until specifically rescinded by
me.
I specifically permit this Power of Attorney to be filed, as an
exhibit to a registration statement or amendment to a registration
statement of any or all Colonial Mutual Funds or the LFC Trust, with
the Securities and Exchange Commission and I request that this Power
of Attorney then constitutes authority to sign additional amendments
and registration statements by virtue of its incorporation by
reference into the registration statements and amendments for the
Colonial Mutual Funds and the LFC Trust.
In witness, I have signed this Power of Attorney on this 19th day of
December, 1997.
Richard W. Lowry
POWER OF ATTORNEY FOR SIGNATURE
The undersigned constitutes William J. Ballou, Truman S. Casner,
Harold W. Cogger, Nancy L. Conlin, Ellen Harrington, Timothy J.
Jacoby, Michael H. Koonce and John M. Loder, individually, as my true
and lawful attorney, with full power to each of them to sign for me
and in my name, any and all registration statements and any and all
amendments to the registration statements filed under the Securities
Act of 1933 or the Investment Company Act of 1940 with the Securities
and Exchange Commission for the purpose of complying with such
registration requirements in my capacity as a trustee or officer of
certain mutual funds for which Liberty Finanical Investments, Inc.
serves as principal underwriter or Colonial Management Associates,
Inc. serves as investment manager or administrator (Colonial Mutual
Funds), or of the LFC Utilities Trust (LFC Trust). This Power of
Attorney supercedes any and all Powers of Attorney previously
executed by me, authorizes the above individuals to sign my name and
will remain in full force and effect until specifically rescinded by
me.
I specifically permit this Power of Attorney to be filed, as an
exhibit to a registration statement or amendment to a registration
statement of any or all Colonial Mutual Funds or the LFC Trust, with
the Securities and Exchange Commission and I request that this Power
of Attorney then constitutes authority to sign additional amendments
and registration statements by virtue of its incorporation by
reference into the registration statements and amendments for the
Colonial Mutual Funds and the LFC Trust.
In witness, I have signed this Power of Attorney on this 19th day of
December, 1997.
William E. Mayer
POWER OF ATTORNEY FOR SIGNATURE
The undersigned constitutes William J. Ballou, Truman S. Casner,
Harold W. Cogger, Nancy L. Conlin, Ellen Harrington, Timothy J.
Jacoby, Michael H. Koonce and John M. Loder, individually, as my true
and lawful attorney, with full power to each of them to sign for me
and in my name, any and all registration statements and any and all
amendments to the registration statements filed under the Securities
Act of 1933 or the Investment Company Act of 1940 with the Securities
and Exchange Commission for the purpose of complying with such
registration requirements in my capacity as a trustee or officer of
certain mutual funds for which Liberty Finanical Investments, Inc.
serves as principal underwriter or Colonial Management Associates,
Inc. serves as investment manager or administrator (Colonial Mutual
Funds), or of the LFC Utilities Trust (LFC Trust). This Power of
Attorney supercedes any and all Powers of Attorney previously
executed by me, authorizes the above individuals to sign my name and
will remain in full force and effect until specifically rescinded by
me.
I specifically permit this Power of Attorney to be filed, as an
exhibit to a registration statement or amendment to a registration
statement of any or all Colonial Mutual Funds or the LFC Trust, with
the Securities and Exchange Commission and I request that this Power
of Attorney then constitutes authority to sign additional amendments
and registration statements by virtue of its incorporation by
reference into the registration statements and amendments for the
Colonial Mutual Funds and the LFC Trust.
In witness, I have signed this Power of Attorney on this 19th day of
December, 1997.
James L. Moody, Jr.
POWER OF ATTORNEY FOR SIGNATURE
The undersigned constitutes William J. Ballou, Truman S. Casner,
Harold W. Cogger, Nancy L. Conlin, Ellen Harrington, Timothy J.
Jacoby, Michael H. Koonce and John M. Loder, individually, as my true
and lawful attorney, with full power to each of them to sign for me
and in my name, any and all registration statements and any and all
amendments to the registration statements filed under the Securities
Act of 1933 or the Investment Company Act of 1940 with the Securities
and Exchange Commission for the purpose of complying with such
registration requirements in my capacity as a trustee or officer of
certain mutual funds for which Liberty Finanical Investments, Inc.
serves as principal underwriter or Colonial Management Associates,
Inc. serves as investment manager or administrator (Colonial Mutual
Funds), or of the LFC Utilities Trust (LFC Trust). This Power of
Attorney supercedes any and all Powers of Attorney previously
executed by me, authorizes the above individuals to sign my name and
will remain in full force and effect until specifically rescinded by
me.
I specifically permit this Power of Attorney to be filed, as an
exhibit to a registration statement or amendment to a registration
statement of any or all Colonial Mutual Funds or the LFC Trust, with
the Securities and Exchange Commission and I request that this Power
of Attorney then constitutes authority to sign additional amendments
and registration statements by virtue of its incorporation by
reference into the registration statements and amendments for the
Colonial Mutual Funds and the LFC Trust.
In witness, I have signed this Power of Attorney on this 19th day of
December, 1997.
John J. Neuhauser
POWER OF ATTORNEY FOR SIGNATURE
The undersigned constitutes William J. Ballou, Truman S. Casner,
Harold W. Cogger, Nancy L. Conlin, Ellen Harrington, Timothy J.
Jacoby, Michael H. Koonce and John M. Loder, individually, as my true
and lawful attorney, with full power to each of them to sign for me
and in my name, any and all registration statements and any and all
amendments to the registration statements filed under the Securities
Act of 1933 or the Investment Company Act of 1940 with the Securities
and Exchange Commission for the purpose of complying with such
registration requirements in my capacity as a trustee or officer of
certain mutual funds for which Liberty Finanical Investments, Inc.
serves as principal underwriter or Colonial Management Associates,
Inc. serves as investment manager or administrator (Colonial Mutual
Funds), or of the LFC Utilities Trust (LFC Trust). This Power of
Attorney supercedes any and all Powers of Attorney previously
executed by me, authorizes the above individuals to sign my name and
will remain in full force and effect until specifically rescinded by
me.
I specifically permit this Power of Attorney to be filed, as an
exhibit to a registration statement or amendment to a registration
statement of any or all Colonial Mutual Funds or the LFC Trust, with
the Securities and Exchange Commission and I request that this Power
of Attorney then constitutes authority to sign additional amendments
and registration statements by virtue of its incorporation by
reference into the registration statements and amendments for the
Colonial Mutual Funds and the LFC Trust.
In witness, I have signed this Power of Attorney on this 19th day of
December, 1997.
George L. Shinn
POWER OF ATTORNEY FOR SIGNATURE
The undersigned constitutes William J. Ballou, Truman S. Casner,
Harold W. Cogger, Nancy L. Conlin, Ellen Harrington, Timothy J.
Jacoby, Michael H. Koonce and John M. Loder, individually, as my true
and lawful attorney, with full power to each of them to sign for me
and in my name, any and all registration statements and any and all
amendments to the registration statements filed under the Securities
Act of 1933 or the Investment Company Act of 1940 with the Securities
and Exchange Commission for the purpose of complying with such
registration requirements in my capacity as a trustee or officer of
certain mutual funds for which Liberty Finanical Investments, Inc.
serves as principal underwriter or Colonial Management Associates,
Inc. serves as investment manager or administrator (Colonial Mutual
Funds), or of the LFC Utilities Trust (LFC Trust). This Power of
Attorney supercedes any and all Powers of Attorney previously
executed by me, authorizes the above individuals to sign my name and
will remain in full force and effect until specifically rescinded by
me.
I specifically permit this Power of Attorney to be filed, as an
exhibit to a registration statement or amendment to a registration
statement of any or all Colonial Mutual Funds or the LFC Trust, with
the Securities and Exchange Commission and I request that this Power
of Attorney then constitutes authority to sign additional amendments
and registration statements by virtue of its incorporation by
reference into the registration statements and amendments for the
Colonial Mutual Funds and the LFC Trust.
In witness, I have signed this Power of Attorney on this 19th day of
December, 1997.
Robert L. Sullivan
POWER OF ATTORNEY FOR SIGNATURE
The undersigned constitutes William J. Ballou, Truman S. Casner,
Harold W. Cogger, Nancy L. Conlin, Ellen Harrington, Timothy J.
Jacoby, Michael H. Koonce and John M. Loder, individually, as my true
and lawful attorney, with full power to each of them to sign for me
and in my name, any and all registration statements and any and all
amendments to the registration statements filed under the Securities
Act of 1933 or the Investment Company Act of 1940 with the Securities
and Exchange Commission for the purpose of complying with such
registration requirements in my capacity as a trustee or officer of
certain mutual funds for which Liberty Finanical Investments, Inc.
serves as principal underwriter or Colonial Management Associates,
Inc. serves as investment manager or administrator (Colonial Mutual
Funds), or of the LFC Utilities Trust (LFC Trust). This Power of
Attorney supercedes any and all Powers of Attorney previously
executed by me, authorizes the above individuals to sign my name and
will remain in full force and effect until specifically rescinded by
me.
I specifically permit this Power of Attorney to be filed, as an
exhibit to a registration statement or amendment to a registration
statement of any or all Colonial Mutual Funds or the LFC Trust, with
the Securities and Exchange Commission and I request that this Power
of Attorney then constitutes authority to sign additional amendments
and registration statements by virtue of its incorporation by
reference into the registration statements and amendments for the
Colonial Mutual Funds and the LFC Trust.
In witness, I have signed this Power of Attorney on this 19th day of
December, 1997.
Sinclair Weeks, Jr.
