As filed with the Securities and Exchange Commission on April 30, 1997
Registration No. 2-78066
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
Registration Statement Under
The Securities Act of 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 25 [X]
and/or
Registration Statement Under
The Investment Company Act of 1940
Amendment No. 28 [X]
-------------------------------------
Registrant's Name, Address and Telephone Number:
American Federation of Labor and Congress of Industrial Organizations
Housing Investment Trust
1717 K Street, N.W.
Suite 707
Washington, D.C. 20006
(202) 331-8055
Name and Address of Agent for Service:
Kenneth G. Lore
Swidler & Berlin, Chartered
3000 K Street, N.W., Suite 300
Washington, D.C. 20007
Approximate Date of Proposed Public Offering:
Public Offering Commenced February 9, 1983
-------------------------------
It is proposed that this filing will become effective:
[X] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Rule 24f-2(a)(1) Declaration:
An indefinite number of Units of Beneficial Interest of the Registrant
are being registered by this Registration Statement pursuant to Rule 24f-2
under the Investment Company Act of 1940. Registrant's most recent Rule 24f-2
Notice was filed on February 26, 1997 and registration fees totalling
$73,051.56 were paid. Future Rule 24f-2 Notices will be filed and further
filing fees paid as prescribed in Rule 24f-2.
<PAGE>
<PAGE>
AMERICAN FEDERATION OF LABOR AND
CONGRESS OF INDUSTRIAL ORGANIZATIONS
HOUSING INVESTMENT TRUST
Registration Statement on Form N-1A
CROSS REFERENCE SHEET
N-1A Item No. Location
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PART A: PROSPECTUS
Item 1. Cover Page Cover Page
Item 2. Synopsis Prospectus Summary
Item 3. Condensed Financial Condensed Financial
Information Information
Item 4. General Description of Prospectus Summary;
Registrant History and Purpose;
Investment Objective and Policies
Investment Restrictions
Risk Factors
Item 5. Management of the Fund Prospectus Summary;
Management; Investment Adviser
Item 5A. Management's Discussion Trust Performance
of Fund Performance
Item 6. Capital Stock and Other Prospectus Summary;
Securities Incidents of Ownership of Units
Securities Offered; Tax Status
Item 7. Purchase of Securities Prospectus Summary;
Being Offered Securities Offered;
Sales Activities
Item 8. Redemption or Repurchase Prospectus Summary; Redemption
Item 9. Legal Proceedings Pendency of Legal Proceedings
<PAGE>
<PAGE>
PART B: STATEMENT OF ADDITIONAL INFORMATION
N-1A Item No. Location
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Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History; Exemptions
History from Specific Requirements of the
Investment Company Act;
Supplementary Information
Item 13. Investment Objective and Prospectus Investment Objective
and Policies and Policies; Prospectus
Investment Restrictions
Item 14. Management of the Management of the Trust
Registrant
Item 15. Control Persons and Principal Holders of
Principal Holders of Securities
Securities
Item 16. Investment Advisory and Management of the Trust;
Other Services Investment Adviser;
Sales and Distribution Activities;
Supplementary Information
Item 17. Brokerage Allocation and Prospectus Management;
Other Services Investment Adviser
Item 18. Capital Stock and Other Admission to the Trust
Securities
Item 19. Purchase, Redemption and Sales and Distribution Activities;
Pricing of Securities Being Admission to the Housing Trust;
Offered Prospectus Securities Offered
Item 20. Tax Status Prospectus Tax Status
Item 21. Underwriters Not Applicable
Item 22. Calculation of Not Applicable
Performance Data
Item 23. Financial Statements Financial Statements<PAGE>
<PAGE>
PART C: STATEMENT OF OTHER INFORMATION
N-1A Item No. Location
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Item 24. Financial Statements and Financial Statements and Exhibits
and Exhibits
Item 25. Persons Controlled by or Common Control
Under Common Control
Item 26. Number of Holders of Number of Security Holders
Securities
Item 27. Indemnification Indemnification
Item 28. Business and Other Connections Business and Other Connections
of Investment Adviser of Investment Advisor
Item 29. Principal Underwriters Not Applicable
Item 30. Location of Accounts and Location of Accounts and
Records Records
Item 31. Management Services Not Applicable
Item 32. Undertakings Not Applicable
SIGNATURES Signatures
<PAGE>
<PAGE>
AFL-CIO
HOUSING INVESTMENT TRUST
-------------------
PROSPECTUS
-------------------
The investment objective of the American Federation of Labor and Congress
of Industrial Organizations Housing Investment Trust ("Trust") is to provide
current income through a program of investment in construction and long-term
mortgage loans and mortgage-backed securities carrying competitive market
yields. The Trust invests primarily in obligations that are evidenced or
secured by mortgage-backed securities, mortgages or other liens on real
estate. At least 70% of the mortgage loans and mortgage-backed
securities in which the Trust invests directly or that back other investments
of the Trust are either federally insured or guaranteed or issued or
guaranteed by the Federal National Mortgage Association ("Fannie Mae") or the
Federal Home Loan Mortgage Corporation ("Freddie Mac"). At the same time, the
Trust seeks to promote important objectives of the American labor union
movement by encouraging the construction of housing and by promoting
additional and continuing employment for union members in the construction
trades and related industries that provide materials, furnishings, appliances
and services related to housing construction. The Trust proposes to achieve
these union objectives by limiting investments secured by mortgaged real
estate involving new construction or rehabilitation work to those in which
such new construction or rehabilitation work is done by union labor. Real
estate securing Trust investments will include single-family dwellings,
multi-family projects, intermediate care facilities and nursing homes.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus sets forth concisely the information about the Trust that
a prospective investor ought to know before investing. Investors should read
and retain this Prospectus for future reference. A Statement of Additional
Information about the Trust has been filed with the Securities and Exchange
Commission ("SEC") and is available upon request without charge from Trust
headquarters. The Statement of Additional Information, including the Trust's
audited financial statements for the year ended December 31, 1996, is
incorporated by reference in this Prospectus.
The date of this Prospectus is April 30, 1997.
The date of the Statement of Additional Information is April 30, 1997.
<PAGE>
<PAGE>
TABLE OF CONTENTS
Page
Prospectus Summary.................................................... 1
Condensed Financial Information........................................ 6
History and Purpose.................................................... 7
Investment Objective and Policies...................................... 8
Investment Restrictions................................................ 22
Risk Factors........................................................... 24
Management............................................................. 32
Trust Performance...................................................... 34
Investment Adviser..................................................... 36
Incidents of Ownership of Units........................................ 37
Securities Offered..................................................... 38
Sales Activities....................................................... 42
Redemption............................................................. 43
Tax Status............................................................. 44
Pendency of Legal Proceedings.......................................... 44
NO ONE HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION
WITH THIS OFFERING, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER
TO BUY ANY OF THESE SECURITIES IN ANY STATE TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH STATE.
<PAGE>
<PAGE>
PROSPECTUS SUMMARY
The summary information below should be read in conjunction with the
detailed information appearing elsewhere in this Prospectus.
ISSUER
The Trust is a common law trust created under the laws of the District
of Columbia and sponsored by the American Federation of Labor and Congress of
Industrial Organizations ("AFL-CIO"). The terms of the Trust are set forth in
the Declaration of Trust as amended to date ("Declaration of Trust"). See
"HISTORY AND PURPOSE."
The Trust is governed by a Board of Trustees, consisting of up to 12
Trustees who are officers of the AFL-CIO or its member unions ("Union
Trustees"); up to 12 Trustees who are (i) officers or management employees of
one or more organizations contributing directly or indirectly through
contractors to an Eligible Pension Plan (as defined below), or officers or
management employees of such a Plan, or (ii) with respect to not more than 2
of such Trustees, an officer, director or trustee of an organization connected
in whole or in part with the housing industry, or an elected or appointed
official of the federal or any state or local government or an agency or
instrumentality thereof ("Management Trustees"); and one Trustee who is
neither an officer, trustee or employee of any organization that participates
in the Trust ("Chairman"). The number of Management Trustees may not exceed
the number of Union Trustees except in case a Trustee dies or resigns before
the expiration of his or her term. See "MANAGEMENT."
ELIGIBLE INVESTORS
Units of beneficial interest ("Units") in the Trust are offered,
without charge of any sales load or commission, only to organizations which
exist for the purpose of dealing with employees regarding terms and conditions
of employment, as well as any employee benefit plan or other organization
affiliated with or sponsored by such an organization ("Labor Organizations")
and to pension plans constituting qualified trusts under Section 401(a) of the
Internal Revenue Code of 1986, as amended ("IRC") that have beneficiaries who
are union members ("Eligible Pension Plans"). See "SECURITIES OFFERED" for
more complete definitions. Eligible Labor Organizations include 72 national
and international unions and 624 state and local central bodies directly
affiliated with the AFL-CIO, the great number of local unions and state and
local central bodies affiliated directly with those national and international
unions, and other labor organizations.
SECURITIES OFFERED
Units representing interests in the Trust are offered at the Net Asset
Value per Unit as of the last business day of each month ("Valuation Date")
following receipt of a purchase order. A minimum initial investment of
$50,000 is required. See "SECURITIES OFFERED." Securities may be issued for
whole or fractional Units. Units are not transferable and are not assignable.
The Trust is an open-end company but securities are redeemable in whole or
<PAGE>
<PAGE>
fractional Units as of monthly Valuation Dates with at least 15 days prior
written notice. See "REDEMPTION." Each Unit will be valued at its pro rata
share of the Net Asset Value of the Trust as of the close of business on the
last business day of each month. The Trust does not issue certificates
evidencing ownership of Units. Units are issued and redeemed by bookkeeping
entry and without physical delivery of securities.
INVESTMENT OBJECTIVE
The Trust's investment objective is to provide current income through
investment in construction and long-term mortgage loans and mortgage-backed
securities carrying competitive market yields. The Trust invests primarily in
obligations that are evidenced or secured by mortgage-backed securities,
mortgages or liens on real estate. At least 70% of the mortgage loans and
mortgage-backed securities in which the Trust invests or that back other
investments of the Trust are either federally insured or guaranteed or issued
or guaranteed by Fannie Mae or Freddie Mac. Although principal and interest
(base interest in the case of contingent interest mortgage loans) payments are
guaranteed, the market value of such mortgage loans and securities is not
guaranteed and will fluctuate. One purpose of these investments is to
encourage construction of housing and thereby facilitate additional and
continuing employment for union members in the construction trades and related
industries. In addition, to promote its objective of encouraging union
construction, the Trust may enter into pre-construction loan commitments. See
"INVESTMENT OBJECTIVE AND POLICIES--Pre-construction Commitments." The Trust
has been established to promote important objectives of the American labor
union movement.
The Trust may invest up to 100% of its assets in construction and
long-term loans insured or guaranteed by the Federal Housing Administration
("FHA"), the Department of Veterans Affairs ("VA") and the Government National
Mortgage Association ("Ginnie Mae") and securities that are secured by
securities and/or mortgage loans issued or insured, as applicable, by FHA, VA
and Ginnie Mae if the securities are rated in one of the two highest rating
categories (that is, AAA or AA) of a nationally recognized rating agency. The
Trust may invest up to 100% of its assets in obligations that are issued or
guaranteed by Fannie Mae or Freddie Mac (including Fannie Mae mortgage-backed
securities and Freddie Mac participation certificates) and in securities
backed by Fannie Mae or Freddie Mac if the securities are rated in one of the
two highest rating categories (that is, AAA or AA) of a nationally recognized
rating agency (such obligations and securities are sometimes hereinafter
referred to collectively as "Fannie Mae and Freddie Mac Investments").
Trust investments may include federal government-related, Fannie Mae,
and Freddie Mac contingent interest mortgage loans. See "INVESTMENT OBJECTIVE
AND POLICIES -- Contingent Interest Mortgage Loans" and "INVESTMENT OBJECTIVE
AND POLICIES -- Pass-Through and Pay-Through Securities." Trust investments
also may include federally insured or guaranteed mortgages or securities
backed thereby and Fannie Mae and Freddie Mac Investments that include a right
to require early repayment under certain circumstances. See "INVESTMENT
OBJECTIVE AND POLICIES--Early Repayment Loans."
<PAGE>
<PAGE>
The Trust may invest up to 30% of its assets in certain privately
collateralized obligations and in certain qualified state and local
government-related investments. See "INVESTMENT OBJECTIVE AND
POLICIES--Privately Collateralized Investments; State and Local
Government-Related Investments."
Although the Trust's Declaration of Trust authorizes the Trust to
invest in a range of investments (as described above), historically the Trust
has concentrated its investments in FHA-, VA- and Ginnie Mae-insured or
guaranteed construction loans and in Fannie Mae and Freddie Mac investments.
At December 31, 1996, such investments represented 92.7% of the Trust's total
investment portfolio. The Management of the Trust intends to maximize Trust
investments in such assets to the extent market conditions permit, consistent
with the overall objectives of the Trust. However, there can be no assurance
that this historic concentration of investments will be maintained.
Pending investment in such loans and securities, assets of the Trust
are held in various instruments, including United States Government issues,
federal agency issues, mutual funds that invest in such securities, commercial
paper, collateral loans and warehousing agreements and instruments which are
liquid but which may or may not be secured by real estate or by federal
guarantees or insurance. See "INVESTMENT OBJECTIVE AND POLICIES--Temporary
Investments." A portion of such instruments may be managed by Wellington
Management Company, an investment advisor that has been retained by the Trust
to manage short-term Trust assets. See "INVESTMENT ADVISER."
RISK FACTORS
The Net Asset Value of each Unit will reflect the market value of the
Trust's portfolio of investments. The current market value of the Trust's
portfolio will fluctuate, primarily in response to changing interest rates.
Generally, the market value of Trust mortgage loans, mortgage securities and
other assets will fall below the principal amount of such assets at times when
market interest rates rise above the interest rates on such investments.
Participants who redeem Units in such circumstances will suffer the resulting
loss in value of Trust assets.
While the Trust does not buy mortgage loans or securities backed by
mortgage loans for purposes other than investment, the Trust will from time to
time buy or sell mortgage loans in order to prevent fluctuations in the
weighted average maturity of its portfolio or to maintain a desirable level of
portfolio diversification. The Trust retains the flexibility to sell all or
any portion of its assets if circumstances (e.g., changed market conditions)
suggest the prudence of that course. Although registered investment companies
generally must value their assets and accept redemption requests daily, the
Trust is permitted to value its assets and accept redemption requests no more
often than quarterly, by virtue of an exemptive order received from the SEC.
The Trust's Board of Trustees has implemented monthly valuations of the
Trust's assets, which enables the Trust to redeem Units on a monthly, rather
than quarterly, basis. Consistent with the Trust's exemptive order and its
redemption procedures (see "REDEMPTION"), the Trust will invest at least 90%
of the value of its assets in investments that are readily marketable and
convertible into cash within 120 days without a<PAGE>
<PAGE>
discount from their market value (see "INVESTMENT RESTRICTIONS"). It is
possible, however--due to changes in interest rates, the performance of
specific properties, or general economic conditions since the monthly
Valuation Date preceding a request for redemption--for the market value of an
investment at the time of its liquidation to be less than its market value as
of the monthly Valuation Date preceding a request for redemption.
Most of the Trust's assets could be disposed of in a timeframe
sufficient to meet monthly redemptions. In the event the Trust were to
receive redemption requests with respect to a particular monthly Valuation
Date in an amount that exceeds the amount of assets that the Trust could
liquidate at market value prior to the applicable redemption date, the Trust
would not be able to satisfy such redemption requests without liquidating
certain of its assets at a discount from their market value. If such
circumstances were to occur, the Trust would be unable to satisfy at least
some of the redemption requests on a timely basis because the Trust would not
liquidate assets at a discount from their market value. Therefore, in
anticipating the availability of funds based on a redemption of Units,
investors should be prepared for the possibility of a delay in the
satisfaction of a monthly redemption request. Such a delay would not,
however, extend more than 120 days beyond the monthly Valuation Date following
the Trust's receipt of the redemption request (except to the extent it were
necessary to liquidate that portion of the Trust's portfolio (up to 10%) not
required to be invested in assets that are readily marketable and convertible
into cash within 120 days without a discount from their market value). See
"REDEMPTION." The Trust has never failed to satisfy any redemption request on
a timely basis.
Other risk factors relating to an investment in Units include: the
possible reduction in yield caused by prepayments, a limited resale market for
certain types of loans, inflation, defaults on loans, changes in ratings, lack
of diversification and real estate-related risks for certain investments that
are neither federally insured or guaranteed nor issued or guaranteed by Fannie
Mae or Freddie Mac. For a discussion of these items, see "RISK FACTORS."
INVESTMENT MANAGEMENT
The Trust's Chief Executive Officer, assisted by the Chief Investment
Officer, Director of Investor Relations and the General Counsel, is
responsible for the day to day administration of the Trust, including the
selection of investments, other than certain short-term investments, and
communication with existing and potential investors. For the fiscal year
ended December 31, 1996, the Trust's personnel expenses (salaries and
benefits) for all Trust officers and staff members totalled $3,402,914. See
"MANAGEMENT."
Set forth below is certain information regarding fund operating expenses
in tabular format:
<PAGE>
<PAGE>
Annual Fund Operating Expenses
(as a percentage of average net assets)
12b-1 Fees .03%
Other Expenses .43%
Total Fund Operating Expenses .46%
EXAMPLE
1 year 3 years 5 years 10 years
You would pay the
following expenses
on a $1,000 investment,
assuming (1) 5% annual
return and (2) redemption
at the end of each time
period: $4.83 $14.49 $24.15 $48.30
The purpose of the foregoing table is to assist the investor in
understanding the various costs and expenses that an investor in the Trust
will bear directly or indirectly. The Trust does not charge a sales load or
redemption fee on the purchase or redemption of its Units. For a more
complete description of the various costs and expenses listed above, see
"MANAGEMENT" and "SALES ACTIVITIES."
The foregoing example should not be considered a representation of
past or future expenses. Actual expenses may be greater or lesser than those
shown.
REDEMPTION
The Trust will redeem Units after receipt of a written request for
redemption. Redemptions will be made without any charge, at the Net Asset
Value of each Unit, determined as of the next Valuation Date following the
request. The Trust will accept a request for redemption only if received 15
days or more before the Valuation Date as of which the Net Asset Value is to
be determined. It usually takes from 7 to 10 business days to calculate the
Trust's Net Asset Value after a Valuation Date. Cash payment upon redemption
will be made within 7 days after the Net Asset Value has been determined. See
"REDEMPTION."
<PAGE>
<PAGE>
REGISTERED INVESTMENT COMPANY
The Trust has registered as an investment company under the Investment
Company Act of 1940, as amended ("Investment Company Act"), and accordingly is
subject to the regulatory authority of the SEC. The Trust has been exempted
from certain investor protection provisions of the Investment Company Act.
See "EXEMPTIONS FROM SPECIFIC REQUIREMENTS OF THE INVESTMENT COMPANY ACT" in
the Statement of Additional Information. THE SEC HAS NOT "APPROVED" OR
"DISAPPROVED" THE UNITS ISSUED BY THE TRUST OR PASSED UPON THE ACCURACY OF
THIS PROSPECTUS.
INVESTMENT ADVISER
Except with respect to certain short-term assets, the Trust operates
without an investment adviser. Except with respect to such short-term assets,
investment decisions are the responsibility of the Trust's Chief Executive
Officer, Chief Investment Officer and General Counsel subject to the
supervision and control of the Board of Trustees and the Executive Committee
(with respect to certain activities delegated to such committee by the full
Board). Certain short-term assets are managed by Wellington
Management Company, LLP, a registered investment adviser. See "INVESTMENT
ADVISER." Sales of Units are effected only by representatives of the Trust.
See "SALES ACTIVITIES."
CONDENSED FINANCIAL INFORMATION
The following information regarding per unit income and capital
changes is presented here for the fiscal years ended September 30, 1987, the 3
month period ended December 31, 1987, and the years ended
December 31, 1988, 1989, 1990, 1991, 1992, 1993, 1994, 1995 and 1996. The
condensed financial information has been derived from financial statements
audited by KPMG Peat Marwick, the Trust's independent certified public
accountants, and should be read in conjunction with the financial statements
and the notes thereto. The financial statements as of December 31, 1996, and
for each of the years in the 2 year period then ended, and the selected per
share data and ratios for the years ended December 31, 1996, 1995, 1994, 1993,
1992, 1991 and 1990, together with the auditors' report thereon, are included
in the Statement of Additional Information. The following data is presented
for each unit outstanding throughout each period.
[Financial information is set forth on the following pages 6-A through 6-C.]
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights
(amounts in thousands)
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Year Ended Three Months Ended
September 30, 1987 December 31, 1987
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<S> <C> <C>
Net asset value,
Beginning of Period 1,064.08 991.28
Net Investment
Income 96.65 25.00
Net Gains (losses)
on investments -
realized and unrealized (72.80) (17.60)
Dividends (from
net investment
income) <F1> (96.65) (25.00)
Distributions
(from capital gains) ---- ----
Net Asset Value,
End of Period 991.28 1,008,88
Total Gross Return 2.78% 4.46%
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
- ------------------------------------------------------------------------------
Year Ended Three Months Ended
September 30, 1987 December 31, 1987
- ------------------------------------------------------------------------------
<S> <C> <C>
Net Assets,
End of Period 186,666,594 201,924,231
Ratio of Expenses to
Average Net Assets <F2> 0.7% 0.7%<F3>
Ratio of Net Income
to Average Net Assets <F2> 8.9% 9.8%<F3>
Portfolio Turnover Rate 12.0% 6.2%<F3>
</TABLE>
<F1> Includes income distributed for the semi-annual periods ended March 31
and September 30 of 7, and June 30 and December 31 for 1988; and for the
quarterly periods ended March 31, June 30, September 30, and December 31,
1989, 1990, 1991, 1992, 1993, 1994, 1995 and 1996.
<F2> Average net assets were computed on the net asset value at the end of
each quarter. Investments were valued quarterly through September 30,
1987.
<F3> Percentages are annualized.
- ------------------
Primarily as a result of fluctuations in market interest rates, the net
unrealized gains (losses) on investments fluctuate from month to month.
Return on investment calculated on a market value basis would consist of both
net investment income and net realized and unrealized gains (losses) on
investments.
6-A<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights
(amounts in thousands)
- ------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1988 1989 1990 1991
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period 1,008.88 994.27 1,056.29 1,054.91
Net Investment Income 99.12 100.22 96.89 91.99
Net Gains (losses)
on investments -
realized and unrealized (14.61) 62.02 (1.38) 51.99
Dividends (from net
investment income) <F1> (99.12) (100.22) (96.89) (91.99)
Distributions (from
capital gains) --- --- --- ---
Net Asset Value, End
of Period 994.27 1,056.29 1,054.91 1,106.90
Total Gross Return 9.15% 17.65% 10.25% 14.90%
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
- ------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1988 1989 1990 1991
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Assets,
End of Period 227,570,708 284,723,220 366,147,338 528,731,177
Ratio of Expenses to
Average Net Assets 0.6% 0.6% 0.6% 0.6%
Ratio of Net Income to
Average Net Assets 9.7% 9.7% 9.3% 8.4%
Portfolio Turnover Rate 7.0% 8.6% 2.3% 9.5%
</TABLE.
<F1> Includes income distributed for the semi-annual periods ended March 31
and September 30 of 7, and June 30 and December 31 for 1988; and for the
quarterly periods ended March 31, June 30, September 30, and December 31,
1989, 1990, 1991, 1992, 1993, 1994, 1995 and 1996.
- ----------
Primarily as a result of fluctuations in market interest rates, the net
unrealized gains (losses) on investments fluctuate from month to month.
Return on investment calculated on a market value basis would consist of both
net investment income and net realized and unrealized gains (losses) on
investments.
6-B
<PAGE>
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
(amounts in thousands)
- -----------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31, December 31,
1992<F4> 1993 1994 1995 1996
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period 1,106.90 1,086.40 1,102.58 991.40 1098.53
Net Investment Income 81.54 85.93 81.66 81.12 79.11
Net Gains (Losses) on
investments -
realized and unrealized (20.50) 16.18 (111.18) 107.13 (25.55)
Dividends (from net
investment income)<F1> (81.54) (83.64) (81.66) (80.77) 78.76
Undistributed Investment
Income --- --- --- (.35) (.35)
Distributions (from
capital gains) --- (2.29) --- --- ---
Net Asset Value,
End of Period 1,086.40 1,102.58 991.40 1,098.53 1,072.98
Total Gross Return 6.25% 10.17% (2.15%) 20.11% 5.59%
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31, December 31,
1992<F4> 1993 1994 1995 1996
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Assets,
End of Period 661,940,825 845,793,592 935,264,189 1,166,893,471 1,383,163,166
Ratio of Expenses
to Average Net Assets 0.5% 0.5% 0.5% 0.5% 0.5%
Ratio of Net Income
to Average Net Assets 7.4% 7.5% 7.8% 7.6% 7.3%
Portfolio Turnover Rate 22.1% 24.2% 27.5% 31.2% 20.3%
</TABLE>
<F1> Includes income distributed for the semi-annual periods ended March 31
and September 30 of 7, and June 30 and December 31 for 1988; and for the
quarterly periods ended March 31, June 30, September 30, and December 31,
1989, 1990, 1991, 1992, 1993, 1994, 1995 and 1996.
<F4> Beginning as of May 21, 1992, the Trust engaged Wellington Management
Company to furnish investment advisory services concerning certain short-
term, liquid assets in the Trust's portfolio. See "INVESTMENT ADVISER."
- -------
Primarily as a result of fluctuations in market interest rates, the net
unrealized gains (losses) on investments fluctuate from month to month.
Return on investment calculated on a market value basis would consist of both
net investment income and net realized and unrealized gains (losses) on
investments.
6-C<PAGE>
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HISTORY AND PURPOSE
The Trust is a common law trust created under the laws of the District of
Columbia pursuant to a Declaration of Trust originally executed September 19,
1981. The Trust is an open-end management company with a portfolio that may
be either diversified or nondiversified, as it changes from time to time. The
Trust has been established under the sponsorship of the AFL-CIO as an
instrumentality of the United States labor union movement.
The Trust acquired all the assets of the AFL-CIO Mortgage Investment
Trust ("Mortgage Trust") in exchange for Units of the Trust on the basis of
relative net asset values as of September 30, 1984. The exchange was approved
by order of the SEC dated October 1, 1984. Trust Units received in the
exchange were distributed on a pro rata basis to Mortgage Trust participants
as of September 30, 1984 and the Mortgage Trust was thereupon liquidated.
The Trust is a non-tax-exempt investment company operated without
profit to the Trust or the AFL-CIO for funds controlled by or of interest to
unions that may wish to place a portion of their assets in mortgage
investments. The Trust pays expenses of trust administration but, except with
respect to certain short-term assets (see "INVESTMENT ADVISER"), no investment
advisor earns a profit of the sort normally taken by an investment adviser for
a commercial investment company; instead the Trust distributes all net
earnings on investments to Participants (as defined below). See "MANAGEMENT."
The Trust increases the amount of financing available for housing and other
construction projects. It thereby creates job opportunities for union labor
in the construction trades and related industries and stimulates the
production of housing.
The Labor Organizations and Eligible Pension Plans for which the Trust
is designed ("Participants") are institutional-type investors that are
interested in a long-term income investment program. Units are sold without
charge of any sales load or commission. Units are nonassignable and
nontransferable. The minimum initial investment by any Participant is
$50,000. Each Unit is valued at its pro rata share of the Net Asset Value of
the Trust as of the close of business on the last business day of each month
("Valuation Date"). The Trust is an open-end investment company but Units are
redeemable as of each Valuation Date with at least 15 days prior written
notice. Any order to purchase or request for redemption of Units made between
Valuation Dates is honored as of the next Valuation Date. See "REDEMPTION."
The Trust distributes net income quarterly. See "INCIDENTS OF OWNERSHIP OF
UNITS."
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INVESTMENT OBJECTIVE AND POLICIES
GENERAL
The Trust concentrates its investments in the real estate industry.
For purposes of the Investment Company Act, "concentration" means more than
twenty-five percent of asset value in any one industry.) The Trust invests
primarily in mortgage loans and mortgage-backed securities that are secured by
mortgages or liens on real estate, at least 70% of which mortgages or
mortgage-backed securities acquired by the Trust or backing securities
acquired by the Trust will be federally insured or guaranteed or guaranteed by
Fannie Mae or Freddie Mac with respect to the payment of principal and
interest, or issued by Fannie Mae or Freddie Mac. These are fundamental
policies and may not be changed without the approval of the holders of a
majority of the Trust's outstanding Units.
The investment objective of the Trust is to earn current income through
investment in construction and long-term mortgage loans and mortgage-backed
securities secured by mortgages or other liens upon real estate, or by other
mortgage-backed securities. The Trust will limit investments secured by
mortgaged real estate involving new construction or rehabilitation work to
those in which such new construction or rehabilitation work is done by union
labor. The Trust will acquire only mortgages and mortgage-backed and other
investments with yields competitive with those then generally prevailing on
similar investments having comparable terms and conditions taking into account
differences in risk including those resulting from differences in properties,
borrowers and loan terms.
Under existing federal housing programs, the federally insured or
guaranteed mortgage loans eligible for direct purchase by the Trust are first
or second mortgage loans insured by the Department of Housing and Urban
Development ("HUD") acting by and through the FHA to finance the purchase and
ownership of completed single-family dwellings and, in some circumstances, the
construction or renovation of single-family dwellings, or to provide
construction and/or permanent financing for multi-family housing projects and
certain health care facilities, including hospitals, intermediate care
facilities and nursing homes. These mortgage loans have maturities that range
from 10 to 40 years from project completion and commencement of principal
repayments. The Trust may also purchase mortgage loans guaranteed by the VA
to finance the purchase of single-family dwellings. Obligations of FHA are
backed by the General Insurance Fund established pursuant to the National
Housing Act of 1934, as amended. Obligations of the VA are backed by the Loan
Guaranty Revolving Fund.
The Trust may also purchase notes or other obligations guaranteed
under Section 108 of the Housing and Community Development Act of 1974, as
amended ("Section 108"). Under Section 108, HUD is authorized to guaranty
notes or other obligations issued by eligible public entities; the proceeds
from the sale of the notes are used by such public entities for eligible
community development and economic development activities, including
rehabilitation of privately owned or publicly owned housing. The Trust may
purchase such notes in cases where the proceeds will be used to finance the
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construction or rehabilitation of housing, and may invest in mortgage loans
for the construction or rehabilitation of housing if such mortgage loans are
guaranteed under Section 108. Section 108-guaranteed notes have terms not
exceeding 20 years and bear interest rates that are generally slightly higher
than rates on Treasury obligations of comparable maturity. Under Section 108,
the timely payment of all principal of and interest on the guaranteed note is
guaranteed by the full faith and credit of the United States.
The Trust may also purchase federally guaranteed mortgage-backed
certificates. Such certificates are issued by Ginnie Mae, a mortgage
banker or other lender and carry the right to receive principal and interest
payments related to payments of principal and interest under one or more
identified mortgages. Full and timely payment under these mortgage-backed
securities is guaranteed by Ginnie Mae and backed by the full faith and credit
of the United States. These Ginnie Mae securities are readily marketable,
generally at publicly quoted prices. Such Ginnie Mae securities bear interest
at rates ranging from 0.25% to 0.5% less than the whole loans backing such
securities, reflecting the cost of the Ginnie Mae guarantee and servicing of
the mortgages in the pool.
Other investments that the Trust is authorized to make are Fannie Mae and
Freddie Mac Investments, contingent interest mortgage loans, early repayment
loans, pass-through and pay-through securities, construction loans secured by
a bank letter of credit or other guarantee, state and local government-related
investments and pre-construction commitments, in each case as described below
and subject to the restrictions noted below.
Certain of the Trust's authorized investments are tied to specified
ratings by one or more nationally recognized statistical rating agencies. A
description of Standard & Poor's Corporation ("Standard & Poor's") rating
categories is included as Appendix A to the Statement of Additional
Information. The rating categories of other nationally recognized statistical
rating agencies are similar to those of Standard & Poor's.
THE NATIONAL PARTNERSHIP FOR COMMUNITY INVESTMENT
In 1993, the Trust initiated a 5 year investment initiative called The
National Partnership for Community Investment ("National Partnership").
Pursuant to this initiative, the Trust expects to invest significant funds in
mortgage loans and securities secured by properties located in
major metropolitan areas and regions throughout the country. It is
contemplated that an aggregate investment of approximately $500 million will
be made in qualified investments over this five year period by the Trust.
One potential benefit to the Trust from the National Partnership
initiative is expected to be larger and more diversified investment
opportunities. The National Partnership initiative is also expected to benefit
the nation's urban areas and create employment opportunities for union
members. <PAGE>
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Each investment made by the Trust through the National Partnership
program must meet the underwriting criteria established in its Declaration of
Trust, and may be insured or guaranteed by the FHA, the VA, Ginnie Mae, Fannie
Mae or Freddie Mac. While the investments will be consistent with the Trust's
present Declaration of Trust, the National Partnership initiative will help
target investments within the selected metropolitan areas, located in all
regions of the country. The Trust believes this targeting will enable it to
originate investments more expeditiously and at lower cost with borrowers who
will better understand the Trust's investment criteria and origination and
underwriting procedures.
The Trust hopes to secure the involvement and assistance of local and
state housing groups, labor organizations and the United States Departments of
Labor and Housing and Urban Development in achieving its objectives under the
National Partnership initiative.
FANNIE MAE AND FREDDIE MAC INVESTMENTS
The Trust may invest up to 100% of its total assets in Fannie Mae and
Freddie Mac Investments, which consist of (i) obligations issued or guaranteed
by Fannie Mae or Freddie Mac, including Fannie Mae mortgage-backed securities
and Freddie Mac participation certificates backed by pooled conventional
mortgages and (ii) securities that are backed by Fannie Mae or Freddie Mac and
are, at the time of their acquisition by the Trust, rated in one of the two
highest categories by at least one nationally recognized statistical rating
agency. The backing referred to in clause (ii) may take the form of Fannie
Mae mortgage-backed securities and Freddie Mac participation certificates.
SEE "INVESTMENT OBJECTIVE AND POLICIES -- PASS-THROUGH AND PAY-THROUGH
SECURITIES."
Fannie Mae and Freddie Mac are federally chartered corporations engaged
principally in providing a secondary market for mortgage obligations. Neither
Fannie Mae mortgage-backed securities nor Freddie Mac participation
certificates, nor any other Fannie Mae or Freddie Mac Investments, are
federally insured or guaranteed. The mortgages backing any Fannie Mae and
Freddie Mac mortgage-related investments in which the Trust invests will meet
Fannie Mae or Freddie Mac standards, as applicable, will, when the Trust
commits to acquire them, carry competitive market yields and will be secured
by real estate, on which any buildings, structures and improvements to be
built or rehabilitated will be built or rehabilitated with union labor.
As a result of a significant decrease in the availability of
FHA-insured multi-family mortgage loans, Ginnie Mae-guaranteed securities
backed by multi-family mortgage loans, and other multi-family projects, the
Trust has, since 1991, increased investments in single-family Fannie Mae and
Freddie Mac mortgage-backed securities. In these investments, the Trust
enters into commitments with mortgage banking firms, banks and other financial
institutions ("Issuers") to purchase mortgage-backed securities secured by
mortgage loans financing the purchase of newly-constructed single-family homes
that are union-built and meet certain eligibility criteria. The securities
which are purchased by the Trust under this program are single-family
mortgage-backed securities guaranteed by Fannie Mae or Freddie Mac. The
securities are generally required to be delivered to the Trust within 60 days
after all of the qualified mortgage loans backing a given issue of securities
have been closed. <PAGE>
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The interest rate and discount points for each mortgage loan backing
an issue of securities is generally established under one of two alternate
methods. Under the first and most frequently used mechanism, the Trust and
each Issuer agree weekly, based on a survey of current market conditions, on
an interest rate and discount point schedule which is used to determine the
maximum interest rate and maximum discount points on each mortgage loan for
which the Issuer issues a loan commitment during the applicable week. Under
the second mechanism, the Trust and each Issuer agree to use the interest
rates and discount points publicly quoted for securities of the type to be
purchased by the Trust at the time the loan applications for the underlying
mortgage loans are accepted plus the applicable servicing and guarantee fees
with respect to the related securities. Depending upon the terms and
conditions of the loan, the Trust will lock the interest rate for a period of
time in advance of the loan closing. Typically, the interest rate lock will
be for a period of no more than 18 months. The number of points that the
Trust charges for the interest rate lock varies depending upon the length of
the lock-in period.
The interest rates and discount points may be reduced by the mortgagor
prior to the closing of the underlying mortgage loan if market interest rates
have declined from the commitment date. The Trust has concluded that the
slight reduction in yield on the securities backed by mortgage loans whose
interest rates and discount points are reduced in this way is largely offset
by savings on transactions fees that would have been incurred in purchasing
comparable securities from broker-dealers in the secondary market (which
securities also would not necessarily have financed union-built single family
homes).
Almost all of the single family Fannie Mae and Freddie Mac
mortgage-backed securities purchased by the Trust to date have been backed by
fixed rate mortgage loans, although the Trust has the authority to acquire
single family Fannie Mae and Freddie Mac securities which are backed by
adjustable
rate mortgage loans. The Trust anticipates that in the future some portion of
the single family Fannie Mae and Freddie Mac securities it purchases may be
backed by adjustable rate mortgage loans. There are a wide variety of
adjustable rate mortgage loans which may be used to back the single family
Fannie Mae and Freddie Mac securities. These range from loans on which the
interest rate is adjusted periodically (with adjustments occurring from every
6 months to annually to each 3 or 5 years) based upon a specified market index
at the time of each adjustment to loans which carry a fixed interest rate for
a specified period of time (e.g., 3 or 5 years in the case of Freddie Mac
securities or 5 or 7 years in the case of Fannie Mae securities) after which
the interest rate on the loan is adjusted annually based on a specified market
index. There are specified limits on the maximum amount of each upward or
downward adjustment in the interest rate on these mortgage loans and caps on
the maximum aggregate adjustment in the interest rate, either up or down, over
the life of each loan. These limits and caps vary based on the frequency with
which the adjustments are made and by loan type. Some types of the adjustable
rate mortgage loans which may back single family Fannie Mae and Freddie Mac
securities also have provisions under which they may be converted into fixed
rate mortgage loans at the option of the mortgagor at specified times.
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Under the single family Fannie Mae and Freddie Mac securities backed by
adjustable rate mortgage loans, Fannie Mae or Freddie Mac, as applicable,
guarantees the timely payment of interest, based upon the interest rates borne
by the underlying mortgage loans, as the same are adjusted from time to time,
less applicable servicing and guaranty fees.
CONTINGENT INTEREST MORTGAGE LOANS
The Trust is authorized to make or invest in federal
government-related, Fannie Mae or Freddie Mac contingent interest mortgage
loans. A contingent interest mortgage loan of this type is a mortgage loan on
a rental project which provides for repayment of principal and base interest
at a fixed rate which is insured or guaranteed by the federal government or an
agency thereof, or is guaranteed by Fannie Mae or Freddie Mac, and also
includes separate contractual provisions obligating the borrower to pay
additional interest based entirely on net or gross cash flow and/or net or
gross proceeds upon sale, refinancing or disposition of the project. This
additional interest is not insured or guaranteed, and is sometimes referred to
as "contingent interest."
Agreements for such contingent interest mortgage loans would be
negotiated on a project-by-project basis. Accordingly, the precise formula
for calculating the amount of contingent interest payments would vary
depending on several factors, including the projected cash flow from the
project, the base interest rate and financial resources of the borrower, and
other factors which the Trust deems relevant. Receipt of contingent interest
is affected by the amount of appreciation and rental income and expenses of a
project. Generally, if there is insufficient cash flow or appreciation, no
contingent interest is due or payable.
Contingent interest mortgage loans generally require the lender to
accept a lower base interest rate than it otherwise would have been able to
negotiate in return for the right to receive as additional interest a portion
of cash flow and/or proceeds from the sale or refinancing of the project. The
Trust is permitted to make a contingent interest mortgage loan in return for a
base interest rate which is up to 2% per annum lower than the rate which it
would otherwise be willing to accept (i.e., in the absence of the contingent
interest feature). Although all principal and base interest would remain
insured by FHA, or guaranteed by Ginnie Mae, Fannie Mae or Freddie Mac, as the
case may be, this structure may result in a reduction of current income
(particularly during construction and rent-up) in the hope of greater returns
in future years based on the project's economic performance. As noted above,
such amounts of contingent interest are neither federally guaranteed or
insured nor guaranteed by Fannie Mae or Freddie Mac. See "RISK
FACTORS--Defaults on Loans."
EARLY REPAYMENT LOANS
The Trust also may invest in federally insured or guaranteed mortgages or
securities backed thereby and in Fannie Mae and Freddie Mac Investments that
include a right to require the borrower to repay a mortgage loan prior to the
regular maturity date of the mortgage loan after an initial period during
which the loan cannot be called. This authorization affords the Trust<PAGE>
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additional flexibility to make loans of shorter duration. Such loans may be
more attractive to borrowers since the rate of interest on shorter term loans
may be lower and may be more attractive to the Trust because it involves a
commitment of funds for a shorter term.
In the case of such "early repayment" loans that are federally insured or
guaranteed, while all principal and base interest would continue to be insured
or guaranteed by FHA, VA or Ginnie Mae, the balloon repayment obligation would
not be secured by the mortgaged real property or by any government insurance
or guarantee. It is anticipated that such obligation instead would be secured
by a security interest in the ownership interests of the principals of the
borrower or other security as negotiated by the Trust and the borrower or
principals. Since the obligation to repay the loan prior to its stated
maturity would not be included in the note and mortgage, the Trust would not
be entitled to foreclose on the mortgaged property or obtain insurance
proceeds in the event of non-compliance with a demand for repayment at such
earlier date. The Trust expects that if it is unable to enforce its right to
early repayment, it would continue to hold the mortgage loan or the securities
backed by such mortgage loan, the principal and interest of which would remain
federally insured or guaranteed. In such event, a loss could be incurred
because the Trust would have required a higher rate for a mortgage or
mortgage-backed security that was not accompanied by the right to demand
repayment at an earlier date. The risk described in this paragraph does not
apply to "early repayment" loans, or securities backed thereby, that are
guaranteed by Fannie Mae or Freddie Mac. This is because such loans and
securities are guaranteed at the stated early maturity.
PASS-THROUGH AND PAY-THROUGH SECURITIES
The Trust also is authorized to invest in mortgage-backed pass-through
or pay-through securities if the securities are rated in one of the two
highest rating categories of a national rating agency, such as Standard and
Poor's or Moody's Investors Service ("Moody's"), and also backed by certain
mortgage investments in which the Trust is otherwise authorized to invest.
Mortgage-backed pass-through or pay-through securities are securities
which may be issued by privately owned corporations or public issuers and
secured by mortgages or mortgage-related instruments such as FHA-insured or
VA-guaranteed loans, Ginnie Mae securities or securities which are guaranteed
by Fannie Mae or Freddie Mac, and provide certain characteristics and features
that federally insured loans or guaranteed certificates do not. Although
payment of the principal of, and interest on, such mortgage-backed securities
may be secured by Ginnie Mae securities, FHA-insured loans, VA-guaranteed
loans or securities which are guaranteed by Fannie Mae or Freddie Mac, such
mortgage-backed pass-through or pay-through securities represent obligations
solely of the issuer and may not themselves be guaranteed or insured by any
governmental entity or instrumentality.
Although the Trust will purchase only mortgage-backed pass-through and
pay-through securities that have been rated in one of the two highest rating
categories by a nationally recognized statistical rating agency, there is no
assurance that any rating on securities purchased by the Trust will continue
for any given period of time or that it will not be revised downward or<PAGE>
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withdrawn entirely by the rating agency if, in its judgment, circumstances so
warrant. Any such downward revision or withdrawal of such rating would be
likely to signify an increase in the risk to the Trust associated with the
related securities and would be likely to result in a reduction in the value
of the related securities. The Trust is not required to dispose of securities
the rating for which has been revised below the second highest rating category
or withdrawn except to the extent required by certain investment restrictions.
See "INVESTMENT RESTRICTIONS, " RISK FACTORS--Investment Restrictions."
PRIVATELY COLLATERALIZED INVESTMENTS; STATE AND LOCAL
GOVERNMENT-RELATED INVESTMENTS
The Trust is authorized to invest up to 30% of its total
assets in the following two categories of investments.
1. Privately Collateralized Investments
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The Trust may invest in construction loans, or securities backed by
construction loans, if the loans are collateralized by (a) a letter of credit
in favor of the Trust issued by a depository institution rated in category "B"
or higher by Thomson Bankwatch, Inc. ("Thomson Bankwatch") on terms and
conditions acceptable to the Trust, or (b) another form of guaranty issued by
an entity with a short-term (12 months or less) rating at the time of issuance
of the guaranty of at least "A-1" from Standard & Poor's or "P-1" from Moody's
with respect to a guaranty with a duration of 12 months or less, or with a
long-term (more than 12 months) rating in one of the two highest rating
categories of at least one nationally recognized statistical rating agency
with respect to a guaranty with a duration of more than 12 months.
Thomson Bankwatch is a proprietary credit ratings and consulting
service. A rating of "B" is the third highest of nine rating categories. A
bank rated in category "B" is characterized as follows: "A strong company
with a solid financial record and well received by its natural money markets.
Some minor weaknesses may exist, but any deviation from the company's
historical performance levels should be both limited and short-lived. The
likelihood of a problem developing is small, yet slightly greater than for a
higher-rated company." As of December 31, 1996 there were 114 banks in the
United States rated in category "B" or higher by Thomson Bankwatch. A
description of all Thomson Bankwatch rating categories is included as Appendix
B to the Trust's Statement of Additional Information.
There is no assurance that the rating of the issuer of any letter of
credit or other form of guaranty which collateralizes a construction loan
investment acquired by the Trust will continue for any given period of time or
that it will not be revised downward or withdrawn entirely by the rating
agency if, in the rating agency's judgment, circumstances so warrant. Any
such downward revision or withdrawal of such rating would be likely to signify
an increase in the risk to the Trust associated with the related investment
and would be likely to result in a reduction in the value of the related
obligation. The Trust is not required to dispose of privately collateralized
construction investments if the rating of the issuer of the related letter of
credit or guaranty is downgraded or withdrawn, except to the extent required
by certain investment restrictions. See "INVESTMENT RESTRICTIONS"; "RISK<PAGE>
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FACTORS--Investment Restrictions." Notwithstanding any of the above, such a
downward revision or withdrawal of a rating would not have any impact upon the
flow of income from the project to the Trust.
If the issuer of any letter of credit or other form of guaranty which
secures a privately collateralized construction investment fails or is unable
to meet its obligations under such letter of credit or other guaranty, the
Trust would be subject to the same real estate-related risks and uncertainties
that apply to real estate investments generally, which could have a material
adverse effect on the value and performance of the investments, except to the
extent that the Trust has obtained other forms of credit enhancement or has
taken other steps to secure its interests in the project. See "RISK FACTORS
- -- Real Estate-Related Risks."
The Trust intends to enter into a Memorandum of Understanding with
approximately 4 or 5 major banks with respect to privately collateralized
construction loan investments. It is anticipated that the Memorandum of
Understanding with each bank will provide as follows: The Trust and the bank
will cooperate with each other in marketing efforts with respect to new
construction and substantial rehabilitation and permanent mortgage loan
financing on multifamily rental and cooperative housing projects and single
family developments located within a specified market region. The
construction loan will be secured by a letter of credit issued by the bank or
another form of guaranty issued by the bank or another entity acceptable to
the Trust. The making of the Trust loan is also conditioned on the delivery
of a commitment from (a) Fannie Mae to issue mortgage-backed securities
secured by the permanent loan, (b) another source acceptable to the Trust to
provide credit enhancement for the permanent loan on terms acceptable to the
Trust, or (c) a commitment for a take-out of the construction loan from an
entity, and on terms, acceptable to the Trust.
2. State and Local Government-Related Obligations
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The Trust may invest in the types of state and local government-related
obligations described below.
(a) Full Faith and Credit. The Trust may invest in construction
or permanent loans, or securities backed by construction or permanent loans,
or interests in such loans or securities, if such loans or securities are
supported by a full faith and credit guaranty of a state or local government
or agency or instrumentality thereof that has general taxing authority,
without regard to the credit rating of such entity or the obligations
acquired. If the state or local government or agency or instrumentality which
provided such guaranty fails or is unable to meet its obligations thereunder,
the Trust would be subject to the same real estate-related risks and
uncertainties that apply to real estate investments generally, which could
have a material adverse effect on the value and performance of the
investments. See, "RISK FACTORS -- Real Estate-Related Risks."
(b) "Top Tier" Agencies. The Trust may invest in construction
or permanent loans, or securities backed by construction or permanent loans,
or interests in such loans or securities, provided that such loans or<PAGE>
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securities are issued (with or without recourse) or guaranteed, as the case
may be, by a state or local housing finance agency designated "top tier" by
Standard & Poor's (or designated comparably by another nationally recognized
statistical rating agency, as determined by the Executive Committee of the
Trust) at the time of acquisition by the Trust, and are (i) with full recourse
(directly or by way of guaranty or indemnity) to such agency's general credit
and assets, or (ii) secured by recourse to such assets of the agency or by
such third party credit enhancement as to provide, in the judgment of
management, protection comparable to a pledge of the agency's general credit,
or (iii) backed by the "moral obligation" of the state in which such agency is
located in the form of the state's commitment to replenish any insufficiencies
in the funds pledged to debt service on the obligations.
Although the agency must be rated "top tier" by Standard & Poor's,
there is no requirement that the obligations to be acquired by the Trust be
rated or ratable at all, as long as the agency is a top tier agency at the
time an obligation is acquired by the Trust. Standard & Poor's has informally
indicated to the Trust that the only relevance a top tier designation would
have on the rating of particular obligations issued by such an agency is that
Standard & Poor's would, under certain circumstances, increase the rating of
such obligations from the level they would otherwise be entitled to receive by
one-half a level within an existing rating category. So, for example, an
issue that might otherwise be entitled to an A rating could get an A+ rating
if the agency was top tier (or an AA- rating could be raised to an AA rating).
However, an A+ rating would not be increased to AA- because it would take the
rating into another rating category (that is, from single-A to double-A).
Before designating a housing agency as top tier, Standard & Poor's
must favorably evaluate a number of criteria, including the agency's general
track record, unrestricted fund balances, administrative capabilities,
investment policy, internal controls, portfolio quality and the sponsoring
state's commitment to housing. For a more complete description of the
guidelines used by Standard & Poor's, see Appendix C to the Statement of
Additional Information. There can be no assurance that any such rating of any
agency would continue for any given period of time after the Trust acquires
such an obligation, or that it would not be revised downward or withdrawn
entirely by the rating entity if, in its judgment, circumstances so warrant.
A downgrade in or withdrawal of the rating of an agency would signify an
increase in the risk that the obligations issued or guaranteed by that agency
would not be paid in accordance with their terms and would be likely to result
in a reduction in the value of the related obligations, except to the extent
that the Trust has obtained other forms of credit enhancement or has taken
other steps to secure its interests in the project. The Trust is not required
to dispose of the obligations issued or guaranteed by an agency which loses
its top tier rating, except to the extent required by certain investment
restrictions. See "INVESTMENT RESTRICTIONS;" "RISK FACTORS--Investment
Restrictions."
With respect to any obligation issued or guaranteed by a top tier
agency, the Trust expects that it will be secured either by the recourse
obligation of the issuer (or its guarantee) or by other collateral security,
in addition to having the benefit (directly or indirectly) of a lien on the
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underlying real estate. Management of the Trust intends to undertake
transactions with top tier agencies under the foregoing authority selectively,
and only after having made its own independent evaluation and investigation
with respect to the experience, credit history, and underwriting expertise of
the agencies issuing the obligations to be acquired. The Trust therefore
believes that the direct obligation or other collateral security provided by
the top tier issuer will be a significant factor in helping to assure the
safety and soundness of the investment to the Trust. If such recourse or
other collateral security which the Trust receives in conjunction with an
investment issued by a top tier agency proves insufficient to ensure full and
timely performance of the obligations of the issuer under the terms of the
investment, the Trust (or an agent or nominee on its behalf) will have
recourse to a lien on the underlying real property securing the projects
financed. If the Trust is required to enforce its rights to the underlying
real property because its recourse to the
issuer or the other collateral security is insufficient, the Trust will be
subject to the same real estate-related risks and uncertainties that apply to
real estate investments generally, which could have a material adverse effect
on the value and performance of the investments. For a description of these
potential risks, see "RISK FACTORS -- Real Estate-Related Risks" below.
(c) State Insurance Funds/Programs. The Trust may invest in
construction and permanent loans, or securities backed by construction or
permanent loans, or interests in such loans or securities, if no less than the
first 75% of such investment is supported by a guaranty of a state-related
agency under a state insurance or guarantee program with a record of
creditworthiness, as evidenced by a rating of the agency or the obligations
issued or guaranteed by such agency, of at least "A-" by Standard & Poor's,
Fitch Investors Services Inc. ("Fitch"), or Duff & Phelps Inc. ("Duff &
Phelps") or at least "A3" by Moody's at the time of the acquisition of such
investment by the Trust. There can be no assurance that any such rating would
continue for any given period of time after the insurance or guaranty is
issued, or that it would not be revised downward or withdrawn entirely by the
rating entity if, in its judgment, circumstances so warrant. A downgrade in
or withdrawal of the rating would signify an increase in the risk to the Trust
associated with the related investments, and would be likely to result in a
reduction in the value of the related obligations. The Trust is not required
to dispose of these investments if the rating of an agency or the obligations
issued or guaranteed by such agency is downgraded or withdrawn.
There is no requirement that obligations acquired under this category be
rated or ratable.
If the state-related agency providing the guaranty for obligations
acquired under this investment authority failed or is unable to meet its
obligations thereunder, or if the guaranty was insufficient to cover all
losses in the event of a default on a construction or permanent loan in which
the Trust invests or which backs securities in which the Trust invests, the
Trust would be subject to the same real estate-related risks and uncertainties
that apply to real estate investments generally, which could have a material
adverse effect on the value and performance of the investments. See, "RISK
FACTORS--Real Estate-Related Risks."
<PAGE>
<PAGE>
(d) State and Local Government Encouraged Projects Meeting
Specified Underwriting Criteria. The Trust is permitted to invest in
construction or permanent loans, or securities backed by construction or
permanent loans, that have evidence of support by a state or local government
or an agency or instrumentality thereof (evidenced by at least the adoption of
a resolution by the governing body or other applicable governmental agency in
support of the related project), provided that all of the following criteria
are satisfied: (i) the loan-to-value ratio of the project shall not exceed
50%, the "value" for such purposes to be determined on the basis of an
independent appraisal by a licensed appraiser acceptable to the Trust, except
that a loan-to-value ratio of up to 65% shall be permitted if mortgage
insurance in an amount that will cover all first losses down to a 50%
loan-to-value level has been provided by a private mortgage insurance company
rated at least "A-" by Standard & Poor's, Fitch or Duff & Phelps or at least
"A3" by Moody's or approved and accepted by Fannie Mae or Freddie Mac for
insurance of the type of obligation to be acquired by the Trust; (ii) the
state or local government or agency or instrumentality thereof or a foundation
exempt from federal income tax under IRC Section 501(c) must have, in the
aggregate, a financial participation in the project of at least $15,000
(present value) per unit for a period at least equal to the outstanding term
of the Trust's investment, such financial interest to be in the form of
subordinate financing, an interest rate write-down, a donation of land, some
other form of insurance or guarantee or some other similar contribution within
guidelines adopted by the Executive Committee of the Trust; (iii) the sponsor
of the project must have a demonstrably successful record of developing or
managing low-income housing projects, in accordance with guidelines developed
by the Trust; (iv) the underwriter and servicer of the mortgage loan for the
project must have been approved by the Trust; (v) the construction of the
project must be supervised on a regular basis by agents or employees of the
state or local government or agency or instrumentality thereof, or tax-exempt
foundation; and (vi) the minimum debt service coverage for the project must be
at least 1.15 to 1, based upon projections of future income and expenses
satisfactory to the Trust. There is no requirement that the obligations
acquired by the Trust be rated or ratable.
The investments in this category are subject to real-estate related
risks which could have a material adverse effect on the value and performance
of the obligations. See "RISK FACTORS--Real Estate-Related Risks."
(e) Collateralized Loans. The Trust may invest in construction
(but not permanent) loans made by a state or local government or an agency or
instrumentality thereof, or by another party so long as the related project is
sponsored by a state or local government or an agency or instrumentality
thereof, to the extent that such loans are fully collateralized or secured in
a manner satisfactory to the Trust by: (i) cash placed in trust or in escrow
by a state or local government or agency or instrumentality thereof with an
independent third party satisfactory to the Trust on terms and conditions
satisfactory to the Trust; or (ii) a letter of credit in favor of the Trust
established by or at the direction of a state or local government, or an
agency or instrumentality thereof, with a depository institution rated in
category "B" or higher by Thomson Bankwatch, on terms and conditions
acceptable to the Trust; or (iii) some other form of guaranty issued by an
entity with a short-term (twelve months or less) rating at the time of
<PAGE>
<PAGE> issuance of the guaranty of at least "A-1" from Standard & Poor's or
"P-1" from Moody's with respect to a guaranty with a duration of 12 months or
less, or with a long-term (more than 12 months) rating in one of the two
highest rating categories by at least one nationally recognized statistical
rating agency with respect to a guaranty with a duration of more than twelve
months. Obligations acquired by the Trust under this category are not
required to be rated or ratable.
There is no assurance that the rating of the issuer of any letter of
credit or other form of guaranty which collateralizes this type of
construction loan investment acquired by the Trust will continue for any given
period of time or that it will not be revised downward or withdrawn entirely
by the rating agency if, in the rating agency's judgment, circumstances so
warrant. Any such downward revision or withdrawal of such rating would
signify an increase in the risk to the Trust associated with the related
investment and would be likely to result in a reduction in the value of the
related obligation. The Trust is not required to dispose of its investments
in collateralized loans if the rating of the issuer of the related letter of
credit or guaranty is downgraded or withdrawn.
If the issuer of any letter of credit or other form of guaranty which
secures this type of collateralized construction loan investment fails to meet
its obligations under such letter of credit or other guaranty, the Trust will
be subject to the same real estate-related risks and uncertainties that apply
to real estate investments generally, which could have a material adverse
effect on the value and performance of the investments. See, "RISK
FACTORS--Real Estate-Related Risks".
In evaluating investments in all categories of state and local
government-related obligations described above, the Trust staff will consider,
among other factors: (i) the experience, past performance, credit rating,
competence and managerial and marketing ability of prospective project
developers; (ii) the geographic area; (iii) the location, construction
quality, condition and design of the project; (iv) the projected
loan-to-appraised value ratio and underlying assumptions on which such
projections are based; (v) the current and projected cash flow; (vi) the
potential for capital appreciation; (vii) the occupancy, supply of and demand
for properties of similar type in the vicinity; (viii) the prospects for
liquidity through sale, financing or refinancing of the project; and (ix) such
other factors as become relevant in the course of the evaluation process. In
evaluating such underwriting criteria, the Trust may retain consultants to
assist them in evaluating state and local government investment opportunities.
See "INVESTMENT OBJECTIVE AND POLICIES -- Retention of Technical Consultants."
In determining whether to invest in a state or local
government-related mortgage loan or security, the Trust is not limited to
investments which have been rated in any particular category by a nationally
recognized statistical rating organization. Although such a rating provides
no assurance of repayment and is subject to revision or withdrawal at any time
by the assigning rating agency, ratings do provide the prospective investor
with some indication that the proposed structure and revenue analysis satisfy
the rating agency's internal criteria for the respective rating. The Trust
will seek to minimize the risk of loss in this connection by investing only in
instruments satisfying other criteria, as outlined above.<PAGE>
<PAGE>
The Trust believes that the foregoing state and local
government-related investments provide the Trust with considerable flexibility
in creating investment opportunities for the Trust. In addition to the issues
outlined above, the investments can involve certain risks not present with
other authorized investments. Without requirements for ratings or access to
taxing power, the credit determinations with respect to the proposed state and
local government-related investments could be more difficult to make, and
their credit quality could be lower than that of other investments the Trust
is permitted to make. The state and local government-related investments may
also be less liquid than most other investments authorized for the Trust.
However, the state and local government-related investments, together with all
other Trust investments, would be subject to the SEC's requirement that at
least 90% of the value of the Trust's assets be invested in investments that
are readily marketable and convertible into cash within 120 days without a
discount from their market value. See "INVESTMENT RESTRICTIONS;" "RISK
FACTORS--Redemption." To the extent that state and local government-related
investments are not rated or may not be readily traded in existing markets,
the valuation of these are likely to be less precise than those of the Trust's
other investments.
PRE-CONSTRUCTION COMMITMENTS
The Trust may enter into pre-construction commitments to provide
long-term financing upon satisfactory completion of a specified project. Such
commitments, commonly known as permanent loan commitments, are often a
precondition to the ability of a developer to obtain a construction loan. The
Trust may receive good-faith deposits for such financing commitments, but such
deposits are not expected to be a major source of Trust income. In contrast
to a company hoping to earn a standby commitment fee without investment, the
Trust will make loan commitments with the purpose and ability to acquire the
mortgage or mortgage-related investment.
Because complete funding of construction and long-term mortgage loans
requires up to three years after making a loan commitment, the Trust estimates
the amount of funds it expects to have available for investment from principal
payments and prepayments on existing loans, dividend reinvestment and sales of
additional Units to new or existing Participants. Loan commitments are made
after considering reasonable projections of available funds. At times, the
Trust's short-term cash balances may be less than its outstanding loan
commitments. This commitment policy reduces the amount of assets the Trust
would otherwise invest in lower yielding, short-term investments. The Trust
maintains highly liquid government securities in a segregated account which,
in addition to short-term liquid assets, and amounts projected to be
available, is at least equal to outstanding loan commitments. If, however, a
substantial amount of the funds projected to be available are not in fact
received, the Trust would either borrow funds pursuant to lines of credit
previously established with commercial banks (in accordance with applicable
asset coverage requirements) or sell long-term assets to raise the cash
necessary to fund the loan commitments.
<PAGE>
<PAGE>
FORWARD COMMITMENTS
The majority of Trust investments are made pursuant to forward
commitments, in which the Trust agrees to purchase investments in or backed by
mortgage loans that have not yet been originated. This type of transaction
requires the Trust to commit funds for future purchases of such investments at
rates which are set at the time of the commitment. With respect to
multi-family mortgage loans, the Trust sets fixed rates for future delivery.
With respect to single-family mortgage loans, the Trust generally sets either
(i) a fixed rate or (ii) a maximum rate that may be adjusted by the mortgagor
prior to the closing of the mortgage loan if market interest rates decline.
In the event market interest rates decline, it may be difficult for the Trust
to get delivery of the single- and multi-family mortgage loans that back the
Trust's investments. The Trust generally imposes penalties equal to the
commitment fee on the mortgage loan (generally 1/2 to 1 point) where delivery
on a forward commitment is not fulfilled. The Trust also has begun including
mandatory-delivery clauses in its forward commitments on certain obligations
secured by mortgages on multi-family projects. Notwithstanding such penalties
and clauses referred to above, there is no guarantee that the obligations
committed to will be delivered to the Trust.
TEMPORARY INVESTMENTS
The Trust will invest funds temporarily in liquid assets until they
can be placed in investments meeting Trust investment objectives. Such liquid
assets are limited by the Declaration of Trust to: United States Treasury
issues; federal agency issues; commercial bank time certificates of deposit
and savings bank deposits in domestic banks insured by the Federal Deposit
Insurance Corporation (through the Bank Insurance Fund); domestic savings
association deposits insured by the Federal Deposit Insurance Corporation
(through the Savings Association Insurance Fund); bankers acceptances (drafts
or bills of exchange accepted by a bank or trust company that guarantees
payment thereof); commercial paper rated as category A-1 or P-1 by Standard &
Poor's or Moody's; collateral loans and warehousing agreements (temporary
assignments of mortgage notes or mortgage-backed securities) secured by
mortgages on FHA-insured or VA-guaranteed single-family dwellings or
FHA-insured multi-family projects or by mortgage-backed pass-through or pay
through securities guaranteed by Ginnie Mae, Fannie Mae or Freddie Mac; and
interests (including repurchase agreements, that is, purchase of securities
accompanied by an agreement to resell the securities at a later date) in
United States Government securities pledged by a bank or other borrower to
secure short-term loans from the Trust.
The Trust also may invest funds temporarily in registered investment
companies investing predominantly in United States Treasury issues or federal
agency issues. Investments in other registered investment companies are
restricted as follows:
(1) Such securities acquired by the Trust shall not exceed 3% of
the total outstanding voting stock of any investment company;
<PAGE>
<PAGE>
(2) The total value of such securities acquired by the Trust in
any one investment company shall not exceed 5% of the Trust's total assets;
and
(3) The total value of such securities acquired by the Trust in
all investment companies shall not exceed 10% of the Trust's total assets.
RETENTION OF TECHNICAL CONSULTANTS
The majority of the construction and long-term mortgage loans and
mortgage-backed securities in which the Trust invests have been underwritten
to meet the requirements of HUD, Fannie Mae or Freddie Mac, or have been
underwritten by state or local housing finance authorities based on specified
qualifying loan to value standards. In evaluating certain investments,
however, the Trust may retain consultants to provide site inspections,
appraisal reviews, environmental analyses, property management reviews, and
such other statistical and factual information as the Trust may deem useful to
its evaluation and investment decision-making. Such consultants would provide
such analysis on a case-by-case basis and only with respect to occasional
transactions in specific proposals. It is anticipated that any such
consultants would be compensated either on an hourly basis or for a set fee
for evaluating each specific proposal.
OTHER POLICIES
If it is feasible and profitable, the Trust may directly service some
of its long-term loans. Generally, however, long-term mortgage loans and
construction loans in which the Trust proposes to invest, whether or not they
are originated by the Trust, will ordinarily be serviced by mortgage banks or
other mortgage servicing institutions, such as savings and loan institutions
or commercial banks, located throughout the United States. Such institutions
are generally compensated for their services at rates that vary from
one-twentieth to three-quarters of one percent (.05%-.75%) per annum,
calculated monthly, on the then current outstanding principal balance in the
case of long-term first mortgage loans, and at rates of 1% per annum or more
of the total loan commitment in the case of construction loans.
The Trust is empowered to invest in loans for projects anywhere in the
United States. The Trust will invest only in loans which provide yields
competitive with those then generally prevailing in the market taking into
consideration all factors relevant to an appropriate evaluation of risk and
return and the overall objectives of the Trust. Among loans of comparable
yield, the Trust will, if possible, invest in projects in geographic areas in
which Participants or their members are located.
<PAGE>
<PAGE>
While the Trust does not buy mortgage loans or securities backed by
mortgage loans for purposes other than investment, the Trust will from time to
time buy or sell mortgage loans in order to prevent fluctuations in the
weighted average maturity of its portfolio or to maintain a desirable level
of portfolio diversification. Moreover, the Trust remains free to dispose of
construction and long-term loan investments at any time to meet objectives of
the Trust, generally on the basis of changed circumstances or market
conditions. The short-term liquid assets in which the Trust may temporarily
invest are subject to a very high turnover rate. Fees associated with the
purchase, sale or redemption of such liquid assets are nominal. See
"INVESTMENT ADVISER."
INVESTMENT RESTRICTIONS
The Trust operates under the following restrictions and policies relating
to investment of its assets and activities.
The Trust will not:
(1) concentrate its investments in any industry except the real
estate industry as set forth above;
(2) permit less than 70% of the mortgages and
mortgage-backed securities acquired by the Trust or backing securities
acquired by the Trust to be federally insured or guaranteed or guaranteed by
Fannie Mae or Freddie Mac with respect to the payment of principal and
interest (base interest in the case of contingent interest mortgage loans) or
issued by Fannie Mae or Freddie Mac; or
(3) originate or purchase any loan secured by a mortgage for a
project involving new construction or rehabilitation unless the buildings,
structures, or other improvements to be built on the real estate subject to
such mortgage will be built or rehabilitated by union labor.
The foregoing policies are fundamental to the Trust and may not be
changed without the approval of the holders of a majority of the Trust's
outstanding Units.
In addition, the Trust will not:
(1) issue senior securities, except in accordance with clause
(9) below;
(2) purchase securities on margin (but the Trust may obtain such
short-term credits as may be necessary for the clearance of transactions);
(3) sell any securities short;
(4) write put and call options;<PAGE>
<PAGE>
(5) underwrite the securities of other issuers except that the
Trust may resell to other financing institutions all or a portion of the
interests in loans acquired by the Trust in transactions exempt from
registration under the Securities Act of 1933, as amended;
(6) purchase or sell real estate (other than real estate
mortgage loans and construction loans) except for real
estate acquired through the foreclosure of mortgage loans
and construction loans held by the Trust;
(7) purchase or sell commodities or commodities futures
contracts;
(8) lend any assets of the Trust except as set forth above;
(9) borrow money from banks unless immediately after such
borrowing there is an asset coverage of at least 300%
of all borrowings of the Trust. Not more than fifty percent
of the value of the Trust's assets will be used as security
for such borrowings. This borrowing provision is not for
investment leverage, but primarily to facilitate management
of the portfolio by enabling the Trust to meet redemption
requests and to make advances on existing construction loans
and to meet outstanding Trust commitment obligations (and,
on occasion, to make income distributions) when available
Trust cash is insufficient for such purposes and the
liquidation of portfolio securities is deemed to be
inconvenient or disadvantageous. Interest paid by the Trust
on borrowed funds will decrease the amount of Trust assets
available for investment;
(10) invest in commodities, commodity contracts, oil, gas or
other mineral leases, or arbitrage transactions; or
(11) invest more than 10% of the value of the Trust's assets in
securities that are not readily marketable and convertible
into cash within 120 days without a discount from their
market value.
One effect of the restriction described in clause (11) above is to
prohibit the Trust from investing more than ten percent of the value of its
assets in investments that do not satisfy the liquidity requirement even
though they may otherwise be permitted under the Trust's Declaration of Trust.
RISK FACTORS
RELIANCE ON MANAGEMENT -- UNSPECIFIED INVESTMENTS
The Trustees and officers of the Trust will invest the Trust's assets
as deemed prudent by the Trustees. See "INVESTMENT OBJECTIVE AND POLICIES,"
and "MANAGEMENT." Investors in the Trust will not have any specific<PAGE>
<PAGE>
information with which to evaluate future investments of the Trust in advance
of the Trust's investment or commitment to invest. Given present
uncertainties concerning the future status of FHA and HUD, there can be no
assurance that the Trust will be successful in acquiring investments that meet
the business objectives and investment objectives and policies of the Trust.
FLUCTUATING INTEREST RATES
While the Trust retains the freedom to sell all or any portion of its
assets if circumstances (e.g., changed market conditions) suggest the prudence
of that course, it will manage its assets with the expectation that despite
major temporary fluctuations in interest rates from time to time, return on
assets over a long term will be satisfactory. Nevertheless, the market value
of Trust mortgage loans and mortgage-backed securities and the resulting net
asset value of the Trust portfolio will fluctuate with short-term changes in
interest rates. When market interest rates rise, the net asset value of the
Trust will decline; Participants who redeem Units in such circumstances will
suffer the resulting loss in value of Trust assets. Conversely, in certain
periods of declining interest rates, mortgage investments held by the Trust
will increase in market value but may be prepaid by the various borrowers or
other obligors so that anticipated yields on such investments may not be
realized.
Scheduled payments of principal and any prepayments will be reinvested at
prevailing interest rates, which may be less than the rate of interest for the
loans or securities on which such payments are made. In addition, to the
extent the Trust purchases mortgage loans, mortgage-backed securities or other
investments at a premium (i.e., an amount in excess of the principal amount of
the asset purchased), partial prepayments of principal would reduce the yield
to the Trust and, in the event of complete prepayment, the Trust would be
unable to recover or recoup the premium.
REDEMPTION
While the Trust does not buy loans or securities backed by mortgage
loans for purposes other than investment, the Trust will from time to time buy
or sell mortgage loans in order to prevent fluctuations in the weighted
average maturity of its portfolio or to maintain a desirable level of
portfolio diversification. See "INVESTMENT OBJECTIVE AND POLICIES--Other
Policies.) Although registered investment companies generally
must value their assets and accept redemption requests daily, the Trust is
permitted to value its assets and accept redemption requests no more often
than quarterly, by virtue of an exemptive order received from the SEC. The
Trust's Board of Trustees has implemented monthly valuations of the Trust's
assets, which enables the Trust to redeem Units on a monthly, rather than
quarterly, basis. Consistent with the Trust's exemptive order and its
redemption procedures (see "REDEMPTION"), the Trust will invest at least 90%
of the value of its assets in investments that are readily marketable and<PAGE>
<PAGE>
convertible into cash within 120 days without a discount from their market
value (see "INVESTMENT RESTRICTIONS"). It is possible, however--due to
changes in interest rates, the performance of specific properties, or general
economic conditions since the monthly Valuation Date preceding a request for
redemption--for the market value of an investment at the time of its
liquidation to be less than its market value as of the monthly Valuation Date
preceding a request for redemption.
Most of the Trust's assets could be disposed of in a timeframe
sufficient to meet monthly redemptions. In the event the Trust were to
receive redemption requests with respect to a particular monthly Valuation
Date in an amount that exceeds the amount of assets that the Trust could
liquidate at market value prior to the applicable redemption date, the Trust
would not be able to satisfy such redemption requests without liquidating
certain of its assets at a discount from their market value. If such
circumstances were to occur, the Trust would be unable to satisfy at least
some of the redemption requests on a timely basis because the Trust would not
liquidate assets at a discount from their market value. Therefore, in
anticipating the availability of funds based on a redemption of Units,
investors should be prepared for the possibility of a delay in the
satisfaction of a monthly redemption request. Such a delay would not,
however, extend more than 120 days beyond the monthly Valuation Date following
the Trust's receipt of the redemption request (except to the extent it were
necessary to liquidate that portion (up to 10%) of the Trust's portfolio not
required to be invested in assets that are readily marketable and convertible
into cash within one hundred twenty days without a discount from their market
value). See "REDEMPTION." Redemption is the only means available to the
holder of a Unit wishing to liquidate its interest in the Trust, as the Units
may not be transferred, assigned, pledged or otherwise encumbered. See
"INCIDENTS OF OWNERSHIP OF UNITS." The Trust has never failed to satisfy any
redemption request on a timely basis.
LIMITED RESALE MARKET FOR CERTAIN TYPES OF LOANS
The Trust normally anticipates holding the majority of its loans to
maturity. However, if for any reason the Trust were required to sell such
loans quickly, it may, on occasion, be able to dispose of them only at a
discount from their market value. These constraints relate principally to
loans that are not federally insured or guaranteed or not issued or
guaranteed by Fannie Mae or Freddie Mac. Under the Trust's Declaration of
Trust, such loans may not exceed more than 30% of the Trust's portfolio.
Moreover, to the extent such loans are considered illiquid for purposes of the
Investment Company Act (see "INVESTMENT RESTRICTIONS"), they will be treated
as such by the Trust.
A number of factors constrain the marketability of long-term loans that
are not federally insured or guaranteed or not issued or guaranteed by Fannie
Mae or Freddie Mac. Administrative loan servicing requirements and costs and
other factors restrict the resale market for single-family mortgage loans to
some extent. The large denominations of loans for multi-family projects
restrict the number of buyers interested in them. In the case of any
long-term loan, the market is apt to be more limited than for loans of shorter
maturity. Required liquidation of long-term loans in an unfavorable market
<PAGE>
<PAGE>
could result in significant losses from face value.
The market for construction loans is affected by the uncertainties
inherent in building construction. If a loan is sold during the construction
period, the purchaser customarily will seek assurances as to the status of
construction, the nature of the permanent loan commitment and other matters
relating to the underlying project. These and other factors may cause delays
in the event a decision is made to sell a construction loan.
INFLATION
Loans in which the Trust invests generally do not include any
provision giving the lender the right to require repayment of principal in
advance of maturity except in the case of default. The rate of inflation in
the national economy may from time to time be such that prevailing interest
rates exceed the rates earned on the loans in the Trust's portfolio. Such
circumstances could diminish the value of the Trust's assets, although
continued sales of Units will tend to mitigate such diminution.
DEFAULTS ON LOANS
The Trust may experience certain losses in the event of default on its
mortgage investments. This is true even for federally insured or guaranteed
loans. Losses on federally insured or guaranteed loans can occur as a result
of: (i) the requirement in some cases that the holder of a mortgage in
default generally pay an assignment fee of 1% when receiving an insurance
settlement; (ii) the requirement in some cases that the holder of the mortgage
obtain title to the property, through foreclosure or otherwise, in order to
obtain an insurance settlement; (iii) the fact that federal agencies can, in
some cases, settle insurance obligations by payment in debentures rather than
in cash; (iv) possible offsets of insurance proceeds against amounts held by
the Trust or mortgage banker; (v) loss of certain interest payments upon
default that are not covered by certain FHA insurance programs; (vi) costs of
foreclosure and related costs; and (vii) other reasons.
For VA-guaranteed loans not included in Ginnie Mae pools, it is
possible that the amount of the loss will exceed VA's maximum loss exposure
under its guaranty. If this were to occur, the Trust would bear the portion
of the loss not covered by VA's guaranty.
The Trust may invest in certain mortgages or securities which, in
addition to principal and base interest insured or guaranteed by FHA, VA or
Ginnie Mae, or guaranteed by Fannie Mae or Freddie Mac, include separate
uninsured obligations. These investments may consist of (i) federal
government-related, Fannie Mae and Freddie Mac contingent interest mortgage
loans which include separate contractual provisions obligating the borrower to
pay additional interest based entirely on net or gross cash flow and/or net or
gross proceeds upon sale, refinancing or disposition of the project (the
contingent interest); and (ii) mortgage loans that include a right to require
the borrower to repay a mortgage loan prior to the regular maturity date of
the insured mortgage loan. See "INVESTMENT OBJECTIVE AND POLICIES."
Contingent interest obligations in excess of principal and base<PAGE>
<PAGE>
interest are not secured by the mortgaged real property, by any government
insurance or guarantee, or by any obligation of Fannie Mae or Freddie Mac.
Moreover, in the event of a default under the mortgage loan which results in a
claim under the federal government's insurance or guarantee, or against Fannie
Mae or Freddie Mac's obligation, the right to receive the contingent interest
would either be assigned to the federal government agency, Fannie Mae or
Freddie Mac, as the case may be, or would terminate. In addition, the
obligation of the principals of a project owner to pay contingent interest is
generally not a personal obligation of such parties. There can be no
assurance that any project owner or principals thereof will have sufficient
financial resources to pay any contingent interest that may be owing. The
Trust expects that it will attempt to secure a contingent interest obligation
by obtaining, where possible, a subordinate mortgage and/or a security
interest in the ownership interest of the principals of the borrower or other
security.
State usury laws establish restrictions, in certain circumstances, on the
maximum rate of interest that may be charged and impose penalties on the
making of usurious loans, including monetary penalties, forfeiture of interest
and unenforceability of the debt. Although the Trust does not intend to make
or invest in mortgage loans charging contingent interest rates in excess of
those permitted by law, there is a risk that interest on contingent interest
mortgage loans could be found to exceed legal limits as a result of
uncertainties in determining the maximum legal rate of interest in certain
jurisdictions, especially with respect to contingent interest. To address
this risk, in circumstances where the Trust invests in contingent interest
mortgage loans, the Trust intends to obtain (i) an opinion of counsel from the
jurisdiction in which the mortgaged property is located stating that, in the
opinion of counsel, the rate of contingent interest does not and will not
exceed the maximum rate of interest allowed by law and/or (ii) a special
endorsement to the title insurance policy, in jurisdictions where obtainable,
insuring the Trust against penalties that may arise from the charging of
interest in excess of the maximum rate of interest allowed by law.
If the Trust obtains a subordinate mortgage or other security for any
obligations to secure the payment of contingent interest, there can be no
assurance that such subordinate mortgage or other security will provide
meaningful protection to the Trust with respect to any payments due, because
rights under such subordinate mortgage or other security to the related
project and the revenues therefrom will be subordinate to the rights of the
first priority lien holder.
The Trust's ability to collect contingent interest in excess of
insured base interest will be dependent also on the economic performance of
the project and will be subject to the risks inherent in investing in real
estate. The economic performance of a project may be affected by a number of
factors, including occupancy levels, defaults by tenants in the payment of
rent, increases in project operating expenses and acts of God, such as
earthquakes and floods.
With respect to federally insured or guaranteed mortgage loans that
include a right to require the borrower to repay the indebtedness prior to the
regular maturity date of a mortgage loan, the balloon repayment obligation
<PAGE>
<PAGE>
would not be secured by the federally insured note or mortgage or by any
government insurance or guarantee. It is anticipated instead that such
obligation would be secured by a security interest in the ownership interests
of the principals of the borrower or other security, including, where
obtainable, a subordinate mortgage. Because the obligation to repay the loan
prior to its stated maturity would not be included in the federally insured or
guaranteed note and mortgage, the Trust would not be entitled to obtain
insurance proceeds in the event of non-compliance with a demand for repayment
at such earlier date. If the Trust has obtained a subordinate mortgage to
secure the early repayment of the mortgage loan, the Trust would be able,
subject to compliance with certain conditions, foreclose on the mortgaged
property, and obtain title (either directly or through an agent or nominee) to
the underlying real property subject to the federally insured first mortgage.
However, even if the Trust obtains a subordinate mortgage or other security,
there can be no assurance that such subordinate mortgage or other security
will provide meaningful protection to the Trust with respect to the early
repayment of the loan, because rights under such subordinate mortgage or other
security to the related project and the revenues therefrom will be subordinate
to the rights of the holder of the first mortgage. The Trust expects that if
it is unable to enforce its right to early repayment, it would continue to
hold the mortgage loan or the securities backed by such mortgage loan, the
principal and interest of which would remain federally insured or guaranteed.
In such event, a loss could be incurred because the Trust would have required
a higher rate for a mortgage or mortgage-backed security that was not
accompanied by the right to demand repayment at an earlier date. The risk
described in this paragraph does not apply to "early repayment" loans, or
securities backed thereby, that are guaranteed by Fannie Mae or Freddie Mac,
because such loans and securities are guaranteed at the stated early maturity.
In addition, not all loans or mortgage-related assets in which the
Trust may invest are federally insured or guaranteed, or guaranteed by Fannie
Mae or Freddie Mac; mortgage investments which are not so insured or
guaranteed will be subject to all the risks inherent in investing in real
estate. See "INVESTMENT OBJECTIVE AND POLICIES; RISK FACTORS -- Real
Estate-Related Risks."
RATINGS
There can be no assurance that a rating that exists when a Trust
investment is made will continue for any given period of time, or that it
would not be revised downward or withdrawn entirely by the rating entity if,
in its judgment, circumstances so warrant. A downgrade in the rating or
withdrawal of the rating would signify an increase in the risk of default on
the mortgage investment and would be likely to result in a reduction in the
value of the investment.
LACK OF DIVERSIFICATION
The Investment Company Act defines a "diversified company" as an
investment company that maintains at least seventy-five percent of the value
of its total assets in, among other investments, securities of any one issuer
limited to an amount not greater in value than 5% of the value of the
company's total assets. In this connection, the Declaration of Trust does not
<PAGE>
<PAGE>
specify the proportion of the Trust's assets that may be committed to each of
the several types of investments the Trust may make. The Trust plans to
follow a policy of investing no more than 15% of the value of its total assets
in any single mortgage or construction loan as of the time of investment.
Given the foregoing definition of a diversified company, the Trust's ability
to lend up to 15% of its total assets in a single mortgage or construction
loan under this policy may from time to time result in the Trust's investment
portfolio shifting from nondiversified to diversified and back again, without
prior investor approval. This shift is contrary to Section 13(a)(1) of the
Investment Company Act, absent prior security holder approval. However, the
Trust has obtained from the SEC an exemption from this requirement insofar as
the exemption might be necessary for the Trust to conduct its investment
practices as described above. To the extent the Trust operates as a
nondiversified company, the risk of loss on its investment portfolio will be
increased. See "EXEMPTIONS FROM SPECIFIC REQUIREMENTS OF THE INVESTMENT
COMPANY ACT" in the Statement of Additional Information.
The terms "diversified" and "nondiversified" as used herein are not
intended to describe the geographical locations or concentrations of mortgaged
properties in the Trust's portfolio. Such properties are spread throughout
the United States and it is the Trust's intention to maintain such
geographical diversity.
INVESTMENT RESTRICTIONS
Because of certain legal restrictions, the Trust may not invest more
than 10% of the value of the Trust's assets in securities or investments that
are not readily marketable and convertible into cash within 120 days without a
discount from their market value. As of December 31, 1996, 0.9% of the
Trust's net assets were in this category. See "INVESTMENT RESTRICTIONS."
Circumstances may arise where the aggregate of such restricted investments
held by the Trust temporarily exceeds the 10% limitation. For example, the
rating of the issuer of a letter of credit or guarantee related to a privately
collateralized investment held by the Trust, or the rating of a state agency
guaranteeing obligations held by the Trust, may be downgraded or withdrawn,
which could in turn result in the investments being not readily marketable or
not convertible into cash within 120 days without a discount from their market
value. To the extent that the total amount of such securities or investments
exceeds 10% of the value of the Trust's assets, such securities must be
liquidated by the Trust even if the market requires that they be liquidated at
a price that reflects a substantial discount from their market value.
REAL ESTATE-RELATED RISKS
Certain authorized investments that (i) are neither federally insured
or guaranteed nor issued or guaranteed by Fannie Mae or Freddie Mac or (ii)
provide for contingent interest (see "INVESTMENT OBJECTIVE AND
POLICIES--Privately Collateralized investments; State and Local Government
Related Investments.") will be subject to one or more real estate-related
risks described below.
Construction Risks. Due to the lack of federal insurance or
guarantees, some proposed investments may involve potential construction<PAGE>
<PAGE>
risks. The construction period is an extremely risky phase of any project
development for a variety of reasons. For example, it is sometimes difficult
accurately to estimate prior to the commencement of construction the total
costs of construction and related carrying costs that will be required in
order to complete a project and to pay operating expenses, leasing costs and
debt service until the project reaches sustaining occupancy. In addition, the
construction period may be subject to unforeseeable delays and difficulties
which may adversely affect the project and the related construction loan.
The total development costs of a project and its scheduled completion
date are subject to change as construction and operation of a project
progresses. During all stages of development and construction, a developer is
subject to extensive environmental, building, land use, zoning and other
statutes and regulations administered by various federal, state, county and
local authorities. Such statutory and regulatory requirements (and any
changes in such requirements during construction) may result in increased
costs, delays in construction and/or an inability to complete a project on
schedule and in accordance with development plans. For example, changes in
environmental or other laws may impose or increase restrictions on the use or
operation of a project, may increase certain expenses of a project or may
necessitate potentially expensive changes in the physical configuration of the
property. Changes in federal tax laws may make investment in real estate less
attractive economically and thereby adversely affect real estate values.
Other factors that may result in increased costs, delays in
construction and/or an inability to complete a project on schedule and in
accordance with development plans include, without limitation, cost increases
or shortages in, or the unavailability when needed of, materials, labor and/or
services, construction or labor disputes, delays in construction caused by
adverse weather, casualty and other factors, poor management, delays,
unanticipated costs and difficulties in obtaining lease-up of a project and
other unforeseen occurrences. Such cost overruns and delays may adversely
affect the developer's ability to complete the construction of a project, as
well as the economic viability of a project.
Although the project and the sponsor will be carefully reviewed and
underwritten, there is no assurance that a developer will have the resources
available to fund the total construction and marketing costs of a project or
will be able to secure secondary or alternative financing of cost overruns or
unanticipated costs. In the event that construction loan proceeds and other
funds available to a borrower are insufficient to pay all such costs, the
project may not reach completion, satisfy any requirements for permanent
financing and/or reach sustaining occupancy, in which event the borrower is
unlikely to be able to repay the loan.
There is no assurance that a developer will be able to complete the
construction or lease-up of a project as required. Delays may result from a
variety of causes, including, without limitation, the factors discussed above,
despite the developer's contractual obligations as to completion and lease-up.
Any failure to complete the construction or lease-up of a project on schedule
and in accordance with development plans may result in loss of rental income,
loss of permanent financing (if the Trust is providing only construction
financing) or other financial assistance for the project.<PAGE>
<PAGE>
Market conditions also may change between the time at which a commitment
is issued or the construction loan is made and the completion of a project,
rendering the project economically unfeasible or anticipated rents
unattainable. In the event that any of the foregoing or other difficulties
occur during the construction period, the Trust may not receive the repayment
on a timely basis of all amounts advanced under a construction loan.
Risks Affecting the Operation of Projects and Repayment of Permanent
Loans. A borrower's ability to make required payments on any mortgage loan
after the completion of construction of a project will be affected by a
variety of factors. These include, but are not limited to, the achievement
and maintenance of a sufficient level of occupancy, sound management of the
project, timely receipt of rental income, increases in rents to cover
increases in operating expenses (including taxes, utility rates and
maintenance costs), and the costs of required repairs resulting from
reasonable wear and tear and casualties and changes in applicable laws and
governmental regulations. In addition, the continued feasibility of each
project may depend in part upon general and local economic factors, the supply
and demand for rental housing in the area in which the project is located,
competition from other rental housing projects, rent controls and profit
controls. There are no assurances that a project owner will be able to
achieve and maintain sufficient rental income in order to pay all operating
expenses and maintenance and repair costs of a project and the debt service
on the related mortgage loan on a timely basis. In the event that a project
owner is unable to pay all such costs, expenses and debt service, a default on
the related mortgage loan is likely to occur.
Environmental and Litigation Risks. Certain states impose a statutory
lien for associated costs on property that is the subject of a cleanup action
by the state on account of hazardous wastes or hazardous substances released
or disposed of on the property. Such a lien generally will have priority over
all subsequent liens on the property and, in certain states, will have
priority over prior recorded liens, including the lien of a mortgage. In
addition, under federal environmental law and possibly under state law in a
number of states, a secured party which takes a deed in lieu of foreclosure or
acquires a mortgaged property at a foreclosure sale may be liable for the
costs of cleaning up a contaminated site. Such costs could be substantial.
The imposition of such costs on a project owner may adversely affect such
owner's ability to pay the debt service on a mortgage loan. It is unclear
whether such costs would be imposed on a secured lender such as the Trust in
the event that it did not actually acquire title to the project. In the event
that title to a project securing a mortgage loan to the Trust was acquired by
the Trust and cleanup costs were incurred in respect of the project (or such
cleanup costs were imposed upon the Trust as a secured lender even if it did
not acquire title to the project), the Trust could realize a loss.
Any project owner may be vulnerable to potential litigation arising from
public or private disputes about the conduct of its business or the operation
of its project. A project owner may become involved in disputes or
litigation, during construction or in the course of continuing operations, as
to violations of federal, state or local laws, property tax valuations and
assessments, rent or profit controls, the terms of lease agreements with
tenants or any other contract or agreement as to which it is a party or will
<PAGE>
<PAGE>
become a party in the course of its business operations. There is no
assurance that litigation arising from such disputes will be resolved in favor
of the project owner and the existence of such a dispute or an unfavorable
resolution of such a dispute could adversely affect the ability of a project
owner to pay the debt service on its mortgage loan.
Foreclosure Risks. In cases in which the Trust invests directly in
mortgage loans, it is anticipated that the mortgage loan will be secured by a
deed of trust or mortgage, depending upon the prevailing practice in the state
in which the subject property is located. Foreclosure of a deed of trust may
be accomplished by a non-judicial trustee's sale under a specific provision in
the deed of trust which authorizes the trustee to sell the property upon any
default by the borrower under the terms of the note or deed of trust.
Foreclosure of a mortgage generally is accomplished by judicial action. The
action is initiated by the service of legal pleadings upon all parties having
an interest in the real property. Delays in completion of the foreclosure
occasionally may result from difficulties in locating necessary party
defendants. The borrower may seek bankruptcy protection in an attempt to
delay or avert a foreclosure and/or assert other defenses to the proceedings.
Any bankruptcy filing will, and the assertion of other defenses may,
significantly delay the proceedings and increase the expenses incurred by the
lender in prosecuting the proceedings, and could result in a reduction of the
secured debt in the event of a "cramdown" by a bankruptcy court. Depending
upon market conditions, the net proceeds of the sale of the property after
foreclosure, fix-up, and selling expenses may be less than the Trust's
investment.
In some states, after foreclosure and sale, the borrower and foreclosed
junior lienholders are given a statutory period in which to redeem the
property from the foreclosure sale. In some states, redemption may occur only
upon payment of the entire principal balance of the loan, accrued interest and
expenses of foreclosure. In other states, redemption may be authorized if the
former borrower pays only a portion of the sums due. The effect of a
statutory right of redemption is to diminish the ability of the lender to sell
the foreclosed property. Consequently, the practical effect of the redemption
right is often to force the lender to retain the property and pay the expenses
of ownership until the redemption period has run.
MANAGEMENT
Under the terms of the Declaration of Trust, the power to exercise a
controlling influence over the management and policies of the Trust is vested
exclusively in the Board of Trustees. The Declaration of Trust provides that
the Board may have up to 25 Trustees. Up to 12 of the Trustees may be Union
Trustees, up to 12 of the Trustees may be Management Trustees, and one Trustee
is to be the Chairman. As of April 1, 1997, the Board of Trustees consisted
of the Chairman, 10 Union Trustees and 9 Management Trustees. The number of
Management Trustees may not exceed the number of Union Trustees except in the
event a Trustee dies or resigns before expiration of his term.
The Board of Trustees has overall responsibility for the management of
the Trust. Between meetings of the full Board, the Executive Committee of the
<PAGE>
<PAGE>
Board of Trustees, currently consisting of the Chairman, one Union Trustee and
one Management Trustee, acts for the Board in managing Trust affairs. When
the Executive Committee is not in session, the Chief Executive Officer is
responsible for Trust management.
The Declaration of Trust divides the Union and Management Trustees
into 3 Classes. Each Class is required to have, insofar as the pool of
Trustees permits, an equal number of Union and Management Trustees. The term
of each Class expires at the third annual meeting following its election. At
each annual meeting, the Participants will elect a Chairman to serve until
the next annual meeting and such number of Trustees as is necessary to fill
vacancies in the Class whose terms expire as of that meeting and any Trustee
appointed to complete the remainder of a term. The current Trustees and
officers of the Trust and their principal occupations are described in the
Statement of Additional Information under "MANAGEMENT OF THE TRUST."
The Trust pays the Chairman $10,000 per year. The Trust pays Management
Trustees $500 per day for participation in Board of Trustee meetings and
committee meetings. The Trust pays no remuneration to any Union Trustee.
Individual Trustees are reimbursed for out-of-pocket expenses of attending
Trustee and committee meetings. The Trust employs the Chief Executive Officer
as a salaried employee pursuant to an employment agreement with him.
For the fiscal year ended December 31, 1996, the Trust's personnel
expenses (salaries and benefits) for all Trust officers and staff members
totaled $3,402,914.
The Trust has no independent investment adviser, except with respect
to certain short-term assets. See "INVESTMENT ADVISER." Investment decisions
are made by the Chief Executive Officer and the Chief Investment Officer of
the Trust under the general supervision of the Executive Committee and,
ultimately, the Board of Trustees. Since both the Chief Executive Officer and
the Chief Investment Officer are officers of the Trust and neither is engaged
in the business of providing securities investment advice to others, neither
the Chief Executive Officer nor the Chief Investment Officer has registered or
plans to register as an investment adviser under the Investment Advisers Act.
The Trust has no independent transfer agent or dividend paying agent.
Issuance and redemption of Units and distribution of interest income are the
responsibility of the Chief Executive Officer and his staff.
The Chief Executive Officer and the Chief Investment Officer plan to
acquire the Trust's mortgage investments from, in participation with, or with
the assistance of FHA- and VA-approved mortgage banking firms, Fannie Mae- and
Freddie Mac-approved seller/servicers, depository institutions, and other
lenders approved by management, located throughout the United States believed
to be in a position to know the standing of local builders and other borrowers
and the merit of the building projects considered for investment. The Chief
Executive Officer and the Chief Investment Officer each has broad discretion
regarding the mortgage banking firms and institutions through which the Trust
deals. Construction loans and first mortgage loans are acquired from mortgage
banking firms or other lenders on a net price basis without commissions,
although the Trust will typically pay the mortgage banker or depository
institution involved an ongoing loan servicing fee in connection with whole
<PAGE>
<PAGE>
mortgage loans and participations therein, in each case ranging from .125% to
1.20% of the amount involved in the transaction.
The Trust does not ordinarily engage brokers to effectuate transactions
in mortgage loans or securities. It is customary for brokers for construction
and long-term real estate loans to be engaged by the mortgage borrower or the
mortgage banker without expense to mortgage investors such as the Trust.
Transactions in short-term liquid assets are customarily effectuated on a net
price basis without commission.
During the year ended December 31, 1996, the Trust's expenses totaled
$5,822,349 (0.46% of average net assets). The Trust does not expect to incur
a material amount of extraordinary expense during the current fiscal year.
TRUST PERFORMANCE
The factors that materially influenced the Trust's performance during
its most recently completed fiscal year are discussed in the Trust's 1996
annual report to shareholders, currently on file with the SEC.
The following graph illustrates the net and gross account value of
$50,000 invested in the Trust on January 1, 1987 at the end of each of the
past ten years, compared to the account value of $50,000 invested on the same
date at total rate of return of the Salomon Brothers Broad Bond Index, Salomon
Brothers Mortgages Index and the U.S. Treasury Bill Index.
Trust's Annualized Total Gross Returns
One year ended Five years ended Ten years ended
December 31, 1996 December 31, 1996 December 31, 1996
5.59% 7.75% 9.39%
PAST PERFORMANCE OF AN INVESTMENT IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
COMPARATIVE RATES OF RETURN 1986 - 1995
- ------------------------------------------------------------------------------
TOTAL VALUE OF INVESTMENT FOR YEAR ENDING
1987 1988 1989 1990 1991
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AFL-CIO Housing
Investment Trust
Total Gross Rate
of Return $ 51,896.20 56,655.08 66,652.55 73,486.47 84,436.81
AFL-CIO Housing
Investment Trust
Total Net Rate
of Return $ 51,553.18 55,996.95 65,544.86 71,882.97 82,158.88
Salomon Brothers
Broad Bond -
Total Gross Rate
of Return $ 51,300.00 55,404.00 63,382.18 69,149.95 80,213.95
Salomon Brothers
Mortgages -
Total Gross Rate
of Return $ 52,050.00 56,630.40 65,238.22 72,349.19 83,635.66
U.S. Treasury
Bill - Total
Gross Rate of
Return $ 52,600.00 55,808.60 60,161.67 64,493.31 67,846.96
/TABLE
<PAGE>
<TABLE>
<CAPTION>
COMPARATIVE RATES OF RETURN 1986 - 1995 (continued)
- ------------------------------------------------------------------------------
TOTAL VALUE OF INVESTMENT FOR YEAR ENDING
1992 1993 1994 1995 1996
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AFL-CIO Housing
Investment Trust
Total Gross Rate
of Return $ 89,718.12 98,842.23 96,712.48 116,161.96 122,655.94
AFL-CIO Housing
Investment Trust
Total Net Rate
of Return $ 86,891.46 95,295.00 92,724.54 110,861.02 116,543.03
Salomon Brothers
Broad Bond -
Total Gross Rate
of Return $ 86,310.21 94,854.92 92,104.12 102,235.49 113,167.97
Salomon Brothers
Mortgages -
Total Gross Rate
of Return $ 89,824.70 96,112.43 94,766.85 110,687.69 116,664.83
U.S. Treasury
Bill - Total
Gross Rate of
Return $ 70,018.07 71,908.55 74,497.26 78,147.63 81,820.57
</TABLE>
<PAGE>
<PAGE>
INVESTMENT ADVISER
Beginning as of May 21, 1992, the Trust engaged Wellington Management
Company, LLP ("Wellington Management") to furnish investment advisory services
concerning certain of the short-term, liquid assets in the Trust's portfolio
designated by the Trust from time to time (the "Short-Term Assets"). As of
December 31, 1996, the value of all short term assets eligible for management
by Wellington Management was $88,598,803 which represented 6.4% of the Trust's
total net assets at that date.
Wellington Management, a Massachusetts limited liability partnership,
is a registered investment adviser with principal offices located at 75 State
Street, Boston, Massachusetts 02109. Its Managing Partners are Robert W.
Doran, Duncan M. McFarland and John R. Ryan. Wellington Management is a
professional investment counseling firm that provides investment services to
investment companies, employee benefit plans, endowment funds, foundations,
and other institutions and individuals. As of December 31, 1996, Wellington
Management held investment management authority over approximately $133.2
billion of assets, including $15.5 billion of cash and cash-equivalent assets.
Wellington Management and its predecessor organizations have provided
investment advisory services to investment companies since 1933 and to
investment counseling clients since 1960.
Pursuant to the terms of its contract with the Trust, which was
renewed in May 1996 for a period of one year, Wellington Management manages
the investment and reinvestment of the Short-Term Assets; continuously
reviews, supervises, and administers the investment program of the Trust with
respect to the Short-Term Assets; determines in its discretion the securities
to be purchased, retained, and sold (and implements those decisions); and
renders regular reports to the Trust's officers and Trustees with all
statistical information and reports reasonably required by them, including all
information required under Section 15(c) of the Investment Company Act.
Wellington Management must discharge these and its other duties subject to the
oversight of the officers and Trustees of the Trust and in compliance with the
Trust's policies, as well as with applicable laws and regulations.
Wellington Management is authorized to arrange for the execution of
portfolio transactions by selecting brokers or dealers that will execute the
transactions, and is directed to use its best efforts to obtain the best net
results, taking into account such factors as price (including the applicable
brokerage commission or dealer spread), size of order, difficulty of
execution, and operational facilities of the firm involved. Wellington
Management may in its discretion purchase and sell portfolio securities
through brokers who provide it or the Trust with research, analysis, advice
and similar services, and Wellington Management may pay to these brokers, in
return for research and analysis, a higher commission than may be charged by
other brokers, provided that Wellington Management determines in good faith
that such commission is reasonable in terms either of that particular
transaction or of the overall responsibility of Wellington Management, that
the total commission paid by the Trust will be reasonable in relation to the
benefits to the Trust over the long term, and that the total commission paid
by the Trust is consistent with commissions paid in comparable transactions.
<PAGE>
<PAGE>
In selecting a broker for each specific transaction, Wellington
Management will use its best judgment to choose the broker most capable of
providing the brokerage services necessary to obtain the best available price
and most favorable execution. The full range and quality of brokerage
services available will be considered in making these determinations.
Wellington Management will make periodic evaluations of the quality of these
brokerage services as provided by various firms and measure these services
against its own standards of execution. Brokerage services will be obtained
only from those firms which meet its standards, maintain a reasonable capital
position, and can be expected to reliably and continuously supply these
services.
In compensation for the investment advisory services provided by
Wellington Management, the Trust will pay Wellington Management on a quarterly
basis a fee at the annual rate of 0.125% of the market value of the Short-Term
Assets based on the average monthly market value of the first $100 million,
and at the annual rate of 0.100% of the market value of the Short-Term Assets
based on the average monthly market value in excess of $100 million. In fiscal
1996, the Trust incurred total investment advisory fees of $105,644, which
represented .008% of the Trust's average net assets for such period.
INCIDENTS OF OWNERSHIP OF UNITS
Beneficial interests of the Trust are divided into Units representing
equal portions of Trust assets. Rights arising from ownership of Units are
set forth in the Declaration of Trust. The Declaration of Trust can be
amended by vote of a majority of Trustees without any requirements of a vote
by holders of Units. However, the Declaration of Trust provides that,
notwithstanding anything to the contrary contained in the Declaration of Trust
or any amendment thereto, no part of the Trust that equitably belongs to any
investor (other than such part as is required to pay the expenses of the
Trust) is to be used for any purpose other than the exclusive benefit of the
investors. In addition, fundamental investment policies may not be changed
without the approval of holders of a majority of the Trust's outstanding
Units.
Each Unit carries the right to vote to elect a Class of Trustees, to
ratify selection of the auditors for the Trust, and to approve changes in
investment policy. Each Unit entitles the holder thereof to participate pro
rata with all other Units in the distribution of assets in any liquidation of
the Trust. No preemptive rights attach to Units; the Trust has the right to
sell or exchange Units without offering the same to the holders of the then
outstanding Units.
The overwhelming majority of jurisdictions in the United States
recognize a trust, such as the Trust, as a separate legal entity, wholly
distinct from its beneficiaries. In those jurisdictions, the beneficiaries of
a trust, such as the Participants in the Trust, are not liable for the debts
or other obligations of the trust. A few jurisdictions, particularly Texas
and Kansas, do not recognize so-called "business trusts" as separate legal
entities and hold the beneficiaries of such trusts personally liable for<PAGE>
<PAGE>
actions of the business trusts. The Trust nevertheless does not expect to
exclude otherwise eligible investors in Kansas and Texas and other such
jurisdictions from investing in Units.
The Declaration of Trust requires that every written undertaking
contain a provision stating that such undertaking is not binding upon any
investor personally and that any person, firm, corporation or association
dealing with the Trustees shall be limited to satisfying any obligation,
liability, or covenant of the Trustees out of the Trust property and not out
of the personal property of any investor. Counsel for the Trust is of the
opinion that in the overwhelming majority of jurisdictions, no personal
liability will attach to the holders of Units on any undertaking containing
such a provision. However, in those jurisdictions that refuse to recognize
the separate status of trusts such as the Trust, Participants could be held
personally liable for claims against the Trust. These claims could include
contract claims where the provision referred to above is omitted from the
undertaking, tort claims, tax claims and certain other statutory liabilities.
If such liability were ever imposed upon Participants, they would be liable
only to the extent that Trust assets and insurance were not adequate to
satisfy the claims.
Units are not transferable and are not assignable. No holder of a Unit
has the authority to pledge the Unit as collateral for any loan. The Trust
does not issue certificates to evidence ownership of Units. In lieu thereof,
Units are issued and redeemed by bookkeeping entry and without physical
delivery of any securities.
The Trust, at the end of each calendar quarter, makes pro rata
distributions of net income earned during the preceding three-month period.
Such distributions are made in cash. Pursuant to an Internal Revenue Service
ruling received by the Trust, a Participant may authorize the Trust
automatically to reinvest any dividends to which the Participant is entitled
in the Trust in exchange for a corresponding amount of Units, calculated at
the Net Asset Value as of the end of the calendar quarter.
The Trust may be terminated at any time by the Trustees after notice in
writing to all Participants.
Any inquiries or expressions of interest concerning sales transactions
should be referred to the Director of Investor Relations at Trust
headquarters, 1717 K Street, N.W., Suite 707, Washington, D.C. 20006.
SECURITIES OFFERED
ELIGIBLE INVESTORS
Only "Labor Organizations" and "Eligible Pension Plans" are eligible
to own Units. A Labor Organization means any organization of any kind, any
agency, employee representation committee, group, association, or plan in
which employees participate directly or through affiliated organizations, and
which exists for the purpose, in whole or in part, of dealing directly or<PAGE>
<PAGE>
through affiliated organizations with employers concerning terms or conditions
of employment and any employee benefit plan of such an organization, or any
other organization which is, in the discretion of the Board of Trustees,
affiliated with or sponsored by such an organization. An Eligible Pension
Plan is a pension plan constituting a qualified trust under IRC Section 401(a)
that has beneficiaries who are represented by a Labor Organization and the
management of which has the discretionary right to invest funds of
beneficiaries without the direct intervention or control of those
beneficiaries.
VALUATION
The price of Units is based on Net Asset Value as of the monthly
Valuation Date following receipt of a purchase order by dividing the value of
the Trust's portfolio plus any cash and other assets (including interest and
dividends accrued but not collected) less all liabilities (including accrued
expenses but excluding capital and surplus) as of that Valuation Date by the
number of Units then outstanding.
Admission to or withdrawal from the Trust is permitted in whole or
fractional Units as of monthly Valuation Dates. A request for purchase of
Units must be received by the Trust before the Valuation Date as of which it
is to be issued. A minimum initial investment of $50,000 is required. A
request for purchase of Units must be accompanied by cash or by a subscription
agreement providing for a cash escrow of the amount to be invested as of the
forthcoming Valuation Date.
Forms of subscription agreements with banks providing for a cash escrow
pursuant to which escrowed amounts will be held in interest-bearing form are
available from the Trust. There is no sales charge or commission payable in
connection with the purchase of Units or the escrow.
Trust investments that regularly trade in a secondary market are
valued by the Trust principally by reference to available bid and ask
quotations. When the secondary market for the securities, mortgage loans and
construction loans in which the Trust invests is not sufficiently active to
permit ready ascertainment of a market price for any particular asset in the
Trust's portfolio, the Trust's securities, mortgage loans and construction
loans and other portfolio assets are valued in good faith after consideration
of other factors affecting remarketability and comparable market yield
pricing. The Trust has retained a third-party consultant which, in
consultation with Trust management, has developed a valuation methodology for
certain securities in the Trust's portfolio that have a less active secondary
market. The Trust may from time to time retain additional outside consultants
to assist the Trust's staff in establishing values in accordance with such
procedures.
A summary of the current valuation methodology used by the Trust with
respect to various categories of investments is as follows:
SHORT-TERM INVESTMENTS consisting of repurchase agreements, commercial
paper, bankers acceptances, investment trusts, other investments and
warehousing loans, which mature less than sixty days from the<PAGE>
<PAGE>
Valuation Date are valued at amortized cost which approximates value.
Short-term investments which mature more than sixty days from the Valuation
Date are valued at the last reported sales price on the last business day of
the month or the mean between
the reported bid and ask price if there was no sale. Short-term investments
maturing more than sixty days from the Valuation Date for which there are no
quoted market prices are valued to reflect current market yields for
securities with comparable terms and interest rates.
LONG-TERM INVESTMENTS consisting of mortgage-backed securities, permanent
mortgages, construction loans and participation certificates are valued using
published prices or dealer bids, supported by the present value of projected
cash flows, discounted using market-based discount and prepayment rates
developed individually for each security. The market-based discount rate is
composed of the sum of a risk-free yield (i.e., a U.S. Treasury Note with a
weighted average life comparable to the security being valued), adjusted
for an appropriate risk premium. The risk premium reflects actual premiums in
the marketplace over the yield on U.S. Treasury securities of a comparable
risk and maturity to the security being valued. On loans for which the Trust
finances the construction and permanent mortgage, a value is determined based
upon funded and unfunded commitment amount for the term of the construction
loan plus the permanent mortgage loan. For construction only loans, the
outstanding principal balance of the loan is used to approximate value,
assuming no decline in credit quality.
CONTINGENT INTEREST LOANS. Contingent interest mortgage loans bear a
base rate of interest at a rate below the market rate for non-contingent
interest mortgage loans prevailing at the time the loan was made in return for
the right to receive as additional interest a portion of (i) net cash flow
from operations and/or (ii) proceeds from the sale or refinancing of the
related project. In general, the interest in the early years is lower than
would be the case for non-contingent interest mortgage loans, but increases in
later years as net operating cash flow increases and/or upon receipt of
proceeds of a sale or refinancing, and is added to the base interest. The
Trust, as holder of the contingent interest loan, is entitled to receive
additional interest in excess of the base interest rate. Because the amount
of any proceeds from net cash flow cannot be determined in advance, and the
amount of any proceeds from a sale or refinancing cannot be determined before
a sale or refinancing actually occurs, it is not possible to value the
contingent interest feature with precision.
The values of non-contingent mortgage loans are affected primarily by
changes in interest rates and secondarily by the performance of the underlying
property. With regard to contingent interest mortgage loans, however, the
performance of the underlying property becomes a more important determinant of
value.
Contingent interest mortgage loans generally are accounted for by an
estimate of the underlying property's value in those circumstances where no
exchange market exists. It is possible that the exchange value that would
take place between a willing buyer and a willing seller could differ from the
estimated value, and that the difference could be significant. The estimated
value is determined by an appraisal method that discounts the expected cash
flows of the underlying property. During the initial years the mortgage is
<PAGE>
<PAGE>
carried at outstanding principal amounts plus accrued interest (assuming no
inherent credit problems with the underlying property). In later years, as
the property matures, the Trust may record appreciation or depreciation in the
value of the investment based on whether the performance of the underlying
property exceeds or falls short of expectations. As long as the underlying
property is projected to generate net operating cash flow above the base rate,
the amount of the projected contingent interest obligation is accruable by the
Trust throughout the term of the mortgage. In no event, however, will the
carrying value of the underlying property exceed its appraised value at any
one reporting date.
Determining the value of underlying properties necessarily requires
assumptions and estimates about future events and cash flows of the
properties. It is the intent of the Trust to engage a qualified MAI appraiser
to perform the appraisal of underlying property every five years and to place
into effect appropriate procedures to assess the relevance of individual
appraisals so that they may be updated annually by the Trust.
Privately collateralized investments; state and local government-related
investments.
- ------------------------------------------------------------------------------
(1) Public ratings. Obligations which carry a public rating from one or
more nationally recognized rating agencies are valued to reflect current
market yields as determined by giving effect to the average of quotes obtained
from dealers in such obligations for securities of comparable quality,
interest rates and maturities.
(2) No public rating with recourse to issuer and/or with credit
enhancement. Obligations which do not carry a public rating but are with
recourse to the issuer and/or have the benefit of credit enhancement are
valued to reflect current market yields as determined by giving effect to the
average of quotes obtained from dealers in such obligations for securities of
comparable yield and term to maturity and of a quality which, in the
determination of the Trust, is most nearly comparable to obligations in any
one or more of the following categories:
(a) obligations which carry a private rating upon which the Trust is
entitled to rely shall be valued against securities having comparable
public or private ratings;
(b) obligations which are guaranteed or otherwise secured by the
general credit or moral obligation of a state or local government or an
agency or instrumentality thereof shall be compared to other publicly
sold obligations of the particular state or local government or agency or
instrumentality thereof carrying comparable guarantees or security
arrangements;
(c) obligations with respect to which no other publicly sold
obligations issued or guaranteed or otherwise secured by a particular
state or local government or agency or instrumentality thereof are
available (for purposes of determining comparable quality) will be valued
as if they were comparable in quality to the lowest rated "investment
grade" obligations of the particular issuer with respect to which<PAGE>
<PAGE>
comparable quotes are available, and if the only obligations of such
issuer with respect to which comparable quotes are available are of a
grade higher than the lowest rated investment grade, the Trust will make
an appropriate discount from quotes on such obligations to reflect a
reduction to the lowest rated investment grade; or
(d) obligations with respect to which no publicly sold securities of
comparable quality are found in accordance with the foregoing guidelines
will be valued by management on the basis of the particular facts and
circumstances of the case based on investments that are comparable with
respect to terms, quality and yield.
The averaging of quotes from dealers may be supplemented by application
of the following valuation criteria when, in the opinion of management, the
application of such supplemental criteria is warranted or desirable:
(i) discounting of expected future cash flows;
(ii) assessing the nature of the issuer or the entity providing credit
enhancement, as applicable, risks it is subject to, historical patterns
of revenue assessment and collection;
(iii) assessing tangible book value and financial condition of the
issuer or the entity providing credit enhancement, as applicable;
(iv) assessing revenue history of the issuer or the entity providing
credit enhancement, as applicable.
Obligations with respect to which a notice of redemption has been issued
will be valued on the basis of their current market yield and yield to
maturity, if the Trust has no reason to believe that payment on the
obligations will not be made at the call date. Any obligations (i) which are
in default or (ii) with respect to which one or more underlying assets are in
default and there is no mortgage insurance or other credit enhancement
available to assure full and timely payment will be valued by management based
upon the particular facts and circumstances of the case.
(3) No public rating without recourse to issuer and without credit
enhancement. Obligations which do not carry a public rating, are without
recourse to the issuer, and are without credit enhancement will be valued by
management on the basis of the particular facts and circumstances of the case
based on investments that are comparable with respect to terms, quality and
yield.
General. In addition to the valuation methods described above, all
investments are reviewed and appropriate adjustments are made to reflect the
effect of income (collected or accrued), realized and unrealized gains and
losses, expenses and any material impairments in value arising from the
specific conditions of investment (e.g., mortgage in default).<PAGE>
<PAGE>
SALES ACTIVITIES
The Trust conducts sales and distribution activities for Units that
are directed to certain pension plans. These activities, which are conducted
by and under the direction of the Director of Investor Relations, include
solicitations in person or by mail or telephone, as well as responding to
inquiries concerning the Trust's offering of Units, and the ministerial and
clerical work of effecting sales of Units. All inquiries concerning the
Trust's offering of Units should be directed to AFL-CIO Housing Investment
Trust, 1717 K Street, N.W., Suite 707, Washington, D.C. 20006, Attention:
Director of Investor Relations, (202) 331-8055. Expenses of sales and
distribution of Units are paid by the Trust pursuant to a Plan for
Distribution adopted pursuant to SEC Rule 12b-1 under the Investment Company
Act.<F5> The budget for the sales and distribution activities authorized by
the Participants was $500,000 in 1996 and is $500,000 in 1997. Such sales and
distribution expenses for the year ended December 31, 1996 were $434,105,
which represented approximately .03 percent of $1,383,163,166 in net Trust
assets as of December 31, 1996. No material increase in the budgeted rate of
sales and distribution expense will be made without Participant approval. See
"SALES AND DISTRIBUTION ACTIVITIES" in the Statement of Additional Information
for a more detailed discussion of sales and distribution.
The Plan for Distribution will continue in effect until April 30,
1998, unless earlier terminated by vote of a majority of the Trust's
outstanding Units or by a majority of disinterested Trustees. Any change in
the Plan for Distribution that would materially increase the amount of
distribution expense borne by the Trust requires Participants' approval; any
other material change requires approval by the Trustees, including a majority
of the disinterested Trustees. The Plan for Distribution may continue in
effect for successive one-year periods, provided that each continuance is
specifically approved: (a) by a vote of the majority of the Trust's Units or
by the Trustees; and (b) by the vote of a majority of the Trustees who are
disinterested and who have no direct or indirect financial interest in the
Plan for Distribution or any related agreements. For additional information
regarding the Plan for Distribution, see "SALES AND DISTRIBUTION ACTIVITIES"
in the Statement of Additional Information.
<F5> In general, SEC Rule 12b-1, with which the Trust will comply,
requires that a Plan for Distribution be approved in a specified manner by the
holders of voting securities and Trustees, that quarterly reports of
distribution expenses be made to the Trustees, and that the plan be terminable
upon specified conditions.<PAGE>
<PAGE>
REDEMPTION
A request for redemption of Units will be honored if it is in writing
and received 15 days or more before the Valuation Date on which the Units are
to be redeemed. Securities may be redeemed in whole or fractional Units.
Payment in satisfaction of duly tendered requests for redemption will be made
as soon as practicable and, in any event, within 7 business days after the Net
Asset Value of the Trust is ascertained for the Valuation Date as of which
redemption is effected. It usually takes 7 to 10 business days to calculate
the Trust's Net Asset Value after a Valuation Date.
Upon the agreement of the redeeming Participant, the Trust may tender
securities or mortgages or other Trust assets in partial or full satisfaction
of a duly tendered request for redemption. Such securities, mortgages or
other assets will be treated for redemption purposes as the cash equivalent of
their value on the Valuation Date on which redemption is effected. A
Participant receiving such assets may incur expenses in disposing of such
assets for cash.
Section 22(c) of the Investment Company Act and SEC Rule 22c-1
thereunder provide that no registered investment company issuing a redeemable
security and no principal underwriter of such company shall sell or redeem any
such security except at a price based on the current net asset value of such
security that is next computed after receipt of a tender of such security for
redemption or of an order to purchase such security. Section 22(e) provides
that no registered investment company shall postpone the date of payment upon
redemption of a redeemable security in accordance with its terms for more than
seven days after the tender of such security for redemption except in certain
limited circumstances. The Trust's redemption policies do not conform to the
foregoing requirements. The Trust has obtained exemption from generally
applicable redemption requirements on the grounds that the interests of its
Participants will make investment and redemption other than on a quarterly
basis unnecessary and that daily valuation of the Trust portfolio of mortgage
loans would be unduly burdensome. The Board of Trustees has implemented
monthly valuations of the Trust's assets, which enables the Trust to sell and
redeem Units on a monthly, rather than quarterly, basis. See "RISK
FACTORS--Redemption."
TAX STATUS
The Trust has filed its tax returns as a regulated investment company
under Subchapter M of the Internal Revenue Code and intends to operate in a
manner which qualifies for treatment as a regulated investment company. If
the Trust so qualifies and distributes all of its taxable income to
Participants, it will not be subject to federal income tax. Participants
will be required to report their proportionate share of such income for income
tax purposes, but Participants not subject to tax on their income will not be
required to pay tax on amounts distributed to them. The Trust will inform
Participants annually of the amounts and nature of such income.<PAGE>
<PAGE>
PENDENCY OF LEGAL PROCEEDINGS
The Trust is not involved in any material legal proceedings and is not
aware of any legal proceedings against it contemplated by any governmental
authorities. <PAGE>
<PAGE>
PART B. STATEMENT OF ADDITIONAL INFORMATION
AFL-CIO
HOUSING INVESTMENT TRUST
1717 K Street, N.W.
Suite 707
Washington, D.C. 20006
(202) 331-8055
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
This Statement of Additional Information is not a Prospectus. It
should be read in conjunction with the American Federation of Labor and
Congress of Industrial Organizations Housing Investment Trust ("Trust")
Prospectus, dated April 30, 1997, which may be obtained without charge from
Trust headquarters.
The date of this Statement of Additional Information is April 30,
1997.
<PAGE>
<PAGE>
TABLE OF CONTENTS
Page
History............................................................... 1
Exemptions from Specific Requirements of the Investment
Company Act......................................................... 1
Nondiversification.............................................. 1
Redemption Restrictions......................................... 2
Investment Objective and Policies..................................... 3
Management of the Trust............................................... 4
Principal Holders of Securities....................................... 14
Investment Adviser.................................................... 15
Sales and Distribution Activities..................................... 17
Admission to the Trust................................................ 18
Supplementary Information............................................. 19
Custodian....................................................... 19
Auditors........................................................ 19
Reports......................................................... 19
Legal Matters................................................... 19
Financial Statements.................................................. 19
Appendix A............................................................ A-1
Appendix B............................................................ B-1
Appendix C............................................................ C-1
<PAGE>
<PAGE>
HISTORY
The American Federation of Labor and Congress of Industrial Organizations
Housing Investment Trust ("Trust") is a common law trust created under the
laws of the District of Columbia pursuant to a Declaration of Trust originally
executed September 19, 1981. The name of the Trust was changed from "AFL-CIO
Pooled Investment Trust" on May 27, 1982. The Trust has been established
under the sponsorship of the AFL-CIO as an instrumentality of the United
States labor union movement.
EXEMPTIONS FROM SPECIFIC
REQUIREMENTS OF THE INVESTMENT COMPANY ACT
On April 21, 1982 the Trust obtained from the Securities and Exchange
Commission ("SEC") an order under Section 6(c) of the Investment Company Act
of 1940, as amended ("Investment Company Act") exempting the Trust from
certain requirements of that Act (SEC Release No. 12387). The following is a
brief summary of certain of these exemptions.
NONDIVERSIFICATION
The Investment Company Act provides that no registered investment company
shall change its subclassification from diversified to nondiversified without
the shareholders' authorization. Under Section 5(b) of the Act, a
"diversified company" is:
[A] management company which meets the following requirements: At least
75 percentum of the value of its total assets is represented by cash and
cash items (including receivables), Government securities, securities of
other investment companies and other securities for the purposes of this
calculation limited in respect to any one issuer to an amount not greater
in value than 5 percentum of the value of the total assets of such
management company and to not more than 10 percentum of the outstanding
voting securities of such issuer.
A "nondiversified company" means any management company other than a
diversified company.
The Trust will seek to remain as diversified as practicable. Because,
however, the mortgages in which it proposes to invest are often offered in
large denominations, the Trust may shift from time to time from diversified to
nondiversified status. The Trust has obtained an exemption from the
requirement of a shareholder vote before shifting its diversification status.
The terms "diversified" and "non-diversified" as used herein are not
intended to describe the geographical locations or concentrations of mortgaged
properties represented in the Trust's portfolio. Such properties are spread
throughout the United States and it is the Trust's intention to maintain such
geographical diversity.
<PAGE>
<PAGE>
REDEMPTION RESTRICTIONS
Section 22(c) of the Investment Company Act and SEC Rule 22c-1 thereunder
provide that no registered investment company issuing a redeemable security
and no principal underwriter of such company shall sell or redeem any such
security except at a price based on the current net asset value of such
security that is next computed after receipt of a tender of such security for
redemption or of an order to purchase such security. Section 22(e) provides
that no registered investment company shall postpone the date of payment upon
redemption of a redeemable security in accordance with its terms for more than
seven days after the tender of such security for redemption except in certain
limited circumstances. The Trust's redemption policies do not conform to the
foregoing requirements. See "REDEMPTION" in the Prospectus. The Trust has
obtained exemption from generally applicable redemption requirements on the
grounds that the interests of its Participants will make investment and
redemption other than on a quarterly basis unnecessary and that daily
valuation of the Trust portfolio of mortgage loans would be unduly burdensome.
Effective October 1, 1987, the Board of Trustees authorized investments and
redemptions on a monthly basis instead of a quarterly basis.
INVESTMENT OBJECTIVE AND POLICIES
A description of the Trust's investment objective and policies is set
forth in the Trust's Prospectus under "INVESTMENT OBJECTIVE AND POLICIES."
Certain of the Trust's authorized investments are tied to ratings at various
levels by one or more nationally recognized statistical rating agencies. A
description of Standard & Poor's rating categories for long-term debt and
short-term debt are attached as Appendix A to this Statement of Additional
Information. The rating categories of other nationally recognized statistical
rating agencies are similar to those of Standard & Poor's.
Similarly, certain of the Trust's authorized investments relate to
depository institutions rated in category "B" or higher by Thomson Bankwatch,
Inc. See "INVESTMENT OBJECTIVE AND POLICIES--Privately Collateralized
Investments; State and Local Government-Related Investments in the Prospectus.
A description of the rating categories of Thomson Bankwatch, Inc. is attached
as Appendix B to this Statement of Additional Information.
The following information is included to augment the discussion of "top
tier" agencies under "INVESTMENT OBJECTIVE AND POLICIES--Privately
Collateralized Investments; State and Local Government-Related Investments" in
the Prospectus. The Trust is allowed to invest in construction or permanent
loans, or securities backed by construction or permanent loans, or interests
in such loans or securities, provided that such loans or securities are issued
or guaranteed, as the case may be, by a state or local housing finance agency
designated "top tier" by Standard & Poor's (or designated comparably by
another nationally recognized statistical rating agency, as determined by the
Executive Committee of the Trust) at the time of acquisition by the Trust.
Before designating a housing agency as top tier, Standard & Poor's must
favorably evaluate a number of criteria, including the agency's general track
record, unrestricted fund balances, administrative capabilities, investment
policy, internal controls, portfolio quality and the sponsoring state's
commitment to housing. A more complete description of the guidelines used by
Standard & Poor's is attached to this Statement of Additional Information as
Appendix C.
MANAGEMENT OF THE TRUST
The current Trustees and officers of the Trust and their principal
occupations are as follows:
Position with Principal Occupation(s)
Name, Address, and Age Housing Trust During Past 5 Years
- --------------------- --------------- ------------------------
Richard Ravitch Chairman Formerly President and
350 Park Avenue Chief Executive Officer,
18th Floor Player Relations Committee
New York, New York of Major League Baseball;
age 63 formerly Chairman, Aquarius
Management Corporation
(limited profit housing
project management); formerly
Chairman and Chief Executive
Officer, Bowery Savings Bank
Linda Chavez-Thompson* Union Trustee Executive Vice President,
815 16th Street, N.W. AFL-CIO; formerly Inter-
Washington, D.C. 20006 national Vice President,
age 53 American Federation of State,
County and Municipal
Employees
Arthur A. Coia* Union Trustee General President, Laborers'
905 16th Street, N.W. International Union of
Washington, D.C. 20006 North America
age 54
Robert A. Georgine* Union Trustee President, Building and
815 16th Street, N.W. Construction Trades
Washington, D.C. 20006 Department, AFL-CIO
age 64
Francis X. Hanley Union Trustee General President (formerly
1125 17th Street, N.W. General Secretary-Treasurer
Washington, D.C. 20036 International Union of
age 66 Operating Engineers
Frank Hurt* Union Trustee President, Bakery,
10401 Connecticut Avenue Confectionery & Tobacco
Kensington, MD 20895 Workers International Union
age 58
John T. Joyce* Union Trustee President, Bricklayers &
815 15th Street, N.W. Allied Craftsmen Internationl
Washington, D.C. 20005 Union
age 61
A.L. Monroe* Union Trustee General President,
1750 New York Ave., N.W. International Brotherhood of
Washington, D.C. 20006 Painters and Allied Trades
age 63
Jack F. Moore* Union Trustee Secretary (formerly Vice
1125 15th Street, N.W. President), International
Washington, D.C. 20005 Brotherhood of Electrical
age 70 Workers
<PAGE>
<PAGE>
Position with Principal Occupation(s)
Name, Address, and Age Housing Trust During Past 5 Years
- --------------------- --------------- ------------------------
John J. Sweeney* Union Trustee President, AFL-CIO;
815 16th Street, N.W. Formerly International
Washington, D.C. 20006 President, Service
age 63 Employees International
Union
Richard L. Trumka* Union Trustee Secretary-Treasurer,
815 16th Street, N.W. AFL-CIO, formerly
Washington, D.C. 20006 President, Mine Workers
age 47 of America, United
Terrence R. Duvernay Management Trustee Public Finance division,
4740 Guilford Forest Dr. Legg Mason; formerly
Atlanta, GA 30331 Deputy Secretary of U.S.
age 54 Department of Housing and
Urban Development; formerly
Executive Director of Georgia
Housing and Finance Authority
and Michigan State Housing
Development Authority
Alfred J. Fleischer Management Trustee Chairman, Fleischer-Seeger
5725 Manchester Avenue Construction Corporation;
St. Louis, MO 63110 formerly a Direction of the
age 76 National Corporation for
Housing Partnerships of
Washington, D.C.
Walter Kardy Management Trustee President, Specialty
9500 Barroll Lane Contractor's Management, Inc.
Kensington, MD 20895
age 69
George Latimer Management Trustee Chief Executive Officer,
547 West Jackson National Equity Fund;
Suite 601 Professor of Urban Studies,
Chicago, IL 60661 Macalster College; Formerly
age 61 Director, Special Actions
Office, HUD<PAGE>
<PAGE>
Position with Principal Occupation(s)
Name, Address, and Age Housing Trust During Past 5 Years
- --------------------- --------------- ------------------------
H.D. LaVere Management Trustee President, Michigan
1100 Owendale Avenue Carpentry, Inc. (residential
Suite K building contractor); Labor
Troy, Michigan 48083-1914 Relations Director, Michigan
age 68 Carpentry Contractor
Association
George Miller Management Trustee Executive Vice President,
1550 Spring Road Mason Contractors Association
Suite 320 of America
Oakbrook Terrace, IL 60521
age 73
Marlyn J. Spear Management Trustee Investment Coordinator, The
500 Elm Grove Road Building Trades United
Room 300 Pension Trust Fund
Elm Grove, WI 53122-0530
age 44
Tony Stanley Management Trustee Executive Vice President and
25250 Rockside Road Director, TransCon Builders,
Bedford Heights, OH 44146 Inc. (building construction)
age 63
Patricia F. Wiegert Management Trustee Retirement Administrator,
1355 Willow Way Contra Costa County
Suite 221 Employee's Retirement
Concord, CA 94520 Association
age 50
Stephen F. Coyle* Chief Executive Formerly Director of the
1717 K Street, N.W. Officer Boston Redevelopment
Suite 707 Authority
Washington, D.C. 20006
age 51
Michael M. Arnold* Director of Investor Director of Investor
1717 K Street, N.W. Relations Relations, AFL-CIO Housing
Suite 707 Investment Trust
Washington, D.C. 20006
age 57
<PAGE>
<PAGE>
Position with Principal Occupation(s)
Name, Address, and Age Housing Trust During Past 5 Years
- --------------------- --------------- ------------------------
Helen R. Kanovsky General Counsel Formerly Executive Vice
1717 K Street, N.W. President and General Counsel
Suite 707 GE Capital Asset Management
Washington, D.C. 20006 Corporation; formerly Vice
age 46 President, Skyline Financial
Services Corporation
James D. Campbell Chief Investment Formerly Director, National
1717 K Street, NW Officer Partnership for Community
Suite 707 Investment, AFL-CIO
Washington, D.C. 20006 Housing Investment Trust
age 43
Union Trustees Chavez-Thompson, Hanley and Trumka and Management
Trustees Kardy, Latimer and LaVere are "Class I" Trustees, whose terms expire
at the 1999 Annual Meeting of Participants. Union Trustees Georgine, Joyce
and Moore and Management Trustees Fleischer, Miller and Spear are "Class II"
Trustees whose terms expire at the 1997 Annual Meeting of Participants. Union
Trustees Coia, Hurt, Monroe and Sweeney and Management Trustees Duvernay,
Stanley and Wiegert are "Class III" Trustees whose terms expire at the 1998
Annual Meeting of Participants. Trustee Ravitch is the Chairman (a
non-classified trustee) with a one-year term expiring at the 1997 Annual
Meeting of Participants.
Those Trustees and officers whose names are marked with an asterisk (*)
may be considered to be "interested persons" within the meaning of Section
2(19) of the Investment Company Act although the Trust does not concede that
such is the case. Each of these Trustees and officers is an officer or
employee of the AFL-CIO, a Labor Organization (as that term is defined in the
Trust's Declaration of Trust) that is a member of the AFL-CIO, or the Trust.
The Executive Committee of the Trust is composed of the Chairman, Richard
Ravitch (Chairman of the Executive Committee), Union Trustee John J. Sweeney
and Management Trustee Tony Stanley (Vice Chairman of the Executive
Committee). The Executive Committee has all the authority of the Board of
Trustees when the Board is not in session, except to the extent that such
authority is limited by law. The Executive Committee also serves as
Nominating Committee with authority to identify potential new members of the
Board of Trustees.
Since February 1, 1992, Stephen Coyle has served as Chief Executive
Officer of the Trust. Mr. Coyle, age 51, served as Director of the Boston
Redevelopment Authority from July 1984 to January 1992. Prior to that, he
served as Chief Executive Officer of John Carl Warnecke & Associates in San
Francisco, a national firm for architecture and urban design. From 1977
through 1980, Mr. Coyle served the Federal Government in Washington, D.C. as
Deputy Under Secretary of the United States Department of Health and Human
Services and Executive Assistant to the Secretary of the United States
Department of Housing and Urban Development. Mr. Coyle earned his Bachelor's
degree from Brandeis University (Waltham), his Master's degree from the
Harvard Kennedy School of Government, and a law degree from Stanford Law
School.
Mr. Tutt served as Financial Manager of the Trust until his retirement
in December 1996.
<PAGE>
<PAGE>
The Trustees have selected Mr. Arnold to be Director of Investor
Relations. Mr. Arnold is 57 years old. He joined the Trust in April 1985
after being employed by the AFL-CIO Human Resources Development Institute
(HRDI) since 1969. During his tenure with HRDI, he held the positions of area
representative, regional director, assistant director and executive director.
As executive director during the six years prior to being employed by the
Trust, he was responsible for overall administration and fiscal affairs and
the general supervision of staff located at the national office in Washington,
D.C. and in field offices in 59 major metropolitan areas of the country.
During this period, Mr. Arnold had extensive experience in working with
officers and staff of international, state and local labor organizations. In
1967-68, Mr. Arnold was manpower coordinator and labor liaison officer with
the Dallas Community Action Agency. He is a 37-year member and former local
union officer of the International Union of Bricklayers and Allied Craftsmen,
and is also a licensed real estate broker.
The Trustees have selected Ms. Kanovsky to be General Counsel. Ms.
Kanovsky is 46 years old. She joined the Trust in 1995 after serving as
Executive Vice President and General Counsel of GE Capital Asset Management
Corporation (GECAMC) from October 1990 to December 1995. Prior to GECAMC,
from 1986 to 1990, Ms. Kanovsky served as Litigation Counsel (December 1986 -
June 1988) and Executive Vice President and General Counsel (June 1988 -
October 1990) of Skyline Financial Services Corporation. Ms. Kanovsky earned
her Bachelor of Arts degree from Cornell University and her Juris Doctor
degree from Harvard Law School.
<PAGE>
<PAGE>
The Trustees have selected Mr. Campbell to be Chief Investment officer
of the Trust. Mr. Campbell is 43 years old. He joined the Trust in 1993
after serving as Financial Consultant to the Boston Redevelopment Authority
from 1990 to 1992. Prior to that, from 1986 to 1989, Mr. Campbell served as
Vice President for Development for Related Companies Northeast. From 1983 to
1986, he served as Director of the East Cambridge Riverfront Redevelopment
Project. Mr. Campbell earned his Bachelor's degree from Syracuse University
and his Master's degree in City Planning from Harvard University.
Mr. Arnold, Ms. Kanovsky, Mr. Campbell and their staff are
responsible, under the supervision of the Chief Executive Officer, for the
day-to-day administration and operation of the Trust, including the selection
of mortgage and other investments (with the exception of certain short-term
assets--see "Investment Adviser") and communication with existing and
potential investors.
The following table sets forth the aggregate remuneration, including any
deferred compensation, which was paid during 1996 to each executive officer of
the Trust and to all executive officers and trustees of the Trust as a group:
<TABLE>
<CAPTION>
1996 COMPENSATION TABLE
NAME OF PERSON, AGGREGATE PENSION ESTIMATED
POSITION COMPENSATION OR RETIREMENT ANNUAL TOTAL COMPEN-
FROM TRUST<F6> BENEFITS BENEFITS SATION FROM
ACCRUED AS UPON TRUST PAID
PART OF TRUST RETIREMENT TO DIRECTORS
EXPENSES($) <F7> ($) <F8> ($)
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Stephen Coyle<F9>
Chief Executive $128,600.93 $66,737.24 can not be not
Officer determined applicable
Michael M. Arnold<F10>
Director of $ 93,495.22 $23,027.00 $39,994.33 not
Investor Relations applicable
Helen R. Kanovsky<F11> not
General Counsel $ 88,230.48 $22,166.94 not vested applicable
William C. Tutt<F12> not
Financial Manager $139,977.72 $23,027.04 $68,626.00 applicable
Richard Ravitch,
Chairman $ 10,000.00 0.00 0.00 10,000.00
Arthur A. Coia*,
Union Trustee $ 0.00 $ 0.00 0.00 $ 0.00
Linda Chavez-
Thompson, Union
Trustee $ 0.00 $ 0.00 0.00 $ 0.00
Terrence R. Duvernay,
Management Trustee $ 0.00 $ 0.00 $ 0.00 $ 0.00
<PAGE>
<PAGE>
Alfred J. Fleischer,
Management Trustee $ 2,000.00 $ 0.00 $ 0.00 $2,000.00
Robert A. Georgine*,
Union Trustee $ 0.00 $ 0.00 $ 0.00 $ 0.00
Francis X. Hanley*,
Union Trustee $ 0.00 $ 0.00 $ 0.00 $ 0.00
Frank Hurt*,
Union Trustee $ 0.00 $ 0.00 $ 0.00 $ 0.00
John T. Joyce*,
Union Trustee $ 0.00 $ 0.00 $ 0.00 $ 0.00
Walter Kardy,
Management Trustee $ 0.00 $ 0.00 $ 0.00 $ 0.00
George Latimer,
Management Trustee $ 1,000.00 $ 0.00 $ 0.00 $ 1,000.00
H.D. LaVere,
Management Trustee $ 0.00 $ 0.00 $ 0.00 $ 0.00
George Miller,
Management Trustee $ 2,000.00 $ 0.00 $ 0.00 $ 2,000.00
A.L. Monroe,*
Union Trustee $ 0.00 $ 0.00 $ 0.00 $ 0.00
Jack F. Moore*,
Union Trustee $ 0.00 $ 0.00 $ 0.00 $ 0.00
Marlyn J. Spear,
Management Trustee $ 0.00 $ 0.00 $ 0.00 $ 0.00
Tony Stanley,
Management Trustee $ 5,000.00 $ 0.00 $ 0.00 $ 5,000.00
John Sweeney*,
Union Trustee $ 0.00 $ 0.00 $ 0.00 $ 0.00
Richard L. Trumka*,
Union Trustee $ 0.00 $ 0.00 $ 0.00 $ 0.00
Patricia F. Wiegart*,
Management Trustee $ 0.00 $ 0.00 $ 0.00 $ 0.00
All Directors and
Executive Officers
as a Group (24
persons) $ 470,304.85 $134,958.22 $108,620.33 $20,000.00
<PAGE>
<PAGE>
</TABLE>
- ---------------------
<F6> Compensation figures represent 100% of each executive officer's
compensation for time devoted to Trust matters. Approximately 29% of Mr.
Coyle's time, 32% of Mr. Arnold's time, 32% of Ms. Kanovsky's time and 0%
of Mr. Tutt's time was devoted to matters relating to the AFL-CIO
Building Investment Trust ("BIT"). Mr. Coyle, Mr. Arnold and Ms.
Kanovsky received compensation from BIT Limited Partnership in addition
to the amount set forth above.
<F7> The Internal Revenue Code limits the permissible benefit payments that
may be paid under the Retirement Plan. Consequently, the amounts of
retirement benefits that actually may be paid to individual employees may
be significantly lower than as shown, depending on several factors,
including but not limited to the employee's years of service, level of
compensation, and actual year of retirement.
<F8> Includes compensation from the Trust and all other registered 1940 Act
companies that have a common investment advisor with the Trust, or an
investment advisor that is an affiliated person of the Trust's investment
advisor.
<F9> Aggregate Compensation includes $2,194.40 of deferred compensation in
1996 under the 401(k) Plan, and excludes compensation deferred in lieu of
participation in the Retirement Plan, and interest thereon. Pension or
Retirement Benefits Accrued as Part of Trust Fund Expenses includes
$1,150.00 of matching funds accrued under the 401(k) Plan and $65,587.24
of deferred compensation in lieu of participation in the Retirement Plan.
The total amount of compensation deferred by Mr. Coyle through December
31, 1996 in lieu of participation in the Retirement Plan, including
interest, is $172,754.07 and the total amount deferred under the 401(k)
Plan through December 31, 1996, including interest and Trust matching, is
$9,682.72.
<F10> Aggregate Compensation includes $9,500.00 of deferred compensation in
1996 under the 401(k) Plan, and excludes amounts contributed to the
Retirement Plan on Mr. Arnold's behalf. Pension or Retirement Benefits
Accrued as Part of Trust Fund Expenses includes $1,150.00 of matching
funds accrued under the 401(k) Plan and $21,877.00 contributed to the
Retirement Plan in 1996. The total amount of compensation deferred by
Mr. Arnold as of December 31, 1996 under the 401(k) Plan, including
interest and Trust matching, is $166,103.74.
<F11> Aggregate Compensation includes $9,500.00 of deferred compensation in
1996 under the 401(k) Plan, and excludes amounts contributed to the
Retirement Plan on Ms. Kanovsky's behalf. Pension or Retirement Benefits
Accrued as Part of Trust Fund Expenses includes $1,150.00 of matching
funds accrued under the 401(k) Plan and $21,016.94 contributed to the
Retirement Plan in 1996. The total amount of compensation deferred by
Ms. Kanovsky as of December 31, 1996 under the 401(k) Plan, including
interest and Trust matching, is $13,833.38.
<F12> Aggregate Compensation includes $9,500.00 of deferred compensation in
1996 under the 401(k) Plan, and excludes amounts contributed to the
Retirement Plan on Mr. Tutt's behalf. Pension or Retirement Benefits
Accrued as Part of Trust Fund Expenses includes $1,150.00 of matching
funds accrued under the 401(k) Plan and $21,877.04 contributed to the
Retirement Plan in 1996. The total amount of compensation deferred by
Mr. Tutt as of December 31, 1996 under the 401(k) Plan, including
interest and Trust matching, is $104,699.03. Mr. Tutt retired from the
Trust on December 31, 1996.
<PAGE>
<PAGE>
Prior to October 1, 1990, the Trust had not established or adopted any
bonus, profit sharing, pension, retirement, stock purchase, or other
compensation or incentive plans for its officers and employees. Personnel
(other than the Chief Executive Officer) were provided pursuant to a Personnel
Contract between the Trust and the AFL-CIO whereby the Trust reimbursed the
AFL-CIO for the AFL-CIO's costs of employing the personnel. While the
Personnel Contract was in effect, the personnel participated in the AFL-CIO
Deferred Compensation Plan, a defined contribution plan, and were subject to
the AFL-CIO Staff Retirement Plan ("Retirement Plan"), a defined benefit plan.
Any amounts contributed by the AFL-CIO on behalf of such personnel pursuant to
the Retirement Plan were reimbursed by the Trust pursuant to the Personnel
Contract. The Trust adopted the Retirement Plan for all of its employees
except for its Chief Executive Officer, effective as of October 1, 1990.
Also, effective October 1, 1990, the Trust adopted the AFL-CIO Deferred
Compensation Plan for all of its employees including its Chief Executive
Officer (and subsequent Chief Executive Officers), which plan was subsequently
replaced by the AFL-CIO Housing Investment Trust 401(k) Retirement Plan (the
"401(k) Plan") in 1996.
THE RETIREMENT PLAN
Under the Retirement Plan, contributions are based on an eligible
employee's base salary. In general, rates are determined actuarially every
other year. As of June 30, 1996, contributions were 17.5 percent of an
eligible employee's base salary. During 1996, the base salaries
of Mr. Arnold and Ms. Kanovsky were $126,457 and $121,485, respectively.
The Retirement Plan is open to employees of the AFL-CIO and other
participating employers approved by the Retirement Plan's board of trustees
that make contributions to the Retirement Plan on their behalf. Such
employees become members of the Retirement Plan on their first day of
employment that they are scheduled to work at least 1,000 hours during the
next 12 consecutive months.
The Retirement Plan provides a normal retirement pension to eligible
employees for life, beginning at age 65. The amount of this pension depends
on salary and years of credited service at retirement. Eligible employees
will receive 2.80 percent of the average of their highest three years'
earnings ("Final Average Salary") for each year of credited service up to 25
years, and 0.5 percent of their Final Average Salary of each year of credited
service over 25 years. Eligible employees must have at least five years of
service to retire and receive a monthly pension. Eligible employees generally
earn credited service toward their pension for each year that they work for a
participating employer.
An eligible employee also can receive full benefits after reaching age
55, if his or her age plus his or her years of service equals 80 or more. It
is also possible for an employee who meets the combination of 80 requirement
to retire after age 50, but in such event benefits would be reduced 4 percent
for each year or portion thereof that the employee is less than 55 years old.
Set forth below is a table showing estimated annual benefits payable
upon retirement in specified compensation and years of service
classifications. As of the date hereof, Mr. Arnold and Ms. Kanovsky
have approximately 11 and 1 credited years of service, respectively, under
the Retirement Plan.
<PAGE>
<PAGE>
Years of Service
----------------
Final Average
Salary 15<F13> 20<F13> 25<F13> 30<F14> 35<F14>
$ 50,000 $21,000 $28,000 $35,000 $36,250 $37,500
70,000 29,400 39,200 49,000 50,750 52,500
100,000 42,000 56,000 70,000 72,500 75,000
<F13> 2.80 percent per year up to 25 years.
<F14> 0.5 percent per year for years over 25 years.
Benefits listed in the table are not subject to any deduction for Social
Security benefits or other offset amounts.
THE 401(K) PLAN
Under the 401(k) Plan, an eligible employee may agree with the Trust
to set aside up to 10 percent of his or her base salary (that is, base weekly
pay exclusive of bonuses, lump-sum payments, or over-time pay), up to a
maximum of $9,500 in 1997. In 1997, the Trust will match dollar-for-dollar
the first $1,250 contributed. The amount set aside by an eligible employee
and the amount of the Trust's matching contribution, if any, will be deposited
in a trust account in the employee's name.
An employee of the Trust is eligible to participate (i) if the employee
is a full-time employee, or (ii) if the employee is a temporary employee who
has been credited with 1,000 hours of service for any year beginning with the
date, or any subsequent anniversary date, of the employee's commencement of
employment with the Trust.
When a participating employee terminates his or her employment, retires,
or becomes disabled, the employee will be able to receive as a lump sum
payment the salary reduction amounts that were contributed to the Trust on the
employee's behalf, the additional amounts that the Trust contributed to the
trust account on the employee's behalf, plus income (less the employee's
allocated share of expenses) earned on these contributions.
If the employee continues to work for the Trust, the employee cannot
withdraw these amounts unless the employee has reached the age of 59 1/2 or
has a financial hardship. A financial hardship is one that is of such
magnitude that it would impair the employee's financial security. The
employee will be required to present evidence of the financial hardship and
upon submission of such evidence may be entitled to withdraw an amount, up to
the balance in the employee's account, to meet the immediate financial need.
The amount in an employee's account must be distributed to the employee
within 60 days following the later of (i) the calendar quarter in which the
employee reaches age 70 1/2 or (ii) the calendar quarter in which the employee
terminates employment with the Trust. Additionally, these amounts must be
distributed no later than 60 days following the year in which the latest of
the following occurs: (i) the employee's attainment of age 65; (ii) the tenth
<PAGE>
<PAGE>
anniversary of the employee's participation in the 401(k) Plan; or (iii)
termination of the employee's employment.
A participating employee may borrow from his or her account subject to
certain prescribed limitations.
The following table sets forth the amounts paid or distributed pursuant
to the 401(k) Plan in 1996 to the executive officers listed in the
Compensation Table above, and the amounts deferred and accrued pursuant to the
401(k) Plan for the accounts of such individuals during 1996, the distribution
or unconditional vesting of which are not subject to future events.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Name of Individual Amount Paid Amount Deferred Trust Matching or
Number of Group or Distributed in 1995 Contributions in 1995
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Stephen Coyle $0.00 $ 2,194.40 $1,150.00
Michael M. Arnold $0.00 $ 9,500.00 $1,150.00
Helen R. Kanovsky $0.00 $ 9,500.00 $1,150.00
William C. Tutt $0.00 $ 9,500.00 $1,150.00
All executive
officers as a
group (4 persons) $0.00 $30,694.40 $4,600.00
</TABLE>
PRINCIPAL HOLDERS OF SECURITIES
The following table sets forth the beneficial ownership information as
of April 1, 1997 with respect to each Labor Organization and Eligible Pension
Plan (as those terms are defined in the Trust's Declaration of Trust) known to
the Trust to be the beneficial owner of more than 5 percent (that is more than
66,099.5009 units) of the Trust's 1,321,990.0182 outstanding Units of
Participation. Because only Labor Organizations and Eligible Pension Plans
are eligible to own Units of Participation in the Trust, no Units of
Participation are owned by any Trustee or officer individually. Each
beneficial owner set forth below is also the record owner of the Units
specified.
Percent
Name and Address Number of Units of Class
- ---------------- --------------- ---------
California Public Employees'
Retirement System (Lincoln Plaza
400 P Street, Suite 2220
Sacramento, CA 96814) 70,374.5995 units 5.3%
Ohio Public Employees'
Retirement System
(227 East Town Street
Columbus, OH 43215) 67,165.5901 units 5.1%
<PAGE>
<PAGE>
INVESTMENT ADVISER
Beginning as of May 21, 1992, the Trust engaged Wellington Management
Company, LLP ("Wellington Management") to furnish investment advisory services
concerning certain of the short-term, liquid assets in the Trust's portfolio
designated by the Trust from time to time (the "Short-Term Assets"). As of
December 31, 1996, the value of all short-term assets eligible for management
by Wellington Management was $88,598,803, which represented 6.4% of the
Trust's total net assets at that date.
Wellington Management, a Massachusetts limited liability partnership,
is a registered investment adviser with principal offices located at 75 State
Street, Boston, Massachusetts 02109. Its Managing Partners are Robert W.
Doran, Duncan M. McFarland and John R. Ryan. Wellington Management is a
professional investment counseling firm that provides investment services to
investment companies, employee benefit plans, endowment funds, foundations,
and other institutions and individuals. As of December 31, 1996, Wellington
Management held investment management authority over approximately $133.2
billion of assets, including $15.5 billion of cash and cash-equivalent assets.
Wellington Management and its predecessor organizations have provided
investment advisory services to investment companies since 1933 and to
investment counseling clients since 1960.
Pursuant to the terms of its contract with the Trust, which was
renewed in May 1996, Wellington Management manages the investment and
reinvestment of the Short-Term Assets; continuously reviews, supervises and
administers the investment program of the Trust with respect to the Short-Term
Assets; determines in its discretion the securities to be purchased, retained
and sold (and implements those decisions); renders regular reports to the
Trust's officers and Trustees concerning its discharge of the foregoing
responsibilities, including causing to be provided to the Trust's officers
within 2 business days after each Valuation Date market prices as of the
Valuation Date of Short-Term Assets that mature more than 60 days after the
Valuation Date; develops and produces portfolio analysis reports; monitors
portfolio investment characteristics; analyzes portfolio performance and
provides to the Trust's officers within 10 business days after each calendar
month end a report regarding such performance for such month; provides
analysis on markets and instruments; provides investment overview and economic
outlook forecasts; provides information and comment on various relevant
regulatory and legal issues; attends meetings of the Trust's Executive
Committee and Trustees as reasonably requested; and supplies the Trust's
officers and Trustees with all statistical information and reports reasonably
required by them, including all information required under Section 15(c) of
the Investment Company Act. Wellington Management must discharge these and
its other duties subject to the oversight of the officers and Trustees of the
Trust and in compliance with the Trust's policies, as well as with applicable
laws and regulations.
Wellington Management renders all of the services described above at its
own expense, and provides the office space, furnishings and equipment, and
personnel required by it to perform those services for the compensation
described below.
<PAGE>
<PAGE>
Wellington Management is authorized to arrange for the execution of
portfolio transactions by selecting brokers or dealers that will execute the
transactions, and is directed to use its best efforts to obtain the best net
results, taking into account such factors as price (including the applicable
brokerage commission or dealer spread), size of order, difficulty of
execution, and operational facilities of the firm involved. Wellington
Management may in its discretion purchase and sell portfolio securities
through brokers who provide it or the Trust with research, analysis, advice
and similar services, and Wellington Management may pay to these brokers, in
return for research and analysis, a higher commission than may be charged by
other brokers, provided that Wellington Management determines in good faith
that such commission is reasonable in terms either of that particular
transaction or of the overall responsibility of Wellington Management, that
the total commission paid by the Trust will be reasonable in relation to the
benefits to the Trust over the long term, and that the total commission paid
by the Trust is consistent with commissions paid in comparable transactions.
In selecting a broker for each specific transaction, Wellington
Management will use its best judgment to choose the broker most capable of
providing the brokerage services necessary to obtain the best available price
and most favorable execution. The full range and quality of brokerage
services available will be considered in making these determinations. For
example, brokers may be selected on the basis of the quality of such brokerage
services related to the requirements of the specific transaction such as the
following; capable floor brokers or traders, competent block trading coverage,
good communications, ability to position, use of automation, research
contracts, arbitrage skills, administrative ability, or provision of market
information relating to the security. Wellington Management will make
periodic evaluations of the quality of these brokerage services as provided by
various firms and measure these services against its own standards of
execution. Brokerage services will be obtained only from those firms which
meet its standards, maintain a reasonable capital position, and can be
expected to reliably and continuously supply these services.
On occasions when Wellington Management deems the purchase or sale of a
security to be in the best interest of the Trust as well as other clients,
Wellington Management, to the extent permitted by applicable laws and
regulations, may, but is under no obligation to, aggregate the securities to
be so purchased or sold in order to obtain the most favorable price or lower
brokerage commissions and efficient execution. In such event, allocation of
the securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by Wellington Management in the manner it considers
to be the most equitable and consistent with its fiduciary obligations.
In compensation for the investment advisory services provided by
Wellington Management, the Trust will pay Wellington Management on a quarterly
basis a fee at the annual rate of 0.125% of the market value of the Short-Term
Assets based on the average monthly market value of the first $100 million,
and at the annual rate of 0.100% of the market value of the Short-Term Assets
based on the average monthly market value in excess of $100 million. In
fiscal 1996, the Trust incurred total investment advisory fees of $105,644,
which represented .008% of the Trust's average net assets for such period.
During its last three fiscal years, the Trust incurred total investment<PAGE>
<PAGE>
advisory fees of $222,813.
SALES AND DISTRIBUTION ACTIVITIES
The Director of Investor Relations of the Trust, operating out of the
Trust headquarters in the District of Columbia, conducts, and is responsible
for other Trust staff members who conduct, sales and distribution activities
for the Trust. Sales and distribution activities are directed to certain
pension plans and include solicitations in person or by mail or telephone as
well as responding to inquiries concerning the Trust's offering of Units, and
the ministerial and clerical work of effecting sales of Units. Expenses of
sales and distribution of Units in this manner are paid by the Trust pursuant
to a Plan for Distribution adopted by the Trustees and the Participants
pursuant to SEC Rule 12b-1 under the Investment Company Act.<F15> Sales and
distribution expenses, including printing of the prospectus and travel costs,
for the year ended December 31, 1996 were $434,105, which represents
approximately .03 percent of the $1,383,163 in net Trust assets as of
December 31, 1996. In 1996, the Board of Trustees approved a budget of
$500,000 per year for the Plan for Distribution from which non-material
increases may be made by the Board. At its 1996 fall meeting, the Board of
Trustees approved a budget of $500,000 for the Plan of Distribution in 1997.
No material increase in the budget for the Plan for Distribution will be made
without Participant approval.
Under the Plan for Distribution approved by Participants and Trustees,
including all disinterested Trustees, the Trust may finance any activity that
is primarily intended to result in the sale of the Trust's Units, subject to
the limitations set forth above, including but not limited to advertising and
other expenses relating to selling efforts, printing of prospectuses and
reports for other than existing Participants, and preparation and distribution
of advertising material and sales literature. Each expenditure must be
specifically approved in advance by the Chief Executive Officer or the
Chief Investment Officer of the Trust, who will provide at least quarterly to
the Trustees a written report setting forth amounts expended and the purposes
for which the expenditures were made. In approving the Plan for Distribution
in accordance with the requirements of Rule 12b-1 under the Investment Company
Act, the Trustees (including the disinterested Trustees, none of whom have any
direct or indirect financial interest in the Plan for Distribution or any
related agreements) considered various factors and determined that there is a
reasonable likelihood that the Plan for Distribution will benefit the Trust
and its Participants because a relatively constant flow of funds into the
Trust, even at times when asset values are relatively high, will tend to
offset the effect of possible liquidation effected to obtain cash for
redemptions from the Trust when asset values are relatively low. The Plan for
Distribution will continue in effect until April 30, 1998, unless earlier
terminated by vote of a majority of the Trust's outstanding Units or by a
majority of disinterested Trustees. Any change in the Plan for Distribution
that would materially increase the amount of distribution expense borne by the
<F15> In general, SEC Rule 12b-1, with which the Trust will comply, requires
that such a plan be approved in a specified manner by the holder of
voting securities and Trustees, that quarterly reports of distribution
expenses be made to the Trustees, and that the plan be terminable upon
specified conditions.
<PAGE>
<PAGE>
Trust requires Participants' approval; any other material change requires
approval by the Trustees, including a majority of the disinterested Trustees.
The Plan for Distribution may continue in effect for successive one-year
periods, provided that each continuance is specifically approved: (a) by a
vote of the majority of the Trust's Units or by the Trustees; and (b) by the
vote of a majority of the Trustees who are disinterested and who have no
direct or indirect financial interest in the Plan for Distribution or any
related agreements. Any agreements relating to the Plan for Distribution will
be terminable upon assignment or upon 60 days written notice without payment
of any penalty by vote of a majority of Trustees who are not interested
persons.
Of the $434,105 of sales and distribution expenses incurred for the
year ended December 31, 1996, the following amounts were expended on each of
the categories listed below. All such amounts were paid in cash.
Year Ended
Category December 31, 1996
-------- ------------------
Printing and mailing of prospectuses
to other than current security holders................. $ 6,206
Compensation to sales personnel
(salaries plus fringe benefits)........................ $ 272,629
Other (includes travel and meeting
expenses, office supplies, consulting
fees and expenses and printing and
mailing of sales literature)........................... $ 155,270
TOTAL............................................. $ 434,105
No interested person of the Trust or any disinterested Trustee had any
direct or indirect financial interest in the operation of the Plan for
Distribution or related agreement during the year ended December 31, 1996,
with the possible exception of Director of Investor Relations Arnold who, if
he were determined to be an interested person of the Trust, would have such an
interest because part of his compensation is covered by the Plan.
ADMISSION TO THE TRUST
Only Labor Organizations and Eligible Pension Plans are eligible to own
Units. See "SECURITIES OFFERED" in the Prospectus for a discussion of
eligible persons.
The price of Units is based on Net Asset Value. Net Asset Value for a
particular purchase will be determined as of each Valuation Date following
receipt of the purchase order by dividing the value of the Trust's portfolio
plus any cash and other assets (including interest and dividends accrued but
not collected) less all liabilities (including accrued expenses but excluding
<PAGE>
<PAGE>
capital and surplus), by the number of Units outstanding as of that Valuation
Date.
Admission to the Trust is permitted in whole or fractional Units as of
monthly Valuation Dates. A request for purchase of Units must be received by
the Trust before the Valuation Date as of which they are to be issued. A
minimum initial purchase of $50,000 is required. A request for purchase of
Units must be accompanied by cash or by a subscription agreement providing for
a cash escrow of the amount to be invested as of the forthcoming Valuation
Date. See "SECURITIES OFFERED" in the Prospectus for a discussion of the
valuation methods used by the Trust in determining the market price of its
portfolio assets.
SUPPLEMENTARY INFORMATION
CUSTODIAN
NationsBank Trust, 1501 Pennsylvania Avenue, N.W., Washington, D.C. acts
as a bank custodian of Trust portfolio securities pursuant to a safekeeping
agreement dated December 21, 1988, as amended. For providing such safekeeping
services, the Bank charges the Trust an annual fee of $4,000 plus a $10
transaction charge for each asset accepted or released. The Bank also serves
as custodian for the Trust's short-term account, pursuant to an amendment to
the safekeeping agreement dated May 21, 1991. Pursuant to this amendment, the
Bank charges the Trust an annual fee of $1,800 per year plus a $20 transaction
charge.
AUDITORS
KPMG Peat Marwick, L.L.P., 2001 M Street, N.W., Washington, D.C., was
approved by the Participants at the 1996 Annual Meeting of Participants as the
independent certified public accountants for the Trust for the period ending
December 31, 1997. KPMG Peat Marwick, L.L.P. audits the financial statements
of the Trust at the conclusion of each fiscal year, prepares applicable tax
returns for the Trust, and counsels the officers of the Trust with respect to
accounting and taxation matters from time to time.
REPORTS
In accordance with SEC requirements under the Investment Company Act, the
Trust will distribute periodic financial statements to Participants and will
file periodic reports with the SEC. Financial statements distributed to
Participants will include unaudited semi-annual statements and audited annual
statements. Copies of all reports filed with the SEC will be made available
for inspection by Participants at Trust headquarters in Washington, D.C.
LEGAL MATTERS
Certain legal matters in connection with the offering of Units were
reviewed for the Trust by Swidler & Berlin, Chartered, 3000 K Street, N.W.,
Suite 300, Washington, D.C. 20007.
FINANCIAL STATEMENTS
Reference is hereby made to the Financial Statements of the AFL-CIO
Housing Investment Trust filed with the Securities and Exchange Commission on
February 25, 1997 as part of the Trust's Annual Report to Participants, which
are incorporated herein by reference.
<PAGE>
<PAGE>
APPENDIX A
STANDARD & POOR'S DEBT RATING DEFINITIONS
Excerpted from Standard & Poor's "Credit Week", April 18, 1994, page 15.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
A Standard & Poor's corporate or municipal debt rating is a current
assessment of the creditworthiness of an obligor with respect to a specific
obligation. This assessment may take into consideration obligors such as
guarantors, insurers, or lessees.
The debt rating is not a recommendation to purchase, sell, or hold a
security, inasmuch as it does not comment as to market price or suitability
for a particular investor.
The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources it considers reliable. S&P does not
perform an audit in connection with any rating and may, on occasion, rely on
unaudited financial information. The ratings may be changed, suspended, or
withdrawn as a result of changes in, or unavailability of, such information,
or based on other circumstances.
The ratings are based, in varying degrees, on the following
considerations:
1. Likelihood of default-capacity and willingness of the obligor
as to the timely payment of interest and repayment of principal in accordance
with the terms of the obligation;
2. Nature of and provisions of the obligation;
3. Protection afforded by, and relative position of, the
obligation in the event of bankruptcy, reorganization, or other arrangement
under the laws of bankruptcy and other laws affecting creditors' rights.
INVESTMENT GRADE
AAA -- Debt rated AAA' has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.
AA -- Debt rated AA' has a very strong capacity to pay interest and
repay principal and differs from the highest rated issues only in small
degree.
A -- Debt rated A' has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
<PAGE>
BBB -- Debt rated BBB' is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay<PAGE>
<PAGE>
principal for debt in this category than in higher rated categories.
SPECULATIVE GRADE
Debt rated BB', B', CCC', CC', and C' is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. BB' indicates the least degree of speculation
and CCC' the highest. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or
major exposures to adverse conditions.
BB -- Debt rated BB' has less near-term vulnerability to default than
other speculative issues. However, it faces 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 -- Debt rated B' has a greater vulnerability to default but currently
has 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-- Debt rated CCC' has a currently identifiable vulnerability to
default, and is 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, it is 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 -- The rating CC' typically is applied to debt subordinated to
senior debt that is assigned an actual or implied CCC' rating.
C -- The rating C' typically is applied to debt subordinated to senior
debt that is 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 -- The rating CI' is reserved for income bonds on which no interest
is being paid.
D -- Debt rated D' is 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.
<PAGE>
<PAGE>
Plus (+) or Minus (-): The ratings from AA' to CC' may be modified by
the addition of a plus or minus sign to show relative standing within the
major rating categories.
c -- The letter c' indicates that the holder's option to tender the
security for purchase may be canceled under certain prestated conditions
enumerated in the tender option documents.
L -- The letter L' indicates the rating pertains to the principal amount
of those bonds to the extent that the underlying deposit collateral is
federally insured and interest is adequately collateralized. In the case of
certificates of deposit, the letter L' indicates that the deposit, combined
with other deposits being held in the same right and capacity, will be honored
for principal and accrued pre-default interest up to the federal insurance
limits within 30 days after closing of the insured institution or, in the
event that the deposit is assumed by a successor insured institution, upon
maturity.
p -- 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, while addressing credit
quality subsequent to completion of the project, makes no comment 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.
* Continuance of the rating is contingent upon S&P's receipt of an
executed copy of the escrow agreement or closing documentation confirming
investments and cash flows.
N.R. -- Not rated.
Debt Obligations of Issuers outside the U.S. and its territories are
rated on the same basis as domestic corporate and municipal issues. The
ratings measure the creditworthiness of the obligor but do not take into
account currency exchange and related uncertainties.
<PAGE>
<PAGE>
APPENDIX B
THOMSON BANKWATCH RATING CHARACTERISTICS
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A Company possesses an exceptionally strong balance sheet and earnings
record, translating into an excellent reputation and very good access to
its natural money markets. If weakness or vulnerability exists in any
aspect of the company's business, it is entirely mitigated by the
strengths of the organization.
A/B Company is financially very solid with a favorable track record and no
readily apparent weakness. Its overall risk profile, while low, is not
quite as favorable as for companies in the highest rating category.
B A strong company with a solid financial record and well received by its
natural money markets. Some minor weaknesses may exist but any
deviation from the company's historical performance levels should be
both limited and short-lived. The likelihood of a problem developing is
small, yet slightly greater than for a higher-rated company.
B/C Company is clearly viewed as a good credit. While some shortcomings are
apparent, they are not serious and/or are quite manageable in the short-
term.
C Company is inherently a sound credit with no serious deficiencies, but
financials reveal at least one fundamental area of concern that prevents
a higher rating. Company may recently have experienced a period of
difficulty, but those pressures should not be long-term in nature. The
company's ability to absorb a surprise, however, is less than that for
organizations with better operating records.
C/D While still considered an acceptable credit, the company has some
meaningful deficiencies. Its ability to deal with further deterioration
is less than that for better-rated companies.
D Company's financials suggest obvious weaknesses, most likely created by
asset quality considerations and/or a poorly structured balance sheet.
A meaningful level of uncertainty and vulnerability exists going
forward. The ability to address further unexpected problems must be
questioned.
D/E Company has areas of major weakness which may include funding and/or
liquidity difficulties. A high degree of uncertainty exists as the
company's ability to absorb incremental problems.
E Very serious problems exist for the company, creating doubt as to its
continued viability without some form of outside assistance - regulatory
or otherwise.
<PAGE>
<PAGE>
APPENDIX C
STANDARD & POOR'S STATE AGENCY RATINGS
Excerpted from Standard & Poor's "Credit Review",
February 7, 1994, pages 59-61.
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State housing finance agencies (HFAs) represent an important presence in
the municipal bond market, with over $80 billion of debt outstanding. These
agencies have a 10 to 20-year history of debt issuance and have funded over
one million loans for first-time buyers of single-family homes and over
900,000 units of rental housing. Many agencies have built up a considerable
level of expertise in all areas of finance, development, and portfolio
management. In addition, because of their prudent and conservative approach
and many successful years of bond issuance, many HFAs have built up
significant fund balances either in their own general funds or under various
bond resolutions.
S&P's assessment of the managerial, administrative and financial
resources of agencies is an integral part of the bond rating. Managerial and
administrative capabilities are evaluated based upon meetings with the agency
at its offices, at which time the team of S&P analysts focuses on all systems
and procedures applicable to the bonds being rated. The specific areas of
focus are detailed in the attachment entitled "Checklist for Good Management."
The assessment of these capabilities is important because in addition to their
role as issuer, many agencies lend support to their bond programs depending on
their ability to:
- Perform the role of master servicer and directly service loan
portfolios;
- Manage investment portfolio to provide ongoing credit quality and
meet liquidity needs;
- Directly provide primary mortgage insurance and portfolio loss
coverage, or participate in risk sharing programs; and
- Generate bond cash flows at the time of the rating, and at critical
junctures of bond administration, such as prior to extension of
acquisition periods, exercising open flow of funds, recycling of
prepayments to make new loans and non-pro rata redemptions.
In addition to S&P's recognition of an agency's ability to perform these
responsibilities, additional flexibility in bond programs is often permitted.
For example, with regard to [certain housing bonds], S&P uses a blended rating
approach in determining the appropriate ratings of credit enhancement
providers, depending upon the level of investments the magnitude, duration and
purpose of the credit support, and such factors as the agency's cash flow
strength and portfolio performance. Agencies can also receive flexibility in
investment maturity standards, if they can substantiate their ability to
provide liquidity as needed. In the area of cash flow standards, agencies who
act as master servicer for their programs and demonstrate a strong track<PAGE>
<PAGE>
record of good portfolio performance and monitoring, can reduce the lag in
receipt of mortgage payments on `AA' rated transactions from 60 to 30 days.
Other reserves can be reduced as agency financial strength and track
records dictate.
GENERAL OBLIGATION RATINGS. State HFAs may also be assigned their own
general obligation ratings. Although several agencies' debt incorporates a
general obligation pledge, the rating on that debt has traditionally addressed
the credit strength of the primary security for the bonds, such as the
mortgage portfolio, reserves and investments. When an agency has been
afforded its own general obligation rating, the rating on the bonds reflects
the overall financial strength of the agency first.
TOP TIER STATUS. Top tier status was developed by S&P in 1986 to
recognize agencies with superior managerial and administrative strength who
also showed the willingness and the ability to lend financial support to their
bond programs. The top tier designation affords agencies increased
flexibility and can result in higher ratings than would be attainable based
solely on the credit strength of the bonds being rated. To date, 12 state
HFAs have been designated top tier. Local housing finance agencies are also
eligible, as evidenced by the recent addition of New York City Housing
Development Corporation, to the list of Top Tier agencies. The seven
guidelines for Top Tier status are as follows:
Years Issuing Bonds. S&P looks at the years of experience in active
management of the entire agency in the tax-exempt bond area. Continuity of
management and the agency's ability to resolve difficult situations in the
face of changing legislatures, changing governors and changing economic cycles
over the past 10 to 15 years are evaluated. S&P also focuses on the track
records of the agency, on its programs and overall operations and any lapses
in years issuing bonds.
Unrestricted Fund Balance. S&P will examine two levels: the overall
percentage of total unrestricted funds to total debt, and the percentage of
liquid unrestricted funds to total mortgages outstanding. As guidelines, the
percentages should be in the range of total unencumbered fund balances equal
to 4% of outstanding bonds, of which a minimum of 2% of outstanding mortgages
is liquid (i.e. with maturities of 18 months or less). This 4% ratio cannot
include money pledged to risk share programs, self-insurance funds,
multifamily coinsurance, letter of credit reimbursement obligations or any
other programs where the agency is taking on additional risk, that is not
covered by indentured monies. S&P reviews these ratios annually and factors
in all upcoming risks on issues anticipated for the coming year. Further,
these unencumbered fund balances should be stable over several fiscal years.
Surpluses under specific resolutions are eligible to be counted among agency
fund balances as long as they can be made available as needed. S&P will
examine whether the funds to be considered unrestricted are tangible assets
available for any general agency use. Outstanding debt should include
short-term obligations and overall debt may be reduced, for calculation
purposes, if
it is considered to have S&P's lowest degree of risk or highest ratings.
<PAGE>
<PAGE>
Administrative Capabilities. In general, S&P will evaluate the
degree of portfolio oversight and computerization of the agency's entire
operations. Established procedures should be in effect requiring periodic
reports to senior staff as well as the board of directors. In addition, an
agency should be able to substantiate its ability to assume servicing of a
given portfolio, if necessary, without delays. Parallel monitoring, including
access to (or duplicates) of actual loan documents, indicate the agency's
level of preparedness. An ideal situation is when an agency maintains
parallel systems with the servicer and can track the loans individually
themselves, on a daily basis instead of relying solely on servicer's reports.
Periodic reviews of the performance of the entire portfolio should be designed
to address problems at an early stage of development.
Investment Policy. S&P will focus on the investment of unrestricted
fund balances and other funds being counted to meet financial standards for
top tier, including procedures for making investment decisions and monitoring
the investment portfolio. Written investment guidelines are considered
essential to good management. Investment standards should meet S&P's
standards at the `A' rating level. It is viewed positively when an agency is
on line with the trustee, which enables them to have immediate access to all
investment decisions as parallel computer systems are maintained.
Internal Controls and Financial Management. On a regular basis, S&P
will evaluate the agency's ability to produce audited financial reports,
including balance sheets, revenue and expenditure statements, changes in fund
balances, and changes in financial position. Interim statements need not be
audited or include notes to financials, but should be prepared on the same
basis as audited statements. An agency's accounting and/or financial control
area, as indicated on an organizational chart, will be evaluated as a separate
department. Long-term financial planning and the ability to deliver annual
cash flow projections on bond programs is considered favorably.
Portfolio Quality. The performance of an agency's single-family
portfolio is evaluated in comparison to the national and respective state
averages based on Mortgage Bankers Association (MBA) statistics, and compared
to the performance of other state agency portfolios. Other appropriate
measures may be used and the relative risk, including any available offsetting
coverage, will be considered. All loan portfolios, whether under rated or
unrated programs, will be assessed according to S&P's single-family mortgage
loan criteria, as detailed in [S&P's Credit Review, February 7, 1994].
Multifamily portfolios will be addresses according to S&P's multifamily
criteria. Good portfolio performance and close monitoring as outlined in the
"Checklist for Good Management" are earmarks of a top tier agency. Most
agencies do experience portfolio problems from time to time due to economic
and market downturns. This would not preclude an agency from being designated
top tier as long as they demonstrate strong portfolio oversight and the
ability to turn around problem situations.
State Support. S&P will examine any agency's legislative mandate
and review the degree to which a state interacts with the agency's programs
and purpose. S&P looks for a positive relationship where the state is working
with the housing agency to address the state's housing needs. Top tier
agencies should be able to demonstrate strong state support for its programs.
<PAGE>
<PAGE>
Past appropriations or expected future appropriations would be considered
evidence of state government support. As mentioned previously, S&P is
especially concerned about potential threats to agency fund balances. S&P
should be notified immediately of any such event. S&P's general obligation
group will assist in evaluating the degree of state involvement and financial
control of its housing finance agency. As part of the top tier review, S&P
may meet with members of state government, as well as the agency's board, to
better understand the interaction among the agency, state governments and its
board.
<PAGE>
<PAGE>
PART C: STATEMENT OF OTHER INFORMATION
AFL-CIO
HOUSING INVESTMENT TRUST
1717 K Street, N.W.
Suite 707
Washington, D.C. 20006
(202) 331-8055
STATEMENT OF OTHER INFORMATION
This Statement of Other Information is not a prospectus. It should be
read in conjunction with the AFL-CIO Housing Investment Trust ("Trust")
Prospectus, dated April 30,1997, which may be obtained without charge from
Trust headquarters.
The date of this Statement of Other Information is April 30, 1997.
<PAGE>
<PAGE>
TABLE OF CONTENTS
Page
----
Financial Statements and Exhibits..................................... 1
Persons Controlled by or Under
Common Control with Registrant...................................... 6
Business and Other Connections of Investment Advisor.................. 6
Number of Holders of Securities....................................... 6
Indemnification....................................................... 6
Location of Accounts and Records...................................... 7
Signatures............................................................ 8
<PAGE>
<PAGE>
FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
The following financial statements pertaining to the year ended
December 31, 1996 are included in Part B of this Registration
Statement (the Statement of Additional Information):
(i) Statement of Assets and Liabilities
(ii) Schedule of Investments
(iii) Statement of Operations
(iv) Statement of Changes in Net Assets
(v) Notes to Financial Statements
(vi) Supplemental Information -- Selected Per Share Data
and Ratios
(vii) Report of KPMG Peat Marwick, LLP independent
auditors
(b) Exhibits:
(1) Copies of the charter as now in effect;
Declaration of Trust as amended through April 25, 1994:
incorporated by reference to Part C, Item 24(b)(1)
[Exhibit 1] of the Trust's Registration Statement on Form
N-1A under the Securities Act of 1933 (Post-Effective
Amendment No. 20) and the Investment Company Act of 1940
(Amendment No. 23), Registration No. 2-78066, as filed
with the SEC on June 6, 1994.
(2) Copies of the existing by-laws or instruments corresponding
thereto;
Rules and Regulations as amended through March 15, 1990:
incorporated by reference to Part C, Item 24(b)(2)
[Exhibit(2)] of the Trust's Registration Statement on
Form N-1A under the Securities Act of 1933(Post-Effective
Amendment No. 13)and the Investment Company Act of 1940
(Amendment No. 16), Registration No. 2-78066, as filed
with the SEC on April 30, 1990.
(3) Copies of any voting trust agreement with respect to more than
5 percent of any class of equity securities of the Registrant;
(Not applicable)<PAGE>
<PAGE>
(4) Specimens or copies of each security issued by the Trust,
including copies of all constituent instruments, defining the
rights of the holders of such securities, and copies of each
security being registered;
(Not applicable)
(5) Copies of all investment advisory contracts relating to the
management of the assets of the Trust;
Investment Advisory Agreement dated May 21, 1992 with
Wellington Management Company: incorporated by reference
to Part C, Item 24(b)(5), [Exhibit (5)] of the Trust's
Registration Statement on Form N-1A under the Securities
Act of 1933 (Post-Effective amendment No. 17) and the
Investment Company Act of 1940 (Amendment No. 20),
Registration No. 2-78066, as filed with the SEC on June
24, 1992.
(6) Copies of each underwriting or distribution contract between
the Trust and a principal underwriter, and specimens or copies
of all agreements between principal underwriters and dealers;
(Not applicable)
(7) Copies of all bonus, profit sharing, pension, or other similar
contracts or arrangements wholly or partly for the benefit of
directors or officers of the Trust in their capacity as such;
if any such plan is not set forth in a formal document,
furnish a reasonably detailed description thereof;
(a) Summary of AFL-CIO Staff Retirement Plan dated
July 1985 and amendments thereto in effect as of January
30, 1989: incorporated by reference to Part C, Item
24(b)(7)(b) [Exhibit 7(b)] of the Trust's Registration
Statement on Form N-1A under the Securities Act of 1933
(Post-Effective Amendment No. 14) and the Investment
Company Act of 1940 (Amendment No. 17), Registration No.
2-78066, as filed with the SEC on March 25, 1991.
(b) AFL-CIO Deferred Compensation Plan and Trust, as
restated and amended through August 1, 1988: incorporated
by reference to Part C, Item 24(b)(7)(c) [Exhibit 7(c)]
of the Trust's Registration Statement on Form N-1A under
the Securities Act of 1933 (Post-Effective Amendment No.
14) and the Investment Company Act of 1940 (Amendment No.
17), Registration No. 2-78066, as filed with the SEC on
March 25, 1991.
(c) AFL-CIO Housing Investment Trust 401(k)
Retirement
Plan, efffective as of October 1, 1996: incorporated by
reference to Part C, Item 24(b)(7)(c) [Exhibit 7(c)] of
the Trust's Registration Statement on Form N-1A under the
Securities Act of 1933 (Post-Effective Amendment No. 25)
and the Investment Company Act of 1940 (Amendment No.
28), Registration No. 2-78066, as filed with the SEC on
April 30, 1997. <PAGE>
<PAGE>
(8) Copies of all custodian agreements and depository contracts
under Section 17(f) of the Investment Company Act, with
respect to securities and similar investments of the Trust,
including the schedule of remuneration;
Custody Agreement with American Security Bank dated
October 18, 1983, as amended through December 21, 1988:
incorporated by reference to Part C, Item 24(b)(8)
[Exhibit (8)] of the Trust's Registration Statement on
Form N-1A under the Securities Act of 1933
(Post-Effective Amendment No. 12) and the Investment
Company Act of 1940 (Amendment No. 15), Registration No.
2-78066, as filed with the SEC on April 28, 1989.
Custodian Agreement with Security Trust Company, N.A.
dated May 21, 1991: incorporated by reference to Part C,
Item 24(b)(8) [Exhibit (8)] of the Trust's Registration
Statement on Form N-1A under the Securities Act of 1933
(Post Effective Amendment No. 16) and the Investment
Company Act of 1940 (Amendment No. 19), Registration
No. 2-78066, as filed with the SEC on April 22, 1992.
(9) Copies of all other material contracts not made in the
ordinary course of business which are to be performed in whole
or in part at or after the date of filing the Registration
Statement;
(Not applicable)
(10) An opinion and consent of counsel as to the legality of the
securities being registered, indicating whether they will when
sold be legally issued, fully paid, and non-assessable;
Opinion letter and written consent of Swidler & Berlin,
Chartered, dated April 29, 1997, is included as Exhibit
(10) to this Registration Statement incorporated by
reference to Part C, Item 24(b)(10)[Exhibit (10)] of the
Trust's Registration Statement on Form N-1A under the
Securities Act of 1933 (Post-Effective Amendment No. 25)
and the Investment Company Act of 1940 (Amendment No.
28), Registration No. 2-78066, as filed with the SEC on
April 30, 1997.
(11) Copies of any other opinions, appraisals, or rulings, and
consents to the use thereof relied on in the preparation of
this Registration Statement and required by Section 7 of the
1933 Act;
Consent of KPMG Peat Marwick, L.L.P. dated April 30,
1997 is included as Exhibit (11) to this Registration
Statement: incorporated by reference to Part C, Item
24(b)(11)[Exhibit (11)] of the Trust's Registration
Statement on Form N-1A under the Securities Act of 1933
<PAGE>
<PAGE>
(Post-Effective Amendment No. 25) and the Investment
Company Act of 1940 (Amendment No. 28), Registration No.
2-78066, as filed with the SEC on April 30, 1997.
(12) All financial statements omitted from Item 23 of Part B;
(Not applicable)
(13) Copies of any agreements or understandings made in
consideration for providing the initial capital between or
among the Trust, the underwriter, adviser, promoter, or
initial stockholders and written assurances from promoters or
initial stockholders that their purchases were made for
investment purposes without any present intention of redeeming
or reselling;
(Agreements for Advances, executed September 24, 1981,
September 25, 1981, October 19, 1981 and April 16, 1982,
previously submitted, have expired.)
(14) Copies of the model plan used in the establishment of any
retirement plan in conjunction with which the Trust offers its
securities, any instructions thereto, and any other documents
making up the model plan. Such form(s) should disclose the
costs and fees charged in connection therewith;
(Not applicable)
(15) Copies of any plan entered into by the Trust pursuant to Rule
12b-1 under the Investment Company Act, which describes all
material aspects of the financing of distribution of the
Trust's shares, and any agreements with any person relating to
implementation of such plan;
Plan for Distribution as amended through December 14,
1995: incorporated by reference to Part C, Item 24(b)(15)
included as Exhibit (15) of this Registration Statement
on Form N-1A under the Securities Act of 1933
(Post-Effective Amendment No. 24) and the Investment
Company Act of 1940 (Amendment No. 27), Registration No.
2-78066, as filed with the SEC on April 29, 1996.
(16) Schedule for computation of each performance quotation
provided in the Registration Statement in response to Item 22
(which need not be audited);
(Not applicable)
<PAGE>
<PAGE>
(17) Financial Data Schedule: incorporated by reference to Part C,
Item 24(b)(17) [Exhibit (17)] of the Trust's Registration
Statement on Form N-1A under the Securities Act of 1933 (Post-
Effective Amendment No. 25) and the Investment Company Act of
1940 (Amendment No. 28), Registration No. 2-78066, as filed
with the SEC on April 30, 1997.
(18) Other Exhibits:
(a) Powers of Attorney for Trustees Moore
and Sweeney: incorporated by reference to Part
C, Item 24(b)(17)(b) [Exhibit (17)] of the Trust's
Registration Statement on Form N-1A under the Securities
Act of 1933 (Post-Effective Amendment No. 12) and the
Investment Company Act of 1940 (Amendment No. 15),
Registration No. 2-78066, as filed with the SEC on April
28, 1989.
(b) Power of Attorney for Trustee Georgine:
incorporated by reference to Part C, Item 24(b)(17)(b)
[Exhibit (17)]
of the Trust's Registration Statement on Form N-1A under
the Securities Act of 1933 (Post-Effective Amendment No.
13) and the Investment Company Act of 1940 (Amendment No.
16), Registration No. 2-78066, as filed with the SEC on
April 30, 1990.
(c) Power of Attorney for Trustee LaVere: incorporated
by reference to Part C, Item 24(b)(17)(a) [Exhibit (17)]
of the Trust's Registration Statement on Form N-1A under
the Securities Act of 1933 (Post-Effective Amendment No.
14) and the Investment Company Act of 1940 (Amendment No.
17), Registration No. 2-78066, as filed with the SEC on
March 25, 1991.
(d) Power of Attorney for Trustee
Fleischer: incorporated by reference to Part C,
Item 24(b)(17)(d) [Exhibit (17)] of the Trust's
Registration Statement on Form N-1A under the Securities
Act of 1933 (Post-Effective Amendment No. 16) and the
Investment Company Act of 1940 (Amendment No. 19),
Registration Statement No. 2-78066, as filed with the SEC
on April 22, 1992.
<PAGE>
<PAGE>
Sequentially
Numbered
Page Exhibit
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(e) Powers of Attorney for Trustees Joyce and Coia:
incorporated by reference to Part C, item
24(b)(17)(d) [Exhibit (17)] of the Trust's Registration
Statement on Form N-1A under the Securities Act of 1933
(Post-Effective Amendment No. 18) and the Investment
Company Act of 1940 (Amendment No. 21), Registration
Statement No. 2-78066, as filed with the SEC on April 30,
1993.
(f) Power of Attorney for Trustee Monroe:
incorporated by reference to Part C,
item 24(b)(17)(d) [Exhibit (17)] of the Trust's
Registration Statement on Form N-1A under the Securities
Act of 1933 (Post-Effective Amendment No. 23) and the
Investment Company Act of 1940 (Amendment No. 26),
Registration No. 2-78066, as filed with the SEC on June
6, 1995.
(g) Power of Attorney for Trustee Duvernay: incorporated
by reference to Part C, item 24(b)(18)(d) [Exhibit 18] of
the Trust's Registration Statement on Form N-1A under the
Securities Act of 1933 Post-Effective Amendment No. 24)
and the Investment Company Act of 1940 (Amendment No.
27), Registration No. 2-78066, as filed with the SEC on
April 29, 1996.
(h) Powers of Attorney for Trustees Chavez-Thompson,
Kardy, Latimer, Stanley, Fleischer, Hanley, Miller, Hurt,
Spear and Wiegert: included as item 24(b)(18)(d) [Exhibit
18] to this Registration Statement on Form N-1A under the
Securities Act of 1933 (Post-Effective Amendment No. 25)
and the Investment Company Act of 1940 (Amendment No.
28), Registration No. 2-78066, as filed with the SEC on
April 30, 1997.
PERSONS CONTROLLED BY OR UNDER
COMMON CONTROL WITH REGISTRANT
See "History and Purpose" in Part A of this Registration Statement.
BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Wellington Management Company ("Wellington Management") is an investment
adviser registered under the Investment Advisers Act of 1940, as amended (the
"Advisers Act"). The list required by this Item 28 of officers and partners
of Wellington Management, together with information as to any business
profession, vocation or employment of substantial nature engaged in by such
officers and partners during the past two years, is incorporated herein by
reference to Schedules A and D of Form ADV filed by Wellington Management
pursuant to the Advisers Act (SEC File No. 801-15908).
NUMBER OF HOLDERS OF SECURITIES
The number of record holders of Units of Participation of the Trust as
of April 1, 1997 is shown in the following table. No other securities were
outstanding as of that date.
Number of Record
Title of Class Holders
- -------------- -----------------
Units of Participation 394
<PAGE>
<PAGE>
INDEMNIFICATION
Pursuant to Section 4.8 of the Trust's Declaration of Trust (see Exhibit
(1) under "Financial Statements and Exhibits" above), each Trustee and officer
and each former Trustee and officer shall be indemnified against fines,
judgments, amounts paid in settlement and expenses, including attorney's fees,
actually and reasonably incurred in connection with any pending or threatened
criminal action, civil suit or administrative or investigative proceeding (any
"matter") against him or her arising by reason of the fact that he or she is
or was a Trustee or officer of the Trust, or by reason of actions taken by him
or her as such Trustee or officer, if it is found that his or her liability
does not result from willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her office
("disabling conduct"). The finding that liability does not arise from
disabling conduct may be made in a final decision by a court or other body
before which the matter giving rise to the expense or liability was brought
or, in the absence of such a decision, by (a) the vote of a majority of a
quorum of Trustees who are neither "interested persons" of the Trust as
defined in Section 2(a)(19) of the Investment Company Act of 1940 nor parties
to such matter ("disinterested non-party trustees") or (b) an independent
legal counsel in a written opinion. Expenses of the kind eligible for
indemnification may be paid as incurred by a Trustee or officer in advance of
final disposition of a matter upon receipt of an undertaking by the recipient
to repay such amount unless it is ultimately determined that he is entitled to
indemnification hereunder if (a) the indemnity provides security for his or
her undertaking, (b) the Trust is insured for losses arising by reason of any
lawful advances or (c) a majority of a quorum of disinterested non-party
Trustees or independent legal counsel (in a written opinion) determines, based
on a review of readily available facts, that there is reason to believe that
the indemnitee ultimately will be found entitled to indemnification. Section
4.8 is intended to provide indemnification to Trustees and officers to the
full extent permitted by law and is to be construed and enforced to that
extent.
LOCATION OF ACCOUNTS AND RECORDS
All accounts, books, and other documents required to be maintained by
Section 31(a) of the Investment Company Act and Rules 31a-1 to 31a-3
thereunder are maintained in the possession of the Chief Executive Officer of
the Trust, 1717 K Street, N.W., Suite 707, Washington, D.C. 20006.<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant has duly caused this amendment
to the Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of Washington, District of Columbia on
the 30th day of April, 1997. This amendment to the registration statement
meets all the requirements for effectiveness in paragraph (b) of Rule 485,
Regulation C under the Securities Act of 1933.
AMERICAN FEDERATION OF LABOR AND
CONGRESS OF INDUSTRIAL ORGANIZATIONS
HOUSING INVESTMENT TRUST
By: /s/ Stephen Coyle
--------------------------------
Stephen Coyle
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this amendment to
the Registration Statement has been signed below by the following persons in
the capacities and on the date(s) indicated:
/s/Richard Ravitch* Chairman April 30, 1997
----------------
Richard Ravitch
/s/Linda Chavez-Thompson* Union Trustee April 30, 1997
---------------------
Linda Chavez-Thompson
/s/Arthur A. Coia* Union Trustee April 30, 1997
----------------
Arthur A. Coia
/s/Robert A. Georgine* Union Trustee April 30, 1997
-------------------
Robert A. Georgine
/s/Francis X. Hanley* Union Trustee April 30, 1997
------------------
Francis X. Hanley
/s/Frank Hurt* Union Trustee April 30, 1997
-----------------
Frank Hurt
/s/John T. Joyce* Union Trustee April 30, 1997
-------------------
John T. Joyce
/s/A.L. Monroe* Union Trustee April 30, 1997
--------------------
A.L. Monroe
<PAGE>
<PAGE>
/s/Jack F. Moore* Union Trustee April 30, 1997
---------------------
Jack F. Moore
/s/John Sweeney* Union Trustee April 30, 1997
---------------------
John Sweeney
/s/Richard L. Trumka* Union Trustee April 30, 1997
---------------------
Richard L. Trumka
/s/Terrence R. Duvernay* Management Trustee April 30, 1997
----------------------
Terrence R. Duvernay
/s/Alfred J. Fleischer* Management Trustee April 30, 1997
----------------------
Alfred J. Fleischer
/s/Walter Kardy* Management Trustee April 30, 1997
----------------------
Walter Kardy
/s/George Latimer* Management Trustee April 30, 1997
-----------------------
George Latimer
/s/H.D. LaVere* Management Trustee April 30, 1997
------------------------
H.D. LaVere
/s/George Miller* Management Trustee April 30, 1997
------------------------
George Miller
/s/Tony Stanley* Management Trustee April 30, 1997
------------------------
Tony Stanley
/s/Marlyn J. Spear* Management Trustee April 30, 1997
-----------------------
Marlyn J. Spear
/s/Patricia F. Wiegert* Management Trustee April 30, 1997
-------------------------
Patricia F. Wiegert
/s/Stephen Coyle Chief Executive April 30, 1997
------------------------ Officer (Principal
Stephen Coyle Executive Officer)
/s/James D. Campbell Chief Investment April 30, 1997
-------------------------- Officer (Principal
James D. Campbell Financial and Accounting
Officer)
/s/Helen R. Kanovsky General Counsel April 30 1997
--------------------------
Helen R. Kanovsky
Note: Original Powers of Attorney authorizing Michael M. Arnold to sign
all amendments to the Registration Statement as attorney for the above listed
trustees are filed herewith as Exhibit (18), or have been filed previously as
Exhibit (17) or (18), as applicable.
April 30, 1997 *By:/s/ Michael Arnold
----------------------------
Michael Arnold
As filed with the Securities and Exchange Commission on April 30, 1996
Registration No. 2-78066
- ------------------------------------------------------------------------------
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------------
EXHIBITS
to
FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 24
AND/OR
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 27
----------------------------
American Federation of Labor and Congress of Industrial Organizations
Housing Investment Trust
(Exact Name of Registrant as Specified in Charter)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
INDEX TO EXHIBITS
Sequentially
Numbered
Page Exhibit
- ------------ -------
(1) Copies of the charter as now in effect;
Declaration of Trust as amended through April 25, 1994:
incorporated by reference to Part C, Item 24(b)(1)
[Exhibit 1] of the Trust's Registration Statement on Form
N-1A under the Securities Act of 1933 (Post-Effective
Amendment No. 20) and the Investment Company Act of 1940
(Amendment No. 23), Registration No. 2-78066, as filed
with the SEC on June 6, 1994.
(2) Copies of the existing by-laws or instruments corresponding
thereto;
Rules and Regulations as amended through March 15, 1990:
incorporated by reference to Part C, Item 24(b)(2)
[Exhibit(2)] of the Trust's Registration Statement on
Form N-1A under the Securities Act of 1933(Post-Effective
Amendment No. 13)and the Investment Company Act of 1940
(Amendment No. 16), Registration No. 2-78066, as filed
with the SEC on April 30, 1990.
(3) Copies of any voting trust agreement with respect to more than
5 percent of any class of equity securities of the Registrant;
(Not applicable)
(4) Specimens or copies of each security issued by the Trust,
including copies of all constituent instruments, defining the
rights of the holders of such securities, and copies of each
security being registered;
(Not applicable)
(5) Copies of all investment advisory contracts relating to the
management of the assets of the Trust;
Investment Advisory Agreement dated May 21, 1992 with
Wellington Management Company: incorporated by reference
to Part C, Item 24(b)(5), [Exhibit (5)] of the Trust's
Registration Statement on Form N-1A under the Securities
Act of 1933 (Post-Effective amendment No. 17) and the
Investment Company Act of 1940 (Amendment No. 20),
Registration No. 2-78066, as filed with the SEC on June
24, 1992.
<PAGE>
<PAGE>
Sequentially
Numbered
Page Exhibit
- ------------ -------
(6) Copies of each underwriting or distribution contract between
the Trust and a principal underwriter, and specimens or copies
of all agreements between principal underwriters and dealers;
(Not applicable)
(7) Copies of all bonus, profit sharing, pension, or other similar
contracts or arrangements wholly or partly for the benefit of
directors or officers of the Trust in their capacity as such;
if any such plan is not set forth in a formal document,
furnish a reasonably detailed description thereof;
(a) Summary of AFL-CIO Staff Retirement Plan dated
July 1985 and amendments thereto in effect as of January
30, 1989: incorporated by reference to Part C, Item
24(b)(7)(b) [Exhibit 7(b)] of the Trust's Registration
Statement on Form N-1A under the Securities Act of 1933
(Post-Effective Amendment No. 14) and the Investment
Company Act of 1940 (Amendment No. 17), Registration No.
2-78066, as filed with the SEC on March 25, 1991.
(b) AFL-CIO Deferred Compensation Plan and Trust, as
restated and amended through August 1, 1988: incorporated
by reference to Part C, Item 24(b)(7)(c) [Exhibit 7(c)]
of the Trust's Registration Statement on Form N-1A under
the Securities Act of 1933 (Post-Effective Amendment No.
14) and the Investment Company Act of 1940 (Amendment No.
17), Registration No. 2-78066, as filed with the SEC on
March 25, 1991.
(c) AFL-CIO Housing Investment Trust 401(k)
Retirement
Plan, efffective as of October 1, 1996: incorporated by
reference to Part C, Item 24(b)(7)(c) [Exhibit 7(c)] of
the Trust's Registration Statement on Form N-1A under the
Securities Act of 1933 (Post-Effective Amendment No. 25)
and the Investment Company Act of 1940 (Amendment No.
28), Registration No. 2-78066, as filed with the SEC on
April 30, 1997.
(8) Copies of all custodian agreements and depository contracts
under Section 17(f) of the Investment Company Act, with
respect to securities and similar investments of the Trust,
including the schedule of remuneration;
Custody Agreement with American Security Bank dated
October 18, 1983, as amended through December 21, 1988:
incorporated by reference to Part C, Item 24(b)(8)
[Exhibit (8)] of the Trust's Registration Statement on
Form N-1A under the Securities Act of 1933
(Post-Effective Amendment No. 12) and the Investment
Company Act of 1940 (Amendment No. 15), Registration No.
2-78066, as filed with the SEC on April 28, 1989.
<PAGE>
<PAGE>
Sequentially
Numbered
Page Exhibit
- ------------ -------
Custodian Agreement with Security Trust Company, N.A.
dated May 21, 1991: incorporated by reference to Part C,
Item 24(b)(8) [Exhibit (8)] of the Trust's Registration
Statement on Form N-1A under the Securities Act of 1933
(Post Effective Amendment No. 16) and the Investment
Company Act of 1940 (Amendment No. 19), Registration
No. 2-78066, as filed with the SEC on April 22, 1992.
(9) Copies of all other material contracts not made in the
ordinary course of business which are to be performed in whole
or in part at or after the date of filing the Registration
Statement;
(Not applicable)
(10) An opinion and consent of counsel as to the legality of the
securities being registered, indicating whether they will when
sold be legally issued, fully paid, and non-assessable;
Opinion letter and written consent of Swidler & Berlin,
Chartered, dated April 29, 1997, is included as Exhibit
(10) to this Registration Statement incorporated by
reference to Part C, Item 24(b)(10)[Exhibit (10)] of the
Trust's Registration Statement on Form N-1A under the
Securities Act of 1933 (Post-Effective Amendment No. 25)
and the Investment Company Act of 1940 (Amendment No.
28), Registration No. 2-78066, as filed with the SEC on
April 30, 1997.
(11) Copies of any other opinions, appraisals, or rulings, and
consents to the use thereof relied on in the preparation of
this Registration Statement and required by Section 7 of the
1933 Act;
Consent of KPMG Peat Marwick, L.L.P. dated April 30,
1997 is included as Exhibit (11) to this Registration
Statement: incorporated by reference to Part C, Item
24(b)(11)[Exhibit (11)] of the Trust's Registration
Statement on Form N-1A under the Securities Act of 1933
(Post-Effective Amendment No. 25) and the Investment
Company Act of 1940 (Amendment No. 28), Registration No.
2-78066, as filed with the SEC on April 30, 1997.
(12) All financial statements omitted from Item 23 of Part B;
(Not applicable)<PAGE>
<PAGE>
Sequentially
Numbered
Page Exhibit
- ------------ -------
(13) Copies of any agreements or understandings made in
consideration for providing the initial capital between or
among the Trust, the underwriter, adviser, promoter, or
initial stockholders and written assurances from promoters or
initial stockholders that their purchases were made for
investment purposes without any present intention of redeeming
or reselling;
(Agreements for Advances, executed September 24, 1981,
September 25, 1981, October 19, 1981 and April 16, 1982,
previously submitted, have expired.)
(14) Copies of the model plan used in the establishment of any
retirement plan in conjunction with which the Trust offers its
securities, any instructions thereto, and any other documents
making up the model plan. Such form(s) should disclose the
costs and fees charged in connection therewith;
(Not applicable)
(15) Copies of any plan entered into by the Trust pursuant to Rule
12b-1 under the Investment Company Act, which describes all
material aspects of the financing of distribution of the
Trust's shares, and any agreements with any person relating to
implementation of such plan;
Plan for Distribution as amended through December 14,
1995: incorporated by reference to Part C, Item 24(b)(15)
included as Exhibit (15) of this Registration Statement
on Form N-1A under the Securities Act of 1933
(Post-Effective Amendment No. 24) and the Investment
Company Act of 1940 (Amendment No. 27), Registration No.
2-78066, as filed with the SEC on April 29, 1996.
(16) Schedule for computation of each performance quotation
provided in the Registration Statement in response to Item 22
(which need not be audited);
(Not applicable)
<PAGE>
<PAGE>
Sequentially
Numbered
Page Exhibit
- ------------ -------
(17) Financial Data Schedule: incorporated by reference to Part C,
Item 24(b)(17) [Exhibit (17)] of the Trust's Registration
Statement on Form N-1A under the Securities Act of 1933 (Post-
Effective Amendment No. 25) and the Investment Company Act of
1940 (Amendment No. 28), Registration No. 2-78066, as filed
with the SEC on April 30, 1997.
(18) Other Exhibits:
(a) Powers of Attorney for Trustees Moore
and Sweeney: incorporated by reference to Part
C, Item 24(b)(17)(b) [Exhibit (17)] of the Trust's
Registration Statement on Form N-1A under the Securities
Act of 1933 (Post-Effective Amendment No. 12) and the
Investment Company Act of 1940 (Amendment No. 15),
Registration No. 2-78066, as filed with the SEC on April
28, 1989.
(b) Power of Attorney for Trustee Georgine:
incorporated by reference to Part C, Item 24(b)(17)(b)
[Exhibit (17)]
of the Trust's Registration Statement on Form N-1A under
the Securities Act of 1933 (Post-Effective Amendment No.
13) and the Investment Company Act of 1940 (Amendment No.
16), Registration No. 2-78066, as filed with the SEC on
April 30, 1990.
(c) Power of Attorney for Trustee LaVere: incorporated
by reference to Part C, Item 24(b)(17)(a) [Exhibit (17)]
of the Trust's Registration Statement on Form N-1A under
the Securities Act of 1933 (Post-Effective Amendment No.
14) and the Investment Company Act of 1940 (Amendment No.
17), Registration No. 2-78066, as filed with the SEC on
March 25, 1991.
(d) Power of Attorney for Trustee
Fleischer: incorporated by reference to Part C,
Item 24(b)(17)(d) [Exhibit (17)] of the Trust's
Registration Statement on Form N-1A under the Securities
Act of 1933 (Post-Effective Amendment No. 16) and the
Investment Company Act of 1940 (Amendment No. 19),
Registration Statement No. 2-78066, as filed with the SEC
on April 22, 1992.
<PAGE>
<PAGE>
Sequentially
Numbered
Page Exhibit
- ------------ -------
(e) Powers of Attorney for Trustees Joyce and Coia:
incorporated by reference to Part C, item
24(b)(17)(d) [Exhibit (17)] of the Trust's Registration
Statement on Form N-1A under the Securities Act of 1933
(Post-Effective Amendment No. 18) and the Investment
Company Act of 1940 (Amendment No. 21), Registration
Statement No. 2-78066, as filed with the SEC on April 30,
1993.
(f) Power of Attorney for Trustee Monroe:
incorporated by reference to Part C,
item 24(b)(17)(d) [Exhibit (17)] of the Trust's
Registration Statement on Form N-1A under the Securities
Act of 1933 (Post-Effective Amendment No. 23) and the
Investment Company Act of 1940 (Amendment No. 26),
Registration No. 2-78066, as filed with the SEC on June
6, 1995.
(g) Power of Attorney for Trustee Duvernay: incorporated
by reference to Part C, item 24(b)(18)(d) [Exhibit 18] of
the Trust's Registration Statement on Form N-1A under the
Securities Act of 1933 Post-Effective Amendment No. 24)
and the Investment Company Act of 1940 (Amendment No.
27), Registration No. 2-78066, as filed with the SEC on
April 29, 1996.
(h) Powers of Attorney for Trustees Chavez-Thompson,
Kardy, Latimer, Stanley, Fleischer, Hanley, Miller, Hurt,
Spear and Wiegert: included as item 24(b)(18)(d) [Exhibit
18] to this Registration Statement on Form N-1A under the
Securities Act of 1933 (Post-Effective Amendment No. 25)
and the Investment Company Act of 1940 (Amendment No.
28), Registration No. 2-78066, as filed with the SEC on
April 30, 1997.
EXHIBIT 8
T. ROWE PRICE TRUST COMPANY
SIMPLIFIED 401(K) PROTOTYPE PLAN
BASIC DOCUMENT #07
<PAGE>
<PAGE>
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 prototype defined contribution
profit-sharing plan. The provisions herein and the selections made by
the Employer by execution of the Adoption Agreement 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 subaccounts
established for each Participant, as provided in Section 6.1.
2.2 Adoption Agreement. The written agreement 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 section 414(m) or (o) of the
Code) which includes the Employer or any other entity (whether or not
incorporated) which is aggregated with the Employer under section 414(o)
of the Code.
2.4 Beneficiary. The person or persons (natural or otherwise) designated by
a Participant in accordance with Section 11.2(c) to receive any
undistributed vested amounts credited to the Participant's Account under
the Plan at the time of the Participant's death.
2.5 Break in Service. A Plan Year in which an Employee fails to complete
more than 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. Except for such amounts as the Employer may elect to
exclude in the Adoption Agreement, Compensation shall be defined as
follows:
(a) Compensation will mean the information required to be reported
under sections 6041 and 6051 of the Code (Wages, Tips and Other
Compensation Box on Form W-2). Compensation is defined as wages
within the meaning of section 3401(a) of the Code 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
sections 6041(d) and 6051(a)(3) of the Code. Compensation must be
determined without regard to any rules under section 3401(a) of the
Code 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 section 3401(a)(2)
of the Code). Compensation shall include any amount which is
contributed to a plan by the Employer pursuant to a salary
reduction agreement and which is not includible in the gross income
of the Employee under sections 125,402(a)(8), 402(h) or 403(b) of
the Code.
(b) For any self-employed individual covered under the Plan,
Compensation will mean Earned Income.
(c) For Plan Years beginning after December 31, 1988, the annual
compensation of each Participant taken into account for determining
all benefits provided under the Plan for any year shall not exceed
$200,000, as adjusted by the Secretary at the same time and in the
same manner as under section 415(d) of the Code. If, during the
first Plan Year or the last Plan Year, the Plan Year is less than
12 months, the $200,000 limit, as adjusted, shall be equal to such
limit for such Plan Year multiplied by a fraction the numerator of
which is the number of full months in such Plan Year and the
denominator of which is 12 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 19 before the close of the year. If, as a result of the
application of such rules, the adjusted $200,000 limitation is
exceeded, then 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. This subsection shall be effective in Plan Years
beginning on or after January 1, 1989.
(d) In addition to the other applicable limitations set forth in the
Plan, and notwithstanding any other provision of the Plan to the
contrary, for Plan Years beginning on or after January 1, 1994, the
annual compensation of each Employee taken into account under the
Plan shall not exceed the OBRA 93 annual compensation limit. The
OBRA 93 annual compensation limit is $150,000 as adjusted by the
Commissioner for increases in the cost of living in accordance with
section 401(a)(17)(B) of the Internal Revenue Code. The cost-of-
living adjustment in effect for a calendar year applies to any
period, not exceeding 12 months, over which Compensation is
determined (determination period) beginning in such calendar year.
<PAGE>
<PAGE>
If a determination period consists of fewer than 12 months, the
OBRA 93 annual compensation limit will be multiplied by a
fraction, the numerator of which is the number of months in the
determination period, and the denominator of which is 12.
For Plan Years beginning on or after January 1, 1994, any reference
in this Plan to the limitation under section 401(a)(17) of the Code
shall mean the OBRA 93 annual compensation limit set forth in this
provision.
If Compensation for any prior determination period is taken into
account in determining an Employee's benefits accruing in the
current Plan Year, the Compensation for that prior determination
period is subject to the OBRA 93 annual compensation limit in
effect for that prior determination period. For this purpose, for
determination periods beginning before the first day of the first
Plan Year beginning on or after January 1, 1994, the OBRA 93
annual compensation limit is $150,000.
2.8 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 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.
2.9 Effective Date. The day on which the Plan is effective as specified
in the Adoption Agreement. If the Employer is adopting this Plan as
an amendment and restatement of an existing plan, the provisions of
the existing plan shall apply prior to the Effective Date unless an
earlier date is specified herein.
2.10 Elective Deferrals. Any employer contributions made to the Plan at the
election of the Participant, in lieu of cash Compensation, pursuant to a
salary reduction agreement or other deferral mechanism. With respect to
any taxable year, a Participant's Elective Deferral is the sum of all
such employer contributions made on behalf of such Participant pursuant
to an election to defer under any qualified cash or deferred arrangement
as described in section 401(k) of the Code, any simplified employee
pension cash or deferred arrangement as described in section
402(h)(I)(B) of the Code, any eligible deferred compensation plan under
section 457 of the Code, any plan as described in section 501(c)(18) of
the Code and any employer contributions made on behalf of a Participant
pursuant to a salary reduction agreement for the purchase of an annuity
contract under section 403(b) of the Code. Elective Deferrals shall not
include any deferrals properly distributed as excess Annual Additions as
described in Section 7.1.
<PAGE>
<PAGE>
2.11 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 section 414(b), (c),
(m) or (o) of the Code. The term "Employee" shall also include any
Leased Employee.
2.12 Employee After-Tax Contributions. Any contribution made to the Plan by
or on behalf of a Participant before the Plan Year in which the Employer
adopted this Plan that was included in the Participant's gross income in
the year in which made and that is maintained under a separate
subaccount to which earnings and losses are allocated. Employee After-
Tax Contributions shall not be allowed in or after the Plan Year in
which this Plan is adopted by the Employer.
2.13 Employer. The corporation, proprietorship, partnership or other
organization that adopts the Plan by execution of an Adoption Agreement.
2.14 Employer Discretionary Contributions. The contributions of the Employer
to the Plan and Trust as set forth in Section 5.3(b) and the Adoption
Agreement.
2.15 Entry Dates. The Entry Dates shall be the dates specified in the
Adoption Agreement.
2.16 ERISA. The Employee Retirement Income Security Act of 1974, as amended.
2.17 Family Members. The spouse, lineal ascendants and descendants of a
Highly Compensated Employee and the spouses of such lineal ascendants
and descendants.
2.18 Five Percent Owner. Any person who owns (or is considered to own within
the meaning of section 318 of the Code) more than 5% of the interests in
the Employer.
2.19 Highly Compensated Employee
(a) The term "Highly Compensated Employee" shall include highly
compensated active Employees and highly-compensated former
employees.
(b) A highly-compensated active Employee includes any Employee who
performs service for the Employer during the determination year and
who, during the look-back year
(i) received compensation from the Employer in excess of $75,000
(as adjusted pursuant to section 415(d) of the Code);
(ii) received Compensation from the Employer in excess of
$50,000 (as adjusted pursuant to section 415(d) of the
Code) and was a member of the top-paid group for such year;
or
<PAGE>
<PAGE>
(iii) was an officer of the Employer and received Compensation
during such year that is greater than 50% of the dollar
limitation in effect under section 415(b)(1)(A) of the
Code.
(c) The term "Highly Compensated Employee" also includes:
(i) Employees who are both described in the preceding subsection
if the term "determination year" is substituted for the term
"look-back year" and the Employee is one of the 100
Employees who received the most Compensation from the
Employer during the determination year; and
(ii) Employees who are Five Percent Owners at any time during
the look-back year or determination year.
(d) (i) If no officer has satisfied the Compensation requirement of
subsection (b)(iii) above during either a determination
year or look-back year, the highest paid officer for such
year shall be treated as a Highly Compensated Employee.
(ii) For this purpose, the determination year shall be the Plan
Year. The look-back year shall be the twelve month period
immediately preceding the determination year.
(e) A highly-compensated former Employee includes any Employee who
separated from service (or was deemed to have separated from
service) prior to the determination year, performs no service for
the Employer during the determination year, and was a highly-
compensated active Employee for either the separation year or any
determination year ending on or after the Employee's 55th birthday.
(f) If an Employee is, during a determination year or look-back year, a
Family Member of either a Five Percent Owner who is an active or
former Employee or a Highly Compensated Employee who is one of the
ten most Highly Compensated Employees ranked on the basis of
compensation paid by the Employer during such year, then the Family
Member and Five Percent Owner or top ten Highly Compensated
Employees shall be aggregated. In such case, the Family member and
Five Percent Owner or to ten Highly Compensated Employee shall be
treated as a single Employee receiving Compensation and Plan
contributions or benefits equal to the sum of such Compensation and
contributions or benefits of the Family Member and Five Percent
Owner or top ten Highly Compensated Employee.
(g) For purposes of this Section, "compensation" shall include Section
415 Compensation plus any amount which is contributed to a plan by
the Employer pursuant to a salary reduction agreement and which is
not includible in the gross income of the Employee under section
125,402(a)(8), 402(h) or 403(b) of the Code.
<PAGE>
<PAGE> (h) The determination of who is a Highly Compensated Employee,
including the determinations of the number and identify of
Employees in the top-paid group, the top 100 Employees, the number
of Employees treated as officers and the Compensation that is
considered, will be made in accordance with section 414(q) of the
Code and the regulations thereunder.
2.20 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 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 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 40 Hours of Service per
week or eight Hours of Service per working day), provided the
Employee returns to employment at the end of his leave of absence or
within 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) of the Code), a
controlled group of corporations (under section 414(b) of the Code),
or a group of trades or businesses under common control (under
section 414(c) of the Code) of which the adopting Employer is a
member, and any other entity required to be aggregated with the
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Employer pursuant to section 414(o) of the Code and the regulations
thereunder. Hours of Service will also be credited for any
individual considered an Employee for purposes of this Plan under
section 414(n) or (o) of the Code 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 by 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 501 Hours of Service will be credited for
purposes of any such maternity or paternity absence from work.
(g) Hours of Service will be determined on the actual hours for which
an Employee is paid or entitled payment.
(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:
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(i) The employee shall receive credit, as of the date of
amendment or transfer, for a number of Years of Eligibility
Service and Years of Vesting Service equal to the number of
one year periods of eligibility service and vesting service,
respectively, 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 in
accordance with paragraph (g).
2.21 Leased Employee.
(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 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:
(A) a nonintegrated employer contribution rate of at
least 10% of Section 415 Compensation but including
amounts contributed pursuant to a salary reduction
agreement which are excludable from the Employee's
gross income under section 125,302(a)(8), 402(h) or
403(b)of the Code.
(B) immediate participation; and
(C) full and immediate vesting.
and
(ii) Leased Employees do not constitute more than 20% of the
Affiliated Employer's non-highly compensated workforce.
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(c) The determination of whether a person is a Leased Employee will be
made pursuant to section 414(n) of the Code and the regulations
thereunder.
2.22 Matching Contributions. A contribution by the Employer made to this or
any other defined contribution plan on behalf of a Participant on
account of a Participant's Elective Deferral or on account of a
Participant's voluntary contributions under a plan maintained by the
Employer. Matching Contributions to this Plan shall be made as set
forth in Section 5.3(a) and the Adoption Agreement.
2.23 Non-Highly Compensation Employees. An Employer who is neither a Highly
Compensated Employee nor a Family Member of a Highly Compensated
Employee.
2.24 Normal Retirement Age. Unless otherwise specified in the Adoption
Agreement, Normal Retirement Age shall be age 65.
2.25 Owner-Employee. An individual who is a sole proprietor or who is a
partner owning more than 10% of either the capital or profits interest
of a partnership.
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 the other trades or businesses must, when
looked at as a single Plan, satisfy section 401(a) and (d) if the Code
for the Employees of this and all such other trades or businesses. 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 section 401(a) and (d) of the Code and which provides
contributions and benefits not less favorable than provided for Owner-
Employees under this Plan. 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.
For purposes of the preceding paragraphs, 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:
(a) own the entire interest in an unincorporated trade or business, or
(b) in the case of a partnership, own more than 50% of either the
capital interest or the profits interest in the partnership.
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For purposes of the preceding sentence, an Owner-Employee, or two
or more Owner-Employees shall be treated as owning any interest in
a partnership which is owned, directly or indirectly, by a
partnership which such Owner-Employee, or such two or more Owner-
Employees, are considered to control within the meaning of the
preceding sentence.
2.26 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.
2.27 Plan. This 401(k) prototype plan, as amended from time to time, and
the Adoption Agreement executed by the Employer and Trustee.
2.28 Plan Administrator. The Employer.
2.29 Plan Year. Unless otherwise specified in the Adoption Agreement, the
Plan Year shall be the calendar year.
2.30 Section 415 Compensation. A Participant's Earned Income, wages,
salaries and fees for professional services and other amounts received
(without regard to whether an amount is paid in cash) or made available
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, bonuses
and reimbursements or other expense allowances under a nonaccountable
plan (as described in Code Regulation 1.62-2(c), but excluding the
following:
(a) 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.
(b) Amounts realized from the exercise of a nonqualified stock option,
or when restricted stock (or property) held by an Employee either
becomes freely transferable or is no longer subject to a
substantial risk of forfeiture.
(c) Amounts realized from the sale, exchange or other disposition of
stock acquired under a qualified stock option; and
(d) 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 contract described in
section 403(b) of the Code (whether or not the contributions are
actually excludable from the gross income of the Employee).
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For Plan Years beginning after December 31, 1988, Section 415
Compensation for any Plan Year shall be limited as provided in Section
2.7(c).
2.31 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.
2.32 Shares. Shares of stock in any regulated investment company registered
under the Investment Company Act of 1940, the investment advisor of
which is T. Rowe Price Associates, Inc., or units in any common trust
fund or collective investment fund of the Sponsor qualified under
sections 401 and 501 of the Code, that are made available by the Sponsor
for investment purposes as an investment option under this Plan.
2.33 Sponsor. T. Rowe Price Trust Company.
2.34 Total Compensation. Compensation plus any amounts the Employer elected
to exclude from the definition of Compensation in the Adoption
Agreement.
2.35 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 months; provided, however,
that Total and Permanent Disability shall not include an illness or
injury caused by or connected with a Participant's service in the armed
forces of any country, or his alcoholism or addiction to narcotics or
other drugs, or his engaging in a criminal act, or resulting from his
effort to bring about the illness, injury or death or himself or any
other person.
2.36 Trust. The fund maintained by the Trustee for the investment of Plan
assets in accordance with the terms and conditions of the Trust
Agreement.
2.37 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.
2.38 Trustee. The individual or corporate Trustee or Trustees under the
Trust Agreement as they may be named from time to time in the Adoption
Agreement.
2.39 Valuation Date. Each day of the Plan Year.
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2.40 Year of Eligibility Service. Except as provided below, a year of
Eligibility Service is an eligibility computation period during which an
Employee completed at least 1,000 Hours of Service. For this purpose,
the initial eligibility computation period shall be the twelve
consecutive month period beginning with the day the Employee first
performs an Hour of Service for the Employer. Successive eligibility
computation periods shall commence on the first day of each Plan Year
beginning after the date on which the Employee first completes an Hour
of Service for the Employer. An Employee who is credited with 1,000
Hours of Service in both the initial eligibility computation period and
the Plan Year beginning immediately after the date on which the Employee
first completes an Hour of Service for the Employer will be credited
with two Years of Eligibility Service.
Notwithstanding the foregoing, if the Employer selects a Year of Service
in the Adoption Agreement that is a fraction of a Year of Service, an
Employee shall not be required to complete any specified number of Hours
of Service to receive credit for such fractional year.
2.41 Year of Vesting Service. A Plan Year during which an Employee completes
at least 1,000 Hours of Service.
ARTICLE 3. ELIGIBILITY AND YEARS OF SERVICE
3.1 Eligibility Requirements.
(a) General Rule. Subject to subsection (b) below and any contrary
designation made by the Employer in the Adoption Agreement, 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, if
any, specified in the Adoption Agreement. Notwithstanding the
foregoing, nonresident aliens (within the meaning of section
7701(b)(I)(B) of the Code) 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) shall not be eligible
to participate in the Plan.
(b) Excludable Employees. The Employer may elect in the Adoption
Agreement to exclude from participation 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. 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 executive of the Employer.
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(c) Change in Status. In the event an Employee who is not a
member of an eligible class of Employees becomes a member of an
eligible class, such Employee will participate immediately if such
Employee has satisfied the minimum age and service requirements
specified in the Adoption Agreement and otherwise would have
previously become a Participant. In the event a Participant is no
longer a member of an eligible class of Employees and becomes
ineligible to participate, such Employee will participate
immediately upon returning to an eligible class of Employees.
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 he is in a
class of eligible Employees. If he is not a member of an eligible
class upon reemployment, such Employee will participate immediately
upon returning to a class of eligible Employees. 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.
(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 Eligibility 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. No credit will be given for service with a
predecessor employer, except that if this Plan is a continuation or a
predecessor plan, service under the predecessor plan must be counted.
ARTICLE 4. TRUST FUND
4.1 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 in accordance with the
terms and conditions of the Trust Agreement and the Plan. The Trustee
shall be subject to the proper directions of the Employer made in
accordance with the terms of the Plan and ERISA.
4.2 Investment Responsibility.
(a) Investment Choices. The selection of the investments in which
assets of the Trust may be invested shall be the responsibility of
the Employer.
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(b) Participant Direction. Subject to such reasonable restrictions as
may be imposed by the Employer, each Participant or Beneficiary
shall be permitted to select the investments in his Account. The
Employer must complete and forward to the Trustee a schedule of
Participant designations. 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 a Participant's or
Beneficiary's exercise of control. All investment related expenses,
including administrative fees charged by brokerage houses, will be
charged against the Accounts of the Participants.
(c) Change in Investment Choices. The Employer may at any time change
the selection of investments in which the assets of the Trust may be
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 to the Trustee. 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.
4.3 Investment Limitations. All Trust assets must be invested in Shares.
ARTICLE 5. CONTRIBUTIONS
5.1 Payment. All contributions, including rollover contributions, to the
Plan must be made in U.S. currency, by check, wire transfer or ACH
credit. All Employer contributions to the Trust for any Plan Year shall
be made either in one lump-sum or in installments 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.
5.2 Employee Contributions.
(a) After-Tax Contributions. Beginning with the Plan Year in which
this Plan is adopted by the Employer, no Participant shall be
permitted to make Employee After-Tax Contributions to the Plan.
(b) Employee Elective Deferrals.
(i) If the Adoption Agreement so provides and the Employer
elects, a Participant may make Elective Deferrals to the Trust
in amounts not to exceed the limitations specified in the
Adoption Agreement or any other limitations specified in this
Plan. A Participant's Elective Deferrals shall be made by
direct reduction of Compensation, with such reduction to be
accomplished through regular payroll reduction.
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(ii) The Elective Deferrals of a Participant shall be limited in
accordance with the provisions of this subsection, Sections
5.7(a), 5.8(a), 7.1 an 10.2(c) and any other applicable
provisions of this Plan. No Participant shall be permitted to
have Elective Deferrals made under this Plan, or any other
qualified plan maintained by the Employer, during any taxable
year, in excess of the dollar limitation contained in section
402(g) of the Code in effect at the beginning of such taxable
year.
(iii) Participants may elect to commence Elective Deferrals at least
once each Plan Year during a period established by the
Employer. Such election may not be made retroactively and the
election must remain in effect until modified or terminated.
Participants may terminate the election or change the amounts
designated to be deducted at any time and such changes will
become effective on the next payroll period following by at
least ten days of the submission of such change of designation
to the Plan Administrator unless a shorter period is agreed to
by the Plan Administrator.
(iv) No contributions or benefits (other than Matching Contributions
or qualified Matching Contributions) may be conditioned upon an
Employee's Elective Deferrals.
(c) Rollovers. Subject to the approval of the Plan Administrator, a
Participant, or an Employee who would otherwise be eligible to
participate in the Plan but for the failure to satisfy any service
condition for eligibility to participate, 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 (or direct rollover)
contribution to the Trustee of all or part of an amount received by
such individual 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 section 4.2(a)(5), 403(a)(4) or 408(d)(3)(A)(ii)
of the Code, whichever is applicable. Before approving such a
rollover, the Plan Administrator may request from the individual or
the sponsor of such other plan any documents that the Plan
Administrator, in its discretion, deems necessary to determine that
such rollover meets the preceding requirements.
(d) Plan-to-Plan Transfers. Beginning with the Plan Year in which this
Plan is adopted by the Employer, no Participant shall be permitted
to make a directly plan-to-plan transfer of all or part of his
benefits in any other plan.
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5.3 Employer Contributions.
(a) Matching Contributions. If the Employer elects in the Adoption
Agreement to make Matching Contributions, for each Plan Year the
Employer shall contribute to the Trust an amount as shall be
determined by the Employer in accordance with the matching
contribution formula specified in the Adoption Agreement. Subject
to the minimum top-heavy allocation rules of Section 6.3 and the
exclusions specified in this Section, Matching Contributions shall
be made on behalf of those Participants specified by the Employer in
the Adoption Agreement.
(b) Discretionary Contributions. If the Employer elects in the Adoption
Agreement to make Discretionary Contributions, the Employer may
contribute to the Trust an amount as may be determined by the
Employer for each Plan Year. Subject to the minimum top-heavy
allocation rules of Section 6.3 and the exclusions specified in this
Section, each Participant (i) who completes at least 500 Hours of
Service during the Plan Year, (ii) who is employed by the Employer
on the last day of the Plan Year (regardless of his Hours of
Service), or (iii) whose employment with the Employer terminates
during the Plan year by reason of death, retirement on or after
Normal Retirement Age or Total and Permanent Disability (regardless
of his Hours of Service) shall be eligible to share in the Employer
Discretionary Contribution for such Plan Year.
(c) Contribution Limitation. In no event shall any Employer
contribution (plus any Elective Deferrals) 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 7.
5.4 Excess Elective Deferrals.
(a) General. A Participant may assign to this Plan any Excess Elective
Deferrals made during a taxable year of the participant by notifying
the Plan Administrator on or before March 1 following the close of
the Participant's taxable year of the Excess Elective Deferrals to
be assigned to the Plan. (A Participant is deemed to notify the
Plan Administrator of any Excess Elective Deferrals that arise by
taking into account only those Elective Deferrals made to this Plan
and any other plans of this Employer). Notwithstanding any other
provision of the Plan, Excess Elective Deferrals, plus any income
and minus any loss allocable thereto, shall be distributed after the
preceding taxable year and no later than April 15 following the
close of the preceding taxable year to any Participant to whose
Account Excess Elective Deferrals were assigned for the preceding
year and who claims Excess Elective Deferrals for such taxable year.
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(b) Calculation of Income or Loss. The income or loss allocable to
Excess Elective Deferrals is equal to the amount of income or loss
allocable to the Participant's Elective Deferral subaccount for the
taxable year multiplied by a fraction, the numerator of which is
such Participant's Excess Elective Deferrals for the year and the
denominator of which is the Participant's account balance
attributable to Elective Deferrals without regard to any income or
loss occurring during such taxable year.
(c) Tax Treatment. Excess Elective Deferrals that are distributed after
April 15 are includible in the Participant's gross income in both
the taxable year in which deferred and the taxable year in which
distributed.
(d) Forfeiture of Certain Matching Contributions. All Matching
Contributions (whether or not vested) that were made on account of
an Excess Elective Deferral that has been distributed in accordance
with this Section 5.4 shall be forfeited before the last day of the
twelve-month period immediately following the close of taxable year
in which such Excess Elective Deferrals were made.
5.5 Actual Deferral Percentage Test.
(a) General Test. The Actual Deferral Percentage (hereinafter "ADP")
for Participants who are Highly Compensated Employees for each Plan
Year and the ADP for Participants who are Non-Highly Compensated
Employees for the same Plan Year must satisfy one of the following
tests:
(i) The ADP for Participants who are Highly Compensated
Employees for the Plan Year shall not exceed 125% of the ADP
for Participants who are Non-Highly Compensated Employees for
the same Plan Year; or
(ii) The ADP for Participants who are Highly Compensated Employees
for the Plan Year shall not exceed 200% of the ADP for
Participants who are Non-Highly Compensated Employees for the
same Plan Year, provided that the ADP for Participants who are
Highly Compensated Employees does not exceed the ADP for
Participants who are Non-Highly Compensated Employees by more
than two percentage points.
(b) Special Rules.
(i) The ADP for any Participant who is a Highly Compensated
Employee for the Plan Year, and who is eligible to have
Elective Deferrals (and Qualified, Nonelective Contributions or
Qualified Matching Contributions, or both, if treated as
Elective Deferrals for purposes of the ADP test) allocated to
his Accounts under two or more cash or deferred arrangements
described in section 401(k) of the Code that are maintained by
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the Employer, shall be determined as if such Elective Deferrals
(and, if applicable, such qualified Nonelective Contributions
or qualified Matching Contributions, or both) were made under a
single arrangement. If a Highly Compensated Employee
participates in two or more cash or deferred arrangements that
have different plan years, all cash or deferred arrangements
ending with or within the same calendar year shall be treated
as a single arrangement. Notwithstanding the foregoing,
certain plans shall be treated as separate if mandatorily
disagggregated under regulations under section 401(k) of the
Code.
(ii) In the event that this Plan satisfies the requirements of
section 401(k), 401(a)(4) or 410(b) of the Code only if
aggregated with one or more other plans, or if one or more
other plans satisfy the requirements of such sections of the
Code only if aggregated with this Plan, then this Section shall
be applied by determining the ADP of Employees as if all such
plans were a single plan. Plans may be aggregated in order to
satisfy section 401(k) of the Code only if they have the same
plan year.
(iii) For purposes of determining the ADP of a Participant who is a
Five Percent Owner or one of the ten most highly-paid Highly
Compensated Employees, the Elective Deferrals (and Qualified
Nonelective Contributions or qualified Matching Contributions,
or both, if treated as Elective Deferrals for purposes of the
ADP test) and Total Compensation of such Participant shall
include the Elective Deferrals (and, if applicable, Qualified
Nonelective Contributions and Qualified Matching Contributions)
and Total Compensation for the Plan Year of Family Members.
Family Members, with respect to such Highly Compensated
employees, shall be disregarded as separate Employees in
determining the ADP both for participants who are Non-Highly
Compensated Employees and for Participants who are Highly
Compensated Employees.
(iv) For purposes of applying the ADP test, Elective Deferrals,
qualified Nonelective Contributions and Qualified Matching
Contributions must be made before the last day of the twelve-
month period immediately following the Plan Year to which
contributions relate.
(v) The Employer shall maintain records sufficient to demonstrate
satisfaction of the ADP test and the amount of qualified
Nonelective Contributions or qualified Matching Contributions,
or both, used in such test.
(vi) The determination and treatment of the ADP amounts of any
Participant shall satisfy such other requirements as may be
prescribed by the Secretary of the Treasury.
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5.6 Average Contribution Percentage Test.
(a) General Test. The Average Contribution Percentage (hereinafter
"ACP") for Participants who are Highly Compensated Employees for
each Plan Year and the ACP for Participants who are Non-Highly
Compensated Employees for the same Plan Year must satisfy one of the
following tests:
(i) The ACP for Participants who are Highly Compensated
Employees for the Plan Year shall not exceed the ACP for
Participants who are Non-Highly Compensated Employees for the
same Plan Year multiplied by 1.25; or
(ii) The ACP for Participants who are Highly Compensated Employees
for the Plan Year shall not exceed 200% of the ACP for
Participants who are Non-Highly Compensated Employees for the
same Plan Year, provided that the ACP for Participants who are
Highly Compensated Employees does not exceed the ACP for
Participants who are Non-Highly Compensated Employees by more
than two percentage points.
(b) Special Rules.
(i) The Contribution Percentage for any Participant who is a Highly
Compensated Employee and who is eligible to have Contribution
Percentage Amounts allocated to his or her Account under two
or more plans described in section 401(a) of the Code, or cash
or deferred arrangements described in section 401(k) of the
Code, that are maintained by the Employer shall be determined
as if the total of such Contribution Percentage Amounts was
made under each plan. If a Highly Compensated Employee
participates in two or more cash or deferred arrangements that
have different plan years, all cash or deferred arrangements
ending with or within the same calendar year shall be treated
as a single arrangement. Notwithstanding the foregoing,
certain plans shall be treated as separate if mandatorily
disaggregated under regulations under section 401(m) of the
Code.
(ii) In the event that this Plan satisfies the requirements of
section 401(m), 401(a)(4) or 410(b) of the Code only if
aggregated with one or more other plans, or if one or more
other plans satisfy the requirements of such sections of the
Code only if aggregated with this Plan, then this Section shall
be applied by determining the Contribution Percentage of
Employees as if all such plans were a single plan. Plans may
be aggregated in order to satisfy section 401(m) of the Code
only if they have the same plan year.
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(iii) For purposes of determining the Contribution Percentage of a
Participant who is a Five Percent Owner or one of the ten most
highly-paid Highly Compensated Employees, the Contribution
Percentage Amounts and Total Compensation of such Participant
shall include the Contribution Percentage Amounts and Total
Compensation for the Plan Year of Family Members. Family
Members, with respect to Highly Compensated Employees, shall be
disregarded as separate Employees in determining the
Contribution Percentage both for Participants who are Non-
Highly Compensated Employees and for Participants who are
Highly Compensated Employees.
(iv) For purposes of applying the ACP test, Matching Contributions
and qualified Nonelective Contributions will be considered made
for a Plan Year if made no later than the end of the twelve-
Month period beginning on the day after the close of the Plan
Year.
(v) If one or more Highly Compensated Employees participate in both
a cash or deferred arrangement and a plan subject to the ACP
test maintained by the Employer and the sum of the ADP and ACP
of those Highly Compensated Employees subject to either or both
tests exceeds the Aggregate Limit, then the ACP of those Highly
Compensated Employees who also participate in a cash or
deferred arrangement will be reduced (beginning with such
Highly Compensated Employees whose ACP is the highest) so that
the limit is not exceeded. The amount by which each Highly
Compensated Employee's Contribution Percentage Amounts is
reduced shall be treated as an Excess Aggregate Contribution.
The ADP and ACP of the Highly Compensated Employees are
determined after any corrections required to meet the ADP and
ACP tests. Impermissible multiple use does not occur if either
the ADP or ACP of the Highly Compensated Employees does not
exceed 1.25 multiplied by the ADP and ACP of the Non-Highly
Compensated Employees.
(vi) The Employer shall maintain records sufficient to demonstrate
satisfaction of the ACP test and the amount of Elective
Deferrals, Qualified Nonelective Contributions or Qualified
Matching Contributions used in such test.
(vii) The determination and treatment of the Contribution Percentage
of any Participant shall satisfy such other requirements as may
be prescribed by the Secretary of the Treasury.
5.7 Prevention or Cure of ADP Test Failures. The Plan Administrator may, in
its sole discretion, use any one or a combination of the following
methods to prevent or cure any ADP test failure in accordance with
section 401(k) of the Code and the regulations thereunder:
(a) The Plan Administrator may refuse to accept any or all prospective
Elective Deferrals to be contributed by a Highly Compensated
Employee.<PAGE>
<PAGE>
(b) The Plan Administrator may distribute any or all Excess
Contributions in accordance with the provisions of Section 5.9.
(c) The Employer may, in its sole discretion, elect to contribute a
Qualified Nonelective Contribution in accordance with the provisions
of Section 5.10.
(d) Subject to the requirements of Section 5.11, the Employer may, in
its sole discretion, elect to treat Qualified Matching Contributions
as if they were Elective Deferrals for purposes of the ADP test.
5.8 Prevention or Cure of ACP Test Failures. The Plan Administrator may, in
its sole discretion, use any one or a combination of the following
methods to prevent or cure any ACP test failure in accordance with
section 401(m) of the Code and the regulations thereunder:
(a) The Plan Administrator may refuse to accept any or all prospective
Elective Deferrals to be contributed by a Highly Compensated
Employee.
(b) The Plan Administrator may elect to contribute a Qualified Matching
Contribution in accordance with the provisions of Section 5.11.
(c) The Plan Administrator may forfeit, if forfeitable, or distribute,
if not forfeitable, Excess Aggregate Contributions in accordance
with Section 5.12.
(d) The Plan Administrator may elect to treat Qualified Nonelective
Contributions or Elective Deferrals, or both, as if they were
Matching Contributions for purposes of the ACP test, subject to the
requirements of Section 5.13(e).
5.9 Distribution of Excess Contributions to Cure ADP Test Failure.
(a) General Rule. Notwithstanding any other provision of this Plan,
Excess Contributions for a Plan Year, plus any income and minus any
loss allocable thereto, shall be distributed after the close of such
Plan Year and no later than twelve months after the close of such
Plan Year to Participants to whose Accounts such Excess
Contributions were allocated. (If such excess amounts are
distributed more than 2 1/2 months after the last day of the Plan
Year
in which such excess amounts arose, a 10% excise tax on such amounts
will be imposed on the Employer.) Such distributions shall be made
to Highly Compensated Employees on the basis of the respective
portions of the Excess Contributions attributable to each of such
Employees. Excess Contributions of Participants who are subject to
the Family Member aggregation rules shall be allocated among the
Family Members in proportion to the Elective Deferrals (and amounts
treated as Elective Deferrals) of each Family Member that is
combined to determine the combined ADP.
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(b) Calculations of Income or Loss. The income or loss allocable to
Excess Contributions is equal to the amount of income or loss
allocable to the Participant's Elective Deferral subaccount (and, if
applicable, the Qualified Nonelective Contribution subaccount or the
Qualified Matching Contributions subaccount, or both) for the Plan
Year multiplied by a fraction, the numerator of which is such
Participant's Excess Contributions for the Plan Year and the
denominator of which is the Participant's account balance
attributable to Elective Deferrals (and Qualified Nonelective
Contributions or Qualified Matching Contributions, or both, if any
of such contributions are included in the ADP test) without regard
to any income or loss occurring during such Plan Year.
(c) Method of Distribution. Excess Contributions shall be distributed
from the Participant's Elective Deferral subaccount and Qualified
Matching Contribution subaccount (if applicable) in proportion to
the Participant's Elective Deferrals and Qualified Matching
Contributions (to the extent used in the ADP test) for the Plan
Year. Excess Contributions shall be distributed from the
Participant's Qualified Nonelective Contribution subaccount only to
the extent that such Excess Contributions exceed the balance in the
Participant's Elective Deferral subaccount and Qualified Matching
Contribution subaccount.
(d) Forfeiture of Certain Matching Contributions. Any Matching
Contribution (whether or not vested) that was made on account of an
Excess Contribution that has been distributed in accordance with
this Section 5.9 shall be forfeited no later than twelve months
after the close of the Plan Year in which such Excess Contribution
occurred.
5.10 Qualified Nonelective Contributions to Cure ADP and/or ACP Test Failure.
The Employer may, in its sole discretion, elect to contribute a
Qualified Nonelective Contribution in an amount necessary to cure any
ADP and/or ACP test failure for a Plan Year within twelve months after
the close of such Plan Year. Qualified Nonelective Contributions for a
Plan Year shall be allocated to the Accounts of Participants who are not
Highly Compensated Employees and who would be eligible for an allocation
of Employer Discretionary Contributions in accordance with Section
5.3(b) in the ratio in which each such Participant's Compensation for
such Plan Year bears to the Total Compensation of all such Participants
for such Plan Year.
5.11 Qualified Matching Contribution to Cure ADP and/or ACP Test Failure.
The Employer may, in its sole discretion, elect to contribute a
Qualified Matching Contribution in an amount necessary to cure any ADP
and/or ACP test failure for a Plan Year within twelve months after the
close of such Plan Year. Qualified Matching Contributions for a Plan
Year shall be allocated to the Accounts of Participants who are not
Highly Compensated Employees and who would be eligible for an allocation
of Matching Contributions in accordance with Section 5.3(a) in the ratio
in which each such Participant's Elective Deferrals for such Plan Year
bear to the total Elective Deferrals of all such Participants for such
Plan Year.<PAGE>
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5.12 Forfeiture and/or Distribution of Excess Aggregate Contributions.
Notwithstanding any other provision of this Plan, Excess Aggregate
Contributions for a Plan Year, plus any income and minus any loss
allocable thereto, may be forfeited, if forfeitable, or distributed, if
not forfeitable, no later than twelve months after the close of such
Plan Year to Participants to whose Accounts such Excess Aggregate
Contributions were allocated for such Plan Year. Excess Aggregate
Contributions of Participants who are subject to the Family Member
aggregation rules shall be allocated among the Family Members in
proportion to the Matching Contributions (or amounts treated as Matching
Contributions) of each Family Member that is combined to determine the
combined ACP. Excess Aggregate Contributions shall be forfeited, if
forfeitable, or distributed on a pro rata basis from the Participant's
Matching Contribution subaccount, and Qualified Matching Contribution
subaccount (and, if applicable, the Participant's Qualified Nonelective
Contribution subaccount or Elective Deferral subaccount, or both).
The income or loss allocable to Excess Aggregate Contributions
distributed or forfeited is equal to the amount of income or loss
allocable to the Participant's Matching Contribution subaccount.
Qualified Matching Contribution subaccount (if any, and if all amounts
therein are not used in the ADP test) and, if applicable, Qualified
Nonelective Contribution subaccount and Elective Deferral subaccount for
the Plan Year multiplied by a fraction, the numerator of which is such
Participant's Excess Aggregate Contributions for the year and the
denominator of which is the Participant's account balance(s) attributable
to Contribution Percentage Amounts without regard to income or loss
occurring during such Plan Year.
Any Matching Contribution (whether or not vested) that was made on
account of an Excess Aggregate Contribution that has been distributed in
accordance with this Section 5.12 shall be forfeited no later than twelve
months after the close of the Plan Year in which such Excess Aggregate
Contribution occurred.
5.13 Definitions.
(a) Actual Deferral Percentage. For a specified group of Participants
for a Plan Year, the average of the ratios (calculated separately
for each Participant in such group) of (i) the amount of Employer
deferral contributions actually paid over to the Plan on behalf of
such Participant for the Plan Year to (ii) the Participant's Total
Compensation for such Plan Year. Employer deferral contributions on
behalf of any Participant shall include: (i) any Elective Deferrals
made pursuant to the Participant's deferral elective (including
Excess Elective Deferrals of Highly Compensated Employees), but
excluding (A) Excess Elective Deferrals of Non-Highly Compensated
Employees that arise solely from Elective Deferrals made under the
Plan or plans of this Employer, and (B) Elective Deferrals that are
taken into account in the ADP test (provided the ADP test is
satisfied both with and without exclusion of these Elective
Deferrals); and (ii) at the election of the Employer, Qualified
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Nonelective Contributions and Qualified Matching Contributions. For
purposes of computing Actual Deferral Percentages, an Employee who
would be a Participant but for the failure to make Elective
Deferrals shall be treated as a Participant on whose behalf no
Elective Deferrals are made.
(b) Aggregated Limit. The sum of (i) 125% of the greater of the ADP of
the Non-Highly Compensated Employees for the Plan Year or the ACP of
Non-Highly Compensated Employees under the Plan subject to section
401(m) of the Code for the Plan Year beginning with or within the
Plan Year of the cash or deferred arrangement, and (ii) the lesser
of 200% or two plus the lesser of such ADP or ACP. "Lesser" is
substituted for "greater" in "(i)", above, and "greater" is
substituted for "lesser" after "two plus the" "(ii)" if it would
result in a larger Aggregate Limit.
(c) Average Contribution Percentage. The average of the Contribution
Percentages of the eligible Participants in a group.
(d) Contribution Percentage. The ratio (expressed as a percentage) of
an eligible Participant's Contribution Percentage Amounts to such
eligible Participant's Total Compensation for the Plan Year.
(e) Contribution Percentage Amounts. The sum of the Matching
Contributions and Qualified Matching Contributions (to the extent
not taken into account for purposes of the ADP test) made under the
Plan on behalf of the Participant for the Plan Year. Such
Contribution Percentage Amounts shall not include Matching
Contributions that are forfeited either to correct Excess Aggregate
Contributions or because the contributions to which they relate are
excess Elective Deferrals, Excess Contributions or Excess Aggregate
Contributions. The Plan Administrator may include Qualified
Nonelective Contributions in the Contribution Percentage Amounts.
The Plan Administrator also may elect to use Elective Deferrals in
the Contribution Percentage Amounts so long as the ADP test is met
before the Elective Deferrals are used in the ACP test and continues
to be met following the exclusion of those Elective Deferrals that
are used to meet the ACP test.
(f) Excess Aggregate Contributions. With respect to any Plan Year, the
excess of the aggregate Contribution Percentage Amounts taken into
account in computing the numerator of the Contribution Percentage
actually made on behalf of Highly Compensated Employees for such
Plan Year, over the maximum Contribution Percentage Amounts
permitted by the ACP test (determined by reducing contributions made
on behalf of Highly Compensated Employees in order of their
Contribution Percentages beginning with the highest of such
percentages). Such determination shall be made after first
determining Excess Elective Deferrals pursuant to Section 5.13(h)
and the determining Excess Contributions pursuant to Section
5.13(g).
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(g) Excess Contribution. With respect to a Plan Year, the excess of
the Elective Deferrals (including any Qualified Nonelective
Contributions and Qualified Matching Contributions that are treated
as Elective Deferrals under sections 401(k)(2) and 401(k)(3) of the
Code) on behalf of eligible Highly Compensated Employees for the
Plan Year over the maximum amount of such contributions permitted
under sections 401(k)(2) and 401(k)(3) of the Code.
The amount of excess Contributions for a Highly Compensated Employee
for a Plan Year is to be determined by the following leveling method
under which the Actual Deferral Percentage of the Highly Compensated
Employee with the highest Actual Deferral Percentage is reduced to
the extent required to:
(i) Enable the Plan to satisfy Section 5.5; or
(ii) Cause such Highly Compensated Employee's Actual Deferral
Percentage to equal the Actual Deferral Percentage of the
Highly Compensated Employee with the next highest Actual
Deferral Percentage. This process is repeated until the Plan
satisfies Section 5.5. For each Highly Compensated Employee,
the amount of Excess Contributions is equal to the total
Elective Deferrals (plus Qualified Nonelective Contributions
and Qualified Matching Contributions treated as Elective
Deferrals) on behalf of the Participant (determined prior to
the application of this paragraph) minus the amount determined
by multiplying the Participant's Actual Deferral Percentage
(determined after application of the paragraph) by his Total
Compensation used in determining such Actual Deferral
Percentage.
(h) Excess Elective Deferrals. Those Elective Deferrals that are
includible in a Participant's gross income under section 402(g) of
the Code to the extent such Participant's Elective Deferrals for a
taxable year exceed the dollar limitation under such Code section.
(i) Qualified Matching Contributions. Matching Contributions that are
made to this Plan or another arrangement described in section 401(k)
of the Code that is maintained by the Employer that are subject to
the distribution and nonforfeitability requirements of section
401(k) of the Code when made.
(j) Qualified Nonelective Contributions. Contributions (other than
Matching Contributions or Qualified Matching Contributions) made by
the Employer and allocated to Participants' Accounts that the
Participants may not elect to receive in cash until distributed from
the Plan; that are nonforfeitable when made; that are distributable
only in accordance with distribution provisions that are applicable
to Elective Deferrals.
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ARTICLE 6. ALLOCATIONS
6.1 Individual Accounts. The Plan Administrator shall establish and
maintain an Account in the name of each Participant. Each Participant's
Account shall contain the following subaccounts.
(a) Elective Deferrals. An Elective Deferral subaccount to which shall
be credited (or debited, as the case may be) (i) such Participant's
Elective Deferrals made under Section 5.2(b); (ii) the net earnings
or net losses on the investment of the assets of the subaccount; and
(iii) distributions from such subaccount.
(b) Rollovers. A rollover subaccount to which shall be credited for
debited, as the case may be (i) rollover contributions made by such
Participant to the Trust under Section 5.2(c); (ii) the net earnings
or net losses on the investment of the assets of such subaccount;
and (iii) distributions from such subaccount.
(c) After-Tax Contributions. A nondeductible voluntary contribution
subaccount to which shall be credited (or debited, as the case may
be) (i) Employee After-Tax Contributions made by the Participant
before the Plan Year in which this Plan was adopted by the Employer;
(ii) the net earnings or net losses on the investment of the assets
of such subaccount; and (iii) distributions from such subaccount.
(d) Matching Contributions. A Matching Contribution subaccount to which
shall be credited (or debited, as the case may be) (i) such
Participant's Matching Contributions made under Section 5.3(a); (ii)
the net earnings or net losses on the investment of the assets of
such subaccount; and (iii) distributions from such subaccount.
(e) Discretionary Contributions. An Employer Discretionary Contribution
subaccount to which shall be credited (or debited, as the case may
be) (i) the Participant's share of Employer Discretionary
Contributions under Section 5.3(b); (ii) the net earnings or net
losses on the investment of the assets of such subaccount; and (iii)
distributions from such subaccount.
(f) Qualified Nonelective Contributions. A Qualified Nonelective
Contribution subaccount to which shall be credited (or debited, as
the case may be) (i) such Participant's Qualified Nonelective
Contributions made under 5.10; (ii) the net earnings or net losses
on the investment of the assets of the subaccount; and (iii)
distributions from such subaccount.
(g) Qualified Matching Contributions. A Qualified Matching Contribution
subaccount to which shall be credited (or debited, as the case may
be) (i) the Participant's Qualified Matching Contributions made
under Section 5.11; (ii) the net earnings or net loses on the
investment of assets in such subaccount; and (iii) distributions
from such subaccount.
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6.2 Allocation of Contributions.
(a) Elective Deferrals, Matching Contributions and Rollover
contributions. All Elective Deferrals, Matching Contributions and
rollover contributions shall be allocated to the Account of the
Participant on whose behalf such contributions were made.
(b) Qualified Nonelective and Qualified Matching Contributions. All
Qualified Nonelective Contributions and Qualified Matching
Contributions shall be allocated as provided in Sections 5.10 and
5.11, respectively.
(c) Employer Discretionary Contributions. All Employer Discretionary
Contributions shall be allocated to the Account of each Participant
eligible for such an allocation, as provided in Section 5.3(b), in
the ratio that such Participant's Compensation bears to the
compensation of all such Participants. However, if the
Discretionary Employer Contribution formula selected in the Adoption
Agreement is allocated under the permitted disparity rules,
Discretionary Employer Contributions for the Plan Year shall be
allocated to the Accounts of Participants eligible for such an
allocation as follows:
(d) If the Plan is Top-Heavy (as defined below) for the Plan Year, begin
at Step One; if the Plan is not Top-Heavy for the Plan Year, begin
at Step Three.
(i) Step One. Contributions will be allocated to each
Participant's Account in the ratio that each Participant's
Compensation bears to all such Participants' Compensation, but
not in excess of 3% of each Participant's Compensation.
(ii) Step Two. Any contributions remaining after the allocation in
Step One will 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 (hereinafter "Excess
Compensation") bears to the Excess Compensation of all
Participants, but not in excess of 3% of Compensation.
(iii)Step Three. Any contributions (remaining after the allocation
in Step Two if the Plan is Top-Heavy) will be allocated to each
Participant's Account in the ratio that the sum of each
Participant's Compensation and Excess Compensation bears to the
sum of all Participants' Compensation and Excess Compensation,
but not in excess of the Maximum Profit Sharing Disparity Rate.
(iv) Step Four. Any remaining contributions will be allocated to
each Participant's Account in the ratio that each Participant's
Compensation for the Plan Year bears to the total of all
Participants' Compensation for that year.
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If the Employer maintains any other plan that provides for permitted
disparity, and if any Participant in this Plan is eligible to
participate in such other plan, this Plan may not provide for
permitted disparity.
6.3 Minimum Top-Heavy Allocation.
(a) General Rule. Notwithstanding any other provision of this Plan to
the contrary, during any Plan Year that this Plan is Top-Heavy,
the Matching Contributions, Employer Discretionary Contributions and
forfeitures allocated on behalf of any Participant who is not a Key
Employee and who has not separated from service with the Employer
before the end of such Plan Year shall not be less than the lesser
of 3% of such Participant's Section 415 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
$200,000 of the Key Employee's Section 415 Compensation, allocated
on behalf of any Key Employee for that year. The minimum allocation
is determined without regard to any Social Security contribution.
For purposes of this subsection, all defined contribution plans
required to be included in an aggregation group under section
416(g)(2)(A)(i) of the Code shall be treated as a single plan.
(b) Special Rule If Other Plans Satisfy Top-Heavy Minimum. 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 any other plan or plans of the Employer
provide that the minimum allocation or benefit requirement
applicable to Top-Heavy plans will be met in the other plan or
plans.
6.4 ALLOCATION OF FORFEITURES. ANY FORFEITURES ARISING UNDER THE PLAN,
INCLUDING FORFEITURES OF EXCESS AGGREGATE CONTRIBUTIONS, SHALL BE
ALLOCATED IN THE FOLLOWING ORDER OF PRIORITY IN THE PLAN YEAR IN WHICH
FORFEITURES OCCUR:
(a) First, forfeitures shall be used to the extent necessary to restore
a returning Participant's Account as provided in Section 8.5(a) and
to restore a formerly unlocatable Participant's Account as provided
in Section 8.6;
(b) Next, forfeitures shall be treated as an Employer contribution,
shall be used to reduce the Employer Matching Contribution as
required by Section 5.3(a) and shall be allocated to the Matching
Contribution subaccounts of the Participants on whose behalf such
contributions are to be made.
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(c) Next, forfeitures shall be treated as Employer contributions and
shall be allocated to Participants' Accounts to the extent necessary
to satisfy the minimum allocation provisions of Section 6.3;
(d) Next, to the extent elected by the Plan Administrator, forfeitures
shall be treated as a Qualified Nonelective Contribution or a
Qualified Matching Contribution and shall be allocated as provided
in Sections 5.10 and 5.11;
(e) Next, to the extent elected by the Plan Administrator, forfeitures
shall be used to pay reasonable costs of administering the Plan;
(f) Any remaining forfeitures shall be treated as Employer contributions
and allocated as follows:
(i) If the Employer has elected in the Adoption Agreement that
it may make Employer Discretionary Contributions to the Plan,
such forfeitures shall be treated as Employer Discretionary
Contributions and allocated in accordance with the provisions
of Section 6.2(c);
(ii) If the Employer has not elected in the Adoption Agreement that
it may make Employer Discretionary Contributions to the Plan,
such forfeitures shall be allocated to each Participant's
Matching Contribution subaccount in the ratio that each
Participant's Elective Deferrals for the Plan Year bear to the
total of all Participants' Elective Deferrals for the Plan
Year.
6.5 Withdrawals and Distributions. Any distribution to a Participant or his
Beneficiary, any amount directly rolled over from a Participant's Account
directly to the trustee of any other qualified plan described in section
401(a) of the Code, to a qualified annuity plan described in section
403(a) of the code, to an individual retirement account described in
section 408(a) of the Code or to an individual retirement annuity
described in section 408(b) 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.
6.6 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 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 value 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
or disposition or the current Valuation Date, whichever is applicable.
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6.7 Allocation of Net Earnings or Losses.
(a) Specific Participant Account Allocations. To the extent that Shares
and other assets are specifically allocated to a specific
Participant's Account or subaccount, earnings, dividends, capital
gain distributions, appreciation, depreciation, losses and accrued
but unpaid interest and any other earnings or losses from Shares and
any other assets in such Account or subaccount shall be allocated to
such Account or subaccount.
(b) Common Account Allocations. As of each Valuation Date, the net
earnings or losses of the Trust (excluding gains or losses on assets
specifically allocated to a specific Participant's Account or
subaccount, all of which shall be allocated to such Account or
subaccount) for the valuation period then ending shall be allocated
to the Accounts of all Participants (or Beneficiaries) (excluding
the Accounts to which are allocated assets of specific Participants)
having assets in the Trust both on such date and on the immediately
preceding Valuation Date. 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 that
preceding Valuation Date, reduced by any distributions therefrom
since such preceding Valuation Date.
6.8 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 and subaccounts of
Participants in accordance with Section 6.1 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.
6.9 Definitions.
(a) Determination Date. For the first Plan Year of the Plan, the last
day of that Plan Year. With respect to any Plan Year subsequent to
the first Plan Year, the last day of the preceding Plan Year.
(b) Integration Level. The Taxable Wage Base or such lesser amount (or
percentage of Taxable Wage Base) elected by the Employer in the
Adoption Agreement.
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(c) Key Employee.
(i) Any Employee or former Employee (and the Beneficiaries of such
Employee) who at any time during the determination period was
an officer of the Employer if such individual's annual
compensation exceeds 50% 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 largest
interests in the Employer if such individual's compensation
exceeds 100 of the dollar limitation under section
415(c)(1)(A) of the Code; a Five Percent Owner of the
Employer; or a 1% owner of the Employer who has annual
compensation of more than $150,000.
(ii) For purposes of this Section, annual compensation means
Section 415 Compensation, but including amounts contributed by
the Employer pursuant to a salary reduction agreement which
are excludable from the Employee's gross income under section
125.402(a)(8), 402(h) or 403(b) of the Code.
(iii) For purposes of this Section, the determination period is the
Plan Year containing the Determination Date and the four
preceding Plan Years.
(d) Maximum Profit Sharing Disparity Rate. The lesser of:
(i) 2.7% (5.7% if the Plan is not Top-Heavy);
(ii) The applicable percentage determined in accordance with the
table below:
The Applicable
More Than But Not More Than Percentage Is:
Top Heavy Not Top-Heavy
50 X 2.7% 5.7%
X*/ of TWB 80% of TWB 1.3% 4.3%
80% of TWB Y**/ 2.4% 5.4%
*X = the greater of $10,000 or 20% of TWB.
**Y = any amount more than 80% of the TWB but less than 100% of TWB.
If the Integration Level is equal to TWB, the applicable percentage is
2.7% (5.7% if the Plan is not Top-Heavy).
(e) 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.
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(f) 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 sections 401(a)(4) and 410
of the Code.
(g) Present Value. Present Value shall be based only on the interest
and mortality rates specified in the Adoption Agreement.
Required Aggregation Group. (A) Each qualified plan of the Employer
in which at least one Key Employee participates or participated at
any time during the determination period (regardless of whether the
plan has terminated), and (B) any other qualified plan of the
Employer which enables a plan described in (A) to meet the
requirements of section 401(a)(4) or 410 of the Code.
(h) Top Heavy. For any Plan Year beginning after December 31, 1983,
this Plan is Top-Heavy if any of the following conditions exist:
(i) If the Top-Heavy Ratio for this Plan exceeds 60% and this Plan
is not part of any Required Aggregation Group or Permissive
Aggregation Group of plans.
(ii) 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 60%.
(iii)If this Plan is 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 60%.
(j) Top-Heavy Ratio.
(i) If the Employer maintains one or more defined contribution
plans (including any Simplified Employee Pension Plan) and the
Employer has not maintained any defined benefit plan which
during the 5-year period ending on the Determination Date(s)
has or has had accrued benefits, the Top-Heavy Ratio for this
Plan alone or for the Required or Permissive Aggregation
Group, as appropriate, is a fraction, the numerator of which
is the sum of the account balances of all Key Employees as of
the Determination Date(s) including any part of any account
balance distributed in the 5-year period ending on the
Determination Date(s), and the denominator of which is the
sum of all account balances (including any part of any account
balance distributed in the 5-year period ending on the
Determination Date(s)), both computed in accordance with
section 416 of the Code 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 section 416 of the code and the
regulations thereunder.
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(ii) If the Employer maintains one or more defined contribution
plans (including any Simplified Employee Pension Plan) and the
Employer maintains or has maintained one or more defined
benefit plans which during the 5-year period ending on the
Determination Date(s) has or has had any accrued benefits, the
Top-Heavy Ratio for any Required or Permissive Aggregation
Group, as appropriate, is a fraction, the numerator of which is
the sum of account balances under the aggregated defined
contribution plan or plans for all Key Employees, determined in
accordance with (i) above, and the Present Value of accrued
benefits under the aggregated defined benefit plan or plans for
all Key Employees as of the Determination Date(s), and the
denominator of which is the sum of the account balances under
the aggregated defined contribution plan or plans for all
Participants determined in accordance with (i) above, and the
Present Value of accrued benefits under the defined benefit
plan or plans for all Participants as of the Determination
Date(s), all determined in accordance with section 416 of the
Code 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 5-year period
ending on the Determination Date.
(iii) For purposes of (i) and (ii) above, the value of account
balances and the Present Value of accrued benefits will be
determined as of the most recent Valuation Date that falls
within or ends with the 12-month period ending on the
Determination Date, except as provided in section 416 of the
Code and the regulations thereunder for the first and second
plan years of a defined benefit plan. The account balances and
accrued benefits of a Participant (A) who is not a Key
Employee but who was a Key Employee in a prior year, or (B) who
has not been credited with at least one Hour of Service with
any Employer maintaining the Plan at any time during the 5-year
period ending on the Determination Date will be disregarded.
The calculation of the Top-Heavy Ratio, and the extent to which
distributions, rollovers and transfers are taken into account
will be made in accordance with section 416 of the Code and the
regulations thereunder. Deductible employee contributions will
not be taken into account for purposes of computing the Top-
Heavy Ratio. When aggregating plans, the value of account
balances and accrued benefits will be calculated with reference
to the Determination Dates that fall within the same calendar
year.
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The accrued benefit of a Participant other than a Key Employee
shall be determined under (A) the method, if any that uniformly
applies for accrual purposes under all defined benefit plans
maintained by the Employer, or (B) if there is no such method,
as if such benefit accrued no more rapidly than the slowest
accrual rate permitted under the fractional rule of section
411(b)(1)(C) of the Code.
(k) Taxable Wage Base (or "TWB"). The contribution and benefit base in
effect under section 230 of the Social Security Act on the first day
of the Plan Year.
ARTICLE 7. LIMITATIONS ON ALLOCATIONS
7.1 Limitations on Annual Additions to Qualified Defined Contribution Plans.
Notwithstanding any other provision of this Plan to the contrary, the
amount of Annual Additions that may be credited to the Participant's
Account for any Limitation Year may not exceed the Maximum Permissible
Amount reduced by the sum of the Annual Additions to his Account under
all other defined contribution plans now or hereafter maintained by the
Employer or Affiliated Employers, except that in determining whether any
entity is part of the controlled group of corporations or trades or
businesses including the Employer, "more than 50%" shall be substituted
for "at least 80%" in the tests under section 414(b) and (c) of the Code.
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 preceding limitation, the amount
contributed or allocated under this Plan will be reduced so that the
Annual Additions for the Limitation Year to all defined contribution
plans maintained by the Employer will equal the Maximum Permissible
Amount. If, as a result of the allocation of forfeitures, a reasonable
error in determining a Participant's Compensation or other limited facts
and circumstances, there is an Excess Amount, the Excess Amount will be
deemed to consist of the Annual Additions last allocated, except that
Annual Additions attributable to a Simplified Employee Pension Plan will
be deemed allocated first followed by Annual Additions to a welfare
benefit fund or individual medical account regardless of the actual
allocation date. 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:
(a) the total Excess Amount allocated as of such date, times
(b) the ratio of (i) the Annual Additions allocated to the Participant
for the Limitation Year as of such date under this Plan to (ii) 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.
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Any Excess Amount allocated to this Plan will be disposed of as follows:
(a) Any Elective Deferrals, and any income attributable thereto, to
the extent they would reduce the Excess Amount, will be returned to
the Participant;
(b) If, after the application of subsection (a), 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 such succeeding Limitation Year if necessary;
(c) If, after the application of subsection (a), 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;
(d) If a suspense account is in existence at any time during the
Limitation Year, 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.
7.2 Employers Who, In Addition To This Plan, Maintain A Qualified Defined
Benefit Plan. If the Employer or Affiliated Employer maintain, 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 such a
Participant's Account under this Plan for any Limitation Year will be
limited in accordance with the terms of the Adoption Agreement.
7.3 Definitions.
(a) Annual Additions. Effective on the first day of the Plan Year
beginning after December 31, 1986, the sum of the following amounts
credited to a Participant's Account for the Limitation Year:
(i) Employer contributions (including Excess Elective Deferrals (as
defined in Section 5.13) not distributed to the Participant on
or before the April 15 following the close of the taxable year
of such Excess Elective Deferrals, Excess Contributions and
Excess Aggregate Contributions, both as defined in Section
5.13);
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(ii) for Plan Years beginning on and after January 1, 1987, Employee
After-Tax Contributions;
(iii) forfeitures;
(iv) amounts allocated after March 31, 1984 to an individual
medical account as defined in section 415(1)(2) of the Code,
that 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
paid or accrued after December 31, 1985, in taxable years
ending after such date that 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; and
(v) allocations under a Simplified Employee Pension Plan.
For this purpose, any Excess Amount applied in the Limitation Year to
reduce Employer contributions will be considered Annual Additions for
such Limitation Year.
(b) Defined Benefit Fraction. A fraction, the numerator of which is
the sum of the Participant's projected annual benefits under all
defined benefit plans (whether or not terminated) maintained by the
Employer, and the denominator of which is the lesser of 100% of the
dollar limitation determined for the Limitation Year under section
415(b) and (d) of the Code or 140% of his average Section 415
Compensation for the three consecutive calendar years that produces
the highest average, 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 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.
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(c) Defined Contribution Fraction. A fraction, the numerator of which
is the sum of the Annual Additions to the Participant's Accounts
under all the defined contribution plans (whether or not terminated)
maintained by the Employer for the current and all prior Limitation
Years (including the Annual Additions attributable to the
Participant's voluntary nondeductible 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(1)(2) of the
Code, and simplified employee pensions 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 100% of the dollar limitation
in effect under section 415(c)(1)(A) of the Code or 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, as amount equal to the product
of (1) the excess of the sum of the fractions over 1.0 and (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 of the code 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.
(d) Excess Amount. The excess of the Participant's Annual Addition for
the Limitation Year over the Maximum Permissible Amount.
(e) Limitation Year. The Plan Year.
(f) 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:
(i) $30,000 or, if greater, 25% of the section 415(b)(1) of the
Code limitation for such year; or
(ii) 25% of the Participant's Section 415 Compensation actually
paid or includible in gross income during the Limitation Year.
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The limitation referred to in (iii) shall not apply to any contribution
for medical benefits (within the meaning of section 401(h) or 419A(f)(2)
of the Code) which is otherwise treated as an Annual Addition under
section 415(l)(1) or 419A(d)(2) of the Code.
If a Limitation Year less than 12 consecutive months is created because
of an amendment changing the Plan Year, the Maximum Permissible Amount
shall be equal to the limit for such Limitation Year under paragraph (i)
multiplied by a fraction, the numerator of which is the number of months
in such short Limitation Year and the denominator of which is 12.
(g) 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 all defined benefit plans assuming:
(i) the Participant will continue employment until Normal Retirement
Age under the Plan (or current age, if later), and
(ii) the Participant's Section 415 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 8. VESTING
8.1 Employee After-Tax Contributions, Elective Deferral Contributions,
Rollover Contributions, Qualified Nonelective Contributions and Qualified
Matching Contributions. A Participant's Employee After-Tax Contribution
subaccount, Elective Deferral subaccount, Rollover subaccount, Qualified
Nonelective Contribution subaccount and Qualified Matching Contribution
subaccount shall be fully vested and nonforfeitable at all times.
8.2 Employer Discretionary Contributions and Matching Contributions.
(a) General. Notwithstanding the vesting schedule selected by the
Employer in the Adoption Agreement, the Participant's Employer
Discretionary Contribution subaccount and Matching Contribution
subaccount shall be fully vested and nonforfeitable upon
the Participant's death, Total and Permanent Disability or
attainment of Normal Retirement Age while employed by the Employer.
In the absence of any of the preceding events, and subject to the
provisions of Sections 5.4(d), 5.9(d) and 5.12, the Participant's
Employer Discretionary Contribution subaccount and Matching
Contribution subaccount shall be vested in accordance with the
vesting schedule specified in the Adoption Agreement. The schedule
must be at least as favorable to Participants as either schedule (i)
or (ii) below.
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(i) Graduated vesting according to the following schedule:
Years of Vesting Service Percent Vested
Less than 2 0%
2 but less than 3 20%
3 but less than 4 40%
4 but less than 5 60%
5 but less than 6 80%
6 or more 100%
(ii) Full 100% vesting after three Years of Vesting Service.
(b) In-Service Distribution When Not Fully Vested. If a distribution is
made from a Participant's Employer Discretionary Contribution
subaccount or Matching Contribution subaccount at a time when the
Participant is not 100% vested in such subaccount and the
Participant's employment with the Employer has not terminated, then
(i) A separate remainder subaccount will be established for the
Participant's interest in such Employer Discretionary
Contribution subaccount or Matching Contribution subaccount at
the time of the distribution, and
(ii) At any subsequent time, the Participant's vested portion of
such separate subaccount will be equal to an amount "X"
determined under the formula:
X = P(AB + (RxD)) - (RxD)
where
P = the Participant's vested percentage determined under
subsection (a) at the relevant time.
AB = the amount in such separate subaccount at the relevant
time.
R = the ratio of AB to the amount in the subaccount prior to
the distribution.
D = the amount of the distribution.
8.3 Amendments to Vesting Schedule.
(a) Participants' Election Rights. 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, each Participant with at least three
years of service with the Employer may elect, within a reasonable
period after the adoption of the amendment or change, to have the
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nonforfeitable percentage computed under the Plan without regard to
such amendment or change. For any Participants who do not have at
least one Hour of Service in any Plan Year beginning after December
31, 1988, the preceding sentence shall be applied by substituting
"five years of service" for "three years of service" where such
language appears.
(b) Election Period. 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) 60 days after the amendment is adopted;
(ii) 60 days after the amendment becomes effective; or
(iii)60 days after the Participant is issued written notice of the
amendment by the Employer or Plan Administrator.
(c) Prohibition Against Reducing Accrued Benefits. 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 subsection, a Plan amendment which has the effect
of decreasing a Participant's Account balance or eliminating an
optional form of benefit, with respect to benefits attributable to
service before the amendment shall be treated as reducing an accrued
benefit. Furthermore, if the vesting schedule of a Plan is amended,
in the case of an Employee who is a Participant as of the later of
the date such amendment is adopted or the date it becomes effective,
the nonforfeitable percentage (determined as of such date) of such
Employee's right to his Employer-derived accrued benefit will not be
less than his percentage computed under the Plan without regard to
such amendment.
8.4 Determination of Years of Vesting Service. For purposes of determining
the vested and nonforfeitable percentage of the Participant's Employer
Discretionary Contribution and Matching Contribution subaccounts, all of
the Participant's Years of Vesting Service with the Employer or an
Affiliated Employer shall be taken into account. If Employer maintains
the plan of a predecessor employer, Years of Vesting Service with such
employer will be treated as service with the Employer.
8.5 Forfeiture of Nonvested Amounts. 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 he incurs a
Break in Service. For Plan Years beginning after 1984, any portion of a
Participant's Account that is not vested shall be forfeited in accordance
with the following rules:
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(a) Distribution in Full. If a Participant's service with the Employer
terminates and if the entire vested portion of the Participant's
Account is distributed to him at any time before the end of the
second Plan Year following the Plan Year in which his employment
terminated, the remaining portion of the Participant's Account shall
be forfeited as of the end of the Plan Year in which such
distribution occurs, as long as the Participant has not resumed
employment with the Employer by such date. However, if the
Participant has no vested interest in his Account at the time of his
termination of employment, the Plan Administrator nonetheless shall
treat the Participant as if he had received a distribution on the
date his employment terminated and shall forfeit the Participant's
entire Account on the date his employment terminated. If the
Participant returns as an Employee before the end of the five
consecutive Breaks in Service measured from the day immediately
after the date of his distribution (or measured from the date his
employment terminated in the case of a Participant who had no vested
interest in his Account), and if he repays to the Trustee the full
amount of the distribution (if any) paid to him by reason of his
termination of employment no later than the fifth anniversary of the
date of his reemployment, then his Account (determined as of the
date of the distribution of his vested interest, unadjusted by
subsequent gains and losses) shall be fully restored to him as of
the end of the Plan Year in which such repayment occurs (or in the
case of a Participant who had no vested interest in his Account,
such Account shall be restored as of the end of the Plan Year in
which he is reemployed). In such case, the Participant's Account
shall be restored first out of such Participant's repayment (if any
is required), next out of the forfeitures for such Plan Year and, if
such forfeitures are insufficient to restore such Account, the
Employer shall make a special contribution to the Trustee to the
extent necessary so that the Participant's Account is fully
restored.
(b) Partial Distributions. If a Participant's service with the Employer
terminates and if his entire vested interest in his Account is not
distributed to him before the end of the second Plan Year following
the Plan Year in which his employment terminated, a separate
remainder subaccount shall be established for that portion of the
Participant's Account that is not vested and such separate
subaccount shall be forfeited at the end of the Plan Year in which
the Participant incurs five consecutive Breaks in Service. If all
or any portion of such a Participant's vested benefits are
distributed before a forfeiture is permitted and if the Participant
returns to work as an Employee after the distribution and before he
incurs five consecutive Breaks in Service, his vested interest in
such separate subaccount at any time shall be determined by applying
the formula in Section 8.2(b)(ii).
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8.6 Reinstatement of Benefit. If a vested benefit is forfeited because the
Participant or Beneficiary cannot be found, such benefit will be
reinstated if a claim is made by the Participant or Beneficiary.
ARTICLE 9. LOANS
9.1 General Provisions.
(a) Eligibility for Loans. If the Employer so elects in the Adoption
Agreement, 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. Loans will not be made
to any shareholder-employee, Owner-Employee or Participant or
Beneficiary who is not a party-in-interest (as defined in section
3(14) of ERISA). 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 5% of the
outstanding stock of the corporation.
(b) Spousal Consent Rules.
(i) If Section 11.9 is applicable to a Participant, the Participant
must obtain the consent of his or her spouse, if any, to use his
or her account balance as security for the loan. Spousal
consent shall be obtained no earlier than the beginning of the
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 vested account balance is used for
renegotiation, extension, renewal or other revision of the loan.
(ii) If Section 11.9 is applicable to a Participant and a valid
spousal consent has been obtained in accordance with subsection
(b)(i), then, notwithstanding any other provision of this Plan,
the portion of the Participant's vested Account 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 payable at the
time of death or distribution, but only if the reduction is used
as repayment of the loan. If less than 100% of the
Participant's vested Account (determined without regard to the
preceding sentence) is payable to the Participant's surviving
spouse, then the vested Account shall be adjusted by first
reducing the vested Account by the amount of the security used
as repayment of the loan, and then determining the benefit
payable to the surviving spouse.
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9.2 Amount of Loan. Loans shall not be made available to Highly-Compensated
Employees in an amount greater than the amount made available to other
Employees. 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:
(a) $50,000 reduced by the excess (if any) of the highest outstanding
balance of loans during the one 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 the present value of the vested Account of the Participant.
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.
9.3 Manner of Making Loans. The Plan's loan program will be administered by
the Plan Administrator. 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 investments 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 on 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.
9.4 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 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.
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9.5 Security for Loan. Any loan to a Participant under the Plan shall be
secured by the pledge of no more than 50% of the Participant's vested
interest in his Account. 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
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 will be treated as a loan under
this Article.
9.6 Segregated Investment. Loans shall be considered a Participant directed
investment and, for the purposes of allocating earnings and losses
pursuant to Article 6, shall not be considered a part of the common fund
under the Trust.
9.7 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.
9.8 Default on Loan. 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 Plan Administrator shall take any and all actions
necessary and appropriate to enforce collection of the unpaid loan.
However, attachment of the Participant's Account pledged as security will
not occur until a distributable event occurs under the Plan.
ARTICLE 10. WITHDRAWALS
10.1 Withdrawal of Employee After-Tax Contributions. Subject to the
requirements of Sections 10.3 and 11.9, any Participant who has made
Employer After-Tax Contributions may, upon 30 days notice in writing
filed with the Plan Administrator, have paid to him all or any portion of
the value of his Employee After-Tax Contribution subaccount.
10.2 Hardship Withdrawals.
(a) General Rule. Subject to Sections 10.3 and 11.9 and if the Employer
so elects in the Adoption Agreement, distribution of Elective
Deferrals (and earnings thereon accrued as of December 31, 1988) may
be made to a Participant in the event of hardship. For the purposes
of this Section, hardship is defined as an immediate and heavy
financial need of the Participant where such Participant lacks other
available resources.
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(b) Needs Considered Immediate and Heavy. The only financial needs
considered immediate and heavy are the following:
(i) deductible medical expenses (within the meaning of section
213(d) of the Code) of the Employee, the Employee's spouse,
children or dependents;
(ii) the purchase (excluding mortgage payments) of a principal
residence for the Employee;
(iii) payment of tuition and related educational fees for the next
twelve months of post-secondary education for the Employee, the
Employee's spouse, children or dependents; or
(iv) the need to prevent the eviction of the Employee from, or a
foreclosure on the mortgage of, the Employee's principal
residence.
(c) Necessary to Satisfy Need. A distribution will be considered as
necessary to satisfy an immediate and heavy financial need to the
Employee only if:
(i) the Employee has obtained all distributions, other than
hardship distributions, and all nontaxable loans under all
plans maintained by the Employer;
(ii) all plans maintained by the Employer provide that the
Employee's Elective Deferrals (and Employee contributions) will
be suspended for twelve months after the receipt of the
hardship distribution;
(iii) the distribution is not in excess of the amount of an immediate
and heavy financial need (including amounts necessary to pay
any federal, state or local income taxes or penalties
reasonably anticipated to result from the distribution); and
(iv) all plans maintained by the Employer provide that the Employee
may not make Elective Deferrals for the Employee's taxable year
immediately following the taxable year of the hardship
distribution in excess of the applicable limit under section
402(g) of the Code for such taxable year less the amount of
such Employee's Elective Deferrals for the taxable year of the
hardship distribution.
10.3 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 therefor, if a hardship withdrawal) and the amount of funds
requested to be withdrawn and, if applicable, including the spousal
consent required under Section 11.9. Upon approving any withdrawal, the
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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.
10.4 Limitations on Withdrawals. The Plan Administrator may prescribe
uniform and nondiscriminatory 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.
10.5 Special Circumstances. Elective Deferral, Qualified Nonelective
Contribution and Qualified Matching Contribution subaccounts may be
distributed upon:
10.6 Plan Termination. Termination of the Plan without the establishment of
another defined contribution plan, other than an employee stock
ownership plan (as defined in section 4975(e) or section 409 of the
Code) or a Simplified Employee Pension Plan as defined in section 408(k)
of the Code.
10.7 Disposition of Assets. The disposition by a corporation to an unrelated
corporation of substantially all of the assets (within the meaning of
section 409(d)(2) of the Code) used in a trade or business of such
corporation if such corporation continues to maintain this plan after
the disposition, but only with respect to Employees who continue
employment with the corporation acquiring such assets.
10.8 Disposition of Subsidiary. The disposition by a corporation to an
unrelated entity of such corporation's interest in a subsidiary (within
the meaning of section 409(d)(3) of the Code) if such corporation
continues to maintain this Plan, but only with respect to Employees who
continue employment with such subsidiary.
All distributions that may be made pursuant to one or more of the
foregoing distributable events are subject to the spousal and
participant consent requirements (if applicable) contained in sections
411(a)(11) and 417 of the Code. In addition, distributions after March
31, 1988, that are triggered by any of the foregoing events must be made
in a lump sum.
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ARTICLE 11. DISTRIBUTION PROVISIONS
11.1 Retirement Distributions. If a Participant's Normal Retirement Age
should occur prior to the termination of his employment with the
Employer, all amounts then credited to such Participant's Account shall
become 100% vested regardless of the number of the Participant's Years
of Vesting Service. If a Participant's employment is terminated on or
after his Normal Retirement Age, such termination shall be deemed
"Retirement," and the Plan Administrator shall direct the Trustee to
take such action as may be necessary to distribute to such Participant,
in one of the methods provided in Section 11.7, the value of his
Account.
(a) Deferred Retirement. If a Participant's employment continues after
his Normal Retirement Age, his participation in the Plan shall
continue and, subject to Section 11.8, the distribution of his
benefits shall be postponed until the earlier of (i) the date on
which his Retirement becomes effective, which shall be his
Deferred Retirement Date, or (ii) the date the Participant elects
to receive his benefits.
(b) Participant Status after Retirement. Upon a Participant's
Retirement, his participation as an active Participant hereunder
shall cease, subject to his right to share in contributions made
with respect to the Plan Year of his Retirement if he otherwise
qualifies for such contributions in such Plan Year.
11.2 Death Benefits. Upon the death of a Participant before retirement or
before other termination of employment with the Employer, all amounts
then credited to his Account shall become 100% vested, regardless of the
number of his Years of Vesting Service. The Plan Administrator shall
direct the Trustee to distribute the value of the Participant's Account,
in one of the methods provided in Section 11.7, and at the time provided
in Section 11.6, to any surviving Beneficiary designated by the
Participant in accordance with the provisions of subsection (c) below.
(a) Death of Former Employee. Upon the death of a former Employee before
distribution of his vested interest in his Account has begun, the
Trustee, in accordance with the instructions of the Plan
Administrator and in accordance with the provisions of this Article,
shall take such action as may be necessary to distribute his vested
interest in his Account, in one of the methods provided in Section
11.7 hereof and commencing at such time provided in Section 11.6, to
any surviving Beneficiary, designated in accordance with the
provision of subsection (c) below. Upon the death of a former
Participant after distribution of his benefits has begun and before
the entire vested interest in his Account has been distributed to
him, the Plan Administrators shall direct the Trustee to distribute
the remaining portion of such interest to any surviving Beneficiary
designated in accordance with the provisions of subsection (c) below
at least as rapidly as under the method of distribution being used as
of the date of the Participant's death.
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(b) Proof of Death. The Plan Administrator may require such proper proof
of death and such evidence of the right of any person to receive
payment of the vested interest of a deceased Participant or former
Participant as it may deem desirable. The Plan Administrator's
determination of death and of the right of any person to receive
payment shall be conclusive.
(c) Beneficiary Designation. Each Participant may designate one or more
primary Beneficiaries and one or more secondary Beneficiaries by
filing written notice with the Plan Administrator on a form
acceptable to the Plan Administrator. However, in the case of a
married Participant, the Participant shall be deemed to have
designated his surviving spouse as his sole primary Beneficiary,
notwithstanding any contrary written notice, unless such spouse filed
a written voluntary consent with the Plan Administrator irrevocably
consenting to the Participant's designation of a non-spouse
Beneficiary, which consent shall be notarized or witnessed by the
Plan Administrator, and shall acknowledge the effect of the
Participant's designation of Beneficiary. A married Participant may
not subsequently change the designated non-spouse Beneficiary unless
his spouse's voluntary consent acknowledges that the spouse has a
right to consent to a specific beneficiary and expressly permits
designations by the Participant without further spousal consent or
his spouse has filed a written consent with the Plan Administrator,
irrevocably consenting to such change, which consent shall be
notarized or witnessed by the Plan Administrator, and shall
acknowledge the effect of the change. Subject to the two preceding
sentences, a Participant may change any designated Beneficiary by
filing written notice of the change with the Plan Administrator. If
any Participant fails to designate a Beneficiary, or if his
designated Beneficiary or Beneficiaries do not survive the
Participant, the Plan Administrator shall designate a Beneficiary or
Beneficiaries on his behalf, in the following order:
(i) The Participant's spouse, if living at the time of the
Participant's death.
(ii) The Participant's issue, per stirpes.
(iii) The Participant's brothers and sisters, per stirpes.
(iv) The estate of the Participant.
11.3 Permanent Disability Benefits. If, prior to his Retirement or other
termination of employment with the Employer, a Participant incurs a
Total and Permanent Disability, he shall be deemed to have retired by
reason of Permanent Disability, and his Account shall become 100%
vested, regardless of the number of his Years of Vesting Service. The
Plan Administrator shall determine the date as of which such Retirement
shall become effective. The Trustee, in accordance with the
instructions of the Plan Administrator and in accordance with the
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provisions of this Article, shall take such action as may be necessary
to distribute the value of the Participant's Account(s) to the
Participant commencing at such time, and in one of the methods, provided
in Sections 11.5 through 11.7 hereof.
11.4 Termination of Employment Prior to Retirement, Death or Total and
Permanent Disability. If a Participant's employment with the Employer
terminates for any reason other than Retirement, Total and Permanent
Disability or death, the Plan Administrator shall direct the Trustee to
take such action as may be needed to distribute to such Participant the
vested portion of his Account, as determined in accordance with Article
8. Such distribution shall be made commencing at such time, and in one
of the methods, provided in Sections 11.5 through 11.7 hereof.
11.5 Commencement of Lifetime Distributions.
(a) Upon Retirement. The distribution of benefits payable to a
Participant who retires by reason of Retirement or Total and
Permanent Disability shall commence as soon as is administratively
feasible after a date on or after the Participant's Retirement as he
elects, but in no event later than his required beginning date.
Notwithstanding the foregoing provisions of this subsection (a), if
such a Participant's total vested benefits do not exceed $3,500, his
vested benefits shall be distributed to him in a lump sum payment as
soon as administratively feasible after his Retirement.
(b) Upon Termination of Employment Other Than Retirement. The
distribution of the vested interest of a Participant whose
employment terminated for any reason other than Retirement, Total
and Permanent Disability or death shall commence as soon as is
administratively feasible after a date elected by the Participant
that follows the date his employment terminated. Notwithstanding
the foregoing provisions of this subsection (b),
(i) If a Participant's total vested benefits do not exceed (or at
the time of any prior distribution did not exceed) $3,500, his
vested benefits shall be distributed to him in a lump sum
payment as soon as is administratively feasible after the date
on which his employment terminated, as long as he has not
returned as an Employee on the date of such distribution, and
(ii) Distributions shall begin no later than the Participant's
required beginning date.
(c) Statutory Requirements. If a Participant does not elect to defer
payment of his benefits in accordance with subsections (a) or (b)
above, distribution of his benefits shall commence during the sixty
day period immediately following the Plan Year in which occurs the
latest of:
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(i) the Participant's Normal Retirement Age,
(ii) the 10-year anniversary of the date on which the Participant
commenced participation in the Plan, and
(iii) the date the Participant's employment with the Employer
terminated.
(d) In-Service Distributions. The distribution of a Participant's
vested benefits shall not commence prior to the time his employment
with the Employer terminates, except in the following circumstances:
(i) Withdrawals made in accordance with the provisions of Article
10, or
(ii) Payments to an alternate payee pursuant to qualified domestic
relations order as described in section 414(p) of the Code may
be made at any time, or
(iii) Minimum required distributions made on and after his required
beginning date, or
(iv) Distributions made in accordance with the provisions of Section
11.1(a).
(e) Required Beginning Date. 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 70 1/2.
Notwithstanding the foregoing:
(i) The required beginning date of a Participant who attains age
70 1/2 before January 1, 1988, shall be determined in
accordance with (A) or (B) below:
(A) The required beginning date of a Participant who is not a
Five Percent Owner is the first day of April of the
calendar year following the calendar year in which the
later of retirement or attainment of age 70 1/2 occurs.
(A Participant is treated as a Five Percent Owner for
purpose of this subsection if such Participant is a Five
Percent Owner at any time during the Plan Year ending
with or within the calendar year in which such owner
attains age 66 1/2 or any subsequent Plan Year.)
(B) The required beginning date of a Participant who is a
Five Percent Owner during any year beginning after
December 31, 1979, is the first day of April following
the later of:
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(1) the calendar year in which the Participant attains
age 70 1/2, or
(2) the earlier of the calendar year with or within which
ends the Plan Year in which the Participant become a
Five Percent Owner, or the calendar year in which the
Participant retires.
(ii) The required beginning date of a Participant who is not a Five
Percent Owner who attains age 70 1/2 during 1988 and who has
not retired as of January 1, 1989, is April 1, 1990.
11.6 Commencement of Death Benefits. Subject to Section 11.9, if a
Participant dies before his benefit payments have commenced, his death
benefits, if any, shall be payable beginning at such reasonable time
after the Participant's death as his Beneficiary elects, subject to and
in accordance with the following provisions.
(a) Non-Spouse Beneficiary. In the case of a Beneficiary other than the
Participant's surviving spouse, benefits must commence no later than
the December 31 that coincides with or immediately follows the fifth
anniversary of the Participant's death. If the beginning date of
such benefits is after the December 31 that coincides with or
immediately follows the first anniversary of the Participant's
death, the Beneficiary's entire interest in the Participant's death
benefits must be distributed no later than the December 31 that
coincides with or immediately follows the fifth anniversary of the
Participant's death.
(b) Spouse Beneficiary. If the Participant's Beneficiary is the
Participant's surviving spouse, the surviving spouse may elect to
defer the commencement of benefits to the December 31 that coincides
with or immediately follows the later of (i) the first anniversary
of the Participant's death, or (ii) the date on which the
Participant would have attained age 70 1/2. If the Participant's
Beneficiary is his surviving spouse, and if his surviving spouse
dies after the Participant dies but prior to the time the
Participant's death benefits have commenced, the provisions of this
Article 11 shall apply as if the surviving spouse were the
Participant, except that the surviving spouse of the deceased
Participant's surviving spouse shall not qualify as a surviving
spouse.
(c) Election Period. Any election made by a Beneficiary under this
Section must be made no later than the December 31 that coincides
with or immediately follows the first anniversary of the
Participant's death and must be irrevocable as of such date, except
that if the Participant's Beneficiary is the Participant's surviving
spouse, the surviving spouse may defer making such election to the
earlier of (i) the December 31 that coincides with or immediately
follows the fifth anniversary of the Participant's death, or (ii)
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the last date on which the surviving spouse could defer the
commencement of benefits under subsection (b). If a Beneficiary
fails to make a proper election hereunder, the Beneficiary's
interest in the Participant's death benefits shall be distributed in
full no later than the December 31 that coincides with or
immediately follows the fifth anniversary of the Participant's
death.
11.7 Methods of Distribution.
(a) General rule. Subject to Section 11.9, all benefits shall be
distributed in accordance with one of the following methods as the
Participant or Beneficiary, as the case may be, may elect in writing
during the 90-day period before the date benefits commence:
(i) In equal monthly, quarterly or annual installments over a
period certain not to exceed the life expectancy of the
Participant (or Beneficiary in the case of a Participant who
dies prior to the time his benefits commenced) or the joint
and last survivor life expectancy of the Participant and his
Beneficiary, so that the amount distributed in each Plan Year
equals the amount determined by dividing the Participant's
vested account balance on the last day of the immediately
preceding Plan Year by the period certain determined in
accordance with this paragraph (i) which shall be reduced by
one for each Plan Year after the Plan Year in which the
Participant's benefits commence.
(ii) Payment to the Participant or Beneficiary of all or part of
such benefits in one lump sum.
(b) Direct Rollover. Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a distributee's election under
this Article 11, for all distributions made on or after January 1,
1993, 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 subsection, the following definitions shall
apply:
(i) An "eligible rollover distribution" is any distribution of all
or a 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;
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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).
(ii) An "eligible retirement plan" is an individual retirement
account described in section 408(a) of the Code, an individual
retirement annuity described in section 408(b) of the Code, an
annuity plan described in section 403(a) of the Code, or a
qualified trust described in section 401(a) of the Code, that
accepts the distributee's eligible rollover distribution.
However, in the case of an eligible rollover distribution to the
surviving spouse, an eligible retirement plan is an individual
retirement account or individual retirement annuity.
(iii) A "distributee" includes an Employee or former Employee. In
addition, the Employee's or former Employee's surviving spouse
and the Employee's or former Employee's spouse or former spouse
who is the alternate payee under a qualified domestic retirement
order, as described in section 414(p) of the Code, are
distributed with regard to the interest of the spouse or former
spouse.
(iv) A "direct rollover" is a payment by the Plan to the eligible
retirement plan specified by the distributee.
11.8 Minimum Required Distributions. If the Participant's interest is to be
distributed in other than a single sum, the following minimum
distribution rules shall apply on or after the required beginning date:
(a) Individual Account:
(i) If a Participant's benefit is to be distributed over (A) 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
(B) 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 benefits by the
applicable life expectancy.
(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 50%
of the present value of the amount available for distribution
is paid within the life expectancy of the Participant.
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(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 (A) the applicable life
expectancy or (B) if the Participant's spouse is not the
designated Beneficiary, the applicable divisor determined from
the table set forth in Q&A-4 of section 1.401(a)(9)-2 of the
proposed regulations. Distributions after the death of the
Participant shall be distributed using the applicable life
expectancy in paragraph (i) 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 the 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.
For purposes of this Section 11.8, any amount paid to a child of the
Participant will be treated as if it had been paid to the surviving
spouse if the amount becomes payable to the surviving spouse when
the child reaches the age of majority.
For the purposes of this Section 11.8, distribution of a
Participant's interest is considered to begin on the Participant's
required beginning date (or, if Section 11.6 is applicable, the date
distribution is required to begin to the surviving spouse pursuant
to section 11.6(b)). If distribution in the form of an annuity
irrevocably commences to the Participant before the required
beginning date, the date distribution is considered to begin is the
date distribution actually commences.
(c) Definitions.
(i) 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 for each calendar year
which has elapsed since the date life expectancy was first
calculated. If life expectancy is being recalculated, the
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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 before the required beginning date, the
applicable calendar year is the year such payments commence.
If distribution is in for 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.
(ii) Designated Beneficiary. The individual who is designated as
the Beneficiary under the Plan in accordance with section
401(a)(9) of the Code and the proposed regulations thereunder.
(iii) 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 11.6
above.
(iv) Life Expectancy. Life expectancy and joint and last survivor
expectancy are computed by use of the expected return
multiplies in Table V and VI of section 1.72-9 of the Income
Tax Regulations. Unless otherwise elected by the Participant
(or spouse, in the case of distributions described in Section
11.6(b)) by the time distributions are required to begin, life
expectancies shall not be recalculated. 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.
(d) Participant's Benefit. 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 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. Notwithstanding the foregoing, 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.
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11.9 Joint and Survivor Annuity Requirements. Notwithstanding the foregoing
provisions of this Article 11, if the Plan is a direct or indirect
transferee of a Participant's interest in 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, then the following provisions shall
apply to distributions to such Participant:
(a) Qualified Joint and Survivor Annuity. All benefit distributions to
such a Participant in the Plan shall be in the form of a "Qualified
Joint and Survivor Annuity," subject to the following rules:
(i) For the purposes of this subsection (a) and of subsection
(b), (A) in the case of a Participant who is married on the
date his benefit payments commence, the term "Qualified Joint
and Survivor Annuity" shall mean an immediate nontransferable
annuity policy which complies with the provisions of this
Plan, purchased with the Participant's total vested interest
in his Account, payable to the Participant for life with a
survivor annuity payable to his spouse at the time of the
purchase of the policy, for the life of that spouse, which is
equal to 50% of the amount of the annuity payable during the
joint lives of the Participant and his spouse, (B) in the
case of a Participant who is not married on the date his
benefit payments commence, the term "Qualified Joint and
Survivor Annuity" shall mean an annuity policy, purchased
with the Participant's total vested interest in his Account,
payable to the Participant for his life, and (C) the
term "Annuity Starting Date" shall mean the first day of the
first period for which an amount is to be paid to the
Participant or Beneficiary as an annuity, or in the case of a
benefit not payable in the form of an annuity, the first day
on which all events have occurred which entitle the
Participant or Beneficiary to such benefit.
(ii) Written notice explaining the Qualified Joint and Survivor
Annuity and optional forms of benefit, the right of the
Participant to elect to waive the Qualified Joint and
Survivor Annuity, the right of the spouse to consent to such
waiver, the effect of a waiver and the effect of a consent to
a waiver, the right of the Participant to revoke an election
to waive, and the inability of the spouse to revoke his or
her consent shall be given to the Participant no less than 30
days and no more than 90 days prior to his Annuity Starting
Date.
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If a distribution is one to which sections 401(a)(11) and 417 of the
Code do not apply, such distribution may commence less than 30 days
after the notice required under section 1.411(a)-11(c) of the Income
Tax Regulations is given, provided that (a) the Plan Administrator
clearly informs the Participant that the Participant has a right to a
period of at least 30 days after receiving the notice to consider the
decision of whether or not to elect a distribution (and, if
applicable, a particular distribution option), and (b) the
Participant, after receiving the notice, affirmatively elects a
distribution.
(iii) A Qualified Joint and Survivor Annuity shall not be paid to a
Participant if, during the 90-day period ending on the Annuity
Starting Date, (A) the Participant has filed a written
election with the Plan Administrator waiving the Qualified
Joint and Survivor Annuity, and (B) in the case of a married
Participant, his spouse has filed a written consent with the
Plan Administrator irrevocably consenting to such waiver,
which consent shall be notarized or witnessed by the Plan
Administrator, and shall acknowledge the effect of the waiver.
The written election waiving the Qualified Joint and Survivor
Annuity shall state the specific non-spouse Beneficiary and/or
the alternative form of benefit. A married Participant may
not subsequently change non-spouse Beneficiary and/or
alternative form of benefit elected unless his spouse's
consent expressly permits designations by the Participant
without any further spousal consent or his spouse has filed a
written consent with the Plan Administrator irrevocably
consenting to such change, which consent shall be notarized or
witnessed by the Plan Administrator, and shall acknowledge the
effect of the change. Notwithstanding the preceding sentence,
a married Participant may revoke his election waiving the
Qualified Joint and Survivor Annuity at any time and any
number of times on or before the Annuity Starting Date without
the consent of his spouse.
(iv) Even if a Participant does not waive the Qualified Joint and
Survivor Annuity in accordance with paragraph (iii) above, the
Plan Administrator will not be required to direct the Trustee
to distribute a Participant's or former Participant's benefits
in the form of a Qualified Joint and Survivor Annuity if the
value of the Participant's vested Account on the Annuity
Starting Date does not exceed $3,500 and if such Account is
distributed to the Participant in a single lump sum payment of
cash, provided that no such distribution shall be made after
the Annuity Starting Date without the written consent of the
Participant and his spouse.
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(b) Qualified Pre-Retirement Survivor Annuity. In the case of a
Participant with a vested interest under this Plan who dies prior to
his Annuity Starting Date, and who is married on the date of his
death, all death benefits under the money purchase pension plan
shall be distributed to his surviving spouse in the form of a
"Qualified Pre-Retirement Survivor Annuity," and in accordance with
the following rules:
(i) For the purposes hereof, the term "Qualified Pre-Retirement
Survivor Annuity" shall mean a non-transferable annuity which
complies with the provisions of this Plan for the life of the
Participant's surviving spouse, in such amount as may be
purchased with an amount equal to 100% of the value of the
Participant's total vested interest in his Account.
(ii) Written notice explaining the Qualified Pre-Retirement Survivor
Annuity, the right of the Participant to elect to waive the
Qualified Pre-Retirement Survivor Annuity, the right of the
spouse to consent to such waiver, the effect of a waiver and
the effect of a consent to a waiver, the right of the
Participant to revoke an election to waive, and the inability
of the spouse to revoke his or her consent shall the given to
the Participant during the two-year period ending on (A) the
first anniversary of the date he became a Participant, and (B)
the first anniversary of the date his employment terminates.
If, in accordance with clause (A) of the preceding sentence,
written notice is given to the Participant prior to the last
day of the Plan Year in which he attains age 31, a second
notice, similar to the initial notice, shall be given to the
Participant within whichever of the following periods ends
first: (A) the one-year period after his employment with the
Employer terminates, or (B) the period beginning with the first
day of the Plan Year in which he attains age 32 and ending with
the last day of Plan Year in which he attains age 34.
(iii) A Qualified Pre-Retirement Survivor Annuity shall not be paid
to the surviving spouse of a deceased Participant if, during
the period beginning on the day on which the Participant first
became a Participant in the Plan and ending on the date of his
death, (A) the Participant has filed a written election with
the Plan Administrator waiving such Qualified Pre-Retirement
Survivor Annuity, and (B) his spouse has filed a written
consent with the Plan Administrator, irrevocably consenting to
such waiver, which consent shall be notarized or witnessed by
the Plan Administrator, and shall acknowledge the effect of
the waiver. The written election waiving the Qualified Pre-
Retirement Survivor Annuity shall state the specific non-spouse
Beneficiary. A Participant may not subsequently change the
designated non-spouse Beneficiary unless his spouse's voluntary
consent acknowledges that the spouse has the right to limit
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consent to a specific beneficiary, and a specific form of
benefit where applicable, and expressly permits designations by
the Participant without further spousal consent or his spouse
has filed a written consent with the Plan Administrator,
irrevocably consenting to such change, which consent shall be
notarized or witnessed by the Plan Administrator, and shall
acknowledge the effect of the change. Notwithstanding the
preceding sentence, a Participant may revoke his election
waiving the Qualified Pre-Retirement Survivor Annuity at any
time and any number of times without the consent of his spouse.
(iv) Notwithstanding the first sentence of paragraph (iii), if the
Participant waives the Qualified Pre-Retirement Survivor
Annuity prior to the first day of the Plan Year in which he
attains age 35, such waiver shall be invalid upon the beginning
of the Plan Year in which he attains age 35 until the
Participant, during the period beginning on the earlier of the
first day of the Plan Year in which he attains age 35 or the
date on which his employment with the Employer terminates and
ending on the date of his death, again waives the Qualified
Pre-Retirement Survivor Annuity in accordance with the
preceding sentence. Qualified Pre-Retirement Survivor Annuity
coverage automatically will be reinstated as of the first day
of the Plan Year in which the Participant attains age 35.
Provided, however, that a Participant who (A) terminates his
employment with the Employer prior to the first day of the Plan
Year in which he attains age 35, and (B) on or after that date
waives the Qualified Pre-Retirement Survivor Annuity, need not
again waive the Qualified Pre-Retirement Survivor Annuity.
(v) Even if a Participant does not waive the Qualified Pre-
Retirement Survivor Annuity in accordance with paragraphs (iii)
or (iv) above, the Plan Administrator will not be required to
direct the Trustee to distribute a Participant's total vested
interest in all of his Accounts in the form of a Qualified Pre-
Retirement Survivor Annuity if (A) the Participant's surviving
spouse files a written consent with the Plan Administrator
consenting to the distribution of such vested benefits in one
of the methods described in Section 11.7 hereof, or (B) the
value of the Participant's total vested interest in his Account
does not exceed $3,500 and such Account is distributed to the
surviving spouse in a single lump sum payment of cash; provided
that no such distribution shall be made after the Annuity
Starting Date without the written consent of the Participant's
or former Participant's surviving spouse.
(c) Special Rules. For purposes of this Section 11:
(i) A former spouse of a Participant will be treated as the
Participant's spouse or surviving spouse to the extent provided
under a qualified domestic relations order as described in
section 414(p) of the Code.
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(ii) If the Plan Administrator determines that a Participant has no
spouse or the Participant's spouse cannot be located, no
spousal consent shall be necessary.
(iii) A spouse's consent (or determination that the consent of a
spouse cannot be obtained) hereunder shall be effective only
with respect to such spouse.
11.10 Reemployment. If a former Employee who has begun to receive benefit
payments hereunder should be reemployed by the Employer prior to his
Normal Retirement Age, his benefit payments shall cease.
11.11 Valuation of Benefits. All distributions made in the form of a lump sum
shall be based upon the value of the Participant's Account(s) determined
as of the Valuation Date which coincides with or immediately precedes
the date on which the distribution is being made, reduced by withdrawals
and distributions made from such Account(s) after such Valuation Date
and increased by all allocations to the Participant's Accounts made
after such Valuation Date.
ARTICLE 12. ADMINISTRATION
12.1 Duties and Responsibilities of Fiduciaries; Allocation of Fiduciary
Responsibility. A fiduciary of the Plan shall have only those 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 5, appointing the Trustee, 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 12.2. 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.
12.2 Powers and Responsibilities of the Plan Administrator.
(a) Administration of the Plan. The Plan Administrator shall be
charged with the full power and the responsibility for
administering the Plan in all its details. 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 12.6; and to appoint or employ advisors, including legal
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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 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 periods in which
an Employee is credited with one or more Years of Eligibility
Service or Years of Vesting Service for purposes of determining his
eligibility to participate and his vesting, respectively, 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 11, all withdrawals by
Participants in accordance with Article 10 and all loans to
Participants in accordance with Article 9. In addition, the Plan
Administrator shall be responsible for furnishing the Trustee with
any further information regarding 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.
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(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.
12.3 Allocation of Duties and Responsibilities. The Plan Administrator may,
by written instrument, allocate among its Employees any of its duties
and responsibilities not already allocated under the Plan or may
designate persons other than 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.
12.4 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.
12.5 Liabilities. The Plan Administrator and each person to whom duties and
responsibilities have been allocated pursuant to Section 12.3 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,
penalties and all expenses reasonably incurred by or imposed upon it
(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.
12.6 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
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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 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 60 days after receipt by the claimant of
written notification of the denial or limitation of the claim. The
60 days requirement may be waived by the Plan Administrator (or its
delegate in appropriate cases.
(d) Decision on Review. A decision shall be rendered by the Plan
Administrator within 60 days after it receives 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 60 day period) for an additional 60 days, but in no event
shall the decision be rendered more than 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 13. AMENDMENT, TERMINATION AND MERGER
13.1 Sponsor's Power to Amend. The Sponsor may amend any part of the Plan.
If the Sponsor amends or terminates the Plan, it shall give notice of
such amendment or termination to each adopting Employer which has
notified the Sponsor it has adopted, but not yet ceased to use, this
prototype Plan and which has all Plan assets invested in Shares at the
time of such amendment or termination.
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13.2 Amendment by Adopting Employees
(a) change the choice of options in the Adoption Agreement;
(b) add overriding language in the Adoption Agreement when such language
is necessary to (i) satisfy section 415 or 416 of the Code because
of the required aggregation of multiple plans, or (ii) preserve
benefits protected under section 411(d)(6) of the Code; and
(c) 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.
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.
13.3 Termination. The Employer is not and shall not be under any obligation
to continue its contributions to, or to maintain, the Plan for any
length of time. The Employer may, in its sole discretion, completely
discontinue its contributions to or terminate the Plan and Trust in
accordance with the provisions of the Plan in effect at the time of
discontinuance of contributions or termination. In the event of the
termination or partial termination of the Plan, the account balance of
each affected Participant will be nonforfeitable.
13.4 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.
13.5 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).
ARTICLE 14. MISCELLANEOUS
14.1 Exclusive Benefit of Participants and Beneficiaries.
(a) General Rule. 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 subsection (b) below.
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(b) Special Rules. 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 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 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 year after the
date of the disallowance of the deduction.
14.2 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.
14.3 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.
14.4 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 qualified, domestic relations order, as defined
in section 414(p) of the Code, or any domestic relations order entered
before January 1, 1985.
14.5 Failure of Qualification. If the Employer's plan fails to attain or
retain qualification, such plan will no longer participate in this
prototype plan and will be considered an individually designed plan.
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14.6 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.
14.7 Reference to Federal Law. All references in this Plan to sections of the
Internal Revenue Code or ERISA and any regulations or ruling thereunder
shall be deemed to refer to such sections (and any regulation or ruling
thereunder) as they subsequently may be modified, amended, replaced or
amplified by any successor federal statute, regulation or ruling of
similar application and import.
14.8 Construction. Whenever used in this Plan, unless the context indicates
otherwise, the singular shall include the plural, the plural shall
include the singular and the male gender shall include the female gender.
14.9 Headings. Headings in this Plan are inserted solely for convenience of
reference and shall neither constitute a part of this Plan nor affect its
meaning, construction or intent.
14.10 Priority of Adoption Agreement. The Adoption Agreement has the function
of amending the terms of this document where necessary or appropriate.
If there is any conflict between the terms of this document and the
terms of the Adoption Agreement, the terms of the Adoption Agreement
shall prevail.
SIMPLIFIED 401(k) PROTOTYPE
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 - TRUST FUND
1.1 Trust.
The Employer hereby establishes with the Trustee a trust account or
accounts ("Accounts") consisting of such sums of U.S. currency and such
other property acceptable to the Trustee as shall from time to time be
contributed, paid or delivered to the Trustee pursuant to this Trust
Agreement at the address specified by the Trustee. All such money and
property, all investments and reinvestments made therewith and proceeds
thereof, less any payments or distributions made by the Trustee pursuant
to the terms of this Trust Agreement, are referred to herein as the
"Trust." The Trust shall be held by the Trustee in accordance with the
express provisions of this instrument and the requirements of law.
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1.2 Delegation of Authority.
The Trustee may delegate to a custodian or other agent the custodianship
of all or part of the assets of the Trust. The Trustee 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 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 Section 4.8.
1.3 Limitations of Trustee's Duties.
With respect to its duties hereunder, the Trustee is a non-discretionary
trustee and shall have no duty to: (a) determine or enforce payment of
any contribution due under the Plan; (b) inquire into the accuracy of any
contribution; (c) determine the adequacy of the funding policy adopted by
the Employer to meet its obligations under the Plan; (d) look into the
property of any investment or distribution made under the Plan; or (e)
ensure the qualification of the Plan under the code. The Trustee shall
not be deemed to be the administrator, the Plan sponsor or a "named
fiduciary" of the Plan as defined in sections 3(16)(A), 3(16)(B) and
402(a)(2), respectively, of ERISA.
ARTICLE II - ACCOUNTS
2.1 Establishing Accounts. The Trustee shall open and maintain a Trust
Account for the Plan. Upon receipt of written instructions from the
Employer, the Trustee also shall open and maintain such Participant
Accounts and subaccounts as the Employer may direct. The Trustee shall
also open and maintain such other subaccounts as may be appropriate or
desirable to aid in the administration of the Plan. The Employer shall
give written instructions to the Trustee specifying the Participants'
Accounts and subaccounts to which contributions and forfeitures are to
be credited, and the amounts of such contributions and forfeitures which
are to be credited to such Accounts and subaccounts.
2.2 Charges Against Accounts. Upon receipt of written instructions from the
Employer, the Trustee shall charge the appropriate Account or subaccount
of a Participant for any withdrawals or distributions made under the
Plan, for any forfeiture which may be required under the Plan of unvested
interests attributable to Employer contributions and for any fees which
may be charged against the Trust assets.
ARTICLE III - INVESTMENT OF TRUST ASSETS
2.3 Investment of Trust Assets.
The Trustee shall not have any discretion, and is specifically prohibited
from having or exercising any discretion, with respect to the investment
of Trust assets. Except as provided in Section 3.3 (Participant Directed
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Investments) hereof, the Employer shall be solely responsible for giving
the Trustee directions as to the investment and disposition of the Trust
assets. Assets of the Trust may be invested in shares of stock in any
regulated investment company registered under the Investment Company Act
of 1940, the investment advisor of which is T. Rowe Price Associates,
Inc. or any of its affiliates. Trust assets may also be invested in
units in any common, collective or group trust fund sponsored by T. Rowe
Price Trust Company and qualified under sections 401 and 501 of the Code,
that is made available for investment purposes as an investment option
under the T. Rowe Price Simplified 401(k) Prototype Plan (the instrument
of trust creating any such qualified common, collective or group trust
fund being adopted hereby).
3.2 Written Instruction.
Any action of the Employer pursuant to any provisions of this Trust
Agreement shall be in writing from the Employer, and the Trustee shall be
fully protected in relying upon such written notification as actions of
the Employer. The term "Employer," as used throughout this Trust
Agreement, includes any duly authorized designee of the Employer, such as
a Plan Administrator, or any individual having apparent authority as
such. 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
Employer of written instructions or other clarification. If any
contributions received by the Trustee from the Employer are less than any
minimum which a directed investment requires, the Trustee may hold the
specified portion of such contributions in cash, without interest, until
such time as the proper amount has been contributed so that the directed
investment may be made. The Trustee shall receive all directions or
instructions in writing provided that the Trustee may accept oral
directions for purchases or sales from the Employer or Participant with
subsequent written confirmation.
3.3 Participant Directed Investments.
When so instructed by the Employer, the Trustee shall invest all or any
portion of the individual Accounts of any Participant as directed by said
Participant. Such directed investments shall be accounted for separately
for each Participant. The Employer shall have the duty to select and
monitor all investment options made available to Participants under the
Plan. The Employer shall ensure that all Participants who are entitled
to direct the investment of assets in their Accounts previously received
or receive a copy of all material describing such investment options that
is required by law. Delivery of investment directions by the Employer in
accordance with the instructions of a Participant or by the Participant
directly to the Trustee shall entitle the Trustee to assume that the
Participant has received all such descriptive material. Each Participant
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who directs the investment of his Accounts shall be solely and absolutely
responsible for the investment or reinvestment of any such directed Plan
investment held on his behalf in the 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, reinvestment, retention or disposition of any
such assets. The Trustee shall not have any liability or responsibility
for diversification of such assets or for any loss to or depreciation of
such assets because of the purchase, retention or sale of assets in
accordance with a Participant's direction. The Participant shall have
sole responsibility for the overall diversification, liquidity and
prudence of the investments of his Accounts. If a Participant fails to
direct the investments of his Accounts, the Trustee shall invest his
Accounts in accordance with the written directions of the Employer.
3.4 Employer Directed Investments.
The Employer, by written direction to the Trustee, is authorized to
designate all or a portion of the Trust assets of which the Employer will
direct investments, and the Trustee may segregate such assets into one or
more separate accounts or administer the Trust as one account. In the
event the Employer shall employ or appoint an investment advisor to
direct the Trustee with respect to a portion of the Trust, the Employer
will notify the Trustee in writing of the appointment of the investment
advisor, including his name and address. Whether or not the Trust is
segregated into separate accounts, the Trustee shall invest such portion
of the Trust as directed by the Employer or its duly appointed investment
advisor only to the extent that such instruction is consistent with ERISA
and any other applicable legal authority. The Trustee shall have no duty
to question any action or direction of the Employer or investment advisor
or any failure of the Employer or investment advisor to give directions,
or to review the securities or other investments which are held pursuant
to the Employer's or investment advisor's directions, or to make
suggestions to the Employer or investment advisor as to the investment,
reinvestment, retention or disposition of any such assets. The Trustee
shall not have any liability or responsibility for diversification of
such assets, or for any loss to or depreciation of such assets because
of the purchase, retention or sale of assets in accordance with the
Employer's or investment advisor's direction. The Employer shall have
responsibility for the overall diversification of the Trust.
3.5 Trustee's Liability with Respect to Employer or Participant Directed
Accounts.
The Trustee shall not be liable for, and the Employer will indemnify and
hold harmless the Trustee (including its employees, affiliates,
representatives and agents) from and against, any liability or expense
(including counsel fees) because of: (a) any investment action taken or
omitted by the Trustee in accordance with any direction of the Employer
or a Participant, or (b) any investment inaction in the absence of
investment directions from the Employer or a Participant.
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3.6 Limitation on Investments.
Notwithstanding any other provision of this Trust Document to the
contrary:
(a) 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, effecting any
transaction with respect to Participant directed investments 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.
(b) In no event shall the Trustee engage in any transactions that would
be prohibited under ERISA.
3.7 "Knowledge" of Trustee.
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 ("Ministerial Duties") with respect to the
portion of the Trust subject to such direction, such duties do not
involve the exercise of any discretionary authority to manage or control
Trust assets. Such Ministerial Duties will be performed in the normal
course of business by employees of the Trustee, its affiliates 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 the Trust as
a result of the performance of these 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, this Trust Agreement or any law regulating the conduct of directed
trustees with respect to the investment of trust assets, as a result of
any act or omission of the Employer or any Participant, or as the result
of any transaction engaged in by any of them, then the receipt and
processing of investment orders and any other documents relating to Trust
assets by an employee of the Trustee or its affiliates or agents engaged
in the performance of purely Ministerial Duties shall not constitute
"knowledge" of the trustee.
ARTICLE IV - DUTIES OF THE TRUSTEE
4.1 Duties of the Trustee.
The Trustee is authorized and empowered with respect to the Trust:
(a) 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.
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<PAGE>
(b) To register any investment held in the Trust in the name of the
Trustee 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.
(c) To employ suitable agents and counsel (who may also be agents and/or
counsel for the Employer) and to pay their reasonable expenses and
compensation.
(d) To borrow or raise monies for the purpose of the Trust from any
source and, for any sum borrowed, to issue its promissory note as
Trustee and to secure the repayment thereof by pledging all or any
part of the Trust, but nothing contained herein 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 by the
Trustee or need to see the application of any money paid or property
transferred to or upon the order of the Trustee.
4.2 General Powers.
The Trustee shall have all of the powers necessary or desirable to do all
acts and exercise all such rights and privileges, whether or not
expressly authorized herein, which it may deem necessary or proper for
the protection of the Trust and to accomplish any action provided for in
this Trust Agreement.
4.3 Valuation of Trust.
The Trustee, as of the valuation date, and at such other time or times as
is necessary, shall determine the net worth of the assets of the Trust.
The Trustee may adopt such methods of valuation as it deems advisable.
4.4 Trust Records.
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 agrees to
treat as confidential all records and other information relative to the
Trust. The Trustee shall not disclose such records and other information
to parties, other than the Employer, except to the extent required by law
or as requested in writing by the Employer.
<PAGE>
<PAGE>
4.5 Distributions.
At the direction of the Employer, the Trustee shall mail distributions
from the Trust to the Employer for the benefit of the Participants and,
to the extent agreed to by the Trustee, shall make distributions directly
to the Participants. The Trustee shall not be liable or responsible for
any errors made by the Employer with respect to distributions. The
Trustee shall be entitled to rely conclusively upon the Employer's
directions. Notwithstanding any other provision of the Trust Agreement,
the Trustee may condition its delivery, transfer or distribution of any
Trust assets upon the Trustee's receiving satisfactory assurances that
the approval of appropriate governmental agencies or other authorities
has been secured and that all notice and other procedures required by
applicable law have been satisfied.
4.6 Trustee's Fees.
The Trustee's fees for performing its dues hereunder shall be such
reasonable amounts as shall be established by it from time to time. The
Trustee shall furnish to the Employer its current schedule of fees and
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 the Trust, and any 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.
4.7 Duties not Assigned.
The duties of the Trustee with respect to the Trust are limited to those
assumed by the Trustee under the terms of this Trust Agreement. The
Trustee 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.
4.8 Standards for the Trustee's Powers.
Notwithstanding any other provision of this Trust Agreement, the Trustee
shall discharge its duties hereunder solely in the interest of the
Participants and for the exclusive purpose of providing benefits to the
Participants and defraying reasonable expenses of administering the
Trust, with the skill, care, 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 like aims. 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 with respect to the performance of
its duties and obligations set forth in this Trust Agreement and in the
<PAGE>
<PAGE>
Plan. The Trustee may rely upon such information, direction, action or
inaction of the Employer as being proper under the Plan or the Trust
Agreement and is not required to inquire into the propriety of any such
information, direction, action or inaction. 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),
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.
ARTICLE V - DUTIES OF THE EMPLOYER
5.1 Duties of the Employer.
It is understood that the Employer shall be responsible for the
performance of the following functions with respect to the Trust:
(a) Transmitting all Trust contributions made by or on behalf of each
Participant in accordance with the instructions of each Participant
to the Trustee at such time and in such manner as is mutually agreed
between the Employer and the Trustee.
(b) Providing to the Trustee, on a timely basis, a copy of the Plan
document including all amendments and restatements.
(c) Determining that the contributions made by or on the behalf of each
Participant are in accordance with any applicable Federal and state
laws and regulations.
(d) Assuring that the Plan maintains qualified status under applicable
provisions of the Code.
(e) If applicable, assuring that the Plan complies with section 404(c)
of ERISA and any regulations issued thereunder.
5.2 Bonding.
The Employer agrees to obtain and maintain a fiduciary bond and to
include as those covered by such bond the Employees of the Employer, the
Plan Administrator and the Trustee, including any of the Trustee's
employees, officers and agents required by law to be so covered. The
cost of any such bond shall be paid by the Employer.
5.3 Information and Data to be Furnished to the Trustee.
The Employer shall furnish the Trustee with such information and data
relevant to the Plan as is necessary for the Trustee to properly perform
its duties assumed hereunder, including, but not limited to, a copy of
the Plan's qualification letter from the Internal Revenue Service.
<PAGE>
<PAGE>
5.4 Limitation of Duties.
Neither the Trustee nor any of its officers, directors, partners or
agents shall have any duties or obligations with respect to this Trust
Agreement, except those expressly set forth herein, in the Plan and in
ERISA.
ARTICLE VI - TERMINATION OF TRUST
6.1 Resignation of Removal of Trustee,.
The Trustee may resign at any time upon thirty days' prior written notice
to the Employer and may be removed by the Employer at any time upon
thirty days' prior written notice to the Trustee. Upon resignation or
removal of the Trustee, the Employer shall appoint a successor trustee.
Upon receipt by the Trustee of written acceptance of such appointment by
the successor trustee, the Trustee shall transfer and pay over to the
successor the assets of the Trust and all records (or copies) pertaining
thereto. The Trustee is authorized, however, to reserve such sum of
money or property as it may deem advisable for payment of all fees,
compensation, costs and expenses, or for payment of any 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
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 claims based only upon the Trustee's willful misconduct or
gross negligence. The successor trustee shall hold the assets paid over
to it under the terms similar to those of this Trust Agreement under a
trust that will qualify under section 401(a) of the Code. If on the date
upon which the Trustee's resignation or removal is effective, the
Employer has not appointed a successor trustee which has accepted such
appointment, the Trustee shall, unless it elects to terminate the Trust
pursuant to Section 6.3 hereof, appoint such successor itself.
6.2 Termination of the Trust.
Subject to the right of the Trustee to terminate the Trust in accordance
with Section 6.3 hereof, 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.
6.3 Termination of the Trust by the Trustee.
The Trustee may elect to terminate the Trust if on the date upon which
the Trustee's resignation or removal is effective, the Employer has not
appointed a successor trustee which has accepted such appointment.
<PAGE>
<PAGE>
Termination of the Trust shall be effected by distribution of all assets
thereto to the Participants or other persons entitled thereto pursuant to
the directions of the Employer (or, in the absence of such direction, as
determined by the Trustee), subject to the Trustee's right to reserve
funds as provided in Section 6.1 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 or gross negligence.
ARTICLE VII - MISCELLANEOUS
7.1 Purpose.
This Trust has been established for the exclusive benefit of the Plan's
Participants. Except as provided herein, it shall be impossible at any
time prior to the satisfaction of all liabilities to the Participants for
any part of the principal or income of the Trust, other than such part as
is required to pay taxes, administrative expenses or refund contributions
as provided herein, to be paid or diverted to the Employer or to be used
for any purpose whatsoever other than for the exclusive benefit of the
Participants.
7.2 Indemnification.
The Employer shall indemnify and hold harmless the Trustee (including its
affiliates, employees, representatives and agents) from and against any
liability, cost or other expense, including, but not limited to, the
payment of attorneys' fees which the Trustee may incur in connection with
the Trust or the Plan unless such liability, cost or expense arises from
the Trustee's own willful misconduct or gross negligence. The Trustee
shall not be obligated or expected to commence or defend any legal action
or proceeding in connection with the Trust unless agreed upon in writing
by the Trustee and Employer and unless the Trustee is fully indemnified
for doing so to its satisfaction.
7.3 Construction.
Whenever used in this Trust Agreement, unless the context indicates
otherwise, the singular shall include the plural, the plural shall
include the singular, and the male gender shall include the female
gender.
7.4 Headings.
Headings in this Trust Agreement are inserted sole for convenience of
reference and shall neither constitute a part of this Trust Agreement,
nor affect its meaning, construction or intent.
<PAGE>
<PAGE>
7.5 Severability.
If any provision of this Trust Agreement is held invalid or
unenforceable, such invalidity or unenforceability shall not affect any
other provision, and this Trust Agreement shall be construed and enforced
as if such provision had not been included.
7.6 Return of Contributions.
Contributions are conditioned on initial qualification of the Plan under
section 401(a) of the Code, and if the Plan and Trust do not qualify, the
Trustee may return such contributions to the Employer upon the Employer's
written direction. The Trustee may also return amounts to the Employer
upon the Employer's written direction due to a "mistake of fact" as
described in section 403(c) of ERISA. Contributions made by the Employer
by "mistake of fact" may revert and be paid to the Employer within one
year after the payment of such mistaken contributions. In making such a
return of assets to the Employer, the Trustee may accept the Employer's
written direction as its warranty that such payment is provided for in
the plan and complies with such plan provision and section 403(c) of
ERISA, and the Trustee need make no further investigation.
7.7 Voting.
The Employer shall direct the Trustee how to vote any Trust assets for
which the Trust has voting rights. The Employer may not appoint the
Trustee as its designee for purposes of this Section unless the Trustee
agrees to such a designation in writing.
7.8 Nonalienation of Benefits.
No rights or claims to any of the monies or other assets of the Trust
shall be assignable, nor shall such rights or claims be subject to
garnishment, attachment, execution or levy of any kind; and any attempt
to transfer, assign or pledge the same, except as specifically permitted
by law, shall not be recognized by the Trustee.
7.9 Amendments.
The Employer and the Trustee may amend this Agreement at any time by a
written agreement between them; provided, however, that no such amendment
shall make it possible for any part of the corpus or income of the Trust
to be used or diverted to purposes other than the exclusive benefit of
Participants and defraying reasonable expenses of administering the Plan
and Trust.
7.10 Inspection of Plan Records by Employer.
The Trustee agrees to permit the Employer to inspect the records of the
Trust maintained by the Trustee during regular business hours and to
<PAGE>
<PAGE>
permit the Employer to audit the same upon the giving of reasonable
notice to the Trustee. The Trustee further agrees that it will provide
the Employer with information and records that the Employer may
reasonably require in order to perform audits of said records.
7.11 Law Governing.
This Agreement shall be administered, construed and enforced according to
the laws of the state of the principal place of business of the Trustee
and applicable Federal law.
7.12 Merger, Consolidation or Transfer.
In the event of the merger, consolidation or transfer of any portion of
the Trust to a trust fund held under any other plan, the Trustee shall
dispose of all or part, as the case may be, of the Trust, in accordance
with the written directions of the Employer, subject to the right of the
Trustee to reserve funds as provided in Section 6.1 hereof.
7.13 Trustee as Successor Trustee.
If the Trustee is acting as a successor trustee with respect to the
Trust, the Employer shall indemnify the Trustee against all liabilities
with respect to the Trust arising prior to the appointment of the Trustee
and its acceptance thereof.
7.14 Successors and Assigns.
This Agreement shall be binding upon the successor and assigns of the
parties hereto.
7.15 Notices.
Any notice from the Trustee to the Employer or from the Employer to the
Trustee provided for in the Plan or in this Trust Agreement shall be
effective if sent by first class mail to their respective last addresses
of record.
7.16 Effective Date.
The effective date of this Trust shall be the date on which the Trustee
has executed the Adoption Agreement unless specified otherwise in that
agreement.<PAGE>
<PAGE>
Internal Revenue Service Department of the Treasury
Plan Description: Prototype Standardized Profit Sharing Plan with CODA
FFN: 502365000067-001 Case: 9307665 EIN: 52-1309931
BPD: 07 Plan: 001 Letter Serial No.: D261637a Washington, DC 20224
Person to Contact: Mr. Dua
Telephone Number: (202)622-8380
Refer Reply to: CP:E:EP:Q:3
Date: 12/20/93
T. Rowe Price Trust Co.
100 East Pratt Street
Baltimore, MD 21202
Dear Applicant:
In our opinion, the form of the plan identified above is acceptable under
section 401 to the Internal Revenue Code for use by employers for the benefit
of their employees. This opinion relates only to the acceptability of the
form of the plan under the Internal Revenue Code. It is not an opinion of the
effect of other Federal or local statutes.
You must furnish a copy of this letter to each employer who adopts this
plan. You are also required to send a copy of the approved form of the plan,
any approved amendments and related documents to each Key District Director of
Internal Revenue Service in whose jurisdiction there are adopting employers.
Our opinion on the acceptability of the form of the plan is not a ruling
or determination as to whether an employer's plan qualifies under Code section
401(a). An employer who adopts this plan will be considered to have a plan
qualified under Code section 401(a) provided all the terms of the plan are
followed, and the eligibility requirements and the contribution or benefit
provisions are not more favorable for highly compensated employees than for
other employees. Except as stated below, the Key District Director will not
issue a determination letter with regard to this plan.
Our opinion does not apply to the form of the plan for purposes of Code
section 401(a)(16) if: (1) an employer ever maintained another qualified plan
for one or more employees who are covered by this plan, other than a specified
paired plan within the meaning of section 7 of the Rev. Proc. 89-9, 1989-1
<PAGE>
<PAGE>
C.B. 780; or (2) after December 31, 1985, the employer maintains a welfare
benefit fund defined in Code section 419(e), which provides postretirement
medical benefits allocated to separate accounts for key employees as defined
in Code section 419(A)(d)(3).
An employer that has adopted a standardized plan may not rely on this
opinion letter with respect to: (1) whether any amendment or series of
amendments to the plan satisfies the nondiscrimination requirements of section
1.401(a)(4)-5(a) of the regulations, except with respect to plan amendments
granting past service that meet the safe harbor described in section
1.401(a)(4)-5(a)(5) and are not part of a pattern of amendments that
significantly discriminates in favor of highly compensated employees; or (2)
whether the plan satisfies the effective availability requirement of section
1.401(a)(4)-4(c) of the regulations with respect to any benefit, right or
feature.
An employer that has adopted a standardized plan as an amendment to a
plan other than a standardized plan may not rely on this opinion letter with
respect to whether a benefit, right or other feature that is prospectively
eliminated satisfies the current availability requirements of section
1.401(a)-4 of the regulations.
The employer may request a determination (1) as to whether the plan,
considered with all related qualified plans and, if appropriate, welfare
benefit funds, satisfies the requirements of Code section 401(a)(16) as to
limitations on benefits and contributions in Code section 415; (2) regarding
the nondiscriminatory effect of grants of past service; and (3) with respect
to whether a prospectively eliminated benefit, right or feature satisfies the
current availability requirements.
Our opinion does not apply to the form of the plan for the purposes of
section 401(a) of the Code unless the terms of the plan, as adopted or
amended, that pertain to the requirements of sections 401(a)(4), 401(a)(5),
401(a)(17), 401(1), 410(b) and 414(s) of the Code, as amended by the Tax
Reform Act of 1986 or subsequent legislation, (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 became
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.
Because you submitted this plan for approval after March 31, 1991, the
continued, interim and extended reliance provisions of sections 13 and 17.03
of Rev. Proc. 89-9, 1989-1 C.B. 780 are not applicable.
If you, the sponsoring organization, have any questions concerning the
IRS processing of this case, please call the above telephone number. This
number is only for use of the sponsoring organization. Individual
participants and/or adopting employers with questions concerning the plan
<PAGE>
<PAGE>
should contact the sponsoring organization. The plan's adoption agreement
must include the sponsoring organizations' address and telephone number for
inquiries by adopting employers.
If you write to the IRS regarding this plan, please provide your
telephone number and the most convenient time for us to call in case we need
more information. Whether you call or write, please refer to the Letter
Series Number and File Folder Number shown in the heading of this letter.
You should keep this letter as a permanent record. Please notify us if
you modify or discontinue sponsorship of this plan.
Sincerely yours,
Chief, Employee Plans and Qualifications Branch
<PAGE>
T. Rowe Price Trust Company
SIMPLIFIED 401(k) PROTOTYPE PLAN
TABLE OF CONTENTS
ARTICLE 1. GENERAL...........................................1
1.1 Purpose. .......................................1
1.2 Trust. .........................................1
ARTICLE 2. DEFINITIONS.......................................1
2.1 Account. .......................................1
2.2 Adoption Agreement. ............................1
2.3 Affiliated Employers.............................1
2.4 Beneficiary......................................1
2.5 Break in Service.................................1
2.6 Code.............................................1
2.7 Compensation.....................................2
2.8 Earned Income. .................................3
2.9 Effective Date. ................................3
2.10 Elective Deferrals...............................3
2.11 Employee.........................................4
2.12 Employee After-Tax Contributions. ..............4
2.13 Employer.........................................4
2.14 Employer Discretionary Contributions.............4
2.15 Entry Dates. ...................................4
2.16 ERISA. .........................................4
2.17 Family Members...................................4
2.18 Five Percent Owner. ............................4
2.19 Highly Compensated Employee......................4
2.20 Hour of Service..................................6
2.21 Leased Employee..................................8
2.22 Matching Contributions. ........................9
2.23 Non-Highly Compensation Employees................9
2.24 Normal Retirement Age............................9
2.25 Owner-Employee. .................................9
2.26 Participant.....................................10
2.27 Plan............................................10
2.28 Plan Administrator. ...........................10
2.29 Plan Year.......................................10
2.30 Section 415 Compensation........................10
2.31 Self-Employed Individual........................11
2.32 Shares..........................................11
2.33 Sponsor.........................................11
2.34 Total Compensation..............................11
2.35 Total and Permanent Disability..................11
2.36 Trust...........................................11
2.37 Trust Agreement.................................11
2.38 Trustee.........................................11
2.39 Valuation Date..................................11
2.40 Year of Eligibility Service.....................12
2.41 Year of Vesting Service.........................12
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<PAGE>
ARTICLE 3. ELIGIBILITY AND YEARS OF SERVICE................12
3.1 Eligibility Requirements........................12
(a) General Rule.............................12
(b) Excludable Employees.....................12
(c) Change in Status.........................12
3.2 Participation and Service Upon Reemployment......13
(a) Participation. .........................13
(b) Credit for Prior Service.................13
3.3 Predecessor Employers............................13
ARTICLE 4. TRUST FUND......................................13
4.1 Receipt of Contributions by Trustee............13
4.2 Investment Responsibility......................13
(a) Investment Choices. ..................13
(b) Participant Direction. ...............13
(c) Change in Investment Choices...........14
4.3 Investment Limitations.........................14
ARTICLE 5. CONTRIBUTIONS...................................14
5.1 Payment........................................14
5.2 Employee Contributions.........................14
(a) After-Tax Contributions................14
(b) Employee Elective Deferrals............14
(c) Rollovers. ...........................15
(d) Plan-to-Plan Transfers ................15
5.3 Employer Contributions.........................15
(a) Matching Contributions.................15
(b) Discretionary Contributions............16
(c) Contribution Limitation................16
5.4 Excess Elective Deferrals......................16
(a) General. .............................16
(b) Calculation of Income or Loss..........16
(c) Tax Treatment. .......................17
(d) Forfeiture of Certain Matching
Contributions.......................17
5.5 Actual Deferral Percentage Test................17
(a) General Test. ........................17
(b) Special Rules..........................17
5.6 Average Contribution Percentage Test...........18
(a) General Test. ........................18
(b) Special Rules..........................19
5.7 Prevention or Cure of ADP Test Failures.......20
5.8 Prevention or Cure of ACP Test Failures........21
5.9 Distribution of Excess Contributions to
Cure ADP Test Failure........................21
(a) General Rule. .........................21
(b) Calculations of Income or Loss.........21
(c) Method of Distribution.................22
(d) Forfeiture of Certain Matching
Contributions........................22 <PAGE>
<PAGE>
5.10 Qualified Nonelective Contributions to Cure ADP
and/or ACP Test Failure..................22
5.11 Qualified Matching Contribution to Cure ADP
and/or ACP Test Failure..................22
5.12 Forfeiture and/or Distribution of Excess
Aggregate Contributions..................22
5.13 Definitions...................................23
(a) Actual Deferral Percentage............23
(b) Aggregated Limit......................24
(c) Average Contribution Percentage.......24
(d) Contribution Percentage...............24
(e) Contribution Percentage Amounts.......24
(f) Excess Aggregate Contributions........24
(g) Excess Contribution...................24
(h) Excess Elective Deferrals.............25
(i) Qualified Matching Contributions......25
(j) Qualified Nonelective Contributions...25
ARTICLE 6. ALLOCATIONS.....................................26
6.1 Individual Accounts............................26
(a) Elective Deferrals. ..................26
(b) Rollovers. ...........................26
(c) After-Tax Contributions. .............26
(d) Matching Contributions. ..............26
(e) Discretionary Contributions............26
(f) Qualified Nonelective Contributions....26
(g) Qualified Matching Contributions.......26
6.2 Allocation of Contributions.....................27
(a) Elective Deferrals, Matching
Contributions and Rollover
Contributions. ......................27
(b) Qualified Nonelective and Qualified
Matching Contributions. .............27
(c) Employer Discretionary Contributions...27
6.3 Minimum Top-Heavy Allocation....................28
(a) General Rule. ........................28
(b) Special Rule If Other Plans Satisfy
Top-Heavy Minimum.....................28
6.4 Allocation of Forfeitures......................28
6.5 Withdrawals and Distributions..................29
6.6 Determination of Value of Trust Fund and of
Net Earnings or Losses...................29
6.7 Allocation of Net Earnings or Losses...........30
(a) Specific Participant Account
Allocations..........................30
(b) Common Account Allocations.............30
6.8 Responsibilities of the Plan Administrator.....30
6.9 Definitions....................................30
(a) Determination Date.....................30
(b) Integration Level......................30
(c) Key Employee...........................30
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<PAGE>
(d) Maximum Profit Sharing Disparity Rate..31
(e) Non-Key Employee. ....................31
(f) Permissive Aggregation Group. ........32
(g) Present Value. .......................32
(h) Required Aggregation Group. ..........32
(i) Top Heavy. ...........................32
(j) Top-Heavy Ratio........................32
(k) Taxable Wage Base (or "TWB")...........34
ARTICLE 7. LIMITATIONS ON ALLOCATIONS.....................34
7.1 Limitations on Annual Additions to Qualified
Defined Contribution Plans...............34
7.2 Employers Who, In Addition To This Plan,
Maintain A Qualified Defined
Benefit Plan............................35
7.3 Definitions....................................35
(a) Annual Additions. ....................35
(b) Defined Benefit Fraction. ............36
(c) Defined Contribution Fraction..........37
(d) Excess Amount. .......................37
(e) Limitation Year. ......................37
(f) Maximum Permissible Amount.............37
(g) Projected Annual Benefit...............38
ARTICLE 8. VESTING........................................38
8.1 Employee After-Tax Contributions, Elective
Deferral Contributions, Rollover
Contributions, Qualified Nonelective
Contributions and Qualified Matching
Contributions................................38
8.2 Employer Discretionary Contributions and
Matching Contributions.......................38
(a) General. ..............................38
(b) In-Service Distributions When Not
Fully Vested..........................39
8.3 Amendments to Vesting Schedule..................40
(a) Participants' Election Rights...........40
(b) Election Period. ......................40
(c) Prohibition Against Reducing Accrued
Benefits..............................40
8.4 Determination of Years of Vesting Service.......40
8.5 Forfeiture of Nonvested Amounts.................41
(a) Distribution in Full. .................41
(b) Partial Distributions. ................41
8.6 Reinstatement of Benefit........................42
ARTICLE 9. LOANS...........................................42
9.1 General Provisions..............................42
(a) Eligibility for Loans. ................42
(b) Spousal Consent Rules...................42 <PAGE>
<PAGE>
9.2 Amount of Loan..................................43
9.3 Manner of Making Loans..........................43
9.4 Terms of Loan...................................43
9.5 Security for Loan...............................44
9.6 Segregated Investment...........................44
9.7 Repayment of Loan...............................44
9.8 Default on Loan.................................44
ARTICLE 10. WITHDRAWALS....................................44
10.1 Withdrawal of Employee After-Tax
Contributions...............................44
10.2 Hardship Withdrawals...........................44
(a) General Rule. ........................44
(b) Needs Considered Immediate and Heavy...45
(c) Necessary to Satisfy Need. ...........45
10.3 Manner of Making Withdrawals...................45
10.4 Limitations on Withdrawals.....................46
10.5 Special Circumstances..........................46
(a) Plan Termination. ....................46
(b) Disposition of Assets. ...............46
(c) Disposition of Subsidiary. ...........46
ARTICLE 11. DISTRIBUTION PROVISIONS........................47
11.1 Retirement Distributions.......................47
(a) Deferred Retirement. .................47
(b) Participant Status after Retirement....47
11.2 Death Benefits.................................47
(a) Death of Former Employee. ............47
(b) Proof of Death. ......................48
(c) Beneficiary Designation. .............48
11.3 Permanent Disability Benefits..................48
11.4 Termination of Employment Prior to Retirement,
Death or Total and Permanent Disability......49
11.5 Commencement of Lifetime Distributions.........49
(a) Upon Retirement. .....................49
(b) Upon Termination of Employment Other
Than Retirement. ...................49
(c) Statutory Requirements. ..............49
(d) In-Service Distributions. ............50
(e) Required Beginning Date. .............50
11.6 Commencement of Death Benefits.................51
(a) Non-Spouse Beneficiary. ..............51
(b) Spouse Beneficiary. ..................51
(c) Election Period. .....................51
11.7 Methods of Distribution........................52
(a) General rule. ........................52
(b) Direct Rollover. .....................52
11.8 Minimum Required Distributions.................53
(a) Individual Account:....................53
(b) Other Forms. .........................54
(c) Definitions............................54 <PAGE>
<PAGE>
(d) Participant's Benefit. ...............55
11.9 Joint and Survivor Annuity Requirements........55
(a) Qualified Joint and Survivor Annuity...55
(b) Qualified Pre-Retirement Survivor
Annuity..............................57
(c) Special Rules. .......................59
11.10 Reemployment..................................59
11.11 Valuation of Benefits.........................59
ARTICLE 12. ADMINISTRATION................................60
12.1 Duties and Responsibilities of Fiduciaries;
Allocation of Fiduciary Responsibility......60
12.2 Powers and Responsibilities of the Plan
Administrator..............................60
(a) Administration of the Plan. .........60
(b) Records and Reports. .................60
(c) Furnishing Trustee with Instructions...61
(d) Rules and Decisions. .................61
(e) Application and Forms for Benefits.....61
(f) Facility of Payment. .................61
12.3 Allocation of Duties and Responsibilities......61
12.4 Expenses.......................................61
12.5 Liabilities....................................62
12.6 Claims Procedure...............................62
(a) Filing a Claim. ......................62
(b) Notice of Denial of Claim. ...........62
(c) Right of Review. .....................62
(d) Decision on Review. ..................63
(e) Court Action. ........................63
ARTICLE 13. AMENDMENT, TERMINATION AND MERGER..............63
13.1 Sponsor's Power to Amend.......................63
13.2 Amendment by Adopting Employees................63
13.3 Termination....................................63
13.4 Vesting Upon Complete Discontinuance of
Contributions............................64
13.5 Maintenance of Benefits Upon Merger............64
ARTICLE 14. MISCELLANEOUS..................................64
14.1 Exclusive Benefit of Participants and
Beneficiaries.........................64
(a) General Rule. ........................64
(b) Special Rules. .......................64
14.2 Nonguarantee of Employment.....................65
14.3 Rights to Trust Assets.........................65
14.4 Nonalienation of Benefits......................65
14.5 Failure of Qualification.......................65
14.6 Applicable Law.................................65
14.7 Reference to Federal Law.......................65
14.8 Construction...................................65 <PAGE>
<PAGE>
14.9 Headings.......................................65
14.10 Priority of Adoption Agreement.................65
<PAGE>
<PAGE>
TRUST AGREEMENT
ARTICLE I - TRUST FUND......................................66
1.1 Trust..........................................66
1.2 Delegation of Authority........................66
1.3 Limitations of Trustee's Duties................66
ARTICLE II - ACCOUNTS.......................................67
2.1 Establishing Accounts..........................67
2.2 Charges Against Accounts.......................67
ARTICLE III - INVESTMENT OF TRUST ASSETS....................67
3.1 Investment of Trust Assets.....................67
3.2 Written Instruction............................67
3.3 Participant Directed Investments...............68
3.4 Employer Directed Investments..................68
3.5 Trustee's Liability with Respect to Employer
or Participant Directed Accounts.....69
3.6 Limitations on Investments.....................69
3.7 "Knowledge" of Trustee.........................69
ARTICLE IV - DUTIES OF THE TRUSTEE..........................70
4.1 Duties of the Trustee..........................70
4.2 General Powers.................................71
4.3 Valuation of Trust.............................71
4.4 Trust Records..................................71
4.5 Distributions..................................71
4.6 Trustee's Fees.................................71
4.7 Duties not Assigned............................72
4.8 Standards for the Trustee's Powers.............72
ARTICLE V - DUTIES OF THE EMPLOYER..........................72
5.1 Duties of the Employer.........................72
5.2 Bonding........................................73
5.3 Information and Data to be Furnished to the
Trustee..............................73
5.4 Limitation of Duties...........................73
ARTICLE VI - TERMINATION OF TRUST...........................73
6.1 Resignation or Removal of Trustee,.............73
6.2 Termination of the Trust.......................74
6.3 Termination of the Trust by the Trustee........74
<PAGE>
<PAGE>
ARTICLE VII - MISCELLANEOUS.................................74
7.1 Purpose........................................74
7.2 Indemnification................................74
7.3 Construction...................................75
7.4 Headings.......................................75
7.5 Severability...................................75
7.6 Return of Contributions........................75
7.7 Voting.........................................75
7.8 Nonalienation of Benefits......................76
7.9 Amendments.....................................76
7.10 Inspection of Plan Records by Employer.........76
7.11 Law Governing..................................76
7.12 Merger, Consolidation or Transfer..............76
7.13 Trustee as Successor Trustee...................76
7.14 Successors and Assigns.........................77
7.15 Notices........................................77
7.16 Effective Date.................................77
EXHIBIT 10
SWIDLER & BERLIN, CHARTERED
3000 K Street, N.W., Suite 300
Washington, D.C. 20007
April 29, 1997
AFL-CIO Housing Investment Trust
1717 K Street, N.W.
Suite 707
Washington, D.C. 20006
Re: AFL-CIO Housing Investment Trust,
Units of Beneficial Interest
Ladies and Gentlemen:
You have requested our opinion with respect to the legality of the
securities being registered pursuant to the Registration Statement on Form
N-1A (Registration No. 2-78066), Post-Effective Amendment No. 24 under the
Securities Act of 1933 and Amendment No. 27 under the Investment Company Act
of 1940 ("Registration Statement"). At your request, this opinion is being
furnished as an exhibit to, and we consent to the filing of it with, the
Registration Statement.
In rendering this opinion, we have reviewed the Declaration of Trust of
the AFL-CIO Housing Investment Trust ("Trust") and applicable judicial
decisions interpreting the laws of the District of Columbia with respect to
common law business trusts. We have also reviewed the prospectus, statement
of additional information and statement of other information included in the
Registration Statement. We assume, for purposes of this opinion, that Units
of Beneficial Interest in the Trust ("Units") will be issued at a price equal
to the net asset value per Unit, as described in the Registration Statement
and as determined as of monthly valuation dates and in accordance with the
procedures approved by the Board of Trustees pursuant to Section 2(a)(41)
under the Investment Company Act of 1940, as amended.
Based upon the foregoing and upon such other investigation as we have
deemed necessary, we are of the opinion that, when offered and sold in
accordance with the Declaration of Trust and in the manner described in the
Registration Statement, the Units being registered under the Registration
Statement will when sold be legally issued, fully paid and non-assessable,
except that owners or holders of such Units may be liable for debts and other
obligations of the Trust in those states, such as, among others, Texas and
Kansas, that do not recognize so-called "business trusts" as separate legal
entities and hold beneficiaries of such trusts personally liable for actions
thereof.
Very truly yours,
SWIDLER & BERLIN, CHARTERED
/s/ SWIDLER & BERLIN, CHARTERED
EXHIBIT 11
KPMG Peat Marwick LLP
Certified Public Accountants
2001 M Street, N.W.
Washington, D.C. 20036
Telephone 202-467-3000
Telex 440477 PMMDCUI
Telecopier 202-223-2199
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
---------------------------------------------------
Trustees of the American Federation
of Labor and Congress of Industrial
Organizations Housing Investment Trust:
We hereby consent to the use in this Registration Statement No. 2-78066 (Form
N-1A, Post-effective Amendment No. 25 under The Securities Act of 1933, and
Amendment No. 28 under The Investment Company Act of 1940) of our report
included herein dated January 29, 1997, relating to the financial statements
of the American Federation of Labor and Congress of Industrial Organizations
Housing Investment Trust for the year ended December 31, 1996, and to the
reference to our Firm under the heading "Condensed Financial Information" in
the Prospectus and "Auditors" in the Statement of Additional Information.
/s/ KPMG Peat Marwick LLP
Washington, D.C.
April 30, 1997
EXHIBIT 17
POWER OF ATTORNEY
The undersigned Trustee of the AFL-CIO Housing Investment Trust ("Housing
Trust") hereby constitutes and appoints and Michael M. Arnold and Helen R.
Kanovsky and each of them, either of whom may act without the joinder of the
other, as his true and lawful attorney-in-fact and agent, with full power of
substitution and re-substitution, to sign in his behalf, individually and in
his capacity as a Trustee of the Housing Trust, all amendments to the
Registration Statement on Securities and Exchange Commission Form N-1, Form
N-1A or otherwise, executed after the date of this Power of Attorney, which
amendments may make such changes and additions to the Registration Statement
as the attorney(s)-in-fact may deem necessary or appropriate, and to file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission.
/s/ George Latimer
-------------------------
(signature)
Name: George Latimer
Date: 3/27/97
<PAGE>
<PAGE>
POWER OF ATTORNEY
The undersigned Trustee of the AFL-CIO Housing Investment Trust ("Housing
Trust") hereby constitutes and appoints and Michael M. Arnold and Helen R.
Kanovsky and each of them, either of whom may act without the joinder of the
other, as his true and lawful attorney-in-fact and agent, with full power of
substitution and re-substitution, to sign in his behalf, individually and in
his capacity as a Trustee of the Housing Trust, all amendments to the
Registration Statement on Securities and Exchange Commission Form N-1, Form
N-1A or otherwise, executed after the date of this Power of Attorney, which
amendments may make such changes and additions to the Registration Statement
as the attorney(s)-in-fact may deem necessary or appropriate, and to file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission.
/s/ Tony Stanley
-------------------------
(signature)
Name: Tony Stanley
Date: 4/1/97
<PAGE>
<PAGE>
POWER OF ATTORNEY
The undersigned Trustee of the AFL-CIO Housing Investment Trust ("Housing
Trust") hereby constitutes and appoints and Michael M. Arnold and Helen R.
Kanovsky and each of them, either of whom may act without the joinder of the
other, as his true and lawful attorney-in-fact and agent, with full power of
substitution and re-substitution, to sign in his behalf, individually and in
his capacity as a Trustee of the Housing Trust, all amendments to the
Registration Statement on Securities and Exchange Commission Form N-1, Form
N-1A or otherwise, executed after the date of this Power of Attorney, which
amendments may make such changes and additions to the Registration Statement
as the attorney(s)-in-fact may deem necessary or appropriate, and to file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission.
/s/ Alfred J. Fleischer
-------------------------
(signature)
Name: Alfred J. Fleischer
Date: 3/27/97
<PAGE>
<PAGE>
POWER OF ATTORNEY
The undersigned Trustee of the AFL-CIO Housing Investment Trust ("Housing
Trust") hereby constitutes and appoints and Michael M. Arnold and Helen R.
Kanovsky and each of them, either of whom may act without the joinder of the
other, as his true and lawful attorney-in-fact and agent, with full power of
substitution and re-substitution, to sign in his behalf, individually and in
his capacity as a Trustee of the Housing Trust, all amendments to the
Registration Statement on Securities and Exchange Commission Form N-1, Form
N-1A or otherwise, executed after the date of this Power of Attorney, which
amendments may make such changes and additions to the Registration Statement
as the attorney(s)-in-fact may deem necessary or appropriate, and to file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission.
/s/ Frank Hanley
-------------------------
(signature)
Name: Frank Hanley
Date: 4/2/97
<PAGE>
<PAGE>
POWER OF ATTORNEY
The undersigned Trustee of the AFL-CIO Housing Investment Trust ("Housing
Trust") hereby constitutes and appoints and Michael M. Arnold and Helen R.
Kanovsky and each of them, either of whom may act without the joinder of the
other, as his true and lawful attorney-in-fact and agent, with full power of
substitution and re-substitution, to sign in his behalf, individually and in
his capacity as a Trustee of the Housing Trust, all amendments to the
Registration Statement on Securities and Exchange Commission Form N-1, Form
N-1A or otherwise, executed after the date of this Power of Attorney, which
amendments may make such changes and additions to the Registration Statement
as the attorney(s)-in-fact may deem necessary or appropriate, and to file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission.
/s/ George A. Miller
-------------------------
(signature)
Name: George A. Miller
Date: 3/26/97<PAGE>
<PAGE>
POWER OF ATTORNEY
The undersigned Trustee of the AFL-CIO Housing Investment Trust ("Housing
Trust") hereby constitutes and appoints and Michael M. Arnold and Helen R.
Kanovsky and each of them, either of whom may act without the joinder of the
other, as his true and lawful attorney-in-fact and agent, with full power of
substitution and re-substitution, to sign in his behalf, individually and in
his capacity as a Trustee of the Housing Trust, all amendments to the
Registration Statement on Securities and Exchange Commission Form N-1, Form
N-1A or otherwise, executed after the date of this Power of Attorney, which
amendments may make such changes and additions to the Registration Statement
as the attorney(s)-in-fact may deem necessary or appropriate, and to file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission.
/s/ Walter M. Kardy
-------------------------
(signature)
Name: Walter M. Kardy
Date: 3/26/97
<PAGE>
<PAGE>
POWER OF ATTORNEY
The undersigned Trustee of the AFL-CIO Housing Investment Trust ("Housing
Trust") hereby constitutes and appoints and Michael M. Arnold and Helen R.
Kanovsky and each of them, either of whom may act without the joinder of the
other, as his true and lawful attorney-in-fact and agent, with full power of
substitution and re-substitution, to sign in his behalf, individually and in
his capacity as a Trustee of the Housing Trust, all amendments to the
Registration Statement on Securities and Exchange Commission Form N-1, Form
N-1A or otherwise, executed after the date of this Power of Attorney, which
amendments may make such changes and additions to the Registration Statement
as the attorney(s)-in-fact may deem necessary or appropriate, and to file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission.
/s/ Frank Hurt
-------------------------
(signature)
Name: Frank Hurt
Date: 3/26/97
<PAGE>
<PAGE>
POWER OF ATTORNEY
The undersigned Trustee of the AFL-CIO Housing Investment Trust ("Housing
Trust") hereby constitutes and appoints and Michael M. Arnold and Helen R.
Kanovsky and each of them, either of whom may act without the joinder of the
other, as his true and lawful attorney-in-fact and agent, with full power of
substitution and re-substitution, to sign in his behalf, individually and in
his capacity as a Trustee of the Housing Trust, all amendments to the
Registration Statement on Securities and Exchange Commission Form N-1, Form
N-1A or otherwise, executed after the date of this Power of Attorney, which
amendments may make such changes and additions to the Registration Statement
as the attorney(s)-in-fact may deem necessary or appropriate, and to file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission.
/s/ Marlyn J. Spear
-------------------------
(signature)
Name: Marlyn J. Spear
Date: 3/26/97
<PAGE>
<PAGE>
POWER OF ATTORNEY
The undersigned Trustee of the AFL-CIO Housing Investment Trust ("Housing
Trust") hereby constitutes and appoints and Michael M. Arnold and Helen R.
Kanovsky and each of them, either of whom may act without the joinder of the
other, as his true and lawful attorney-in-fact and agent, with full power of
substitution and re-substitution, to sign in his behalf, individually and in
his capacity as a Trustee of the Housing Trust, all amendments to the
Registration Statement on Securities and Exchange Commission Form N-1, Form
N-1A or otherwise, executed after the date of this Power of Attorney, which
amendments may make such changes and additions to the Registration Statement
as the attorney(s)-in-fact may deem necessary or appropriate, and to file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission.
/s/ Patricia F. Wiegert
-------------------------
(signature)
Name: Patricia F. Wiegert
Date: 3/27/97
<PAGE>
<PAGE>
POWER OF ATTORNEY
The undersigned Trustee of the AFL-CIO Housing Investment Trust ("Housing
Trust") hereby constitutes and appoints and Michael M. Arnold and Helen R.
Kanovsky and each of them, either of whom may act without the joinder of the
other, as his true and lawful attorney-in-fact and agent, with full power of
substitution and re-substitution, to sign in his behalf, individually and in
his capacity as a Trustee of the Housing Trust, all amendments to the
Registration Statement on Securities and Exchange Commission Form N-1, Form
N-1A or otherwise, executed after the date of this Power of Attorney, which
amendments may make such changes and additions to the Registration Statement
as the attorney(s)-in-fact may deem necessary or appropriate, and to file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission.
/s/ Linda Chavez-Thompson
-------------------------
(signature)
Name: Linda Chavez-Thompson
Date: 6/15/96
<TABLE> <S> <C>
<ARTICLE> 6
<CURRENCY> U.S. DOLLARS
<PERIOD-START> JAN-01-1996
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 1,358,215,169
<INVESTMENTS-AT-VALUE> 1,379,431,358
<RECEIVABLES> 9,916,445
<ASSETS-OTHER> 582,119
<OTHER-ITEMS-ASSETS> 1,063,559
<TOTAL-ASSETS> 1,391,878,885
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 8,715,719
<TOTAL-LIABILITIES> 8,715,719
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<ACCUMULATED-NET-GAINS> (17,914)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 21,216,189
<NET-ASSETS> 1,383,163,166
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 98,182,644
<OTHER-INCOME> 73,916
<EXPENSES-NET> 5,822,349
<NET-INVESTMENT-INCOME> 92,434,211
<REALIZED-GAINS-CURRENT> 748,269
<APPREC-INCREASE-CURRENT> (25,991,014)
<NET-CHANGE-FROM-OPS> 67,191,466
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 91,992,173
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 186,419
<NUMBER-OF-SHARES-REDEEMED> 32,866
<SHARES-REINVESTED> 73,296
<NET-CHANGE-IN-ASSETS> 216,269,695
<ACCUMULATED-NII-PRIOR> 0
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<GROSS-ADVISORY-FEES> 105,644
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<GROSS-EXPENSE> 5,822,349
<AVERAGE-NET-ASSETS> 1,261,044,926
<PER-SHARE-NAV-BEGIN> 1098.53
<PER-SHARE-NII> 79.11
<PER-SHARE-GAIN-APPREC> (25.55)
<PER-SHARE-DIVIDEND> 78.76
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